Flight Attendants and Stewards Association of the Philippines versus

Philippine Airlines
REVISITING RULES ON RETRENCHMENT AND
TERMINATION FOR AUTHORIZED CAUSES
by Francis V. Sobrevias*
Retrenchment, an authorized cause termination of employment, is a
management prerogative, a means to protect and preserve the employer's viability
and ensure his survival. While our Supreme Court has always respected this
prerogative during trying times, it has invariably insisted on the faithful
compliance by management with the substantive and procedural requirements laid
down by law and jurisprudence.
This paper will attempt to review the said requirements as they have been
interpreted and continue to be clarified and elucidated by the Court in recent
decisions on authorized causes for termination of employment. It will further
discuss the development of the doctrine respecting the employer's legal duty to
grant separation benefits to affected employees. Finally, it will examine the very
recent case of Flight Attendants and Stewards Association of the Philippines
(FASAP) vs. Philippine Airlines insofar as it illustrates the situations when
retrenchment is permitted and when it is proscribed.
Legal Duty to Grant Separation Benefits
Under the Labor Code the employer may terminate the employment of any
employee due to "the closing or cessation of operations of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions
of this Title, by serving a written notice on the workers and the (Department) of
Labor and Employment at least one (1) month before the intended date thereof."
Pursuant to Article 283, the terminated employees are entitled to separation pay
only when the closure or cessation of operations of the establishment or
undertaking is due to causes other than "serious business losses or financial
reverses." Otherwise, the employer is not obliged to grant separation pay to the
terminated employees. This is plain from the following pertinent portion of the law,
to wit: "xxx In case of retrenchment to prevent losses and in case of closures or
cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses the separation pay shall be equivalent to one (1) month
pay or at least one-half () month pay for every year of service, whichever is
higher.
The fact that the foregoing legal provision makes a distinction is a clear
indication of the legislative intent to circumscribe the grant of separation. pay to
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those employees affected by the situation specified expressly therein, i.e., "in case
of closure or cessation of' operations of establishment or undertaking not due to
serious business losses or financial reverses." This proposition is in accord with the
rule of casus omissus pro omisso habendus est . Thus, under said rule, a person,
object or being omitted from an enumeration must be held to have been omitted
intentionally.
It is a well-settled rule of statutory construction that there is no better means
of ascertaining the will and intention of the legislature than that which is afforded
by the history of the statute. By looking at and investigating the legislative history
of the statute, the court will be able to arrive at its correct interpretation. For this
purpose, the court may take judicial notice of the origin and history of the statue
which it is called upon to construe and apply, and of the facts which affect its
derivation, validity and operation.
That the intent of Article 283 of the Labor Code is to limit the grant of
separation pay only to employees who are terminated on account of the closure or
cessation of operation of the establishment or undertaking due to causes other than
serious business losses or financial reverses is manifest in the deliberations of the
bill which was eventually passed as Batas Pambansa Bilang 130 (BP 130). It is to
be noted that prior to 1981, the Labor Code mandated that in case of retrenchment
to prevent losses and other similar causes, the separation pay shall be equivalent to
one month pay or at least one-half month pay for every year of service, whichever
is higher. This portion of the law was carried over in the original draft of BP 130.
However, during the deliberations, the following transpired:
MR. ESPINA, Mr. Speaker, I have an anterior amendment 'THE
PRESIDING OFFICER (Mr. Garcia, M.). The Gentleman from Manila is
recognized.
MR. ESPINA. On lines 6 and 7, page 19, delete the words "and the other
similar causes, and in lieu thereof, insert the following phrase: AND IN CASES
OF CLOSURES OR CESSATIONS OF OPERATIONS OF THE
ESTABLISHMENT NOT DUE TO SERIOUS BUSINESS LOSSES OR
FINANCIAL REVERSES, so that the sentence will read as follows: In case of
retrenchment to prevent losses AND IN CASES OF CLOSURES OR
CESSATIONS OF OPERATIONS OF THE ESTABLISHMENT OR
UNDERTAKING NOT DUE TO SERIOUS BUSINESS LOSSES OR
FINANCIAL REVERSES, the separation pay shall be equivalent to one month pay
or at least one-.half month pay for every year of service, whichever is higher.
MR. OPLE. Mr. Speaker.
THE PRESIDING OFFICER (Mr. Garcia, M.). The Minister of Labor, the
Honorable Blas Ople, is recognized.
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'MR. OPLE. The Committee gladly accepts the amendment.

'MR. ESPINA. Thank you, Mr. Speaker.
THE PRESIDING OFFICER (Mr. Garcia, M.). Is there any objection?
(Silence) The Chair hears none; the amendment is approved.
In the case of Banco Filipino Savings & Mortgage Bank v. NLRC, however,
the Supreme Court held that a bank closed by the government due to serious
business losses or financial reverses and placed under liquidation is still legally
mandated to pay its workers separation benefits. According to the Court:
The bank argues that Dizon is not entitled to separation pay citing Article
283 of the Labor Code which reads to wit:
x x x In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one (1) month
pay or at least one-half (1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be considered one (I) whole year.
It is the bank's interpretation of the law that when an institution is closed due
to serious business losses or financial reverses its workers are not entitled to
separation pay.
We disagree.
thus:

We instead quote with approval the opinion of respondent Labor Arbiter,

Article 283 (Art. 282) of the Labor Code enumerated the just causes for an
employer to terminate an employee. If an employee is dismissed for just cause, he
is not entitled to termination pay. However, in Article 284 (Art. 283), in case of
closure of establishment, the employee is always given termination pay. The reason
for the closure is taken into consideration only to determine whether to give one
month or one-half month pay for every year of service. This provision is based on
social justice and equity, x x x.
Not unexpectedly, therefore, Banco Filipino was almost always invoked as
authority for the proposition that dismissed workers are entitled to separation pay
albeit the employer closes or ceases operations by reason of serious business losses
or financial reverses. But even if this ruling was not explicitly abandoned, there
were subsequent decisions that modified the doctrine enunciated in that case.

In 1992, in the case of Golden Taxi Employees and Workers Union-ANGLO

v. Golden Taxicab Co., the NLRC declared that the closure of a company "'DUE
TO serious business losses or financial reverses. x x x exempts [said company
from the usual obligation of paving separation pay. The rationale for such a
provision is not beyond our reach. An employer that folds up because of serious
business reverses can no longer absorb any further costs. In Golden Taxi, the
NLRC held that the intent of Article 283 of the Labor Code is to limit\the grant of
separation pay only to employees who are terminated on account of the closure or
cessation of operations of the establishment or undertaking due to causes other
than serious business losses or financial reverses.
The ruling in Golden Taxi hewed very closely to the judgment of the NLRC
in National Federation of Labor Unions (NAFLU) v. Philippine Blooming Mills
'Co., Inc., wherein the Second Division of the NLRC set aside the award of
separation pay, as granted by the Labor Arbiter to the employees of Philippine
Blooming Mills Co., Inc. ("PBM"), on the ground that said employees were not
entitled thereto since the closure of PBM was due to serious business losses or
financial reverses. According to the NLRC:
"... in cases of closure or cessation of operation of establishment or
undertaking due to serious business losses or financial reverses. there can be no
right to separation pay. The reason is obvious:
To hold the respondent liable for separation pay would be highly oppressive.
for to do so would aggravate the unfortunate situation which compelled it to close
operation.' (Ricardo Crisostomo et al., vs. Balut Island Sawmill Co., Inc., NLRC
Case No. 2-262-74, OP Decision No. 1795, March 29, 1976)."
The above-cited decision of the NLRC was sustained by the Supreme Court
when the latter dismissed on June 20, 1984 the petition for certiorari filed by
NAFLU in G.R. No. 65903 for lack of merit.
The same rule was again applied by the NLRC in another related case,
namely, Pedro Ablaza, et al. v. Philippine Blooming Mills Co., Inc., 14 wherein the
NLRC, in an en banc decision dated May 10, 1985, declared:
"x x x the only remaining issue properly raised by the appeal is the validity
of the separation pay awarded. In this connection, it is noteworthy that, as stressed
by the respondent, the Second Division of this Commission found in NLRC Case
No.5-3780-82, National Federation of Labor Unions (NAFLU) vs. Philippine
Blooming Mills Co., Inc., that the respondent ceased operations due to serious
business losses and financial reverses and for that reason, the Commission
dismissed the complaint for separation pay filed by NAFLU in behalf of its
members in the respondent company. The complainants in the earlier case cited
and the complainants in this case seeking payment of separation pay are similarly
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situated as in fact all of them predicated their claim upon the same grounds and the
respondent also raised the same defense in avoidance of the claim - serious
business losses and financial reverses. Under the circumstances, we cannot hold
otherwise in the present case, there being no sufficient justification to deviate from
the Decision in the earlier case. For, indeed, while it may be true as borne by the
evidence of the complainants that the respondent realized substantial profits from
1973 to 1979, they do not dispute that it suffered losses in subsequent years. There
may have been contributory causes that brought about its dismal financial state, but
the fact remains that it suffered serious financial reverses such that it lacked
operating capital to enable it to continue its operations. All told, we cannot sustain
the award of separation pay in the instant case."
The NLRC decision in the above-cited case was upheld by the Supreme
Court when it dismissed on November 18, 1987 the petition for certiorari in G.R.
No, 79202, entitled "Pedro Ablaza, et at v; National Labor Relations Commission,
et at.", for lack of merit. The same rule was reiterated in G.R. No. 80580, entitled
"Philippine Blooming Mills Co., Inc. v. Eduardo Zurita, et al., and National Labor
Relations Commission", 'wherein the Supreme Court, in its Resolution dated May
2, 1988, held:
"There is no merit in this petition. The factual findings of the NLRC are
based on substantial evidence and the petitioners have failed to make out a case of
reversible error on the part of the public respondent .As a matter of fact, this Court
has, in various and more appropriate cases involving consortium of banks trying to
recover even only a percentage of the loan extended to PBM, passed upon the issue
that the petitioners are now trying to raise. The PBM was not only incurring
serious losses but was in desperate straits leading to its collapse.
The NLRC ruling in NLRC-NCR Case No. 3-1250-83, which was affirmed
by the Supreme Court in G .R. No. 79202, was again reiterated by the Supreme
Court in an en banc decision in three consolidated cases led by State Investment
House, Inc. v. Court of Appeals, wherein the High Tribunal agreed with the NLRC
that separation benefits are no longer due employees of a business closed down by
financial losses. Thus said the Court:
"In 1981, the PBM stopped operations due to business losses and financial
reverses. On April 1, 1982, the PBM filed with the SEC a petition seeking for a
declaration of a state of suspension of payments. On April 6, 1982, the SEC
assumed jurisdiction over the petition. On July 9, 1982, the SEC placed the PBM
under rehabilitation receivership and appointed rehabilitation receivers. The
employees of PBM then filed a complaint for illegal dismissal with money claims
against PBM with the National Labor Relations Commission (NLRC). The case
was docketed as NCR No, 3-1250-83.

On December 28, 1983, Labor Arbiter Bienvenido Hermogenes rendered a

decision in favor of the employees. The employees were granted monetary
benefits, including separation pay. On appeal, the Labor Arbiter's decision was
modified by the NLRC, to wit:
WHEREFORE, except for the modification dismissing the claim for
separation pay for lack of merit, the Decision appealed from is hereby AFFIRMED
in all other respects. The injunction issued on 15 November 1984 is lifted.' (Rollo
~G.R., No. 79202, p. 18)
In G.R. No. 79202, we affirmed the NLRC decision in a resolution dated
November 18, 1987. Thus, we dismissed the petition for certiorari filed by the
employees questioning the deletion of the award of separation pay resulting from
serious losses by PBM.
Moreover, in the same decision, the Supreme Court re-stated and reaffirmed
its ruling in G.R No. 80580, in this manner:
"In the meantime, the employees of PBM numbering 2,081 filed another
complaint for illegal dismissal and money claims with the NLRC. The case was
docketed as NCR Case No. 9-3296-84.
On May 28, 1987, the Labor Arbiter Bienvenido V. Hermogenes rendered a
decision in favor of the employees including separation pay.
On appeal, the Labor Arbiters Decision was affirmed by the NLRC in a
decision dated November 9, 1987.
xxx
On November 19, 1987, PBM filed with us a petition to review the decision
of the NLRC on the ground that the November 9, 1987 decision did not take into
account the fact that as found by this Court in G.R No. 71318 the NLRC had
already denied claims for separation pay of the employees, x x x The petition was
docketed as G.R. No. 80580.
In a resolution dated December 1, 1987, G.R. Nos. 79202 and 80580 were
consolidated.
On May 2, 1988, we issued a resolution in the consolidated petitions, to wit:
xxx
In G.R. No. 80580, the Solicitor General has taken sides with the petitioner
6

and adopted the petitioner's reply to the private respondents' comment: No

explanation is given and no substantial distinctions are cited to explain why the
National Labor Relations Commission should take an action in G.R. No. 80580
which is different from and conflicts with its stand in G.R. No. 79202. This being
the case, the Court reiterates its ruling in G.R. No. 79202.
In Mendoza, et. al. vs. NLRC, et. al. the Supreme Court sustained the
findings of the NLRC in NLRC NCR CA Case No. 00-3214-94, promulgated on
April 27, 1993, holding that the closure of a business establishment due to serious
losses or financial reverses negates the grant of separation pay to employees whose
services are terminated . It is only when the closure is for reasons other than
business reverses or losses that separated personnel are entitled to separation pay,
which is computed at (1) month or one-half () month pay for every year of
service, whichever is higher.
In 1994, the Supreme Court distinctly declared in Mindanao Terminal and
Brokerage Service, Inc. versus Minister of Labor and Employment that the law
obligates the employer to grant separation pay to the affected employees only
where the closure of the employers business was not due to serious business
losses or financial reverses.
Eventually, a noted commentator expressed the view that any remaining
doubt or confusion on entitlement to separation benefits has been dispelled by the
en banc decision of the Supreme Court in North Davao Mining Corp. v. NLRC. In
that case, the corporation had to close in 1992 because in the preceding five years
it had been incurring "mind-boggling" losses averaging three billion
(P3,OOO,OOO,OOO,OO) pesos per year.
As of December 31, 1991 (five months before it closed), its total liabilities
had exceeded its assets by over P20 billion pesos. Rejecting the demand for
payment of separation benefits "for obvious reasons," the Court stressed that "Art.
283 of the Labor Code does not obligate an employer to pay separation benefits
when the closure is due to losses.
Emphasized the highest court of the land: In the instant case however, the
companys practice of giving one months pay for every year of service could no
longer be continued precisely because the company could not afford it anymore. It
was forced to closed down an account of accumulated losses of over P 20 Billion.
This could not be said of BISSI. In the case of North Davao, it gave 30-days
separation pay to each employees when it was still a going concern even if it was
already losing heavily. As a going concern, its cash flow could still have sustained
the payment of such separation benefits. But when a business enterprise
completely ceases operations, i.e., upon its death as a going business concerned it
vital lifeblood its cash flow literally dries up. Therefore, the fact that less
7

separation benefits were granted when the company finally met its business death
cannot be characterized as discrimination. Such action was dictated not by a
discriminatory management option but by its complete inability to continue its
business life due to accumulated losses. Indeed, one cannot squeeze blood out of a
dry stone. Nor water out of parched land.
In Alabang Country Club, Inc. versus NLRC the Court acknowledged that
while the Labor Code provides for the payment of separation package in case of
retrenchment to prevent losses, it does not obligate the employer to make such
payment if there is closure of business due to serious losses. Moreover, the Court
stated that while retrenchment and closure of a business establishment or
undertaking are often used interchangeably and are interrelated, they are actually
two separate and independent authorized causes for termination of employment.
Thus:
"Retrenchment is the reduction of personnel for the purpose of cutting down
on costs of operations in terms of salaries and wages resorted to by an employer
because of losses in operation of a business occasioned by lack of work and
considerable reduction in the volume of business.
Closure of a business or undertaking due to business losses is the reversal of
fortune of the employer whereby there is a complete cessation of business
operations to prevent further financial drain upon an employer who cannot pay
anymore his employees since business has already stopped.
One of the prerogatives of management is the decision to close the entire
establishment or to close or abolish a department or section thereof for economic
reasons, such as to minimize expenses and reduce capitalization.
While the Labor Code provides for the payment of separation package in
case of retrenchment to prevent losses, it does not obligate the employer for the
payment thereof if there is closure of business due to serious losses.
The Court likewise held that, as in the case of retrenchment, for the closure
of a business or a department due to. serious business losses to be regarded as an
authorized cause for terminating employees, it must be proven that the losses
incurred are substantial and actual or reasonably imminent; that the same increased
through a period of time; and that the condition of the company is not likely to
improve in the near future.
It is useful to quote further the Court's ruling:
"For any bonafide reason, an employer can lawfully close shop anytime. Just as
no law forces anyone to go into business, no law can compel anybody to continue
8

the same. It would be stretching the intent and spirit of the law if a court interferes
with management's prerogative to close or cease its business operations just
because the business is not suffering from any loss or because of the desire to
provide the workers continued employment.
While petitioner did not sufficiently establish substantial losses to justify
closure of its F & B Department on this ground, there is basis for its claim that the
continued maintenance of said department had become more expensive through the
years. An evaluation of the financial figures appearing in the audited financial
statements prepared by the SGV &Co. shows that ninety one to ninety six (91 % 96%) percent of the actual revenues earned by the F & B Department comprised
the costs and expenses in maintaining the department. Petitioner's decision to place
its F & B operations under a concessionaire must then be respected; absent a
showing of bad faith on its part.
In fine, management's exercise of its prerogative to close a section, branch,
department, plant or shop will be upheld as long as it is done in good faith to
advance the employer's interest and not for the purpose of defeating or
circumventing the rights of employees under the law or a valid agreement. While
the closure of the F &B Department is found to be justified, petitioner is, under the
above-quoted provision of Art. 283 of the Labor Code, mandated to pay separation
pay computed from the time individual respondents commenced their employment
until the time the department ceased operations x x x".
Later, in Espina v. Court of Appeals the Court stated that the phrase "closure or
cessation not due to serious business losses or financial reverses" recognizes the
right of the employer to close or cease its business operations or undertaking even
in the absence of serious business losses or financial reverses, as long as he pays
his employees their termination pay in the amount corresponding to their length of
service.
The Court concluded:
"It would indeed be stretching the intent and spirit of the law if a court were to
unjustly interfere in management's prerogative to close or cease its business
operations just because said business operation or undertaking is not suffering from
any loss. The determination to cease operations is a prerogative of management
which the State does not usually interfere with, as no business or undertaking must
be required to continue operating simply because it has to maintain its workers in
employment, and such act would be tantamount to a taking of property without due
process of law. As long as the company's exercise of the same is in good faith to
advance its interest and not for the purpose of circumventing the rights of
employees under the law or a valid agreement, such exercise will be upheld.
Clearly then, the right to close an establishment or undertaking may be justified
9

on grounds other than business losses but it cannot be an unbridled prerogative to

suit the whims of the employer, x x x x x x x x x.
The ultimate test of the validity of closure or cessation of establishment or
undertaking is that it must be bona fide in character. And the burden of proving
such falls upon the employer.
In the newly decided case of Eastridge Golf Club, Inc. v. Eastridge Golf Club
Labor Union-SUPER, the Supreme Court declared that where the closure of
business is found to be in bad faith, the dismissal of the employees shall be
declared illegal and the employer held liable for their reinstatement and payment of
full backwages, unless reinstatement is no longer feasible, in which case the
employer shall be liable for full backwages as well as separation pay. If the closure
of business due to serious business losses or financial reverses is shown to be in
good faith, the resultant dismissal of the employees shall be upheld, with no
separation benefits due them. If the closure of business is not due to serious
business losses or financial reverses but it is shown to be in good faith, the
resultant dismissal of the employees will still be upheld but the latter shall be
entitled to separation pay at the rate of one half month pay for every year of service
or one month pay. whichever is higher.
Legal Requirements
Article 283 of the Labor Codes enumerates the authorized causes for
termination, namely, installation of laborsaving devices, redundancy, retrenchment
to prevent losses and the closing or cessation of operations not due to serious
business losses or financial reverses. In the case of lndino v, NLRC, the Supreme
Court had occasion to rule that "under the said provision of law, the right of an
employer to terminate the services of any employee is predicated on the existence
of any of the following causes: (1) installation of labor saving devices; (2)
redundancy; (3) retrenchment to prevent losses; and (4) the closing or cessation of
operation of the establishment or undertaking unless the closing is. for the purpose
of circumventing the provisions of law."
Employees who are terminated on the ground of labor-saving devices or
redundancy shall be entitled to separation pay equivalent to at least one (I) month
pay or one (1) month pay for every year of service, whichever is higher. On the
other hand, employees who are retrenched to prevent losses or in cases of closure
or cessation of operation not due to serious business or financial reverses shall be
entitled to separation ay equivalent to at least one (l) month pay or one-half (1/2)
month pay for every year of service, whichever is higher. A fraction of at least six
(6) months shall be considered one (1) whole year.
Article 283, Closure of establishment and reduction of personnel. The
employer may also terminate the employment of any employee due to the
10

installation of labor saving devices, redundancy, retrenchment to prevent losses or

the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a
written notice on the workers and the Ministry of Labor and Employment at least
one (1) month before the intended date thereof. In case of termination 'due to the
installation of labor saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least his one (1) month pay for
to at least one (I) month pay for every year of service, whichever is higher. In case
of retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment .or undertaking not ~ to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (I) whole year. 29178
SCRA 168, 174-175(1989).
There are certain procedural requirements that have to be observed in
effecting a retrenchment or redundancy program. Both the affected employee and
the Regional Office of the Department of Labor and Employment (DOLE) should
be given a written notice of the termination at least one (1) month before the
intended date thereof. Notice to the DOLE is required to enable said office "to
ascertain the verity of the cause for termination of employment." The required
notice to the employees is necessary "to enable the employees to look for other
means of employment and therefore, to ease the impact of the loss of their jobs and
the corresponding income. In Revidad v. NLRC, it was explained that the purpose
of this notice requirement is to enable the proper authorities to ascertain whether
the closure of business is being done in good faith and is not just a pretext for
evading compliance with the just obligations of the employer to the affected
employees. In Sebuguero v. NLRC, it was held that the notice requirement for both
the employee and the DOLE is mandatory and must be written and given at least
one month before the intended date of separation. Under the rules and regulations
implementing the Labor Code, the affected employee shall be entitled to
termination pay based on his latest salary.34 In the case of Union of Filipino
Workers (UFW) v. NLRC, the Supreme Court held that retrenchment under Article
283 is valid when the following requisites have been met: (1) it is to prevent losses;
(2) written notices were served on the workers and the DOLE at least one (1)
month before the effective date of the retrenchment; and (3) separation pay is paid
to the affected workers. With respect to the termination on the ground of
redundancy. However, the High Tribunal has held in Escareal v. NLRC. that
financial losses are not necessary before redundancy is declared.
Declared the Court:
While concededly, Article 283 of the Labor Code does not require. that the
employer should be suffering financial losses before he can terminate the services
of the employee on the ground of redundancy, however, it does not mean either
11

that a company which is doing well can effect such a dismissal whimsically or
capriciously. The fact that a company is suffering from business losses merely
provides stronger justification for the termination."
In Almodiel v. NLRC, the Supreme Court reiterated its earlier ruling in the
leading case of Wiltshire File Co, Inc. vs. NLRC that redundancy, for purposes of
our Labor Code, exists "where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise." A position is
redundant, said the Court, "where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as over hiring of
workers, decreased volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the enterprise. The
authoritative definition of the term "redundant", first enunciated in Wiltshire, was
quoted and adopted in the subsequent cases of de Ocampo vs. NLRC, Escareal vs.
NLRC, and Tierra International Construction Corp. v, NLRC.
In Lopez Sugar Corporation vs. Federation of Free Workers, the Supreme
Court resolved that the employer may validly retrench employees to prevent losses
sometime before the losses anticipated are actually sustained or realized. The
employer according to the High Tribunal does not have to keep all his employees
until after losses shall have been incurred.
Thus said the Court:
In its ordinary connotation, the phrase to prevent losses means that
retrenchment or termination of the services of some employee is authorized to be
undertaken by the employer sometime before the losses anticipated are actually
sustained or realized. It is not. in other words. the intention of the lawmaker to
compel the employer to stay his hand and keep all his employees until sometime
after losses shall have in fact materialized: if such an intent were expressly written
into the law, that law may well be "vulnerable to constitutional attack as taking
property from one man to give to another. This is simple enough."
Realizing the difficulty in determining when, or under what circumstances,
the employer becomes legally privileged to retrench and reduce the number of his
employees, the Court deemed it useful to sketch the general standards in terms of
which the acts of the employer must be appraised, as follows:
"Firstly, the losses expected should be substantial and not merely de minimis
in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly
shown to be insubstantial and inconsequential in character, the bona fide nature of
the retrenchment would appear to be seriously in question. Secondly, the
substantial loss apprehended must be reasonably imminent, as such imminence can
be perceived objectively and in good faith by the employer. There should, in other
words, be a certain degree of urgency for the retrenchment, which is after all a
12

drastic recourse with serious consequences for the livelihood of the employees
retired or otherwise laid-off. Because of the consequential nature of retrenchment,
it must, thirdly, be reasonably necessary and likely to effectively prevent the
expected losses. The employer should have taken other measures prior or parallel
to retrenchment to forestall losses, i.e., cut other costs than labor costs. An
employer who, for instance, lays off substantial number of workers while
continuing to dispense fat executive bonuses and perquisites or so-called 'golden
parachutes,' can scarcely claim to be retrenching in good faith to avoid losses. To
impart operational meaning to the constitutional policy of providing "full
protection' to labor, the employer's prerogative to bring down labor costs by
retrenching must be exercised essentially as a measure of last resort, after less
drastic means - e.g., reduction of both management and rank-and-file bonuses and
salaries, going on reduced time, improving manufacturing efficiencies, trimming of
marketing and advertising costs, etc. ... have been tried and found wanting.
Lastly, but certainly not the least important, alleged losses if already
realized, and the expected imminent losses sought to be forestalled, must be proved
by sufficient and convincing evidence. The reason for requiring this quantum of
proof is readily apparent: any less exacting standard of proof would render too easy
the abuse of this ground for termination of services of employees.
In CAFFCO International, Limited v, Office of the Minister, the Supreme
Court recognized the fact that because of the financial problems that businessmen
face, they are pressured to adopt certain changes and programs in order to improve
their profits and protect their investments. In the process, the employer may even
choose to close a branch, a department, a plant, or a shop.
"When an employer decides to reduce the number of its personnel in order to
prevent further losses, he is exercising his right to retrench employees to prevent
losses in his business operations. On the other hand, where for purposes of
economy, a company decides to reorganize its departments by imposing on
employees of one department the duties performed by the employees of the other
department, thus rendering unnecessary the job of the latter, the services of the
employees whose functions are now being performed by the others, may be validly
terminated on the ground of redundancy.
Business enterprises today are faced with the pressures of economic
recession, stiff competition, and labor unrest. Thus, businessmen are always
presumed to adopt certain changes and programs in order to enhance their profits
and protect their investments. Such changes may take various forms. Management
may even choose to close a branch, a department, a plant, or a shop (Philippine
Engineering Corp. vs. CIR, 41 SCRA89 [1971]).
Hence, it has been adjudged that management can shut down its business
when convenient provided it is not meant to coerce the employees or force them to
13

submit it to its demands. Likewise, the Court has accepted in another case that
there is no question as to the right of the employer to reduce his work force
provided that it is not made a pretext for easing out employees on account of union
activities.
In National Federation of Labor Unions V. NLRC, the Supreme Court rule
that "an employer's exercise of management prerogatives, with or without reason,
does not, per se, constitute unjust discrimination. Unless there is a showing of
grave abuse of discretion, we cannot substitute our discretion and judgment for that
which is clearly and exclusively management prerogatives. To do so, would take
away from the employer what rightly belongs to him." Indeed, it has been held in
Associated Labor Unions VIMCONTU v. NLRC, that in the exercise of such
management prerogative, the employer may dismiss or terminate its employees.
"This flows from the well-recognized principle that it is within the
employer's legitimate sphere of management control of the business to adopt
economic policies or make some changes or adjustments in their organization or
operations that would ensure profit to itself or project the investment of its
stockholders. As in the exercise of such management prerogative, the employer
may merge or consolidate its business with another, or sell or dispose all or
substantially all of its assets and properties which may bring about the dismissal or
termination of its employees in the process."
While the employer may have the right to validly retrench or dismiss its
employees, this right must not be abused. We find this judicial pronouncement in
Bataan Shipyard & Engineering Co., Inc. vs NLRC.
"It is not disputed that the retrenchment undertaken by the Company is valid.
However, the manner in which this prerogative is exercised should not be tainted
with abuse of discretion. Labor is a person's means of livelihood. He cannot be
deprived of his labor or work without due process of law. Retrenchment strikes at
the very heart of one's employment. .While the right of an employer to dismiss an
employee is conceded in a valid retrenchment, the right differs from and should not
be confused with the manner in which such right is exercised. It should not be
oppressive and abusive since it affects one's person and property. Due process of
law demands nothing less.
As already mentioned, pursuant to jurisprudential policy there are three (3)
basic requirements for a valid retrenchment:
1. the retrenchment is necessary to prevent or minimize losses and such
losses are proven;
2. written notice is given to the employees and the DOLE at least one month
before the intended date of retrenchment; and
14

3. separation benefits are given.

The case of Asian Alcohol Corp. vs. NLRC added two (2) more:
4. the employer exercises its prerogative to retrench employees in good faith
for the advancement of its interests and not to defeat or circumvent the employee's
right to security of tenure; and
5. the employer uses fair and reasonable criteria in ascertaining "who will be
dismissed or retained among the employees, such as status (i.e., whether they are
temporary, casual or ,regular), efficiency, seniority, physical fitness, age, and
financial hardship for certain workers.
Thus, as seen in the recent case of Eastridge Golf Club, the employer's
exercise of management prerogative to retrench or layoff employees will be upheld
only "if compliant with [the foregoing] substantive and procedural requirements."
In a case decided in 1995, namely, Revidad v. NLRC, the Supreme Court
ruled that the "financial statements audited by independent external auditors
constitute the normal and reliable method of proof of the profit and loss
performance of a company." In Uichangco v. NLRC, the Court affirmed the rule
that to prove losses the employer must present the report of a certified public
accountant or that of an independent auditor. And in Manatad v. Philippine
Telegraph & Telephone Corporation it was acknowledged that the financial
statements audited by an independent external auditor constitute the normal
method of proving the profit and loss performance of a company. That the financial
statements are audited by independent auditors safeguards the same from the
manipulation of the figures therein to suit the company's needs. Moreover, the
auditing of financial reports by independent external auditors are strictly governed
by national and international standards and regulations for the accounting
profession.
The Case of the Cabin Crew Personnel of Philippine Airlines
In June of 1998, Philippine Airlines (PAL) retrenched 5,000 of its
employees, including more than 1,400 of its cabin crew personnel, to take effect in
July 1998. PAL adopted the retrenchment scheme allegedly to cut costs and
mitigate huge financial losses as a result of a downturn in the airline industry
brought about by the Asian financial crisis. During said period, PAL claimed to
have incurred P90 billion in liabilities, while its assets stood atP85 billion.
PAL, in implementing the retrenchment scheme, adopted its so-called "Plan
14" whereby its fleet of aircraft would be reduced from 54 to 14, thus requiring the
15

services of only 654 cabin crew personnel. PAL admitted that the retrenchment is
wholly premised upon such fleet reduction and the strike staged by PAL pilots
since this action also translated into a reduction of flights.
Prior to the full implementation of the retrenchment program, PAL and the
Flight Attendants and Stewards Association of the Philippines (FASAP), as the
exclusive bargaining representative of the cabin crew personnel, conducted a series
of consultations and meetings and explored all possibilities of cushioning the
impact of the impending reduction in cabin crew personnel. The parties, however,
failed to agree on how the scheme would be implemented. Thus PAL unilaterally
resolved to utilize the criteria set forth in their Collective Bargaining Agreement
(CBA) in retrenching cabin crew personnel, namely, that retrenchment shall be,
based on the individual employee's efficiency rating and seniority.
PAL determined the cabin crew personnel efficiency rating through an
evaluation of the individual cabin crew member's overall performance for the year
1997 alone. Their respective performance during previous years, i.e., the whole
duration of service with PAL of each cabin crew personnel, was not considered.
The factors taken into account on whether the cabin crew members would be
retrenched, demoted or retained were: (1) the existence of excess sick leaves; (2)
the crew member's being physically overweight; (3) seniority; and (4) previous
suspensions or warnings imposed.
While consultations between FASAP and PAL were ongoing, the latter
began implementing its retrenchment program by initially terminating the services
of 140 probationary cabin attendants only to rehire them in April 1998. Moreover,
their employment was made permanent and regular.
In July of 1998, PAL carried out the retrenchment of its more than 1,400
cabin crew personnel.
On September 23, 1998, PAL ceased operations and sent notices of
termination to its employees. Two days after, PAL employees, through the
Philippine Airlines Employees Association (PALEA) board, sought the
intervention of then President Joseph Estrada. PALEA offered a 10-year
moratorium on strikes and similar actions and a waiver of some of the economic
benefits in the existing CBA. The Chairman and Chief Executive Officer of PAL,
Lucio Tan, rejected this proposal.
In September 1998, the PALEA board again wrote President Estrada
proposing, among others, that its existing CBA be suspended for 10 years,
provided certain political and economic benefits are extended to the employees.
This was approved by the employees in a referendum on October 2, 1998. On
October 7, 1998, PAL resumed domestic operations and, soon after, international
flights as well.
16

On June 22, 1998, FASAP filed a complaint against PAL for unfair labor
practice, illegal retrenchment and other money claims. Two years later or on July
21, 2000, the Labor Arbiter rendered a decision holding that PAL illegally
retrenched, 1,400 cabin attendants including flight pursers "in a despotic and
whimsical manner." Consequently, the cabin attendants were ordered reinstated
with backwages and damages including attorney's fees. On May 31,2004, the
NLRC reversed and set aside the Labor Arbiter's decision. Its motion for
reconsideration having been denied, FASAP went up to the Court of Appeals which
denied FASAP's petition and affirmed the NLRC on August 23, 2006. Hence,
FASAP elevated the case to the Supreme Court in a petition docketed as G.R. No.
178083, July 22, 2008, Flight Attendants and Stewards Association of the
Philippine vs. Philippine Airlines.
At once, the High Tribunal announced that any claim of actual or potential
business losses must satisfy the five (5) "established standards, all of which must
concur, before any reduction of personnel becomes legal." It added that the
resolution of the case hinges on a determination of the existence of the first, fourth
and fifth elements for a valid retrenchment, to wit:
(1) That the retrenchment is reasonably necessary and likely to prevent
business losses which, if already incurred, are not merely de minimis, but
substantial, serious, actual and real, or if only expected, are reasonably imminent
as perceived objectively and in good faith by the employer;
(4) That the employer exercises its prerogative to retrench employees in
good faith for the advancement of its interest and not to defeat or circumvent the
employees' right to security of tenure; and
(5) That the employer used fair and reasonable criteria in ascertaining who
would be dismissed and who would be retained among the employees, such as
status, efficiency, seniority, physical fitness, age, and financial hardship for certain
workers. After recalling the rule, first enunciated in Lopez Sugar Corp.. that the
employer's prerogative to layoff employees is subject to certain limitations, the
Court found that PAL failed to substantiate its claim of actual and imminent
substantial losses which would justify the retrenchment of more than 1,400 of its
cabin crew personnel. Although the Philippine economy was gravely affected by
the Asian financial crisis, the Court firmly insisted that it cannot be assumed that
said crisis has likewise brought PAL to the brink of bankruptcy. Likewise, the fact
that PAL underwent corporate rehabilitation does not automatically justify the
retrenchment of its cabin personnel.
Records show that PAL was not even aware of its actual financial position
when it implemented its retrenchment program. It initially decided to cut its fleet
size to only 14 (Plan 14) and based on said plan, it retrenched more than 1,400 of
17

its cabin crew personnel. Later on, however, it abandoned its Plan 14 and
decided to retain 22 units of aircraft (Plan 22). Unfortunately, it has retrenched
more than what was necessary.
PAL admits that;
Upon reconsideration and with some optimistic prospects for operations,
the Company (PAL) decided not to implement Plan 14 and instead implemented
Plan 22 which would involve a fleet of 22 planes. Since Plan 14 was
abandoned, the Company deemed it appropriate to recall back into employment
employees it had previously retrenched. Thus, some of the employees who were
initially laid off were recalled back to duty, the basis of which was passing the
1997 efficiency rating to meet the Companys operational requirements.
PAL decided to adopt Plan 14 on June 12, 1998. Three days after, or June
15, 1998, it sent notices of retrenchment to its cabin crew personnel to take effect
on July 15, 1998. However, after allegedly realizing that it was going to retain 22
of its aircraft instead of 14, and after more than 1,400 of its cabin crew have been
fired- during the period from November 30, 1998 to December 15, 1998, it
suddenly recalled to duty 202 of the retrenched cabin crew personnel.
This only proves that PAL was not aware of the true state of its finances at
the time it implemented the assailed massive retrenchment scheme. It embarked
on the mass dismissal without first undertaking a well-considered study on the
proposed retrenchment scheme. This view is underscored by the fact that
previously, PAL terminated the services of 140 probationary cabin attendants, but
rehired them almost immediately and even converted their employment into
permanent and regular, even as a massive retrenchment was already looming in the
horizon.
To prove that PAL was financially distressed, the Court pointed out that it
could have submitted its audited financial statements but it failed to present the
same to the Labor Arbiter. That PAL was placed under receivership did not excuse
it from submitting to the labor authorities copies of its audited financial statements
to prove the urgency, necessity and extent of its retrenchment program. Indeed,
PAL should have presented its audited financial statements for the years
immediately preceding and during the time retrenchment was carried out. But it
did not.
While PAL did submit its audited financial statements when the case was
already before the Court of Appeals, the Supreme Court asserted that the same
were copies of the consolidated audited financial statements for the years 2002,
2003 and 2004. In addition, the Court stressed that these are not the financial
statements that would have shown PALs alleged precarious position at the time it
implemented the massive retrenchment scheme in 1998. PAL should have
18

submitted its financial statements for the years 1997 up to 1999; and not for the
years 2002 up to 2004 because these financial statements cover a period markedly
distant to the years in question, which make them irrelevant and unacceptable .
Finally, the Court averred that there is no proof that PAL engaged in cross-cutting
measures other than a mere reduction in its fleet of aircraft and the retrenchment of
its 5,000 employees.
Coming now to the fourth element namely, good faith, the Supreme Court
recollected its previous rulings that the hiring of new employees and subsequent
rehiring of retrenched employees constitute bad faith; that the failure of the
employer to resort to other less drastic measures than retrenchment seriously belies
its claim that retrenchment was done in good faith to avoid losses; and that the
demonstrated arbitrariness in the selection of which of its employees to retrench is
further proof of the illegality of the employer's retrenchment program, not to
mention its bad faith. Thereafter, the Court affirmed that PAL was wanting in good
faith as borne out by the following facts and circumstances.
When PAL implemented Plan 22, instead of Plan 14, which was what it had
originally made known to its employees, it could not be said that it acted in a
manner compatible with good faith. It offered no satisfactory explanation why it
abandoned Plan 14; instead, it justified its actions of subsequently recalling to duty
retrenched employees by making it appear that it was a show of good faith; that it
was due to its good corporate nature that the decision to consider recalling
employees was made. The truth, however, is that it was unfair for PAL to have
made such a move; it was capricious and arbitrary, considering that several
thousand employees who had long been working for PAL had lost their jobs, only
to be recalled but assigned to lower positions (i.e., demoted), and, worse, some as
new hires, without due regard for their long years of service with the airline.
The irregularity of PALs implementation of Plan 14 becomes more apparent
when it rehired 140 probationary cabin attendants whose services it had previously
terminated, and yet proceeded to terminate the services of its permanent cabin crew
personnel.
In sum, we find that PAL had implemented its retrenchment program in an
arbitrary manner and with evident bad faith, which prejudiced the tenurial rights of
the cabin crew personnel.
Moreover, the management's September 4, 1998 offer to transfer PAL shares
of stock in the name of its employees in exchange for the latter's commitment to
suspend all existing CBAs for 10 years; the closure of its operations when the offer
was rejected; and the resumption of its business after the employees relented; all
indicate that PAL had not acted in earnest in regard to relations with its employees
at the time."

19

With respect to the fifth element, viz., the use of f air and reasonable criteria
in selecting employees to be dismissed, the Court underscored the fact that this
standard is of paramount importance because an employer's retrenchment program
could be easily justified considering the subjective nature of this requirement. The
adoption and implementation of unfair and unreasonable criteria could not easily
be detected especially in the retrenchment of large numbers of employees, and in
this aspect, abuse is a very distinct and real possibility. The Court found that the
employer in this case abused its right to dismiss even as it held that, in assessing
the over-all performance of each cabin crew personnel based alone on the year
1997 or only one year's worth of job performance for evaluation, PAL virtually
disregarded the concept of seniority, loyalty and past efficiency, and treated all
cabin attendants as if they were on equal footing, with no one more senior than the
other. This made the evaluation of each employee's efficiency rating "capricious
and prejudicial to PAL employees covered by it."
"In sum, PAL's retrenchment program is illegal because it was based on
wrongful premise (Plan 14, which in reality turned out to be Plan 22, resulting in
retrenchment of more cabin attendants than was necessary) and in a set of criteria
or rating variables that is unfair and unreasonable when implemented. It failed to
take into account each cabin attendant's respective service record, thereby
disregarding seniority and loyalty in the evaluation of overall employee
performance."
And so it was that the Supreme Court nullified the assailed decision of the
Court of Appeals, which affirmed the decision of the NLRC setting aside the Labor
Arbiter's findings of illegal retrenchment, and rendered a new ruling finding PAL
guilty of illegal dismissal and ordering it to reinstate the cabin crew Personnel who
were covered by the retrenchment and demotion scheme effective on July 15,
1998. The employees were awarded full backwages without loss of seniority rights
inclusive of allowances and other monetary benefits, computed from the time of
their separation up to the time of actual reinstatement. They were also awarded
attorney's fees.
ABSTRACTS OF SELECTED
SUPREME COURT DECISIONS IN LABOR LAW
By Atty. Vicente B. Foz
Termination of Employment
A TALE OF A BANK OFFICER-DEPOSITOR VIOLATING BANK
REGULATIONS, FALSIFYING HIS PASSBOK TO COVER UP FALSE
TRANSACTION.

20

Philippine National Bank, Ramon Brigido L. Velasco, GR166096, Sept. 11,

2008, Reyes, R.T. J. The bank audit officer and his wife maintained a dollar
savings account at PNB Escolta branch. He was charged with transacting a nobook withdrawal against his account at the bank's Ligao Albay branch and failing
to present the required letter of introduction. The Ligao branch is an off-line
branch, or with no network connection with other branches and the head office.
The irregular inter-bank withdrawal was aggravated when the Escolta branch failed
to post the withdrawal into the computer, resulting in the account balance
overstatement. Presumed to be fully aware that the deposit and the withdrawal of
the amount was not reflected on the passbook, he appropriated the amount for his
personal benefit, free of interest, to the damage and prejudice of the bank. The
bank found him guilty of grave misconduct. In view of his length of service and
absence of actual loss to the bank, he was penalized with forced resignation with
benefits.
Court ruling: The manager committed serious misconduct. As an audit
officer, he should be the first to ensure that banking laws, policies and rules and
regulations are strictly observed by its officers. The serious misconduct was
aggravated when he presented a falsified passbook to make it appear that he did
not commit any misdeed. He worked for the bank for 18 long years, his last
position being as manager 1 of the office which examines the bank's books of
account. Thus, when he violated the bank rules and regulations and tried to cover
up his infractions by falsifying his passbook, he committed them not only as a
depositor but also, or rather more so, as a bank officer.
bank.

Taken together, his acts render him unfit to remain in the employ of the

Managerial employees like him are tasked to perform key and sensitive
functions and are bound by more exacting work ethics. Indeed, not even his 18
years of service could exonerate him. But because he restituted the amount, akin to
no actual loss to the bank, and served the bank for a long time, the bank imposed
on him the penalty, of forced resignation with benefits, instead of dismissal. He
was granted P542,110. 75 as separation benefits which was used to offset his loan
in the bank, leaving an outstanding balance of P167,625.82. We find that the bank
acted humanely under the circumstances.
GROSS
NEGLIGENCE
PLUS
SERIOUS
MISCONDUCT;
NUMEROUS INFRACTIONS, MEMORANDA WITH WARNINGS
Marcial Aparece v. J. Marketing Corp. GR 174224, Oct. 17, 2008, Tinga, J.
JMC is engaged in the wholesale and retail of home appliances and motorcycle
units. Aparece, credit investigator /collector with a motorcycle. lost seven pages of
the turnover sheets and 230 ledger cards and several official receipts; reported late
on several occasions and would leave the office without permission in violation of
21

company rules and regulations; unmindful of all the memoranda and warnings, he
was caught sleeping while on duty several times; did not report to the office before
noon break; his motorcycle unit was reported missing after he left it in front of the
company office, and was only recovered after earnest efforts. Due to these
numerous infractions and after several memoranda with warnings, he was
administratively investigated after which he was formally terminated.
Court ruling: Employee's acts constituted gross negligence and serious
misconduct warranting his dismissal. He was undoubtedly negligent and careless
in handling of company property and committed a series of violations of company
policies. His conduct exhibited his nonchalance and insolence, traits that have no
place in the work setting.
To justify the dismissal of an employee for negligence, the act must not only
be gross but also habitual, although it is not necessary that the employer show that
he has incurred actual losses, damage or prejudice by reason of the employee's
conduct (Department of Labor Manual, Sec. 4343.0 1(2)
Serious misconduct, on the other hand, 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 in judgment. For
serious misconduct to warrant the dismissal of an employee, it (1 ) must be serious;
(2) must relate to the performance of the employee's duty; and (3) must show that
the employee has become unfit to continue working for the employer (Roquero v.
Philippine Airlines, OR 152329, April 22,2003,449 Phil 437,443).
ALL ABOUT RELEASES AND QUITCLAIMS: INTELLIGENCE,
RANK, EDUCATIONAL AND PROFESSIONAL BACKGROUND AMID
EMPLOYER PRESSURE: DID EMPLOYEES VOLUNTARILY RETIRE?
Universal Robina Sugar Milling Corp. (URSUMCO v. Agripino Caballeda
and Alejandro Cadalin, GR 156644, July 28,2008, Nachura, J. Employer claimed
the employees voluntarily retired when they filed their applications for retirement
with all documentary requirements, accepted the retirement benefits and executed
quitclaims in favor of the company. The employees contended they were merely
forced to comply as they were no longer given any work assignment and
considering that employment severance is a condition precedent for them to
receive their retirement benefits.
Court ruling: The employees did not voluntarily retire but were rather forced
to retire, tantamount to illegal dismissal. The employer failed to establish all the
following requisites for the validity of quitclaims executed by employees: 1) the
employee voluntarily executes a quitclaim, 2) no fraud or deceit on the part of the
parties; 3) the quitclaim's consideration is credible and reasonable; and 4) the
contract is not contrary to law, public order, public policy, morals or good customs
22

or prejudicial to a third person with a right recognized by law (Sime Darby

Filipinos, Inc. v. Arguilla, 143542, June 8, 2006, 490 SCRA183, 201. In
exceptional cases, the Court has accepted the validity of quitclaims if the employer
is able to prove the above requisites.
Generally, 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. (JMM Promotion and Management Inc, v. CA. 439 Phil.
t, 11, 2002). They are frowned upon as contrary to public policy. A quitclaim is
ineffective in baarring recovery of the full measure of a worker's right, and the
acceptance of benefits from it does not amount to estoppels (R &E Transport Inc.
V, Latag, 467 Phil. 355,369, 2004).
The reason is laid down in Lopez Corporation v. Federation of the Sugar
Workers (GR 75700-01, August 30, 1990, 189 SCRA 179,193): "Employer and
employees, obviously, do not stand on the same footing. The employer drove the
employee to the wall. The latter must have to get hold of money. Because, out of
job, he had to face harsh necessities of life. He thus found himself in no position to
resist money proffered. His, then, is a case of "adherence, not of choice. One thing
sure, however, is that petitioners did not relent their claim. They pressed for it.
They are deemed not to have waived any of their rights. Renuntiatio non
praesumitur. "
Moreover, the employer, not the employee, has the burden of proving that
the quitclaim was voluntarily entered into. In previous cases, we have considered,
among others, the educational attainment of the employees concerned in upholding
the validity of the quitclaims which they have executed in favor of their employers.
In one case, we held that employee was not an unsuspecting or a gullible person.
He was a University of San Carlos political science instructor. He was also at that
time a university law student. In another case, we held that the employee, a
lawyer, could not have reneged on the release, waiver and quitclaim he executed,
since lawyers are not easily coerced into signing legal documents.
On the other hand, Becton Dickinson Phils., Inc. v. NLRC (GR 159969 &
160116, Nov. 15, 2005,475, SCRA 123,147) held that there is no connection
between intelligence and even the employee's position in the company when it
concerns the pressure which the employer may exert upon the employee to sign a
release and quitclaim. "A lowly employee or a sales manager, as in the present
case, who is confronted with the same dilemma of whether signing a release and
quitclaim and accepting what the company offers him, or refusing to sign and walk
out without receiving anything, may do succumb to the same pressure, being very
well aware that it is going to take quite a while before he can recover whatever he
is entitled to, because it is only after a protracted legal battle starting from the labor
arbiter level, all the way to this Court, can he receive anything at all. The Court
23

understands that such a risk of not receiving anything whatsoever, coupled with the
probability of not immediately getting any gainful employment or means of
livelihood in the meantime, constitutes enough pressure upon anyone who is asked
to sign a release and quitclaim in exchange of some amount of money which may
be way below what he may be entitled to based on company practice and policy or
by law."
In the URSUMCO case, the respondents are rank-and-file employees. They
are simple folks who rely on their work for the daily sustenance of their respective
families. Without a convincing proof of voluntariness in submitting the
documentary requirements and executing the quitclaim, it cannot simply be
assumed that employees were not subjected to the very same pressure mentioned in
Becton. Moreover, employees' filing an illegal dismissal case against petitioners
completely negates the claim that they voluntarily retired. The employees
vigorously pursued its case against petitioners, all the way up to this Court.
Without doubt, this manifests that they had no intention of relinquishing their
employment, wholly incompatible to employer's assertion that they voluntarily
retired.
Unless there is a showing that the employee signed involuntarily or under
duress, quitclaims and releases are upheld by this Court as the law between the
parties (citing C. Pianos Commercial V. NLRC, G R 144619, Nov.11, 2005, 474
SCRA 608; Unicorn Safety Glass Inc. v. Basarte, G R 154689, Nov. 25, 2004, 444
SCRA 287; Philippine Carpet Employees Association v. Philippine Carpet
Manufacturing Corp. 394 Phil. 716,2000). In such a case, it is binding on the
parties and may not be later disowned simply because of a change of mind
(Periquet v. NLRC, GR 91298, June 22, 1990, 186 SCRA 724).
(NOTE: However, in a different tenor, in Bay Haven Inc. vs Florentine
Abuan, et al, GR 160859, July 30,2008, Austria-Martinez, the Court cited the
policy laid down in AFP Mutual Benefit Association ( AFPMBAI-EU (No. L39140, May 14,1980,97 S C R A 7 I 5 , 729 - 7 3 0) : "In labor jurisprudence, it is
well established that quitclaims and/or complete releases executed by the
employees do not stop them from pursuing their claims arising from the unfair
labor practice of the employer. The basic reason for this is that such quitclaims are
against public policy, and therefore, null and void. The acceptance termination pay
does not divest a laborer of the right to prosecute his employer for unfair labor
practice acts (Carino vs. ACCFA,L-19808, Sept. 29,1966,18 SCRA 163; Philippine
Sugar Institute vs. CIR, L-13475, Sept. 29,1960,109 Phil. 452; Mercury Drug Co.
vs. CIR, L-23357, April 30,1974, 56 SCRA 694,704}."
(Bay Haven clarified that the above principle should benefit only the
employees who outrightly denied the quitclaims validity because it may be
supposed that those who did not protest employer's presentation of the quitclaims
in evidence have admitted the same by their silence (Rules of Court, Rule 130, Sec.
24

32).
ALL ABOUT SECURITY GUARDS; RELIEF AND TRANSFER
ORDER: UNDATED, SIMILARLY WORDED RESIGNATION LETTERS;
WHEN TERMPORARY OFF-DETAIL BECOMES PERMANENT.
Blue Angel Manpower and Security Services Inc. v. CA, GR 1611196, July
28, 2008, Velasco Jr. J. The four security guards filed a complaint for illegal
deductions and other money claims against the agency. Apprised of their
complaint, the employer dismissed them, prompting their filing of an illegal
dismissal complaint. The security agency claimed they had pleaded to resign when
told they would be investigated for insubordination, sleeping on the job, and
absence without leave. And they actually resigned through two sets of resignation
letters.
Court ruling: The resignations were involuntary and the termination of the
four guards was illegal. The undated, similarly worded resignation letters tended to
show that they were made to copy the pro-forma letters, in their own hands, to
make them appear more convincing that they had voluntarily resigned. The second
set letters were pre-drafted, similarly worded, and with blank spaces filled in with
the effectivity dates of the resignation. The guards claimed they were forced to sign
and copy the pro-forma resignation letters and quitclaims on pain that they would
not get their remaining compensation. We are inclined to believe them.
It seems unlikely and improbable that two of them would voluntarily resign
15 and 12 days after they were terminated, and inconsistent and implausible that
the other two guards would voluntarily resign and sign a quitclaim eight days after
filing a complaint for illegal deductions from their salaries. Lastly, the agency
failed to prove the charges of infractions against the guards and merely enumerated
the offenses without specifying the date and place of such infractions. Neither did
it present written notices, warnings, and affidavits of the officer-in-charge
to
support the allegations against the guards.
That the guards filed a. complaint for illegal dismissal negates the claim that
they voluntarily resigned. (Amkor Technology Philippines Inc. v. Jaunco,
GR166507, Sept. 27, 2006, 503 SCRA 683). Well-entrenched is the rule that
resignation is inconsistent with the filing of a complaint for illegal dismissal
(Oriental Ship Management Co. v. CA, GR 153750, Jan. 25, 2006,480 SCRA 100,
110). To constitute resignation, the resignation must be unconditional with the
intent to operate as such. There must be a clear intention to relinquish the position.
In this case, the complaining guards actively pursued their illegal dismissal case
against
the agency such that they cannot be said to have voluntarily resigned
from their jobs.

25

(Earlier, in Megqforce Security and Allied Services Inc. v. Hency Lactao and
NLRC, GR 160940, July 21, 2008, Austria-Martinez, J., the Court ruling: In cases
involving security guards, a relief and transfer order in itself does not sever
employment relationship between a security guard and his agency. An employee
has the right to security of tenure, but this does not give him a vested right to his
position as would deprive the company of its prerogative to change his assignment
or transfer him where his services as security guard will be most beneficial to the
client (Tinio v. CA, G R 171764, June 8, 2007, 524 SCRA 533,540). Temporary
"off-detail" or period of time security guards are made to wait until they are
transferred or assigned to a new post or client does not constitute constructive
dismissal as their assignments primarily depend on the contract entered into by the
security agencies with third parties (Mobile Protective & Detective Agency v.
Ompad, GR 159195, May 9, 2005, 458 SCRA 308,322-323).
(Indeed, in six earlier cases, the Court has repeatedly recognized that offdetailing is not equivalent to dismissal, so long as such status does not continue
beyond a reasonable time; when such a "floating status" lasts for more than six
months, the employee may be considered to have been constructively dismissed.
(In the present case, the security guard had not been given a new assignment
and the temporary "off-detail" was for seven days only. The continued failure of
Megaforce to offer him a new assignment during the proceedings before the labor
arbiter and beyond the reasonable six-month period makes it liable for constructive
dismissal. While employer claimed that the security guard was not dismissed, it
failed to reinstate him or give him work assignment during the mandatory
conciliation before the arbiter. Even when the writ of execution for his
reinstatement was served upon Megaforce, it refused to reinstate him. Clearly, the
supposed temporary "off-detail" of Lactao was meant to be a permanent one.
There is constructive dismissal if an act of clear discrimination, insensibility,
or disdain by an employer becomes so unbearable on the part of the employee that
it would foreclose any choice for him except to forego his continued employment
(Fuego v. Lourdes School of Mandaluyong, G R 152531, July 27, 2007, 528 SCRA
248, 256-257; The Philippine American Life and General Insurance Co. v.
Gramaje, G R 156963, Nov. 11, 2004, 442 SCRA 274,290). It exists where there is
cessation of work because continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and a diminution
in pay (Duldulao v. CA, GR 164893, March 1, 2007,517 SCRA 191,199; Phil.
Employ Service and Resources Inc. v. Paramio, GR 144786, April 15, 2004,427
SCRA 732,753-754).
CONSTRUCTIVE
DISMISSAL:
SUBSTANTIAL
DIMINUTION,
FEELING
OPPRESSED,
IMPOSIBLE
CONTINUE WORK.

26

PAY
TO

Siemens Philippines v. Enrico A. Domingo, GR150488, July 28, 2008,

Nachura, J. Court ruling: Domingo was constructively dismissed. His resignation
was brought about by the decision of Siemens Philippines not to renew or work for
the renewal of his consultancy contract with Siemens Germany which clearly
resulted in the substantial diminution of his salary. It brought about a feeling of
oppression compelling him to resign. The diminution in pay created an adverse
working environment that rendered it impossible for him to continue working for
Siemens Philippines. His resignation was in reality not his choice but a situation
created by the company, thereby amounting to constructive dismissal.
Siemens Philippines was ordered to pay Domingo separation pay equivalent
to one month pay for per every year of service; full backwages and other benefits
from the date of constructive dismissal up to the time of the finality of the decision;
moral damages of P50,000.00 and exemplary damages of P50,000.00 and
attorney's fees. The case is remanded to labor arbiter for computation of the
separation pay, backwages and other monetary awards due to Domingo.
(NOTE: The complainant filed the illegal dismissal case on July 6, 1995.
The labor arbiter decided it on May 28, 1997 in employee's favor but the NLRC
reversed it, declaring that he was not illegally dismissed. On March 11, 2001, the
CA declared he was constructively dismissed. Finally, Siemens Philippines
elevated the case to the Supreme Court on Dec. 13, 2001. The Supreme Court
promulgated its decision on July 28, 2008. All in all, the case went through some
13 years. But the Court remanded the case to the labor arbiter for computation of
the separation pay, backwages and other monetary awards due the complainant. In
Megaforce Security case (cited earlier), the computation of similar monetary
awards was also remanded to the labor arbiter, but with a 30-day deadline.
(In Philmare Inc. v. Benedicto Suganor, G.R. 168753, July 9, 2008, the
NLRC remanded the case of a seafarer to the labor arbiter for further proceedings
to determine, with the aid of either a private or public physician to be chosen or
agreed upon by the parties, the degree of disability of the seafarer for entitlement to
payment of benefits. The seafarer had opposed the NLRC decision which would
merely delay the proceedings.
(Court ruling: "Remanding the case to the labor arbiter would only cause
further delay and may frustrate speedy justice and, in any event, would be a futile
exercise, as in all probability the case would eventually end up with this Court
(Reyes v. Court of Appeals, GR 154448, Aug. 15, 2003, 409 SCRA 267,278, citing
Femandez v. NLRC, G.R. 195892, Jan. 28, 1998,285 SCRA 149,170). Also, this
Court has repeatedly ruled that delay in the settlement of labor cases cannot be
countenanced. Not only does it involve the survival of an employee and his loved
ones who are dependent on him for food, shelter, clothing, medicine, and
education, it also wears down the meager resources of the workers (Santos vs.
Velarde, G.R. 140753, April 30, 2003, 402 SCRA 321,329).
27

(NOTE: The Philmare decision showed that the labor arbiter originally
decided the case on Oct. 30, 2002; the NLRC, April 22, 2004; the Court of Appeals
April 29, 2005; the Supreme Court, July 9, 2008: about seven years in all. Were
the issue remanded to the labor arbiter, it would go through the NLRC, CA and the
Supreme Court for another round of litigation. )
Principle of locos parentis: class adviser's gross negligence, even if not
habitual, which led to pupil's drowning, sufficient cause for dismissal.
School of the Holy Spirit of Quezon City and/or SR. Crispina A. Tolentino v.
Corazon P. Taguiam, GR165565, July 14, 2008, Quisumbing, J. Taguiam was class
adviser of the school's Grade 5. The principal allowed the use of the swimming
pool for the class' year-end affair, Class adviser distributed parent's / guardian's
permit forms to the pupils. A pupil's permit form was returned unsigned. She
assumed that the pupil's mother allowed her child to join the activity by personally
taking her to school with packed lunch and swimsuit. She warned those who did
not know how to swim to avoid the deeper area. Two pupils sneaked out. Adviser
went out to check where they went. While she was away, the pupil whose permit
form was unsigned drowned. The pupil was rushed to a hospital where she died on
arrival. Class adviser was dismissed for gross negligence resulting in loss of trust
and confidence.
Court ruling: She had been grossly negligent. The pupil's permit form was
not signed by the parent, yet she allowed her to join the activity. With many pupils
present, it would be impossible for her by herself to watch each one. Those left at
the pool were put at greater risk when she left them unattended. The kids who
sneaked out could not have left the school premises because the gate guards would
not allow them to go out.
As a teacher who stands in loco parentis to her pupils, the class adviser
should have made sure that the children were protected from all harm while with
her. Leaving the pupils in the swimming pool all by themselves might result in an
accident A simple reminder "not to go to the deeper part of the pool" was
insufficient to cast away all the serious dangers facing the kids, especially the
victim who could not swim. This was a clear violation not only of the trust and
confidence reposed on her by the parents of the pupils but by the school itself.
Notably, her negligence, although gross, was not habitual. In view of the
considerable resultant damage, however, the cause is sufficient to dismiss her. This
is not the first time that we departed from the requirement of law that neglect of
duties must be both gross and habitual. Philippine Airlines Inc. vs. NLRC (Feb.
18.1991,194 SCRA 139) upheld the dismissal of an employee for gross negligence
in his duties which delayed the plane's flight due to aircraft damage and other
problems like hotel accommodations for passengers, re-booking, the possibility of
28

law suits and payment of special landing fees and soaring costs of replacing
aircraft parts. Fuentes vs. NLRC (No. L-75955, Oct. 28 ,1988, 166 SCRA 752)
held it was unfair for Philippine Banking Corporation to continue employing its
bank teller whose infraction was not habitual but a substantial amount of money
was lost. The sufficiency of evidence and the resultant damage to the employer
should be considered in the dismissal of the employee. In this case, the damage
went as far as claiming the life of a child.
DID EMPLOYEE COMMIT SERIOUS MISCONDUCT BY
OBTAINING COPIES OF HER PAYSLIP VOUCHERS?
The Peninsula Manila vs. Elaine M. Alipio, GR167310, June 17, 2008,
Quisumbing, J. The employee was hired a mere reliever nurse for the company's
clinic. She performed the usual work of a regular nurse since she started working.
After working for four years, she inquired why she was not receiving her 13th
month pay. After being paid for this 13th month pay, she also asked for the same
pay for the last four years, but it was denied. During a meeting, the HRM asked her
about her having several copies of her pay slip vouchers. She told the manager that
she made copies of her payslip vouchers because the company did not give her
copies. The manager was peeved by employee's response' because she was
allegedly not entitled to get copies of her pay slip vouchers. She was also told not
to report for work anymore.
Court ruling: She was illegally dismissed as a regular employee. The
termination was not for cause and without due process. Her services were engaged
by the hotel intermittently from 1993 up to 1989. Her services as a reliever nurse
were undoubtedly necessary and desirable in the hotel's business of providing
comfortable accommodations to its guests. Having rendered more than one year
of intermittent service as a reliever nurse, she had become a regular employee. The
hotel had earlier certified that she was "regular staff nurse" before her dismissal.
Her act of obtaining copies of her pay slips cannot be characterized as a
misconduct, much less a grave misconduct. On the contrary, it is absurd that she
had to resort to her own resourcefulness to get hold of these documents since it was
incumbent upon the employer to give her copies of her payslips as a matter of
course. Thus, the employee's dismissal was not based on a just cause. Misconduct
is any forbidden act or dereliction of duty. It is willful in character and implies a
wrongful intent, not a mere error in judgment. The misconduct, to be serious, must
be grave and not merely trivial (Lakepue Drug, Inc. v. Belga, G. R. 166379, Oct.
20, 2005, 473 SCRA617, 623).
She is entitled to reinstatement without loss of seniority rights and other
privileges and to full backwages, allowances, and other benefits, or their monetary
equivalent computed from the time compensation was withheld up to the time of
29

actual reinstatement (Art. 279, Labor Code). Should reinstatement be no longer

feasible, employee is entitled to separation pay equivalent to one month pay for
every year of service in lieu of reinstatement (P.J. Lhuillier, Inc. v. NLRC, GR
158758,ApriI 29, 2005, 457 SCRA 784,799, citing Gaco v. NLRC. G.R. 104690,
Feb. 23, 1994, 230 SCRA260,268).
Breach of trust: employee's inaccurate, completely false court
testimony contradicting employer bank's stand.
Rolando V. Aromin v. NLRC. Bank of the Philippine Islands, GR 164824,
April 30, 2008, Velasco, Jr., J. Aromin headed the bank's real property
management unit. After meeting with him and BPIVP Albano, Limketkai officials
offered to buy a 33, 056 sq. m. property, a BPI trust asset in Pasig City, for
P33,056,000, claiming there was already a meeting of minds, thus. a perfected
contract to sell. But the bank refused to sell the property. The company sued the
bank and top its officials in the regional trial court. Aromin and Albano submitted
a memo to the legal services division, denying the company's claim of a meeting of
minds or a perfected contract Later, Aromin testified in court that he and Albano
were authorized to sell the property and there was a perfected contract of sale. On
the basis of Aromin's testimony, the court rendered judgment finding for the
interested buyer and annulling BPI's sale of the lot to the National Book Store.
BPI dismissed him for willful breach of trust arising from his court testimony.
Court ruling: We agree with the parallel factual conclusions of the labor
arbiter, NLRC and CA on Aromin's false statements before the trial court. What
Aromin said on the witness stand was inconsistent with or the exact opposite of
what he said in his memo. He employed backhanded tactics. It is abundantly clear
that Aromin indeed committed acts which formed the basis for BPI's loss of trust
and confidence in him. The acts reflected on his competence, loyalty, and,
integrity. Thus, it is a real case of betrayal of trust and confidence, duly
substantiated, to justify the bonafide dismissal of an employee.
Aromin's testimony on the supposed meeting of minds" between BPI
represented by Aromin and Albano, and interested buyer, was peremptorily belied
by the, Supreme Court's decision of March 29, 1996 on BPI's appeal from the trial
court's decision. We can logically say in the present case, therefore, that Aromin's
testimony was inaccurate and completely false.
Breach of trust, confidence: manager's outrage, demanding: P2-million,
with court suit threat
Ma. Wenelila Tinzona v. CA, Philippine EDS-Techno Service, Inc. (PET
Inc.), GR169712, March 14, 2008, Chico-Nazario, J. The company's
administrative manager, the top-ranking Filipino manager, acted as the liaison
between Japanese management and Filipino staff. A lady employee complained
30

that the manager humiliated her when she reported back to work after recuperating
from tuberculosis. The manager insinuated in a manner loud enough to be heard
from the outside, that the employee still had the disease. But the employee had a
medical clearance to prove her fitness to work. Asked by PET for comment, the
manager denied the accusation, saying that she only intended to inform the
complainant on her legal right as a sick employee - if she planned to resign, the
company could give her separation pay. The manager asked for an independent
investigation and threatened to file a libel case against the complainant for
allegedly destroying her reputation and credibility.
PET director Ono's memo to the manager: "management was satisfied that
she did not intend to humiliate or embarrass the employee and appreciated her
concern for employees. But a little more circumspection could have readily
avoided the incident which undeniably caused unnecessary discomfort and hurt
feelings to the employee. The matter could have been discussed in private and the
employee allowed to explain instead of being preempted. As it turned out, the
manager's assumption that the employee would request for leave extension was
wrong for she had a medical certificate attesting to her fitness to return to work.
The management deemed the matter closed. Then she was reminded of its high
expectations of her position. It did not favor her notice to file legal action against
the complaining employee. Employee relations are best threshed out within the
company. Resorting to legal action is unlikely to solve but on the contrary only
exacerbate such problems. "We trust that, after emotions have calmed down, you
would still see it that way."
The manager's lawyers' letter to Ono: "Considering the position and stature
of the client in the community and business circles, we are constrained to formally
demand payment ofP2-miliion for damages, injured feelings, serious anxiety and
besmirched reputation that she is now suffering." Management was given five days
to respond, otherwise, the lawyers would file legal action to protect their client's
interests. A letter to the complainant employee sought the same amount of damages
for her allegedly baseless and unfounded accusations against the manager.
They claimed that Ono had concluded that the manager was guilty of the
employee's charges. Her letter to management presented point by point her side
and asked for an independent investigation to thresh out all issues and give her the
opportunity to be heard and to confront her accuser. Her requests were all denied.
As a result, the lawyers, decried, the manager's constitutional right to due process
was violated and judgment was rendered on mere allegations in, employee's letter complaint. She continued pressing her demand for compensation. Later, she was
dismissed for serious misconduct and breach of trust.
Court ruling: The manager has given the company more than enough reason
to distrust her. The arrogance and hostility she has shown towards the company and
her stubborn, uncompromising stance in almost all instances justify the company's
31

termination of her employment. The manager had absolutely no basis for a P2

million demand, coupled with a lawsuit, if not paid within five days. Her demand
was based on the company's alleged finding of her guilt. But she was never
charged of any offense and was never issued a notice of disciplinary action. What
was issued to her in a letter was a gentle and sound reminder to be more
circumspect in handling the incident or situations like it. Instead of seeking a
dialogue with the company on her felt grievance, she, through her lawyers, sent the
questioned demand letter to Ono. Petitioner's act bared her animosity to the
company and was definitely not a proper response of a top level manager like her
to a trivial matter.
She rejected the company's appointment of its external counsel as the
investigating panel's presiding officer and demanded for a panel of three
employees, one each for the rank-and-file, supervisory and management levels
with a Department of Labor and Employment representative. As correctly held by
the NLRC and the CA, her stance was without any legal basis.
Foster Parents Plan International / Bicol v. Demetriou (226 Phil.
421,426~1986) is controlling: "The right to dismiss or otherwise impose
disciplinary sanctions upon an employee for just and valid cause, as well as the
authority to determine the existence of said cause in accordance with the norms of
due process, belongs in the first place to the employer. In the very nature of things,
any investigation of the employee will have to be conducted by the employer
himself or his duly designated representative; and the investigation cannot be
thwarted or nullified by arguing that it is the employer who is accuser,
prosecutor and judge at the same time, x x x. Of course, the decision of the
employer meting out sanctions against the employee and the evidentiary and
procedural bases thereof may subsequently be passed on to the corresponding labor
arbiter (and the NLRC on appeal) upon the filing by the aggrieved employee of the
appropriate complaint." (words italicized by the Court for emphasis.)
COVER-UP OF BANKS TELLERS BORROWING FROM
DEPOSITS TO PAY HER PERSONAL OBLIGATIONS
Amelia R. Enriquez and Remo Sia v. Bank of the Philippine Islands and Luis
A. Fuentebetta, GR 172812, Feb. 12, 2008, Tinga., J. On the last banking day of
the year, bank teller temporarily "borrowed" P36,000.00 from her pico box to pay
her personal financial obligations. She intended to return the amount on the first
week of January. When another teller reported the matter to the bank manager and
assistant manager, both suggested that "borrowing" teller fill the shortage with a
loan from her family. She posted the corresponding amount in a withdrawal slip
signed by her parents-in law against their joint account. Bank manager and
assistant manager approved the transaction. The "borrowing" teller and the
"telling" teller signed the "white lie" report stating that first teller had inadvertently
misplaced the withdrawal slip of her mother-in-law and the transaction was
32

regularized within the same day. The second teller confided her uneasiness about it
to a colleague from another bank branch. The matter was investigated by the main
bank office. After an audit report, a hearing and interviews, the two bank
executives were dismissed for conflict of interest and breach of trust.
Court ruling: The failure of the branch bank managers to report the cash
shortage of the teller, even if done in good faith, nevertheless resulted in their
abetting the dishonesty committed by the teller. Under the bank's personnel policy,
this act of the branch officers as senior managerial employees justifies their
dismissal even on the first offense. That they had been bank employees for a long
time, if it is to be considered at all, should be taken against them. Their cover-up of
the teller's misconduct makes them unworthy of the trust and confidence demanded
by their positions. The banking industry is imbued with public interest and
mandated by law to serve the clients with extraordinary care and diligence. To
fulfill this duty, it in turn must rely on the honesty and loyalty of its employees
(Villanueva v. Citytrust Banking Corporation, 413 Phil. 776, 786, 785, GR 141028,
July 19, 2001).
CONTINUING WILLFUL DISOBEDIENCE, NEGLECT OF DUTIES,
ATTITUDE PROBLEM DEMORALIZING COM-EMPLOYEES.
Citibank, NA vs. NLRC and Rosita Tan Paragas, G.R. 159302, Feb. 6, 2008,
Carpio Morales, J Being retired after 18 years in various capacities, employee was
appointed filing clerk handling the bank's universal account opening forms. She
was informed that she committed many miss-filings and was asked to correct them
within a time-frame. She failed to comply for sometime and continued to commit
errors. Employer also found that at workplace she was "hard to deal with,
belligerent, picking fights with peers and other employees even without
provocation." She had a negative presence which affected the morale of the entire
unit and she failed to reform. Employer finally directed her to explain in writing
why she should not be dismissed for serious misconduct, willful disobedience,
gross and habitual neglect of duties and gross inefficiency. Her explanation given
in her lawyer's presence during a meeting with management officials was found
self serving. Finally, she was dismissed.
Court ruling: Employee's dismissal is upheld both for failing to meet
performance targets and committing serious misconduct. Management's appraisals
of her performance did not only show that employee failed to meet targets, but
more relevantly also consistently noted her significant behavioral and attitudinal
problems. All this, the appraisals said, affected the morale of the entire unit.
Employee even admitted that "she may have been tactless and insolent in dealing
with her superior but it does not allegedly warrant the supreme penalty of
dismissal.
When an employee, despite repeated warnings from the employer,
33

obstinately refuses to curtail a bellco inclination such that it erodes the morale of
co-employees, it may be a ground for dismissal for serious misconduct. A series of
irregularities when put together may constitute serious misconduct, which under
Art. 283 of the Labor Code, is a just cause for termination and acts destructive of
the morale of one's co-employees may be considered serious misconduct. It is her
obstinate refusal to reform herself which ultimately persuades this Court to find her
dismissal on the ground of serious misconduct as valid.
SERIOUS MISCONDUCT: EXTORTION FROM COMPANYS RICE
SUPPLIER.
Mitsubishi Motors Phi/so Corp. V. Rolando Simon and Constantino Ajero,
GR154081, April 16,2008, Tinga, J. Simon was union chairman, while Ajero was
vice-chairman of the rice subsidy sub-committee. One of the company's accredited
rice suppliers complained that the two employees had extorted money from him in
exchange for union protection for his rice store's continued accreditation in the rice
supply program. The supplier said they demanded from him P50 per sack of rice
given to employer's workers. After investigation, the employer found the
employees guilty of serious misconduct and breach of trust amounting to loss of
confidence under Art. 282 (a) of the Labor Code in relation to the company rules
and regulations for committing an act considered a crime under the law.
Court ruling: Respondent's acts constitute serious misconduct and willful
breach of trust reposed by the employer, which are just causes for termination
under the Labor Code (Art. 282 (a) Serious misconduct or' willful disobedience. by
the employee of the lawful order of his employer or representative in connection
with his work.)
The core of employer's decision to dismiss them is the statements of the
supplier and his spouse. However, testimonies are to be weighed, not numberefd;
thus it has been said that a finding of guilt may be based on the uncorroborated
testimony of a single witness when the tribunal finds such testimony positive and
credible. The sworn statements are straightforward and uncomplicated. In the
simplest of terms, they narrated how the supplier was approached by the two
employees, the actual handing out of money, and the warning not to tell the
incident to anyone. We see no reason to doubt their credibility, nor any motive for
them to make up the story. They are not employees of the company; even
respondents admitted that they could not think of any motive why the supplier
would accuse them of extortion. The testimonies of persons not shown to be
harboring any motive to depose falsely against an employee must be given due
credence, particularly where no rational motive is show why the employer would
single an employee for dismissal unless the latter were truly guilty (Philippine
Airlines V. NLRC, GR126805, March 16, 2000, 328 SCRA273).
In demanding money from the rice supplier, they gave the impression of
34

having authority to cause the termination of his contract should he not

accommodate their demand. This amounts to fraud and extortion, and possible
estafa under Article 318 of the Revised Penal Code. Under the employer's rules,
the commission of an act which is considered a crime under the Republic of the
Philippines, committed against the company or its employees is punishable by
dismissal after administrative conviction. By their acts they have betrayed not only
the employer, but also their fellow union members who elected them, to their
positions. They have prejudiced the company's rice subsidy program, and disrupted
the efficient administration of the services and benefits to their fellow employees.
Without doubt, there is substantial evidence to support respondents dismissal for
cause.
USING PROHIBITED DRUGS DURING WORKING HOURS.
Eduardo Bughaw Jr. vs Treasure lsland Industrial Corp., GR 173151, March
28,2008, Chico-Nazario, J. Employee Loberanes was caught in possession of
shabu, arrested and jailed by police officers. During investigation, he admitted the
crime and implicated co-employee Bughaw who allegedly gave the money to buy
the illegal drugs to be consumed for the rest of the month. Employer required
Bughaw to explain why no disciplinary action should be imposed on him for illegal
drug activities. He was directed to appear at a hearing, but failed to do so, He did
not also show up in other administrative hearings. In a third letter, employer
terminated his employment.
Court ruling: The charge of drug abuse inside the company's premises and
during working hours against employee constitutes serious misconduct, which is
one of the just causes for termination. The Court took judicial notice of scientific
findings that drug abuse can damage the mental faculties of the user. It is beyond
question that any employee under the influence of drugs cannot possibly continue
doing his duties without posing a serious threat to the lives and property of his coworkers and even his employer. Loberanes's statements to the police is evidence
which can be considered by employer against Bughaw. He failed to controvert
Loberanes' claim and appear at the two hearings to explain and defend himself
from the charge. Thus, employer cannot be faulted for considering only the
evidence at hand, Loberanes' statement, and conclude there was just cause for
employee's termination. It was by the employee's own omission and inaction that
he was not able to present evidence to refute the charge against him.
NUMEROUS UNAUTHORIZED ABSENCES: AUTHORIZED CAUSE
FOR EMPLOYEE DISMISSAL.
San Miguel Corporation and Geribern Abetta v. NLRC and Ernesto Ibias,
G.R. 146121-22, April 16, 2008, Tinga, J, The company policy requires that
employee's absence be covered by a plant doctor's certification that employee "was
absent due to sickness or by a duly-approved application for leave of absence filed
35

at least six days before intended leave. Otherwise, it will be considered as absence
without permission (AWOP) and will be penalized. In the scale of violations, the
worse infraction is AWOP for six or more consecutive working days which is
deemed abandonment of work, for which the penalty is dismissal.
Employee's time cards showed he was on AWOP for several days in three
months for which he was suspended for some of these absences. During a company
investigation, he admitted some his absences but claimed having a family problem
which needed his attention; He was confused and was unable to inform or seek
permission from his superior. Before the labor arbiter, he presented copies of
medical certificates and a barangay certification that he attended hearings during
some of the days of his absence. But be never submitted these documents to the
employer. In the Supreme Court he sought to belittle the employer's complaint by
claiming that employer had been too rigid in applying company rules on leaves.
Court ruling: Employee was validly dismissed and afforded due process.
Employee cannot feign surprise nor ignorance of the earlier AWOPs he had
incurred. He was informed of and warned for AWOPs. He received the notices
but refused to acknowledge them. The medical and barangay certifications cannot
work to erase his AWOPs.
Even if he was not punished for his subsequent AWOPs, the same remained
on record. He was aware of the number of AWOPs he incurred and should have
known that these were punishable under company rules. The fact that he was
spared from suspension cannot be used as a reason to incur further AWOPs and be
absolved from the penalty.
Was penalty of dismissal disproportionate to employee's absences because
employer has been inconsistent and lax in implementing its policy on attendance?
What the lower tribunals perceived as laxity, we consider as leniency. Employer's
tendency to excuse justified absences actually redounded to the benefit of
employee since imposing the corresponding penalty would have been deleterious
to him. In a world where "no work-no pay" is the rule of thumb, several days of
suspension would have been difficult for an ordinary working man like respondent.
He should be thankful that employer did not exact from him almost 70 days
suspension before he was finally dismissed from work.
Employer acted well within its rights in imposing the penalty of dismissal
for the 12th and 13th AWOPs. It has the prerogative to prescribe reasonable rules
and regulations necessary for the proper conduct of its business and impose
disciplinary measures to assure compliance. It has also the prerogative to impose
sanctions lighter than those specifically prescribed by its rules, or to condone
completely the violations of its erring employees. Of course, this prerogative must
be exercised free of grave abuse of discretion, bearing in mind the requirements of
justice and fair play.
36

Retrenchment or redundancy, or neither? Both defined, differentiated.

AMA Computer College Inc. v. Ely Garcia and Ma. Teresa Balla, GR16673,
April 14, 2008, Chico-Nazario, J., Employer claimed that the two complainants
was justly dismissed because the college experienced financial difficulties,
affecting all of its campuses and departments. Appropriate notices were given to
the two employees, along with 52 others, as part of its austerity program brought
about by the countrys prevailing economic condition. The two employees'
positions were found no longer necessary as their work could be handled by other
employees.
Court ruling: In sum, as found by the labor arbiter, NLRC and CA, which
the Court affirms, the employees were illegally dismissed.
Employer raised different grounds to justify its dismissal of the two
employees: before the labor arbiter, it cited retrenchment; before the NLRC, it
claimed redundancy; and before the CA, both retrenchment and redundancy. It is
apparent that employer was confused as to the real reason for terminating
employees' employment. Both retrenchment and redundancy are authorized causes
for termination of employment under the Labor Code (Art. 283). But they are two
distinct grounds for termination arising from different circumstances, which are in
no way interchangeable,
Redundancy exists when the service capability of the workforce is in excess
of what is reasonably needed to meet the demands of the business enterprise. A
reasonably redundant position is rendered superfluous, such as by over-hiring of
workers, decreased volume of business, dropping of a particular product line
previously manufactured by the company or phasing out of service activity. Among
the requisites for a valid redundancy program are 1) the good faith of the employer
in abolishing the redundant position, and 2) fair and reasonable criteria in
ascertaining what positions are to be declared redundant and accordingly abolished
(Asian Alcohol Corporation v. NLRC, 364 Phil. 912, 930, 1999).
Employer exercises its business judgment by determining whether the
employee's services are no longer necessary or sustainable and, therefore, properly
terminable for being redundant. Its wisdom or soundness is not subject to
discretionary review of the labor arbiter and NLRC, provided there is no violation
of law and no showing that it was prompted by arbitrary or malicious act. But it is
not enough for the company to merely declare that it has become overmanned. It
must produce adequate proof of such redundancy to justify the dismissal of the
affected employees (Asufrin Jr. v. San Miguel Corporation, 469 Phil. 237, 245,
2004).
The following evidence may be presented to substantiate redundancy: the
37

new staffing pattern" feasibility studies/proposal on the viability of the newly

created positions, job description and the approval by the management of the
restructuring (Panlilio v. NLRC, 346 Phil. 30, 34, 1997). Employer's new table of
organization and the certification that the functions of many rank-and-file
employees, including the two complainants, were now being performed by
supervisory employees, do not satisfy the requirement of substantial evidence
adequate to support a conclusion (Mendoza v. NLRC, 395 Phil 1113, 1130, 1999).
They are grossly inadequate and mainly self-serving. More compelling evidence
would be a comparison of the old and new staffing patterns, a description of the
abolished and newly created positions, and proof of the business targets and failure
to attain them, necessitating reorganization or stream lining.
To further justify its dismissal of the two employees, several memoranda
were presented that they had been remiss in performing their duties and perennially
tardy and absent. The memoranda are self-serving and irrelevant as redundancy
proof. Redundancy arises because the employee's position is no longer needed in
the whole business of the enterprise, and not because the employee unsatisfactorily
performed his duties and responsibilities. Redundancy is an authorized cause for
termination of employment under Art 283 of the Labor Code, while serious
misconduct or willful disobedience or gross and habitual neglect of duties by the
employee is a just cause for dismissal under Art. 282.
Further casting doubt as to employer's redundancy or "streamlining
program", the employer failed to file a formal notice to the DOLE at least onemonth before the intended dismissal (Art. 238 of the Labor Code). The notice
would enable DOLE to verify the employer's claim of declining student enrollment
and excess manpower. It would have established that employer was pursuing its
streamlining program in good faith.
The employer also failed to prove using fair and reasonable criteria for
choosing which employees to dismiss. Among accepted criteria in implementing a
redundancy are less preferred status, e.g. temporary employees; efficiency; and
seniority (Asufrin Jr. v.' San Miguel Corporation, 469 Phil 237, 247, 2004). There
is no showing that employer applied any of these criteria in deciding that, among
its employees, the two complainants should be dismissed thus, making their
dismissal arbitrary and illegal.
Retrenchment, on the other hand, is employment termination effected during
periods of business recession, industrial depression, seasonal fluctuations, lack of
work or considerable reduction in the volume of the employer's business (De la
Cruz v. NLRC, 33.5 PhiL932, 939, 1997, 335 Phil. 932:939, J 997). Resorted to by
an employer to avoid or minimize business losses," it is a management prerogative
consistently recognized by this Court (Sumerville Stainless Steel Corp. v. NLRC,
350PhiL 859,869,1998).

38

Three basic requisites for valid retrenchment: it is necessary to prevent

losses and such losses are proven; the written notice to the employees and to
DOLE at least one month before the intended retrenchment; and payment of
separation pay of one month or at least one-half month pay for every year of
service, whichever is higher (FF. Marine Corp. v. NLRC, GR 152039, April 8,
2005,455 SCRA 154,165).
To justify retrenchment, an employer must prove serious business losses
(Balbalec v. NLRC, 321 Phil 771, 778, 1995). Indeed, not all business losses
suffered by the employer would justify retrenchment under Art. 283 of the Labor
Code (Guerrero v NLRC, 329 Phil 1069, 1075, 1996). The "loss" referred to in Art
283 cannot be just any kind or amount of loss; otherwise, a company could easily
feign excuses to suit its whims and prejudices or to rid itself of unwanted
employees.
In a number of cases, the Court has identified the necessary conditions for
the company losses to justify retrenchment: the losses incurred are substantial and
not de minimis; the losses are actual or reasonably imminent, or the expected
imminent losses sought to be forestalled are proven by sufficient and convincing
evidence. In the present case, employer miserably failed to prove any of the
foregoing.
But other than its bare allegations that the employees were retrenched due to
financial difficulties experienced in all its campuses and departments; the employer
failed to present any supporting evidence. It also failed to file the necessary notice
to DOLE one month before the purported retrenchment. As found by the labor
arbiter, as affirmed by the NLRC and CA, the employer did not give the two
employees sufficient separation pay. Thus, the employer failed to effect a valid
retrenchment of the two employees.
SIMPLY CLOSURE OF BUSINESS OR RETRENCHMENT?
AUDITIED FINANCIAL STATEMENTS TO PROVE BUSINESS LOSSES.
Sari-Sari Group of Companies Inc. vs. Piglas Kamao, et al, GR 164624,
Aug. 11, 2008, Austria-Martinez, J. The issue was whether the case involved
simply closure of business or retrenchment of employees. Employer claimed it
terminated the employees on the ground of closure under Art. 283 of the Labor
Code, thus evidence of substantial losses is not required for termination. On the
other hand, the terminated employees claimed. it was retrenchment requiring
evidence of substantial business reverses.
In its initial notice to DOLE, employer did not clearly state whether it was
retrenching workers or simply closing its
branch. In a position paper to the
labor arbiter, it stated that it had retrenched employees, using the term
"retrenchment" or "termination." In its second notice to DOLE, it said that closure
39

of the branch was due to business losses that resulted in "retrenchment" of

employees. The labor arbiter disposed of the issue by stating that closing the
branch was a management prerogative, citing two Supreme Court decisions which
involved retrenchment issue. In opposing the employees' appeal to the NLRC,
employer raised the argument that it may close or cease business operations even if
not suffering from serious business losses as long as it pays the employees their
termination pay. Throughout the entire proceedings before the LA and NLRC, the
employees were adamant that employer failed to resent sufficient and convincing
evidence of the alleged losses to justify a retrenchment of workers. The CA ruled
in their favor.
Court ruling: We find that employer had in fact retrenched workers. All its
pleadings submitted to the LA clearly showed that what it had in mind when it
terminated the employees was that it had retrenched workers. It was only when the
employees appealed the LA decision that the employer pursued a new theory a
simple closure of business which did not require proof of substantial losses. This
we cannot allow. When a party deliberately adopts a certain theory, and the case is
tried and decided on that theory in the court below, the party will not be permitted
to change his theory on appeal. To permit him to change his theory will be unfair
to the adverse party.
The requisites of retrenchment are: losses expected should be substantial and
not merely de minimis in extent; the substantial losses apprehended must be
reasonably imminent; retrenchment must be reasonably necessary and likely to
effectiyely prevent the expected losses, and the alleged losses; if already incurred,
and the expected imminent losses sought to he forestalled, must he proven by
sufficient and convincing evidence. (Lopez Sugar Corp. v. Federation of Free
Workers, GR 75700-01, Aug. 30, 1990, 189 SCRA 179, 180-887) (Emphasis
supplied)
In this case, employer failed to submit its audited financial statements to the
Securities and Exchange Commission for 1991 and 1992. Other than employer's
bare allegation or irreversible losses, there is no evidence to prove and substantiate
it. In Uichico v. NLRC, GR 121434, June 2, 1997, 273 SCRA 35), the Court
affirmed the NLRC findings that as to the kind of evidence needed to prove
irreversible loss: "the statement of Profit and Losses." But the profit-loss statement
submitted by employer does not bear the signature of a certified public accountant
or audited by an independent auditor, thus, it has no evidentiary value."
(NOTE: The importance of profit- losses financial statements to prove
business losses was also earlier discussed in Juvy M Manatad v. Philippine
Telegraph and Telephone Corp. GR 172363, March 7, 2008, Chico-Nazario, J.
which ruled that employer indeed experienced serious financial crises as shown in
the financial statements audited by independent auditors, SGV & Co. and Alba
Ledesma & Co. It is unlikely that employer was just feigning business losses in
40

order to ease out employees. Financial statements audited by independent external

auditors constitute the normal method of proving the profit and loss performance
of a company as enunciated in San Miguel v. Aballa (GR 149011 , June 28, 2005,
46 SCRA 392,429; and Anino vs NLRC. GR 123226, May21, 1998, 290 SCRA489,
502). No evidence can best attest to a company's economic status other than its
financial statement. We find that the company was fully justified in carrying out a
retrenchment program since it was undergoing business reverses, not only for a
single year, but for several years prior to and even after the program. In. the span of
years, it realized profits only in one year.
(The evidentiary weight accorded audited financial statements is defined in
Asian Alcohol Corporation v. NLRC(GR 131108, March 25, 1999, 305 SCRA 416,
430-431). In that case, the Court ruled that unless audited by independent auditors,
financial statements can be assailed as self-serving documents. But it is not enough
that only financial statements for the year during which retrenchment was
undertaken, are presented in evidence. For it may happen that while the company
has indeed been losing, its losses may be on a downward trend, indicating that
business is picking up and retrenchment, ,being a drastic move, should no longer
be resorted to. Thus, the failure to show its income or loss for the immediately
preceding year or to prove that it expected no abatement of such losses in the
coming years, may bespeak the weakness of its cause. It is necessary that the
employer also show that its losses increased through a period of time and that the
condition of the company is not likely to improve in the near future.)
DISABILITY
RETIREMENT
AFTER
EATING
MUSSLES
(TAHONG): ARE RETIREMENT BENEFITS TAXABLE? DO LABOR
TRIBUNALS HAVE JURISDICTION OVER THE ISSUE? DO
RETIREMENT BENEFITS BAR SEPARATION BENEFITS?
Ma. Isabel T. Santos, represented by Antonio P. Santos, v. Servier
Philippines Inc. and NLRC, GR 166377, Nov. 28, 2008, Nachura, J. After a
meeting of human resources managers in Paris, France, Santos, Servier Philippines
HRM, had dinner with her family at Leon des Bruxelles, a Paris restaurant known
for its specialty, mussles (commonly known as "tahong" in the Philippines). 'She
suffered stomach pain and vomiting; was hospitalized; fell into a coma and stayed
in an intensive care unit for almost two months. Hospital finding: probable cause
of her sudden attack after ingesting mussles, was "alimentary allergy" with
uticarial eruption. At the St. Luke's Medical Center, the physician concluded that
patient had not fully recovered. The employer was constrained to terminate her
services. The company offered a package of benefits, including retirement
amounts. But a portion of the retirement benefits was withheld for taxation
purposes. Through her husband, she filed a complaint for payment of the
balance of retirement benefits, separation pay and other monetary claims.
Court ruling: The only ultimate issue for resolution: are employee's
41

retirement benefits taxable? Yes. Section 32 (6) (a) of the New National Internal
Revenue Code provides for exclusion of retirement benefits from gross income.
For the retirement benefits to be exempt from the withholding tax, the taxpayer is
bound to prove the concurrence of the following elements: 1) a reasonable private
benefit plan is maintained by the employer; 2) the retiring official or employee has
been in the service of the same employer for at least 10 years; 3) the retiring
official or employee is not less than 50 years of age at the time of his retirement;
and 4) the benefit had been availed of only once.
Petitioner was qualified for disability retirement. But since she retired at
only 41 years old and had served only for eight years, she failed to comply with the
age and service requirements. Therefore, the employer cannot be faulted for
deducting the amount for taxation from her retirement benefits.
The labor arbiter and NLRC have jurisdiction over the issue since it is
intertwined with the main issue of whether or not employees benefits have been
fully given her. It is, therefore, a money claim arising from the employeremployee relationship, which clearly falls within the jurisdiction of the labor
arbiter and NLRC.
Is the employee entitled to both separation pay and retirement benefits? The
company dismissed the employee from her employment based on Article 284 of
the Labor Code (Disease as Ground for Termination) which provides for separation
pay. Under this provision, she had the right to demand separation pay. However,
the employer had established a retirement plan specifically providing for
"disability retirement" for concerned employees.
Aquino v. NLRC GR 87653, Feb. 11, 1992, 206 SCRA 1118) has ruled that
payment of retirement benefits does not bar the retiree from receiving separation
pay. Separation pay is a statutory right designed to provide the employee with the
wherewithal during the period that he/she is looking for another employment. On
the other hand, retirement benefits are intended to help the employee enjoy the
remaining years of his life, lessening the burden of worrying about his financial
support, and are a form of reward for his loyalty and service to the employer.
Hence, they are not mutually exclusive. However, this is only true if there is no
specific prohibition against the payment of both benefits in the retirement plan
and/or in the collective bargaining agreement.
In the instant case, the retirement plan bars the employee from getting
additional benefits on top of its provision. There being such a provision, as held in
Cruz v. Philippine Global Communications Inc. (GR 141858, May 28,2004,430
SCRA 184), employee is entitled only to either the separation pay under the
retirement benefits under the plan, and not both.
ALL ABOUT OBESITY: PHYSICAL ABNORMALITY, SICKNESS
42

OR LACK OF WILLPOWER?
Armando G. Yrasuegui v. Philippine Airlines, OR 168081, Oct. 17, 2008,
Reyes, R.T., J. Yrasuegui, a PAL international flight steward, stands five feet and
eight inches with a large body frame. The proper weight for a man of his height
and body structure is from 147 to 166 pounds, the ideal weight being 166 pounds,
as mandated by the PAL cabin and crew administrative manual. His weight
problem dated back to 1984 until 1992 or almost five years.
PAL warned him that a repeated refusal to report for weight check would be
dealt with accordingly. He was given several sets of weight check dates. Again, he
ignored the directive and did not report for weight checks. When he later tipped the
scale, he weighed 212 pounds, clearly still way above the ideal weight of 166
pounds. From then on, nothing was heard from him until he followed up his case in
1992, requesting for leniency. He weighed 219 pounds on August 20 and 205
pounds on Nov. 5, 1992. He did not deny being overweight but claimed that his
violation, if any, had already been condoned by PAL since "no action has been
taken" regarding the case "since 1988." PAL formally informed him that due to his
inability to attain his ideal weight, "and considering the utmost leniency" extended
to him which spanned almost five years," his services were considered terminated
effective immediately.
Court ruling: Employee's obesity is a ground for dismissal. PAL's weight
standards constitute a continuing qualification of an employee in order to keep the
job. Tersely put, an employee may be dismissed the moment he is unable to
comply with his ideal weight as prescribed by the weight standards.
As explained by the Court of Appeals: "The standards violated in this case
were not mere 'orders' of the employer; they were the 'prescribed weights' that a
cabin crew must maintain in order to qualify for and keep his or her position in the
company. In other words, they were standards that establish continuing
qualifications for an employee's position. In this sense, the failure to maintain these
standards does not fall under Article 282(a) whose express term require the
element of willfulness in order to be aground for dismissal. The failure to meet the
employer's qualifying standards is in fact a ground that does not fall squarely under
grounds (a) to (d) and is therefore one that falls under Article 282(e) -the 'other
causes analogous to the foregoing.
"By its nature, these qualifying standards are norms that apply prior to
and after an employee is hired. They apply prior to employment because these are
the standards a job applicant must initially meet in order to be hired. They apply
after hiring because an employee must continue to meet these standards while on
the job in order to keep his job. Under this perspective, a violation is not one of the
faults for which an employee can be dismissed pursuant to pars, (a) to (d)of Article
282; the employee can be dismissed simply because he no longer 'qualifies' for his
43

job irrespective of whether or not the failure to qualify was willful or intentional. "
The employee claims that obesity is a "physical abnormality and/or illness."
But being able to reduce his weight several times in 1984 to 1992 shows that he
could lose weight given the proper attitude, determination, and self-discipline.
Indeed, during the hearing, employee himself claimed that "the issue is could I
bring my weight down to ideal weight which is 172, then the answer is yes. I can
do it now."
If it is true that reducing weight is costing him "a lot of expenses", he has
only himself to blame. He could have easily availed of the company physicians
assistance, per PAL advice which he ignored. Repeatedly, without validly
explaining, he did not show up when required to undergo weight checks. His
fluctuating weight indicates absence of willpower rather than illness. The
employee is not morbidly obese. At his heaviest, he was only less than 50 pounds
over his ideal weight. His obesity may not be intended, but is nonetheless
voluntary. As the CA correctly puts it, "voluntariness basically means that the just
cause is solely attributable to the employee without any external force influencing
or controlling his actions. This element runs through all just causes under Article
282, whether in the nature of a wrongful action or omission. Gross and habitual
neglect, a recognized just cause, is considered voluntary although it lacks the
element of intent found in Article 282(a), (c), and (d).
That all obese cabin attendant occupies more space than a slim one is an
unquestionable fact which courts can judicially recognize without introduction of
evidence. (Rules of Court, Rule 129, Sec. 2) It would also be absurd to require
airline companies to reconfigure their aircrafts, widening the aisles and exit doors
just to accommodate overweight cabin attendants like petitioner.
The biggest problem with an overweight cabin attendant: the possibility of
impeding passengers from evacuating the aircraft, should occasions call for it. The
job of a cabin attendant during emergencies is to speedily get the passengers out of
the aircraft safely. Being overweight necessarily impedes mobility. Indeed, in an
emergency situation, seconds are what cabin attendants are dealing with, not
minutes. Three lost seconds can translate into three lost lives. Evacuation might
slow down just because a wide-bodied cabin attendant is blocking the narrow
aisles. These possibilities are not remote.
TOTALITY
OF
INFRACTIONS:
ALCOHOL
PROBLEM,
DISOBEDIENCE, THREAT TO HARM SUPERIOR, BRAGGING ABOUT
POEA CONNECTIONS.
Brendo D. Merin v. NLRC, Great Southern Maritime Services and / or IMC
Shipping Co., GR 171790, Oct. 17, 2008. Hired as an ordinary seaman for 10
months, petitioner committed several infractions on board the vessel in a short
44

period. He failed to report for work after he drank too much alcohol at a party; he
was found sleeping in the crew's smoke cabin and roused from his slumber, he had
bloodshot eyes and was intoxicated. Inquiring from the chief officer if he would be
repatriated for the incidents, he claimed having strong connections with the
Philippine Overseas Employment Administration (POEA) and warned that should
he be repatriated, the ship agent would be held liable. The following day, the
vessel's petty officer, his immediate superior, narrated previous incidents of his
refusal to obey instructions without justifiable reasons. The petty officer also
reported that when petitioner learned of his impending repatriation, he threatened
to harm him. Petitioner was repatriated the following day, prompting him to file a
complaint for illegal dismissal.
The NLRC found substantial evidence that petitioner committed the offenses
charged against him. It took note of the POEA order, as affirmed by the DOLE
secretary, which suspended him for three years from the POEA registry of overseas
Filipino workers. Also cited was Vir-Jen Shipping and Marine Services Inc. v.
NLRC, No. L-58011-12, July 20, 1982,115 SCRA 347 which exhorted Filipino
seafarers on board foreign-going ships to conduct themselves with utmost
propriety and abide strictly with the terms and conditions of their employment
contracts.
The CA, relying on the principle of "totality of infractions," found petitioner
committed several infractions while employed for a short period. Instead of being
repentant for the offenses he committed, he even challenged his superiors to
repatriate him while bragging about his connections with POEA. Unreasonable
behavior and unpleasant deportment in dealing with the people in the workplace
are analogous to the other just causes of termination enumerated under the law, the
CA added. Petitioner's attitude is unwarranted and uncalled for and demeans not
only Filipino seamen but also the Philippine government.
Court ruling: There is just cause for petitions termination. The totality of
infractions or the number of violations committed during the period of employment
shall be considered in determining the penalty to be imposed upon an erring
employee. The offenses should not be taken singly and separately. Fitness for
continued employment cannot be compartmentalized into tight little cubicles of
aspects of character, conduct and ability separate and independent of each other.
While it may be true that petitioner was penalized for his previous infractions, this
does not and should not mean that his employment record should be wiped clean of
his infractions. After all, the record of an employee is a relevant consideration in
determining the proper imposable penalty (Challenge Socks Corporation v. CA,
GR 165268, Nov. 8, 2005, 474 SCRA 356). Despite the sanctions imposed upon
petitioner, he continued to commit misconduct and exhibit undesirable behavior on
board. Indeed, the employer cannot be compelled to retain a misbehaving
employee, or one who is guilty of acts inimical to its interests. It has the right to
dismiss such an employee if only as a measure of self-protection.
45

HOW ILLEGAL TERMINATION CASE BECAME IMMATERIALEMPLOYEES WITH ADEQUATE EDUCATIONLA BACKGROUND,
PROFESSIONAL STATUS, VOLUNTARILY RESIGNED AFTER
SUCCESSFULLY BARGAINING FOR BETTER SEPARATION PAY.
Engracio Guerzon, Jr., Lilian E. Cruz and Josephine O. Bauyon v. Pasig
Industries, Inc. (PII), GR 170266, Sept. 12, 2008, Corona, J. Petitioners were
employees of PII in its Makati office Guerzon was P II's export-import manager for
21 years. Cruz was its chief accountant for 20 years and Bauyon was a member of
the PH accounting staff since 1989. In 1995, the employer informed them that its
parent company decided to close its Makati office and transfer its functions to its
facilities in the Bataan Export Processing Zone. The three employees were given
the option to resign in which case they would be entitled to a special separation
package equivalent to one-month basic salary for each year of service. The
employees decided to resign but requested for recomputation of separation pay
based on the monthly gross pay, i.e. basic pay plus all allowances. Employer
acceded and paid them accordingly.
Despite voluntarily availing of the benefits, they filed a complaint for illegal
dismissal and payment of separation pay, retirement benefits, leave pay and 13th
month pay against the company.
Court ruling: Petitioners held responsible positions in PII. Employees of
their educational backgrounds and professional standing do not easily relinquish
their legal rights unless they intend to (Globe Telecom vs. Crisologo, GR174644,
Aug. 10, 2007, 529 SCRA 811, 818). In fact, they even bargained to improve the
terms of the special separation package and, after successfully doing so, voluntarily
resigned. Consequently, whether the streamlining of PII's operations constituted an
authorized cause for petitioners' termination became immaterial in view of their
voluntary resignation (Samiengo v. NLRC, GR 93095, June 3, 1991, 198 SCRA
111, 118-119).
TRANSFER OF UNION MEMBERS: CALOOCAN CITY TO SAN
RAFAEL, BULACAN CONSTRUCTIVE DISMISSAL? UNFAIR LABOR
PRACTICE?
Bisig Manggagawa sa Tryco vs NLRC, GR151309, Oct. 15, 2008, Nachura,
J. Tryco Pharma Corp. is manufacturer of veterinary medicines with principal
office in Caloocan City. The petitioners were helper, shipment helper and factory
worker assigned to the production department. They are members of the labor
union, exclusive bargaining representative of the rank-and-file employees.

46

The Bureau of Animal Industry of the Department of Agriculture reminded

the company that its production should be done in San Rafael, Bulacan, not in
Caloocan City. Thus, Tryco directed the petitioners to report to its Bulacan plant.
The union opposed the transfer of its members to Bulacan for being allegedly
unfair labor practice and it declared a strike. The four workers filed separate
complaints for illegal dismissal, nonpayment of overtime pay and service incentive
leave and refusal to bargain. They claimed their transfer was meant to paralyze the
union and the letter of the Bureau of Animal industry was a ploy solicited by
employer as an excuse to effect a massive transfer of employees.
Court ruling: There is no constructive dismissal. Tryco's decision to transfer
its production activities to San Rafael, Bulacan, regardless of whether it was
pursuant to the bureau's letter, was part of its inherent right to control and manage
its enterprise effectively. The transfer does not entail a demotion in rank or
diminution of salaries, benefits and other privileges of the employees. Employees,
therefore, anchor their objection solely on the ground that it would cause them
great inconvenience since they are all residents of Metro Manila and they would
incur additional expenses to travel daily from Manila to Bulacan.
Mere incidental inconvenience is not sufficient to warrant a claim of
constructive dismissal (Duldulao v. Court of Appeals. G. R. 164893, March 1,
2007, 517 SCRA 533, 541). Objection to a transfer that is 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 (Mercury
Drug Corporation vs Domingo, G R 143998; April 29, 2005, 457 SCRA 578,592).
Escobin v. NLRC (351 Phil. 973, 1998) held that transfer of employees was
unreasonable as they were transferred from Basilan to Manila. It would entail the
separation of the employees from their families who were residing in Basilan and
accrual of additional expenses for living accommodations in Manila. In contrast,
the distance from Caloocan to San Rafael, Bulacan is not considerably great so as
to compel petitioners to seek living accommodations in the area and prevent them
from commuting to Metro Manila daily to be with their families.
As to the charge of unfair labor practices to paralyze and render the Union
ineffective, the union was not deprived of the membership of the petitioners whose
work assignments were only transferred to another location. There was no showing
or any indication that the transfer was motivated by an intention to interfere with
the petitioners' right to organize. Unfair labor practice refers to acts that violate the
workers' right to organize. With the exception of Article 248 (f) of the Labor Code,
the prohibited acts are related to the workers' right to self-organization and to the
observance of a CBA. Without that element, the acts, no matter how unfair, are not
unfair labor practice (Philcom Employees Union V. Philippine Global
Communications, GR144315, July 17, 2006, 495 SCRA 214, 235).

47

DISMISSAL FOR VIOLATING EMPLOYERS MEAL POLICY: TOO

HARSH FOR THE OFFENSE.
McDonald's (Katipunan Branch) v. Ms. Duke Alba, GR 156382, Dec. 18,
2008, Carpio Morales, J. Alba was part of the service crew whose members were
prohibited from eating white on duty. A fellow member reported seeing her eating
inside the crew room while still on duty.
Management suspended her. Told to explain, she admitted joining a fellow
member, asking if she could have a piece of her chicken because she was hungry
and her stomach was aching bad. She was not able to take medicine. She would
not do it every time, but admitted it was wrong and against company policy. After
an investigation, she was found guilty and dismissed.
Court ruling: There is no dispute that she violated employer's meal policy.
The only issue is whether such violation amounts to or borders on "serious or
willful" misconduct or willful disobedience to call for her dismissal. By any
measure, the Court holds not.
Under Article 282 of the Labor Code, willful disobedience to the employer's
lawful orders as a just cause termination of employment needs the. concurrence of
at least two requisites: 1) the employee's conduct must have been willful or
intentional, the willingness being 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 one has been engaged
to discharge (Rosari v. Victory Ricemill, 445 Phil. 830, 839, 2003; Villeno v. NLRC,
GR 108153, Dec. 26, 1945, 251 SCRA 494, 497, citing San Miguel Corp. v.
Ubaldo, GR 92859, Feb. 1, 1993, 218 SCRA293).
In serious misconduct, it is not sufficient that the act or the conduct
complained of must have violated some established rules or policies. It must have
been performed with wrongful intent (NLRC v. Salgarino, GR 164376, July 31,
2006, 497 SCRA 361,375376). The employer failed to prove that employee's
misconduct was induced by a perverse and wrongful intent. It merely claimed that
she knewing the meal policy.
While employers wield a wide latitude of discretion in promulgating
policies, rules and regulations on work-related activities of employees, these must
be fair and reasonable at all times, and the corresponding sanctions for violations
thereof, when prescribed, must be commensurate to the degree of the infraction
(VH Manufacturing Inc. v. NLRC. 379 Phil. 444, 451, 2000).
Given employee's claim of suffering stomach pains due to hunger, which is
not implausible, it should have been properly considered in imposing the proper
penalty for violation of the meal policy. Employee's suspension for five days
48

sufficed. With that penalty, the necessity of cautioning other employees who may
be wont to violate the same policy was not compromised.
Employer also failed to prove that it suffered material damage or prejudice
as a result of employee's act. Its claim that the act would cause "irremediable harm
to the company's business" is too vague to merit consideration. Finally, employer
harped on supposed numerous infractions for which she was repeatedly sanctioned,
such as a three-day suspension for incurring several absences, two verbal warnings
for incurring cash shortages of P52.00, and verbal warnings for reporting late for
work for five days, all in the year 1994.
Employer resort to employee's past conduct is a desultory attempt to justify
its drastic action. Previous offenses; may be used as valid justification for dismissal
from work only if these are related to or have a bearing on, the proximate offense
warranting dismissal (La Carlota Planters Association v. NLRC. 358 Phil.
732,739,1998)., No such bearing exists, however, between the alleged infractions
and the employee's 'meal policy violation.
On the contrary, employee's record reflects her fairly outstanding work
ethics and performance, which is punctuated by at least 31 counts of
commendations from the management no less. In fine, given the totality of
employee's employment record, the penalty of dismissal is too harsh for the
infraction she committed.
MEDICAL REPS: DISTRIBUTE PRODUCTS PER COMPANY
ORDERS OR RISK TERMINATION.
Bristol Myers Squibb (Phils) vs. Richard Nixon Baban, GR167449, Dec. 17,
2008, Reyes, R.T. J. Baban was company's district manager charged with
promoting company's products. Company's auditor found 20 packs of medicine in
a company car's baggage compartment each with a note with political overtones.
The note was written by Baban's father thanking supporters through company
sample products to be distributed. Baban admitted committing an honest mistake.
He pleaded for consideration for the lapse, for it did not cause any damage to the
company's image as the samples were not distributed and he or his family derived
no gain. After an investigation attended by him, he was dismissed.
Court ruling: Employee's act of stapling on the sample products "thank you"
notes from his father warrants the loss of employer's trust and confidence. As the
supervisor of fellow medical representatives, his duty was to set a good example to
them. A higher standard of trust and confidence was reposed in him. He willfully
breached it by not asking for permission before using company property for his
own or another's benefit, as required by company standards of conduct. When he
failed to turn over the samples left in his care and stapled the political "thank you"
note on them, intending to distribute them to his father's supporters, he had, in
49

effect appropriated company property for personal gain and benefit.

He anchored his plea of mercy on filial loyalty to his father and that the
samples were still going to the proper parties. His father's loss is of no moment
since the employer has a right not to associate their products with winning or
losing politicians. It has every right to ensure that the distribution of medical
samples is done in the manner exactly prescribed. Moreover, his claim that the
samples would still have gone to the proper parties is wrong. These product were
supposed to be returned to the employer or one of its agents.
(in a dissenting opinion, Associate Justice Ma. Alicia Austria-Martinez
wrote: "In essence, respondent's error was brought about by a lack of good
judgment, not to breach the truth and confidence reposed upon him by petitioner.
Thus, the CA is correct in upholding the NLRC in meting out one month of
suspension on respondent.
(She cited Janssen Pharmaceutica v. Silayro (GR 172528, Feb. 26, 2008,
546 SCRA 628). Silayro, a territory-medical representative, was dismissed for
dishonesty in accomplishing the report on the number of product samples in his
possession and failure to return the company vehicle and other accountabilities
such as granting unauthorized premium free goods, unauthorized pull-outs from
customers, cheating in the ROL exams and three infractions of delayed process
reports.
(The Court found that "employer failed to identify an act of dishonesty,
misrepresentation, misappropriation, or any illicit act, which may have been
committed in the reporting product samples. While he was admittedly negligent in
filling up his two months reports, his errors alone are insufficient evidence of a
dishonest purpose. Since fraud implies willfulness or wrongful intent, the innocent
non-disclosure of or inadvertent errors in declaring facts by the employee will not
constitute a just cause for his dismissal. In addition, the subsequent acts belie a
design to misappropriate product sample. So as to escape any liability, respondent
could have easily submitted for audit only the number of product samples which he
reported. Instead, respondent brought all the product samples in his custody
during the audit and, afterwards, honestly admitted to his negligence.
(Negligence is defined as the failure to exercise the standard of care that a
reasonably prudent person would have exercised in a similar situation. To this
Court, respondent did not commit any willful violation rather he merely failed to
exercise the standard care required by a territory representative to carefully count
the number of product samples delivered to him in August and September 1998. "
Justice Austria-Martinez wrote: "More, Janssen Pharmaceutica took into
account the family situation of respondent at the time he committed the infraction.
The infractions were committed when he was undergoing serious family problems.
50

His failure to comply with deadlines for his progress reports and his lack of care in
accounting for product samples in his custody are understandably the result of his
preoccupations with very serious problems. Added to the pressure brought about
by the numerous charges he found himself facing, his errors and negligence should
be viewed in a more compassionate light.
("In Bristol Myers Squibb, the district manager (not a medical
representative) was dismissed for willful breach of trust. The auditor found 20
packs of medical samples in the company car compartment, with accompanying
notes with political overtones, signed by respondents father, conveying the latter's
appreciation for the community's support in the last election. Respondent admitted
he had caused the attachment of the notes to the product samples but explained that
his act did not constitute unauthorized distribution. The samples had not yet been
actually distributed to the medical professionals for whom they were intended. He
did not derive personal gain and no damage was suffered by the company. During
the investigation, it emerged that employee would have avoided all the trouble had
he inquired from his immediate superior if it was proper to attach political notes to
the product samples.
("As held in numerous cases, the Court has distinguished willful breach of
trust from a mere infraction: breach of trust must be based on substantial evidence
of the commission of a specific act of breach, done willfully, intentionally and
knowingly, without any justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly or inadvertently (Cruz, Jr. vs. Court of Appeals, G.R.
I 4854, July 12, 2006, 494 SCRA 643, 654-655; Philippine National Construction
Corp. v. Mafias, GR 156283,May 6,2005,458 SCRA 148,159). Ordinary breach
does not suffice (Solas v. Aboitiz One Inc. G.R. 178236, June: 27, 2008).
Moreover, the breach of trust must be actual (Manila Memorial Park Cemetery v.
Panado, OR 167118, June 15,2006,490 SCRA 751,768, citing Dela Cruz v. NLRC,
335 Phil. 932,942-943 (1997); Molina v. Pacific Plans Inc. vs. GR 165476, March
10, 2006, 484 SCRA 498, 518).
"Much like in Janssen, Baban was impelled by nothing more than poor
judgment. He entertained no intention to purposely or willfully violate the trust of
petitioner. This is demonstrated by the fact that respondent kept the product
samples within the company premises even during the audit that was conducted by
petitioner. Had be harbored any ill motives, he could have easily slipped out with
the products or prevented access to them by the auditor. Moreover, respondent
readily admitted to his error, explaining that it was the circumstances of his father
that led him to his impetuous decision. Besides, it should be noted that the intended
recipients of the subject samples were not shown by petitioner to be not qualified
under the rules of petitioner to receive such samples.
DAMAGING REMARKS VS. EMPLOYER IN UNION MEETING:
51

WAS UNION PRESIDENT DISMISSABLE?

Kephilco Employees Union & Leonilo Burgos v. Kepso Philippine Corp. GR
171927, June 29, 2007, Carpio Morales, J, Burgos was union president. The
company president visited the plant site and donated U8$1,000 "as a sign 'of
goodwill" to the employees, which was accepted by Burgos on their behalf. During
a union membership meeting, he responded to a question concerning the status of
the gift: "What is the problem if the US $ l,000 is with me? It is intact. Don't
worry. Just wait because we will buy gifts for everybody. The amount of US
$1,000 is a small amount compared to a KIA plus P 700,000, which was possibly
offered in exchange for the CBA during the negotiation but which I did not have
any interest in."
Company charged Burgos with violating the code of employee discipline for
causing damage or prejudice to the company. Explaining his side in a letter to the
company president, he recalled the conversation between him and the company
personnel manager on the remarks about a "KIA plus P700,000." The personnel
manager asked for a meeting with union officers. When Burgos arrived at the
venue, the manager was already there. He said the manager casually asked him:
"Do you have a service? Burgos answered: "Yes, I have two cars, one brand new
and one second hand." Then, the manager said: "How about my KIA PREGIO
plusP700,000?" Thinking that he was testing me (sinusubukan ako), I said with a
smile: "For what? For CBA exchange?" The manager laughed at my answer but
did not make any reply. He just told me that he was leaving for Korea for good."
Company claimed that the manager had denied Burgos' allegation, without
however presenting any written statement of the manager. After notice and hearing,
Burgos was dismissed for being guilty of disseminating communications which
tend to discredit or cause damage to the company or its officers.
Court ruling: Employee's remarks do not sufficiently reflect a scornful
attitude and depravity of conduct to be considered as serious misconduct. The
NLRC found that in making the remarks, Burgos "could have sought to prove his
sincerity to union members and disabuse their minds of any allusion of
misappropriation by laying stress on his personal disinterest in pecuniary matters
and by citing, in the interest of transparency, what he must have believed was an
attempt of subornation, which he deemed put his integrity to test."
In controversies between a worker and his employer, doubts reasonably
arising from the evidence or in the interpretation of agreements and writings should
be resolved in the worker's favor. Moreover, serious misconduct requires a
wrongful intent, the presence of which this Court fails to appreciate, the
controversial remarks having been uttered in the course of a legitimate union
meeting over which Burgos presided as head. In Lopez v. Chronicle Publications
Employees Association, 120 Phil 1490,1964, upon which employer relies to
52

support its case, the employees were dismissed for publishing in the union
newspaper their suspicion which actually amounted to a public accusation that
their employer was exerting political pressure on a public official to thwart some
legitimate activities of the employees. However, reliance on Lopez is misplaced
since the erring employee there deliberately and unnecessarily utilized a different
medium-one of a permanent nature - (CF. People v. Santiago, 115 Phil. 219,1962
(by analogy), without any justification (Cf. Dabuet v. Roche Pharmaceuticals, L45402, April 30, 1987,149 SCRA 386), concerning a union's grievance letter
addressed to management as a concerted act for the employees' mutual aid,
protection and benefit; Cosep v. NLRC, 353 Phil. 148,1998, where an employee
was merely expressing an opinion in an open letter; and Fujitsu Computer
Products Corporation of the Philippines v. Court of Appeals, GR1582332, March
31, 2005,454 SCRA 737, involving an employee's act of sending an electronics
mail as an expression of sympathy for the plight of a superior).
The Court is not, of course, unmindful of cases involving unpleasant verbal
communications in the workplace (Samson v. NLRC, 386 Phil. 669, 2000) and
cases cited therein. However, the facts in the present case do not sufficiently reflect
a scornful attitude and depravity of conduct on the part of Burgos for his
questioned remarks to be considered as serious misconduct.
In St. Michael's Institute: v. Santos (422 Phil. 723,200), this Court reinstated
the employees who were dismissed for uttering offensive remarks in their speeches
denouncing the corrupt practices of the administration in an assembly. The
dismissal was found to be too harsh a penalty. The Court said that company
policies, rules and regulations on work-related activities of employees must always
be fair and reasonable and the corresponding penalties, when prescribed;
commensurate to the offense involved and to the degree of the infraction.
The magnitude of the infraction must thus be weighed and equated with the
penalty prescribed and must be commensurate thereto. Where a penalty less
punitive would suffice, whatever missteps may have been committed by the
employee ought not to be visited with a consequence so severe as dismissal from
employment. In labor management relations, there can be no higher penalty than
dismissal from employment. For it severs employment ties and could well be the
economic death sentence of an employee. Dismissal prejudices the socio-economic
well-being of the employee's family and threatens the industrial peace. Due to the
far-reaching implications, the Labor Code decrees that an employee cannot be
dismissed, except for the most serious causes. The overly concerns of our laws for
the welfare of employees is in accord with the social justice, philosophy of our
Constitution (Felix v. NLRC, GR 148256, Nov. 17, 2004, 442 SCRA 465,484).
Indeed, the employer's inherent right to discipline is subject to reasonable
regulation by the State in the exercise of its police power (Associated Labor
Unions- TUCP v. NLRC, 362 Phil. 322, 329, 1999).

53

ILLEGAL DISMISSAL OF OVERSEAS WORKER: THE PROPER

AMOUNT TO AWARD
In Bahia Shipping Services v. Reynaldo Chua, GR 162195, April 8,2008;
Flourish Maritime Shipping and Lolita Uy v. Donato A, Almanzor, GR 177948,
March 14, 2008; Olarte vs. Nayona (461 Phil. 429, 2003); Shippers Pacific Inc. v.
Mira 400 Phil, 906, 2002); and JSS Indochina Corporation v. Ferrer (GR 156381,
Oct. 14, 2005, 473 SCRA120), the Court applied the interpretation in Marsamann
Manning Agency v. NLRC (371 Phil. 827,1999) of Section 10 of RA No. 8042
(Migrant Workers and Overseas Filipino Workers Act of 1995). The provision
entitles an illegally dismissed overseas worker to "his salaries for the unexpired
portion of the employment contract or for three (3) months for every year of the
unexpired term, whichever is less.
Thus, the three-month-salary cap applies only when the term of the overseas
contract is fixed at one year or longer, otherwise, the first option applies so that the
overseas worker shall be entitled to payment for all his salaries for the entire
unexpired period of his contract. A plain reading of Section 10 clearly reveals that
the choice of which amount to award an illegally dismissed contract worker, i.e.,
whether his salaries for the unexpired portion of his employment contract or three
(3) months' salary for every year of the unexpired term, whichever is less, comes
into play only when the employment contract has a term of at least one year or
more. This is evident from the words 'for every year of the unexpired contract term
which follows the words 'salaries x x x for three months." The Court should not
"completely disregard and overlook some words used in the statute while giving
effect to some. This is contrary to the well established rule in legal hermeneutics
that in interpreting a statute, care should be taken that every part or word thereof be
given effect since the law-making body is presumed to know the meaning of the
words employed in the statute and to have used them advisedly. Ut resmagis valeat
quam pereat,
In Marsamann Manning, where the contract was 10 months; in Shippers
Pacific, six months, and in Bahia, nine months the Court applied the first choke:
the salaries of the unexpired contract. In Flourish Maritime, the contract was two
years; Olarte, one year; and JSS Indochina, one year, thus the second choice was
applied: three-months' salaries for unexpired portion of the contract.
(NOTES: The choice is between "salaries for the unexpired portion, of the employment contract or for three months for every year of the unexpired contract,
whichever is less." The amount to be awarded is subject to the controlling proviso
"whichever is less", clearly referring to the amount of award and not to the length
of the unexpired portion of the contract which jurisprudence applied. Indeed the
first choice does not expressly specify the length of the unexpired contract - it may
be months or years. The second choice which mentions "every year" of the
unexpired contract clearly appears to require a period of at least one year. But the
54

length of the unexpired term in both choices does not matter because only the
controlling "whichever is less" proviso determines the amount of the award.
(Nevertheless, contrast the whichever is less restriction of the Migrant
Workers and Overseas Filipino Workers Act of 1995 from the proviso "whichever
is higher" of Art. 283 of the Labor Code: redundancy separation pay equivalent to
at least his one month pay or at least one (1) month pay for every year of service,
"whichever is higher ", and retrenchment to prevent losses and closures or
cessation of operations of establishment or undertaking not due to serious business
losses, the separation pay of one (1) month pay or at least one-half month pay for
every year of service, "whichever is higher. " The Labor Code provision involves
cases of valid, not illegal, termination of employment. The overseas workers law
provision involves illegal dismissals of workers, but it nevertheless imposes a
lighter even benevolent, penalty on the erring employer. Why does the overseas
workers law provide "whichever is less", when "whichever is higher", would have
been more pro-labor?)
(SEE HOWEVER, THE COURTS LATEST MOST PRO OFW
DECISION ON THE WHICHEVERIS LESS ISSUE IN THE
FOLLOWING ABSTRACT.) THE CLAUSE OR FOR THREE MONTHS
FOR EVERY YEAR OF THE UNEXPIRED TERM, WHICHEVER IS
LESS IS UNCONSTITUTIONAL.
Antonio M. Serrano v. Gallant Maritime Services and Marlow Navigation
Co., en banc, G. R. 167614, March 24, 2009, Austria-Martinez, J. Serrano was
hired as chief officer for 12 months. On the date of his departure, he was
constrained to accept a downgraded contract for second officer with a lower salary
with the employers assurance that he would be made chief officer by the end of
the year. But the employer did not fulfill its promise, hence employee refused to
stay on as second officer and was repatriated to the Philippines. He had served only
two months and seven days of his contract, leaving an unexpired contract portion
of nine months and 23 days. He filed a complaint for constructive dismissal. The
LA, NLRC and CA found the employee was illegally dismissed. The NLRC and
CA computed employee's lump sum salary at the monthly rate of US $1,400
covering three months out of the unexpired portion of nine months and 23 days of
his employment contract or a total of US$4,200. Employee questioned the
constitutionality of Section 10 of RA 8042 which limits the award to three months
for every year of the unexpired term of the contract.
Court ruling;
The clause or for three months for every year of the unexpired portion of
the contract" violates the constitutional provision that "No person shall be deprived
of life, liberty or property without due process of law nor shall any person be
denied the equal protection of the laws" and the provision according all members
55

of the labor sector, without distinction as to the place of employment, full

protection of their rights and welfare (Section 1, Article III and Section 18, Article
II and Section 3, Article III.
The clause has a discriminatory intent against, and an obvious impact on,
OFWs at two levels: those with employment contracts of less than one year and
those with contracts of more than one year.
The disparity becomes more aggravating when the Court takes into account
jurisprudence that, prior to the effectivity of RA 8042, July 14, 1995, illegally
dismissed OFWs, no matter how long the period of their employment contracts,
were entitled to their salaries for the entire unexpired portions of their contracts.
It is plain that prior to RA 8042, all OFWs, regardless of contract periods, or
the unexpired portions thereof, were treated alike in terms of the computation of
their monetary benefits in case of illegal dismissal. Their claims were subject to a
uniform rule of computation: the basic salaries multiplied by the entire unexpired
portion of their employment contracts.
The enactment of the clause in RA 8924 introduced a differentiated rule of
computation of money claims of illegally dismissed OFWs 'based on their
employment periods in the process, singling out one category whose contracts have
an unexpired portion of one year or more and subjecting them to the peculiar
disadvantage of having their monetary awards limited to their salaries for three
months or for the unexpired portion thereof: whichever is less, but all the while
sparing the other category from such prejudice, simply because the latter's
unexpired contracts fall short of one year.
The clause "or for three (3) months for every year of the unexpired term,
whichever is less" contains the qualifying phrases "every year and "unexpired
term." By its ordinary meaning, the word "term means a limited or definite extent
of time. Corollarily, that ''every year" is but part of an unexpired term is
significant in many ways: first, the unexpired term must be at least one year, for if
it were any shorter, there would be no occasion for such unexpired term to be
measured by every year; and second, the original term must be more than one year,
for otherwise, whatever would be the unexpired term thereof will not reach even a
year. Consequently, the more decisive factor in the determination of when the
subject clause "for three (3) months for every year of the unexpired term.
whichever is less. shall apply is not the length of the original contract period as
held in Marsaman, but the length of the unexpired portion of the contract period the subject clause applies in cases when the unexpired portion of the contract
period is at least one year, which arithmetically requires that the original contract
period be more than one year.
Viewed in this light, the clause creates a sub-layer of discrimination among
56

OFW s whose contract periods are for more than one year: those who are illegally
dismissed with less than one year left in their contracts shall be entitled to their
salaries for the entire unexpired period thereof, while those who are illegally
dismissed with one year or more remaining in their contracts shall be covered by
the subject clause, and their monetary benefits limited to their salaries for three
months only.
IN SUM, PRIOR TO RA 8042, OFWS AND LOCAL WORKERS WITH
FIXED-TERM EMPLOYMENT WHO WERE ILLEGALY DISMISSED WERE
TREATED ALIKE IN TERMS OF THE COMPUTATION OF THEIR MONEY
CLAIMS: THEY WERE UNIFORMLY ENTITLED TO THEIR SALARIES
FOR THE ENTIRE UNEXPIRED PORTION OF THEIR CONTRACTS. But
with the enactment of RA 8042, specifically the adoption of the subject clause,
illegally dismissed OFWs with an unexpired portion of one year or more in their
employment contract have since been differently treated in that their money claims
are subject to a 3-month cap, whereas no such limitation is imposed on local
workers with fixed-term employment.
The Court conclude that the subject clause contains a suspect classification
in that, in the computation of the monetary benefits of fixed-term employees who
are illegally discharged, it imposes a 3-month cap on the claim of OFWs, with an
unexpired portion of one year or more in their contracts, but none on the claims of
other OFWs or local workers with fixed term employment. The subject clause
singles out one classification of OFW sand burdens it with a peculiar disadvantage.
Examining the congressional records in the passage of RA 8042, the Court
said it finds no discernable state interest let alone a compelling one, that is sought
to be protected or advanced by the adoption of the subject clause. Thus, the
Government has failed to discharge its burden of proving the existence of a
compelling state interest that would justify the perpetuation of the discrimination
against OFWS under the subject clause.
As to the stand of the Office of the Solicitor General that the purpose of the
clause is to protect the employment of OFWs by mitigating the solidary liability of
placement agencies, such callous and cavalier rationale will have to be rejected.
There can never be a justification for any form of government action that alleviates
the burden of one sector, but imposes the same burden on another sector, especially
when the favored sector is composed of private businesses such as, placement
agencies, while the disadvantaged sector is composed of OFW s whose protection
no less than the Constitution commands. The idea that private business interest can
be elevated to the level of a compelling state interest is odious:
Even if the purpose of the clause is to lessen the solidary liability of
placement agencies vis-a-vis their foreign principals, there are mechanisms already
in place that can be employed to achieve that purpose without infringing on the
57

OFWs' constitutional rights. POEA rules and regulations impose administrative

disciplinary measures on erring foreign employers who default on their contractual
obligations to migrant workers and seafarers and/or their Philippine agents.
The subject clause does not state or imply a definitive governmental
purpose, and it is for that precise reason that the clause violates, not just petitioner's
right to equal protection, but also his rights to Substantive due process under
Section I, Article III of the Constitution. (No person shall be deprived of life,
liberty, or property without due process of law, nor shall any person be denied the
equal protection of the laws.)
The clause being unconstitutional, petitioner is entitled to his salaries for the
entire unexpired period of nine months and 23 days of his employment contract,
pursuant to laws and jurisprudence prior to the enactment of RA 8042.
(In a separate concurring opinion, Associate Justice Antonio T. Carpio stated
that the subject clause is unconstitutional because it violates the prohibition against
deprivation of property without due process and an invalid exercise of police
power. Section I, Article m of the Constitution states that "no person shall be
deprived of property without due process of law. It Protected property includes the
right to work and the right to earn a living, citing JMM Promotion and
Management Inc. v. CA which states "A profession, trade or calling is a property
right within the meaning of our constitutional guarantees." The assailed clause is
"unduly oppressive, unreasonable, and repugnant to the Constitution. It undermines
the mandate of the Constitution to protect the rights of overseas workers and to
promote their welfare.
Section 3, Article III of the Constitution states that the State shall afford full
protection to overseas labor, promote full employment and equality of employment
opportunities for all, and guarantee the rights of all workers to security of tenure,
humane conditions work, and a living wage. Section 18, Article II states that "The
State' affirms labor as a primary social economic force. It shall protect the rights of
workers and promote their welfare.
(In his concurring opinion, Associate Justice Arturo D. Brion agreed with the
ponencia's conclusion that the clause "for three (3) months for every year of the
unexpired term, whichever is less" of Section 10 of RA 8042 is unconstitutional,
However, he stated, his conclusion proceeds from a different reason and
constitutional basis. The provision should be struck down for violating the
constitutional provisions in favor of labor (Article II, Section 19 and Article XIII,
Section 3) and of the substantive aspect of the due process clause.
(The best indicator of the effect of the disputed clause of Section 10 of the
law can be seen from the results of pre-RA 8042 rulings of the Court that the
ponencia painstakingly arranged in tabular form. The table shows that by our own
58

past rulings, before RA 8042", all illegal dismissals merited the payment of the
salaries that OFWs would have received for the unexpired portion of their
contracts. After RA 8042, our rulings vary on the computation of what should be
paid to illegally dismissed OFWs, but in all cases the principal's/agency's adjudged
liability was for less than the unexpired portion of the OFW s contract.
(Anyway viewed, the situation of illegally dismissed OFWs changed for the
worse after RA 8042. In this sense, the disputed portion of Section 10 is one that
goes against the interests of labor, based on RA 8042's own declared purposes and,
more importantly, on constitutional standards. Section 10 diminished rather than
enhanced the protection the Constitution envisions for OFW.
(The more important violations, however, are what the disputed portion of
Section 10 spawns relates to its character as a police power, and its failure to meet
the substantive due process requirements of Article III, Section 1 of the
Constitution.
(Cited were the POEA rules that collectively protect OFWs by ensuring the
integrity of their contracts, establishing the responsible parties, and providing the
mechanisms for their enforcement. in all these, the primary recourse is with the
foreign principal employer who has the direct and primary responsibility under the
employment contract. Section 10 of RA 8042 affects these well-laid rules and
measures and in fact provides a hidden twist affecting the principal/employer's
liability. While intended as an incentive accruing to recruitment/manning agencies,
the law, as worded, simply limits the OFWs' recovery in wrongful dismissal
situations. Thus, it redounds to the benefit of whoever may be liable, including the
principal/employer - the direct employer primarily liable for the wrongful
dismissal. In this sense, Section 10 read as a grant of incentives to
recruitment/manning agencies - oversteps what it aims to do by effectively limiting
what is otherwise the full liability of the foreign principal/employers. Section 10,
in short, really operates to benefit the wrong party and allows that party, without
justifiable reason, to mitigate its liability for wrongful dismissals. Because of this
hidden twist, the limitation of liability under Section 10 cannot be an "appropriate"
incentive, to borrow the term that RA 8042 itself uses to describe the incentive it
envisions under its purpose clause.
(What worsens the situation is the chosen mode of granting the incentive:
instead of a grant that, to encourage greater efforts at recruiting, is directly related
to extra efforts undertaken, the law simply limits their liability for the wrongful
dismissals of already deployed OFWs.
This is effectively a legally-imposed partial condonation of their liability to
OFWs, justified solely by the law's intent to encourage greater deployment efforts.
Thus, the incentive, from a more practical and realistic view is really part of a
scheme to sell Filipino overseas labor at a bargain for purposes solely of attracting
59

the market. Ironically, the OSG unabashedly confirmed this view in its comment
when it represented that by limiting the liability to three months, Filipino
seafarers have a better chance of getting hired by foreign employers.
(The so-called incentive is rendered particularly odious by its effects on the
OFWs - the benefits accruing to the recruitment/manning agencies and their
principals are taken from the pockets of the OFWs to whom the full salaries for the
unexpired portion of the contract rightfully belong. Thus, the principal/employer
and the recruitment/manning agencies even profit from their violation of the
security of tenure that an employment contract embodies. Conversely, lesser
protection is afforded the OFW, not only because of lessened recovery afforded
him or her by operation of law, but also because this same lessened recovery
renders a wrongful dismissal easier and less onerous to undertake; the lesser costs
of dismissing a Filipino will always be a consideration a foreign employer will take
into account in termination of employment decisions. This reality, unfortunately, is
one that we cannot simply wish away with the disputed Section 10 in place. Thus,
this inherently oppressive, arbitrary, confiscatory and inimical provision should be
struck down for its conflict with the substantive aspect of the constitutional due
process guarantee. Specifically, the phrase "for three (3) months for every year of
the unexpired terms, whichever is less in the fifth and final paragraph of Section
1 of RA 8042 should be declared unconstitutional.)
ALL ABOUT DUE PROCESS IN TERMINATION CASES
ESSENCE OF DUE PROCESS HEARING: SIMPLY AN
OPPURTUNITY TO BE HEARD, NOT ACTUAL FACE-TO-FACE HEARING.
Asian Terminals Inc. vs. Nepthally Sallao and Asian Terminals Workers'
Union, GR166211, July 14, 2008, Quisumbing, J. Court ruling: Employer appears
to have complied with due process requirements. It furnished the employee with a
memo appraising him of the particular acts or omissions constituting the alleged
infraction and requiring him to explain within 48 hours. Instead of submitting a
written explanation, he merely denied in general the allegations against him and
requested for an investigation in the presence of his counsel. He also asked that he
be furnished with the sworn statements of his co-employees who implicated him
for wrongdoing. Moreover, he submitted his request only beyond the 48-hour
period given by employer. In any event, employer furnished him with a notice of
termination informing him of the basis of his dismissal.
Thus, we find that Sallao was afforded due process before he was dismissed.
Even if no face-to-face hearing was conducted, the requirement of due process had
been met since he was accorded a chance to explain his side of the controversy.
It is settled that notice and hearing constitute the essential elements of due
60

process in the dismissal of employees. The employer must furnish the employee
with two written notices before the termination of employment can be legally
effected. The first apprises the employee of the particular acts or omissions for
which his dismissal is sought. The second informs the employee of employer's
decision to dismiss him. With regard to a hearing requirement, the essence of due
process lies simply in an opportunity to be heard, and not that an actual hearing
should always and indispensably held (Metropolitan Bank and Trust Company v.
Barrientos, GR 157028, Jan. 31,2006,481 SCRA311,321-322).
(In a separate concurring opinion, Justice Presbitero J. Velasco Jr. said: "The
conclusions are correct when applied to the instant case. While no hearing or
conference was conducted by petitioner Asian Terminals when the administrative
proceedings were held against Sallao, the absence, thereof does not constitute a
breach of the procedural due process for such was the settled jurisprudence
enunciated in MBTC v. Barrientos and other cases.
("However, the Court, in King of Kings Transport vs. Mamac (GR 166208,
June 29, 2007, 526 SCRA 116123,127), explained that the requirement of a hearing
or conference is an indispensable, element of procedural due process. Cited were
Art. 277 (Miscellaneous Provisions) and the implementing rule of the provision,
SEC. 2 (Standards of due process; requirements of notice).
("Article 277 speaks of a written notice containing a statement of the causes
of termination and shall afford the latter (employee) ample opportunity to be heard
and defend himself with the assistance of his representative. The Court, in the
Metrobank (MBTC) case, gave such provision a myopic and restrictive
interpretation which appears to be off-tangent to the constitutional protection to
labor. This strict interpretation was discarded in King of Kings Transport for the
following reasons:
("The first written notice containing the charges does not encompass the 2 nd
requisite of opportunity to be heard. Note should be taken of the conjunctive "and"
which means that the written notice should be distinct from the opportunity to be
heard. While it may be conceded that the first notice gives the employee reasonable
opportunity to explain his side, such does not cover the 2nd requisite of ample
opportunity to be heard and defend himself with the assistance of his representative
which will necessitate the conduct of a hearing or conference to give the laborer
the chance to respond to the charge, present evidence or rebut the evidence
presented against him. 'Ample' means full and more than adequate chances to be
heard and defend himself against the charges leveled against him. Without the
hearing or conference, the written reply or answer to the first notice is insufficient
to fully explain and support his defenses, present evidence in support of his
defenses due to time constraints in the preparation of the answer and rebut the
evidence of the employer since the first notice does not usually contain the
evidence intended to support the charges. In addition, the employee's counsel or
61

representative can better articulate his defenses in an actual hearing than by just
merely relying on a written reply or answer.
("Under the Omnibus Rules Implementing the Labor Code, Book V, Rule
XXIII, Section 2 (Standards of due process, requirements of notice, 1 (b), provides
for a hearing or conference during which the employee concerned, with the
assistance of counsel if he so desires, is given opportunity to respond to the charge,
present his evidence, or rebut the evidence presented against him. Any rule or
regulation in the implementation of a law issued by the rulemaking authority has
the force and effect of law (Commissioner of Internal Revenue v. CA. GR 119761 ,
Aug. 29, 1996, 261 SCRA 236; De La Salle University Medical Center;' and
College of Medicine v. Laguesma GR192084, Aug. 12, 1998,294 SCRA 141).
(The constitutional provisions on protection to labor and social justice
dictate that a literal interpretation to be accorded. Article 277 of the Labor Code on
the requirement giving an employee ample opportunity to be heard and defend
himself."
("Thus, 1 submit that effective June 29, 2007 when the King of Kings
Transport v. Mamac was promulgated, the prevailing rule is that the hearing or
conference is one of the vital requirements of procedural due process in the
dismissal of employees. Noncompliance therewith would be a ground for the
imposition of the indemnity of P30,000.00"
(NOTE: What if the dismissed employee skips the hearing? In Ma. Wenelita
Tirazona v. CA, GR 169712, March 14,2008, or more than a year after the King of
Kings decision, the Court ruled that the due process requirement was not violated
"even if no hearing was conducted where the party was given a chance to explain
his side of the controversy. The manager was afforded opportunities to take part in
the administrative hearing but she herself and her counsel declined to take part in
the administrative hearing. Despite her absence from the hearing, she was informed
of what was taken up and given the chance to submit a supplemental written
explanation.
Only when she again failed to comply with the same did the
company terminate her employment."
(After the Metro Bank ruling but before the King of Kings. Panuncillo
vs. CAP Philippines. G.R. I61305, Feb. 9, 2007, ruled "As to the requirement
of hearing, the essence of due process lies in an opportunity to be heard, and
not always and indispensably in an actual hearing. It added, "when an
employee admits the acts complained of... no formal hearing is even necessary.
(In Aromin v. BPI G.R. 164824, April 30, 2008, the Court also ruled that the
essence of due process lies in an opportunity to be heard and declared that since the
employee's dismissal was effected on June 14,1991, it applied what it considered
the prevailing jurisprudence at that time (Panuncillo ruling citing Standard
62

Electric Manufacturing Corp. vs. Standard Electric Employees Union-NAFLUKMU, GR 166111, Aug. 25, 2005, 468 SCRA 316, 329). Under the jurisprudence,
as long as the employee was given an opportunity to be heard, due process with
respect to the first notice was deemed complied with, even if incidentally no actual
hearing was conducted. Thus, BPI and its officials did not breach the due process
requirements.)
MEMO TO EMPLOYEE: YOU ARE NOT ALLOWED TO ENTER
THE OFFICE, YOU HAVE BEEN TERMINATED.
Aldeguer & Co. Inc. J Loalde Boutique v. Honeyline Tontboc, GR 147633,
July 28, 2008, Carpio Morales, J. Court ruling: while the manager's employment
was terminated for cause, the employer failed to observe the requirements of
procedural due process. The CA correctly found that instead of complying with the
two written notice rule, the employer, in one, single notice, ordered the manager's
dismissal. Thus, its memorandum to her read: "Effective May 23, 1997 you are not
allowed to enter the Ayala Boutique. You have been given a letter of termination. "
Such single notice does not comply with the requirements of the law
(Vide Perpetual Help Credit Cooperative, Inc. vs Faburada, 419 Phil. 147, 157,
2001) Employer argued that the manager was terminated not only for the
offenses she committed in May 1997 but also for the other offenses, particularly
those committed in February 1997 for which she was already required to
explain in writing x x x . "(Emphasis is the original underscoring supplied).
The argument fails. For the first notice requirement to be satisfied, the
following conditions must be met: The first notice must inform outright the
employee that an investigation will be conducted on the charges particularized
therein which, if proven, will result in his. dismissal. Such notice must not only
contain a plain statement of the charges of malfeasance or misfeasance but must
categorically state the effect on his employment if the charges are proven to be
true. This notice will afford the employee an opportunity to avail of all defenses
and exhaust all remedies to refute the allegations hurled against him for what is at
stake is his very life and limb, his employment. Otherwise, the employee may just
disregard the notice as a warning without any disastrous consequence to be
anticipated. Absent such statement, the first notice falls short of the requirement of
due process.
Overseas workers entitled to due process.
Dante D, De La Cruz v. Maersk Filipinas Crewing Inc. and Elite Shipping
A.S., GR 172038, April 14, 2008, Corona, J. Filipino seamen recruited to work on
board foreign vessels are entitled to the due process requirements. Under the
POEA Revised Standard of Employment Terms and Conditions Governing the
Employment of Filipino Seafarers on Board Ocean-Goong Vessels, the employer is
63

bound to furnish him two notices: the written charge and the written notice of
dismissal (in case that is the penalty imposed (Shippers Untied Pacific v. NLRC,
GR 148893, July .12, 2006, 494 SCRA 661, 667).
Procedural due process requires that a seaman must be given a written notice
of the charges against him and afforded a formal investigation where he can defend
himself personally or through a representative before he can be dismissed and
disembarked from the vessel (Seashore Maritime, Corp. v. NLRC, GR 84712,
Mjity 15, 1989,173 SCRA 390
UNSERVED NOTICES IN ABANDONMENT OF WORK.
Coca-Cola Bottlers Philippines Inc. v. Valentino Garcia, GR 159625, Jan.
31, 2008, Austria-Martinez, J. Employer argued that since employee was
terminated for abandonment of work, the sending of several notices to employees
last known address, informing her of the charges against her and giving her an
opportunity to explain her side was sufficient compliance with due process. It
cannot be held liable for violation of due process when the notices were returned
unserved due to causes solely attributable to the employee herself. Was the
employee accorded due process before her separation
from work?
Court ruling: No. There is no dispute that in cases of abandonment of work,
notice shall be served at the worker's last known address. While employer
presented the envelopes of the alleged notices sent to employee's last known
address, the contents thereof were not offered in evidence. Thus, the records are
wanting of proof that employee was properly apprised of the charges against her
and given an opportunity to explain ,her side, as employer maintains. Evidently, it
is clear that employee's dismissal was effected without the notice required by law.
Employer has the burden of proving that the dismissed employee, has been
served two notices: (1) the first to inform her of particular acts or omissions for
which employer seeks her dismissal, and (2) the second to inform her of
employer's decision to terminate her.
Under the Agabon doctrine (Agabon vs. NLRC, G R 158693, Nov, 17, 2004,
442 SCRA 573), if the dismissal was for cause, the lack of statutory due process
should not nullify the dismissal, or render it illegal or ineffectual. But the
employer's violation of the employee's right to statutory due process warrants the
payment of indemnity in the form of nominal damages. The amount of such
damages is addressed to the Court's sound discretion, taking into account the
relevant circumstances, The Court deems the amount of P30,000 as sufficient
nominal damages, pursuant to prevailing jurisprudence to vindicate or recognize
employee's right to procedural due process. which was violated by her employer.
QUERY DOES THE AGABON DOCTRINE APPLY IRRESPECTIVE
64

OF WHETHER THERE IS LAWFUL IR ILLEGAL DISMISSAL? OR ONLY

WHEN THE DISMISSAL IS FOR CAUSE?
(In ED1 Staff Builders International vs. NLRC and Eleazar Gran, GR
45587, Oct 27, 2007, the employee was not lawfully dismissed nor afforded due
process. But the Court still applied the Agabon doctrine and held the employer
liable to pay P30,000 as indemnity to the employee on top of backwages and the
salaries for the unexpired portion of his two-year contract.
(In Dante D. de la Cruz v. Maersk Filipinos Crewing Inc., GR 172038, April
14, 2008 which also involved illegal dismissal plus due process violation, the
Court did not apply the Agahon ruling.
(In Centennial Transmarine vs.: Ruben de la Cruz, GR 189719, August 22,
2008, also a case of illegal dismissal-no due process observance, Agabon was not
applied. The seafarer was awarded his salaries for the unexpired portion of his
employment contract plus - what is more substantial than the Agabon award is the
payment of P50,000 moral damages, P50,000 exemplary damages, and attorney's
fees at 10% of the aggregate monetary award.)
(In Magro Placement and General Services v. Cresenciano Hernandez, GR
156964, July 8, 2007 involving legal dismissal but denial of due process, the Court
applied the Agabon doctrine by ordering the employer to pay P30,000 as nominal
damages on top of payment of his unpaid salaries in accordance with the Migrant
Workers and Filipino Workers Act. The Court also rectified the Court of Appeals
holding that employer was liable to pay backwages from the time employee was
terminated until it is determined that said termination is for just cause, "in
accordance with Serrano v, National Labor Relations Commission (387 Phil.
345,356 (2000)." The Court stated that the Serrano doctrine awarding full
backwages in "ineffectual dismissal cases" when an employee dismissed for cause
was denied due process, has been abandoned by the Court's ruling in Agabon v.
NLRC. NOTE: Agabon was handed down on Nov. 17, 2004, while the CA decision
was issued on Sept. 2, 2002 when the prevailing rule was still the Serrano
doctrine.)
Background of the Supreme Court's due process rulings:
In Wenphil vs, NLRC, Feb. 8, 1989, 179 SCRA 69, the Court upheld the
dismissal of the employee for just cause even without the observance of the twonotice rule. But the employer was ordered to indemnify the employee from P1,000
to P10,000.
Before the Wenphil doctrine was enunciated, the jurisprudence was that the
termination for a just cause but without due process or the observance of the twin
notice rule, was deemed illegal and the affected employee was ordered reinstated
65

with backwages and without losing his security of tenure.

The Serrano ruling modified the Wenphil doctrine by holding that the
employer's failure to comply with the notice requirement did not constitute a denial
of due process but a mere failure to observe a procedure for termination of
employment, thus making the termination merely ineffective (not illegal) and, as
sanctioned with payment of full backwages plus - in case the dismissal was for an
authorized cause - separation pay in accordance with Art. 283 of the Labor Code.
In addition, nominal and moral damages may also be awarded, if warranted by the
evidence.
The Agabon doctrine was laid down in Jenny M Agabon and Virgilio C.
Agabon vs. NLRC, Riviera Home Improvements, Inc. and Vicente Angeles,
GR159693, Nov. 17, 2004. Court ruling: Where the dismissal is for a just cause,
the lack of statutory due process should not nullify the dismissal, or render it illegal
or ineffectual. However, the employer should indemnify the employee for the"
violation of his statutory right. The indemnity to be imposed should be stiffer to
discourage the abhorrent practice of "dismiss now, pay later," which we sought to
deter in the Serrano ruling. The sanction should be in the nature of indemnification
or penalty and should depend on the facts of each case, taking into account special
consideration the gravity of the due process violations of the employer.
Therefore, Agabon reverted back to Wenphil so that a dismissal for a just
cause is not rendered illegal or ineffectual by the employer's failure" to' comply
with due process, but the employer should indemnify the employee with nominal
damages for non-compliance with the statutory process. Thus, in the Agabon
decision, the Court ordered the employer to pay the employee P30,000 as nominal
damages.
Later, in Jaka Processing Corp. v. Darwin Pacot, et al, OR 151378, March
28, 2005, the employer terminated the employment of six employees because it
was "in dire financial straits." Both NLRC and CA found a basis for the dismissalretrenchment, an authorized cause under Art. 283. But because employer failed to
comply with the notice requirement under the same provision, the CA ordered the
employer to pay to each employee P2,000 as indemnity.
Court en banc ruling: The NLRC and CA findings were upheld, but in view
of the circumstances of the case, the P2,000 indemnity was modified and fixed at
P50,000 each employee. There is only one question: what are the legal implications
where an employee is dismissed for cause but it was effected without complying
with the notice requirement of law?
The difference between Agabon and Jaka Food, it said, is that in the former,
the dismissal was based on a just cause under the Labor Code, while in the latter
case, the employees were dismissed due to retrenchment, one of the authorized
66

causes under Art. 283.

Thus, a dismissal for just cause under Art. 282 implies that the employee has
committed, or is guilty of some, violation against the employer, i.e., the employee
is guilty of some fraud against the employer, or, as in Agabon, he has neglected his
duties. Thus, the employee himself initiated the dismissal process?
On another breath, a dismissal for an authorized cause under Art. 283 does
not necessarily imply delinquency or culpability on the part of the employee.
Instead, dismissal process is initiated by the employer's exercise. of his
management prerogative, i.e., when the employer opts to install labor-saving
devices, when he decides to cease business operations or when, as in this case, he
undertakes to implement a retrenchment program.
The clear-cut distinction is further reinforced by the fact that in the first,
payment of separation pay, as a rule, is not required, while in the second, the law
requires the payment of separation pay. Thus, it is wise to hold that (1) if the
dismissal is based on a just cause under Art. 292 but the employer failed to comply
with the notice requirement,. the sanction to be imposed upon him should be
tempered because the dismissal process was, in effect, initiated by an act imputable
to the employee, and (2) if the dismissal is based on an authorized cause under Art.
283 but the employer failed to comply with the notice requirement, the sanction
should be stiffer because the dismissal process was initiated by the employer's
exercise of his management prerogative." In this case, the Court fixed the amount
of indemnity for violation of the due process rule at P50,000 for each employee.
(Publisher's query: Since the Jaka ruling was handed down on March 20,
2005, has its distinction between terminations for just cause and those for
authorized cause ever been applied in subsequent due process issues?)
In Brendo D. Merin v. NLRC, Great Southern Maritime Services, GR 17190,
Oct. 17, 2008, the Court ruled that "the award of P 50,000 by the Court of Appeals
is excessive, since conformably with the Agabon case, the proper amount for
nominal damages would be P 30,000." (NOTE: Without citing the Jaka doctrine,
the Court appeared to have applied its "tempered or stiffer" rule, depending on the
basis of the dismissal: for cause or authorized termination. Under Jaka, if the
dismissal is for cause, meaning the dismissal was initiated by an act imputable to
the employee, as in the Merin decision, the sanction for violation of due process
should be tempered, thus, for instance, P30,000. If it involves an authorized cause
for-termination, such as retrenchment, meaning the employer itself initiated the
dismissal process, the penalty should be stiffer. In Jaka itself, which involved
retrenchment, "considering the factual circumstances," the Court deemed "it proper
to fix the indemnity at P50,000" payable to each of the six employees for noncompliance with statutory due process. Thus, a stiffer penalty for the employer.
Why did Merin shy away from Jaka but turn to Agabon when Jaka would be the
67

later and more appropriate doctrine to apply?)

FIRST NOTICE COMPLIANCE, BUT NO TERMINATION NOTICE.
Eduardo Bughaw v. Treasure Island Industrial Corp., GR 173151, March 28,
2008. Employee failed to appear at the two hearings to explain and defend himself
from the charge of drug abuse on company premises. It was by employee's own
omission and inaction that he was not able to present evidence to refute the charges
against him. There is no doubt that employer fully complied with the first-notice
requirement of appraising the employee of the cause of his impending termination
and giving him opportunity to explain his side.
But employer failed to satisfy the need for a second notice informing the
employee that he was being dismissed. There is nothing on record that would
indicate that employer ever attempted to serve or tender the notice of termination
to employee. No affidavit of service was appended to the said notice attesting to
the reason for failure of service upon the intended recipient. Neither was there any
note to that effect by the server written on the notice itself.
The burden is on the employer to present clear and unmistakable proof that
employee was duly served a copy of the notice of termination but he refused to
receive. Bare and vague allegations as to the manner of service and the
circumstances surrounding the same would not suffice. A mere copy of the notice
of termination allegedly sent by the employer to employee without proof of receipt,
or in the very least, actual service thereof upon the employee, does not constitute
substantial evidence. It was unilaterally prepared by the employer and, thus
evidently self-serving and insufficient to convince even an unreasonable mind. We
cannot overemphasize the importance of the requirement on the notice of
termination.
The violation of the petitioners' right to statutory due process by the
respondent warrants the payment of indemnity in the form of nominal damage.
Considering the prevailing circumstances in the case at bar, we deem it proper to
fix indemnity at P30,000.
ALL ABOUT SEPARATION PAY
IN EMPLOYEE DISMISSALS
In Central Philippines Bandag Retreaders Inc. v. Prudencio Diasnes,
GR163607, July 14, 2008, Velasco, Jr., J. Respondent was Sales Manager-OfficerIn-Charge based in Tacloban City for Eastern Visayas operations. Six companyissued checks were dishonored for causes attributable to him and for which he was
suspended for six days. He was frequently absent and tardy for two months. He
was relieved of his duties and required to appear before the adjudication
committee. Then, the committee agreed that he be released for three months to give
68

him time to help his wife's problems. Afterwards, he may return to work but with
another position or function, and if he chooses to retire, he will granted
separation/retirement pay. His request to reassigned to Cebu City was granted by
the employer.
However, his attendance and punctuality were also very poor. To top it all,
he did not at all report for work for about one month. Charged and asked to
explain, and finding his explanation insufficient, employer finally dismissed him.
One of the issues was the payment of separation pay to employee.
Court ruling: We are constrained to deny Diasnes separation pay since the
cause for termination of his employment amounts to gross and habitual neglect of
his duties. His repeated and continuous absences without prior leave and his
frequent tardiness within last two months prior to his dismissal exemplify his utter
disregard for his employment and his employer's interest Diasnes character is also
put into question if we take into consideration that he should have been dismissed
as early as January 1996, if not for his employer's benevolence and goodwill. It is
unthinkable to award separation pay or financial assistance to an unworthy
employee who exploited and took advantage of his employer's past generosity and
accommodation.
Gabuay v. Overseas Paper Supply (G.R. 148837, Aug. 13, 2004, 436 SCRA
514, 519, 520) declared that separation pay is designed to provide the employee
with the wherewithal during the period he is looking for another employment. San
Miguel Corporation vs. Lao, (GR 143136-37, July 11, 2002, 384 SCRA 504, 509510) held that the award of separation pay is authorized in the situations dealt with
in Articles 283 and 2M of the Labor Code but not in termination of employment
based on instances enumerated in Art 282.
Eastern Paper Mills Inc. v. NLRC (GR 85497, Feb. 24, 1989,170 SCRA
595,598) explained that the only cases when separation pay shall be paid,
although the employee was lawfully dismissed, are when the cause of termination
was not attributable to the employee's fault hut due to installation of labor saving
devices, redundancy, retrenchment, cessation of employer's business, or when the
employee is suffering from a disease and his continued employment is prohibited
by law or is prejudicial to his health and to the health of his co-employees (Articles
283 and 284, Labor Code). Other than these cases, an employees who is dismissed
for a just cause and lawful cause is not entitled to separation pay even if the award
were to be called by another name."
Separation pay is likewise awarded in lieu of reinstatement if reinstatement
is no longer feasible, as when the relationship between the employer and employee
has become strained (Gabuay ruling). Still, in some cases, separation pay may be
extended as a measure of social justice.

69

PLDT vs. NLRC (No. L-80609, Aug. 23, 1988, 164 SCRA 671, 681-682)
settled the matter on the award and amount of financial assistance that may be
awarded to a legally separated employee based on social or compassionate justice.
"There should be no question that where it comes to such valid but not iniquitous
causes as failure to comply with work standards, the grant of separation pay to the
dismissed employees may be both just and compassionate, particularly if he has
worked for some time with the company. For example, a subordinate who has
irreconcilable policy or personal differences with his employer may be validly
dismissed for demonstrated loss of confidence, which is an allowable ground. A
working mother who has to be frequently absent because she also has to take care
of her child may also be removed because of her poor attendance, this being
another authorized ground. Under these and similar circumstances, however, the
award to the employee of separation pay would be sustainable under the social
justice policy even if the separation is for cause.
"But where the cause of the separation is more serious than mere
inefficiency, the generosity of the law must be more discerning. There is no doubt
it is compassionate to give separation pay to a salesman if he is dismissed for his
inability to fill his quota but surely he does not deserve such generosity if his
offense is misappropriation of the receipts of his sales. This is no longer mere
incompetence but clear dishonesty. A security guard found sleeping on the job is
doubtless subject to dismissal but may be allowed separation pay since his conduct,
white inept, is not depraved. But if he was in tact not really sleeping but sleeping
with a prostitute during his tour of duty and in the company premises, the situation
is changed completely. This is not only inefficiency but immorality and the grant of
separation pay would be entirely unjustified.
"We hold that henceforth separation pay shall be allowed as a measure of
social justice only in those instances where the employee is validly dismissed for
cause other than serious misconduct or those reflecting on his moral character.
Where the reason for the valid dismissal is, for example, habitual intoxication or an
offense involving moral turpitude, like theft or illicit sexual relations with a fellow
worker, the employer may not be required to give the dismissed employee
separation pay, or financial assistance, or whatever other name it is called, on the
ground of social justice."
As may be noted, PLDT held that separation pay or financial assistance
should be denied a legally separated employee when the cause for dismissal is for
an act constituting serious misconduct or that reflects on the employee's moral
character. PLDT, however, did not go further to state that the grant or award of
separation pay or financial assistance is automatically awarded when the dismissal
is for a cause other than that contemplated in said case.
This PLDT doctrine was later expanded in Toyota Motors Phils. Corp.
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Workers Association v. NLRC (Toyota) (GR 158798, Oct. 19, 2007, 537 SCRA
172, 223) which held that "in addition to serious misconduct, in dismissal based
on other grounds under Art. 282 like willful disobedience, gross and habitual
neglect of duty, fraud or willful breach of trust, and commission of a crime against
the employer or his family, separation pay should not be conceded to the dismissed
employee. (Emphasis added.)
Toyata added: In analogous causes for termination, like inefficiency, drug
use, and others, the NLRC or the courts may opt to grant separation pay anchored
on social justice inconsideration of length of service of the employee, the amount
involved, whether the act is the first offense, the performance of the employee and
the like, using guideposts enunciated in PLDT on the propriety of the award of
separation pay."
Toyota, labor adjudicatory officials and the CA must demur the award of
separation pay based on social justice when an employee's dismissal is based on
serious misconduct or willful disobedience, gross and habitual neglect of duty,
fraud or willful breach of trust, or commission of a crime against the person of the
employer or his immediate family-grounds under Art. 282 of the Labor Code that
sanction dismissals of employees. They must be judicious and circumspect in
awarding separation pay or financial assistance as the constitutional policy to
provide full protection to labor is not meant to be an instrument to oppress the
employers. The commitment of the Court to the cause of labor should not
embarrass us from sustaining the employers when they are right, as here (Central
Philippines Bandag case). In fine, we should be more cautious in awarding
financial assistance to the undeserving and those who are unworthy of the liberality
of the law."
TOYOTA MOTORS DOCTRINE ON SEPARATION PAY ISSSUE
Toyota Motors Philippines Corp Workers Association VS. NLRC & Toyota
Motor Philippines Corp., G.R. 158798-99, Oct. 19, 2007, held: The general rule is
that when just causes for terminating the services of an employee under Art. 282 of
the Labor Code exist, the employee is not entitled to separation pay. The apparent
reason is that lawbreakers should not benefit from their illegal acts. The dismissed
employee, however, is entitled to "whatever rights, benefits and privileges (s/he)
may have under the applicable individual or collective bargaining agreement with
the employer or voluntary employer policy or practice (Labor Code, Rule 1 of the
Rules Implementing Book VI, Sec. 7) or under the Labor Code and other existing
laws. This means that the employee, despite his dismissal for a valid cause, retains
the right to receive from the employer benefits provided by law, like accrued
service incentive leaves. With respect to benefits granted by the CBA and
voluntary management policies or rules, the entitlement of the dismissed
employees to the benefits depends on the CBA or the company rules and policies.
71

There are other exceptions. One is where the court justifies applying the
principle of social justice well entrenched in the 1987 Constitution. Phil. Long
Distance Telephone Co. v. NLRC, (GR L-80609, Aug. 23, 1988, 164 SCRA
671,680) explained why social justice can validate the grant of separation pay.
"Our Constitution is replete with positive commands for the promotion of social
justice, and particularly the protection of the rights of the workers. The
enhancement of their welfare is one of the primary concerns of the present charter,
In fact, instead of confining itself to the general commitment to the cause of labor
in Article II on the Declaration of Principles of State Policies, the new Constitution
contains a separate article devoted to the promotion of social justice and human
rights with a separate sub-topic for labor. Article XIII expressly recognizes the vital
role of labor, hand in hand with management, in the advancement of the national
economy and the welfare of the people in general. The categorical mandates in the
Constitution for the improvement of the lot of the workers are more than sufficient
basis to justify the award of separation pay in proper cases even if the dismissal be
for cause."
Explicit in PLDT are two exceptions when the NLRC or the courts should
not grant separation pay based on social justice-serious misconduct (which is the
first ground for dismissal under Art. 282) or acts that reflect on the moral character
of the employee. What is unclear is whether the ruling likewise, precludes the grant
of separation pay when the employee is validly terminated from work on grounds
laid down in Art. 282 of the Labor Code other than serious misconduct.
A recall of recent cases on the same issue reveals that where the termination
is legally justified on any of the grounds under Art 282, separation pay is not
allowed. Ha Yuan Restaurant. NLRC, GR 147719, Jan. 27, 2006 ,480 SCRA 328)
deleted the award of separation pay to the employee who, while unprovoked, hit
her co-worker's face, causing injuries, resulting in a series of fights and scuffles
between them. Her act was deemed a serious misconduct not warranting separation
pay. House of Sara Lee v. Rey (GR 149013, Aug. 31, 2006, 500SCRA 419) deleted
the separation pay award to a branch supervisor who regularly, without
authorization, extended the payment deadlines of the sales agents. Since the cause
for the supervisor's dismissal involved her integrity which could be considered as
breach of trust, she was not worthy of compassion as to deserve separation pay
based on her length of service. Gustito v. Wyeth Phils. Inc., GR 149629, Oct 4,
2004, 440 SCRA 67 found no exceptional circumstance to warrant the grant of
financial assistance to an employee who repeatedly violated the company's
disciplinary rules and regulations and was thus dismissed for gross and habitual
neglect of his duties. Doctrinal San Miguel v. Lao (GR 143136-37, July 11,
2002,384 SCRA 504) set aside the CA ruling granting retirement benefits or
separation pay to an employee who was dismissed for willful breach of trust and
confidence by causing the delivery of raw materials needed by company's glass
production plant, to its competitor. While a review of the cases does not reveal a
72

case involving termination for committing a crime against the employer or his/her
family, it would be adding insult to injury if the employer would still be compelled
to shell out money to the offender despite the harm done.
In all of the foregoing situations, termination pay was not granted because
the causes for dismissals recognized under Art. 282 of the Labor Code were serious
or grave in nature and attended by willful or wrongful intent, or they reflected
adversely on the employees' moral character. Thus, in addition to serious
misconduct, in dismissals based on other grounds under Art. 282 like willful
disobedience, gross and habitual neglect of duty fraud or willful breach of trust and
commission of a crime against the employer or his family, separation pay should
not be provided to the dismissed employee. (Note: The (e) item of Art. 282 on
employee termination is "Other cases analogous to the foregoing. ")
In analogous cases for termination like inefficiency, drug use, and others, the
NLRC or the courts may opt to grant separation pay based on social justice in
consideration of the 1ength of service of the employee, the amount involved,
whether the act is the first offense, the performance of the employee and the like,
using the guideposts enunciated in PLDT on the propriety of awarding separation
pay.
In a slew of cases of legal strikes and illegal acts, separation pay or financial
assistance was not awarded to dismissed union officers and members:
In Filipino Telephone Corp. v. Pilipino Telephone Employees Association
(PHILTEA), (GRI60058-160094, June 27, 2007), they openly defied the return-.towork order of the DOLE Secretary; Sukhothai Cuisine & Restaurant vs. CA (GR
150437, July 17,2006,496 SCRA336), union officers participated in and the union
members committed illegal acts during the illegal strike, thus violating arbitration
agreements; Philippine Diamond Hotel v. Union (GR 158075, June 30, 2006, 494
SCRA 195), the strike was declared illegal for the means employed were illegal;
Samahang Manggagawa sa Sulpicio Lines v. Sulpicio Lines (GR 140992, March
25, 2004, 426 SCRA 319), union officers participated in an illegal strike; Grand
Boulevard Hotel v. Genuine Labor Organization of Workers in Hotel. Restaurant
and Allied Industries (GR 153664-153665, July 18, 2003, 406 SCRA 668), union
officers were dismissed for holding an illegal strike, despite NLRC's declaration
urging the employer to give financial assistance to them; Interphil Laboratories
Union v. lnterphil Laboratories (GR 142824, Dec. 19, 2001, 258 SCRA 724),
union officers who led the concerted action refused to render overtime work and
even caused work slowdowns; CCBPI Postmix Workers Union v. NLRC (GR
114521 and 123491, Nov. 27, 1998, 299 SCRA 410), union officers took part in the
illegal strike and union members committed illegal acts; and Allied Banking Corp.
vs. NLRC (GR 1161128, July 12, 1996, 258 SCRA 724), an employee participated
in unlawful and violent strike resulting in multiple deaths and extensive property
damage, while union officers and other members committed other infractions
73

constituting serious misconduct.

LENGTH OF SERVICE TO JUSTIFY SEPARATION PAY: A
PREMIUM TO EMPLOYEE DISLOYALTY.
Aromin v. Bank of the Philippine Islands, G. R. 164824, April 30,2008 also
involving the separation pay issue, the Court ruled: "Guided by doctrinal
pronouncements and with the reality that Aromin is guilty of willful betrayal of
trust, a serious offense akin to dishonesty, he is not entitled to financial assistance
or separation pay. It may be held that his 26 years of service might generally be
considered for a severance pay award or some form of financial assistance to
cushion the effect of this termination.
But as aptly observed by both the NLRC and CA, Aromin's length of service
is of little moment for purposes of financial award since his willful breach of trust
reflects a regrettable lack of loyalty to his employer. Indeed, if length of service is
to be regarded as justification for moderating the penalty of dismissal, then we
would be giving a premium to disloyalty, distorting in the process the meaning of
social justice and undermining the efforts of labor to cleanse its ranks of
undesirables (Escuban Jr. v. Sulpicio Lines, GR 148410, Jan.17, 2005, 448 SCRA
516, 533-534., citing Flores. v. NLRC, GR 96969, March 2, 1993, 219 SCRA 350,
355).
STATUS OF EMPLOYMENT
PROBATIONERY EMPLOYEES ENJOY SECURITY OF TENURE:
CANNOT BE DISMISSED EXCEPT FOR CAUSE OR FAILURE TO
QUALIFY AS REGULAR EMPLOYEES.
Woodridge College Inc. v, Joanne C. Pe Benito and Randy Balaguer, GR
160240, Oct. 29, 2008, Nachura, J. The two probationary school teachers were
suspended for 30 days for uttering defamatory remarks against the school principal
in the presence of co-teachers; tardiness; spreading false accusations against the
school; absence without official leave; and using TV and radio to malign the
school. After explaining their side, they were dismissed.
Court ruling: The dismissal of the two teachers was illegal because the
school failed to comply with the substantive aspect of employment termination.
Probationary employees enjoy security of tenure in the sense that during their
probationary employment, they cannot be dismissed except for cause or when they
fail to qualify as regular employees (Lacuesta v. Ateneo de Manila University, GR
152777, Dec. 9, 2003, 477 SCRA 217, 225; Escorpizo v. University of Baguio. 366
Phil. 166, 175, 176,1999).

74

Employer based its serious misconduct charge principally on the employees'

expose of a certain school anomaly by appearing on TV and speaking over the
radio thus, they were undeserving to become part of the school community.
But the tenor of the teachers' manifesto of the issues addressed to the school
indicated good faith. Their ultimate objective was not to put the school down, but
to work for some changes beneficial to the students, teachers, the school and the
country as a whole. They sought an amicable settlement through a dialogue with
the principal who, instead of trying to resolve the matter, uttered unnecessary
statements against the teachers. After this incident, the school's acts showed abuse
of its power over the teachers, especially the probationary employees.
The totality of the employees acts cannot be characterized as "misconduct"
under the law, serious enough to warrant the severe penalty of dismissal. This is
especially true because there is no finding of malice or wrongful intent.
Serious misconduct is defined as improper and 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 serious misconduct must be of such a grave and aggravated
character and not merely trivial or important (NLRC v. Salgarino, GR 164376, July
31, 2006, 497 SCRA 361,374; Colegio de San Juan de Letran-Calamba vs. Villas
441 Phil. 692, 699, 2003).
Such misconduct, however serious, must be in connection with the work
of the employee to constitute just cause for his separation. 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 (Salgarino case).
Despite its claim that respondents were remiss in their duties during the
whole period of probation, it was only after the expose when the school informed
respondents of their alleged substandard performance. The termination notices did
not explain the details of their failure to qualify as regular employees and the
standards not met by them. No yearly evaluations of the probationary teachers
were submitted. The unavoidable inference is that employees' dismissal is invalid.
The chronology of events, therefore, supports the view that respondents'
suspension and eventual dismissal were tainted with bad faith, as the school's
obvious retaliatory acts.
Fixed-term employment: the exception, not the general rule; only valid
under certain circumstances.
Cherry J. Price vs. INNODATA Phils. Inc., GR 178505, Sept. 30, 2008,
75

Chico Nazario, J. The employees were employed as formatters by the employer

under fixed one-year contracts. When employer terminated their employment, they
filed a complaint for illegal dismissal, claiming being regular employees.
Court ruling: Undoubtedly, they were regular employees. They were
employed as formatters in the employer's primary business of data encoding, and
the formatting of data entered into the computers is an essential part of data
encoding.
Formatting organizes the data encoded, making it easier for clients or endusers to understand. Undeniably, employees' work was necessary or desirable in
the employer's business or trade.
Considering the nature of their employment, it is clear that the terms fixed in
the contracts were meant only to circumvent the employees' right to security of
tenure and are, therefore, invalid. Since there were no valid fixed-term contracts,
the complainants were regular employees who could not be dismissed except for a
just or authorized cause.
Under Art. 280 of the Labor Code which starts with the proviso "The
provisions of written agreement to the contrary notwithstanding and regardless of
the oral agreement of the parties," the following employees are accorded regular
status: (1) those who are engaged to perform activities which are necessary or
desirable in the usual business or trade of the employer, regardless of the length of
their employment, and (2) those who were initially hired as casual employees, but
have rendered at least one year of service, whether continuous or broken, with
respect to the activity in which they are employed. Undoubtedly, the petitioners
belong to the first type of regular employees.
However, it is also true that while certain forms of employment require the
performance of usual or desirable functions and exceed one year, these do not
necessarily result in regular employment under Article 280 of the Labor Code
(Millares v. NLRC, GR 110524, July 29, 2002, 434 Phil 524, 538).
Under the Civil Code, fixed-term employment contracts are not limited, as
they are under the present Labor Code, to those by nature seasonal or for-specific
projects with predetermined dates of completion; they also include those to which
the parties by free choice have assigned a specific date of termination (Brent
School Inc. vs. Zamora, GR 48494, Feb. 5, 1990, 181 SCRA 702; St. Theresa's
School of Novaliches Foundation v. NLRC, 351 Phil. 1038, 1998).
While the validity of fixed-term employment contracts has been recognized,
this is the exception rather than the general rule. Thus, it is valid only under certain
circumstances. In Brent, the Court identified several circumstances wherein a
"fixed-term is an essential and natural appurtenance: overseas employment
76

contracts, for one, to which, whatever the nature of the engagement, the concept of
regular employment with all that it implies does not appear ever to have been
applied, Article 280 of the Labor Code notwithstanding. Also appointments to the
positions of dean, assistant dean, college secretary, principal, and other
administrative offices in educational institutions, which are by practice or tradition
rotated among the faculty members, and where fixed terms are a necessity without
which no. reasonable rotation would be possible. .Similarly, despite the provisions
of Article 280, Policy Instructions No.8 of the Minister of Labor implicitly
recognized that certain company officials may be elected for whatever amount to
fixed periods, at the expiration of which they would have to step down, in
providing that these officials, "x x x may lose their jobs as president, executive
vice-president or vice president, etc; because the stockholders or the board of
directors for one reason or another did not reelect them."
However, the Court, in its oft-quoted decision in Brent, issued a stern
admonition that where, from the circumstances, it is apparent that the period was
imposed to preclude the acquisition of tenurial security by the employee, then it
should be struck down as being contrary to law, morals, good customs, public
order and public policy.
Construction business but without project employment contracts:
project or regular employees?
Hanjin Heavy Industries and Construction Co. Ltd, Hak Kon Kim and/or
Jhunie Adajar v. Felicito lbariez, et. al., GR 170181, June 26, 2008, ChicoNazario, J. Hanjin, engaged in the construction business, dismissed the nine
workers who, claiming to be regular employees, filed a complaint for illegal
dismissal.
Employer claimed they were project employees hired for the
construction of the LRT/MRT Line 2 project under renewable three months
contracts. Employees denied having executed contracts with the company. Were
the employees regular or project employees?
Court ruling: They were regular employees. Employees hired for carrying
out a separate job, distinct from the other company undertakings, the scope and
duration of which has been determined and made known to the employees at the
time of the employment are properly treated as project employees and their services
may be lawfully terminated upon the completion of a project (Article 280, Labor
Code). Should the terms of their employment fail to comply with this standard,
they cannot be considered project employees.
Thus, it is crucial that the employees are informed of their status as
project employees. The duration and scope of the work is defined in an
employment agreement and is made clear to the employee at the time of
hiring. The period is agreed upon knowingly and voluntarily by the parties,
without any force, duress or improper pressure being brought upon the
77

employee and any other circumstances vitiating his consent.

Employer admitted that due to a lapse in management procedure, no such
employment contracts were executed. Nevertheless, it said, the absence of a
written contract does not change the status of the project employees.
This Court has construed as a red flag cases of the same issue. In one case,
the employer was unable to present employment contracts signed by the workers,
which stated the duration of the project. In another, the Court refused to recognize
employment contracts offered by the company and signed by its president and
general manager, but not by the employees. In other cases, where the Court ruled
that repeatedly-hired construction workers retained their project employee status,
the employers were able to produce employment contracts clearly stipulating that
the workers' employment was coterminous with the project to support their claims
that the employees were notified of the scope and duration of the project. Such a
contract is evidence, that they were informed of the duration and scope of their
work and their status as project employees.
In this case, where no other evidence was offered, the absence of an
employment contract puts into serious question whether the employees were
properly informed at the outset of their employment status as project
employees. Absent any other proof that the employees were informed of their
status as such, it will be presumed that they are regular employees in
accordance with Department Order No. 19, Series of 1993, entitled Guidelines
Governing the Employment of Workers in the Construction Industry, issued
by the Department of Labor and Employment.
The DOLE issuance requires that employment termination in the
particular project/undertaking should be reported to the regional office within
30 days after the separation from work and the employment contract should
provide completion bonus to project employees as practiced by most
construction companies.
The employer reported to DOLE only the last and final termination of
employees. If the employees were actually project employees, the company
should have filed as many termination reports as there were construction
projects actually finished and for which the employees were assigned. Thus, a
lone termination report filed by the company only upon the termination of the
employees' final project and after their previous continuous employment for
other projects, is not only unconvincing, but even suspicious.
Due to employer's failure to adduce any evidence showing that the
employees were project employees who had been informed of the duration and
scope of their employment, the employees are to be considered as regular
employees, Employer also failed to notify them of the particular acts for which
78

their dismissals was sought. Nor were they required to give their side regarding the
charges against them. Employees' dismissal was not carried out in accordance with
law and was, therefore, illegal.
PROJECT OR REGULAR EMPLOYEE? WORKING 3 TO 12 YEARS
WITHOUT A SPECIFIC PROJECT ASSIGNMENT.
Cocomanga's Hotel Beach Resort and Susan Munro vs Federico Visca, etc.
G. R. 67045, Aug. 29, 2008, Austria-Martinez, J.
Court ruling: Respondents cannot be classified as project employees, since
they worked continuously from three to twelve years without any mention of a
"project" to which they were specifically assigned. While designated as
"foreman," "carpenter" and "mason," they also worked in the maintenance and
repair of the furniture, motor boats, cottages, windbreakers and other resort
facilities. There is no evidence of project employment contracts covering the
alleged periods of employment and, more importantly of the employer's report to
the DOLE on employees' termination in alleged project employment per
Department Order No. 19. This indicates that the employees were not project
employees but regular employees (PLDT v. Ylagan, GR 155645, Nov. 24,
2006,508 SCRA 31,36; Grandpan Development Corp. v. Bernardo, GR 141464,
Sept. 21,2005,470 SCRA 461,470; Filipinas Pre-Fabricated Building Systems
(Filsystem) vs. Puente, GR 153832, March 18,2005,453 SCRA 820,827-828).
The repeated and continuing need for their services is sufficient evidence of
the necessity, if not indispensability, of their services to the employer's resort
business. This Court has held that an employment ceases to be coterminous with
specific projects when the employee is continuously rehired due to the demands of
employer's business and re-engaged for many more projects without interruption
(Liganza vs. RBL Shipyard Corp., GR 159862, Oct 17, 2005; Bralun Industries,
Inc. v. NLRC, GR 345 Phil 1077, 1083, 1997; Tomas Lao Construction v. NLRC,
344 Phil 268, 279, 1997)
Maraguinot, Jr. vs. NLRC, (348 Phil. 580, 1998) ruled that "once a project
or work pool employee has been (1) continuously, as opposed to intermittently,
rehired by the same employer for the same tasks or nature of tasks; and (2) these
are tasks vital, necessary and indispensable to the usual business or trade of the
employer, then the employee must be deemed a regular employee, pursuant to
Article 280 of the Labor Code and jurisprudence.
Their regular employment status is further bolstered by the following: (a) the
SSS quarterly summary of contribution payments listing them as employees of the
company; (b) the service records certificates stating that the employees worked for
employer from three to twelve years and all were cited for "very satisfactory
performance"; and (c) petty cash vouchers showing payment of their salaries and
79

holiday and overtime pays. Being regular employees, they are entitled to security
of tenure, and their services may
be terminated except for causes provided by
law.
PROJECT OR REGULAR EMPLOYEES? ELECTRICIANS
EMPLOYED FOR CONTRACTS FROM DEVELOPERS, BUILDERS.
Gregorio S. Saberola v Ronald Suarez and Raymundo Lirasan Jr:, G. R.
15227, July 14, 2008, Nachura, J. Saberola, owner of a firm specializing in
installing electrical devices in subdivision homes and commercial and noncommercial building, employed Suarez and Lirasan as electricians. When the
employer dismissed them after completing specific projects, the employees filed
complaints for illegal dismissal. Employer claimed they were part-time project
employees who were employed only when there were electrical jobs in particular
housing units contracted by the company. Their services were coterminous with
each project. As project employees, the time of rendering their services was not
fixed. Thus, there was no practical way of determining the appropriate
compensation of the value of the employees' accomplishments, as their work
assignment varied depending on the needs of a specific project.
Court ruling: Employer's business, specializing in installing electrical
devices, needs electricians only when there are electrical devices to be installed in
subdivision homes or buildings covered by an appropriate contract. The business
depends on the contracts that he is able to obtain from real estate developers and
builders of buildings. Thus, since the work provided by petitioner depends on the
availability of such contracts or projects, the duration of the employment of his
work force is not permanent but coterminous with the projects to which the
workers are assigned. Viewed in this context, the respondents are considered
project employees of petitioner. Indeed, the status of respondents as project
employees was upheld by the CA based on the findings of the labor arbiter and the
NLRC that the respondents were project employee.
ALL ABOUT RELATIONS AMONG EMPLOYER, CONTRACTOR AND
SUBCONTRACTOR: LAW AND JURISPRUDENCE
Mandaue Galleon Trade Inc. and/or Gamallosos Traders Inc. v. Vicente
Andales, Restituta Solitana, Elpidio Suelto, et. al., GR 159668, March 7, 2008,
Austria. Martinez, J. MGTI and GTl are engaged in rattan furniture manufacturing
for export Employees worked on various dates as weavers, grinders, sanders and
finishers. When employer dismissed them, they filed a complaint for illegal
dismissal. They claimed they were dismissed without notice and just cause.
MGTI denied employer-employee relationship with complainants. They are
workers of independent contractors whose services were engaged temporarily and
seasonally when demands for its products are high and could not be met by its
80

regular workforce. The independent contractors recruited and hired them, prepared
the payroll and paid their wages, supervised and directed their work, and had
authority to dismiss them. Due to the economic crisis and internal squabble in the
company, the volume of orders from foreign buyers dived. As a survival measure,
management decided to retrench its employees, and the substantial separation pay
paid to retrenched employees caught the jealous eyes of complainants who caused
the filing of the complaint for illegal dismissal.
Court ruling: Petitioners' claim that their contractors are independent
contractors and therefore this case is one for permissible job contracting is without
basis. Complainants' work as weavers, grinders, sanders and finishers is directly
related to MGTI's principal business of rattan furniture manufacturing. Where the
employees are tasked to undertake activities usually desirable or necessary in the
usual business of the employer, the contractor is considered as a "labor-only"
contractor and such employees are considered as regular employees of the
employer (Manila Water Company v. Pena, GR 158255, July 8,2004,434 SCRA
53,58; Guinnix Interiors v. NLRC, 339 Phil. 75, 7980, 1997).
MGTI failed to prove that its contractor had substantial capital. There was
no evidence as to the contractor's capitalization, investment in tools, equipment or
implements actually used in the performance or completion of the job, work, or
service that they were contracted to render. The law casts the burden on the
contractor to prove that it has substantial capital, investment, tools, etc. Employees,
on the other hand, need not prove that the contractor does not have substantial
capital, investment, and tools to engage in job-contracting (7K Corporation v.
NLRC. GR 148490, Nov. 22, 2006, 507 SCRA 509, 523; Coca-Cola Bottlers
Phils., Inc. vs Hingpit, 356 Phil. 90,103,1998; Tuarin v. NLRC, GR 86010, Oct. 3,
1989,178 SCRA 267, 273). Thus, the contractors are "labor-only" contractors since
they do not have substantial capital or investment which relates to the service
performed and complainants performed activities which were directly related to
MGTI's main business. MGTI, as the principal employer, is solidarity liable with
the labor-only contractors, for the rightful claims of the employees. Under this set
up "labor-only" contractors are deemed agents of the principal, MGTI, and the law
makes the principal responsible to the employees of the "labor-only" contractor as
if the principal itself directly hired or employed the employees. In prohibiting
"labor-only" contracting and' creating an employer-employee relationship between
the principal and the supposed contractor's employees, the law intends to prevent
employers from circumventing labor laws intended to protect employees.
(NOTE: See Article 106 of the Labor Code which explains the relations
which may arise among an employer, a contractor and the contractor's employees,
and Sections 5 and 7 of the Rules Implementing Articles 106 to 109 of the Labor
Code, as amended, which reinforce the rules in determining the existence of
employer-employee relationship between employer, contractor or subcontractor,
and the contractor's or subcontractor's employee.)
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ALL ABOUT STRIKES

UNION-RECOGNITION STRIKE: AFTER DISPUTE CERTIFIED
FOR COMPULSORY ARBITRATION, AND RETURN-TO-WORK ORDER.
In Steel Corporation of the Philippines v. SCP Employees Union National
Federation of Labor Unions, GR 169829-30, April 16, 2008, Azcuna, J. After the
Secretary of Labor had assumed jurisdiction of the labor dispute and certified the
case to the NLRC for compulsory arbitration, the union filed several notices of
strike which resulted into two certified cases which were consolidated.
Court ruling: respondent's notices of strike were based on employer's
continued refusal to bargain with it. The strike was staged to compel employer to
recognize it as the collective bargaining agent, making it a union-recognition
strike. All this, despite the striking union's doubtful majority status to merit
voluntary recognition and lack of formal certification as the exclusive bargaining
representative in the bargaining unit.
Since the certification election where respondent union won, was not
recognized as valid, it has no authority to represent the rank-and-file employees.
Thus, it could not ask company to bargain with it. As the issue of identity had been
the subject of separate case which was settled by the court with finality (CA-GR.
SP No. 55721), the company cannot be faulted for refusing to bargain with it.
Neither could this Court sustain union's imputation of unfair labor practice and
union busting against the company. With more reason, this Court cannot sustain the
validity of the strike staged on such basis.
Even if the strike's purpose were valid, still, the strike was illegal for
conducted in utter defiance of the Secretary of Labor's return-to-work order and
after the dispute had been certified for Compulsory Arbitration (Note: see Article
263 (g) of the Labor Code). The notices of strike successively filed by the union
were founded on substantially the same grounds company's continued refusal to
recognize it as the collective bargaining representative.
The Secretary's powers have been characterized as an exercise of the police
power of the State to promote the public good. In exercising these powers, he is
granted "great breadth of discretion" to find a solution to a labor dispute. The most
obvious of these powers is the automatic en) joining of an impending strike or
lockout or its lifting if. one has already taken place (Philcom Employees Union v.
Philippine Global Communications and Philcom Corporation, GR 144315, July
17,1006,495 SCRA 214, 232).
The Secretary's assumption of jurisdiction over a labor dispute in an industry
82

indispensable to national interest, has the effect of automatically enjoining the

intended or impending strike. It was not even necessary for the Secretary to issue
another return-work work order, even if the directive to return to work is not
expressly stated in the assumption order (Telefunken Semiconductor Employees
Union vs. Court of Appeals, 401 Phil. 776, 794). A return-to-work order must be
obeyed, otherwise the workers run the risk of severing their relationship with their
employer (Philcom case above and Art. 264 Prohibited activities).
In the instant case, after the assumption of jurisdiction and certification of
the dispute to the NLRC for compulsory arbitration, the labor union filed notices of
strike and staged the strike obviously contrary to law. Worse, it filed not one but
several notices of strike which resulted in two certified cases which were earlier
consolidated. These disputes could have been averted had the union respected the
CA decision. That way, the collective bargaining agent would have been
determined and the company could have been compelled to bargain. Instead, the
union, through its officers, opted to use the weapon of strike to force the company
to recognize it as the bargaining agent. The strike, having been staged after the
dispute had been certified for arbitration and contrary to the return-to-work order,
became a prohibited activity, and was thus illegal.
What is the proper penalty to be imposed on the union officers who
knowingly participated in the illegal strike? It bears stressing that the law makes a
distinction between union members and union officers. (See Article 264, Labor
Code) A worker merely participating in an illegal strike may not be terminated
from employment. It is only when he commits illegal acts during a strike that he
may be declared to have lost employment status. For knowingly participating in an
illegal strike or participating in the commission of illegal acts during a strike, the
law provides that a union officer may be terminated from employment. The law
grants the employer the option of declaring a union officer who participates in an
illegal strike as having lost his employment. It possesses the right and prerogative
to terminate the union officers from service (Santa Rosa Coca- Cola Plant
Employees Union v. Coca-Cola Bottlers Phils. GR 164302-03, Jan. 14, 2007, 512
SCRA 437, 455; See also Stanford Marketing Corp. v. Julian, GR 145496, Feb. 24,
2004, 423 SCRA 633, 649). Otherwise, the workers will simply refuse to return to
their work and cause a standstill in the company operations while retaining the
positions they refuse to discharge and preventing management from filling up their
positions (Philcom Employment Union case above)..
(NOTE: The proviso in the third paragraph's second sentence under Art. 264
(a states: "Provided, That mere participation of a worker in a lawful strike
(italicized for emphasis) shall not constitute sufficient ground for termination of his
employment x x x "The term "lawful strike" in the proviso is a misnomer. It should
properly be "illegal strike" to jibe with the very context of the previous main
provision. There is nothing illegal or wrong with a "lawful strike." A spate of
Supreme Court decisions cited in Toyota, while quoting Art. 264 (a), used "illegal
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strike," not lawful strike" in differentiating the liability of union officer and union
member, or "worker" as used in the provision, though a "union officer" is also a
"worker", for taking part in an illegal strike or committing illegal acts.)
WHEN TERM STRIKE NOT USED: ILLEGAL ACTS DURING
LEGAL OR ILLEGAL STRIKES; LIABILITY OF UNION OFFICERS;
MEMBERS.
In Toyota Motor Phils. Corp. Workers Association vs. NLRC 2nd division
and Toyota Motor Philippines Corp. GR 158786 & 158789; and Toyota Motor
Philippines Corporation vs. Toyota Motor Philippines Corp. Workers Association,
GR 158798-99, Oct. 19, 2007, Velasco Jr., J., union members skipped work and
staged rallies in front of the DOLE and BLR offices for two days allegedly as an
exercise of their right to assemble and ask government for redress of their
grievances in connection with pending issues. When the company dismissed some
union members for being absent from work for two days and refusing to render
scheduled overtime work, causing production and business losses, they went on
strike for almost a month and then again for five days in front of the company's
Bicutan and Sta. Rosa plants. They barricaded the plants and prevented plant
workers from reporting for work, thus causing more losses for the company.
Court ruling: The protest rallies in front of BLR and DOLE Secretary's
offices and at the Toyota plants constituted illegal strikes. The fact that the
conventional term "strike" was not used by the striking employees to describe their
common course of action is inconsequential, since the substance of the situation
and not its appearance, will be deemed controlling. Strike has been elucidated to
encompass not only concerted work stoppages, but also slowdowns, mass leaves,
sit-downs, attempt to damage, destroy, or sabotage plant equipment and facilities,
and similar activities. (Art. 212 Labor Code and Bangalisan v. Court of Appeals,
GR124678, July 31, 1997, 276 SCRA 619, 627, which in turn cited Board of
Education v. New Jersey Education Association (1968) 53 NJ 29 247 A2d 867, and
Santa Rosa Coca-Cola Plant Employees Union v. Coca-Cola Bottlers Phils., GR
164302-03, Jan. 24, 2007,512 SCRA 437,453-454)
The union failed to comply with the following requirements: 1) notice of
strike with DOLE 30 days before the intended date of strike, or 15 days in case of
unfair labor practice; 2) strike vote approved by a majority of the total union
membership in the bargaining unit obtained by secret ballot in a meeting for the
purpose; and 3) notice given to DOLE of the vote result at least seven days before
the strike. These requirements are mandatory and failure by' a union to comply
with them renders the strike illegal. The evident intention of the law in requiring
the strike notice and the strike vote report is to reasonably regulate the right to
strike, which is, essential in attaining legitimate policy objectives of the law
(Stanford Marketing Corp. v. Julian, GR 145496, Feb. 24, 2004, 423 SCRA 597112 633, 647; citing Lapanday Workers Union v. NLRC, GR 95494-97, Sept. 7,
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1995, 248 SCRA 94, 1 04).

Art. 264 (a) sanctions the dismissal of a union officer who knowingly
participates in an illegal strike or who knowingly commits illegal acts during a
lawful strike. A union member is liable when he knowingly participates in an
illegal act "during a strike." While the provision is silent on whether the strike is
legal or illegal, it is irrelevant. As long as the members commit illegal acts, in a
legal or illegal strike, then they can be terminated (Chua vs. NLRC, GR 105775,
Feb. 8, 1993, 218 SCRA545).
However, when union members merely participates in an illegal strike
without committing any illegal act, are they liable? This was squarely answered in
Gold City lntegrated Port Services v. NLRC, GR 123276, July 6, 1995, 245 SCRA
627; 637) holding that an ordinary striking worker cannot be terminated for mere
participation in an illegal strike. This affirmed the rulings in Bacus v. Ople (L56856, Oct. 23, 1984132 SCRA 690) and Progressive Workers Union vs Aguas
(GR 5971-12; May 29,1985,150 SCRA 429) that though the strike is illegal, the
ordinary member who merely participates in the strike should not be meted loss of
employment on the considerations of compassion and good faith and in view of the
security of tenure provisions under the Constitution. Esso Philippines v. Malayang
Manggagawa sa Esso (L-36545, Jan. 26, 1977, 75 SCRA 73, 90) explained that a
member is not responsible for the union's illegal strike even ifhe voted for the
holding of a strike which became illegal.
What are considered "illegal acts"? under Art. 264 (a)? No precise meaning
was given. It may encompass a number of acts that violate existing labor or
criminal laws, such as the following: 1) violation of Art. 264 (e) of the Labor Code
which provides that "no person engaged in picketing shall commit any act of
violence, coercion or intimidation or obstruct the free ingress to or egress from the
employer's premises for lawful purposes, or obstruct public thoroughfares; 2)
commission of crimes and other unlawful acts in carrying out the strike (National
Brewery and Allied Industries Labor Union v. San Miguel Brewery. GR L-19017,
Dec. 27, 19639 SCRA 847); and 3) violation of any order, prohibition, or
injunction issued by the DOLE Secretary or NLRC in connection with the
assumption of jurisdiction/certification order under Art. 263 (g) of the Labor Code.
This enumeration is not exclusive and. it may cover other breaches of existing
laws.
In this case, the individual union officers and members participated in
several illegal strikes and committed illegal acts during illegal strikes. What are the
individual liabilities of the affected union members? Association of Independent
Unions in. the Philippines v. NLRC, (GR 120505, March 25, 1999, 305 SCRA
219,231) lays down the rule on the liability of union members:
"Decisive on the matter is the pertinent provisions of Article 264 (a) of the
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Labor Code that: 'x x x any worker who knowingly participates in the commission
of illegal acts during a strike may be declared to have lost his employment status x
x x ' It can be gleaned unerringly from the aforecited provision of law in point,
however, 'that an ordinary striking employee cannot be terminated for mere
participation in an illegal strike. There must be proof that. he committed illegal acts
during the strike and the striker who participated in the commission of illegal acts
must be identified. But proof beyond reasonable doubt is not required. Substantial
evidence available under the circumstances may suffice to justify the penalty of
dismissal. Substantial evidence is more than a mere scintilla. It means such
relevant evidence that a reasonable mind might accept as sufficient to support a
conclusion.
Thus, it is necessary for the company to prove the participation of the
striking employees in illegal acts during the strikes. Company officials, including
its security chief, proved the commission of illegal acts through documents and
photographs submitted to the authorities identifying those involved in the illegal
acts, which were not disputed by the union.
PROMISSORY ESTOPPEL: EXCEPTION TO THREE-YEAR
PRESCRIPTIVE PERIOD FOR PAYMENT OF MONEY CLAIM.
Accessories Specialist Inc. (ASI) and Tadahiko Hashimoto v: Erlinda B.
Alabama in behalf of Jones B.Alabansa, GR 168985, July 23,2008, Nachura, J.
On behalf of her deceased husband Jones, Erlinda filed a complaint against
the company for payment of his salaries, separation pay and 13 th month pay. The
husband, company vice-president, manager and director, was compelled to resign
because of losses and debts due to lack of market. He demanded payment of his
money claims but the company told him it would first settle the claims of rankand-file employees. He patiently waited to be paid and made several demands. The
company kept assuring him. He died five years later.
Company claimed that Jones voluntarily resigned in 1997. Erlinda's cause of
action was forever barred under Article 291 of the Labor Code providing a threeyear prescription for all money claims from the time the cause of action accrues.
The complaint was filed almost five years from the date of Jones' alleged illegal
dismissal.
Court ruling: it was ASI which was responsible for the delay in the
institution of the complaint. When Jone's resigned, he immediately asked for the
payment of his money claims. The company promised to pay right after paying
rank-and-file employees. Jones relied on its promise. Unfortunately, it, was never
fulfilled even after his death. Thus, the principle of promissory estoppels can apply
as a recognized exception to the three-year prescriptive period under Art. 291.

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Promissory estoppel may arise from the making of a promise, even though
without consideration, if it was intended that the promise should be relied upon" as
in fact it was relied upon, and if, a refusal to enforce it would virtually sanction
fraud or injustice (Ramos v. Central Bank of the Philippines, No. L-29352, Oct. 4,
1971, 41 SCRA 565). It presupposes the existence of a promise on the part of one
against whom estoppels is claimed. The promise must be plain and unambiguous
and sufficiently specific so that the court can understand the obligation assumed
and enforce the terms of the promise (National Power Corporation vs Hon.
Alollonzo-Legasto, GR 148318, Nov. 22, 2004, 443 SCRA 142,371).
In order to make out a claim of promissory estoppel, a party bears the burden
of establishing the following elements: 1. a promise was reasonably expected to
induce action or forbearance; 2) such promise did, in fact, induce such action or
forbearance; and 3) the party suffered detriment as a result (Mendoza v. Court of
Appeals, 412 Phil.14, 29, 2001).
All the requisites of promissory estoppel are present in this case. Jones relied
on the promise of ASTE that he would be paid as soon as the claims of alt rankand-file employees were paid. If not for this promise that he had held on to until
his death, we see no reason why he would delay filing the complaint Thus, we find
ample justification not to follow the prescriptive period imposed under Art 291.
Great injustice would be committed if the employee's claims were brushed aside on
mere technicality, especially when it was the employer's action that prevented
Jones from filing the claims within the required period (Ludo & Luym Corporation
v. Saornido,443 Phil. 554, 2003).
VISITORIAL & ENFORCEMENT POWER OF SECRETARY OF
LABOR TO IMPLEMENT LABOR STANDARDS PROVISIONS:
REGARDLESS OF THE AMOUNT OF EMPLOYEES MONEY CLAIMS?
Bay Haven, Inc. v, Florentino Abuan and 12 others, GR 160859, July 30,
2008, Austria-Martinez, J. Court ruling: The DOLE Secretary and his authorized
representatives such as DOLE regional directors have jurisdiction to enforce
compliance with labor standards laws under the broad visitorial and enforcement
powers conferred by Article 128 of the Labor Code, and expanded by RA 7730.
Article 128 (e) states, "Notwithstanding the provision of Articles 129 and
217 of the Code to the contrary, and in cases where the relationship of employeremployee still exists, the Secretary of Labor and Employment or his dulyauthorized representatives shall have the power to give effect to the labor standards
provisions of this Code and other labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers made in the
course of inspection. "

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The Court has held that the visitorial and enforcement powers of the
Secretary, exercised through his representatives, encompass compliance with all
labor standards laws and other labor legislation regardless of the amount of the
claims filed by workers (Cirineo Bowling Plaza Inc. v. Sensing, GR 146572, Jan.
14,2005, 448 SCRA 175,186; V.L. Enterprises v. CA, GR 167512, March 12,2007,
518 SCRA 174,181-182; Ex-Bataan Veterans Security Agency Inc. v. Secretary of
Labor, GR152396, Nov. 20,2007,537 SCRA 651,663; Allied Investigation Bureau
Inc. v. Secretary of Labor, GR 122006, Nov. 24, 1999, 3190 SCRA 77,83; Guico Jr.
v. Secretary of Labor, GR 131750, Nov. 16, 1998,298 SCRA 666, 675).
This has been the rule since RA No. 7730 was enacted on June 2, 1994,
amending Article 128 (b) of the Labor Code, to expand the visitorial and
enforcement powers of the DOLE Secretary. Under the former rule, the DOLE
Secretary had jurisdiction only in cases where the amount of the claim did not
exceed P5,000. "
(NOTE: RA 7730 amended Articles 128 (b) and 219 through its broad
phraseology "Notwithstanding the provisions of Articles 129 and 217 of this Code
to the contrary," without directly amending or striking down the specific provisions
of both Articles limiting DOLE's jurisdiction to money claims of not more than
P5,000 per employee. Article 129, only an article away, provides that DOLE is
empowered to hear and decide any matter involving the recovery of money claims
of an employee, "Provides that the aggregate money claims of each employee does
not exceed five thousand pesos." Under Article 217 (6) Jurisdiction of Labor
Arbiters), not really so far away, provides that the labor arbiters shall have original
and exclusive jurisdiction of an other claims, arising from employers employee
relations, including those of persons in domestic or household service, involving an
amount exceeding five thousand pesos." What prevented the Congress from
directly providing, through RA 7730, that DOLE jurisdiction over money claims is
unlimited? As both Articles 129 and 217 stand until now, which cause some
confusion, the employee money claims of over P5,000 remain under the
jurisdiction of the Labor Arbiter. Query: Despite RA 7730's intention as interpreted
by jurisprudence to widen DOLE's jurisdiction, may a complainant employee file
the money claim of whatever amount directly with the labor arbiter? Or is the
complainant employee still really required to file it with DOLE or its authorized
representative, .as the initial level of litigation'?).

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