FIRST DIVISION

[G.R. No. 145561. June 15, 2005]

HONDA PHILS., INC., petitioner, vs. SAMAHAN NG MALAYANG

MANGGAGAWA SA HONDA, respondent.
DECISION
YNARES-SANTIAGO, J.:

This petition for review under Rule 45 seeks the reversal of the Court of Appeals
decision dated September 14, 2000 and its resolution dated October 18, 2000, in
CA-G.R. SP No. 59052. The appellate court affirmed the decision dated May 2, 2000
rendered by the Voluntary Arbitrator who ruled that petitioner Honda Philippines, Inc.s
(Honda) pro-rated payment of the 13 th and 14th month pay and financial assistance to its
employees was invalid.
[1]

[2]

[3]

As found by the Court of Appeals, the case stems from the Collective Bargaining
Agreement (CBA) forged between petitioner Honda and respondent union Samahan ng
Malayang Manggagawa sa Honda (respondent union) which contained the following
provisions:

Section 3. 13th Month Pay

The COMPANY shall maintain the present practice in the implementation [of]
the 13th month pay.
Section 6. 14th Month Pay
The COMPANY shall grant a 14th Month Pay, computed on the same basis as
computation of 13th Month Pay.
Section 7. The COMPANY agrees to continue the practice of granting, in its
discretion, financial assistance to covered employees in December of each year, of not
less than 100% of basic pay.
This CBA is effective until year 2000. In the latter part of 1998, the parties started
re-negotiations for the fourth and fifth years of their CBA. When the talks between the
parties bogged down, respondent union filed a Notice of Strike on the ground of
bargaining deadlock. Thereafter, Honda filed a Notice of Lockout. On March 31, 1999,
then Department of Labor and Employment (DOLE) Secretary Laguesma assumed

jurisdiction over the labor dispute and ordered the parties to cease and desist from
committing acts that would aggravate the situation. Both parties complied accordingly.
On May 11, 1999, however, respondent union filed a second Notice of Strike on the
ground of unfair labor practice alleging that Honda illegally contracted out work to the
detriment of the workers. Respondent union went on strike and picketed the premises of
Honda on May 19, 1999. On June 16, 1999, DOLE Acting Secretary Felicisimo Joson,
Jr. assumed jurisdiction over the case and certified the same to the National Labor
Relations Commission (NLRC) for compulsory arbitration. The striking employees were
ordered to return to work and the management accepted them back under the same
terms prior to the strike staged.
On November 22, 1999, the management of Honda issued a
memorandum announcing its new computation of the 13 th and 14th month pay to be
granted to all its employees whereby the thirty-one (31)-day long strike shall be
considered unworked days for purposes of computing said benefits. As per the
companys new formula, the amount equivalent to 1/12 of the employees basic salary
shall be deducted from these bonuses, with a commitment however that in the event
that the strike is declared legal, Honda shall pay the amount deducted.
[4]

Respondent union opposed the pro-rated computation of the bonuses in a letter

dated November 25, 1999. Honda sought the opinion of the Bureau of Working
Conditions (BWC) on the issue. In a letter dated January 4, 2000, the BWC agreed
with the pro-rata payment of the 13th month pay as proposed by Honda.
[5]

The matter was brought before the Grievance Machinery in accordance with the
parties existing CBA but when the issue remained unresolved, it was submitted for
voluntary arbitration. In his decision dated May 2, 2000, Voluntary Arbitrator
Herminigildo C. Javen invalidated Hondas computation, to wit:
[6]

WHEREFORE, in view of all foregoing premises being duly considered and

evaluated, it is hereby ruled that the Companys implementation of pro-rated
13th Month pay, 14th Month pay and Financial Assistance [is] invalid. The Company is
thus ordered to compute each provision in full month basic pay and pay the amounts
in question within ten (10) days after this Decision shall have become final and
executory.
The three (3) days Suspension of the twenty one (21) employees is hereby affirmed.
SO ORDERED.

[7]

Hondas Motion for Partial Reconsideration was denied in a resolution dated May
22, 2000. Thus, a petition was filed with the Court of Appeals, however, the petition was
dismissed for lack of merit.
Hence, the instant petition for review on the sole issue of whether the pro-rated
computation of the 13th month pay and the other bonuses in question is valid and lawful.

The petition lacks merit.

A collective bargaining agreement refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of work and all
other terms and conditions of employment in a bargaining unit. As in all contracts, the
parties in a CBA may establish such stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary to law, morals, good customs,
public order or public policy. Thus, where the CBA is clear and unambiguous, it
becomes the law between the parties and compliance therewith is mandated by the
express policy of the law.
[8]

[9]

[10]

In some instances, however, the provisions of a CBA may become contentious, as

in this case. Honda wanted to implement a pro-rated computation of the benefits based
on the no work, no pay rule. According to the company, the phrase present practice as
mentioned in the CBA refers to the manner and requisites with respect to the payment
of the bonuses, i.e., 50% to be given in May and the other 50% in December of each
year. Respondent union, however, insists that the CBA provisions relating to the
implementation of the 13th month pay necessarily relate to the computation of the same.
We agree with the findings of the arbitrator that the assailed CBA provisions are far
from being unequivocal. A cursory reading of the provisions will show that they did not
state categorically whether the computation of the 13 th month pay, 14th month pay and
the financial assistance would be based on one full months basic salary of the
employees, or pro-rated based on the compensation actually received. The arbitrator
thus properly resolved the ambiguity in favor of labor as mandated by Article 1702 of the
Civil Code. The Court of Appeals affirmed the arbitrators finding and added that the
computation of the 13th month pay should be based on the length of service and not on
the actual wage earned by the worker.
[11]

We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings of
labor officials, who are deemed to have acquired expertise in matters within their
respective jurisdiction, are generally accorded not only respect but even finality, and
bind us when supported by substantial evidence. It is not our function to assess and
evaluate the evidence all over again, particularly where the findings of both the arbiter
and the Court of Appeals coincide.
[12]

Presidential Decree No. 851, otherwise known as the 13 th Month Pay Law, which
required all employers to pay their employees a 13 th month pay, was issued to protect
the level of real wages from the ravages of worldwide inflation. It was enacted on
December 16, 1975 after it was noted that there had been no increase in the minimum
wage since 1970 and the Christmas season was an opportune time for society to show
its concern for the plight of the working masses so that they may properly celebrate
Christmas and New Year.
[13]

Under the Revised Guidelines on the Implementation of the 13 th month pay issued
on November 16, 1987, the salary ceiling of P1,000.00 under P.D. No. 851 was
removed. It further provided that the minimum 13 th month pay required by law shall not
be less than one-twelfth (1/12) of the total basic salary earned by an employee within a
calendar year. The guidelines pertinently provides:

The basic salary of an employee for the purpose of computing the 13 th month pay shall
include all remunerations or earnings paid by his employer for services rendered but
does not include allowances and monetary benefits which are not considered or
integrated as part of the regular or basic salary, such as the cash equivalent of unused
vacation and sick leave credits, overtime premium, night differential and holiday pay,
and cost-of-living allowances. (Emphasis supplied)
[14]

For employees receiving regular wage, we have interpreted basic salary to mean,
not the amount actually received by an employee, but 1/12 of their standard monthly
wage multiplied by their length of service within a given calendar year. Thus, we exclude
from the computation of basic salary payments for sick, vacation and maternity leaves,
night differentials, regular holiday pay and premiums for work done on rest days and
special holidays. In Hagonoy Rural Bank v. NLRC, St. Michael Academy v. NLRC,
Consolidated Food Corporation v. NLRC, and similar cases, the 13th month pay due
an employee was computed based on the employees basic monthly wage multiplied by
the number of months worked in a calendar year prior to separation from employment.
[15]

[17]

[16]

[18]

The revised guidelines also provided for a pro-ration of this benefit only in cases of
resignation or separation from work. As the rules state, under these circumstances, an
employee is entitled to a pay in proportion to the length of time he worked during the
year, reckoned from the time he started working during the calendar year. The Court of
Appeals thus held that:
[19]

Considering the foregoing, the computation of the 13 th month pay should be based on
the length of service and not on the actual wage earned by the worker. In the present
case, there being no gap in the service of the workers during the calendar year in
question, the computation of the 13th month pay should not be pro-rated but should be
given in full. (Emphasis supplied)
[20]

More importantly, it has not been refuted that Honda has not implemented any prorating of the 13th month pay before the instant case. Honda did not adduce evidence to
show that the 13th month, 14th month and financial assistance benefits were previously
subject to deductions or pro-rating or that these were dependent upon the companys
financial standing. As held by the Voluntary Arbitrator:

The Company (Honda) explicitly accepted that it was the strike held that prompt[ed]
them to adopt a pro-rata computation, aside [from] being in [a] state of rehabilitation
due to 227M substantial losses in 1997, 114M in 1998 and 215M lost of sales in 1999
due to strike. This is an implicit acceptance that prior to the strike, a full month basic
pay computation was the present practice intended to be maintained in the CBA.
[21]

The memorandum dated November 22, 1999 which Honda issued shows that it was
the first time a pro-rating scheme was to be implemented in the company. It was a
convenient coincidence for the company that the work stoppage held by the employees
lasted for thirty-one (31) days or exactly one month. This enabled them to devise a

formula using 11/12 of the total annual salary as base amount for computation instead
of the entire amount for a 12-month period.
That a full month payment of the 13 th month pay is the established practice at Honda
is further bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada.
Both attested that when they were absent from work due to motorcycle accidents, and
after they have exhausted all their leave credits and were no longer receiving their
monthly salary from Honda, they still received the full amount of their 13 th month,
14th month and financial assistance pay.
[22]

The case of Davao Fruits Corporation v. Associated Labor Unions, et al. presented
an example of a voluntary act of the employer that has ripened into a company practice.
In that case, the employer, from 1975 to 1981, freely and continuously included in the
computation of the 13th month pay those items that were expressly excluded by the law.
We have held that this act, which was favorable to the employees though not
conforming to law, has ripened into a practice and therefore can no longer be
withdrawn, reduced, diminished, discontinued or eliminated. Furthermore, in Sevilla
Trading Company v. Semana, we stated:
[23]

[24]

With regard to the length of time the company practice should have been exercised to
constitute voluntary employer practice which cannot be unilaterally withdrawn by the
employer, we hold that jurisprudence has not laid down any rule requiring a specific
minimum number of years. In the above quoted case of Davao Fruits Corporation vs.
Associated Labor Unions, the company practice lasted for six (6) years. In another
case, Davao Integrated Port Stevedoring Services vs. Abarquez, the employer, for
three (3) years and nine (9) months, approved the commutation to cash of the
unenjoyed portion of the sick leave with pay benefits of its intermittent workers.
While in Tiangco vs. Leogardo, Jr. the employer carried on the practice of giving a
fixed monthly emergency allowance from November 1976 to February 1980, or three
(3) years and four (4) months. In all these cases, this Court held that the grant of
these benefits has ripened into company practice or policy which cannot be
peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept the
practice of including non-basic benefits such as paid leaves for unused sick leave and
vacation leave in the computation of their 13th-month pay for at least two (2)
years. This, we rule likewise constitutes voluntary employer practice which cannot
be unilaterally withdrawn by the employer without violating Art. 100 of the Labor
Code. (Emphasis supplied)
[25]

Lastly, the foregoing interpretation of law and jurisprudence is more in keeping with
the underlying principle for the grant of this benefit. It is primarily given to alleviate the
plight of workers and to help them cope with the exorbitant increases in the cost of
living. To allow the pro-ration of the 13 th month pay in this case is to undermine the
wisdom behind the law and the mandate that the workingmans welfare should be the
primordial and paramount consideration. What is more, the factual milieu of this case
is such that to rule otherwise inevitably results to dissuasion, if not a deterrent, for
[26]

workers from the free exercise of their constitutional rights to self-organization and to
strike in accordance with law.
[27]

WHEREFORE, the instant petition is DENIED. The decision and the resolution of
the Court of Appeals dated September 14, 2000 and October 18, 2000, respectively, in
CA-G.R. SP No. 59052, affirming the decision rendered by the Voluntary Arbitrator on
May 2, 2000, are hereby AFFIRMED in toto.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION
CENTRAL AZUCARERA
DE TARLAC,

G.R. No. 188949

Petitioner,
Present:
CARPIO, J.,
- versus -

Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

CENTRAL AZUCARERA
DE TARLAC LABOR UNION-NLU,

Promulgated:

Respondent.
July 26, 2010
x------------------------------------------------------------------------------------x

DECISION
NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule

45 of the Rules of Court, assailing the Decision [1] dated May 28,
2009, and the Resolution[2] dated July 28, 2009 of the Court of
Appeals (CA) in CA-G.R. SP No. 106657.

The factual antecedents of the case are as follows:

Petitioner is a domestic corporation engaged in the business of

sugar manufacturing, while respondent is a legitimate labor
organization which serves as the exclusive bargaining
representative of petitioners rank-and-file employees. The
controversy stems from the interpretation of the term basic pay,
essential in the computation of the 13th-month pay.

The facts of this case are not in dispute. In compliance with

Presidential Decree (P.D.) No. 851, petitioner granted its
employees the mandatory thirteenth (13 th) - month pay since
1975. The formula used by petitioner in computing the 13 th-month
pay was: Total Basic Annual Salary divided by twelve
(12). Included in petitioners computation of the Total Basic Annual
Salary were the following: basic monthly salary; first eight (8)
hours overtime pay on Sunday and legal/special holiday; night
premium pay; and vacation and sick leaves for each year.
Throughout the years, petitioner used this computation until
2006.[3]
On November 6, 2004, respondent staged a strike. During the
pendency of the strike, petitioner declared a temporary cessation
of operations. In December 2005, all the striking union members
were allowed to return to work. Subsequently, petitioner declared
another temporary cessation of operations for the months of April
and May 2006. The suspension of operation was lifted on June
2006, but the rank-and-file employees were allowed to report for
work on a fifteen (15) day-per-month rotation basis that lasted
until September 2006. In December 2006, petitioner gave the
employees their 13th-month pay based on the employees total
earnings during the year divided by 12.[4]
Respondent objected to this computation. It averred that
petitioner did not adhere to the usual computation of the 13 thmonth pay. It claimed that the divisor should have been eight (8)
instead of 12, because the employees worked for only 8 months
in 2006. It likewise asserted that petitioner did not observe the
company practice of giving its employees the guaranteed amount
equivalent to their one month pay, in instances where the
computed 13th-month pay was less than their basic monthly pay. [5]

Petitioner and respondent tried to thresh out their differences in

accordance with the grievance procedure as provided in their
collective bargaining agreement. During the grievance meeting,
the representative of petitioner explained that the change in the
computation of the 13th-month pay was intended to rectify an
error in the computation, particularly the concept of basic pay
which should have included only the basic monthly pay of the
employees.[6]

For failure of the parties to arrive at a settlement, respondent

applied for preventive mediation before the National Conciliation
and Mediation Board. However, despite four (4) conciliatory
meetings, the parties still failed to settle the dispute. On March
29, 2007, respondent filed a complaint against petitioner for
money
claims
based
on
the
alleged
diminution
of
th
benefits/erroneous computation of 13 -month pay before the
Regional Arbitration Branch of the National Labor Relations
Commission (NLRC).[7]

On October 31, 2007, the Labor Arbiter rendered a

Decision[8] dismissing the complaint and declaring that the
petitioner had the right to rectify the error in the computation of
the 13th-month pay of its employees. [9] The fallo of the Decision
reads:
WHEREFORE, premises considered, the complaint
filed by the complainants against the respondents
should be DISMISSED with prejudice for utter lack
of merit.

SO ORDERED.[10]

Respondents filed an appeal. On August 14, 2008, the NLRC

rendered a Decision[11] reversing the Labor Arbiter. The dispositive
portion of the Decision reads:
WHEREFORE, the decision appealed is reversed and set
aside and respondent-appellee Central Azucarera de
Tarlac is hereby ordered to adhere to its established
practice of granting 13th[-] month pay on the basis of
gross annual basic which includes basic pay, premium
pay for work in rest days and special holidays, night shift
differential and paid vacation and sick leaves for each
year.

Additionally, respondent-appellee is ordered to observe

the guaranteed one[-]month pay by way of 13 th month
pay.

SO ORDERED.

[12]

Petitioner filed a motion for reconsideration. However, the same

was denied in a Resolution dated November 27, 2008. Petitioner
then filed a petition for certiorari under Rule 65 of the Rules of
Court before the CA.[13]
On May 28, 2009, the CA rendered a Decision [14] dismissing the
petition, and affirming the decision and resolution of the
NLRC, viz.:

WHEREFORE, the foregoing considered, the petition is

hereby DISMISSED and the assailed August 14, 2008
Decision and November 27, 2008 Resolution of the NLRC,
are herebyAFFIRMED. No costs.
SO ORDERED.[15]

Aggrieved, petitioner filed the instant petition, alleging that the

CA committed a reversible error in affirming the Decision of the
NLRC, and praying that the Decision of the Labor Arbiter be
reinstated.

The petition is denied for lack of merit.

The 13th-month pay mandated by Presidential Decree (P.D.) No.

851 represents an additional income based on wage but not part
of the wage. It is equivalent to one-twelfth (1/12) of the total basic
salary earned by an employee within a calendar year. All rankand-file employees, regardless of their designation or
employment status and irrespective of the method by which their
wages are paid, are entitled to this benefit, provided that they
have worked for at least one month during the calendar year. If
the employee worked for only a portion of the year, the 13thmonth pay is computed pro rata.[16]

Petitioner argues that there was an error in the computation of

the 13th-month pay of its employees as a result of its mistake in
implementing P.D. No. 851, an error that was discovered by the
management only when respondent raised a question concerning
the computation of the employees
13th-month pay for 2006. Admittedly, it was an error that was
repeatedly committed for almost thirty (30) years. Petitioner

insists that the length of time during which an employer has

performed a certain act beneficial to the employees, does not
prove that such an act was not done in error. It maintains that for
the claim of mistake to be negated, there must be a clear showing
that the employer had freely, voluntarily, and continuously
performed the act, knowing that he is under no obligation to do
so. Petitioner asserts that such voluntariness was absent in this
case.[17]

The Rules and Regulations Implementing P.D. No. 851,

promulgated on December 22, 1975, defines 13th-month pay and
basic salary as follows:
Sec. 2. Definition of certain terms. - As used in this
issuance:

(a)
"Thirteenth-month pay" shall mean one
twelfth (1/12) of the basic salary of an employee within a
calendar
year;
(b) "Basic salary" shall include all remunerations or
earnings paid by an employer to an employee for services
rendered but may not include cost-of-living allowances
granted pursuant to Presidential Decree No. 525 or Letter
of Instructions No. 174, profit-sharing payments, and all
allowances and monetary benefits which are not
considered or integrated as part of the regular or basic
salary of the employee at the time of the promulgation of
the Decree on December 16, 1975.

On January 16, 1976, the Supplementary Rules and Regulations

Implementing P.D. No. 851 was issued. The Supplementary
Rules clarifies
that overtime
pay,
earnings,
and
other

remuneration that are not part of the basic salary shall not be
included in the computation of the 13 th-month pay.

On November 16, 1987, the Revised Guidelines on the

Implementation of the 13 th-Month Pay Law was issued.
Significantly, under this Revised Guidelines, it was specifically
stated that the minimum 13th-month pay required by law shall not
be less than one-twelfth (1/12) of the total basic salary earned by
an employee within a calendar year.
Furthermore, the term basic salary of an employee for the
purpose of computing the 13 th-month pay was interpreted to
include all remuneration or earnings paid by the employer for
services rendered, but does not include allowances and monetary
benefits which are not integrated as part of the regular or basic
salary, such as the cash equivalent of unused vacation and sick
leave credits, overtime, premium, night differential and holiday
pay, and cost-of-living allowances. However, these salary-related
benefits should be included as part of the basic salary in the
computation of the 13th-month pay if, by individual or collective
agreement, company practice or policy, the same are treated as
part of the basic salary of the employees.

Based on the foregoing, it is clear that there could have no

erroneous interpretation or application of what is included in the
term basic salary for purposes of computing the 13 th-month pay of
employees. From the inception of P.D. No. 851 on December 16,
1975, clear-cut administrative guidelines have been issued to
insure uniformity in the interpretation, application, and
enforcement
of
the
provisions
of P.D.
No.
851 and
its implementing regulations.

As correctly ruled by the CA, the practice of petitioner in giving

13th-month pay based on the employees gross annual earnings
which included the basic monthly salary, premium pay for work
on rest days and special holidays, night shift differential pay and
holiday pay continued for almost thirty (30) years and has ripened
into a company policy or practice which cannot be unilaterally
withdrawn.

Article 100 of the Labor Code, otherwise known as the NonDiminution Rule, mandates that benefits given to employees
cannot be taken back or reduced unilaterally by the employer
because the benefit has become part of the employment contract,
written or unwritten. [18] The rule against diminution of benefits
applies if it is shown that the grant of the benefit is based on an
express policy or has ripened into a practice over a long period of
time and that the practice is consistent and deliberate.
Nevertheless, the rule will not apply if the practice is due to error
in the construction or application of a doubtful or difficult question
of law. But even in cases of error, it should be shown that the
correction is done soon after discovery of the error. [19]

The argument of petitioner that the grant of the benefit was not
voluntary and was due to error in the interpretation of what is
included in the basic salary deserves scant consideration. No
doubtful or difficult question of law is involved in this case. The
guidelines set by the law are not difficult to decipher. The
voluntariness of the grant of the benefit was manifested by the
number of years the employer had paid the benefit to its
employees. Petitioner only changed the formula in the
computation of the 13th-month pay after almost 30 years and only
after the dispute between the management and employees
erupted. This act of petitioner in changing the formula at this time
cannot be sanctioned, as it indicates a badge of bad faith.

Furthermore, petitioner cannot use the argument that it is

suffering from financial losses to claim exemption from the
coverage of the law on 13th-month pay, or to spare it from its
erroneous unilateral computation of the 13th-month pay of its
employees. Under Section 7 of the Rules and Regulations
Implementing P.D. No. 851, distressed employers shall qualify for
exemption from the requirement of the Decree only upon prior
authorization by the Secretary of Labor. [20] In this case, no such
prior authorization has been obtained by petitioner; thus, it is not
entitled to claim such exemption.
WHEREFORE, the Decision dated May 28, 2009 and the
Resolution dated July 28, 2009 of the Court of Appeals in CA-G.R.
SP No. 106657 are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 80609 August 23, 1988
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and MARILYN ABUCAY, respondents.
Nicanor G. Nuevas for petitioner.

CRUZ, J.:
The only issue presented in the case at bar is the legality of the award of financial assistance to an
employee who had been dismissed for cause as found by the public respondent.

Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company, was accused
by two complainants of having demanded and received from them the total amount of P3,800.00 in
consideration of her promise to facilitate approval of their applications for telephone
installation. 1 Investigated and heard, she was found guilty as charged and accordingly separated from
the service. 2 She went to the Ministry of Labor and Employment claiming she had been illegally removed.
After consideration of the evidence and arguments of the parties, the company was sustained and the
complaint was dismissed for lack of merit. Nevertheless, the dispositive portion of labor arbiter's decision
declared:
WHEREFORE, the instant complaint is dismissed for lack of merit.
Considering that Dr. Helen Bangayan and Mrs. Consolacion Martinez are not totally
blameless in the light of the fact that the deal happened outhide the premises of
respondent company and that their act of giving P3,800.00 without any receipt is
tantamount to corruption of public officers, complainant must be given one month pay
for every year of service as financial assistance. 3
Both the petitioner and the private respondent appealed to the National Labor Relations Board,
which upheld the said decision in toto and dismissed the appeals. 4 The private respondent took no
further action, thereby impliedly accepting the validity of her dismissal. The petitioner, however, is now
before us to question the affirmance of the above- quoted award as having been made with grave abuse
of discretion.
In its challenged resolution of September 22, 1987, the NLRC said:
... Anent the award of separation pay as financial assistance in complainant's favor,
We find the same to be equitable, taking into consideration her long years of service
to the company whereby she had undoubtedly contributed to the success of
respondent. While we do not in any way approve of complainants (private
respondent) mal feasance, for which she is to suffer the penalty of dismissal, it is for
reasons of equity and compassion that we resolve to uphold the award of financial
assistance in her favor. 5
The position of the petitioner is simply stated: It is conceded that an employee illegally dismissed is
entitled to reinstatement and backwages as required by the labor laws. However, an employee
dismissed for cause is entitled to neither reinstatement nor backwages and is not allowed any relief
at all because his dismissal is in accordance with law. In the case of the private respondent, she has
been awarded financial assistance equivalent to ten months pay corresponding to her 10 year
service in the company despite her removal for cause. She is, therefore, in effect rewarded rather
than punished for her dishonesty, and without any legal authorization or justification. The award is
made on the ground of equity and compassion, which cannot be a substitute for law. Moreover, such
award puts a premium on dishonesty and encourages instead of deterring corruption.
For its part, the public respondent claims that the employee is sufficiently punished with her
dismissal. The grant of financial assistance is not intended as a reward for her offense but merely to
help her for the loss of her employment after working faithfully with the company for ten years. In
support of this position, the Solicitor General cites the cases of Firestone Tire and Rubber Company
of the Philippines v. Lariosa 6 and Soco v. Mercantile Corporation of Davao, 7 where the employees were

dismissed for cause but were nevertheless allowed separation pay on grounds of social and
compassionate justice. As the Court put it in the Firestone case:

In view of the foregoing, We rule that Firestone had valid grounds to dispense with
the services of Lariosa and that the NLRC acted with grave abuse of discretion in
ordering his reinstatement. However, considering that Lariosa had worked with the
company for eleven years with no known previous bad record, the ends of social and
compassionate justice would be served if he is paid full separation pay but not
reinstatement without backwages by the NLRC.
In the said case, the employee was validly dismissed for theft but the NLRC nevertheless awarded
him full separation pay for his 11 years of service with the company. In Soco, the employee was also
legally separated for unauthorized use of a company vehicle and refusal to attend the grievance
proceedings but he was just the same granted one-half month separation pay for every year of his
18-year service.
Similar action was taken in Filipro, Inc. v. NLRC, 8 where the employee was validly dismissed for
preferring certain dealers in violation of company policy but was allowed separation pay for his 2 years of
service. In Metro Drug Corporation v. NLRC, 9 the employee was validly removed for loss of confidence
because of her failure to account for certain funds but she was awarded separation pay equivalent to onehalf month's salary for every year of her service of 15 years. In Engineering Equipment, Inc. v.
NLRC, 10 the dismissal of the employee was justified because he had instigated labor unrest among the
workers and had serious differences with them, among other grounds, but he was still granted three
months separation pay corresponding to his 3-year service. In New Frontier Mines, Inc. v. NLRC, 11 the
employee's 3- year service was held validly terminated for lack of confidence and abandonment of work
but he was nonetheless granted three months separation pay. And in San Miguel Corporation v. Deputy
Minister of Labor and Employment, et al ., 12 full separation pay for 6, 10, and 16 years service,
respectively, was also allowed three employees who had been dismissed after they were found guilty of
misappropriating company funds.
The rule embodied in the Labor Code is that a person dismissed for cause as defined therein is not
entitled to separation pay. 13 The cases above cited constitute the exception, based upon considerations
of equity. Equity has been defined as justice outside law, 14 being ethical rather than jural and belonging to
the sphere of morals than of law. 15 It is grounded on the precepts of conscience and not on any sanction
of positive law. 16 Hence, it cannot prevail against the expressed provision of the labor laws allowing
dismissal of employees for cause and without any provision for separation pay.
Strictly speaking, however, it is not correct to say that there is no express justification for the grant of
separation pay to lawfully dismissed employees other than the abstract consideration of equity. The
reason is that 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.

The Court notes, however, that where the exception has been applied, the decisions have not been
consistent as to the justification for the grant of separation pay and the amount or rate of such
award. Thus, the employees dismissed for theft in the Firestone case and for animosities with fellow
workers in the Engineering Equipment case were both awarded separation pay notnvithstanding that
the first cause was certainly more serious than the second. No less curiously, the employee in the
Soco case was allowed only one-half month pay for every year of his 18 years of service, but in
Filipro the award was two months separation pay for 2 years service. In Firestone, the emplovee
was allowed full separation pay corresponding to his 11 years of service, but in Metro, the employee
was granted only one-half month separation pay for every year of her 15year service. It would seem
then that length of service is not necessarily a criterion for the grant of separation pay and neither
apparently is the reason for the dismissal.
The Court feels that distinctions are in order. We note that heretofore the separation pay, when it
was considered warranted, was required regardless of the nature or degree of the ground proved, be
it mere inefficiency or something graver like immorality or dishonesty. The benediction of
compassion was made to cover a multitude of sins, as it were, and to justify the helping hand to the
validly dismissed employee whatever the reason for his dismissal. This policy should be reexamined. It is time we rationalized the exception, to make it fair to both labor and management,
especially to labor.
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 employee 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 has also to take care of her child may also be removed
because of her poor attendance, this being another authorized ground. It is not the employee's fault
if he does not have the necessary aptitude for his work but on the other hand the company cannot
be required to maintain him just the same at the expense of the efficiency of its operations. He too
may be validly replaced. 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, while inept, is not depraved. But if
he was in fact 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 causes 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.

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than
punishing the erring employee for his offense. And we do not agree that the punishment is his
dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of
course it has. Indeed, if the employee who steals from the company is granted separation pay even
as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next
employment because he thinks he can expect a like leniency if he is again found out. This kind of
misplaced compassion is not going to do labor in general any good as it will encourage the
infiltration of its ranks by those who do not deserve the protection and concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean and their motives blameless
and not simply because they happen to be poor. This great policy of our Constitution is not meant for
the protection of those who have proved they are not worthy of it, like the workers who have tainted
the cause of labor with the blemishes of their own character.
Applying the above considerations, we hold that the grant of separation pay in the case at bar is
unjustified. The private respondent has been dismissed for dishonesty, as found by the labor arbiter
and affirmed by the NLRC and as she herself has impliedly admitted. The fact that she has worked
with the PLDT for more than a decade, if it is to be considered at all, should be taken against her as
it reflects a regrettable lack of loyalty that she should have strengthened instead of betraying during
all of her 10 years of service with the company. If regarded as a justification for moderating the
penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning of social
justice and undermining the efforts of labor to cleanse its ranks of all undesirables.
The Court also rules that the separation pay, if found due under the circumstances of each case,
should be computed at the rate of one month salary for every year of service, assuming the length of
such service is deemed material. This is without prejudice to the application of special agreements
between the employer and the employee stipulating a higher rate of computation and providing for
more benefits to the discharged employee. 17
WHEREFORE, the petition is GRANTED. The challenged resolution of September 22,1987, is
AFFIRMED in totoexcept for the grant of separation pay in the form of financial assistance, which is
hereby DISALLOWED. The temporary restraining order dated March 23, 1988, is LIFTED. It is so
ordered.
Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes and
Medialdea, JJ., concur.

Separate Opinions

FERNAN, C.J., dissenting:

The majority opinion itself declares that the reason for granting separation pay to lawfully dismissed
employees is that "our Constitution is replete with positive commands for the promotion of social
justice, and particularly the protection of the rights of the workers." 1
It is my firm belief that providing a rigid mathematical formula for determining the amounts of such
separation pay will not be in keeping with these constitutional directives. By computing the allowable
financial assistance on the formula suggested, we shall be closing our eyes to the spirit underlying
these constitutional mandates that "those who have less in life should have more in law." It cannot
be denied that a low salaried employee who is separated from work would suffer more hardship than
a well-compensated one. Yet, if we follow the formula suggested, we would in effect be favoring the
latter instead of the former, as it would be the low- salaried employee who would encounter difficulty
finding another job.
I am in accord with the opinion of Justice Sarmiento that we should not rationalize compassion and
that of Justice Padilla that the awards of financial assistance should be left to the discretion of the
National Labor Relations Commission as may be warranted by the "environmental facts" of the case.
PADILIA, J., separate opinion
I concur in the decision penned by Mr. Justice Cruz when it disallows separation pay, as financial
assistance, to the private respondent, since the ground for termination of employment is dishonesty
in the performance of her duties.
I do not, however, subscribe to the view that "the separation pay, if found due under the
circumstances of each case, should be computed at the rate of one month salary for every year of
service, assuming the length of such service is deemed material." (p.11, Decision). It is my
considered view that, except for terminations based on dishonesty and serious misconduct involving
moral turpitude-where no separation pay should be allowed--in other cases, the grant of separation
pay, i.e. the amount thereof, as financial assistance to the terminated employee, should be left to the
judgment of the administrative agency concemed which is the NLRC. It is in such cases- where the
termination of employment is for a valid cause without, however, involving dishonesty or serious
misconduct involving moral turpitude-that the Constitutional policy of affording protection to labor
should be allowed full play; and this is achieved by leaving to the NLRC the primary jurisdiction and
judgment to determine the amount of separation pay that should be awarded to the terminated
employee in accordance with the "environmental facts" of each case.
It is further my view that the Court should not, as a rule, disturb or alter the amount of separation pay
awarded by the NLRC in such cases of valid termination of employment but with the financial
assistance, in the absence of a demonstrated grave abuse of discretion on the part of the NLRC.
GRIO AQUINO, J., dissent:
We should not rationalize compassion. I vote to affirm the grant of financial assistance.

Separate Opinions
FERNAN, C.J., dissenting:
The majority opinion itself declares that the reason for granting separation pay to lawfully dismissed
employees is that "our Constitution is replete with positive commands for the promotion of social
justice, and particularly the protection of the rights of the workers." 1
It is my firm belief that providing a rigid mathematical formula for determining the amounts of such
separation pay will not be in keeping with these constitutional directives. By computing the allowable
financial assistance on the formula suggested, we shall be closing our eyes to the spirit underlying
these constitutional mandates that "those who have less in life should have more in law." It cannot
be denied that a low salaried employee who is separated from work would suffer more hardship than
a well-compensated one. Yet, if we follow the formula suggested, we would in effect be favoring the
latter instead of the former, as it would be the low- salaried employee who would encounter difficulty
finding another job.
I am in accord with the opinion of Justice Sarmiento that we should not rationalize compassion and
that of Justice Padilla that the awards of financial assistance should be left to the discretion of the
National Labor Relations Commission as may be warranted by the "environmental facts" of the case.
PADILIA, J., separate opinion
I concur in the decision penned by Mr. Justice Cruz when it disallows separation pay, as financial
assistance, to the private respondent, since the ground for termination of employment is dishonesty
in the performance of her duties.
I do not, however, subscribe to the view that "the separation pay, if found due under the
circumstances of each case, should be computed at the rate of one month salary for every year of
service, assuming the length of such service is deemed material." (p.11, Decision). It is my
considered view that, except for terminations based on dishonesty and serious misconduct involving
moral turpitude-where no separation pay should be allowed--in other cases, the grant of separation
pay, i.e. the amount thereof, as financial assistance to the terminated employee, should be left to the
judgment of the administrative agency concemed which is the NLRC. It is in such cases- where the
termination of employment is for a valid cause without, however, involving dishonesty or serious
misconduct involving moral turpitude-that the Constitutional policy of affording protection to labor
should be allowed full play; and this is achieved by leaving to the NLRC the primary jurisdiction and
judgment to determine the amount of separation pay that should be awarded to the terminated
employee in accordance with the "environmental facts" of each case.
It is further my view that the Court should not, as a rule, disturb or alter the amount of separation pay
awarded by the NLRC in such cases of valid termination of employment but with the financial
assistance, in the absence of a demonstrated grave abuse of discretion on the part of the NLRC.
GRIO AQUINO, J., dissent:

We should not rationalize compassion. I vote to affirm the grant of financial assistance.
Footnotes

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION
G.R. Nos. 158786 &158789

Present:
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

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G.R. Nos. 158798-99

Promulgated:
October 19, 2007

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x-----------------------------------------------x
TOYOTA MOTOR PHILIPPINES
CORPORATION,
Petitioner,
- versus T
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Respondent.
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
The Case
In the instant petition under Rule 45 subject of G.R. Nos. 158786 and
158789, Toyota Motor Philippines Corporation Workers Association (Union) and
its dismissed officers and members seek to set aside the February 27, 2003
Decision[1] of the Court of Appeals (CA) in CA-G.R. SP Nos. 67100 and 67561,
which affirmed the August 9, 2001 Decision[2] and September 14, 2001
Resolution[3] of the National Labor Relations Commission (NLRC), declaring
illegal the strikes staged by the Union and upholding the dismissal of the 227
Union officers and members.
On the other hand, in the related cases docketed as G.R. Nos. 158798-99, Toyota
Motor Philippines Corporation (Toyota) prays for the recall of the award of
severance compensation to the 227 dismissed employees, which was granted under
the June 20, 2003 CA Resolution[4] in CA-G.R. SP Nos. 67100 and 67561.
In view of the fact that the parties are petitioner/s and respondent/s and vice-versa
in the four (4) interrelated cases, they will be referred to as simply
the Union and Toyotahereafter.

The Facts
The Union is a legitimate labor organization duly registered with the Department
of Labor and Employment (DOLE) and is the sole and exclusive bargaining agent
of all Toyotarank and file employees.[5]
Toyota, on the other hand, is a domestic corporation engaged in the
assembly and sale of vehicles and parts. [6] It is a Board of Investments (BOI)
participant in the Car Development Program and the Commercial Vehicle
Development Program. It is likewise a BOI-preferred non-pioneer export trader of
automotive parts and is under the Special Economic Zone Act of 1995. It is one of
the largest motor vehicle manufacturers in the country employing around 1,400
workers for its plants in Bicutan and Sta. Rosa, Laguna.It is claimed that its assets
amount to PhP 5.525 billion, with net sales of PhP 14.646 billion and provisions
for income tax of PhP 120.9 million.
On February 14, 1999, the Union filed a petition for certification election among
the Toyota rank and file employees with the National Conciliation and Mediation
Board (NCMB), which was docketed as Case No. NCR-OD-M-9902-001. MedArbiter Ma. Zosima C. Lameyra denied the petition, but, on appeal, the DOLE
Secretary granted theUnions prayer, and, through the June 25, 1999 Order, directed
the immediate holding of the certification election.[7]
After Toyotas plea for reconsideration was denied, the certification election was
conducted. Med-Arbiter Lameyras May 12, 2000 Order certified the Union as the
sole and exclusive bargaining agent of all the Toyota rank and file
employees. Toyota challenged said Order via an appeal to the DOLE Secretary.[8]
In the meantime, the Union submitted its Collective Bargaining Agreement (CBA)
proposals to Toyota, but the latter refused to negotiate in view of its pending
appeal. Consequently, the Union filed a notice of strike on January 16, 2001 with
the NCMB, docketed as NCMB-NCR-NS-01-011-01, based on Toyotas refusal to
bargain. On February 5, 2001, the NCMB-NCR converted the notice of strike into
a preventive mediation case on the ground that the issue of whether or not
the Union is the exclusive bargaining agent of all Toyota rank and file employees
was still unresolved by the DOLE Secretary.

In connection with Toyotas appeal, Toyota and the Union were required to attend a
hearing on February 21, 2001 before the Bureau of Labor Relations (BLR) in
relation to the exclusion of the votes of alleged supervisory employees from the
votes cast during the certification election. The February 21, 2001 hearing was
cancelled and reset to February 22, 2001. On February 21, 2001, 135 Union
officers and members failed to render the required overtime work, and instead
marched to and staged a picket in front of the BLR office in Intramuros, Manila.
[9]
The Union, in a letter of the same date, also requested that its members be
allowed to be absent on February 22, 2001 to attend the hearing and instead work
on their next scheduled rest day. This request however was denied by Toyota.
Despite denial of the Unions request, more than 200 employees staged mass
actions on February 22 and 23, 2001 in front of the BLR and the DOLE offices, to
protest the partisan and anti-union stance of Toyota. Due to the deliberate absence
of a considerable number of employees on February 22 to 23,
2001, Toyota experienced acute lack of manpower in its manufacturing and
production lines, and was unable to meet its production goals resulting in huge
losses of PhP 53,849,991.
Soon thereafter, on February 27, 2001, Toyota sent individual letters to some 360
employees requiring them to explain within 24 hours why they should not be
dismissed for their obstinate defiance of the companys directive to render overtime
work on February 21, 2001, for their failure to report for work on February 22 and
23, 2001, and for their participation in the concerted actions which severely
disrupted and paralyzed the plants operations.[10] These letters specifically cited
Section D, paragraph 6 of the Companys Code of Conduct, to wit:
Inciting or participating in riots, disorders, alleged strikes, or concerted
actions detrimental to [Toyotas] interest.
1st offense dismissal.[11]

Meanwhile, a February 27, 2001 Manifesto was circulated by the Union which
urged its members to participate in a strike/picket and to abandon their posts, the
pertinent portion of which reads, as follows:
YANIG
sa
kanyang
komportableng
upuan
ang management ng TOYOTA. And dating takot, kimi, at mahiyaing
manggagawa ay walang takot na nagmartsa at nagprotesta laban sa
desperadong pagtatangkang baguhin ang desisyon ng DOLE na pabor
sa UNYON. Sa tatlong araw na protesta, mahigit sa tatlong daang
manggagawa ang lumahok.
xxxx
HANDA na tayong lumabas anumang oras kung patuloy na
ipagkakait ng management ang CBA. Oo maari tayong masaktan sa
welga. Oo, maari tayong magutom sa piketlayn.Subalit may
pagkakaiba ba ito sa unti-unting pagpatay sa atin sa loob ng 12 taong
makabaling likod ng pagtatrabaho? Ilang taon na lang ay
magkakabutas na ang ating mga baga sa mga alipato at usok
ng welding. Ilang taon na lang ay marupok na ang ating mga buto sa
kabubuhat. Kung dumating na ang panahong ito at wala pa
tayong CBA, paano na? Hahayaan ba nating ang kumpanya lang ang
makinabang sa yamang likha ng higit sa isang dekadang pagpapagal
natin?
HUWAG BIBITIW SA NASIMULANG TAGUMPAY!
PAIGTINGIN ANG PAKIKIBAKA PARA SA ISANG
MAKATARUNGANG CBA!
HIGIT PANG PATATAGIN ANG PAGKAKAISA NG MGA
MANGGAGAWA SA TOYOTA![12] (Emphasis supplied.)

On the next day, the Union filed with the NCMB another notice of strike
docketed as NCMB-NCR-NS-02-061-01 for union busting amounting to unfair
labor practice.
On March 1, 2001, the Union nonetheless submitted an explanation in
compliance with the February 27, 2001 notices sent by Toyota to the erring
employees. The Union members explained that their refusal to work on their
scheduled work time for two consecutive days was simply an exercise of their
constitutional right to peaceably assemble and to petition the government for

redress of grievances. It further argued that the demonstrations staged by the

employees on February 22 and 23, 2001 could not be classified as an illegal strike
or picket, and that Toyota had already condoned the alleged acts when it accepted
back the subject employees.[13]
Consequently, on March 2 and 5, 2001, Toyota issued two (2) memoranda to the
concerned employees to clarify whether or not they are adopting the March 1, 2001
Unions explanation as their own. The employees were also required to attend an
investigative interview,[14] but they refused to do so.
On March 16, 2001, Toyota terminated the employment of 227 employees [15] for
participation in concerted actions in violation of its Code of Conduct and for
misconduct under Article 282 of the Labor Code. The notice of termination reads:
After a careful evaluation of the evidence on hand, and a thorough
assessment of your explanation, TMP has concluded that there are
overwhelming reasons to terminate your services based on Article 282 of
the Labor Code and TMPs Code of Conduct.
Your repeated absences without permission on February 22 to 23,
2001 to participate in a concerted action against TMP constitute
abandonment of work and/or very serious misconduct under Article 282
of the Labor Code.
The degree of your offense is aggravated by the following
circumstances:
1.

You expressed to management that you will adopt the unions

letter dated March 1, 2001, as your own explanation to the
charges contained in the Due Process Form dated February 27,
2001. It is evident from such explanation that you did not come to
work because you deliberately participated together with other
Team Members in a plan to engage in concerted actions
detrimental to TMPs interest. As a result of your participation in
the widespread abandonment of work by Team Members
from February 22 to 23, 2001, TMP suffered substantial damage.
It is significant that the absences you incurred in order to attend
the clarificatory hearing conducted by the Bureau of Labor

Relations were unnecessary because the union was amply

represented in the said hearings by its counsel and certain
members who sought and were granted leave for the purpose.
Your reason for being absent is, therefore, not acceptable; and
2.

Your participation in the organized work boycott by Team

Members on February 22 and 23 led to work disruptions that
prevented the Company from meeting its production targets,
resulting [in] foregone sales of more than eighty (80) vehicles,
mostly new-model Revos, valued at more than Fifty Million Pesos
(50,000,000.00).

The foregoing is also a violation of TMPs Code of Conduct (Section D,

Paragraph 6) to wit:
Inciting or participating in riots, disorders, illegal strikes or concerted actions
detrimental to TMPs interest.

Based on the above, TMP Management is left with no other

recourse but to terminate your employment effective upon your receipt
thereof.
[Sgd.]
JOSE MARIA ALIGADA
Deputy Division Manager[16]

In reaction to the dismissal of its union members and officers,

the Union went on strike on March 17, 2001. Subsequently, from March 28,
2001 to April 12, 2001, theUnion intensified its strike by barricading the gates
of Toyotas Bicutan and Sta. Rosa plants. The strikers prevented workers who
reported for work from entering the plants. In his Affidavit, Mr. Eduardo Nicolas
III, Security Department Head, stated that:
3. On March 17, 2001, members of the Toyota Motor Philippines
Corporation Workers Association (TMPCWA), in response to the
dismissal of some two hundred twenty seven (227) leaders and members
of TMPCWA and without observing the requirements mandated by the
Labor Code, refused to report for work and picketed TMPC premises
from 8:00 a.m. to 5:00 p.m.The strikers badmouthed people coming in
and hurled invectives such as bakeru at Japanese officers of the
company. The strikers likewise pounded the officers vehicle as they tried
to enter the premises of the company.

4. On March 28, 2001, the strikers intensified their picketing and

barricaded the gates of TMPCs Bicutan and Sta. Rosa plants, thus,
blocking the free ingress/egress to and from the premises. Shuttle buses
and cars containing TMPC employees, suppliers, dealers, customers and
other people having business with the company, were prevented by the
strikers from entering the plants.
5. As a standard operating procedure, I instructed my men to take
photographs and video footages of those who participated in the strike.
Seen on video footages taken on various dates actively participating in
the strike were union officers Emilio C. Completo, Alexander Esteva,
Joey Javellonar and Lorenzo Caraqueo.
6. Based on the pictures, among those identified to have
participated in the March 28, 2001 strike were Grant Robert Toral, John
Posadas, Alex Sierra, Allan John Malabanan, Abel Bersos, Ernesto
Bonavente, Ariel Garcia, Pablito Adaya, Feliciano Mercado, Charlie
Oliveria, Philip Roxas, June Lamberte, Manjolito Puno, Baldwin San
Pablo, Joseph Naguit, Federico Torres, Larry Gerola, Roderick Bayani,
Allan Oclarino, Reynaldo Cuevas, Jorge Polutan, Arman Ercillo, Jimmy
Hembra, Albert Mariquit, Ramil Gecale, Jimmy Palisoc, Normandy
Castalone, Joey Llanera, Greg Castro, Felicisimo Escrimadora, Rodolfo
Bay, Ramon Clemente, Dante Baclino, Allan Palomares, Arturo Murillo
and Robert Gonzales. Attached hereto as Annexes 1 to 18 are the
pictures taken on March 28, 2001 at the Bicutan and Sta. Rosa plants.
7. From March 29 to 31, 2001, the strikers continued to barricade
the entrances to TMPCs two (2) plants. Once again, the strikers hurled
nasty remarks and prevented employees aboard shuttle buses from
entering the plants. Among the strikers were Christopher Saldivar,
Basilio Laqui, Sabas Bernabise, Federico Torres, Freddie Olit, Josel
Agosto, Arthur Parilla, Richard Calalang, Ariel Garcia, Edgar Hilaga,
Charlie Oliveria, Ferdinand Jaen, Wilfredo Tagle, Alejandro Imperial,
Manjolito Puno, Delmar Espadilla, Domingo Javier, Apollo Violeta and
Elvis Tabinao.[17]

On March 29, 2001, Toyota filed a petition for injunction with a prayer for the
issuance of a temporary restraining order (TRO) with the NLRC, which was

docketed as NLRC NCR Case No. INJ-0001054-01. It sought free ingress to and
egress from its Bicutan and Sta. Rosa manufacturing plants. Acting on said
petition, the NLRC, on April 5, 2001, issued a TRO against the Union, ordering its
leaders and members as well as its sympathizers to remove their barricades and all
forms of obstruction to ensure free ingress to and egress from the companys
premises. In addition, the NLRC rejected the Unions motion to dismiss based on
lack of jurisdiction.[18]
Meanwhile, Toyota filed a petition to declare the strike illegal with the NLRC
arbitration branch, which was docketed as NLRC NCR (South) Case No. 30-0401775-01, and prayed that the erring Union officers, directors, and members be
dismissed.[19]
On April 10, 2001, the DOLE Secretary assumed jurisdiction over the labor
dispute and issued an Order[20] certifying the labor dispute to the NLRC. In said
Order, the DOLE Secretary directed all striking workers to return to work at their
regular shifts by April 16, 2001. On the other hand, it ordered Toyota to accept the
returning employees under the same terms and conditions obtaining prior to the
strike or at its option, put them under payroll reinstatement. The parties were also
enjoined from committing acts that may worsen the situation.
The Union ended the strike on April 12, 2001. The union members and officers
tried to return to work on April 16, 2001 but were told that Toyota opted for
payroll-reinstatement authorized by the Order of the DOLE Secretary.
In the meantime, the Union filed a motion for reconsideration of the DOLE
Secretarys April 10, 2001 certification Order, which, however, was denied by the
DOLE Secretary in her May 25, 2001 Resolution. Consequently, a petition for
certiorari was filed before the CA, which was docketed as CA-G.R. SP No. 64998.
In the intervening time, the NLRC, in compliance with the April 10, 2001 Order of
the DOLE Secretary, docketed the case as Certified Case No. 000203-01.
Meanwhile, on May 23, 2001, at around 12:00 nn., despite the issuance of the
DOLE Secretarys certification Order, several payroll-reinstated members of the

Union staged a protest rally in front of Toyotas Bicutan Plant bearing placards and
streamers in defiance of the April 10, 2001 Order.
Then, on May 28, 2001, around forty-four (44) Union members staged
another protest action in front of the Bicutan Plant. At the same time, some twentynine (29) payroll-reinstated employees picketed in front of the Santa Rosa Plants
main entrance, and were later joined by other Union members.
On June 5, 2001, notwithstanding the certification Order, the Union filed another
notice of strike, which was docketed as NCMB-NCR-NS-06-150-01. On June 18,
2001, the DOLE Secretary directed the second notice of strike to be subsumed in
the April 10, 2001 certification Order.
In the meantime, the NLRC, in Certified Case No. 000203-01, ordered both parties
to submit their respective position papers on June 8, 2001. The union, however,
requested for abeyance of the proceedings considering that there is a pending
petition for certiorari with the CA assailing the validity of the DOLE Secretarys
Assumption of Jurisdiction Order.
Thereafter, on June 19, 2001, the NLRC issued an Order, reiterating its previous
order for both parties to submit their respective position papers on or before June 2,
2001. The same Order also denied the Unions verbal motion to defer hearing on
the certified cases.
On June 27, 2001, the Union filed a Motion for Reconsideration of the
NLRCs June 19, 2001 Order, praying for the deferment of the submission of
position papers until its petition for certiorari is resolved by the CA.
On June 29, 2001, only Toyota submitted its position paper. On July 11,
2001, the NLRC again ordered the Union to submit its position paper by July 19,
2001, with a warning that upon failure for it to do so, the case shall be considered
submitted for decision.
Meanwhile, on July 17, 2001, the CA dismissed the Unions petition for
certiorari in CA-G.R. SP No. 64998, assailing the DOLE Secretarys April 10, 2001
Order.

Notwithstanding repeated orders to file its position paper, the Union still failed to
submit its position paper on July 19, 2001. Consequently, the NLRC issued an
Order directing the Union to submit its position paper on the scheduled August 3,
2001 hearing; otherwise, the case shall be deemed submitted for resolution based
on the evidence on record.
During the August 3, 2001 hearing, the Union, despite several accommodations,
still failed to submit its position paper. Later that day, the Union claimed it filed its
position paper by registered mail.
Subsequently, the NLRC, in its August 9, 2001 Decision, declared the strikes
staged by the Union on February 21 to 23, 2001 and May 23 and 28, 2001 as
illegal. The decretal portion reads:

WHEREFORE, premises considered, it is hereby ordered:

(1) Declaring the strikes staged by the Union to be illegal.
(2)
Declared [sic] that the dismissal of the 227 who participated in
the illegal strike on February 21-23, 2001 is legal.
(3) However, the Company is ordered to pay the 227 Union members,
who participated in the illegal strike severance compensation in an
amount equivalent to one month salary for every year of service, as an
alternative relief to continued employment.
(4) Declared [sic] that the following Union officers and directors to have
forfeited their employment status for having led the illegal strikes on
February 21-23, 2001 and May 23 and 28, 2001: Ed Cubelo, Maximino
Cruz, Jr., Ricky Chavez, Joselito Hugo, Virgilio Colandog, Rommel
Digma, Federico Torres, Emilio Completo, Alexander Esteva, Joey
Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio Borsigue,
Bayani Manguil, Jr., and Mayo Mata.[21]
SO ORDERED.[22]

The NLRC considered the mass actions staged on February 21 to 23, 2001 illegal
as the Union failed to comply with the procedural requirements of a valid strike
under Art. 263 of the Labor Code.
After the DOLE Secretary assumed jurisdiction over the Toyota dispute on April
10, 2001, the Union again staged strikes on May 23 and 28, 2001. The NLRC
found the strikes illegal as they violated Art. 264 of the Labor Code which
proscribes any strike or lockout after jurisdiction is assumed over the dispute by
the President or the DOLE Secretary.
The NLRC held that both parties must have maintained the status quo after
the DOLE Secretary issued the assumption/certification Order, and ruled that
the Union did not respect the DOLE Secretarys directive.
Accordingly, both Toyota and the Union filed Motions for Reconsideration,
which the NLRC denied in its September 14, 2001 Resolution.[23] Consequently,
both parties questioned the August 9, 2001 Decision[24] and September 14, 2001
Resolution of the NLRC in separate petitions for certiorari filed with the CA,
which were docketed as CA-G.R. SP Nos. 67100 and 67561, respectively. The CA
then consolidated the petitions.
In its February 27, 2003 Decision,[25] the CA ruled that the Unions petition is
defective in form for its failure to append a proper verification and certificate of
non-forum shopping, given that, out of the 227 petitioners, only 159 signed the
verification and certificate of non-forum shopping. Despite the flaw, the CA
proceeded to resolve the petitions on the merits and affirmed the assailed NLRC
Decision and Resolution with a modification, however, of deleting the award of
severance compensation to the dismissed Union members.
In justifying the recall of the severance compensation, the CA considered the
participation in illegal strikes as serious misconduct. It defined serious misconduct

as a transgression of some established and definite rule of action, a forbidden act, a

dereliction of duty, willful in character, and implies wrongful intent and not mere
error in judgment. It cited Panay Electric Company, Inc. v. NLRC,[26] where we
revoked the grant of separation benefits to employees who lawfully participated in
an illegal strike based on Art. 264 of the Labor Code, which states that any union
officer who knowingly participates in an illegal strike and any worker or union
officer who knowingly participates in the commission of illegal acts during a strike
may be declared to have lost his employment status.[27]
However, in its June 20, 2003 Resolution,[28] the CA modified its February
27, 2003 Decision by reinstating severance compensation to the dismissed
employees based on social justice.
The Issues
Petitioner Union now comes to this Court and raises the following issues for
our consideration:
I.

Whether the mere participation of ordinary employees in an illegal strike

is enough reason to warrant their dismissal.

II.

Whether the Union officers and members act of holding the protest rallies
in front of the BLR office and the Office of the Secretary of Labor and
Employment on February 22 and 23, 2001 should be held as illegal strikes.
In relation hereto, whether the protests committed on May 23 and 28,
2001, should be held as illegal strikes. Lastly, whether the Union violated
the Assumption of Jurisdiction Order issued by the Secretary of Labor and
Employment.

III.

Whether the dismissal of 227 Union officers and members constitutes

unfair labor practice.

IV.

Whether the CA erred in affirming the Decision of the NLRC which

excluded the Unions Position Paper which the Union filed by mail. In the
same vein, whether the Unions right to due process was violated when the
NLRC excluded their Position Paper.

V.

Whether the CA erred in dismissing the Unions Petition for Certiorari.

Toyota, on the other hand, presents this sole issue for our determination:
I.

Whether the Court of Appeals erred in issuing its Resolution dated June
20, 2003, partially modifying its Decision dated February 27, 2003, and
awarding severance compensation to the dismissed Union members.

In sum, two main issues are brought to the fore:

(1) Whether the mass actions committed by the Union on different occasions
are illegal strikes; and
(2) Whether separation pay should be awarded to the Union members who
participated in the illegal strikes.
The Courts Ruling

The Union contends that the NLRC violated its right to due process when it
disregarded its position paper in deciding Toyotas petition to declare the strike
illegal.
We rule otherwise.
It is entirely the Unions fault that its position paper was not considered by the
NLRC. Records readily reveal that the NLRC was even too generous in affording
due process to theUnion. It issued no less than three (3) orders for the parties to
submit its position papers, which the Union ignored until the last minute. No
sufficient justification was offered why the Union belatedly filed its position
paper. In Datu Eduardo Ampo v. The Hon. Court of Appeals, it was explained that a
party cannot complain of deprivation of due process if he was afforded an

opportunity to participate in the proceedings but failed to do so. If he does not avail
himself of the chance to be heard, then it is deemed waived or forfeited without
violating the constitutional guarantee.[29] Thus, there was no violation of the Unions
right to due process on the part of the NLRC.
On a procedural aspect, the Union faults the CA for treating its petition as an
unsigned pleading and posits that the verification signed by 159 out of the 227
petitioners has already substantially complied with and satisfied the requirements
under Secs. 4 and 5 of Rule 7 of the Rules of Court.
The Unions proposition is partly correct.
Sec. 4 of Rule 7 of the Rules of Court states:
Sec. 4. Verification.Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that
the allegations therein are true and correct of his personal knowledge or based on
authentic records.
A pleading required to be verified which contains a verification based on
information and belief or upon knowledge, information and belief, or lacks a
proper verification, shall be treated as an unsigned pleading.

The verification requirement is significant, as it is intended to secure an assurance

that the allegations in the pleading are true and correct and not the product of the
imagination or a matter of speculation. [30] This requirement is simply a condition
affecting the form of pleadings, and noncompliance with the requirement does not
necessarily render it fatally defective. Indeed, verification is only a formal and not
a jurisdictional requirement.[31]
In this case, the problem is not the absence but the adequacy of the Unions
verification, since only 159 out of the 227 petitioners executed the verification.

Undeniably, the petition meets the requirement on the verification with respect to
the 159 petitioners who executed the verification, attesting that they have sufficient
knowledge of the truth and correctness of the allegations of the petition. However,
their signatures cannot be considered as verification of the petition by the other 68
named petitioners unless the latter gave written authorization to the 159 petitioners
to sign the verification on their behalf. Thus, in Loquias v. Office of the
Ombudsman, we ruled that the petition satisfies the formal requirements only with
regard to the petitioner who signed the petition but not his co-petitioner who did
not sign nor authorize the other petitioner to sign it on his behalf. [32] The proper
ruling in this situation is to consider the petition as compliant with the formal
requirements with respect to the parties who signed it and, therefore, can be given
due course only with regard to them. The other petitioners who did not sign the
verification and certificate against forum shopping cannot be recognized as
petitioners have no legal standing before the Court. The petition should be
dismissed outright with respect to the non-conforming petitioners.
In the case at bench, however, the CA, in the exercise of sound discretion, did not
strictly apply the ruling in Loquias and instead proceeded to decide the case on the
merits.
The alleged protest rallies in front of the offices of BLR and DOLE Secretary
and at the Toyota plants constituted illegal strikes

When is a strike illegal?

Noted authority on labor law, Ludwig Teller, lists six (6) categories of an
illegal strike, viz:
(1) [when it] is contrary to a specific prohibition of law, such as strike by
employees performing governmental functions; or

(2) [when it] violates a specific requirement of law[, such as Article 263 of
the Labor Code on the requisites of a valid strike]; or
(3) [when it] is declared for an unlawful purpose, such as inducing the
employer to commit an unfair labor practice against non-union employees; or
(4) [when it] employs unlawful means in the pursuit of its objective, such
as a widespread terrorism of non-strikers [for example, prohibited acts under Art.
264(e) of the Labor Code]; or
(5) [when it] is declared in violation of an existing injunction[, such as
injunction, prohibition, or order issued by the DOLE Secretary and the NLRC
under Art. 263 of the Labor Code]; or
(6) [when it] is contrary to an existing agreement, such as a no-strike
clause or conclusive arbitration clause.[33]

Petitioner Union contends that the protests or rallies conducted on February

21 and 23, 2001 are not within the ambit of strikes as defined in the Labor Code,
since they were legitimate exercises of their right to peaceably assemble and
petition the government for redress of grievances. Mainly relying on the doctrine
laid down in the case ofPhilippine Blooming Mills Employees Organization v.
Philippine Blooming Mills Co., Inc.,[34] it argues that the protest was not directed
at Toyota but towards the Government (DOLE and BLR). It explains that the
protest is not a strike as contemplated in the Labor Code. The Union points out that
in Philippine Blooming Mills Employees Organization, the mass action staged in
Malacaang to petition the Chief Executive against the abusive behavior of some
police officers was a proper exercise of the employees right to speak out and to
peaceably gather and ask government for redress of their grievances.
The Unions position fails to convince us.
While the facts in Philippine Blooming Mills Employees Organization are
similar in some respects to that of the present case, the Union fails to realize one
major difference: there was no labor dispute in Philippine Blooming Mills
Employees Organization. In the present case, there was an on-going labor dispute

arising from Toyotas refusal to recognize and negotiate with the Union, which was
the subject of the notice of strike filed by the Union on January 16, 2001. Thus,
the Unions reliance on Phililippine Blooming Mills Employees Organization is
misplaced, as it cannot be considered a precedent to the case at bar.
A strike means any temporary stoppage of work by the concerted action of
employees as a result of an industrial or labor dispute. A labor dispute, in turn,
includes any controversy or matter concerning terms or conditions of employment
or the association or representation of persons in negotiating, fixing, maintaining,
changing, or arranging the terms and conditions of employment, regardless of
whether the disputants stand in the proximate relation of the employer and the
employee.[35]
In Bangalisan v. Court of Appeals, it was explained that [t]he 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.[36] The term strike has been
elucidated to encompass not only concerted work stoppages, but also slowdowns,
mass leaves, sit-downs, attempts to damage, destroy, or sabotage plant equipment
and facilities, and similar activities.[37]
Applying pertinent legal provisions and jurisprudence, we rule that the protest
actions undertaken by the Union officials and members on February 21 to 23,
2001 are not valid and proper exercises of their right to assemble and ask
government for redress of their complaints, but are illegal strikes in breach of the
Labor Code. The Unions position is weakened by the lack of permit from the City
of Manila to hold rallies. Shrouded as demonstrations, they were in reality
temporary stoppages of work perpetrated through the concerted action of the
employees who deliberately failed to report for work on the convenient excuse that
they will hold a rally at the BLR and DOLE offices in Intramuros, Manila, on

February 21 to 23, 2001. The purported reason for these protest actions was to
safeguard their rights against any abuse which the med-arbiter may commit against
their cause. However, the Union failed to advance convincing proof that the medarbiter was biased against them. The acts of the med-arbiter in the performance of
his duties are presumed regular. Sans ample evidence to the contrary,
the Union was unable to justify the February 2001 mass actions. What comes to the
fore is that the decision not to work for two days was designed and calculated to
cripple the manufacturing arm of Toyota. It becomes obvious that the real and
ultimate goal of the Union is to coerce Toyota to finally acknowledge the Union as
the sole bargaining agent of the company. This is not a legal and valid exercise of
the right of assembly and to demand redress of grievance.
We sustain the CAs affirmance of the NLRCs finding that the protest rallies
staged on February 21 to 23, 2001 were actually illegal strikes. The illegality of
the Unions mass actions was succinctly elaborated by the labor tribunal, thus:
We have stated in our questioned decision that such mass actions staged
before the Bureau of Labor Relations on February 21-23, 2001 by the union
officers and members fall squarely within the definition of a strike (Article 212
(o), Labor Code). These concerted actions resulted in the temporary stoppage of
work causing the latter substantial losses. Thus, without the requirements for a
valid strike having been complied with, we were constrained to consider the strike
staged on such dates as illegal and all employees who participated in the
concerted actions to have consequently lost their employment status.
If we are going to stamp a color of legality on the two (2) [day-] walk
out/strike of respondents without filing a notice of strike, in effect we are
giving license to all the unions in the country to paralyze the operations of
their companies/employers every time they wish to hold a demonstration in
front of any government agency. While we recognize the right of every person
or a group to peaceably assemble and petition the government for redress of
grievances, the exercise of such right is governed by existing laws, rules and
regulations.
Although the respondent union admittedly made earnest representations
with the company to hold a mass protest before the BLR, together with their
officers and members, the denial of the request by the management should have
been heeded and ended their insistence to hold the planned mass demonstration.

Verily, the violation of the company rule cannot be dismissed as mere absences of
two days as being suggested by the union [are but] concerted actions detrimental
to Petitioner Toyotas interest.[38] (Emphasis supplied.)

It is obvious that the February 21 to 23, 2001 concerted actions were

undertaken without satisfying the prerequisites for a valid strike under Art. 263 of
the Labor Code.The Union failed to comply with the following requirements: (1) a
notice of strike filed with the DOLE 30 days before the intended date of strike, or
15 days in case of unfair labor practice;[39] (2) strike vote approved by a majority of
the total union membership in the bargaining unit concerned obtained by secret
ballot in a meeting called for that purpose; and (3) notice given to the DOLE of the
results of the voting at least seven days before the intended strike. These
requirements are mandatory and the failure of a union to comply with them renders
the strike illegal.[40] 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 to the attainment of legitimate policy objectives embodied in the law.
[41]
As they failed to conform to the law, the strikes on February 21, 22, and 23,
2001 were illegal.
Moreover, the aforementioned February 2001 strikes are in blatant violation
of Sec. D, par. 6 of Toyotas Code of Conduct which prohibits inciting or
participating in riots, disorders, alleged strikes or concerted actions detrimental to
[Toyotas] interest. The penalty for the offense is dismissal. The Union and its
members are bound by the company rules, and the February 2001 mass actions and
deliberate refusal to render regular and overtime work on said days violated these
rules. In sum, the February 2001 strikes and walk-outs were illegal as these were in
violation of specific requirements of the Labor Code and a company rule against
illegal strikes or concerted actions.
With respect to the strikes committed from March 17 to April 12, 2001,
those were initially legal as the legal requirements were met. However, on March
28 to April 12, 2001, the Union barricaded the gates of the Bicutan and Sta. Rosa

plants and blocked the free ingress to and egress from the company
premises. Toyota employees, customers, and other people having business with the
company were intimidated and were refused entry to the plants. As earlier
explained, these strikes were illegal because unlawful means were employed. The
acts of the Union officers and members are in palpable violation of Art. 264(e),
which proscribes acts of violence, coercion, or intimidation, or which obstruct the
free ingress to and egress from the company premises. Undeniably, the strikes from
March 28 to April 12, 2001 were illegal.
Petitioner Union also posits that strikes were not committed on May 23 and
28, 2001. The Union asserts that the rallies held on May 23 and 28, 2001 could not
be considered strikes, as the participants were the dismissed employees who were
on payroll reinstatement. It concludes that there was no work stoppage.
This contention has no basis.
It is clear that once the DOLE Secretary assumes jurisdiction over the labor
dispute and certifies the case for compulsory arbitration with the NLRC, the parties
have to revert to the status quo ante (the state of things as it was before). The
intended normalcy of operations is apparent from the fallo of the April 10,
2001 Order of then DOLE Secretary Patricia A. Sto. Tomas, which reads:
WHEREFORE,
PREMISES
CONSIDERED,
this
Office
hereby CERTIFIES the labor dispute at Toyota Motors Philippines Corporation
to the [NLRC] pursuant to Article 263 (g) of the Labor Code, as amended. This
Certification covers the current labor cases filed in relation with the Toyota strike,
particularly, the Petition for Injunction filed with the National Labor Relations
Commission entitled Toyota Motor Philippines Corporation vs. Toyota Motor
Philippines Corporation Workers Association (TMPCWA), Ed Cubelo, et al.,
NLRC Injunction Case No. 3401054-01; Toyota Motor Philippines Corporation
vs. Toyota Motor Philippines Corporation Workers Association, et al., NLRC
NCR Case No. 3004-01775-01, and such other labor cases that the parties may
file relating to the strike and its effects while this Certification is in effect.
As provided under Article 2634(g) of the Labor Code, all striking workers
are directed to return to work at their regular shifts by April 16, 2001; the
Company is in turn directed to accept them back to work under the same terms

and conditions obtaining prior to the work stoppage, subject to the option of the
company to merely reinstate a worker or workers in the payroll in light of the
negative emotions that the strike has generated and the need to prevent the further
deterioration of the relationship between the company and its workers.
Further, the parties are hereby ordered to cease and desist from
committing any act that might lead to the worsening of an already
deteriorated situation.[42] (Emphasis supplied.)

It is explicit from this directive that the Union and its members shall refrain
from engaging in any activity that might exacerbate the tense labor situation
in Toyota, which certainly includes concerted actions.
This was not heeded by the Union and the individual respondents who
staged illegal concerted actions on May 23 and 28, 2001 in contravention of the
Order of the DOLE Secretary that no acts should be undertaken by them to
aggravate the already deteriorated situation.
While it may be conceded that there was no work disruption in the
two Toyota plants, the fact still remains that the Union and its members picketed
and performed concerted actions in front of the Company premises. This is a patent
violation of the assumption of jurisdiction and certification Order of the DOLE
Secretary, which ordered the parties to cease and desist from committing any act
that might lead to the worsening of an already deteriorated situation. While there
are no work stoppages, the pickets and concerted actions outside the plants have a
demoralizing and even chilling effect on the workers inside the plants and can be
considered as veiled threats of possible trouble to the workers when they go out of
the company premises after work and of impending disruption of operations to
company officials and even to customers in the days to come. The pictures
presented by Toyota undoubtedly show that the company officials and employees
are being intimidated and threatened by the strikers. In short, the Union, by its
mass actions, has inflamed an already volatile situation, which was explicitly

proscribed by the DOLE Secretarys Order. We do not find any compelling reason
to reverse the NLRC findings that the pickets on May 23 and 28, 2001 were
unlawful strikes.
From the foregoing discussion, we rule that the February 21 to 23, 2001
concerted actions, the March 17 to April 12, 2001 strikes, and the May 23 and 28,
2001 mass actions were illegal strikes.
Union officers are liable for unlawful strikes or illegal acts during a strike

Art. 264 (a) of the Labor Code provides:

ART. 264. PROHIBITED ACTIVITIES
(a) x x x
Any worker whose employment has been terminated as a consequence of an
unlawful lockout shall be entitled to reinstatement with full backwages. Any
union officer who knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of illegal acts during
a strike may be declared to have lost his employment status:Provided, That mere
participation of a worker in a lawful strike shall not constitute sufficient ground
for termination of his employment, even if a replacement had been hired by the
employer during such lawful strike.

Art. 264(a) sanctions the dismissal of a union officer who knowingly

participates in an illegal strike or who knowingly participates in the commission of
illegal acts during a lawful strike.
It is clear that the responsibility of union officials is greater than that of the
members. They are tasked with the duty to lead and guide the membership in
decision making on union activities in accordance with the law, government rules
and regulations, and established labor practices. The leaders are expected to
recommend actions that are arrived at with circumspection and contemplation, and

always keep paramount the best interests of the members and union within the
bounds of law. If the implementation of an illegal strike is recommended, then they
would mislead and deceive the membership and the supreme penalty of dismissal
is appropriate. On the other hand, if the strike is legal at the beginning and the
officials commit illegal acts during the duration of the strike, then they cannot
evade personal and individual liability for said acts.
The Union officials were in clear breach of Art. 264(a) when they knowingly
participated in the illegal strikes held from February 21 to 23, 2001, from March
17 to April 12, 2001, and on May 23 and 28, 2001. We uphold the findings of fact
of the NLRC on the involvement of said union officials in the unlawful concerted
actions as affirmed by the CA, thus:
As regards to the Union officers and directors, there is overwhelming justification
to declare their termination from service. Having instigated the Union members to
stage and carry out all illegal strikes from February 21-23, 2001, and May 23 and
28, 2001, the following Union officers are hereby terminated for cause pursuant to
Article 264(a) of the Labor Code: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez,
Joselito Hugo, Virgilio Colandog, Rommel Digma, Federico Torres, Emilio
Completo, Alexander Esteva, Joey Javellonar, Lorenzo Caraqueo, Roderick
Nieres, Antonio Borsigue, Bayani Manguil, Jr., and Mayo Mata.[43]

The rule is well entrenched in this jurisdiction that factual findings of the
labor tribunal, when affirmed by the appellate court, are generally accorded great
respect, even finality.[44]
Likewise, we are not duty-bound to delve into the accuracy of the factual
findings of the NLRC in the absence of clear showing that these were arbitrary and
bereft of any rational basis.[45] In the case at bench, the Union failed to convince us
that the NLRC findings that the Union officials instigated, led, and knowingly
participated in the series of illegal strikes are not reinforced by substantial
evidence. Verily, said findings have to be maintained and upheld. We reiterate, as a
reminder to labor leaders, the rule that [u]nion officers are duty bound to guide

their members to respect the law.[46] Contrarily, if the officers urge the members to
violate the law and defy the duly constituted authorities, their dismissal from the
service is a just penalty or sanction for their unlawful acts.[47]
Members liability depends on participation in illegal acts
Art. 264(a) of the Labor Code provides that a 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, we find that the same is irrelevant. As long as
the members commit illegal acts, in a legal or illegal strike, then they can be
terminated.[48] However, when union members merely participate in an illegal strike
without committing any illegal act, are they liable?
This was squarely answered in Gold City Integrated Port Service, Inc. v.
NLRC,[49] where it was held that an ordinary striking worker cannot be terminated
for mere participation in an illegal strike. This was an affirmation of the rulings
in Bacus v. Ople[50] and Progressive Workers Union v. Aguas,[51] where it was held
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. In Esso Philippines, Inc. v. Malayang Manggagawa sa Esso
(MME), it was explained that a member is not responsible for the unions illegal
strike even if he voted for the holding of a strike which became illegal.[52]
Noted labor law expert, Professor Cesario A. Azucena, Jr., traced the history
relating to the liability of a union member in an illegal strike, starting with the rule
of vicarious liability, thus:
Under [the rule of vicarious liability], mere membership in a labor union
serves as basis of liability for acts of individuals, or for a labor activity, done on
behalf of the union. The union member is made liable on the theory that all the
members are engaged in a general conspiracy, and the unlawful acts of the

particular members are viewed as necessary incidents of the conspiracy. It has

been said that in the absence of statute providing otherwise, the rule of vicarious
liability applies.
Even the Industrial Peace Act, however, which was in effect from 1953 to
1974, did not adopt the vicarious liability concept. It expressly provided that:
No officer or member of any association or organization, and no
association or organization participating or interested in a labor dispute
shall be held responsible or liable for the unlawful acts of individual
officers, members, or agents, except upon proof of actual participation in,
or actual authorization of, such acts or of ratifying of such acts after actual
knowledge thereof.
Replacing the Industrial Peace Act, the Labor Code has not adopted the
vicarious liability rule.[53]

Thus, the rule on vicarious liability of a union member was abandoned and it
is only when a striking worker knowingly participates in the commission of illegal
acts during a strike that he will be penalized with dismissal.
Now, what are considered illegal acts under Art. 264(a)?
No precise meaning was given to the phrase illegal acts. 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 [n]o
person engaged in picketing shall commit any act of violence, coercion or
intimidation or obstruct the free ingress to or egress from the employers premises
for lawful purposes, or obstruct public thoroughfares;
(2) Commission of crimes and other unlawful acts in carrying out the strike;
[54]
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.
As earlier explained, this enumeration is not exclusive and it may cover
other breaches of existing laws.
In the cases at bench, the individual respondents participated in several mass
actions, viz:
(1) The rallies held at the DOLE and BLR offices on February 21, 22, and
23, 2001;
(2) The strikes held on March 17 to April 12, 2001; and
(3) The rallies and picketing on May 23 and 28, 2001 in front of the Toyota
Bicutan and Sta. Rosa plants.
Did they commit illegal acts during the illegal strikes on February 21 to 23,
2001, from March 17 to April 12, 2001, and on May 23 and 28, 2001?
The answer is in the affirmative.
As we have ruled that the strikes by the Union on the three different
occasions were illegal, we now proceed to determine the individual liabilities of
the affected union members for acts committed during these forbidden concerted
actions.
Our ruling in Association of Independent Unions in the Philippines v.
NLRC lays down the rule on the liability of the union members:

Decisive on the matter is the pertinent provisions of Article 264 (a) of the Labor
Code that: [x x x] any worker [x x x] 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 can not 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 act[s] must be identified. But proof beyond
reasonable doubt is not required. Substantial evidence available under the
circumstances, which may justify the imposition of the penalty of dismissal,
may suffice.
In the landmark case of Ang Tibay vs. CIR, the court ruled Not only must
there be some evidence to support a finding or conclusion, but the evidence must
be substantial. 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.[55] (Emphasis supplied.)

Thus, it is necessary for the company to adduce proof on the participation of

the striking employee in the commission of illegal acts during the strikes.
After a scrutiny of the records, we find that the 227 employees indeed joined
the February 21, 22, and 23, 2001 rallies and refused to render overtime work or
report for work. These rallies, as we earlier ruled, are in reality illegal strikes, as
the procedural requirements for strikes under Art. 263 were not complied
with. Worse, said strikes were in violation of the company rule prohibiting acts in
citing or participating in riots, disorders, alleged strikes or concerted action
detrimental to Toyotas interest.
With respect to the February 21, 22, and 23, 2001 concerted actions, Toyota
submitted the list of employees who did not render overtime work on February 21,
2001 and who did not report for work on February 22 and 23, 2001 as shown by
Annex I of Toyotas Position Paper in NLRC Certified Case No. 000203-01
entitled In Re: Labor Dispute at Toyota Motor Philippines Corp. The employees
who participated in the illegal concerted actions were as follows:

1. Aclan, Eugenio; 2. Agosto, Joel; 3. Agot, Rodelio; 4. Alarana, Edwin; 5. Alejo,

Alex; 6. Alfonso, Erwin; 7. Apolinario, Dennis; 8. Apostol, Melvin; 9. Arceta,
Romel; 10. Arellano, Ruel; 11. Ariate, Abraham; 12. Arollado, Daniel; 13. Arriola,
Dominador; 14. Atun, Lester; 15. Bala, Rizalino; 16. Baluyut, Rolando; 17.
Banzuela, Tirso Jr.; 18. Bayani, Roderick; 19. Benabise, Sabas Jr.; 20. Berces,
Abel; 21. Bering, Benny; 22. Birondo, Alberto; 23. Blanco, Melchor; 24. Bolanos,
Dexter; 25. Bolocon, Jerry; 26. Borebor, Rurel; 27. Borromeo, Jubert; 28.
Borsigue, Antonio; 29. Bulan, Elmer; 30. Busano, Freddie; 31. Bustillo, Ernesto
Jr.; 32. Caalim, Alexander; 33. Cabahug, Nelson; 34. Cabatay, Jessie; 35.
Cabezas, Marcelo; 36. Calalang, Richard; 37. Candelario, Roque Jr.; 38. Capate,
Leo Nelson; 39. Carandang, Resty; 40. Caraqueo, Lorenzo; 41. Caringal, Dennis;
42. Casaba, Gienell; 43. Catapusan, Christopher; 44. Catral, Rico; 45. Cecilio,
Felipe; 46. Cinense, Joey; 47. Cometa, Julius; 48. Completo, Emilio; 49.
Consignado, Randy; 50. Coral, Jay Antonio; 51. Correa, Claudio Jr.; 52. Cuevas,
Reynaldo; 53. Dacalcap, Albert; 54. Dakay, Ryan; 55. Dalanon, Herbert; 56.
Dalisay, Rene; 57. David, Benigno Jr.; 58. De Guzman, Joey; 59. Dela Cruz,
Basilio; 60. Dela Cruz, Ferdinand; 61. Dela Torre, Heremo; 62. De Leon,
Leonardo; 63. Delos Santos, Rogelio; 64. De Ocampo, Joselito; 65. De Silva,
Leodegario; 66. Del Mundo, Alex; 67. Del Rio, Rey; 68. Dela Ysla, Alex; 69. Dia,
Frank Manuel; 70. Dimayuga, Antonio; 71. Dingcong, Jessiah; 72. Dumalag,
Jasper; 73. Duyag, Aldrin; 74. Ercillo, Armando; 75. Espadilla, Delmar; 76.
Espejo, Lionel; 77. Espeloa, Dennis; 78. Esteva, Alexander; 79. Estole, Francisco;
80. Fajardo, George; 81. Fajilagutan, Jason; 82. Fajura, John; 83. Franco,
Melencio; 84. Franco, Nikko; 85. Fulgar, Dexter; 86. Fulo, Dante; 87. Gado,
Eduardo; 88. Galang, Erwin; 89. Gamit, Rodel; 90. Garces, Robin; 91. Garcia,
Ariel; 92. Gaspi, Ronald; 93. Gavarra, Angelo; 94. Gerola, Genaro Jr.; 95. Gerola,
Larry; 96. Gohilde, Michael; 97. Gojar, Regino; 98. Gojar, Reynaldo; 99.
Gonzales, Roberto; 100. Gutierrez, Bernabe; 101. Hilaga, Edgar; 102. Hilanga,
Melchor; 103. Hondrada, Eugene Jay; 104. Imperial, Alejandro; 105. Jaen,
Ferdinand; 106. Jalea, Philip; 107. Javillonar, Joey; 108. Julve, Frederick; 109.
Lalisan, Victorio; 110. Landicho, Danny; 111. Laqui, Basilio; 112. Lavide, Edgar;
113. Lazaro, Orlando; 114. Legaspi, Noel; 115. Lising, Reynaldo Jr.; 116. Llanera,
Joey; 117. Lomboy, Alberto; 118. Lopez, Geronimo; 119. Lozada, Jude Jonobell;
120. Lucido, Johny; 121. Macalindong, Rommel; 122. Madrazo, Nixon; 123.
Magbalita, Valentin; 124. Magistrado, Rogelio Jr.; 125. Magnaye, Philip John;
126. Malabanan, Allan John; 127. Malabrigo, Angelito; 128. Malaluan, Rolando
Jr.; 129. Malate, Leoncio Jr.; 130. Maleon, Paulino; 131. Manaig, Roger; 132.
Manalang, Joseph Patrick; 133. Manalo, Manuel Jr.; 134. Manaog, Jonamar; 135.
Manaog, Melchor; 136. Mandolado, Melvin; 137. Maneclang, Jovito; 138.
Manego, Ruel; 139. Manguil, Bayani Jr.; 140. Manigbas, June; 141. Manjares,
Alfred; 142. Manzanilla, Edwin; 143. Marasigan, Carlito; 144. Marcial, Nilo; 145.
Mariano, Rommel; 146. Mata, Mayo; 147. Mendoza, Bobit; 148. Mendoza,
Roberto; 149. Milan, Joseph; 150. Miranda, Eduardo; 151. Miranda, Luis; 152.
Montero, Ericson; 153. Montero, Marlaw; 154. Montes, Ruel; 155. Morales,
Dennis; 156. Natividad, Kenneth; 157. Nava, Ronaldo; 158. Nevalga, Alexander;
159. Nicanor, Edwin; 160. Nierves, Roderick; 161. Nunez, Alex; 162. Nunez,

Lolito; 163. Obe, Victor; 164. Oclarino, Alfonso; 165. Ojenal, Leo; 166. Olit,
Freddie; 167. Oliver, Rex; 168. Oliveria, Charlie; 169. Operana, Danny; 170.
Oriana, Allan; 171. Ormilla, Larry; 172. Ortiz, Felimon; 173. Paniterce, Alvin;
174. Parallag, Gerald; 175. Pecayo, Edwin; 176. Pena, Erwin; 177. Penamante,
Jowald; 178. Piamonte, Melvin; 179. Piamonte, Rogelio; 180. Platon, Cornelio;
181. Polutan, Jorge; 182. Posada, John; 183. Puno, Manjolito; 184. Ramos, Eddie;
185. Reyes, Rolando; 186. Roxas, Philip; 187. Sales, Paul Arthur; 188. Sallan,
David Jr.; 189. Salvador, Bernardo; 190. Sampang, Alejandro; 191. San Pablo,
Baldwin; 192. Sangalang, Jeffrey; 193. Santiago, Eric; 194. Santos, Raymond;
195. Sapin, Al Jose; 196.Saquilabon, Bernabe; 197. Serrano, Ariel; 198. Sierra,
Alex; 199. Simborio, Romualdo; 200. Sulit, Lauro; 201. Tabirao, Elvisanto; 202.
Tablizo, Edwin; 203. Taclan, Petronio; 204. Tagala, Rommel; 205. Tagle,
Wilfredo Jr.; 206. Tecson Alexander; 207. Templo, Christopher; 208. Tenorio,
Roderick; 209. Tolentino, Rodel; 210. Tolentino, Rommel; 211. Tolentino,
Romulo Jr.; 212. Tomas, Rolando; 213. Topaz, Arturo Sr.; 214. Toral, Grant
Robert; 215. Torres, Dennis; 216. Torres, Federico; 217. Trazona, Jose Rommel;
218. Tulio, Emmanuel; 219. Umiten, Nestor Jr.; 220. Vargas, Joseph; 221.
Vergara, Allan; 222. Vergara, Esdwin; 223. Violeta, Apollo Sr.; 224. Vistal, Alex;
225. Yangyon, Michael Teddy; 226. Zaldevar, Christopher; and 227. Zamora,
Dominador Jr.

Toyotas Position Paper containing the list of striking workers was attested to
as true and correct under oath by Mr. Jose Ma. Aligada, First Vice President of the
Group Administration Division of Toyota. Mr. Emerito Dumaraos, Assistant
Department Manager of the Production Department of Toyota, likewise submitted
a June 29, 2001 Affidavit[56] confirming the low attendance of employees on
February 21, 22, and 23, 2001, which resulted from the intentional absences of the
aforelisted striking workers. TheUnion, on the other hand, did not refute Toyotas
categorical assertions on the participation of said workers in the mass actions and
their deliberate refusal to perform their assigned work on February 21, 22, and 23,
2001. More importantly, it did not deny the fact of absence of the employees on
those days from the Toyota manufacturing plants and their deliberate refusal to
render work. Their admission that they participated in the February 21 to 23,
2001 mass actions necessarily means they were absent from their work on those
days.

Anent the March 28 to April 12, 2001 strikes, evidence is ample to show
commission of illegal acts like acts of coercion or intimidation and obstructing free
ingress to or egress from the company premises. Mr. Eduardo Nicolas III, Toyotas
Security Chief, attested in his affidavit that the strikers badmouthed people coming
in and shouted invectives such as bakeru at Japanese officers of the company. The
strikers even pounded the vehicles of Toyota officials. More importantly, they
prevented the ingress of Toyotaemployees, customers, suppliers, and other persons
who wanted to transact business with the company. These were patent violations of
Art. 264(e) of the Labor Code, and may even constitute crimes under the Revised
Penal Code such as threats or coercion among others.
On March 28, 2001, the following have committed illegal actsblocking the
ingress to or egress from the two (2) Toyota plants and preventing the ingress
of Toyotaemployees on board the company shuttle at the Bicutan and Sta. Rosa
Plants, viz:
1. Grant Robert Toral; 2. John Posadas; 3. Alex Sierra; 4. Allan John Malabanan;
5. Abel Berces; 6. Ariel Garcia; 7. Charlie Oliveria; 8. Manjolito Puno; 9. Baldwin
San Pablo; 10. Federico Torres; 11. Larry Gerola; 12. Roderick Bayani; 13. Allan
Oclarino; 14. Reynaldo Cuevas; 15. George Polutan; 16. Arman Ercillo; 17. Joey
Llanera; and 18. Roberto Gonzales

Photographs were submitted by Toyota marked as Annexes 1 through 18 of

its Position Paper, vividly showing the participation of the aforelisted employees in
illegal acts.[57]
To further aggravate the situation, a number of union members committed
illegal acts (blocking the ingress to and egress from the plant) during the strike
staged on March 29, 2001 at the Toyota plant in Bicutan, to wit:
1. Basilio Laqui; 2. Sabas Benabise; 3. Federico Torres; 4. Freddie Olit; and 5.
Joel Agosto

Pictures marked as Annexes 21 to 22 of Toyotas Position Paper reveal the

illegal acts committed by the aforelisted workers.[58]
On the next day, March 30, 2001, several employees again committed illegal
acts (blocking ingress to and egress from the plant) during the strike at the Bicutan
plant, to wit:
1. Ariel Garcia; 2. Edgar Hilaga; 3. Charlie Oliveria; 4. Ferdinand Jaen; 5.
Wilfredo Tagle; 6. Alejandro Imperial; 7. Manjolito Puno; 8. Delmar Espadilla; 9.
Apollo Violeta; and 10. Elvis Tabirao

Pictures marked as Annexes 25 to 26 and 28 of Toyotas Position Paper show

the participation of these workers in unlawful acts.[59]
On April 5, 2001, seven (7) Toyota employees were identified to have
committed illegal acts (blocking ingress to and egress from the plant) during the
strike held at the Bicutan plant, to wit:
1. Raymund Santos; 2. Elvis Tabirao; 3. Joseph Vargas; 4. Bernardo Salvador;
5. Antonio Dimayuga; 6. Rurel Borebor; and 7. Alberto Lomboy

The participations of the strikers in illegal acts are manifest in the pictures
marked as Annexes 32 and 33 of Toyotas Position Paper.[60]
On April 6, 2001, only Rogelio Piamonte was identified to have committed
illegal acts (blocking ingress to and egress from the Toyota plant) during the strike
at the Toyota Santa Rosa plant. [61] Then, on April 9, 2001, Alvin Paniterce, Dennis
Apolinario, and Eduardo Miranda[62] were identified to have committed illegal acts

(blocking ingress to and egress from the Toyota plant) during the strike at the
Toyota Santa Rosa plant and were validly dismissed by Toyota.
Lastly, the strikers, though on payroll reinstatement, staged protest rallies
on May 23, 2001 and May 28, 2001 in front of the Bicutan and Sta. Rosa
plants. These workers acts in joining and participating in the May 23 and 28, 2001
rallies or pickets were patent violations of the April 10, 2001 assumption of
jurisdiction/certification Order issued by the DOLE Secretary, which proscribed
the commission of acts that might lead to the worsening of an already deteriorated
situation. Art. 263(g) is clear that strikers who violate the assumption/certification
Order may suffer dismissal from work. This was the situation in the May 23 and
28, 2001 pickets and concerted actions, with the following employees who
committed illegal acts:
a. Strikers who joined the illegal pickets on May 23, 2001 were (1) Dennis
Apolinario; (2) Abel Berces; (3) Benny Bering; (4) Dexter Bolaos; (5) Freddie
Busano; (6) Ernesto Bustillo, Jr.; (7) Randy Consignado; (8) Herbert Dalanon; (9)
Leodegario De Silva; (10) Alexander Esteva; (11) Jason Fajilagutan; (12) Nikko
Franco; (13) Genaro Gerola, Jr.; (14) Michael Gohilde; (15) Rogelio Magistrado;
(16) Rolando Malaluan, Jr.; (17) Leoncio Malate, Jr.; (18) Edwin Manzanilla; (19)
Nila Marcial; (20) Roderick Nierves; (21) Larry Ormilla; (22) Filemon Ortiz; (23)
Cornelio Platon; (24) Alejandro Sampang; (25) Eric Santiago; (26) Romualdo
Simborio; (27) Lauro Sulit; and (28) Rommel Tagala.
Pictures show the illegal acts (participation in pickets/strikes despite the
issuance of a return-to-work order) committed by the aforelisted strikers.[63]
b. Strikers who participated in the May 28, 2001 were (1) Joel Agosto; (2)
Alex Alejo; (3) Erwin Alfonso; (4) Dennis Apolinario; (5) Melvin Apostol; (6)
Rommel Arceta; (7) Lester Atun; (8) Abel Berces; (9) Benny Bering; (10) Dexter

Bolanos; (11) Marcelo Cabezas; (12) Nelson Leo Capate; (13) Lorenzo Caraqueo;
(14) Christopher Catapusan; (15) Ricky Chavez; (16) Virgilio Colandog; (17)
Claudio Correa; (18) Ed Cubelo; (19) Reynaldo Cuevas; (20) Rene Dalisay; (21)
Benigno David, Jr.; (22) Alex Del Mundo; (23) Basilio Dela Cruz; (24) Roel
Digma; (25) Aldrin Duyag; (26) Armando Ercillo; (27) Delmar Espadilla; (28)
Alexander Esteva; (29) Nikko Franco; (30) Dexter Fulgar; (31) Dante Fulo; (32)
Eduardo Gado; (33) Michael Gohilde; (34) Eugene Jay Hondrada II; (35) Joey
Javillonar; (36) Basilio Laqui; (37) Alberto Lomboy; (38) Geronimo Lopez; (39)
Rommel Macalindog; (40) Nixon Madrazo; (41) Valentin Magbalita; (42) Allan
Jon Malabanan; (43) Jonamar Manaog; (44) Bayani Manguil; (45) June Manigbas;
(46) Alfred Manjares; (47) Edwin Manzanilla; (48) Mayo Mata; (49) Leo Ojenal;
(50) Allan Oriana; (51) Rogelio Piamonte; (52) George Polutan; (53) Eric
Santiago; (54) Bernabe Saquilabon; (55) Alex Sierra; (56) Romualdo Simborio;
(57) Lauro Sulit; (58) Elvisanto Tabirao; (59) Edwin Tablizo; (60) Emmanuel
Tulio; (61) Nestor Umiten; (62) Joseph Vargas; (63) Edwin Vergara; and (64)
Michael Teddy Yangyon.
Toyota presented photographs which show said employees conducting mass
pickets and concerted actions.[64]
Anent the grant of severance compensation to legally dismissed union
members, Toyota assails the turn-around by the CA in granting separation pay in its
June 20, 2003 Resolution after initially denying it in its February 27, 2003
Decision. The company asseverates that based on the CA finding that the illegal
acts of said union members constitute gross misconduct, not to mention the huge
losses it suffered, then the grant of separation pay was not proper.
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 behind the forfeiture of the right to termination

pay 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 [65] or under the Labor Code
and other existing laws. This means that the employee, despite the 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 provisions and voluntary management policy or practice, the entitlement of
the dismissed employees to the benefits depends on the stipulations of the CBA or
the company rules and policies.
As in any rule, there are exceptions. One exception where separation pay is
given even though an employee is validly dismissed is when the court finds
justification in applying the principle of social justice well entrenched in the 1987
Constitution. In Phil. Long Distance Telephone Co. (PLDT) v. NLRC, the Court
elucidated why social justice can validate the grant of separation pay, thus:
The reason is that 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.[66]

In the same case, the Court laid down the rule that severance compensation
shall be allowed only when the cause of the dismissal is other than serious
misconduct or that which reflects adversely on the employees moral character. The
Court succinctly discussed the propriety of the grant of separation pay in this wise:

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
causes 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.
A contrary rule would, as the petitioner correctly argues, have the effect,
of rewarding rather than punishing the erring employee for his offense. And we
do not agree that the punishment is his dismissal only and that the separation pay
has nothing to do with the wrong he has committed. Of course it has. Indeed, if
the employee who steals from the company is granted separation pay even as he is
validly dismissed, it is not unlikely that he will commit a similar offense in his
next employment because he thinks he can expect a like leniency if he is again
found out. This kind of misplaced compassion is not going to do labor in general
any good as it will encourage the infiltration of its ranks by those who do not
deserve the protection and concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing
simply because it is committed by the underprivileged. At best it may mitigate the
penalty but it certainly will not condone the offense. Compassion for the poor is
an imperative of every humane society but only when the recipient is not a rascal
claiming an undeserved privilege. Social justice cannot be permitted to be refuge
of scoundrels any more than can equity be an impediment to the punishment of
the guilty. Those who invoke social justice may do so only if their hands are clean
and their motives blameless and not simply because they happen to be poor. This
great policy of our Constitution is not meant for the protection of those who have
proved they are not worthy of it, like the workers who have tainted the cause of
labor with the blemishes of their own character.[67]

Explicit in PLDT are two exceptions when the NLRC or the courts should
not grant separation pay based on social justiceserious 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 decided bearing on the issue reveals that when the
termination is legally justified on any of the grounds under Art. 282, separation pay

was not allowed. In Ha Yuan Restaurant v. NLRC,[68] we deleted the award of

separation pay to an employee who, while unprovoked, hit her co-workers face,
causing injuries, which then resulted in a series of fights and scuffles between
them. We viewed her act as serious misconduct which did not warrant the award of
separation pay. In House of Sara Lee v. Rey,[69] this Court deleted the award of
separation pay to a branch supervisor who regularly, without authorization,
extended the payment deadlines of the companys sales agents. Since the cause for
the supervisors dismissal involved her integrity (which can be considered as breach
of trust), she was not worthy of compassion as to deserve separation pay based on
her length of service. In Gustilo v. Wyeth Phils., Inc.,[70] this Court found no
exceptional circumstance to warrant the grant of financial assistance to an
employee who repeatedly violated the companys disciplinary rules and regulations
and whose employment was thus terminated for gross and habitual neglect of his
duties. In the doctrinal case of San Miguel v. Lao,[71] this Court reversed and set
aside the ruling of the CA 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, which are needed for its glass production plant, to its
competitor. While a review of the case reports does not reveal a case involving a
termination by reason of the commission of a crime against the employer or his/her
family which dealt with the issue of separation pay, it would be adding insult to
injury if the employer would still be compelled to shell out money to the offender
after the harm done.
In all of the foregoing situations, the Court declined to grant termination pay
because the causes for dismissal 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 moral character of the employees. We therefore find that
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 conceded to the dismissed employee.
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
in consideration of the 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 the guideposts enunciated in PLDT on the propriety of the award of
separation pay.
In the case at bench, are the 227 striking employees entitled to separation
pay?
In the instant case, the CA concluded that the illegal strikes committed by
the Union members constituted serious misconduct.[72]
The CA ratiocinated in this manner:
Neither can social justice justify the award to them of severance
compensation or any other form of financial assistance. x x x
xxxx
Considering that the dismissal of the employees was due to their
participation in the illegal strikes as well as violation of the Code of Conduct
of the company, the same constitutes serious misconduct. A serious
misconduct is a transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and implies wrongful
intent and not mere error in judgment. In fact, in Panay Electric Company, Inc. v.
NLRC, the Supreme Court nullified the grant of separation benefits to employees
who unlawfully participated in an illegal strike in light of Article 264, Title VIII,
Book V of the Labor Code, that, any union officer who knowingly participates in
an illegal strike and any worker or union officer who knowingly participates in the
commission of illegal acts during a strike may be declared to have lost his
employment status.

The constitutional guarantee on social justice is not intended only for

the poor but for the rich as well. It is a policy of fairness to both labor and
management.[73] (Emphasis supplied.)

In disposing of the Unions plea for reconsideration of its February 27,

2003 Decision, the CA however performed a volte-face by reinstating the award of
separation pay.
The CAs grant of separation pay is an erroneous departure from our ruling
in Phil. Long Distance Telephone Co. v. NLRC that serious misconduct forecloses
the award of separation pay. Secondly, the advertence to the alleged honest belief
on the part of the 227 employees that Toyota committed a breach of the duty to
bargain collectively and an abuse of valid exercise of management prerogative has
not been substantiated by the evidence extant on record. There can be no good faith
in intentionally incurring absences in a collective fashion from work on February
22 and 23, 2001 just to attend the DOLE hearings. The Unions strategy was plainly
to cripple the operations and bring Toyota to its knees by inflicting substantial
financial damage to the latter to compel union recognition. The Union officials and
members are supposed to know through common sense that huge losses would
befall the company by the abandonment of their regular work. It was not disputed
that Toyota lost more than PhP 50 million because of the willful desertion of
company operations in February 2001 by the dismissed union members. In
addition, further damage was experienced by Toyota when the Union again
resorted to illegal strikes from March 28 to April 12, 2001, when the gates
of Toyota were blocked and barricaded, and the company officials, employees, and
customers were intimidated and harassed.Moreover, they were fully aware of the
company rule on prohibition against concerted action inimical to the interests of
the company and hence, their resort to mass actions on several occasions in clear
violation of the company regulation cannot be excused nor justified. Lastly, they
blatantly violated the assumption/certification Order of the DOLE Secretary,

exhibiting their lack of obeisance to the rule of law. These acts indeed constituted
serious misconduct.
A painstaking review of case law renders obtuse the Unions claim for
separation pay. In a slew of cases, this Court refrained from awarding separation
pay or financial assistance to union officers and members who were separated from
service due to their participation in or commission of illegal acts during strikes. In
the recent case of Pilipino Telephone Corporation v. Pilipino Telephone Employees
Association (PILTEA),[74] this Court upheld the dismissal of union officers who
participated and openly defied the return-to-work order issued by the DOLE
Secretary. No separation pay or financial assistance was granted. In Sukhothai
Cuisine and Restaurant v. Court of Appeals,[75] this Court declared that the union
officers who participated in and the union members who committed illegal acts
during the illegal strike have lost their employment status. In this case, the strike
was held illegal because it violated agreements providing for arbitration. Again,
there was no award of separation pay nor financial assistance. In Philippine
Diamond Hotel and Resort, Inc. v. Manila Diamond Hotel Employees Union,[76] the
strike was declared illegal because the means employed was illegal. We upheld the
validity of dismissing union members who committed illegal acts during the strike,
but again, without awarding separation pay or financial assistance to the erring
employees. InSamahang Manggagawa sa Sulpicio Lines, Inc. v. Sulpicio Lines,
[77]
this Court upheld the dismissal of union officers who participated in an illegal
strike sans any award of separation pay. Earlier, in Grand Boulevard Hotel v.
Genuine Labor Organization of Workers in Hotel, Restaurant and Allied
Industries,[78] we affirmed the dismissal of theUnions officers who participated in
an illegal strike without awarding separation pay, despite the NLRCs declaration
urging the company to give financial assistance to the dismissed employees.
[79]
In Interphil Laboratories Union-FFW, et al. v. Interphil Laboratories, Inc.,
[80]
this Court affirmed the dismissal of the union officers who led the concerted
action in refusing to render overtime work and causing work slowdowns. However,

no separation pay or financial assistance was allowed. In CCBPI Postmix Workers

Union v. NLRC,[81] this Court affirmed the dismissal of union officers who
participated in the strike and the union members who committed illegal acts while
on strike, without awarding them separation pay or financial assistance. In 1996,
in Allied Banking Corporation v. NLRC,[82] this Court affirmed the dismissal of
Union officers and members, who staged a strike despite the DOLE Secretarys
issuance of a return to work order but did not award separation pay. In the earlier
but more relevant case of Chua v. NLRC,[83] this Court deleted the NLRCs award of
separation benefits to an employee who participated in an unlawful and violent
strike, which strike resulted in multiple deaths and extensive property
damage. In Chua, we viewed the infractions committed by the union officers and
members as a serious misconduct which resulted in the deletion of the award of
separation pay in conformance to the ruling in PLDT. Based on existing
jurisprudence, the award of separation pay to the Union officials and members in
the instant petitions cannot be sustained.
One last point to considerit is high time that employer and employee cease
to view each other as adversaries and instead recognize that theirs is a symbiotic
relationship, wherein they must rely on each other to ensure the success of the
business. When they consider only their own self-interests, and when they act only
with their own benefit in mind, both parties suffer from short-sightedness, failing
to realize that they both have a stake in the business. The employer wants the
business to succeed, considering the investment that has been made. The employee
in turn, also wants the business to succeed, as continued employment means a
living, and the chance to better ones lot in life. It is clear then that they both have
the same goal, even if the benefit that results may be greater for one party than the
other. If this becomes a source of conflict, there are various, more amicable means
of settling disputes and of balancing interests that do not add fuel to the fire, and
instead open avenues for understanding and cooperation between the employer and
the employee. Even though strikes and lockouts have been recognized as effective

bargaining tools, it is an antiquated notion that they are truly beneficial, as they
only provide short-term solutions by forcing concessions from one party; but
staging such strikes would damage the working relationship between employers
and employees, thus endangering the business that they both want to succeed. The
more progressive and truly effective means of dispute resolution lies in mediation,
conciliation, and arbitration, which do not increase tension but instead provide
relief from them. In the end, an atmosphere of trust and understanding has much
more to offer a business relationship than the traditional enmity that has long
divided the employer and the employee.
WHEREFORE, the petitions in G.R. Nos. 158786 and
are DENIED while those in G.R. Nos. 158798-99 are GRANTED.

158789

The June 20, 2003 CA Resolution in CA-G.R. SP Nos. 67100 and 67561
restoring the grant of severance compensation is ANNULLED and SET ASIDE.
The February 27, 2003 CA Decision in CA-G.R. SP Nos. 67100 and 67561,
which affirmed the August 9, 2001 Decision of the NLRC but deleted the grant of
severance compensation, is REINSTATED and AFFIRMED.
No costs.
SO ORDERED.

PRESBITERO J. VELASCO, JR.

Republic of the Philippines

Supreme Court

Manila
FIRST DIVISION

PHILIPPINE
INC.,
Petitioner,

AIRLINES,
G.R. No. 123294
Present:

CORONA, C.J.,
- versus -

Chairperson,
VELASCO, JR.,
LEONARDO-DE
CASTRO,
DEL CASTILLO, and

NATIONAL
LABOR
RELATIONS
COMMISSION
and AIDA M. QUIJANO,

PEREZ, JJ.
Promulgated:

Respondents.
October 20, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

LEONARDO-DE CASTRO, J.:

This is a Petition for Certiorari under Rule 65 of the Rules of

Court seeking to annul, reverse and set aside the following
issuances of public respondent National Labor Relations
Commission (NLRC): (1) Decision[1] dated September 29, 1995
in NLRC NCR CA 007860-94 (NLRC NCR 00-03-0185991), entitled Aida M. Quijano v. Philippine Airlines, Inc., which set
aside the Decision[2] of Labor Arbiter Roberto I. Santos and
ordered petitioner Philippine Airlines, Inc. (PAL) to pay
private respondent Aida M. Quijano (Quijano) her separation pay
in accordance with petitioners Special Retirement & Separation
Program, and (2) Resolution[3] dated November 14, 1995 denying
petitioners Motion for Reconsideration thereof.
It bears stressing that pursuant to St. Martin Funeral Home v.
National Labor Relations Commission[4] and In Re: Dismissal of
Special Civil Actions in NLRC Cases,[5] all special civil actions
arising out of any decision, final resolution or order of the NLRC
must be filed with the Court of Appeals. However, since both
parties of this case had filed their respective Memoranda prior to
the promulgation of our decision in St. Martin Funeral Home, this
case was no longer referred to the Court of Appeals.
The following are the pertinent facts, as summarized by the
NLRC:

Complainant Quijano rose from the ranks starting as accounting

clerk in December 1967 until she became effective September 1, 1984,
Manager-Agents Services Accounting Division (ASAD), vice Josefina
Sioson.

ASAD, the specific unit in PAL charged with the processing,

verification, reconciliation, and validation of all claims for commission
filed by agents worldwide, is under the direct supervision and control of
the Vice President-Comptroller, and within the scope of the audit
program of the Vice President-Internal Audit & Control.

On May 5, 1989, an investigating committee chaired by Leslie W.

Espino (hereinafter referred to as the Espino Committee) formally
charged Quijano as Manager-ASAD in connection with the processing
and payment of commission claims to Goldair Pty. Ltd. (Goldair for
short) wherein PAL overpaid commissions to the latter amounting to
several million Australian dollars during the period 1984-1987.
Specifically, Quijano was charged as Manager-ASAD with the following:

Failure on the job and gross negligence resulting in

loss of trust and confidence in that you failed to:

a.
Exercise the necessary monitoring, control
and supervision over your Senior Accounts Analyst to
ensure that the latter was performing the basic duties and
responsibilities of her job in checking and verifying the
correctness and validity of the commission claims from
Goldair.

b.
Adopt and perform the necessary checks and
verification procedures as demanded by your position in
order to ensure that the commission claims of Goldair
which you were approving for payment were correct and
valid claims thus resulting in consistent substantial
overpayments to Goldair over a period of more than three
years.

c.
Require
or
otherwise
cause
a
final
reconciliation of the remaining balance due as
commission claims to Goldair for a particular month such

that a claim for a particular month was never liquidated in

a final amount and thus contributing to consistent
overpayments to Goldair.

The Senior Accounts Analyst referred to in the charge was Dora

Jane Prado Curammeng who was included as a respondent.
Curammeng was specifically assigned to handle and process
commissions of agents in, among others, the Australia Region, and
Goldair was among the travel agents whose production reports and
commission claims were handled by her. Curammeng was accused of
failing to verify the completeness of the documents supporting the
claims; to trace and match each ticket in the production report
submitted by Goldair with the IATA, BSP and CTO sales report; and to
perform a complete verification of the net/net amounts claimed in the
production reports against the approved marketing arrangements.
However, Curammeng had already resigned and became a resident of
Canada at the time of the investigation conducted by the Espino
Committee.

Pending further investigation, the Espino Committee placed

Quijano under preventive suspension and at the same time required
her to submit her answer to the charges. As directed, Quijano
submitted her answer wherein, among others, she explained as
follows:

My staff processes production reports submitted by

both passenger and cargo agents. In 1984, they were only
seven (7) people (with one on loan to Financial Analysis
Division) and yet they process commission claims of an
average of PHP four billion annually. My colleagues who
are responsible for processing and recording gross
passenger and cargo sales have around 51 people. Just
the ratio of my staff to accounting sales staff, which is one
to seven, would indicate the heavy load our unit
experience.

I wish to emphasize however, that the staff

assigned under my division have been selected on the
basis of their judgment competence considering the very
nature of marketing arrangements with agents are strictly
private and confidential. Under the circumstances I have
just mentioned, my staffs judgment and competence is

heavily relied on particularly when random checking of

commission claims for traffic documents and airway bills
against sales reports is being performed by them. I also
seek your appreciation of the work environment we are in
and the intermittent conflicts we experience due to the
pressure of prompt settlement of claims to agents and yet
having the satisfaction that the processing procedures are
adequate.

xxxx

May I reiterate to the Committee that when my

staff informed me of their findings of double claims on the
production reports for the months of October and
November 1987, I followed this up with a representative
of Goldair. On June 1988, I received a handwritten note
from the representative of Goldair signed by its General
Manager Aleco Papazoglou, a xerox copy of it is hereto
attached as Annex A. Mr. Papazoglou, in this note,
guaranteed to me that he will undertake to collect any
excessive payments on the agent fees from his agents
and pay these to us afterwards.

At this point, I would like to emphasize that ASAD,

before known as Confidential Staff under the Office of the
VP-Comptroller, became a unit since 1976. Due to the
confidential nature of its functions, the accounting
procedures were not written. The procedures being
performed by the staff were mainly practices handed
down from their predecessors. Further, the procedures
were tailored to adopt to the market environment of the
country which were based on the approved marketing
arrangements. But of course, there were inherent internal
controls.

A final check whether accounting procedures being

observed were appropriate in accordance with accounting
standards, is the periodic examination of both our internal
and external auditors.

During all these 4-1/2 years I have been with ASAD,

I did not receive any feedback that there were
weaknesses or lapses in accounting controls and
procedures being followed.

In 1985, Cressop Mccormick & Paget made a study

of the CMAs. They conducted an interview of all key
personnel including me who were involved in handling
CMAs. It was of course necessary for them to observe and
evaluate the existing accounting procedures and controls.
Their report, however, did not mention any adverse
findings concerning my division.

In 1986, Sycip, Gorres, Velayo & Co. were engaged

to look into the CMA functional specifications and to
propose the best method of allocating commission
expenses to flown revenues. To be able for them to render
a report, it is, of course, necessary for them to delve into
the reports we receive and the records we maintain. It is
safe to surmise that they walked through our accounting
procedures. No mention, however, of weaknesses on our
accounting procedures and controls was made in their
report.

Again, during the early part of 1987, all the

production reports from Australia for the period April to
September 1986 were borrowed and audited by Internal
Audit and control. We apprised the auditor then of the
various procedures we observed in processing these
production reports. We did not receive any adverse
feedback about their audit. Our confidence that the AMAs
were properly enforced by Australian agents and that
there were no irregularities committed were thus
regained. We shifted our concentration to the other
agents particularly those under Nett-Nett settlement
arrangements and tried to recall any commission that
should be disallowed.

In the middle of 1987, a special team from the

Commission on Audit conducted a fraud audit and again,
interviewed my staff and I on our accounting procedures.
Incentive commission figures by agent by country were

also furnished to them. I wasnt informed of any flaws in

our accounting procedures and control nor existence of
any fraud.

My division underwent scrutiny of three (3)

prestigious consulting firms and of our own internal audit.
I relied heavily on the absence of any unfavorable findings
on accounting procedures and controls from them since
their studies were quite extensive and lengthy. It is quite
surprising at times why I am now asked how I could have
failed to observe that certain accounting procedures were
not being followed by my staff.

xxxx

Also, Internal Audit & Control made a regular audit

in Australia in November, 1986 headed by no less than
the Vice President-Internal Audit & Control. They did not
discover any fraud nor report any questionable
transaction on Passenger but on Cargo transaction only. If
they, the auditors, did not find any discrepancy when their
concentration is on Australia alone, how much more with
us when our concentration is on the whole system? The
production reports of Goldair was borrowed and assessed
by the auditor before and after the regular audit.

The other members of the Espino Committee were Ricardo G.

Paloma, then Senior Vice President-Strategic Planning & Corporate
Services wrote a dissenting opinion to the Final Draft Majority Report in
the following manner, to wit:

A new set of procedures was apparently installed

by Romeo Ines and Josefina Sioson in April, 1984 (without
any evident formal authorization by the Comptroller
Dept.) upon receipt of Aleco Papazoglous letter that
automatic payment be made upon presentation of his
production reports in Manila Gold Air gained immunity
against any possibility of cross of their production
reports: it was simply impossible to cross check the
production reports against sales reports are not yet in by

the time the hand carried production reports arrive in

ASAD.

Upon assumption of office by Aida Quijano this new

set of procedure was carried over. She was made to
understand that these were the OFFICIAL PROCEDURES,
contrary to the actual procedure which called for
production reports being initially checked by PAL
Melbourne during the 1981 to 1983 period. This initial
check which had until them been handled by the Regional
Office was combined with the secondary check and were
all dumped on ASAD.

A mitigating factor in Quijanos favor is that UNSEEN

HANDS designed or allowed this new procedures to be put
in place. Ines, who became the VP Internal Audit should
have known the prescribed procedures (or at the very
least the actual practice during the period 1981 to 1983
when he was the VP Comptroller) and yet, did not alert
her. Unknowingly, Quijano allowed the by-pass and the
automatic payment of 80% upon presentation of
production reports because Sioson assured her that was
the procedure previously followed. Trustingly, she became
a participant in this mess.

It should be noted that the Romeo Ines mentioned in the

dissenting opinion is the same Romeo R. Ines who was one of the
members of the Espino Committee and who was later named a
respondent in the second Goldair charge, together with Chairman
Espino. Romeo R. Ines was the VP-Comptroller for the period 19811983 and VP-Internal Audit for the period 1984-1987. While Josefina
Sioson, as earlier shown, was the Manager-ASAD during the period
1981-1983 until she was replaced by Quijano on September 1, 1984.
Incidentally, as found by respondents witness Benigno Datoc, the
Goldair fraud started in 1981 and continued until its discovery
sometime in the latter part of 1987. And as of that year, Goldair had
been PALs agent for about seventeen (17) years already.

On July 2, 1990, another Administrative charge involving the

same Goldair anomaly was filed, this time including Committee
Chairman Leslie W. Espino and Committee Member Romeo R. Ines and
several others, for gross incompetence and inefficiency, negligence,

imprudence, mismanagement, dereliction of duty, failure to observe

and/or implement administrative and executive policies, and related
acts or omissions. Pending the result of investigation by another
committee chaired by Judge Martin S. Ocampo, the PAL Board of
Directors suspended respondents Leslie W. Espino, Executive VicePresident and Chief Operating Officer; Ramon C. Lozon, Senior VicePresident-Finance; Romeo R. Ines, Vice President-Internal Audit &
Control; Josefina Sioson, Manager-Staff Pricing; except respondents VPComptroller Robin C. Dui and Manager-ASAD Aida Quijano who were
already suspended by the Espino Committee, and respondent Juan
Yoga, former Regional Vice President-Australia who has already retired.

Meantime, PAL filed a civil case in Australia against Goldair

seeking to recover AUD 11 million. Twice, Quijano went to Australia as
witness for PAL. Thereafter, a settlement was reached whereby Goldair
was to pay PAL a total of around AUD 7 million inclusive of court costs.
A criminal case was nevertheless filed against Goldairs owner,
Alexandro Papazoglou, by the Fraud Squad Victorian Police.

The Ocampo Committee having submitted its findings to the PAL

Board of Directors, the latter, in a resolution dated January 18, 1991,
considered respondents Leslie W. Espino, Ramon C. Lozon, Romeo R.
Ines, Robin C. Dui, Josefina Sioson, and Aida M. Quijano, resigned from
the service effective immediately, for loss of confidence and for acts
inimical to the interest of the company.

The Board found as follows:

This is the extended Resolution.

The Goldair fraud has caused a total loss to PAL as

of August 1990 in the amount of AUD 14.6 million (PHP
204 million). Goldair is a company that served then as the
General Sales Agent of PAL in Australia against Goldair, a
settlement was reached whereby Goldair was to pay PAL a
total of around AUD 7 million inclusive of court costs. This
settlement is said to be the most practical and realistic
under the circumstances. A criminal case was
nevertheless filed against Goldairs owner, Alexandro
Papazoglou, by the Fraud Squad Victorian Police. Hearings
are still going on.

According to the evidence received and evaluated

by the investigating committee, PAL lost the above huge
sum of money to Goldair as a result of false, padded,
erroneous or irregular claims for commissions submitted
by Goldair and unwittingly paid by PAL. The Agents
Services Accounting Division (ASAD), one of the divisions
under the Comptroller Department, is the specific unit in
the company charged with the processing, verification,
and validation of all claims for commissions filed by the
companys agents worldwide (excluding the U.S. which is
processed by the San Francisco Regional Office).
Consequently, responsibility for the Goldair fraud has
been attributed mainly to the failure of ASAD to properly
process and validate Goldairs commission claims prior to
payment.

Thus, the following lapses or irregularities were

uncovered in the course of the investigations that have
been conducted:

1.
No adequate effort was exerted to see to it that
the supporting documents (photocopies of tickets
submitted and attached to the production report were
complete). Neither was a verification or comparison made
between the tickets and the production report.

2.
The simple and basic step of verifying the names
of the passengers and their ticket numbers against ticket
numbers, even on a check basis, to see whether they
were reported more than once was not accomplished. If
done, double or multiple reporting of tickets could have
been readily detected.

3.
Validation of the correctness of prorate values,
by performing the proration, was not undertaken.

4.
No reconciliation was made of all the amounts
due the agent for a particular month. Such reconciliation

would have disclosed whether or not the account for a

particular month could be closed.

5.
Production reports were not cross-checked
against sales report or flight coupon registers.

6.
Superiors failed to adequately monitor the
activities of their subordinates to ensure that the latter
were performing their duties.

7.
The policy that cash vouchers could be approved
only by duly authorized persons was in several cases
violated.

Resolving the case of Quijano, the Board said:

The charge against Ms. Quijano is that:

Quijano was the Manager-ASAD (Agents Services
Accounting Division) in 1984-87, and responsible for the
final scrutiny of agents Production Reports and final
recommendation
for
payment
of
travel
agents
commissions.

As Manager-ASAD from 1984 to 1987 (when the

fraud was discovered), she failed to uncover or detect and
report or grossly disregarded the fraud although the
commissions vis--vis production were scandalously high.

Ms. Quijano claims that she relied heavily on Ms.

Curammengs judgment competence to perform her work,
particularly the completeness of the documents check.
She argues that if she were to do the completeness check
herself, there would be no need for the analyst. This
argument, however, wittingly or unwittingly, misconceives
the nature of her job. Precisely, her basic role and duty as
a manager was to make sure that the analysts in her
division were performing the tasks assigned to them. But
Ms. Quijano did not see to it that the completeness check

was actually being performed by Ms. Curammeng. This

lapse in control, contributed materially to the double,
multiple and fictitious reporting of tickets, and double
claims for commissions perpetrated by Goldair. Ms.
Quijano was certainly not expected to personally do and
perform the completeness check herself. But as manager,
it was clearly incumbent upon her to see to it that this
completeness check was being done by her subordinates
competently and efficiently. Yet, Ms. Quijano even failed to
adopt ways and means of keeping herself sufficiently
informed of the activities of her staff members so as to
prevent or at least discover at an early stage the fraud
being perpetrated on a massive scale by Goldair against
her company.

Her incompetence at her job is patent.

Her motion for reconsideration having been denied by the Board

in a Resolution dated February 19, 1991, Quijano filed on March 25,
1991 the instant case against PAL for illegal suspension and illegal
dismissal.[6]

The Labor Arbiter dismissed private respondents complaint in a

Decision dated September 7, 1994, the dispositive portion of
which reads:
WHEREFORE, in conformity with the opinion above-expressed,
judgment is hereby rendered dismissing the above-captioned case for
lack of merit and, consequently, the respondent is absolved from any
liability.[7]

Undeterred, private respondent filed an appeal before the NLRC

which rendered the assailed Decision dated September 29, 1995,
the dispositive portion of which reads:

WHEREFORE, in view of all the foregoing considerations, the decision

appealed from should be, as it is hereby, VACATED and SET ASIDE and
another one entered, directing the Philippine Airlines, Inc., thru its
responsible officials, to pay Aida M. Quijano her separation pay in
accordance with its Special Retirement & Separation Program dated
February 15, 1988, plus ten percent (10%) of the total amount by way
of attorneys fee.[8]

Petitioner filed a Motion for Reconsideration but this was

denied by the NLRC in its Resolution dated November 14, 1995,
the dispositive portion of which reads:
After due consideration of the Motion for Reconsideration filed
by respondent-appellee on October 20, 1995, from the Decision of
September 29, 1995, the Commission (Second Division) RESOLVED to
deny the same for lack of merit.[9]

Hence, this petition for certiorari.

Both parties submitted their respective Memoranda [10] in late
1997, however, on September 11, 1998, petitioner filed a Motion
for Suspension of Proceedings[11] based on Presidential Decree No.
902-A which reads, in part:
That upon appointment of management committee, rehabilitation
receiver, board or body, pursuant to this Decree, all actions for
claims against corporations, partnerships or associations under
management or receivership pending before any court, tribunal, board
or body shall be suspended accordingly.[12] (Underscoring supplied.)

The said motion referred to an Order [13] dated June 23, 1998
of the Securities and Exchange Commission (SEC) which
appointed an Interim Rehabilitation Receiver for petitioner

pursuant to Presidential Decree No. 902-A that was followed by

the issuance of another Order [14] dated July 1, 1998 which
commanded that all claims against PAL are deemed suspended.
After hearing both parties on the question of whether or not
the Court should render judgment during the state of suspension
of claims, we ruled in the negative in a Resolution [15] dated
September 4, 2000, the dispositive portion of which reads:
IN VIEW THEREOF, the Motion for Suspension of Proceedings of
petitioner is GRANTED.[16]

Private respondent filed a Motion for Reconsideration [17] on

October 3, 2000 of the above Resolution but we denied the same
in a Resolution[18] dated November 13, 2000.
Since then petitioner was required by this Court to submit
periodic status reports on the rehabilitation proceedings, the last
of which was dated October 22, 2007,[19]declaring that the
petitioners request to exit from rehabilitation had been granted by
the SEC via an Order[20] issued on September 28, 2007, the
dispositive portion of which reads:
WHEREFORE, in the light of the foregoing, and considering
PALs firm commitment to settle its outstanding obligations as well as
the fact that its operations and its financial condition have
been normalized and stabilized in conformity with the Amended and
Restated Rehabilitation Plan exemplifying a successful corporate
rehabilitation, the PALs request to exit from rehabilitation is
hereby GRANTED.

The PRR is likewise directed to furnish all creditors and parties

concerned with copies of this Order at the expense of the Petitioner

and submit proof of service thereof to the Commission, within fifteen

(15) days from date of receipt of this Order. [21]

Considering the foregoing and the fact that both parties

have long submitted their respective Memoranda in the instant
case, private respondent filed a Motion to Resume Proceedings
and to Render Judgment[22] on December 11, 2007. In compliance
with this Courts Resolution [23] dated January 21, 2008 requiring
petitioner to comment on private respondents motion, petitioner
filed a Comment/Manifestation[24] on February 28, 2008 which
confirmed that with the issuance of the Securities and Exchange
Commissions September 28, 2007 Order granting PALs request to
exit from rehabilitation, there is no longer any legal impediment
to the resumption of the instant proceedings.
In the instant petition, petitioner puts forward a singular
argument, to wit:
ASSUMING ARGUENDO (WITHOUT ADMITTING) THAT THE EQUITABLE
CONSIDERATIONS CITED BY THE NLRC DID EXIST, THE SAME CANNOT
JUSTIFY THE AWARD OF SEPARATION PAY TO MRS. QUIJANO (despite the
finding that she was legally suspended and thereafter legally
dismissed) IN THE FACE OF OVERWHELMING EVIDENCE SUBMITTED BY
PETITIONER WHICH CLEARLY SHOW THAT PHILIPPINE AIRLINES, INC.
LOST SEVERAL MILLION AUSTRALIAN DOLLARS AS A RESULT OF THE
FRAUD COMMITTED BY GOLDAIR AND THAT SAID FRAUD COULD ONLY
HAVE BEEN MADE POSSIBLE BY MRS. QUIJANOS PATENT
MISMANAGEMENT AND GROSS INCOMPETENCE AS ASAD MANAGER IN
FAILING TO DETECT THE IRREGULARITY. IN AWARDING SEPARATION PAY
TO MRS. QUIJANO, THE NLRC COMMITTED A GRAVE ABUSE OF ITS
DISCRETION AMOUNTING TO LACK OF JURISDICTION.[25]

We affirm the NLRC ruling with modification.

At the onset, it should be noted that the parties do not

dispute the validity of private respondents dismissal from
employment for loss of confidence and acts inimical to the
interest of the employer. The assailed September 29, 1995
Decision of the NLRC was emphatic in declaring that it was not
prepared to rule as illegal the preventive suspension and eventual
dismissal from the service of [private respondent] [26] and rightfully
so because the last position that private respondent held,
Manager-ASAD (Agents Services Accounting Division), undeniably
qualifies as a position of trust and confidence.
Loss of confidence as a just cause for termination of
employment is premised from the fact that an employee
concerned holds a position of trust and confidence. This situation
holds where a person is entrusted with confidence on delicate
matters, such as the custody, handling, or care and protection of
the employers property. But, in order to constitute a just cause for
dismissal, the act complained of must be work-related such as
would show the employee concerned to be unfit to continue
working for the employer.[27]
The January 18, 1991 Resolution of the PAL Board of
Directors, the relevant portions of which are discussed in the
narration of the facts of this case as culled from the assailed
September 29, 1995 NLRC Decision, clearly laid out the reasons
why it considered private respondent along with her other coemployees in PAL resigned from the service effective immediately
for loss of confidence and for acts inimical to the interest of the
company. In private respondents case, the Resolution underscored
her acts of mismanagement and gross incompetence which made
her fail to detect the irregularities in the Goldair account that
resulted in huge financial losses for petitioner. Admittedly, the
said findings are not backed by proof beyond reasonable doubt
but are, nevertheless, given credence since they have been
adopted by both the labor arbiter and the NLRC and are
supported by substantial evidence. As we have consistently held,

the degree of proof required in labor cases is not as stringent as

in other types of cases.[28]
As a general rule, employers are allowed a wider latitude of
discretion in terminating the employment of managerial personnel
or those who, while not of similar rank, perform functions which
by their nature require the employers full trust and
confidence. This must be distinguished from the case of ordinary
rank and file employees, whose termination on the basis of these
same grounds requires a higher proof of involvement in the
events in question; mere uncorroborated assertions and
accusations by the employer will not suffice. [29]
Having succinctly disposed of the issue of the validity of
private respondents dismissal, we now delve into the true crux of
this controversy which is the legality of the award of separation
pay to private respondent despite having been lawfully
terminated for a just cause.
Petitioner argues that, in light of the fact that a just cause
forms the basis for her lawful termination from the job, private
respondent is not entitled to separation pay.Likewise, petitioner
insists that even assuming that the equitable considerations cited
by the NLRC did exist, the same cannot justify the award of
separation pay. And, in awarding the same, the NLRC committed
grave abuse of discretion amounting to lack of jurisdiction.
We do not agree.
Grave abuse of discretion is an evasion of a positive duty or
a virtual refusal to perform a duty enjoined by law or to act in
contemplation of law as when the judgment rendered is not based
on law and evidence but on caprice, whim and despotism. [30] This
Court holds that the NLRC did not gravely abuse its discretion in

granting separation pay to private respondent as the same is not

characterized by caprice or arbitrariness being rooted in
established jurisprudence.
The language of Article 279 of the Labor Code is pregnant
with the implication that a legally dismissed employee is not
entitled to separation pay, to wit:
An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and
to his full backwages, inclusive of allowances, and to his other benefits
or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.

However, in exceptional cases, this Court has granted

separation pay to a legally dismissed employee as an act of social
justice or based on equity. In both instances, it is required that the
dismissal (1) was not for serious misconduct; and (2) does not
reflect on the moral character of the employee [31] or would involve
moral turpitude. This equitable and humanitarian principle was
first discussed by the Court in the landmark case of Philippine
Long Distance Telephone Co. (PLDT) v. National Labor Relations
Commission,[32] wherein it was held:

Strictly speaking, however, it is not correct to say that there is no

express justification for the grant of separation pay to lawfully dismissed
employees other than the abstract consideration of equity. The reason is
that 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.

xxxx
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 employee 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 has also to
take care of her child may also be removed because of her poor
attendance, this being another authorized ground. It is not the employee's
fault if he does not have the necessary aptitude for his work but on the
other hand the company cannot be required to maintain him just the
same at the expense of the efficiency of its operations. He too may be
validly replaced. 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, while inept, is not
depraved. But if he was in fact 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 causes 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. [33]

In Toyota
Motor
Phils.
Corp.
Workers
Association (TMPCWA) v. National Labor Relations Commission,
[34]
we clarified that the grant of separation pay may still be
precluded even if the ground for the employees dismissal is not
serious misconduct under Article 282(a) of the Labor Code but
other just causes under the same article and/or other authorized
causes provided for under the Labor Code. However,
the TMPCWA case still recognized the social justice exception
prescribed in Philippine Long Distance Telephone Company. To
quote the relevant portions of that decision:

Explicit in PLDT are two exceptions when the NLRC or the courts
should not grant separation pay based on social justiceserious
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 decided bearing on the issue reveals

that when the termination is legally justified on any of the grounds
under Art. 282, separation pay was not allowed. x x x.

xxxx

In all of the foregoing situations, the Court declined to grant

termination pay because the causes for dismissal 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 moral character of the employees. We
therefore find that 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 conceded to the dismissed employee.

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 in consideration of the
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 the guideposts enunciated in PLDT on the propriety
of the award of separation pay.[35] (Emphases supplied.)

In other words, under the present jurisprudential

framework, the grant of separation pay as a matter of equity to
a validly dismissed employee is not contingent on whether the
ground for dismissal is expressly under Article 282(a) but
whether the ground relied upon is akin to serious misconduct or
involves willful or wrongful intent on the part of the employee.

It, thus, becomes pertinent to examine the ground relied

upon for the dismissal of private respondent and to determine if
the special circumstances described in PLDT are present in the
case at bar.
Serious misconduct as a valid cause for the dismissal of an
employee is defined simply as improper or wrong conduct. It is a
transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error of judgment. To be
serious within the meaning and intendment of the law, the
misconduct must be of such grave and aggravated character and
not merely trivial or unimportant. However serious such
misconduct, it must, nevertheless, be in connection with the
employees work to constitute just cause for his separation. The
act complained of must be related to the performance of the
employees duties such as would show him to be unfit to continue
working for the employer.[36] On the other hand, moral turpitude
has been defined as everything which is done contrary to justice,
modesty, or good morals; an act of baseness, vileness or
depravity in the private and social duties which a man owes his
fellowmen, or to society in general, contrary to justice, honesty,
modesty, or good morals.[37]
In the case at bar, the transgressions imputed to private
respondent have never been firmly established as deliberate and
willful acts clearly directed at making petitioner lose millions of
pesos. At the very most, they can only be characterized as
unintentional,
albeit
major,
lapses
in
professional
judgment. Likewise, the same cannot be described as morally
reprehensible actions. Thus, private respondent may be granted
separation pay on the ground of equity which this Court had
defined as justice outside law, being ethical rather than jural and
belonging to the sphere of morals than of law. It is grounded on
the precepts of conscience and not on any sanction of positive
law, for equity finds no room for application where there is law. [38]

A perusal of the assailed September 29, 1995 NLRC Decision

would show that the following equitable considerations were
relied upon by the NLRC to arrive at its assailed ruling, to wit:
a)

The Goldair fraud was found to have started in 1981.

Private respondent became the Manager-ASAD only on
September 1, 1984. The former Manager-ASAD from
1981 to August 1984 was Josefina Sioson.[39]

b)

ASAD is under the direct supervision and control of

the Vice President-Comptroller and within the scope of
the audit program of the Vice President-Internal Audit
and Control. The VP-Comptroller for the period 1981 to
1983 and the VP-Internal Audit for the period 1984 to
1987 was Romeo Ines.[40]

c)

The accounting procedures and controls inherited by

private respondent when she took over ASAD were
subjected to the scrutiny of prestigious accounting firms
like Cressop, McCormick & Paget in 1985, the Sycip,
Gorres, Velayo & Co., Inc. in 1986, including a special
team from the Commission on Audit in 1987 all of which
made no adverse findings concerning ASAD. [41]

d)

No less than the VP-Internal Audit made a regular

audit in Australia in November 1986 and in the early
part of 1987, by borrowing all production reports
covering April to September 1986, but found no
irregularities nor made any adverse feedback against
ASAD.[42]

e)

Private respondent was the first to discover the

overpayment of commission claims to Goldair in 1984
in rate differences in net/net settlement which, after her

intervention, did not recur. She was also the one who
first discovered the fraud in double and fictitious
commission claims and promptly took action when she
withheld all provisional payments due Goldair. [43]
f)

Even after the Goldair anomaly was discovered,

private respondent could have availed of PALs Special
Retirement and Separation Program, but she stayed put
and had gone twice to Australia, while under preventive
suspension, to attend court proceedings as a witness
for petitioner enabling the said company to recover and
minimize its economic loss.[44]

g)

Private respondent has no derogatory record during

the entire period of her employment with petitioner for
more than two decades. She steadily rose from the
ranks until she became the ASAD Manager. [45]

h)

In the dissenting opinion of Ricardo Paloma, Vice

Chairman of the Espino Committee and PAL Senior VP
Strategic Planning and Corporate Service, to the Final
Draft Majority Report, he observed that a mitigating
factor in [private respondents] favor is that UNSEEN
HANDS designed or allowed this new procedures to be
put in place. Ines, who became the VP Internal Audit
should have known the prescribed procedures (or at the
very least the actual practice during the period 1981 to
1983 when he was the VP Comptroller) and yet, did not
alert her. Unknowingly, [private respondent] allowed
the by-pass and the automatic payment of 80% upon
presentation of production reports because Sioson
assured her that was the procedure previously followed.
Trusting, she became a participant in this mess. [46]

Considering
the
foregoing
uncontroverted
special
circumstances, we rule that the NLRC did not commit grave abuse
of discretion amounting to lack of jurisdiction in ordering
petitioner to pay private respondent separation pay for equitable
considerations.
However, we do not agree with the NLRC that private
respondents separation pay should be awarded in accordance
with PALs Special Retirement & Separation Program dated
February 15, 1988 plus ten percent (10%) of the total amount by
way of attorneys fees.
At the risk of stating the obvious, private respondent was not
separated from petitioners employ due to mandatory or optional
retirement but, rather, by termination of employment for a just
cause. Thus, any retirement pay provided by PALs Special
Retirement & Separation Program dated February 15, 1988 or, in
the absence or legal inadequacy thereof, by Article 287 of the
Labor Code[47] does not operate nor can be made to operate for
the benefit of private respondent. Even private respondents
assertion that, at the time of her lawful dismissal, she was already
qualified for retirement does not aid her case because the fact
remains that private respondent was already terminated for cause
thereby rendering nugatory any entitlement to mandatory or
optional retirement pay that she might have previously
possessed.
Likewise, attorneys fees are not proper in this case because
the same can only be awarded when the employee is illegally
dismissed in bad faith and is compelled to litigate or incur
expenses to protect his rights by reason of the unjustified act of
his employer.[48] The aforementioned conditions do not obtain in
this case.

As to the matter of the proper amount of separation pay to

be awarded to private respondent on the basis of equitable
considerations, our pronouncement in Yrasuegui v. Philippine
Airlines, Inc.[49] is instructive, to wit:

Here, We grant petitioner separation pay equivalent to one-half

(1/2) months pay for every year of service. It should include regular
allowances which he might have been receiving. We are not blind to the
fact that he was not dismissed for any serious misconduct or to any act
which would reflect on his moral character. We also recognize that his
employment with PAL lasted for more or less a decade.

Private respondents circumstances are more or less identical to

the above-cited case in the sense that, as previously discussed,
her dismissal was neither for serious misconduct nor for an
offense involving moral turpitude. Furthermore, her employment
with petitioner spanned more than two decades unblemished with
any derogatory record prior to the infractions at issue in the case
at bar.
WHEREFORE, the assailed NLRC Decision dated September
29, 1995 as well as the Resolution dated November 14, 1995
are AFFIRMED with the MODIFICATIONthat petitioner Philippine
Airlines, Inc. pay private respondent Aida Quijano one-half (1/2)
month salary for every year of service as separation pay on
equitable grounds.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 186621

March 12, 2014

SOUTH EAST INTERNATIONAL RATTAN, INC. and/or ESTANISLAO AGBAY, Petitioners,

vs.
JESUS J. COMING, Respondent.
1

DECISION
VILLARAMA, JR., J.:
Before the Court is a petition for review on certiorari under Rule 45 to reverse and set aside the
Decision dated February 21, 2008 and Resolution dated February 9, 2009 of the Court of Appeals
(CA) in CA-GR. CEB-SP No. 02113.
2

Petitioner South East International Rattan, Inc. (SEIRI) is a domestic corporation engaged in the
business of manufacturing and exporting furniture to various countries with principal place of
business at Paknaan, Mandaue City, while petitioner Estanislao Agbay, as per records, is the
President and General Manager of SEIRI.
4

On November 3, 2003, respondent Jesus J. Coming filed a complaint for illegal dismissal,
underpayment of wages, non-payment of holiday pay, 13th month pay and service incentive leave
pay, with prayer for reinstatement, back wages, damages and attorneys fees.
5

Respondent alleged that he was hired by petitioners as Sizing Machine Operator on March 17, 1984.
His work schedule is from 8:00 a.m. to 5:00 p.m. Initially, his compensation was on "pakiao" basis
but sometime in June 1984, it was fixed at P150.00 per day which was paid weekly. In 1990, without
any apparent reason, his employment was interrupted as he was told by petitioners to resume work
in two months time. Being an uneducated person, respondent was persuaded by the management
as well as his brother not to complain, as otherwise petitioners might decide not to call him back for
work. Fearing such consequence, respondent accepted his fate. Nonetheless, after two months he
reported back to work upon order of management.
6

Despite being an employee for many years with his work performance never questioned by
petitioners, respondent was dismissed on January 1, 2002 without lawful cause. He was told that he
will be terminated because the company is not doing well financially and that he would be called
back to work only if they need his services again. Respondent waited for almost a year but
petitioners did not call him back to work. When he finally filed the complaint before the regional
arbitration branch, his brother Vicente was used by management to persuade him to withdraw the
case.
7

On their part, petitioners denied having hired respondent asserting that SEIRI was incorporated only
in 1986, and that respondent actually worked for SEIRIs furniture suppliers because when the

company started in 1987 it was engaged purely in buying and exporting furniture and its business
operations were suspended from the last quarter of 1989 to August 1992. They stressed that
respondent was not included in the list of employees submitted to the Social Security System (SSS).
Moreover, respondents brother, Vicente Coming, executed an affidavit in support of petitioners
position while Allan Mayol and Faustino Apondar issued notarized certifications that respondent
worked for them instead.
8

10

With the denial of petitioners that respondent was their employee, the latter submitted an
affidavit signed by five former co-workers stating that respondent was one of the pioneer employees
who worked in SEIRI for almost twenty years.
11

In his Decision dated April 30, 2004, Labor Arbiter Ernesto F. Carreon ruled that respondent is a
regular employee of SEIRI and that the termination of his employment was illegal. The dispositive
portion of the decision reads:
12

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent South
East (Intl.) Rattan, Inc. to pay complainant Jesus J. Coming the following:
1. Separation pay

P114,400.00

2. Backwages

P 30,400.00

3. Wage differential

P 15,015.00

4. 13th month pay

P 5,958.00

5. Holiday pay

P 4,000.00

6. Service incentive leave pay

P 2,000.00

Total award

P171,773.00

The other claims and the case against respondent Estanislao Agbay are dismissed for lack of merit.
SO ORDERED.

13

Petitioners appealed to the National Labor Relations Commission (NLRC)-Cebu City where they
submitted the following additional evidence: (1) copies of SEIRIs payrolls and individual pay records
of employees; (2) affidavit of SEIRIs Treasurer, Angelina Agbay; and (3) second affidavit of
Vicente Coming.
14

15

16

On July 28, 2005, the NLRCs Fourth Division rendered its Decision, the dispositive portion of which
states:
17

WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET ASIDE and
VACATED and a new one entered DISMISSING the complaint.
SO ORDERED.

18

The NLRC likewise denied respondents motion for reconsideration.

19

Respondent elevated the case to the CA via a petition for certiorari under Rule 65.
By Decision dated February 21, 2008, the CA reversed the NLRC and ruled that there existed an
employer-employee relationship between petitioners and respondent who was dismissed without just
and valid cause.
The CA thus decreed:
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The assailed Decision
dated July 28, 2005 issued by the National Labor Relations Commission (NLRC), Fourth Division,
Cebu City in NLRC Case No. V-000625-2004 is REVERSED and SET ASIDE. The Decision of the
Labor Arbiter dated April 30, 2004 is REINSTATED with MODIFICATION on the computation of
backwages which should be computed from the time of illegal termination until the finality of this
decision.
Further, the Labor Arbiter is directed to make the proper adjustment in the computation of the award
of separation pay as well as the monetary awards of wage differential, 13th month pay, holiday pay
and service incentive leave pay.
SO ORDERED.

20

Petitioners filed a motion for reconsideration but the CA denied it under Resolution dated February 9,
2009.
Hence, this petition raising the following issues:
6.1
WHETHER UNDER THE FACTS AND EVIDENCE ON RECORD, THE FINDING OF THE
HONORABLE COURT OF APPEALS THAT THERE EXISTS EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN PETITIONERS AND RESPONDENT IS IN ACCORD WITH LAW AND
APPLICABLE DECISIONS OF THIS HONORABLE COURT.
6.2
WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY APPRECIATED IN
ACCORDANCE WITH APPLICABLE LAW AND JURISPRUDENCE THE EVIDENCE PRESENTED
BY BOTH PARTIES.
6.3

WHETHER UNDER THE FACTS AND EVIDENCE PRESENTED, THE FINDING OF THE
HONORABLE COURT OF APPEALS THAT PETITIONERS ARE LIABLE FOR ILLEGAL DISMISSAL
OF RESPONDENT IS IN ACCORD WITH APPLICABLE LAW AND JURISPRUDENCE.
6.4
WHETHER UNDER THE FACTS PRESENTED, THE RULING OF THE HONORABLE COURT OF
APPEALS THAT THE BACKWAGES DUE THE RESPONDENT SHOULD BE COMPUTED FROM
THE TIME OF ILLEGAL TERMINATION UNTIL THE FINALITY OF THE DECISION IS SUPPORTED
BY PREVAILING JURISPRUDENCE.
21

Resolution of the first issue is paramount in view of petitioners denial of the existence of employeremployee relationship.
The issue of whether or not an employer-employee relationship exists in a given case is essentially a
question of fact. As a rule, this Court is not a trier of facts and this applies with greater force in labor
cases. Only errors of law are generally reviewed by this Court. This rule is not absolute, however,
and admits of exceptions. For one, the Court may look into factual issues in labor cases when the
factual findings of the Labor Arbiter, the NLRC, and the CA are conflicting. Here, the findings of the
NLRC differed from those of the Labor Arbiter and the CA, which compels the Courts exercise of its
authority to review and pass upon the evidence presented and to draw its own conclusions
therefrom.
22

23

24

25

To ascertain the existence of an employer-employee relationship jurisprudence has invariably

adhered to the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employees conduct,
or the so-called "control test." In resolving the issue of whether such relationship exists in a given
case, substantial evidence that amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion is sufficient. Although no particular form of evidence is
required to prove the existence of the relationship, and any competent and relevant evidence to
prove the relationship may be admitted, a finding that the relationship exists must nonetheless rest
on substantial evidence.
26

27

In support of their claim that respondent was not their employee, petitioners presented Employment
Reports to the SSS from 1987 to 2002, the Certifications issued by Mayol and Apondar, two
affidavits of Vicente Coming, payroll sheets (1999-2000), individual pay envelopes and employee
earnings records (1999-2000) and affidavit of Angelina Agbay (Treasurer and Human Resources
Officer). The payroll and pay records did not include the name of respondent. The affidavit of Ms.
Agbay stated that after SEIRI started its business in 1986 purely on export trading, it ceased
operations in 1989 as evidenced by Certification dated January 18, 1994 from the Securities and
Exchange Commission (SEC); that when business resumed in 1992, SEIRI undertook only a little of
manufacturing; that the company never hired any workers for varnishing and pole sizing because it
bought the same from various suppliers, including Faustino Apondar; respondent was never hired by
SEIRI; and while it is true that Mr. Estanislao Agbay is the company President, he never dispensed
the salaries of workers.
28

In his first affidavit, Vicente Coming averred that:

6. [Jesus Coming] is a furniture factory worker. In 1982 to 1986, he was working with Ben
Mayol as round core maker/splitter.
7. Thereafter, we joined Okay Okay Yard owned by Amelito Montececillo. This is a rattan
trader with business address near Cebu Rattan Factory on a "Pakiao" basis.
8. However, Jesus and I did not stay long at Okay Okay Yard and instead we joined Eleuterio
Agbay in Labogon, Cebu in 1989. In 1991, we went back to Okay Okay located near the
residence of Atty. Vicente de la Serna in Mandaue City. We were on a "pakiao" basis. We
stayed put until 1993 when we resigned and joined Dodoy Luna in Labogon, Mandaue City
as classifier until 1995. In 1996[,] Jesus rested. It was only in 1997 that he worked back. He
replaced me, as a classifier in Rattan Traders owned by Allan Mayol. But then, towards the
end of the year, he left the factory and relaxed in our place of birth, in Sogod, Cebu.
9. It was only towards the end of 1999 that Jesus was taken back by Allan Mayol as sizing
machine operator. However, the work was off and on basis. Not regular in nature, he was
harping a side line job with me knowing that I am now working with Faustino Apondar that
supplies rattan furnitures [sic] to South East (Intl) Rattan, Inc. As a brother, I allowed Jesus
to work with me and collect the proceeds of his services as part of my collectibles from
Faustino Apondar since I was on a "pakiao" basis. He was working at his pleasure. Which
means, he works if he likes to? That will be until 10:00 oclock in the evening.
xxxx

29

The Certification dated January 20, 2004 of Allan Mayol reads:

This is to certify that I personally know Jesus Coming, the brother of Vicente Coming. Jesus is a
rattan factory worker and he was working with me as rattan pole sizing/classifier of my business from
1997 up to part of 1998 when he left my factory at will. I took him back towards the end of 1999, this
time as a sizing machine operator. In all these years, his services are not regular. He works only if he
likes to.
30

Faustino Apondar likewise issued a Certification which states:

This is to certify that I am a maker/supplier of finished Rattan Furniture. As such, I have several
rattan furniture workers under me, one of whom is Vicente Coming, the brother of Jesus Coming.
That sometime in 1999, Vicente pleaded to me for a side line job of his brother, Jesus who was
already connected with Allan Mayol. Having vouched for the integrity of his brother and knowing that
the job is temporary in character, I allowed Jesus to work with his brother Vicente. However, the
proceeds will be collected together with his brother Vicente since it was the latter who was working
with me. He renders services to his brother work only after the regular working hours but off and on
basis.
31

On the other hand, respondent submitted the affidavit executed by Eleoterio Brigoli, Pedro Brigoli,
Napoleon Coming, Efren Coming and Gil Coming who all attested that respondent was their coworker at SEIRI.

Their affidavit reads:

We, the undersigned, all of legal ages, Filipino, and resident[s] of Cebu, after having been duly
sworn to in accordance with law, depose and say:
That we are former employees of SOUTH EAST RATTAN which is owned by Estan Eslao Agbay;
That we personally know JESUS COMING considering that we worked together in one company
SOUTH EAST RATTANT [sic];
That we together with JESUS COMING are all under the employ of ESTAN ESLAO AGBAY
considering that the latter is the one directly paying us and holds the absolute control of all aspects
of our employment;
That it is not true that JESUS COMING is under the employ of one person other than ESTAN
ESLAO AGBAY OF SOUTH EAST RATTAN;
That Jesus Coming is one of the pioneer employees of SOUTH EAST RATTAN and had been
employed therein for almost twenty years;
That we executed this affidavit to attest to the truth of the foregoing facts and to deny any contrary
allegation made by the company against his employment with SOUTH EAST RATTAN.
32

In his decision, Labor Arbiter Carreon found that respondents work as sizing machine operator is
usually necessary and desirable to the rattan furniture business of petitioners and their failure to
include respondent in the employment report to SSS is not conclusive proof that respondent is not
their employee. As to the affidavit of Vicente Coming, Labor Arbiter Carreon did not give weight to his
statement that respondent is not petitioners employee but that of one Faustino Apondar. Labor
Arbiter Carreon was not convinced that Faustino Apondar is an independent contractor who has a
contractual relationship with petitioners.
In reversing the Labor Arbiter, the NLRC reasoned as follows:
First complainant alleged that he worked continuously from March 17, 1984 up to January 21,
2002. Records reveal however that South East (Intl.) Rattan, Inc. was incorporated only last July
18, 1986 (p. 55 records)[.] Moreover, when they started to actually operate in 1987, the company
was engaged purely on "buying and exporting rattan furniture" hence no manufacturing employees
were hired. Furthermore, from the last quarter of 1989 up to August of 1992, the company
suspended operations due to economic reverses as per Certification issued by the Securities and
Exchange Commission (p. 56 records)[.]
1wphi1

Second, for all his insistence that he was a regular employee, complainant failed to present a single
payslip, voucher or a copy of a company payroll showing that he rendered service during the period
indicated therein. x x x
From the above established facts we are inclined to give weight and credence to the Certifications of
Allan Mayol and Faustino Apondar, both suppliers of finished Rattan Furniture (pp. 442-43, records).
It appears that complainant first worked with Allan Mayol and later with Faustino Apondar upon the

proddings of his brother Vicente. Vicentes affidavit as to complainants employment history was
more detailed and forthright. x x x
xxxx
In the case at bar, there is likewise substantial evidence to support our findings that complainant was
not an employee of respondents. Thus:
1. Complainants name does not appear in the list of employees reported to the SSS.
2. His name does not also appear in the sample payrolls of respondents employees.
3. The certification of Allan Mayol and Fasutino Apondar[,] supplier of finished rattan
products[,] that complainant had at one time or another worked with them.
4. The Affidavit of Vicente Coming, complainants full brother[,] attesting that complainant had
never been an employee of respondent. The only connection was that their employer
Faustino Apondar supplies finished rattan products to respondents.
33

On the other hand, the CA gave more credence to the declarations of the five former employees of
petitioners that respondent was their co-worker in SEIRI. One of said affiants is Vicente Comings
own son, Gil Coming. Vicente averred in his second affidavit that when he confronted his son, the
latter explained that he was merely told by their Pastor to sign the affidavit as it will put an end to the
controversy. Vicente insisted that his son did not know the contents and implications of the document
he signed. As to the absence of respondents name in the payroll and SSS employment report, the
CA observed that the payrolls submitted were only from January 1, 1999 to December 29, 2000 and
not the entire period of eighteen years when respondent claimed he worked for SEIRI. It further
noted that the names of the five affiants, whom petitioners admitted to be their former employees,
likewise do not appear in the aforesaid documents. According to the CA, it is apparent that
petitioners maintained a separate payroll for certain employees or willfully retained a portion of the
payroll.
x x x As to the "control test", the following facts indubitably reveal that respondents wielded control
over the work performance of petitioner, to wit: (1) they required him to work within the company
premises; (2) they obliged petitioner to report every day of the week and tasked him to usually
perform the same job; (3) they enforced the observance of definite hours of work from 8 oclock in
the morning to 5 oclock in the afternoon; (4) the mode of payment of petitioners salary was under
their discretion, at first paying him on pakiao basis and thereafter, on daily basis; (5) they
implemented company rules and regulations; (6) [Estanislao] Agbay directly paid petitioners salaries
and controlled all aspects of his employment and (7) petitioner rendered work necessary and
desirable in the business of the respondent company.
34

We affirm the CA.

In Tan v. Lagrama, the Court held that the fact that a worker was not reported as an employee to
the SSS is not conclusive proof of the absence of employer-employee relationship. Otherwise, an
employer would be rewarded for his failure or even neglect to perform his obligation.
35

36

Nor does the fact that respondents name does not appear in the payrolls and pay envelope records
submitted by petitioners negate the existence of employer-employee relationship. For a payroll to be
utilized to disprove the employment of a person, it must contain a true and complete list of the
employee. In this case, the exhibits offered by petitioners before the NLRC consisting of copies of
payrolls and pay earnings records are only for the years 1999 and 2000; they do not cover the entire
18-year period during which respondent supposedly worked for SEIRI.
37

In their comment to the petition filed by respondent in the CA, petitioners emphasized that in the
certifications issued by Mayol and Apondar, it was shown that respondent was employed and
working for them in those years he claimed to be working for SEIRI. However, a reading of the
certification by Mayol would show that while the latter claims to have respondent under his employ in
1997, 1998 and 1999, respondents services were not regular and that he works only if he wants to.
Apondars certification likewise stated that respondent worked for him since 1999 through his brother
Vicente as "sideline" but only after regular working hours and "off and on" basis. Even assuming the
truth of the foregoing statements, these do not foreclose respondents regular or full-time
employment with SEIRI. In effect, petitioners suggest that respondent was employed by SEIRIs
suppliers, Mayol and Apondar but no competent proof was presented as to the latters status as
independent contractors.
In the same comment, petitioners further admitted that the five affiants who attested to respondents
employment with SEIRI are its former workers whom they describe as "disgruntled workers of SEIRI"
with an axe to grind against petitioners, and that their execution of affidavit in support of
respondents claim is "their very way of hitting back the management of SEIRI after disciplinary
measures were meted against them." This allegation though was not substantiated by petitioners.
Instead, after the CA rendered its decision reversing the NLRCs ruling, petitioners subsequently
changed their theory by denying the employment relationship with the five affiants in their motion for
reconsideration, thus:
38

x x x Since the five workers were occupying and working on a leased premises of the private
respondent, they were called workers of SEIRI (private respondent). Such admission however, does
not connote employment. For the truth of the matter, all of the five employees of the supplier
assigned at the leased premises of the private respondent. Because of the recommendation of the
private respondent with regards to the disciplinary measures meted on the five workers, they wanted
to hit back against the private respondent. Their motive to implicate private respondent was to
vindicate. Definitely, they have an axe to grind against the private respondent. Mention has to be
made that despite the dismissal of these five (5) witnesses from their service, none of them ever
went to the National Labor [Relations] Commission and invoked their rights, if any, against their
employer or at the very least against the respondent. The reason is obvious, since they knew pretty
well that they were not employees of SEIRI but rather under the employ of Allan Mayol and Faustino
Apondar, working on a leased premise of respondent. x x x
39

Petitioners admission that the five affiants were their former employees is binding upon them. While
they claim that respondent was the employee of their suppliers Mayol and Apondar, they did not
submit proof that the latter were indeed independent contractors; clearly, petitioners failed to
discharge their burden of proving their own affirmative allegation. There is thus no showing that the
five former employees of SEIRI were motivated by malice, bad faith or any ill-motive in executing
their affidavit supporting the claims of respondent.
40

In any controversy between a laborer and his master, doubts reasonably arising from the evidence
are resolved in favor of the laborer.
41

As a regular employee, respondent enjoys the right to security of tenure under Article 279 of the
Labor Code and may only be dismissed for a just or authorized cause, otherwise the dismissal
becomes illegal.
42

43

44

Respondent, whose employment was terminated without valid cause by petitioners, is entitled to
reinstatement without loss of seniority rights and other privileges and to his full back wages, inclusive
of allowances and other benefits or their monetary equivalent, computed from the time his
compensation was withheld from him up to the time of his actual reinstatement. Where reinstatement
is no longer viable as an option, back wages shall be computed from the time of the illegal
termination up to the finality of the decision. Separation pay equivalent to one month salary for every
year of service should likewise be awarded as an alternative in case reinstatement in not possible.
45

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated February 21,
2008 and Resolution dated February 9, 2009 of the Court of Appeals in CA-G.R. No. CEB-SP No.
02113 are hereby AFFIRMED and UPHELD.
Petitioners to pay the costs of suit.
SO ORDERED.
MARTIN S. VILLARAMA, JR.
Associate Justice

G.R. No. 195190, July 28, 2014 - ROYALE HOMES MARKETING

CORPORATION, Petitioner, v. FIDEL P. ALCANTARA [DECEASED],
SUBSTITUTED BY HIS HEIRS, Respondent.
PHILIPPINE SUPREME COURT DECISIONS

SECOND DIVISION

G.R. No. 195190, July 28, 2014

ROYALE HOMES MARKETING CORPORATION, Petitioner, v. FIDEL P.

ALCANTARA [DECEASED], SUBSTITUTED BY HIS HEIRS, Respondent.

DECISION

DEL CASTILLO, J.:

Not every form of control that a hiring party imposes on the hired party is
indicative of employee-employer relationship. Rules and regulations that
merely serve as guidelines towards the achievement of a mutually desired
result without dictating the means and methods of accomplishing it do not
establish employer-employee relationship.1cralawred

This Petition for Review on Certiorari2 assails the June 23, 2010 Decision3
of the Court of Appeals (CA) in CA-G.R. SP No. 109998 which (i) reversed
and set aside the February 23, 2009 Decision4 of the National Labor
Relations Commission (NLRC), (ii) ordered petitioner Royale Homes
Marketing Corporation (Royale Homes) to pay respondent Fidel P.
Alcantara (Alcantara) backwages and separation pay, and (iii) remanded
the case to the Labor Arbiter for the proper determination and
computation of said monetary awards.

Also assailed in this Petition is the January 18, 2011 Resolution5 of the CA
denying Royale Homes Motion for Reconsideration,6 as well as its
Supplemental7 thereto.

Factual Antecedents

In 1994, Royale Homes, a corporation engaged in marketing real estates,

appointed Alcantara as its Marketing Director for a fixed period of one
year. His work consisted mainly of marketing Royale Homes real estate
inventories on an exclusive basis. Royale Homes reappointed him for
several consecutive years, the last of which covered the period January 1
to December 31, 2003 where he held the position of Division 5 VicePresident-Sales.8cralawred

Proceedings before the Labor Arbiter

On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal9

against Royale Homes and its President Matilde Robles, Executive VicePresident for Administration and Finance Ma. Melinda Bernardino, and
Executive Vice- President for Sales Carmina Sotto. Alcantara alleged that
he is a regular employee of Royale Homes since he is performing tasks
that are necessary and desirable to its business; that in 2003 the company
gave him P1.2 million for the services he rendered to it; that in the first

week of November 2003, however, the executive officers of Royale Homes

told him that they were wondering why he still had the gall to come to
office and sit at his table;10 and that the acts of the executive officers of
Royale Homes amounted to his dismissal from work without any valid or
just cause and in gross disregard of the proper procedure for dismissing
employees. Thus, he also impleaded the corporate officers who, he
averred, effected his dismissal in bad faith and in an oppressive manner.

Alcantara prayed to be reinstated to his former position without loss of

seniority rights and other privileges, as well as to be paid backwages,
moral and exemplary damages, and attorneys fees. He further sought
that the ownership of the Mitsubishi Adventure with Plate No. WHD-945
be transferred to his name.

Royale Homes, on the other hand, vehemently denied that Alcantara is its
employee. It argued that the appointment paper of Alcantara is clear that
it engaged his services as an independent sales contractor for a fixed term
of one year only. He never received any salary, 13th month pay, overtime
pay or holiday pay from Royale Homes as he was paid purely on
commission basis. In addition, Royale Homes had no control on how
Alcantara would accomplish his tasks and responsibilities as he was free
to solicit sales at any time and by any manner which he may deem
appropriate and necessary. He is even free to recruit his own sales
personnel to assist him in pursuance of his sales target.

According to Royale Homes, Alcantara decided to leave the company after

his wife, who was once connected with it as a sales agent, had formed a
brokerage company that directly competed with its business, and even
recruited some of its sales agents. Although this was against the
exclusivity clause of the contract, Royale Homes still offered to accept
Alcantaras wife back so she could continue to engage in real estate
brokerage, albeit exclusively for Royale Homes. In a special management
committee meeting on October 8, 2003, however, Alcantara announced
publicly and openly that he would leave the company by the end of
October 2003 and that he would no longer finish the unexpired term of his
contract. He has decided to join his wife and pursue their own brokerage
business. Royale Homes accepted Alcantaras decision. It then threw a
despedida party in his honor and, subsequently, appointed a new
independent contractor.

Two months after he relinquished his post, however, Alcantara appeared in

Royale Homes and submitted a letter claiming that he was illegally
dismissed.

Ruling of the Labor Arbiter

On September 7, 2005, the Labor Arbiter rendered a Decision11 holding

that Alcantara is an employee of Royale Homes with a fixed-term
employment period from January 1 to December 31, 2003 and that the pretermination of his contract was against the law. Hence, Alcantara is
entitled to an amount which he may have earned on the average for the
unexpired portion of the contract. With regard to the impleaded
corporate officers, the Labor Arbiter absolved them from any liability.

The dispositive portion of the Labor Arbiters Decision

reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, judgment is hereby rendered ordering

the respondent Royale Homes Marketing Corp. to pay the complainant the
total amount of TWO HUNDRED SEVENTY SEVEN THOUSAND PESOS
(P277,000.00) representing his compensation/commission for the
unexpired term of his contract.

All other claims are dismissed for lack of merit.

SO ORDERED.12chanrobleslaw

Both parties appealed the Labor Arbiters Decision to the NLRC. Royale
Homes claimed that the Labor Arbiter grievously erred in ruling that there
exists an employer-employee relationship between the parties. It insisted
that the contract between them expressly states that Alcantara is an
independent contractor and not an ordinary employee. It had no control
over the means and methods by which he performed his work. Royale
Homes likewise assailed the award of P277,000.00 for lack of basis as it
did not pre-terminate the contract. It was Alcantara who chose not to
finish the contract.

Alcantara, for his part, argued that the Labor Arbiter erred in ruling that
his employment was for a fixed-term and that he is not entitled to
backwages, reinstatement, unpaid commissions, and damages.

Ruling of the National Labor Relations Commission

On February 23, 2009, the NLRC rendered its Decision,13 ruling that
Alcantara is not an employee but a mere independent contractor of Royale
Homes. It based its ruling mainly on the contract which does not require
Alcantara to observe regular working hours. He was also free to adopt the
selling methods he deemed most effective and can even recruit sales
agents to assist him in marketing the inventories of Royale Homes. The
NLRC also considered the fact that Alcantara was not receiving monthly
salary, but was being paid on commission basis as stipulated in the
contract. Being an independent contractor, the NLRC concluded that
Alcantaras Complaint is cognizable by the regular courts.

The fallo of the NLRC Decision reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores

Peralta-Beley dated September 5, 2005 is REVERSED and SET ASIDE and a
NEW ONE rendered dismissing the complaint for lack of jurisdiction.

SO ORDERED.14

Alcantara moved for reconsideration.15 In a Resolution16 dated May 29,

2009, however, the NLRC denied his motion.

Alcantara thus filed a Petition for Certiorari17 with the CA imputing grave
abuse of discretion on the part of the NLRC in ruling that he is not an
employee of Royale Homes and that it is the regular courts which have
jurisdiction over the issue of whether the pre-termination of the contract
is valid.

Ruling of the Court of Appeals

On June 23, 2010, the CA promulgated its Decision18 granting Alcantaras

Petition and reversing the NLRCs Decision. Applying the four-fold and
economic reality tests, it held that Alcantara is an employee of Royale
Homes. Royale Homes exercised some degree of control over Alcantara
since his job, as observed by the CA, is subject to company rules,
regulations, and periodic evaluations. He was also bound by the company
code of ethics. Moreover, the exclusivity clause of the contract has made
Alcantara economically dependent on Royale Homes, supporting the
theory that he is an employee of said company.

The CA further held that Alcantaras termination from employment was

without any valid or just cause, and it was carried out in violation of his
right to procedural due process. Thus, the CA ruled that he is entitled to
backwages and separation pay, in lieu of reinstatement. Considering,
however, that the CA was not satisfied with the proof adduced to establish
the amount of Alcantaras annual salary, it remanded the case to the
Labor Arbiter to determine the same and the monetary award he is
entitled to. With regard to the corporate officers, the CA absolved them
from any liability for want of clear proof that they assented to the patently
unlawful acts or that they are guilty of bad faith or gross negligence.
Thus:chanRoblesvirtualLawlibrary

WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED.

The assailed decision of the National Labor Relations Commission in NLRC
NCR CASE NO. 00-12-14311-03 NLRC CA NO. 046104-05 dated February 23,
2009 as well as the Resolution dated May 29, 2009 are hereby SET ASIDE
and a new one is entered ordering the respondent company to pay
petitioner backwages which shall be computed from the time of his illegal
termination in October 2003 up to the finality of this decision, plus
separation pay equivalent to one month salary for every year of service.
This case is REMANDED to the Labor Arbiter for the proper determination
and computation of back wages, separation pay and other monetary
benefits that petitioner is entitled to.

SO ORDERED.19chanrobleslaw

Royale Homes filed a Motion for Reconsideration20 and a Supplemental

Motion for Reconsideration.21 In a Resolution22 dated January 18, 2011,
however, the CA denied said motions.

Issues

Hence, this Petition where Royale Homes submits before this Court the
following issues for resolution:chanRoblesvirtualLawlibrary

A.

WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT
IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME
COURT WHEN IT REVERSED THE RULING OF THE NLRC DISMISSING THE
COMPLAINT OF RESPONDENT FOR LACK OF JURISDICTION AND
CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS ILLEGALLY
DISMISSED[.]

B.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW

IN DISREGARDING THE EN BANC RULING OF THIS HONORABLE COURT IN
THE CASE OF TONGKO VS. MANULIFE, AND IN BRUSHING ASIDE THE
APPLICABLE RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]

C.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW

IN DENYING THE MOTION FOR RECONSIDERATION OF PETITIONER AND IN
REFUSING TO CORRECT ITSELF[.]23

Royale Homes contends that its contract with Alcantara is clear and
unambiguous - it engaged his services as an independent contractor. This
can be readily seen from the contract stating that no employer-employee
relationship exists between the parties; that Alcantara was free to solicit
sales at any time and by any manner he may deem appropriate; that he
may recruit sales personnel to assist him in marketing Royale Homes
inventories; and, that his remunerations are dependent on his sales
performance.

Royale Homes likewise argues that the CA grievously erred in ruling that it
exercised control over Alcantara based on a shallow ground that his

performance is subject to company rules and regulations, code of ethics,

periodic evaluation, and exclusivity clause of contract. Royale Homes
maintains that it is expected to exercise some degree of control over its
independent contractors, but that does not automatically result in the
existence of employer-employee relationship. For control to be
considered as a proof tending to establish employer-employee
relationship, the same must pertain to the means and method of
performing the work; not on the relationship of the independent
contractors among themselves or their persons or their source of living.

Royale Homes further asserts that it neither hired nor wielded the power
to dismiss Alcantara. It was Alcantara who openly and publicly declared
that he was pre-terminating his fixed-term contract.

The pivotal issue to be resolved in this case is whether Alcantara was an

independent contractor or an employee of Royale Homes.

Our Ruling

The Petition is impressed with merit.

The determination of whether a party who renders services to another is

an employee or an independent contractor involves an evaluation of
factual matters which, ordinarily, is not within the province of this Court.
In view of the conflicting findings of the tribunals below, however, this
Court is constrained to go over the factual matters involved in this
case.24cralawred

The juridical relationship of the parties

based on their written contract

The primary evidence of the nature of the parties relationship in this case
is the written contract that they signed and executed in pursuance of their
mutual agreement. While the existence of employer-employee
relationship is a matter of law, the characterization made by the parties in
their contract as to the nature of their juridical relationship cannot be
simply ignored, particularly in this case where the parties written
contract unequivocally states their intention at the time they entered into

it. In Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc.,25 it

was held that:chanRoblesvirtualLawlibrary

To be sure, the Agreements legal characterization of the nature of the

relationship cannot be conclusive and binding on the courts; x x x the
characterization of the juridical relationship the Agreement embodied is a
matter of law that is for the courts to determine. At the same time,
though, the characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodies their
intent at the time they entered the Agreement, and they were governed
by this understanding throughout their relationship. At the very least, the
provision on the absence of employer-employee relationship between the
parties can be an aid in considering the Agreement and its
implementation, and in appreciating the other evidence on record.26

In this case, the contract,27 duly signed and not disputed by the parties,
conspicuously provides that no employer-employee relationship exists
between Royale Homes and Alcantara, as well as his sales agents. It is
clear that they did not want to be bound by employer-employee
relationship at the time of the signing of the contract.
Thus:chanRoblesvirtualLawlibrary

January 24, 2003

MR. FIDEL P. ALCANTARA

13 Rancho I
Marikina City

Dear Mr. Alcantara,

This will confirm your appointment as Division 5 VICE[-]PRESIDENT-SALES

of ROYALE HOMES MARKETING CORPORATION effective January 1, 2003 to
December 31, 2003.

Your appointment entails marketing our real estate inventories on an

EXCLUSIVE BASIS under such price, terms and condition to be provided to
you from time to time.

As such, you can solicit sales at any time and by any manner which you
deem appropriate and necessary to market our real estate inventories
subject to rules, regulations and code of ethics promulgated by the
company. Further, you are free to recruit sales personnel/agents to assist
you in marketing of our inventories provided that your personnel/agents
shall first attend the required seminars and briefing to be conducted by us
from time to time for the purpose of familiarizing them of terms and
conditions of sale, the nature of property sold, etc., attendance of which
shall be a condition precedent for their accreditation by us.

That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled

to:chanRoblesvirtualLawlibrary

1. Commission override of 0.5% for all option sales beginning January 1,

2003 booked by your sales agents.

2. Budget allocation depending on your divisions sale performance as per

our budget guidelines.

3. Sales incentive and other forms of company support which may be

granted from time to time.

It is understood, however, that no employer-employee relationship exists

between us, that of your sales personnel/agents, and that you shall hold
our company x x x, its officers and directors, free and harmless from any
and all claims of liability and damages arising from and/or incident to the
marketing of our real estate inventories.

We reserve, however, our right to terminate this agreement in case of

violation of any company rules and regulations, policies and code of ethics
upon notice for justifiable reason.

Your performance shall be subject to periodic evaluation based on factors

which shall be determined by the management.

If you are amenable to the foregoing terms and conditions, please indicate
your conformity by signing on the space provided below and return [to] us
a duplicate copy of this letter, duly accomplished, to constitute as our
agreement on the matter. (Emphasis ours)

Since the terms of the contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations
should control.28 No construction is even needed as they already
expressly state their intention. Also, this Court adopts the observation of
the NLRC that it is rather strange on the part of Alcantara, an educated
man and a veteran sales broker who claimed to be receiving P1.2 million
as his annual salary, not to have contested the portion of the contract
expressly indicating that he is not an employee of Royale Homes if their
true intention were otherwise.

The juridical relationship of the

parties based on Control Test

In determining the existence of an employer-employee relationship, this

Court has generally relied on the four-fold test, to wit: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the employers power to control the employee
with respect to the means and methods by which the work is to be
accomplished.29 Among the four, the most determinative factor in
ascertaining the existence of employer-employee relationship is the right
of control test.30 It is deemed to be such an important factor that the
other requisites may even be disregarded.31 This holds true where the
issues to be resolved is whether a person who performs work for another
is the latters employee or is an independent contractor,32 as in this case.
For where the person for whom the services are performed reserves the
right to control not only the end to be achieved, but also the means by
which such end is reached, employer-employee relationship is deemed to
exist.33cralawred

In concluding that Alcantara is an employee of Royale Homes, the CA

ratiocinated that since the performance of his tasks is subject to company
rules, regulations, code of ethics, and periodic evaluation, the element of
control is present.

The Court disagrees.

Not every form of control is indicative of employer-employee relationship.

A person who performs work for another and is subjected to its rules,
regulations, and code of ethics does not necessarily become an
employee.34 As long as the level of control does not interfere with the
means and methods of accomplishing the assigned tasks, the rules
imposed by the hiring party on the hired party do not amount to the labor
law concept of control that is indicative of employer-employee
relationship. In Insular Life Assurance Co., Ltd. v. National Labor Relations
Commission35 it was pronounced that:chanRoblesvirtualLawlibrary

Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it. x x x36

In this case, the Court agrees with Royale Homes that the rules,
regulations, code of ethics, and periodic evaluation alluded to by
Alcantara do not involve control over the means and methods by which he
was to perform his job. Understandably, Royale Homes has to fix the
price, impose requirements on prospective buyers, and lay down the
terms and conditions of the sale, including the mode of payment, which
the independent contractors must follow. It is also necessary for Royale
Homes to allocate its inventories among its independent contractors,
determine who has priority in selling the same, grant commission or
allowance based on predetermined criteria, and regularly monitor the
result of their marketing and sales efforts. But to the mind of this Court,
these do not pertain to the means and methods of how Alcantara was to
perform and accomplish his task of soliciting sales. They do not dictate
upon him the details of how he would solicit sales or the manner as to how
he would transact business with prospective clients. In Tongko, this Court
held that guidelines or rules and regulations that do not pertain to the
means or methods to be employed in attaining the result are not
indicative of control as understood in labor law.
Thus:chanRoblesvirtualLawlibrary

From jurisprudence, an important lesson that the first Insular Life case
teaches us is that a commitment to abide by the rules and regulations of
an insurance company does not ipso facto make the insurance agent an

employee. Neither do guidelines somehow restrictive of the insurance

agents conduct necessarily indicate control as this term is defined in
jurisprudence. Guidelines indicative of labor law control, as the first
Insular Life case tells us, should not merely relate to the mutually
desirable result intended by the contractual relationship; they must have
the nature of dictating the means or methods to be employed in attaining
the result, or of fixing the methodology and of binding or restricting the
party hired to the use of these means. In fact, results-wise, the principal
can impose production quotas and can determine how many agents, with
specific territories, ought to be employed to achieve the companys
objectives. These are management policy decisions that the labor law
element of control cannot reach. Our ruling in these respects in the first
Insular Life case was practically reiterated in Carungcong. Thus, as will be
shown more fully below, Manulifes codes of conduct, all of which do not
intrude into the insurance agents means and manner of conducting their
sales and only control them as to the desired results and Insurance Code
norms, cannot be used as basis for a finding that the labor law concept of
control existed between Manulife and Tongko.37 (Emphases in the
original)

As the party claiming the existence of employer-employee relationship, it

behoved upon Alcantara to prove the elements thereof, particularly Royale
Homes power of control over the means and methods of accomplishing
the work.38 He, however, failed to cite specific rules, regulations or codes
of ethics that supposedly imposed control on his means and methods of
soliciting sales and dealing with prospective clients. On the other hand,
this case is replete with instances that negate the element of control and
the existence of employer-employee relationship. Notably, Alcantara was
not required to observe definite working hours.39 Except for soliciting
sales, Royale Homes did not assign other tasks to him. He had full control
over the means and methods of accomplishing his tasks as he can solicit
sales at any time and by any manner which [he may] deem appropriate
and necessary. He performed his tasks on his own account free from the
control and direction of Royale Homes in all matters connected therewith,
except as to the results thereof.40cralawred

Neither does the repeated hiring of Alcantara prove the existence of

employer-employee relationship.41 As discussed above, the absence of
control over the means and methods disproves employer-employee
relationship. The continuous rehiring of Alcantara simply signifies the
renewal of his contract with Royale Homes, and highlights his satisfactory
services warranting the renewal of such contract. Nor does the exclusivity
clause of contract establish the existence of the labor law concept of
control. In Consulta v. Court of Appeals,42 it was held that exclusivity of

contract does not necessarily result in employer-employee relationship,

viz:chanRoblesvirtualLawlibrary

x x x However, the fact that the appointment required Consulta to solicit

business exclusively for Pamana did not mean that Pamana exercised
control over the means and methods of Consultas work as the term
control is understood in labor jurisprudence. Neither did it make Consulta
an employee of Pamana. Pamana did not prohibit Consulta from engaging
in any other business, or from being connected with any other company,
for as long as the business [of the] company did not compete with
Pamanas business.43

The same scenario obtains in this case. Alcantara was not prohibited from
engaging in any other business as long as he does not sell projects of
Royale Homes competitors. He can engage in selling various other
products or engage in unrelated businesses.

Payment of Wages

The element of payment of wages is also absent in this case. As provided

in the contract, Alcantaras remunerations consist only of commission
override of 0.5%, budget allocation, sales incentive and other forms of
company support. There is no proof that he received fixed monthly salary.
No payslip or payroll was ever presented and there is no proof that Royale
Homes deducted from his supposed salary withholding tax or that it
registered him with the Social Security System, Philippine Health
Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint merely
states a ballpark figure of his alleged salary of P100,000.00, more or less.
All of these indicate an independent contractual relationship.44 Besides,
if Alcantara indeed considered himself an employee of Royale Homes, then
he, an experienced and professional broker, would have complained that
he was being denied statutorily mandated benefits. But for nine
consecutive years, he kept mum about it, signifying that he has agreed,
consented, and accepted the fact that he is not entitled to those employee
benefits because he is an independent contractor.

This Court is, therefore, convinced that Alcantara is not an employee of

Royale Homes, but a mere independent contractor. The NLRC is,
therefore, correct in concluding that the Labor Arbiter has no jurisdiction
over the case and that the same is cognizable by the regular courts.

WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010
Decision of the Court of Appeals in CA-G.R. SP No. 109998 is REVERSED
and SET ASIDE. The February 23, 2009 Decision of the National Labor
Relations Commission is REINSTATED and AFFIRMED.

SO ORDERED.

ANGELINA FRANCISCO, G.R. No. 170087

Petitioner,
Present:
Panganiban, C.J. (Chairperson),
- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
NATIONAL LABOR RELATIONS
COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA Promulgated:
and RAMON ESCUETA,
Respondents.
August 31, 2006
x
x

----------------------------------------------------------------------------------------

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of

Court seeks to annul and set aside the Decision and Resolution of
the Court of Appeals dated October 29, 2004 [1] and October 7,
2005,[2] respectively, in CA-G.R. SP No. 78515 dismissing the
complaint for constructive dismissal filed by herein petitioner
Angelina Francisco. The appellate court reversed and set aside
the Decision of the National Labor Relations Commission (NLRC)
dated April 15, 2003,[3] in NLRC NCR CA No. 032766-02 which
affirmed with modification the decision of the Labor Arbiter dated
July 31, 2002,[4] in NLRC-NCR Case No. 30-10-0-489-01, finding
that private respondents were liable for constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its

incorporation stage. She was designated as Accountant and
Corporate Secretary and was assigned to handle all the
accounting needs of the company. She was also designated as
Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of
the company.[5]

Although she was designated as Corporate Secretary, she

was not entrusted with the corporate documents; neither did she
attend any board meeting nor required to do so.She never
prepared any legal document and never represented the

company as its Corporate Secretary. However, on some occasions,

she was prevailed upon to sign documentation for the company. [6]

In 1996, petitioner was designated Acting Manager. The

corporation also hired Gerry Nino as accountant in lieu of
petitioner. As Acting Manager, petitioner was assigned to handle
recruitment of all employees and perform management
administration functions; represent the company in all dealings
with government agencies, especially with the Bureau of Internal
Revenue (BIR), Social Security System (SSS) and in the city
government of Makati; and to administer all other matters
pertaining to the operation of Kasei Restaurant which is owned
and operated by Kasei Corporation.[7]

For five years, petitioner performed the duties of Acting

Manager. As of December 31, 2000 her salary was P27,500.00
plus P3,000.00 housing allowance and a 10% share in the profit of
Kasei Corporation.[8]

In January 2001, petitioner was replaced by Liza R. Fuentes

as Manager. Petitioner alleged that she was required to sign a
prepared resolution for her replacement but she was assured that
she would still be connected with Kasei Corporation. Timoteo
Acedo, the designated Treasurer, convened a meeting of all
employees of Kasei Corporation and announced that nothing had
changed and that petitioner was still connected with Kasei
Corporation as Technical Assistant to Seiji Kamura and in charge
of all BIR matters.[9]

Thereafter, Kasei Corporation reduced her salary by

P2,500.00 a month beginning January up to September 2001 for a
total reduction of P22,500.00 as of September 2001.Petitioner

was not paid her mid-year bonus allegedly because the company
was not earning well. On October 2001, petitioner did not receive
her salary from the company. She made repeated follow-ups with
the company cashier but she was advised that the company was
not earning well.[10]

On October 15, 2001, petitioner asked for her salary from

Acedo and the rest of the officers but she was informed that she is
no longer connected with the company.[11]

Since she was no longer paid her salary, petitioner did not
report for work and filed an action for constructive dismissal
before the labor arbiter.

Private respondents averred that petitioner is not an

employee of Kasei Corporation. They alleged that petitioner was
hired in 1995 as one of its technical consultants on accounting
matters and act concurrently as Corporate Secretary. As technical
consultant, petitioner performed her work at her own discretion
without control and supervision of Kasei Corporation. Petitioner
had no daily time record and she came to the office any time she
wanted. The company never interfered with her work except that
from time to time, the management would ask her opinion on
matters relating to her profession. Petitioner did not go through
the usual procedure of selection of employees, but her services
were engaged through a Board Resolution designating her as
technical consultant. The money received by petitioner from the
corporation was her professional fee subject to the 10% expanded
withholding tax on professionals, and that she was not one of
those reported to the BIR or SSS as one of the companys
employees.[12]

Petitioners designation as technical consultant depended

solely upon the will of management. As such, her consultancy
may be terminated any time considering that her services were
only temporary in nature and dependent on the needs of the
corporation.

To prove that petitioner was not an employee of the

corporation, private respondents submitted a list of employees for
the years 1999 and 2000 duly received by the BIR showing that
petitioner was not among the employees reported to the BIR, as
well as a list of payees subject to expanded withholding tax which
included petitioner. SSS records were also submitted showing that
petitioners latest employer was Seiji Corporation. [13]

The Labor
dismissed, thus:

Arbiter

found

that

petitioner

was

illegally

WHEREFORE, premises considered, judgment is hereby

rendered as follows:

1. finding complainant an employee of respondent

corporation;
2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant to
her former position without loss of seniority rights and
jointly and severally pay complainant her money claims in
accordance with the following computation:

a. Backwages 10/2001 07/2002 275,000.00

(27,500 x 10 mos.)

b. Salary Differentials (01/2001 09/2001) 22,500.00

c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50
P957,742.50

If reinstatement is no longer feasible, respondents are

ordered to pay complainant separation pay with
additional backwages that would accrue up to actual
payment of separation pay.

SO ORDERED.[14]

On April 15, 2003, the NLRC affirmed with modification the

Decision of the Labor Arbiter, the dispositive portion of which
reads:
PREMISES CONSIDERED, the Decision of July 31,
2002 is hereby MODIFIED as follows:

1) Respondents are directed to pay complainant

separation pay computed at one month per year of
service in addition to full backwages from October 2001
to July 31, 2002;

2) The awards representing moral and exemplary

damages and 10% share in profit in the respective
accounts of P100,000.00 and P361,175.00 are deleted;

3) The award of 10% attorneys fees shall be based

on salary differential award only;

4) The awards representing salary differentials,

housing allowance, mid year bonus and 13th month pay
are AFFIRMED.

SO ORDERED.[15]

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The
decision of the National Labor Relations Commissions
dated April 15, 2003 is hereby REVERSED and SET ASIDE
and a new one is hereby rendered dismissing the
complaint filed by private respondent against Kasei
Corporation, et al. for constructive dismissal.

SO ORDERED.[16]

The appellate court denied petitioners motion for reconsideration,

hence, the present recourse.

The core issues to be resolved in this case are (1) whether

there was an employer-employee relationship between petitioner
and private respondent Kasei Corporation; and if in the
affirmative, (2) whether petitioner was illegally dismissed.

Considering the conflicting findings by the Labor Arbiter and

the National Labor Relations Commission on one hand, and the
Court of Appeals on the other, there is a need to reexamine the
records to determine which of the propositions espoused by the
contending parties is supported by substantial evidence. [17]

We held in Sevilla v. Court of Appeals[18] that in this

jurisdiction, there has been no uniform test to determine the
existence of an employer-employee relation. Generally, courts
have relied on the so-called right of control test where the person
for whom the services are performed reserves a right to control
not only the end to be achieved but also the means to be used in
reaching such end. In addition to the standard of right-of-control,
the existing economic conditions prevailing between the parties,
like the inclusion of the employee in the payrolls, can help in
determining the existence of an employer-employee relationship.

However, in certain cases the control test is not sufficient to

give a complete picture of the relationship between the parties,
owing to the complexity of such a relationship where several
positions have been held by the worker. There are instances
when, aside from the employers power to control the employee
with respect to the means and methods by which the work is to
be accomplished, economic realities of the employment relations
help provide a comprehensive analysis of the true classification of
the individual, whether as employee, independent contractor,
corporate officer or some other capacity.

The better approach would therefore be to adopt a twotiered test involving: (1) the putative employers power to control
the employee with respect to the means and methods by which
the work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship.

This two-tiered test would provide us with a framework of

analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship
between the parties. This is especially appropriate in this case
where there is no written agreement or terms of reference to base
the relationship on; and due to the complexity of the relationship
based on the various positions and responsibilities given to the
worker over the period of the latters employment.

The control test initially found application in the case of Viaa

v. Al-Lagadan and Piga,[19] and lately in Leonardo v. Court of
Appeals,[20] where we held that there is an employer-employee
relationship when the person for whom the services are
performed reserves the right to control not only the end achieved
but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals,[21] we observed the need to consider the
existing economic conditions prevailing between the parties, in addition to the
standard of right-of-control like the inclusion of the employee in the payrolls, to
give a clearer picture in determining the existence of an employer-employee
relationship based on an analysis of the totality of economic circumstances of the
worker.

Thus, the determination of the relationship between

employer and employee depends upon the circumstances of the

whole economic activity,[22] such as: (1) the extent to which the
services performed are an integral part of the employers
business; (2) the extent of the workers investment in equipment
and facilities; (3) the nature and degree of control exercised by
the employer; (4) the workers opportunity for profit and loss; (5)
the amount of initiative, skill, judgment or foresight required for
the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker
and the employer; and (7) the degree of dependency of the
worker upon the employer for his continued employment in that
line of business.[23]

The proper standard of economic dependence is whether the

worker is dependent on the alleged employer for his continued
employment in that line of business. [24] In the United States, the
touchstone of economic reality in analyzing possible employment
relationships for purposes of the Federal Labor Standards Act is
dependency.[25] By analogy, the benchmark of economic reality in
analyzing possible employment relationships for purposes of the
Labor Code ought to be the economic dependence of the worker
on his employer.

By applying the control test, there is no doubt that petitioner

is an employee of Kasei Corporation because she was under the
direct control and supervision of Seiji Kamura, the corporations
Technical Consultant. She reported for work regularly and served
in various capacities as Accountant, Liaison Officer, Technical
Consultant, Acting Manager and Corporate Secretary, with
substantially the same job functions, that is, rendering accounting
and tax services to the company and performing functions
necessary and desirable for the proper operation of the
corporation such as securing business permits and other licenses
over an indefinite period of engagement.

Under the broader economic reality test, the petitioner can

likewise be said to be an employee of respondent corporation
because she had served the company for six years before her
dismissal, receiving check vouchers indicating her salaries/wages,
benefits, 13th month pay, bonuses and allowances, as well as
deductions and Social Security contributions from August 1, 1999
to December 18, 2000.[26] When petitioner was designated
General Manager, respondent corporation made a report to the
SSS signed by Irene Ballesteros. Petitioners membership in the
SSS as manifested by a copy of the SSS specimen signature card
which was signed by the President of Kasei Corporation and the
inclusion of her name in the on-line inquiry system of the SSS
evinces the existence of an employer-employee relationship
between petitioner and respondent corporation. [27]

It is therefore apparent that petitioner is economically

dependent on respondent corporation for her continued
employment in the latters line of business.

In Domasig v. National Labor Relations Commission,[28] we

held that in a business establishment, an identification card is
provided not only as a security measure but mainly to identify the
holder thereof as a bona fide employee of the firm that issues
it. Together with the cash vouchers covering petitioners salaries
for the months stated therein, these matters constitute
substantial evidence adequate to support a conclusion that
petitioner was an employee of private respondent.

We likewise ruled in Flores v. Nuestro[29] that a corporation

who registers its workers with the SSS is proof that the latter were
the formers employees. The coverage of Social Security Law is
predicated on the existence of an employer-employee
relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5,

2001 has clearly established that petitioner never acted as
Corporate Secretary and that her designation as such was only for
convenience. The actual nature of petitioners job was as Kamuras
direct assistant with the duty of acting as Liaison Officer in
representing the company to secure construction permits, license
to operate and other requirements imposed by government
agencies. Petitioner was never entrusted with corporate
documents of the company, nor required to attend the meeting of
the corporation. She was never privy to the preparation of any
document for the corporation, although once in a while she was
required to sign prepared documentation for the company. [30]

The second affidavit of Kamura dated March 7, 2002 which

repudiated the December 5, 2001 affidavit has been allegedly
withdrawn by Kamura himself from the records of the case.
[31]
Regardless of this fact, we are convinced that the allegations in
the first affidavit are sufficient to establish that petitioner is an
employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly

repudiated the first one, courts do not generally look with favor on
any retraction or recanted testimony, for it could have been
secured by considerations other than to tell the truth and would
make solemn trials a mockery and place the investigation of the
truth at the mercy of unscrupulous witnesses. [32] A recantation
does not necessarily cancel an earlier declaration, but like any
other testimony the same is subject to the test of credibility and
should be received with caution.[33]

Based on the foregoing, there can be no other conclusion

that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for
compensation, and is economically dependent upon respondent
for her continued employment in that line of business. Her main
job function involved accounting and tax services rendered to
respondent corporation on a regular basis over an indefinite
period of engagement. Respondent corporation hired and
engaged petitioner for compensation, with the power to dismiss
her for cause. More importantly, respondent corporation had the
power to control petitioner with the means and methods by which
the work is to be accomplished.

The corporation constructively dismissed petitioner when it

reduced her salary by P2,500 a month from January to September
2001. This amounts to an illegal termination of employment,
where the petitioner is entitled to full backwages. Since the
position of petitioner as accountant is one of trust and confidence,
and under the principle of strained relations, petitioner is further
entitled to separation pay, in lieu of reinstatement. [34]
A diminution of pay is prejudicial to the employee and
amounts to constructive dismissal. Constructive dismissal is an
involuntary resignation resulting in cessation of work resorted to
when continued employment becomes impossible, unreasonable
or unlikely; when there is a demotion in rank or a diminution in
pay; or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to an employee. [35] In Globe
Telecom, Inc. v. Florendo-Flores,[36] we ruled that where an
employee ceases to work due to a demotion of rank or a
diminution of pay, an unreasonable situation arises which creates
an adverse working environment rendering it impossible for such
employee to continue working for her employer. Hence, her
severance from the company was not of her own making and
therefore amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure

equal work opportunities regardless of sex, race or creed. Even as
we, in every case, attempt to carefully balance the fragile
relationship between employees and employers, we are mindful
of the fact that the policy of the law is to apply the Labor Code to
a greater number of employees. This would enable employees to
avail of the benefits accorded to them by law, in line with the
constitutional mandate giving maximum aid and protection to
labor, promoting their welfare and reaffirming it as a primary
social economic force in furtherance of social justice and national
development.

WHEREFORE, the petition is GRANTED. The Decision and

Resolution of the Court of Appeals dated October 29, 2004 and
October 7, 2005, respectively, in CA-G.R. SP No. 78515
are ANNULLED and SET ASIDE. The Decision of the National
Labor Relations Commission dated April 15, 2003 in NLRC NCR CA
No. 032766-02, isREINSTATED. The case is REMANDED to the
Labor Arbiter for the recomputation of petitioner Angelina
Franciscos full backwages from the time she was illegally
terminated until the date of finality of this decision, and
separation pay representing one-half month pay for every year of
service, where a fraction of at least six months shall be
considered as one whole year.

SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 155207

August 13, 2008

WILHELMINA S. OROZCO, petitioner,

vs.
THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS,
PHILIPPINE DAILY INQUIRER, and LETICIA JIMENEZ
MAGSANOC, respondents.
DECISION
NACHURA, J.:
The case before this Court raises a novel question never before decided in
our jurisdiction whether a newspaper columnist is an employee of the
newspaper which publishes the column.
In this Petition for Review under Rule 45 of the Revised Rules on Civil
Procedure, petitioner Wilhelmina S. Orozco assails the Decision1 of the Court
of Appeals (CA) in CA-G.R. SP No. 50970 dated June 11, 2002 and its
Resolution2 dated September 11, 2002 denying her Motion for
Reconsideration. The CA reversed and set aside the Decision3 of the National
Labor Relations Commission (NLRC), which in turn had affirmed the
Decision4 of the Labor Arbiter finding that Orozco was an employee of private
respondent Philippine Daily Inquirer (PDI) and was illegally dismissed as
columnist of said newspaper.
In March 1990, PDI engaged the services of petitioner to write a weekly
column for its Lifestyle section. She religiously submitted her articles every
week, except for a six-month stint in New York City when she, nonetheless,
sent several articles through mail. She received compensation ofP250.00
later increased to P300.00 for every column published.5
On November 7, 1992, petitioners column appeared in the PDI for the last
time. Petitioner claims that her then editor, Ms. Lita T. Logarta,6 told her that

respondent Leticia Jimenez Magsanoc, PDI Editor in Chief, wanted to stop

publishing her column for no reason at all and advised petitioner to talk to
Magsanoc herself. Petitioner narrates that when she talked to Magsanoc, the
latter informed her that it was PDI Chairperson Eugenia Apostol who had
asked to stop publication of her column, but that in a telephone conversation
with Apostol, the latter said that Magsanoc informed her (Apostol) that the
Lifestyle section already had many columnists.7
On the other hand, PDI claims that in June 1991, Magsanoc met with the
Lifestyle section editor to discuss how to improve said section. They agreed to
cut down the number of columnists by keeping only those whose columns
were well-written, with regular feedback and following. In their judgment,
petitioners column failed to improve, continued to be superficially and poorly
written, and failed to meet the high standards of the newspaper. Hence, they
decided to terminate petitioners column.8
Aggrieved by the newspapers action, petitioner filed a complaint for illegal
dismissal, backwages, moral and exemplary damages, and other money
claims before the NLRC.
On October 29, 1993, Labor Arbiter Arthur Amansec rendered a
Decision in favor of petitioner, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered, finding complainant to be
an employee of respondent company; ordering respondent company to
reinstate her to her former or equivalent position, with backwages.
Respondent company is also ordered to pay her 13th month pay and
service incentive leave pay.
Other claims are hereby dismissed for lack of merit.
SO ORDERED.9
The Labor Arbiter found that:
[R]espondent company exercised full and complete control over the
means and method by which complainants work that of a regular
columnist had to be accomplished. This control might not be found in
an instruction, verbal or oral, given to complainant defining the means

and method she should write her column. Rather, this control is
manifested and certained (sic) in respondents admitted prerogative to
reject any article submitted by complainant for publication.
By virtue of this power, complainant was helplessly constrained to adopt
her subjects and style of writing to suit the editorial taste of her editor.
Otherwise, off to the trash can went her articles.
Moreover, this control is already manifested in column title, "Feminist
Reflection" allotted complainant. Under this title, complainants writing
was controlled and limited to a womans perspective on matters of
feminine interests. That respondent had no control over the subject
matter written by complainant is strongly belied by this observation.
Even the length of complainants articles were set by respondents.
Inevitably, respondents would have no control over when or where
complainant wrote her articles as she was a columnist who could
produce an article in thirty (3) (sic) months or three (3) days, depending
on her mood or the amount of research required for an article but her
actions were controlled by her obligation to produce an article a week. If
complainant did not have to report for work eight (8) hours a day, six (6)
days a week, it is because her task was mainly mental. Lastly, the fact
that her articles were (sic) published weekly for three (3) years show
that she was respondents regular employee, not a once-in-a-blue-moon
contributor who was not under any pressure or obligation to produce
regular articles and who wrote at his own whim and leisure.10
PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994,
the NLRC Second Division dismissed the appeal thereby affirming the Labor
Arbiters Decision. The NLRC initially noted that PDI failed to perfect its
appeal, under Article 223 of the Labor Code, due to non-filing of a cash or
surety bond. The NLRC said that the reason proffered by PDI for not filing the
bond that it was difficult or impossible to determine the amount of the bond
since the Labor Arbiter did not specify the amount of the judgment award
was not persuasive. It said that all PDI had to do was compute based on the
amount it was paying petitioner, counting the number of weeks from
November 7, 1992 up to promulgation of the Labor Arbiters decision.11

The NLRC also resolved the appeal on its merits. It found no error in the
Labor Arbiters findings of fact and law. It sustained the Labor Arbiters
reasoning that respondent PDI exercised control over petitioners work.
PDI then filed a Petition for Review12 before this Court seeking the reversal of
the NLRC Decision. However, in a Resolution13 dated December 2, 1998, this
Court referred the case to the Court of Appeals, pursuant to our ruling in St.
Martin Funeral Homes v. National Labor Relations Commission.14
The CA rendered its assailed Decision on June 11, 2002. It set aside the
NLRC Decision and dismissed petitioners Complaint. It held that the NLRC
misappreciated the facts and rendered a ruling wanting in substantial
evidence. The CA said:
The Court does not agree with public respondent NLRCs conclusion.
First, private respondent admitted that she was and [had] never been
considered by petitioner PDI as its employee. Second, it is not disputed
that private respondent had no employment contract with petitioner PDI.
In fact, her engagement to contribute articles for publication was based
on a verbal agreement between her and the petitioners Lifestyle
Section Editor. Moreover, it was evident that private respondent was not
required to report to the office eight (8) hours a day. Further, it is not
disputed that she stayed in New York for six (6) months without
petitioners permission as to her leave of absence nor was she given
any disciplinary action for the same. These undisputed facts negate
private respondents claim that she is an employee of petitioner.
Moreover, with regards (sic) to the control test, the public respondent
NLRCs ruling that the guidelines given by petitioner PDI for private
respondent to follow, e.g. in terms of space allocation and length of
article, is not the form of control envisioned by the guidelines set by the
Supreme Court. The length of the article is obviously limited so that all
the articles to be featured in the paper can be accommodated. As to the
topic of the article to be published, it is but logical that private
respondent should not write morbid topics such as death because she is
contributing to the lifestyle section. Other than said given limitations, if
the same could be considered limitations, the topics of the articles
submitted by private respondent were all her choices. Thus, the
petitioner PDI in deciding to publish private respondents articles only

controls the result of the work and not the means by which said articles
were written.
As such, the above facts failed to measure up to the control test
necessary for an employer-employee relationship to exist.15
Petitioners Motion for Reconsideration was denied in a Resolution dated
September 11, 2002. She then filed the present Petition for Review.
In a Resolution dated April 29, 2005, the Court, without giving due course to
the petition, ordered the Labor Arbiter to clarify the amount of the award due
petitioner and, thereafter, ordered PDI to post the requisite bond. Upon
compliance therewith, the petition would be given due course. Labor Arbiter
Amansec clarified that the award under the Decision amounted to P15,350.00.
Thus, PDI posted the requisite bond on January 25, 2007.16
We shall initially dispose of the procedural issue raised in the Petition.
Petitioner argues that the CA erred in not dismissing outright PDIs Petition
for Certiorari for PDIs failure to post a cash or surety bond in violation of
Article 223 of the Labor Code.
This issue was settled by this Court in its Resolution dated April 29,
2005.17 There, the Court held:
But while the posting of a cash or surety bond is jurisdictional and is a
condition sine qua non to the perfection of an appeal, there is a plethora
of jurisprudence recognizing exceptional instances wherein the Court
relaxed the bond requirement as a condition for posting the appeal.
xxxx
In the case of Taberrah v. NLRC, the Court made note of the fact that
the assailed decision of the Labor Arbiter concerned did not contain a
computation of the monetary award due the employees, a circumstance
which is likewise present in this case. In said case, the Court stated,
As a rule, compliance with the requirements for the perfection of
an appeal within the reglamentary (sic) period is mandatory and
jurisdictional. However, in National Federation of Labor Unions v.

Ladrido as well as in several other cases, this Court relaxed the

requirement of the posting of an appeal bond within the
reglementary period as a condition for perfecting the appeal. This
is in line with the principle that substantial justice is better served
by allowing the appeal to be resolved on the merits rather than
dismissing it based on a technicality.
The judgment of the Labor Arbiter in this case merely stated that
petitioner was entitled to backwages, 13th month pay and service
incentive leave pay without however including a computation of the
alleged amounts.
xxxx
In the case of NFLU v. Ladrido III, this Court postulated that "private
respondents cannot be expected to post such appeal bond equivalent to
the amount of the monetary award when the amount thereof was not
included in the decision of the labor arbiter." The computation of the
amount awarded to petitioner not having been clearly stated in the
decision of the labor arbiter, private respondents had no basis for
determining the amount of the bond to be posted.
Thus, while the requirements for perfecting an appeal must be strictly
followed as they are considered indispensable interdictions against
needless delays and for orderly discharge of judicial business, the law
does admit of exceptions when warranted by the circumstances.
Technicality should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties. But while
this Court may relax the observance of reglementary periods and
technical rules to achieve substantial justice, it is not prepared to give
due course to this petition and make a pronouncement on the weighty
issue obtaining in this case until the law has been duly complied with
and the requisite appeal bond duly paid by private respondents.18
Records show that PDI has complied with the Courts directive for the posting
of the bond;19 thus, that issue has been laid to rest.
We now proceed to rule on the merits of this case.

The main issue we must resolve is whether petitioner is an employee of PDI,

and if the answer be in the affirmative, whether she was illegally dismissed.
We rule for the respondents.
The existence of an employer-employee relationship is essentially a question
of fact.20 Factual findings of quasi-judicial agencies like the NLRC are
generally accorded respect and finality if supported by substantial evidence.21
Considering, however, that the CAs findings are in direct conflict with those of
the Labor Arbiter and NLRC, this Court must now make its own examination
and evaluation of the facts of this case.
It is true that petitioner herself admitted that she "was not, and [had] never
been considered respondents employee because the terms of works were
arbitrarily decided upon by the respondent."22 However, the employment
status of a person is defined and prescribed by law and not by what the
parties say it should be.23
This Court has constantly adhered to the "four-fold test" to determine whether
there exists an employer-employee relationship between parties.24 The four
elements of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employees conduct.25
Of these four elements, it is the power of control which is the most
crucial26 and most determinative factor,27 so important, in fact, that the other
elements may even be disregarded.28 As this Court has previously held:
the significant factor in determining the relationship of the parties is the
presence or absence of supervisory authority to control the method and
the details of performance of the service being rendered, and the
degree to which the principal may intervene to exercise such control.29
In other words, the test is whether the employer controls or has reserved the
right to control the employee, not only as to the work done, but also as to the
means and methods by which the same is accomplished.30
Petitioner argues that several factors exist to prove that respondents
exercised control over her and her work, namely:

a. As to the Contents of her Column The PETITIONER had to insure

that the contents of her column hewed closely to the objectives of its
Lifestyle Section and the over-all principles that the newspaper projects
itself to stand for. As admitted, she wanted to write about death in
relation to All Souls Day but was advised not to.
b. As to Time Control The PETITIONER, as a columnist, had to
observe the deadlines of the newspaper for her articles to be published.
These deadlines were usually that time period when the Section Editor
has to "close the pages" of the Lifestyle Section where the column in
located. "To close the pages" means to prepare them for printing and
publication.
As a columnist, the PETITIONERs writings had a definite day on which
it was going to appear. So she submitted her articles two days before
the designated day on which the column would come out.
This is the usual routine of newspaper work. Deadlines are set to fulfill
the newspapers obligations to the readers with regard to timeliness and
freshness of ideas.
c. As to Control of Space The PETITIONER was told to submit only
two or three pages of article for the column, (sic) "Feminist Reflections"
per week. To go beyond that, the Lifestyle editor would already chop off
the article and publish the rest for the next week. This shows that
PRIVATE RESPONDENTS had control over the space that the
PETITIONER was assigned to fill.
d. As to Discipline Over time, the newspaper readers eyes are trained
or habituated to look for and read the works of their favorite regular
writers and columnists. They are conditioned, based on their daily
purchase of the newspaper, to look for specific spaces in the
newspapers for their favorite write-ups/or opinions on matters relevant
and significant issues aside from not being late or amiss in the
responsibility of timely submission of their articles.
The PETITIONER was disciplined to submit her articles on highly
relevant and significant issues on time by the PRIVATE
RESPONDENTS who have a say on whether the topics belong to those

considered as highly relevant and significant, through the Lifestyle

Section Editor. The PETITIONER had to discuss the topics first and
submit the articles two days before publication date to keep her column
in the newspaper space regularly as expected or without miss by its
readers.31
Given this discussion by petitioner, we then ask the question: Is this the form
of control that our labor laws contemplate such as to establish an employeremployee relationship between petitioner and respondent PDI?
It is not.
Petitioner has misconstrued the "control test," as did the Labor Arbiter and the
NLRC.
Not all rules imposed by the hiring party on the hired party indicate that the
latter is an employee of the former. Rules which serve as general
guidelines towards the achievement of the mutually desired result are not
indicative of the power of control.32 Thus, this Court has explained:
It should, however, be obvious that not every form of control that the
hiring party reserves to himself over the conduct of the party hired in
relation to the services rendered may be accorded the effect of
establishing an employer-employee relationship between them in the
legal or technical sense of the term. A line must be drawn somewhere, if
the recognized distinction between an employee and an individual
contractor is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammelled freedom to the party hired
and eschews any intervention whatsoever in his performance of the
engagement.
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it,
and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the
second, which address both the result and the means used to achieve
it. x x x.33

The main determinant therefore is whether the rules set by the employer are
meant to control not just the results of the work but also the means and
method to be used by the hired party in order to achieve such results. Thus, in
this case, we are to examine the factors enumerated by petitioner to see if
these are merely guidelines or if they indeed fulfill the requirements of the
control test.
Petitioner believes that respondents acts are meant to control how she
executes her work. We do not agree. A careful examination reveals that the
factors enumerated by the petitioner are inherent conditions in running a
newspaper. In other words, the so-called control as to time, space, and
discipline are dictated by the very nature of the newspaper business itself.
We agree with the observations of the Office of the Solicitor General that:
The Inquirer is the publisher of a newspaper of general circulation which
is widely read throughout the country. As such, public interest dictates
that every article appearing in the newspaper should subscribe to the
standards set by the Inquirer, with its thousands of readers in mind. It is
not, therefore, unusual for the Inquirer to control what would be
published in the newspaper. What is important is the fact that such
control pertains only to the end result, i.e., the submitted articles. The
Inquirer has no control over [petitioner] as to the means or method used
by her in the preparation of her articles. The articles are done by
[petitioner] herself without any intervention from the Inquirer.34
Petitioner has not shown that PDI, acting through its editors, dictated how she
was to write or produce her articles each week. Aside from the constraints
presented by the space allocation of her column, there were no restraints on
her creativity; petitioner was free to write her column in the manner and style
she was accustomed to and to use whatever research method she deemed
suitable for her purpose. The apparent limitation that she had to write only on
subjects that befitted the Lifestyle section did not translate to control, but was
simply a logical consequence of the fact that her column appeared in that
section and therefore had to cater to the preference of the readers of that
section.
The perceived constraint on petitioners column was dictated by her own
choice of her columns perspective. The column title "Feminist Reflections"

was of her own choosing, as she herself admitted, since she had been known
as a feminist writer.35 Thus, respondent PDI, as well as her readers, could
reasonably expect her columns to speak from such perspective.
Contrary to petitioners protestations, it does not appear that there was any
actual restraint or limitation on the subject matter within the Lifestyle section
that she could write about. Respondent PDI did not dictate how she wrote or
what she wrote in her column. Neither did PDIs guidelines dictate the kind of
research, time, and effort she put into each column. In fact, petitioner herself
said that she received "no comments on her articlesexcept for her to
shorten them to fit into the box allotted to her column." Therefore, the control
that PDI exercised over petitioner was only as to the finished product of her
efforts, i.e., the column itself, by way of either shortening or outright rejection
of the column.
The newspapers power to approve or reject publication of any specific article
she wrote for her column cannot be the control contemplated in the "control
test," as it is but logical that one who commissions another to do a piece of
work should have the right to accept or reject the product. The important factor
to consider in the "control test" is still the element of control over how the work
itself is done, not just the end result thereof.
In contrast, a regular reporter is not as independent in doing his or her work
for the newspaper. We note the common practice in the newspaper business
of assigning its regular reporters to cover specific subjects, geographical
locations, government agencies, or areas of concern, more commonly
referred to as "beats." A reporter must produce stories within his or her
particular beat and cannot switch to another beat without permission from the
editor. In most newspapers also, a reporter must inform the editor about the
story that he or she is working on for the day. The story or article must also be
submitted to the editor at a specified time. Moreover, the editor can easily pull
out a reporter from one beat and ask him or her to cover another beat, if the
need arises.
This is not the case for petitioner. Although petitioner had a weekly deadline to
meet, she was not precluded from submitting her column ahead of time or
from submitting columns to be published at a later time. More importantly,
respondents did not dictate upon petitioner the subject matter of her columns,

but only imposed the general guideline that the article should conform to the
standards of the newspaper and the general tone of the particular section.
Where a person who works for another performs his job more or less at his
own pleasure, in the manner he sees fit, not subject to definite hours or
conditions of work, and is compensated according to the result of his efforts
and not the amount thereof, no employer-employee relationship exists.36
Aside from the control test, this Court has also used the economic reality test.
The economic realities prevailing within the activity or between the parties are
examined, taking into consideration the totality of circumstances surrounding
the true nature of the relationship between the parties.37 This is especially
appropriate when, as in this case, there is no written agreement or contract on
which to base the relationship. In our jurisdiction, the benchmark of economic
reality in analyzing possible employment relationships for purposes of
applying the Labor Code ought to be the economic dependence of the worker
on his employer.38
Petitioners main occupation is not as a columnist for respondent but as a
womens rights advocate working in various womens
organizations.39 Likewise, she herself admits that she also contributes articles
to other publications.40 Thus, it cannot be said that petitioner was dependent
on respondent PDI for her continued employment in respondents line of
business.41
The inevitable conclusion is that petitioner was not respondent PDIs
employee but an independent contractor, engaged to do independent work.
There is no inflexible rule to determine if a person is an employee or an
independent contractor; thus, the characterization of the relationship must be
made based on the particular circumstances of each case.42 There are several
factors43 that may be considered by the courts, but as we already said, the
right to control is the dominant factor in determining whether one is an
employee or an independent contractor.44
In our jurisdiction, the Court has held that an independent contractor is one
who carries on a distinct and independent business and undertakes to
perform the job, work, or service on ones own account and under ones own
responsibility according to ones own manner and method, free from the

control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof.45
On this point, Sonza v. ABS-CBN Broadcasting Corporation46 is enlightening.
In that case, the Court found, using the four-fold test, that petitioner, Jose Y.
Sonza, was not an employee of ABS-CBN, but an independent contractor.
Sonza was hired by ABS-CBN due to his "unique skills, talent and celebrity
status not possessed by ordinary employees," a circumstance that, the Court
said, was indicative, though not conclusive, of an independent contractual
relationship. Independent contractors often present themselves to possess
unique skills, expertise or talent to distinguish them from ordinary
employees.47 The Court also found that, as to payment of wages, Sonzas
talent fees were the result of negotiations between him and ABS-CBN.48 As to
the power of dismissal, the Court found that the terms of Sonzas engagement
were dictated by the contract he entered into with ABS-CBN, and the same
contract provided that either party may terminate the contract in case of
breach by the other of the terms thereof.49 However, the Court held that the
foregoing are not determinative of an employer-employee relationship.
Instead, it is still the power of control that is most important.
On the power of control, the Court found that in performing his work, Sonza
only needed his skills and talent how he delivered his lines, appeared on
television, and sounded on radio were outside ABS-CBNs control.50 Thus:
We find that ABS-CBN was not involved in the actual performance that
produced the finished product of SONZAs work. ABS-CBN did not
instruct SONZA how to perform his job. ABS-CBN merely reserved the
right to modify the program format and airtime schedule "for more
effective programming." ABS-CBNs sole concern was the quality of the
shows and their standing in the ratings. Clearly, ABS-CBN did not
exercise control over the means and methods of performance of
SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows
proves ABS-CBNs power over the means and methods of the
performance of his work. Although ABS-CBN did have the option not to
broadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs
talent fees... Thus, even if ABS-CBN was completely dissatisfied with
the means and methods of SONZAs performance of his work, or even

with the quality or product of his work, ABS-CBN could not dismiss or
even discipline SONZA. All that ABS-CBN could do is not to broadcast
SONZAs show but ABS-CBN must still pay his talent fees in full.
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as
it was by the obligation to continue paying in full SONZAs talent fees,
did not amount to control over the means and methods of the
performance of SONZAs work. ABS-CBN could not terminate or
discipline SONZA even if the means and methods of performance of his
work - how he delivered his lines and appeared on television - did not
meet ABS-CBNs approval. This proves that ABS-CBNs control was
limited only to the result of SONZAs work, whether to broadcast the
final product or not. In either case, ABS-CBN must still pay SONZAs
talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al., the United States Circuit Court of
Appeals ruled that vaudeville performers were independent contractors
although the management reserved the right to delete objectionable
features in their shows. Since the management did not have control
over the manner of performance of the skills of the artists, it could only
control the result of the work by deleting objectionable features.
SONZA further contends that ABS-CBN exercised control over his work
by supplying all equipment and crew. No doubt, ABS-CBN supplied the
equipment, crew and airtime needed to broadcast the "Mel & Jay"
programs. However, the equipment, crew and airtime are not the "tools
and instrumentalities" SONZA needed to perform his job. What SONZA
principally needed were his talent or skills and the costumes necessary
for his appearance. Even though ABS-CBN provided SONZA with the
place of work and the necessary equipment, SONZA was still an
independent contractor since ABS-CBN did not supervise and control
his work. ABS-CBNs sole concern was for SONZA to display his talent
during the airing of the programs.
A radio broadcast specialist who works under minimal supervision is an
independent contractor. SONZAs work as television and radio program
host required special skills and talent, which SONZA admittedly
possesses. The records do not show that ABS-CBN exercised any

supervision and control over how SONZA utilized his skills and talent in
his shows.51
The instant case presents a parallel to Sonza. Petitioner was engaged as a
columnist for her talent, skill, experience, and her unique viewpoint as a
feminist advocate. How she utilized all these in writing her column was not
subject to dictation by respondent. As in Sonza, respondent PDI was not
involved in the actual performance that produced the finished product. It only
reserved the right to shorten petitioners articles based on the newspapers
capacity to accommodate the same. This fact, we note, was not unique to
petitioners column. It is a reality in the newspaper business that space
constraints often dictate the length of articles and columns, even those that
regularly appear therein.
Furthermore, respondent PDI did not supply petitioner with the tools and
instrumentalities she needed to perform her work. Petitioner only needed her
talent and skill to come up with a column every week. As such, she had all the
tools she needed to perform her work.
Considering that respondent PDI was not petitioners employer, it cannot be
held guilty of illegal dismissal.
WHEREFORE, the foregoing premises considered, the Petition
is DISMISSED. The Decision and Resolution of the Court of Appeals in CAG.R. SP No. 50970 are hereby AFFIRMED.
SO ORDERED.

SECOND DIVISION
PEOPLES BROADCASTING G.R. No. 179652
(BOMBO RADYO PHILS., INC.),
Petitioner, Present:

CARPIO MORALES, J.,*

Acting Chairperson,
- versus - TINGA,
VELASCO, JR.,
LEONARDO-DE CASTRO,** and
BRION, JJ.
THE SECRETARY OF THE
DEPARTMENT OF LABOR AND Promulgated:
EMPLOYMENT, THE REGIONAL
DIRECTOR, DOLE REGION VII, May 8, 2009
and JANDELEON JUEZAN,
Respondents.
x----------------------------------------------------------------------------x

DECISION

TINGA, J.:

The present controversy concerns a matter of first

impression, requiring as it does the determination of
the demarcation line between the prerogative of the Department
of Labor and Employment (DOLE) Secretary and his duly
authorized representatives, on the one hand, and the jurisdiction
of the National Labor Relations Commission, on the other, under

Article 128 (b) of the Labor Code in an instance where the

employer has challenged the jurisdiction of the DOLE at the very
first level on the ground that no employer-employee relationship
ever existed between the parties.
I.

The instant petition for certiorari under Rule 65 assails the

decision and the resolution of the Court of Appeals dated 26
October 2006 and 26 June 2007, respectively, in C.A. G.R. CEB-SP
No. 00855.[1]

The petition traces its origins to a complaint filed by Jandeleon

Juezan (respondent) against Peoples Broadcasting Service,
Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal deduction,
non-payment of service incentive leave, 13th month pay, premium
pay for holiday and rest day and illegal diminution of benefits,
delayed payment of wages and non-coverage of SSS, PAG-IBIG
and Philhealth before the Department of Labor and Employment
(DOLE) Regional Office No. VII, Cebu City.[2] On the basis of the
complaint, the DOLE conducted a plant level inspection on 23
September 2003. In the Inspection Report Form,[3] the Labor
Inspector wrote under the heading Findings/Recommendations
non-diminution of benefits and Note: Respondent deny employeremployee relationship with the complainant- see Notice of
Inspection results. In the Notice of Inspection Results[4] also
bearing the date 23 September 2003, the Labor Inspector made
the following notations:

Management
representative
informed
that
complainant is a drama talent hired on a per drama
participation basis hence no employer-employeeship
[sic] existed between them. As proof of this, management
presented photocopies of cash vouchers, billing
statement, employments of specific undertaking (a
contract between the talent director & the complainant),
summary of billing of drama production etc. They (mgt.)
has [sic] not control of the talent if he ventures into
another contract w/ other broadcasting industries.

On the other hand, complainant Juezans alleged

violation of non-diminution of benefits is computed as
follows:

@ P 2,000/15 days + 1.5 mos = P 6,000

(August 1/03 to Sept 15/03)

Note: Recommend for summary investigation or

whatever action deem proper.[5]

Petitioner was required to rectify/restitute the violations within

five (5) days from receipt. No rectification was effected by
petitioner; thus, summary investigations were conducted, with the
parties eventually ordered to submit their respective position
papers.[6]

In his Order dated 27 February 2004,[7] DOLE Regional Director

Atty. Rodolfo M. Sabulao (Regional Director) ruled that respondent
is an employee of petitioner, and that the former is entitled to his
money claims amounting to P203,726.30. Petitioner sought
reconsideration of the Order, claiming that the Regional Director

gave credence to the documents offered by respondent

without examining the originals, but at the same time he missed
or failed to consider petitioners evidence. Petitioners motion for
reconsideration was denied. [8] On appeal to the DOLE Secretary,
petitioner denied once more the existence of employer-employee
relationship. In its Order dated 27 January 2005, the Acting DOLE
Secretary dismissed the appeal on the ground that petitioner did
not post a cash or surety bond and instead submitted a Deed of
Assignment of Bank Deposit.[9]

Petitioner elevated the case to the Court of Appeals, claiming that

it was denied due process when the DOLE Secretary disregarded
the evidence it presented and failed to give it the opportunity to
refute the claims of respondent. Petitioner maintained that there
is no employer-employee relationship had ever existed between it
and respondent because it was the drama directors and producers
who paid, supervised and disciplined respondent. It also added
that the case was beyond the jurisdiction of the DOLE and should
have been considered by the labor arbiter because respondents
claim exceeded P5,000.00.

The Court of Appeals held that petitioner was not deprived of due
process as the essence thereof is only an opportunity to be heard,
which petitioner had when it filed a motion for reconsideration
with the DOLE Secretary. It further ruled that the latter had the
power to order and enforce compliance with labor standard laws
irrespective of the amount of individual claims because the
limitation imposed by Article 29 of the Labor Code had been
repealed by Republic Act No. 7730.[10] Petitioner sought
reconsideration of the decision but its motion was denied. [11]

Before this Court, petitioner argues that the National Labor

Relations Commission (NLRC), and not the DOLE Secretary, has

jurisdiction over respondents claim, in view of Articles 217 and

128 of the Labor Code.[12] It adds that the Court of Appeals
committed grave abuse of discretion when it dismissed
petitioners appeal without delving on the issues raised therein,
particularly the claim that no employer-employee relationship had
ever existed between petitioner and respondent. Finally,
petitioner avers that there is no appeal, or any plain, speedy and
adequate remedy in the ordinary course of law available to it.

On the other hand, respondent posits that the Court of Appeals

did not abuse its discretion. He invokes Republic Act No. 7730,
which removes the jurisdiction of the Secretary of Labor and
Employment or his duly authorized representatives, from the
effects of the restrictive provisions of Article 129 and 217 of the
Labor Code, regarding the confinement of jurisdiction based on
the amount of claims.[13] Respondent also claims that petitioner
was not denied due process since even when the case was with
the Regional Director, a hearing was conducted and pieces of
evidence were presented. Respondent stands by the propriety of
the Court of Appeals ruling that there exists an employeremployee relationship between him and petitioner. Finally,
respondent argues that the instant petition for certiorari is a
wrong mode of appeal considering that petitioner had earlier
filed a Petition for Certiorari, Mandamus and Prohibition with the
Court of Appeals; petitioner, instead, should have filed a Petition
for Review.[14]
II.

The significance of this case may be reduced to one simple

questiondoes the Secretary of Labor have the power to determine
the existence of an employer-employee relationship?

To resolve this pivotal issue, one must look into the extent of the
visitorial and enforcement power of the DOLE found in Article 128
(b) of the Labor Code, as amended by Republic Act 7730. It reads:
Article 128 (b) Notwithstanding the provisions of Articles
129 and 217 of this Code to the contrary, and in cases
where the relationship of employer-employee still
exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue
compliance orders 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. The Secretary or his duly
authorized representative shall issue writs of execution to
the appropriate authority for the enforcement of their
orders, except in cases where the employer contests the
findings of the labor employment and enforcement officer
and raises issues supported by documentary proofs which
were not considered in the course of inspection. (emphasis
supplied)

xxx

The provision is quite explicit that the visitorial and

enforcement power of the DOLE comes into play only in cases
when the relationship of employer-employee still exists. It also
underscores the avowed objective underlying the grant of power
to the DOLE which is to give effect to the labor standard provision
of this Code and other labor legislation. Of course, a persons
entitlement to labor standard benefits under the labor laws
presupposes the existence of employer-employee relationship in
the first place.

The clause in cases where the relationship of employeremployee still exists signifies that the employer-employee
relationship must have existed even before the emergence of the
controversy. Necessarily, the DOLEs power does not apply in
two instances, namely: (a) where the employer-employee
relationship has ceased; and (b) where no such
relationship has ever existed.

The first situation is categorically covered by Sec. 3, Rule 11 of

the Rules on the Disposition of Labor Standards Cases [15] issued
by the DOLE Secretary. It reads:
Rule II MONEY CLAIMS ARISING
FROM COMPLAINT/ROUTINE INSPECTION

Sec. 3. Complaints where no employer-employee

relationship actually exists. Where employer-employee
relationship no longer exists by reason of the fact that it
has already been severed, claims for payment of
monetary benefits fall within the exclusive and original
jurisdiction of the labor arbiters. Accordingly, if on the
face of the complaint, it can be ascertained that
employer-employee relationship no longer exists, the
case, whether accompanied by an allegation of illegal
dismissal, shall immediately be endorsed by the Regional
Director to the appropriate branch of the National Labor
Relations Commission (NLRC).

In the recent case of Bay Haven, Inc. v. Abuan,[16] this Court

recognized the first situation and accordingly ruled that a

complainants allegation of his illegal dismissal had deprived the

DOLE of jurisdiction as per Article 217 of the Labor Code. [17]

In the first situation, the claim has to be referred to the NLRC

because it is the NLRC which has jurisdiction in view of the
termination of the employer-employee relationship. The same
procedure has to be followed in the second situation since it is the
NLRC that has jurisdiction in view of the absence of employeremployee relationship between the evidentiary parties from the
start.

Clearly the law accords a prerogative to the NLRC over the

claim when the employer-employee relationship has terminated
or such relationship has not arisen at all. The reason is obvious. In
the second situation especially, the existence of an employeremployee relationship is a matter which is not easily determinable
from an ordinary inspection, necessarily so, because the elements
of such a relationship are not verifiable from a mere ocular
examination. The intricacies and implications of an employeremployee relationship demand that the level of scrutiny should be
far
above
the
cursory
and
the
mechanical. While documents, particularly documents found in th
e employers

office are the primary source materials, what may prove decisive
are factors related to the history of the employers business
operations, its current state as well as accepted contemporary
practices in the industry. More often than not, the question of
employer-employee relationship becomes a battle of evidence,

the determination of which should becomprehensive and

intensive and therefore best left to the specialized quasi-judicial
body that is the NLRC.

It can be assumed that the DOLE in the exercise of its

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

Thus, before the DOLE may exercise its powers under Article
128, two important questions must be resolved: (1) Does the
employer-employee relationship still exist, or alternatively, was
there ever an employer-employee relationship to speak of; and (2)
Are there violations of the Labor Code or of any labor law?

The existence of an employer-employee relationship

is a statutory prerequisite to and a limitation on the power
of the Secretary of Labor, one which the legislative branch
is entitled to impose. The rationale underlying this limitation is
to eliminate the prospect of competing conclusions of the
Secretary of Labor and the NLRC, on a matter fraught with
questions of fact and law, which is best resolved by the quasijudicial
body,
which
is
the
NRLC,
rather
than
an

administrative official
of
the
executive
branch
of
the
government. If the Secretary of Labor proceeds to exercise his
visitorial and enforcement powers absent the first requisite, as
the dissent proposes, his office confers jurisdiction on itself which
it cannot otherwise acquire.

The approach suggested by the dissent is frowned upon by

common law. To wit:
[I]t is a general rule, that no court of limited
jurisdiction can give itself jurisdiction by a wrong
decision on a point collateral to the merits of the
case upon which the limit to its jurisdiction
depends; and however its decision may be final on all
particulars, making up together that subject matter which,
if true, is within its jurisdiction, and however necessary in
many cases it may be for it to make a preliminary inquiry,
whether some collateral matter be or be not within the
limits, yet, upon this preliminary question, its decision
must always be open to inquiry in the superior court.[18]

A more liberal interpretative mode, pragmatic or functional

analysis, has also emerged in ascertaining the jurisdictional
boundaries of administrative agencies whose jurisdiction is
established by statute. Under this approach, the Court examines
the intended function of the tribunal and decides whether a
particular provision falls within or outside that function, rather
than making the provision itself the determining centerpiece of

the analysis.[19] Yet even under this more expansive approach, the
dissent fails.

A reading of Art. 128 of the Labor Code reveals that the

Secretary of Labor or his authorized representatives was granted
visitorial
and
enforcement
powers for
the
purpose
of determining violations of, and enforcing, the Labor Code and
any labor law, wage order, or rules and regulations issued
pursuant thereto. Necessarily, the actual existence of an
employer-employee relationship affects the complexion of the
putative findings that the Secretary of Labor may determine,
since employees are entitled to a different set of rights under the
Labor Code from the employer as opposed to nonemployees. Among these differentiated rights are those accorded
by the labor standards provisions of the Labor Code, which
the Secretary of Labor is mandated to enforce. If there is no
employer-employee relationship in the first place, the duty of the
employer to adhere to those labor standards with respect to the
non-employees is questionable.

This decision should not be considered as placing an undue

burden on the Secretary of Labor in the exercise of visitorial and
enforcement powers, nor seen as an unprecedented diminution of
the same, but rather a recognition of the statutory limitations
thereon. A mere assertion of absence of employer-employee
relationship does not deprive the DOLE of jurisdiction over the
claim under Article 128 of the Labor Code. At least a prima
facie showing of such absence of relationship, as in this case, is
needed to preclude the DOLE from the exercise of its power. The
Secretary of Labor would not have been precluded from exercising
the powers under Article 128 (b) over petitioner if another person

with better-grounded claim of employment than that which

respondent had. Respondent, especially if he were an
employee, could have very well enjoined other employees to
complain with the DOLE, and, at the same time, petitioner could
ill-afford to disclaim an employment relationship with all of the
people under its aegis.

Without a doubt, petitioner, since the inception of this case

had been consistent in maintaining that respondent is not its
employee. Certainly, a preliminary determination, based on the
evidence offered, and noted by the Labor Inspector during the
inspection as well as submitted during the proceedings before the
Regional Director puts in genuine doubt the existence of
employer-employee relationship. From that point on, the prudent
recourse on the part of the DOLE should have been to
refer respondent to the NLRC for the proper dispensation of his
claims. Furthermore, as discussed earlier, even the evidence
relied on by the Regional Director in his order are mere selfserving declarations of respondent, and hence cannot be relied
upon as proof of employer-employee relationship.
III.

Aside from lack of jurisdiction, there is another cogent

reason to to set aside the Regional Directors 27 February
2004 Order. A careful study of the case reveals that the said
Order, which found respondent as an employee of petitioner and
directed the payment of respondents money claims, is not
supported by substantial evidence, and was even made in
disregard of the evidence on record.

It is not enough that the evidence be simply considered. The

standard is substantial evidence as in all other quasi-judicial

agencies. The standard employed in the last sentence of Article

128(b) of the Labor Code that the documentary proofs be
considered in the course of inspection does not apply. It applies
only to issues other than the fundamental issue of existence of
employer-employee relationship. A contrary rule would lead to
controversies on the part of labor officials in resolving the issue of
employer-employee relationship. The onset of arbitrariness is the
advent of denial of substantive due process.

As a general rule, the Supreme Court is not a trier of facts.

This applies with greater force in cases before quasi-judicial
agencies whose findings of fact are accorded great respect and
even finality. To be sure, the same findings should be supported
by substantial evidence from which the said tribunals can make
its own independent evaluation of the facts. Likewise, it must not
be rendered with grave abuse of discretion; otherwise, this Court
will not uphold the tribunals conclusion. [20] In the same manner,
this Court will not hesitate to set aside the labor tribunals findings
of fact when it is clearly shown that they were arrived at
arbitrarily or in disregard of the evidence on record or when there
is showing of fraud or error of law.[21]

At the onset, it is the Courts considered view that the

existence of employer- employee relationship could have been
easily resolved, or at least prima facie determined by the labor
inspector, during the inspection by looking at the records of
petitioner which can be found in the work premises. Nevertheless,
even if the labor inspector had noted petitioners manifestation
and documents in the Notice of Inspection Results, it is clear that
he did not give much credence to said evidence, as he did not
find the need to investigate the matter further. Considering that
the documents shown by petitioner, namely: cash vouchers,
checks and statements of account, summary billings evidencing

payment to the alleged real employer of respondent, lettercontracts denominated as Employment for a Specific
Undertaking, prima facie negate the existence of employeremployee relationship, the labor inspector could have exerted a
bit more effort and looked into petitioners payroll, for example, or
its roll of employees, or interviewed other employees in the
premises. After all, the labor inspector, as a labor regulation
officer is given access to employers records and premises at any
time of day or night whenever work is being undertaken therein,
and the right to copy therefrom, to question any employee and
investigate any fact, condition or matter which may be necessary
to determine violations or which may aid in the enforcement of
this Code and of any labor law, wage order or rules and
regulations pursuant thereto.[22] Despite these far-reaching powers
of labor regulation officers, records reveal that no additional
efforts were exerted in the course of the inspection.

The Court further examined the records and discovered to its

dismay that even the Regional Director turned a blind eye to the
evidence presented by petitioner and relied instead on the selfserving claims of respondent.

In his position paper, respondent claimed that he was hired by

petitioner in September 1996 as a radio talent/spinner, working
from 8:00 am until 5 p.m., six days a week, on a gross rate
of P60.00 per script, earning an average of P15,0000.00 per
month, payable on a semi-monthly basis. He added that the
payment of wages was delayed; that he was not given any
service incentive leave or its monetary commutation, or his
13th month pay; and that he was not made a member of the Social
Security System (SSS), Pag-Ibig and PhilHealth. By January 2001,
the number of radio programs of which respondent was a
talent/spinner was reduced, resulting in the reduction of his

monthly income fromP15,000.00 to only P4,000.00, an amount he

could barely live on. Anent the claim of petitioner that no
employer-employee relationship ever existed, respondent argued
that that he was hired by petitioner, his wages were paid under
the payroll of the latter, he was under the control of petitioner and
its agents, and it was petitioner who had the power to dismiss him
from his employment.[23] In support of his position paper,
respondent attached a photocopy of an identification card
purportedly issued by petitioner, bearing respondents picture and
name with the designation Spinner; at the back of the I.D., the
following is written: This certifies that the card holder is a duly
Authorized MEDIA Representative of BOMBO RADYO PHILIPPINES
THE NO.1 Radio Network in the Country ***BASTA RADYO
BOMBO***[24] Respondent likewise included a Certification which
reads:
This is to certify that MR. JANDELEON JUEZAN is a program
employee of PEOPLES BROADCASTING SERVICES, INC.
(DYMF- Bombo Radyo Cebu) since 1990 up to the present.
Furtherly certifies that Mr. Juezan is receiving a monthly
salary of FIFTEEN THOUSAND (P15,000.00) PESOS.
This certification is issued upon the request of the above
stated name to substantiate loan requirement.
Given this 18th day of April 2000, Cebu City , Philippines.
(signed)
GREMAN B. SOLANTE
Station Manager

On the other hand, petitioner maintained in its position

paper that respondent had never been its employee. Attached as
annexes to its position paper are photocopies of cash vouchers it
issued to drama producers, as well as letters of employment

captioned Employment for a Specific Undertaking, wherein

respondent was appointed by different drama directors as
spinner/narrator for specific radio programs. [25]

In his Order, the Regional Director merely made a passing

remark on petitioners claim of lack of employer-employee
relationshipa token paragraphand proceeded to a detailed
recitation
of
respondents
allegations.
The
documents
introduced by petitioner in its position paper and even those
presented during the inspection were not given an iota of
credibility. Instead, full recognition and acceptance was accorded
to the claims of respondentfrom the hours of work to his monthly
salary, to his alleged actual duties, as well as to his alleged
evidence. In fact, the findings are anchored almost verbatim on
the self-serving allegations of respondent.

Furthermore, respondents pieces of evidencethe identification

card and the certification issued by petitioners Greman Solante
are not even determinative of an employer-employee
relationship. The certification, issued upon the request of
respondent, specifically stated that MR. JANDELEON JUEZAN is a
program employee of PEOPLES BROADCASTING SERVICES, INC.
(DYMF- Bombo Radyo Cebu), it is not therefore crystal clear that
complainant is a station employee rather than a program
employee hence entitled to all the benefits appurtenant thereto,
[26]
as found by the DOLE Regional Director. Respondent should be
bound by his own evidence. Moreover, the classification as to
whether one is a station employee and program employee, as

lifted from Policy Instruction No. 40, [27] dividing the workers in the
broadcast industry into only two groups is not binding on this
Court, especially when the classification has no basis either in law
or in fact.[28]

Even the identification card purportedly issued by petitioner is

not proof of employer-employee relationship since it only
identified respondent as an Authorized Representative of Bombo
Radyo, and not as an employee. The phrase gains significance
when compared vis a vis the following notation in the sample
identification cards presented by petitioner in its motion for
reconsideration:
1.

This is to certify that the person whose picture

and signature appear hereon is an employee of
Bombo Radio Philippines.

2.

This ID must be worn at all times within Bombo

Radyo Philippines premises for proper identification
and security. Furthermore, this is the property of
Bombo
Radyo Philippines andmust
be
surrendered upon separation from the company.

HUMAN RESOURCE DEPARMENT

(Signed)
JENALIN D. PALER
HRD HEAD

Respondent tried to address the discrepancy between

his identification card and the standard identification cards issued
by petitioner to its employees by arguing that what he annexed to
his position paper was the old identification card issued to him by
petitioner. He then presented a photocopy of another old
identification card, this time purportedly issued to one of the
employees who was issued the new identification card presented
by petitioner.[29] Respondents argument does not convince. If it
were true that he is an employee of petitioner, he would have
been issued a new identification card similar to the ones
presented by petitioner, and he should have presented a copy of
such new identification card. His failure to show a new
identification card merely demonstrates that what he has is only
his Media ID, which does not constitute proof of his employment
with petitioner.

It has long been established that in administrative and quasijudicial proceedings, substantial evidence is sufficient as a basis
for judgment on the existence of employer-employee
relationship. Substantial evidence, which is the quantum of proof
required in labor cases, is that amount of relevant evidence which
a reasonable mind might accept as adequate to justify a
conclusion.[30] No particular form of evidence is required to prove
the existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may
be admitted.[31] Hence, while no particular form of evidence is
required, a finding that such relationship exists must still rest on
some substantial evidence. Moreover, the substantiality of the
evidence
depends
on
its
quantitative
as
well
as
[32]
its qualitative aspects.

In the instant case, save for respondents self-serving

allegations and self-defeating evidence, there is no substantial
basis to warrant the Regional Directors finding that respondent is

an employee of petitioner. Interestingly, the Order of the

Secretary of Labor denying petitioners appeal dated 27 January
2005, as well as the decision of the Court of Appeals dismissing
the petition for certiorari, are silent on the issue of the existence
of an employer-employee relationship, which further suggests that
no real and proper determination the existence of such
relationship was ever made by these tribunals. Even the dissent
skirted away from the issue of the existence of employeremployee relationship and conveniently ignored the dearth of
evidence presented by respondent.

Although substantial evidence is not a function of quantity but

rather of quality, the peculiar environmental circumstances of the
instant case demand that something more should have been
proffered.[33] Had there been other proofs of employment, such as
respondents inclusion in petitioners payroll, or a clear exercise of
control, the Court would have affirmed the finding of employeremployee
relationship. The
Regional
Director,
therefore,
committed grievous error in ordering petitioner to answer for
respondents claims.Moreover, with the conclusion that no
employer-employee relationship has ever existed between
petitioner and respondent, it is crystal-clear that the DOLE
Regional Director had no jurisdiction over respondents
complaint. Thus, the improvident exercise of power by the
Secretary of Labor and the Regional Director behooves the court
to subject their actions for review and to invalidate all the
subsequent orders they issued.

IV.

The records show that petitioners appeal was denied because it

had allegedly failed to post a cash or surety bond. What it
attached
instead
to
its
appeal
was
the Letter
[34]
Agreement
executed by petitioner and its bank, the cash
[35]
voucher,
and the Deed of Assignment of Bank Deposits.
[36]
According to the DOLE, these documents do not constitute the
cash or surety bond contemplated by law; thus, it is as if no cash
or surety bond was posted when it filed its appeal.

The Court does not agree.

The provision on appeals from the DOLE Regional Offices to the

DOLE Secretary is in the last paragraph of Art. 128 (b) of the
Labor Code, which reads:
An
order
issued
by
the
duly
authorized
representative of the Secretary of Labor and Employment
under this article may be appealed to the latter. In case
said order involves a monetary award, an appeal by
the employer may be perfected only upon the
posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the
Secretary of Labor and Employment in the amount
equivalent to the monetary award in the order
appealed from. (emphasis supplied)

While the requirements for perfecting an appeal must be

strictly followed as they are considered indispensable interdictions
against needless delays and for orderly discharge of judicial
business, the law does admit exceptions when warranted by the
circumstances. Technicality should not be allowed to stand in the

way of equitably and completely resolving the rights and

obligations of the parties. [37] Thus, in some cases, the bond
requirement on appeals involving monetary awards had been
relaxed, such as when (i) there was substantial compliance with
the Rules; (ii) the surrounding facts and circumstances constitute
meritorious ground to reduce the bond; (iii) a liberal interpretation
of the requirement of an appeal bond would serve the desired
objective of resolving controversies on the merits; or (iv) the
appellants, at the very least exhibited their willingness and/or
good faith by posting a partial bond during the reglementary
period.[38]

A review of the documents submitted by petitioner is called for to

determine whether they should have been admitted as or in lieu
of the surety or cash bond to sustain the appeal and serve the
ends of substantial justice.

The Deed of Assignment reads:

DEED OF ASSIGNMENT OF BANK DEPOSIT
WITH SPECIAL POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That I, GREMAN B. SOLANTE in my capacity as Station

Manager of DYMF Cebu City, PEOPLES BROADCASTING
SERVICES, INC., a corporation duly authorized and
existing under and by virtue of the laws of the
Philippines, for and in consideration of the sum of
PESOS: TWO HUNDRED THREE THOUSAND SEVEN

HUNDRED TWENTY SIX PESOS & 30/100 ONLY

(P203,726.30)
Phil.
Currency,
as
CASH
BOND
GUARANTEE for the monetary award in favor to the
Plaintiff in the Labor Case docketed as LSED Case No.
R0700-2003-09-CI-09, now pending appeal.

That Respondent-Appellant do hereby undertake to

guarantee available and sufficient funds covered by
Platinum Savings Deposit (PSD) No. 010-8-00038-4
of PEOPLES BROADCASTING SERVICES, INC. in the
amount of PESOS: TWO HUNDRED THREE THOUSAND
SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY
(P203,726.30) payable to Plaintiff-Appellee/Department
of Labor and Employment Regional Office VII at Queen
City Development Bank, Cebu Branch, Sanciangko St.
Cebu City.

It is understood that the said bank has the full control of

Platinum Savings Deposit (PSD) No. 010-8-00038-4 from
and after this date and that said sum cannot be
withdrawn by the Plaintiff-Appellee/ Department of Labor
and Employment Regional Office VII until such time that
a Writ of Execution shall be ordered by the Appellate
Office.

FURTHER, this Deed of Assignment is limited to the

principal amount of PESOS: TWO HUNDRED THREE
THOUSAND SEVEN HUNDRED TWENTY SIX PESOS &
30/100 ONLY (P203,726.30) Phil. Currency, therefore,
any interest to be earned from the said Deposit will be
for the account holder.

IN WITNESS WHEREOF, I have hereunto affixed my

signature this 18th day if June, 2004, in the City of Cebu,
Philippines.

PEOPLES BROADCASTING SERVICES, INC.

By:

(Signed)
GREMAN B. SOLANTE
Station Manager

As priorly mentioned, the Deed of Assignment was accompanied

by a Letter Agreement between Queen City Development Bank
and petitioner concerning Platinum Savings Deposit (PSD) No.
010-8-00038-4,[39] and a Cash Voucher issued by petitioner
showing the amount of P203,726.30 deposited at the said bank.
Casting aside the technical imprecision and inaptness of words
that mark the three documents, a liberal reading reveals the
documents petitioner did assign, as cash bond for the monetary
award in favor of respondent in LSED Case NO. RO700-2003-CI09, the amount of P203,726.30 covered by petitioners PSD
Account No. 010-8-00038-4 with the Queen City Development
Bank at Sanciangko St. Cebu City, with the depositary bank
authorized to remit the amount to, and upon withdrawal by
respondent
and
or
the
Department
of
Labor
and
Employment Regional Office VII, on the basis of the proper writ of
execution. The Court finds that the Deed of Assignment
constitutes substantial compliance with the bond requirement.

The purpose of an appeal bond is to ensure, during the

period of appeal, against any occurrence that would defeat or

diminish recovery by the aggrieved employees under the

judgment if subsequently affirmed. [40] The Deed of Assignment in
the instant case, like a cash or surety bond, serves the same
purpose. First, the Deed of Assignment constitutes not just a
partial amount, but rather the entire award in the appealed
Order. Second, it is clear from the Deed of Assignment that the
entire amount is under the full control of the bank, and not of
petitioner, and is in fact payable to the DOLE Regional Office, to
be withdrawn by the same office after it had issued a writ of
execution. For all intents and purposes, the Deed of Assignment in
tandem with the Letter Agreement and Cash Voucher is as good
as cash. Third, the Court finds that the execution of the Deed of
Assignment, the Letter Agreement and the Cash Voucher were
made in good faith, and constituted clear manifestation of
petitioners willingness to pay the judgment amount.

The Deed of Assignment must be distinguished from the type

of bank certification submitted by appellants in Cordova v. Keysas
Boutique,[41] wherein this Court found that such bank certification
did not come close to the cash or surety bond required by law.
The bank certification in Cordova merely stated that the employer
maintains a depository account with a balance of P23,008.19, and
that the certification was issued upon the depositors request for
whatever legal purposes it may serve. There was no indication
that the said deposit was made specifically for the pending
appeal, as in the instant case. Thus, the Court ruled that the bank
certification had not in any way ensured that the award would be
paid should the appeal fail. Neither was the appellee in the case
prevented from making withdrawals from the savings account.
Finally, the amount deposited was measly compared to the total
monetary award in the judgment.[42]

V.

Another question of technicality was posed against the instant

petition in the hope that it would not be given due
course. Respondent asserts that petitioner pursued the wrong
mode of appeal and thus the instant petition must be
dismissed. Once more, the Court is not convinced.

A petition for certiorari is the proper remedy when any

tribunal, board or officer exercising judicial or quasi-judicial
functions has acted without or in excess of its jurisdiction, or with
grave abuse of discretion amounting to lack or excess of
jurisdiction and there is no appeal, nor any plain speedy, and
adequate remedy at law. There is grave abuse of discretion when
respondent acts in a capricious or whimsical manner in the
exercise of its judgment as to be equivalent to lack of jurisdiction.
[43]

Respondent may have a point in asserting that in this case

a Rule 65 petition is a wrong mode of appeal, as indeed the writ of
certiorari is an extraordinary remedy, and certiorari jurisdiction is
not to be equated with appellate jurisdiction. Nevertheless, it is
settled, as a general proposition, that the availability of an appeal
does not foreclose recourse to the extraordinary remedies, such
as certiorari and prohibition, where appeal is not adequate or
equally beneficial, speedy and sufficient, as where the orders of
the trial court were issued in excess of or without jurisdiction, or
there is need to promptly relieve the aggrieved party from the
injurious effects of the acts of an inferior court or tribunal, e.g.,
the court has authorized execution of the judgment. [44] This Court
has even recognized that a recourse to certiorari is proper not
only where there is a clear deprivation of petitioners fundamental
right to due process, but so also where other special
circumstances warrant immediate and more direct action. [45]

In one case, it was held that the extraordinary writ of

certiorari will lie if it is satisfactorily established that the tribunal
acted capriciously and whimsically in total disregard of evidence
material to or even decisive of the controversy, [46] and if it is
shown that the refusal to allow a Rule 65 petition would result in
the infliction of an injustice on a party by a judgment that
evidently was rendered whimsically and capriciously, ignoring and
disregarding uncontroverted facts and familiar legal principles
without any valid cause whatsoever. [47]

It must be remembered that a wide breadth of discretion is

granted a court of justice in certiorari proceedings. [48] The Court
has not too infrequently given due course to a petition for
certiorari, even when the proper remedy would have been an
appeal, where valid and compelling considerations would warrant
such a recourse.[49] Moreover, the Court allowed a Rule 65
petition,
despite
the
availability
of plain,
speedy
or
adequate remedy, in view of the importance of the issues raised

therein.[50] The rules were also relaxed by the Court after

considering the public interest involved in the case; [51] when
public welfare and the advancement of public policy dictates;
when the broader interest of justice so requires; when the writs
issued are null and void; or when the questioned order amounts
to an oppressive exercise of judicial authority. [52]
The peculiar circumstances of this case warrant, as we held
in Republic v. Court of Appeals, 107 SCRA 504, 524, the exercise
once more of our exclusive prerogative to suspend our own rules

or to exempt a particular case from its operation as in x

x Republic of the Philippines v. Court of Appeals, et al., (83 SCRA
453, 478-480 [1978]), thus: x x The Rules have been drafted with
the primary objective of enhancing fair trials and expediting
justice. As a corollary, if their applications and operation tend to
subvert and defeat instead of promote and enhance it, their
suspension is justified.[53]

The Regional Director fully relied on the self-serving

allegations of respondent and misinterpreted the documents
presented as evidence by respondent. To make matters worse,
DOLE denied petitioners appeal based solely on petitioners
alleged failure to file a cash or surety bond, without any
discussion on the merits of the case. Since the petition for
certiorari before the Court of Appeals sought the reversal of the
two aforesaid orders, the appellate court necessarily had to
examine the evidence anew to determine whether the
conclusions of the DOLE were supported by the evidence
presented. It appears, however, that the Court of Appeals did not
even review the assailed orders and focused instead on a general
discussion of due process and the jurisdiction of the Regional
Director. Had the appellate court truly reviewed the records of the
case, it would have seen that there existed valid and sufficient
grounds for finding grave abuse of discretion on the part of the
DOLE Secretary as well the Regional Director. In ruling and acting
as it did, the Court finds that the Court of Appeals may be
properly subjected to its certiorari jurisdiction. After all, this Court
has
previously
ruled
that the extraordinary writ of certiorari willlie if it is satisfactorily
established that the tribunal had acted capriciously and
whimsically in total disregard of evidence material to or even
decisive of the controversy.[54]

The most important consideration for the allowance of the

instant petition is the opportunity for the Court not only to
set the demarcation between the NLRCs jurisdiction and
the DOLEs prerogative but also the procedure when the
case involves the fundamental challenge on the DOLEs
prerogative based on lack of employer-employee
relationship. As exhaustively discussed here, the DOLEs
prerogative hinges on the existence of employer-employee
relationship, the issue is which is at the very heart of this
case. And
the
evidence
clearly
indicates
private
respondent has never been petitioners employee. But the
DOLE did not address, while the Court of Appeals glossed
over, the issue. The peremptory dismissal of the instant
petition on a technicality would deprive the Court of the
opportunity to resolve the novel controversy.

WHEREFORE, the petition is GRANTED. The Decision dated 26

October 2006 and the Resolution dated 26 June 2007 of the Court
of Appeals in C.A. G.R. CEB-SP No. 00855 are REVERSED and SET
ASIDE. The Order of the then Acting Secretary of the Department
of
Labor and Employment dated 27 January 2005 denying petitioner
s
appeal, and the Orders of the Director, DOLE Regional Office No.
VII, dated 24 May 2004 and 27 February 2004, respectively,
are ANNULLED. The complaint against petitioner is DISMISSED.

SO ORDERED.

DANTE O. TINGA
Associate Justice

WE CONCUR:

G.R. No. L-14183

November 28, 1959

BENEDICTO DINGLASAN, petitioner,

vs.
NATIONAL LABOR UNION, respondent.
Rafael Dinglasan for petitioner.
Eulogio R. Lerum for respondent.
BARRERA, J.:
This is a petition to review the decision of the Court of Industrial Relations of February 27, 1958 (in
Case No. 3ULP), finding the petitioner guilty of unfair labor practice under the Industrial Peace
Act.1
On June 30, 1953, the respondent union filed with the above-mentioned court a complaint for
alleged unfair labor practice committed by the petitioner, in that he locked out from employment 46
drivers, members of the respondent union, on June 27, 1953.
Before filing his answer, the petitioner asked for the dismissal of the complaint on the grounds that
the court had no jurisdiction over the person of the petitioner and the subject matter of the action,
and the respondent union was not the real party in interest. The petitioner claimed that there existed
no employer-employee relationship between the petitioner and the drivers, members of the
respondent union, the relationship being one of lessor and lessee only, as the jeeps being used by
the said drivers were rented out by the petitioner under the so-called "boundary system". The motion
was denied by the court in its order of February 16, 1954, but on petitioner's motion for
reconsideration, the court, en banc, in its resolution of June 23, 1954, unanimously reconsidered its
first order and finally declared that there was no employer-employee relationship between the
parties.
The respondent union appealed to this Court, and on March 23, 1956, we rendered a decision (in G.
R. No. L-7945) * reversing the said resolution and holding that an employer-employee relationship
existed between the parties. The said decision became final on May 29, 1956.

In view of the decision of this Court, the petitioner, on June 4, 1957, filed in the court a quo his
answer to the complaint of June 30, 1953, denying (1) the legitimacy of the respondent union, and
(2) the charge unfair labor practice, claiming that he acted in good faith based on his honest belief
that he was not an employer of the drivers, members of the respondent union, but only a lessor of
his jeepneys.
Thereafter, the case was heard, and on February 27, 1958, the court rendered a decision, as
follows:
It would appear that the main question at issue is whether the respondent has committed the
charges alleged in the complaint.
According to the complaint, the respondent had knowledge of the formation of a union on
June 26, 1953 and respondent upon learning the same decided on dismissing all the driver
members because he did not want to have a union within his company. This Particular union,
it turned out, was a chapter or affiliate of the complainant union which was organized
sometime on June 24, 1953. On June 27, 1953, the respondent dismissed the drivers
appearing in the complaint by refusing them the use of the jeepneys regularly assigned to
them.
On the other hand, respondent claims otherwise. The respondent, it is alleged fearing that a
strike might be called by the drivers decided on not renting out the jeepneys on said date,
June 27, 1953.
Based on the versions submitted in evidence by the parties, it is clear that the respondent
engaged in the unfair labor practice charged in the complaint, amounting to a virtual lockout
of his employee drivers, hence constituting discrimination under Republic Act No. 875. As the
records of this case disclose, the act of locking out committed by respondent was made
without the required notice and no collective bargaining negotiation were ever made. The
mere suspicion by respondent, that a strike might be called by the union, is no justification
for such an act.
We hold therefore, the respondent guilty of the unfair labor practices in the complaint.
However, there are certain aspects of this case which merit consideration. It has been
contended by respondent, since the beginning of this case, that he is not the employer of the
drivers listed in the complaint and had honestly acted under the such belief. This very Court
itself, unanimously were of the same opinion that there was no employer-employee
relationship. In the application of the affirmative reliefs granted by the law, this good faith the
respondent must be taken into consideration in those portions where the law allows this
Court to use it sound discretion and judgment. And the particular portion we have in mind in
Section 5 of Republic Act No. 875.
Furthermore, it appears that some of the drivers listed in the complaint have neither to
returned to work or are already working elsewhere and there is a need for further
proceedings in this respect.
IN VIEW OF THE FOREGOING, this Court hereby orders the respondent:
(1) To cease and desist from further committing the unfair labor practices complained of;

(2) To reinstate the drivers listed in the complaint, except those who have been already
reinstated;
(3) To pay back wages to all drivers listed in the complaint, but in the exercise of the Court's
discretion said back wages shall commence only from May 29. 1956, based on the minimum
daily wage of P4.00, deducting therefrom and from said date the period when said drivers
have found substantially equivalent and regular employment for themselves, for which
reason further hearings shall be had for the sole purpose of determining the respective
amount of back wages due each driver up to the time they are actually re-employed by
respondent.
SO ORDERED.
On March 8, 1958, petitioner filed a motion for reconsidering which was denied by the court in its
resolution en banc, of July 30, 1958. hence, this petition for review.
It is the contention of responding union that petitioner, upon learning that his drivers had formed a
labor union among themselves, refused on June 27, 1953, to let the muse and operate the jeepneys
regularly assigned to them, which act, it is alleged, constitutes an unlawful lockout and an unfair
labor practice. The petitioner, on the other hand, claims that he did not lock out his drivers, members
of the respondent union, on June 27, 1953, as contended by them. Believing honestly that no
employer-employee relationship existed between him and them, and fearing that the drivers were
intending to declare a strike and might abandon his jeepneys in the streets of the city, he decided, as
a precautionary measure to protect his interest, to suspend their operation temporarily and consult
his attorney. Upon obtaining his counsel's advice, he immediately announced to the drivers the
following morning, June 28, that they could then take out his jeepneys. While some four or five of
them needed petitioner's request, the others refused to return to operate. Those who took advantage
of petitioner's offer had, however, to come back after a few hours because some of the drivers on
strike had admonished them to return the jeepneys and join the strike. For some days this situation
continued until on October 8, 1953, when the case was first submitted for decision, thirty-four (34) of
the forty six (46) drivers had already returned to work under the same conditions as before June 27,
1953.
We have examined the record and we are satisfied that what occurred on June 26, 1953, and the
days following was substantially as testified to by petitioner Benedicto Dinglasan and his witnesses,
three of whom are among the drivers of his Jeepneys, two (Julio Ongpin and Francisco Leao) are
completely disinterested persons, two are patrolmen, and the remaining two are his employees, as
against the sole testimony of Juanito Cruz, President of the local group of the respondent labor
union, and the essentially hear say declaration of Zosimo Yjares who claims to be the secretary of
the drivers' association.
While we agree with the lower court that the act of the petitioner in suspending the operation of his
jeepneys on June 27, is legally and technically not in consonance with the industrial Peace Act (the
court a quo termed it "a virtual lockout") so as to entitle the drivers to be reinstated nevertheless, as
the trial court correctly stated in its decision,.
there are certain aspects of this case which merit consideration. It has been contended by
respondent, since the beginning of his case, that he is not the employer of the drivers listed
in the complaint and has honestly noted under such belief. This very Court itself,
unanimously were of the same opinion that there was no employer-employee relationship. In
the application of the affirmative reliefs granted by law, this good faith of the respondent must
be taken into consideration in those portions where the law allows this court or use its sound

discretion and judgment. The particular portion we have in mind is Section 5 of Republic Act
No. 875.
In the exercise of this discretion, that is, whether the reinstatement will be with or without back pay,
aside from the fact that there was no willful violation of the Industrial Peace Act, there is an additional
circumstance that may be considered in favor of herein petitioner. As already mentioned above,
petitioner, the day following his suspension of the operation of the jeepneys, urged the drivers to
return and resume the work, notwithstanding which, the latter not only refused, but even compelled
those who did, to joint the strike. It is clear therefrom that the cassation or stoppage of the operation
after June 27, was not the direct consequence of petitioner's locking them up or of any willful unfair
or discriminatory act of the former, but the result of their (the drivers) voluntary and deliberate refusal
to return to work. Taking into account the foregoing circumstances and considering their similarity to
those in the case of Philippines marine Radio Officers' Association vs. Court of Industrial Relation et
al., 102 Phil., 373, wherein it was held that there is no reason for granting backpay if there is not
been any willful unfair labor practice or refusal of the respondent companies to admit their laborers
back to work, while the drivers members of respondent union may, in this case, be entitled to
reinstatement, we find no justification for their receiving back wage for the period that they
themselves refused to return to work.
Wherefore, the decision appealed from is accordingly modified in the sense that the reinstatement
will be without back pay. In all other respects, the same is affirmed, without costs. So ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Endencia and Gutierrez
David, JJ.,concur.

SECOND DIVISION
SAN MIGUEL CORPORATION and G.R. Nos. 146121-22
GERIBERN ABELLA,
Petitioners, Present:
QUISUMBING, J.
Chairperson,
-

versus - AUSTRIA-MARTINEZ,**

CARPIO MORALES, J.,

TINGA, and

VELASCO, JR., JJ.

NATIONAL LABOR RELATIONS
COMMISSION (First Division),
LABOR ARBITER PEDRO RAMOS Promulgated:
and ERNESTO IBIAS,
Respondents. April 16, 2008
x----------------------------------------------------------------------------x

DECISION

TINGA, J.:

In this Petition for Review on Certiorari [1] under Rule 45,

petitioners San Miguel Corporation (SMC) and Geribern Abella,
Assistant Vice President and Plant Manager of SMCs Metal Closure

and Lithography Plant, assail the Decision [2] dated 28 June 2000
and the Resolution[3] dated 17 November 2000, both of the Court
of Appeals in the consolidated cases ofErnesto M. Ibias v. National
Labor Relations Commission, et al. and San Miguel Corporation
Metal Closure and Lithography Plant, et al. v. National Labor

Relations Commission, et al., docketed as CA G.R. SP No. 54684

and CA G.R. SP No. 54709, respectively.

The factual and legal antecedents follow.

Ernesto M. Ibias (respondent) was employed by petitioner

SMC on 24 December 1978 initially as a CRO operator in its Metal
Closure and Lithography Plant. Respondent continuously worked
therein until he advanced as Zamatic operator. He was also an
active and militant member of a labor organization called Ilaw
Buklod Manggagawa (IBM)-SMC Chapter.

According to SMCs Policy on Employee Conduct, [4] absences

without permission or AWOPs, which are absences not covered
either by a certification of the plant doctor that the employee was
absent due to sickness or by a duly approved application for leave
of absence filed at least six (6) days prior to the intended leave,
are subject to disciplinary action characterized by progressively
increasing weight, as follows:

VIOLATIONS

1ST Offen
se

2nd
Offense

2. ABSENCE WITHOUT
PERMISSION (within
one calendar year)
A. Each day absent not
exceeding two (2) days

Written
warning

B. 3rd AWOP

3 Days
suspensi
on

C. 4th AWOP

5 Days

3rd Offe
nse

4th Offe
nse

5thOffen
se

suspensi
on
D. 5th AWOP

7 Days
suspensi
on

E. 6th AWOP

10 Days
suspensi
on

F. 7th AWOP

15 Days
suspensi
on

G. 8th AWOP

30 Days
suspensi
on

H. 9th AWOP

Discharg
e

3. ABSENCE WITHOUT
PERMISSION FOR SIX
(6) OR MORE
CONSECUTIVE
WORKING DAYS IS
CONSIDERED
ABANDONMENT OF
WORK

Discharg
e[5]

The same Policy on Employee Conduct also punishes

falsification of company records or documents with discharge or
termination for the first offense if the offender himself or
somebody else benefits from falsification or would have benefited
if falsification is not found on time. [6]

It appears that per company records, respondent was AWOP

on the following dates in 1997: 2, 4 and 11 January; 26, 28 and 29
April; and 5, 7, 8, 13, 21, 22, 28 and 29 May. For his absences on

2, 4 and 11 January and 28 and 29 April, he was given a written

warning[7] dated 9 May 1997 that he had already incurred five (5)
AWOPs and that further absences would be subject to disciplinary
action. For his absences on 28 and 29 April and 7 and 8 May,
respondent was alleged to have falsified his medical consultation
card by stating therein that he was granted sick leave by the
plant clinic on said dates when in truth he was not.

In a Notice to Explain dated 20 May 1997,[8] respondent was

required to state in writing why he should not be subject to
disciplinary action for falsifying his medical consultation
card. On 29 May 1997, he was sent a telegram[9] asking him to
explain why he should not be disciplined for not reporting for work
since 26 May 1997. Respondent did not comply with these
notices. He was again issued two Notices to Explain [10] both
dated 3 June 1997, one for his AWOPs from 26 May to 2 June
1997 and another for falsification of medical consultation card
entries for 28 April and 8 May 1997.

On 5 June 1997, respondent submitted a handwritten

explanation to the charges, to wit: Tungkol po sa ibinibintang po
ninyong [sic] sa akin na falsification of medical consultation
card ito po hindi ko magagawa at sa mga araw na hindi ko po
ipinasok ito po ay may kaukulang supporting paper[s].[11]

Not satisfied with the explanation, SMC conducted an

administrative investigation on 17 and 23 June 1997.[12]

During the investigation, respondent admitted that he was

absent on 28 and 29 April and 7 and 8 May 1997 and had not
sought sick leave permission for those dates, and also denied
falsifying or having had anything to do with the falsification of his
medical consultation card.

Ferdinand Siwa (Siwa), staff assistant, and Dr. Angelito

Marable (Marable), retainer-physician, testified for SMC.

Siwa testified that sometime in May 1997, he called

respondents attention to AWOPs he incurred on 28 and 29
April. He admitted having given respondent a written warning for
his absences on 2, 4 and 11 January and on 28 and 29
April. Respondent admitted his absences on 28 and 29 April but
reasoned that he was on sick leave on those dates, producing his
medical consultation card from his locker to prove the same. Siwa
was surprised that the medical consultation card was in
respondents possession since this should have been in the rack
beside the plant clinic. His medical consultation showed that he
was purportedly granted sick leave for 28 and 29 April. However,
upon verification with the plant clinic, Siwa found that respondent
was not granted sick leaves on those dates. When Siwa
confronted
respondent
about
the
falsification,
respondent allegedly replied that he resorted to falsification to
cover up his AWOPs which he was forced to incur because of
personal problems.

Marable testified that sometime in May 1997, he together

with the plant nurse and Siwa counter-checked respondents sick
leaves with the daily personnel leave authority report. The

examination revealed that the clinic had not granted any sick
leave on 28 and 29 April and 7 and 8 May 1997. On 16 June 1997,
when respondent came to him for consultation, Marable
confronted respondent about the falsified entries in his medical
consultation card, but respondent only explained that he had
been having a lot of problems.

After the completion of the investigation, SMC concluded

that respondent committed the offenses of excessive AWOPs and
falsification of company records or documents, and accordingly
dismissed him.[13]

On 30 March 1998, respondent filed a complaint for illegal

dismissal against SMC and Geribern Abella, assistant vice
president and plant manager of the Metal Closure and
Lithography Plant. On 2 September 1998, Acting Executive Labor
Arbiter Pedro C. Ramos rendered his Decision, [14] finding
respondent to have been illegally dismissed and ordering his
reinstatement and payment of full backwages, benefits and
attorneys fees.[15]

The labor arbiter believed that respondent had committed

the absences pointed out by SMC but found the imposition of
termination of employment based on his AWOPs to be
disproportionate since SMC failed to show by clear and convincing
evidence that it had strictly implemented its company policy on
absences. It found nothing in the records that would show that
respondent was suspended for his previous AWOPs before he was
meted the maximum penalty of discharge from service and thus,
it ruled that management was to be blamed for the non-

implementation of and lax compliance with the policy. It also

noted that termination based on the alleged falsification of
company records was unwarranted in view of SMCs failure to
establish respondents guilt. It observed that the medical card was
under the care of Siwa and thus it was he who should be
responsible for its loss and the insertion of falsified entries
therein.

SMC appealed the decision to the National Labor Relations

Commission (NLRC) on 13 November 1998. On 31 March 1999,
the NLRC First Division affirmed with modification the decision of
the labor arbiter.[16] The NLRC found that there was already a
strained relationship between the parties such that reinstatement
was no longer feasible, so instead it granted separation pay
equivalent to one (1) month for every year of service. It also
deleted the award of attorneys fees.[17]

The NLRC, on 30 June 1999, denied the parties respective

motions for reconsideration of its decision.

On 2 September 1999, respondent filed a special civil action

for certiorari assailing the NLRC decision and resolution. SMC filed
its petition for certiorari on 3 September 1999. The cases were
consolidated.

On 28 June 2000, the Court of Appeals rendered its Decision

affirming the findings of the labor arbiter and the NLRC relative to
the illegality of respondents dismissal but modifying the monetary
award. The dispositive portion of the decision reads:

WHEREFORE, the decision of the public respondent modifying

the decision of the labor arbiter is SET ASIDE and the decision of the
labor arbiter is hereby REINSTATED with the modification that the
payment of the full backwages and other benefits would be from 2
July 1997 up to 14 October 1998.

SO ORDERED.[18]

The Court of Appeals believed that contrary to SMCs claims,

it was more consistent with human experience that respondent
did not make an admission, especially in view of his consistent
denials during the administrative investigation and of his written
explanation dated 5 June 1997. The Court of Appeals also
stayed firm in its determination that the testimonies of Marable
and Siwa could not be given weight as they were uncorroborated,
and that it was Siwa who was liable for the falsification of
respondents consultation card.

The appellate court also held that respondents AWOPs did

not warrant his dismissal in view of SMCs inconsistent
implementation of its company policies. It could not understand
why respondent was given a mere warning for his absences on 28
and 29 April which constituted his 5 th and 6th AWOPs, respectively,
when these should have merited suspension under SMCs
policy. According to the appellate court, since respondent was
merely warned, logically said absences were deemed committed
for the first time; thus, it follows that the subject AWOPs did not
justify his dismissal because under SMCs policy, the 4th to
9th AWOPs are meted the corresponding penalty only when
committed for the second time.

The Court of Appeals, however, disagreed with the NLRCs

application of the doctrine of strained relations, citing
jurisprudence[19] that the same should be strictly applied so as not
to deprive an illegally dismissed employee of his right to
reinstatement, and that since every labor dispute almost always
results in strained relations, the phrase cannot be given an overarching interpretation.[20] Thus, it ordered that respondents
backwages be computed from the date of his dismissal up to the
time when he was actually reinstated. Since respondent was
placed on payroll reinstatement on 15 October 1998, he should be
awarded backwages from 2 July 1997 up to 14 October 1998.

Both parties separately moved for reconsideration of the

decision but the Court of Appeals denied the motions for lack of
merit in the Resolution dated 17 November 2000.

In this present petition for review, SMC raises the following

grounds:
A.

THE COURT OF APPEALS DECIDED THE CASES IN A WAY NOT IN

ACCORD WITH LAW AND THE APPLICABLE DECISIONS OF THE
SUPREME COURT, AND IN VIOLATION OF THE ACCEPTED RULES ON
EVIDENCE AND USUAL COURSE OF JUDICIAL PROCEEDINGS.

B.

THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE

ABSENCES OF IBIAS ON 28TH AND 29TH OF APRIL 1997 WERE

COMMITTED FOR THE FIRST TIME.SUCH FINDING IS GROUNDED

ENTIRELY ON SPECULATION AND CONJECTURE AND A RESULT OF A
MANIFESTLY ABSURD INFERENCE.[21]

On the first ground, SMC contends that the Court of Appeals

allegedly disregarded the basic rule on evidence that affirmative
testimony is stronger than negative testimony. It claims that
the testimonies of Marable and Siwa that respondent admitted
having committed the falsification should be given more weight
than his mere denial. SMC adds that the falsified medical
consultation card by itself proves respondents falsification of the
card. The fact that he used the falsified consultation card to
falsely represent that he had been granted sick leave on 28 and
29 April and 7 and 8 May 1997 is sufficient to hold him liable for
falsification,
SMC
adds. Further,
SMC
argues
that
respondentspossession of the falsified consultation card also
raises the presumption that he is the author of the falsification.

On the second ground, SMC points out respondents absences

on 28 and 29 April 1997 were his 5th and 6th AWOPs, respectively,
and following the Court of Appeals ruling, the same should have
been meted the penalty of five (5) days suspension for the
5th AWOP and 10 days suspension for the 6 th AWOP under SMCs
Policy on Employee Conduct. Respondent incurred fourteen (14)
AWOPs but when SMC imposed the penalty of discharge, the
Court of Appeals disagreed since SMC had supposedly failed to
strictly implement its company policy on attendance. Such
reasoning would have respondents AWOPs justified by SMCs lax
implementation of disciplinary action on its employees, and would
place on SMC the burden of proving strict conformity with
company rules. SMC argues that this is contrary to the ruling
in Cando v. NLRC[22] that it should be the employee who must

show proof of condonation by the employer of the offense or

laxity in the enforcement of the company rules since it is he who
has raised this defense.

SMC directs our attention to the Court of Appeals

observation that Ibias 5th and 6th AWOPs should be considered as
though said absences were committed for the first time since
respondent was merely given a warning for said AWOPs. To SMC,
it seems that that the appellate court would count the employees
AWOPs not on the basis of the number of times that he had been
absent, but on the basis of the penalty imposed by the
employee. This is clearly contrary to the dictates of the
Policy. Such a ruling also deprives SMC of its management
prerogative to impose sanctions lighter than those specifically
prescribed by its rules.
The issues to be resolved are whether the Court of Appeals
erred in sustaining the findings of the labor arbiter and the NLRC
and in dismissing SMCs claims that respondent was terminated
from service with just cause.

The petition is meritorious as regards one of the issues.

At the outset, it should be stressed that whether respondent

had falsified his medical consultation card and whether he

incurred unauthorized absences are questions of fact which the

Court of Appeals, the NLRC, and the labor arbiter had already
resolved. We see no reason to disturb the same. After all, findings
of fact of the Court of Appeals, particularly where it is in absolute
agreement with that of the NLRC and the Labor Arbiter, as in this
case, are accorded not only respect but even finality and are
deemed binding upon this Court so long as they are supported by
substantial evidence.[23] Nevertheless, while the Court subscribes
to the factual findings of the lower tribunals, it finds that these
tribunals misapplied the appropriate law and jurisprudence on the
issue of respondents dismissal due to his unauthorized
absences. But first the falsification issue.

The settled rule in administrative and quasi-judicial

proceedings is that proof beyond reasonable doubt is not required
in determining the legality of an employers dismissal of an
employee, and not even a preponderance of evidence is
necessary as substantial evidence is considered sufficient.
Substantial evidence is more than a mere scintilla of evidence or
relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds, equally
reasonable, might conceivably opine otherwise. Thus, substantial
evidence is the least demanding in the hierarchy of evidence. [24]

The Court agrees with the tribunals below that SMC was unable to
prove
the
falsification
charge
against
respondent.
Respondent cannot be legally dismissed on the basis of the
uncorroborated
and
self-serving testimonies
of
SMCs
employees. SMC merely relied on the testimonies of Marabe and
Siwa, who both stated that respondent admitted to them that he
falsified his medical consultation card to cover up his excessive

AWOPs. For his part, respondent denied having had any

knowledge of said falsification, both in his testimony during the
company-level
investigation
and
in
his
handwritten
explanation. He did not even claim that he had requested for, nor
had been granted any sick leave for the days that the falsified
entries were made. Siwa, being responsible for the medical cards,
should take the blame for the loss and alleged tampering thereof,
and not respondent who had no control over the same.

Proof beyond reasonable doubt is not required as a basis for

judgment on the legality of an employers dismissal of an
employee, nor even preponderance of evidence for that matter,
substantial evidence being sufficient. In the instant case, while
there may be no denying that respondents medical card had
falsified entries in it, SMC was unable to prove, by substantial
evidence, that it was respondent who made the unauthorized
entries. Besides,
SMCs
(Your)
Guide
on
Employee
[25]
Conduct
punishes the act of falsification of company records or
documents; it does not punish mere possession of a falsified
document.

The issue of the unauthorized absences, however, is another

matter.

Respondents time cards showed that he was on AWOP on the

dates enumerated by SMC: 2, 4 and 11 January; 26, 28 and 29
April; and 5, 7, 8, 13, 21, 22, 28 and 29 May 1997. The Labor
Arbiter even found that respondent was on AWOP on all said
dates.[26] Respondent also admitted being absent on 28 and 29
April and 7 and 8 May 1997. For each of the periods of 1 to 15

January 1997 and 16 to 30 April 1997, respondent reported for

work only for two days.[27] For the month of May 1997, he reported
only for one day.[28]

The Court observes that respondent admitted during the

company-level investigation that that his absences incurred on 28
and 29 April, and 7 and 8 May 1997 were without permission.
[29]
He explained that during those times, he had a family problem
which needed his attention; he was confused and was unable to
inform or seek permission from his superior. [30]

However, while respondent has admitted these absences, before

the Court, he also seeks to belittle the plain by countering that
SMC has not been too rigid in its application of company rules
pertaining to leave availments. In the proceedings below he
claimed that during the days that he was absent, he had attended
to some family matters. Thus, he presented copies of two (2)
medical certificates and a barangay certification that he attended
hearings on some of the days when he was absent. These
certifications, however, cannot work to erase his AWOPs;
respondent had never submitted these documents to SMC and it
is only when the case was pending before the Labor Arbiter that
he produced the same.[31]

Respondent cannot feign surprise nor ignorance of the

earlier AWOPs he had incurred. He was given a warning for his 2,
4, and 11 January and 26, 28, and 29 April 1997AWOPs.[32] In the
same warning, he was informed that he already had six AWOPs for
1997. He admitted that he was absent on 7 and 8 May 1997. [33] He
was also given notices to explain his AWOPs for the period 26 May

to 2 June 1997, which he received but refused to acknowledge.

[34]
It does not take a genius to figure out that as early as June
1997, he had more than nine AWOPs.

Thus, 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 knownthat 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 therefor.

The Court of Appeals, NLRC, and the labor arbiter found that
respondent incurred unauthorized absences, but concluded
that the
penalty
of
discharge
or
determination
was
disproportionate to respondents absences in view of SMCs
inconsistent and lax implementation of its policy on employees
attendance. The Court disagrees. Respondents dismissal was well
within the purview of SMCs management prerogative.

What the lower tribunals perceived as laxity, we consider as

leniency. SMCs tendency to excuse justified absences actually
redounded to the benefit of respondent since the imposition of
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 be difficult for an ordinary working man like
respondent. He should be thankful that SMC did not exact from
him almost 70 days suspension before he was finally dismissed
from work.

In any case, when SMC imposed the penalty of dismissal for

the 12th and 13th AWOPs, it was acting well within its rights as an
employer. An employer has the prerogative to prescribe
reasonable rules and regulations necessary for the proper conduct
of its business, to provide certain disciplinary measures in order
to implement said rules and to assure that the same would be
complied with.[35] An employer enjoys a wide latitude of discretion
in the promulgation of policies, rules and regulations on workrelated activities of the employees.[36]

It is axiomatic that appropriate disciplinary sanction is within

the purview of management imposition. [37] Thus, in the
implementation of its rules and policies, the employer has the
choice to do so strictly or not, since this is inherent in its right to
control
and
manage
its
business
effectively. Consequently, management has 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. Indeed, we have previously stated:

Management also has its own rights, which, as such, are

entitled to respect and enforcement in the interest of simple fair play.
Out of its concern for those with [fewer] privileges in life, the
Supreme Court has inclined more often than not toward the worker

and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded the Court to rule that justice is in
every case for the deserving, to be dispensed in the light of the
established facts and applicable law and doctrine. [38]

All told, we find that SMC acted well within its rights when it
dismissed respondent for his numerous absences. Respondent
was afforded due process and was validly dismissed for cause.

WHEREFORE, the instant petition is GRANTED. The

challenged Decision dated 28 June 2000 and Resolution dated 17
November 2000 of the Court of Appeals in CA-G.R. SP Nos. 54684
and 54709 are REVERSED and SET ASIDE. Respondents complaint
against petitioners is DISMISSED.

SO ORDERED.
JENNY F. PECKSON, Petitioner, v. ROBINSONS SUPERMARKET CORPORATION, JODY GADIA, ROENA
SARTE, AND RUBY ALEX, Respondents.
DECISION
REYES, J.:

For resolution is the Petition for Review on Certiorari1 of the Decision2 dated June 8, 2011 of the Court of
Appeals (CA) in CA-G.R. SP No. 109604 affirming the Decision3 dated February 25, 2009 of the
National Labor Relations Commission (NLRC) in NLRC NCR Case No. 00-11-09316-06/NLRC LAC No.
002020-07, which upheld the dismissal4 by the Labor Arbiter (LA) on May 30, 2007 of Jenny F. Pecksons
(petitioner) complaint for constructive dismissal.
Antecedent Facts and Proceedings

The petitioner first joined the Robinsons Supermarket Corporation (RSC) as a Sales Clerk on November 3,
1987. On October 26, 2006, she was holding the position of Category Buyer when respondent Roena Sarte
(Sarte), RSCs Assistant Vice-President for Merchandising, reassigned her to the position of Provincial
Coordinator, effective November 1, 2006.5 Claiming that her new assignment was a demotion
because it was non-supervisory and clerical in nature, the petitioner refused to turn over her
responsibilities to the new Category Buyer, or to accept her new responsibilities as Provincial Coordinator.
Jody Gadia (Gadia) and Ruby Alex (Alex) were impleaded because they were corporate officers of the RSC.
In a memorandum to the petitioner dated November 13, 2006, 6 the RSC, through Sarte, demanded an
explanation from her within 48 hours for her refusal to accept her new assignment despite written and
verbal demands. Sarte cited a company rule, Offenses Subject to Disciplinary Action No. 4.07, which
provided that [d]isobedience, refusal or failure to do assigned task or to obey superiors/officials
orders/instructions, or to follow established procedures or practices without valid reason would be meted
the penalty of suspension.
The petitioner ignored the 48-hour deadline to explain imposed by Sarte. On November 23, 2006, Sarte
issued her another memorandum,7 reiterating her demand to explain in writing within 48 hours why she
persistently refused to assume her new position, and warning her that this could be her final chance to
present her side or be deemed to have waived her right to be heard.
In her one-paragraph reply submitted on November 27, 2006, 8 the petitioner stated that she could not
accept the position of Provincial Coordinator since she saw it as a demotion. As it turned out, however, on
November 9, 2006, the petitioner had already filed a complaint for constructive dismissal 9 against RSC,
Sarte, Gadia and Alex (respondents).
On November 30, 2006, Sarte issued an instruction to the petitioner to report to RSCs Metroeast Depot to
help prepare all shipping manifests for Cagayan de Oro and Bacolod, but as witnessed by RSC employees
Raquel Torrechua and Alex, she did not obey as instructed. 10 Again on December 8, 2006, Sarte issued a
similar instruction, citing the need for certain tasks from the petitioner in preparation for the coming
Christmas holidays, but the petitioner again refused to heed. 11
As culled from the assailed appellate court decision,12 the petitioner argued before the LA that the true
organizational chart of the RSC showed that the position of Category Buyer was one level above that of the
Provincial Coordinator, and that moreover, the job description of a Provincial Coordinator was largely clerical
and did not require her to analyze stock levels and order points, or source new local and international
suppliers, or monitor stock level per store and recommend items for replenishment, or negotiate better
items and discounts from suppliers, duties which only a Category Buyer could perform. She also claimed
that she was instructed to file a courtesy resignation in exchange for a separation pay of one-half salary per
year of service.
The respondents in their position paper denied the correctness of the organizational chart presented by the
petitioner. They maintained that her transfer was not a demotion since the Provincial Coordinator occupied a
Level 5 position like the Category Buyer, with the same work conditions, salary and benefits. But while
both positions had no significant disparity in the required skill, experience and aptitude, the position of
Category Buyer demanded the traits of punctuality, diligence and attentiveness because it is a frontline
position in the day-to-day business operations of RSC which the petitioner, unfortunately, did not possess.
The respondents also raised the petitioners record of habitual tardiness as far back as 1999, as well as poor
performance rating in 2005. In addition to her performance rating of 2.8 out of 4.0 in 2005 equivalent
to below expectation, the petitioner was found to be tardy in June and July 2005, 13 times, and for the
entire 2005, 57 times; that she was suspended twice in 2006 for 20 instances of tardiness and absences
from July to September 2006 alone.13 We also note that the petitioner was suspended for seven (7) days in
September and October 2005 for deliberately violating a company policy after she was seen having lunch
with a company supplier.14
In her affidavit,15 respondent Sarte denied that the reassignment of the petitioner as Provincial Coordinator
was motivated by a desire to besmirch the name of the latter. She asserted that it was made in the exercise
of management prerogative and sound discretion, in view of the sensitive position occupied by the Category
Buyer in RSCs daily operations, vis--vis the petitioners below expectation performance rating and
habitual tardiness.

In dismissing the petitioners complaint, the LA in its Decision 16 dated May 30, 2007 ruled that job
reassignment or classification is a strict prerogative of the employer, and that the petitioner cannot refuse
her transfer from Category Buyer to Provincial Coordinator since both positions commanded the same salary
structure, high degree of responsibility and impeccable honesty and integrity. Upholding the employers
right not to retain an employee in a particular position to prevent losses or to promote profitability, the LA
found no showing of any illegal motive on the part of the respondents in reassigning the petitioner. The
transfer was dictated by the need for punctuality, diligence and attentiveness in the position of Category
Buyer, which the petitioner clearly lacked. Moreover, the LA ruled that her persistent refusal to accept her
new position amounted to insubordination, entitling the RSC to dismiss her from employment.
A month after the above ruling, or on June 22, 2007, the petitioner tendered her written forced
resignation,17 wherein she complained that she was being subjected to ridicule by clients and co-employees
alike on account of her floating status since the time she refused to accept her transfer. She likewise
claimed that she was being compelled to accept the position of Provincial Coordinator without due process.
On appeal, the NLRC in its Decision18 dated February 25, 2009 sustained the findings of the LA. It agreed
that the lateral transfer of the petitioner from Category Buyer to Provincial Coordinator was not a demotion
amounting to constructive dismissal, since both positions belonged to Job Level 5 and between them there is
no significant disparity in terms of the requirements of skill, experience and aptitude. Contrary to the
petitioners assertion, the NLRC found that the position of Provincial Coordinator is not a rank-and-file
position but in fact requires the exercise of discretion and independent judgment, as well as appropriate
recommendations to management to ensure the faithful implementation of its policies and programs; that it
even exercises influence over the Category Buyer in that it includes performing a recommendatory function
to guide the Category Buyer in making decisions on the right assortment, price and quantity of the items,
articles or merchandise to be sold by the store.
The NLRC then reiterated the settled rule that management may transfer an employee from one office to
another within the business establishment, provided there is no demotion in rank or diminution of salary,
benefits, and other privileges, and the action is not motivated by discrimination or bad faith or effected as a
form of punishment without sufficient cause. It ruled that the respondents were able to show that the
petitioners transfer was not unreasonable, inconvenient or prejudicial, but was prompted by her failure to
meet the demands of punctuality, diligence, and personal attention of the position of Category Buyer; that
management wanted to give the petitioner a chance to improve her work ethic, but her obstinate refusal to
assume her new position has prejudiced respondent RSC, even while she continued to receive her salaries
and benefits as Provincial Coordinator.
On petition for certiorari to the CA, the petitioner insisted that her transfer from Category Buyer to Provincial
Coordinator was a form of demotion without due process, and that the respondents unjustifiably depicted
her as remiss in her duties, flawed in her character, and unduly obstinate in her refusal to accept her new
post.
In its Decision19 dated June 8, 2011, the CA found no basis to deviate from the oft-repeated tenet that the
findings of fact and conclusions of the NLRC when supported by substantial evidence are generally accorded
not only great weight and respect but even finality, and are thus deemed binding. 20
Petition for Review in the Supreme Court
Now on petition for review to this Court, the petitioner maintains that her lateral transfer from Category
Buyer to Provincial Coordinator was a demotion amounting to constructive dismissal because her
reassignment was not a valid exercise of management prerogative, but was done in bad faith and without
due process. She claims that the respondents manipulated the facts to show that she was tardy; that they
even surreptitiously drew up a new organizational chart of the Merchandising Department of RSC, soon after
she filed her complaint for illegal dismissal, to show that the position of Provincial Coordinator belonged to
Job Level 5 as the Category Buyer, and not one level below; that the company deliberately embarrassed her
when it cut off her email access; that they sent memoranda to her clients that she was no longer a Category
Buyer, and to the various Robinsons branches that she was now a Provincial Coordinator, while Milo Padilla
(Padilla) was taking over her former position as Category Buyer; that for seven (7) months, they placed her
on floating status and subjected her to mockery and ridicule by the suppliers and her co-employees; that
not only was there no justification for her transfer, but the respondents clearly acted in bad faith and with
discrimination, insensibility and disdain to make her stay with the company intolerable for her.
Our Ruling

We find no merit in the petition.

This Court has consistently refused to
interfere with the exercise by management
of its prerogative to regulate the employees
work assignments, the working methods and
the place and manner of work.
As we all know, there are various laws imposing all kinds of burdens and obligations upon the employer in
relation to his employees, and yet as a rule this Court has always upheld the employers prerogative to
regulate all aspects of employment relating to the employees work assignment, the working methods and
the place and manner of work. Indeed, labor laws discourage interference with an employers judgment in
the conduct of his business.21
In Rural Bank of Cantilan, Inc. v. Julve,22 the Court had occasion to summarize the general jurisprudential
guidelines affecting the right of the employer to regulate employment, including the transfer of its
employees:
cralavvonlinelawlibrary

Under the doctrine of management prerogative, every employer has the inherent right to regulate, according
to his own discretion and judgment, all aspects of employment, including hiring, work assignments, working
methods, the time, place and manner of work, work supervision, transfer of employees, lay-off of workers,
and discipline, dismissal, and recall of employees. The only limitations to the exercise of this prerogative are
those imposed by labor laws and the principles of equity and substantial justice.
While the law imposes many obligations upon the employer, nonetheless, it also protects the employers
right to expect from its employees not only good performance, adequate work, and diligence, but also good
conduct and loyalty. In fact, the Labor Code does not excuse employees from complying with valid company
policies and reasonable regulations for their governance and guidance.
Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a transfer is a
movement from one position to another of equivalent rank, level or salary without break in the service or a
lateral movement from one position to another of equivalent rank or salary; (b) the employer has the
inherent right to transfer or reassign an employee for legitimate business purposes; (c) a transfer becomes
unlawful where it is motivated by discrimination or bad faith or is effected as a form of punishment or is a
demotion without sufficient cause; (d) the employer must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee. 23 (Citations omitted)
In Philippine Japan Active Carbon Corporation v. NLRC,24 it was held that the exercise of managements
prerogative concerning the employees work assignments is based on its assessment of the qualifications,
aptitudes and competence of its employees, and by moving them around in the various areas of its business
operations it can ascertain where they will function with maximum benefit to the company.
It is the employers prerogative, based on its assessment and perception of its employees qualifications,
aptitudes, and competence, to move them around in the various areas of its business operations in order to
ascertain where they will function with maximum benefit to the company. An employees right to security of
tenure does not give him such a vested right in his position as would deprive the company of its prerogative
to change his assignment or transfer him where he will be most useful. When his transfer is not
unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or a
diminution of his salaries, benefits, and other privileges, the employee may not complain that it amounts to
a constructive dismissal.25
As a privilege inherent in the employers right to control and manage its enterprise effectively, its freedom to
conduct its business operations to achieve its purpose cannot be denied. 26 We agree with the appellate court
that the respondents are justified in moving the petitioner to another equivalent position, which presumably
would be less affected by her habitual tardiness or inconsistent attendance than if she continued as a
Category Buyer, a frontline position in the day-to-day business operations of a supermarket such as
Robinsons.
If the transfer of an employee is not unreasonable,
or inconvenient, or prejudicial to him, and it does

not involve a demotion in rank or a diminution of his

salaries, benefits and other privileges, the employee
may not complain that it amounts to a constructive
dismissal.
As we have already noted, the respondents had the burden of proof that the transfer of the petitioner was
not tantamount to constructive dismissal, which as defined in Blue Dairy Corporation v. NLRC,27is a quitting
because continued employment is rendered impossible, unreasonable or unlikely, or an offer involving a
demotion in rank and diminution of pay:
cralavvonline lawlibrary

The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion,
bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the
manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid
himself of an undesirable worker. In particular, the employer must be able to show that the transfer is not
unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of
proof, the employees transfer shall be tantamount to constructive dismissal, which has been defined as a
quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer
involving a demotion in rank and diminution in pay. Likewise, constructive dismissal exists when an act of
clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee
leaving him with no option but to forego with his continued employment.
Thus, as further held in Philippine Japan Active Carbon Corporation,28 when the transfer of an employee is
not unreasonable, or inconvenient, or prejudicial to him, and it does not involve a demotion in rank or a
diminution of his salaries, benefits and other privileges, the employee may not complain that it amounts to a
constructive dismissal.29
But like all other rights, there are limits to the exercise of managerial prerogative to transfer personnel, and
on the employer is laid the burden to show that the same is without grave abuse of discretion, bearing in
mind the basic elements of justice and fair play.30 Indeed, management prerogative may not be used as a
subterfuge by the employer to rid himself of an undesirable worker.31
Interestingly, although the petitioner claims that she was constructively dismissed, yet until the unfavorable
decision of the LA on May 30, 2007, for seven (7) months she continued to collect her salary while also
adamantly refusing to heed the order of Sarte to report to the Metroeast Depot. It was only on June 22,
2007, after the LAs decision, that she filed her forced resignation. Her deliberate and unjustified refusal to
assume her new assignment is a form of neglect of duty, and according to the LA, an act of insubordination.
We saw how the company sought every chance to hear her out on her grievances and how she ignored the
memoranda of Sarte asking her to explain her refusal to accept her transfer. All that the petitioner could say
was that it was a demotion and that her floating status embarrassed her before the suppliers and her coemployees.
The respondents have discharged the burden of
proof that the transfer of the petitioner was not
tantamount to constructive dismissal.
In Jarcia Machine Shop and Auto Supply, Inc. v. NLRC, 32 a machinist who had been employed with the
petitioner company for 16 years was reduced to the service job of transporting filling materials after he
failed to report for work for one (1) day on account of an urgent family matter. This is one instance where
the employees demotion was rightly held to be an unlawful constructive dismissal because the employer
failed to show substantial proof that the employees demotion was for a valid and just cause:
cralavvonlinelawlibrary

In case of a constructive dismissal, the employer has the burden of proving that the transfer and demotion
of an employee are for valid and legitimate grounds such as genuine business necessity. Particularly, for a
transfer not to be considered a constructive dismissal, the employer must be able to show that such transfer
is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges and other benefits. Failure of the employer to overcome this burden of
proof, the employees demotion shall no doubt be tantamount to unlawful constructive dismissal. x x x. 33
(Citation omitted)
In the case at bar, we agree with the appellate court that there is substantial showing that the transfer of

the petitioner from Category Buyer to Provincial Coordinator was not unreasonable, inconvenient, or
prejudicial to her. The petitioner failed to dispute that the job classifications of Category Buyer and
Provincial Coordinator are similar, or that they command a similar salary structure and responsibilities. We
agree with the NLRC that the Provincial Coordinators position does not involve mere clerical functions but
requires the exercise of discretion from time to time, as well as independent judgment, since the Provincial
Coordinator gives appropriate recommendations to management and ensures the faithful implementation of
policies and programs of the company. It even has influence over a Category Buyer because of its
recommendatory function that enables the Category Buyer to make right decisions on assortment, price and
quantity of the items to be sold by the store.34
We also cannot sustain the petitioners claim that she was not accorded due process and that the
respondents acted toward her with discrimination, insensibility, or disdain as to force her to forego her
continued employment. In addition to verbal reminders from Sarte, the petitioner was asked in writing
twice to explain within 48 hours her refusal to accept her transfer. In the first, she completely remained
silent, and in the second, she took four (4) days to file a mere one-paragraph reply, wherein she simply said
that she saw the Provincial Coordinator position as a demotion, hence she could not accept it. Worse, she
may even be said to have committed insubordination when she refused to turn over her responsibilities to
the new Category Buyer, Padilla, and to assume her new responsibilities as Provincial Coordinator and report
to the Metroeast Depot as directed. This was precisely the reason why the petitioner was kept on floating
status. To her discredit, her defiance constituted a neglect of duty, or an act of insubordination, per the LA.
Neither can we consider tenable the petitioners contention that the respondents deliberately held her up to
mockery and ridicule when they cut off her email access, sent memoranda to her clients that she was no
longer a Category Buyer, and to the various Robinsons branches that she was now a Provincial Coordinator
on floating status and that Padilla was taking over her position as the new Category Buyer. It suffices to
state that these measures are the logical steps to take for the petitioners unjustified resistance to her
transfer, and were not intended to subject her to public embarrassment.
Judicial review of labor cases does not go beyond
the evaluation of the sufficiency of the evidence upon
which labor officials findings rest.
Finally, as reiterated in Acebedo Optical,35 this Court is not a trier of facts, and only errors of law are
generally reviewed in petitions for review on certiorari criticizing decisions of the CA. Questions of fact are
not entertained, and in labor cases, this doctrine applies with greater force. Factual questions are for labor
tribunals to resolve.36 Thus:
cralavvonlinelawlibrary

Judicial Review of labor cases does not go beyond the evaluation of the sufficiency of the evidence upon
which its labor officials findings rest. As such, the findings of facts and conclusion of the NLRC are generally
accorded not only great weight and respect but even clothed with finality and deemed binding on this Court
as long as they are supported by substantial evidence. This Court finds no basis for deviating from said
doctrine without any clear showing that the findings of the Labor Arbiter, as affirmed by the NLRC, are bereft
of substantiation. Particularly when passed upon and upheld by the Court of Appeals, they are binding and
conclusive upon the Supreme Court and will not normally be disturbed.
xxxx
As earlier stated, we find no basis for deviating from the oft espoused legal tenet that findings of facts and
conclusion of the labor arbiter are generally accorded not only great weight and respect but even clothed
with finality and deemed binding on this Court as long as they are supported by substantial evidence,
without any clear showing that such findings of fact, as affirmed by the NLRC, are bereft of substantiation.
More so, when passed upon and upheld by the Court of Appeals, they are binding and conclusive upon us
and will not normally be disturbed; x x x.37 (Citations omitted)
It is our ruling, that the findings of fact and conclusion of the LA, as affirmed by the NLRC, are supported by
substantial evidence, as found by the CA.
WHEREFORE, the premises considered, the Decision of the Court of Appeals dated June 8, 2011 in CA-G.R.
SP No. 109604 is AFFIRMED.
SO ORDERED.

Sereno, C.J., (Chairperson), Leonardo-De Castro, Bersamin, Villarama, Jr., and Reyes, JJ., concur.

FIRST DIVISION
JULIES BAKESHOP AND/OR

G.R. No. 173882

EDGAR REYES,
Petitioners,
Present:
- versus-

CORONA, C.
Chairperson,

J.,

LEONARDO-DE CASTRO,
BERSAMIN,
HENRY ARNAIZ

DEL CASTILLO, and

EDGAR NAPAL, and

VILLARAMA, JR., JJ.

JONATHAN TOLORES,
Respondents.

Promulgated:
February 15, 2012

x------------------------------------------------------------------x

DECISION
DEL CASTILLO, J.:

Management has a wide latitude to conduct its own affairs in

accordance with the necessities of its business. This so-called

management prerogative, however,

accordance with justice and fair play.

should

be

exercised

in

By this Petition for Review on Certiorari,[1] petitioners Julies

Bakeshop and/or Edgar Reyes (Reyes) assail the September 23, 2005
Decision[2] of the Court of Appeals (CA) in CA-G.R. SP No. 86257,
which reversed the Resolutions dated December 18, 2003[3] and April
19, 2004[4] of the National Labor Relations Commission (NLRC) and
ordered petitioners to reinstate respondents Henry Arnaiz (Arnaiz),
Edgar Napal (Napal) and Jonathan Tolores (Tolores) and to pay them
their
backwages
for
having
been
constructively dismissed, as well as their
other monetary benefits.

Factual Antecedents

Reyes hired respondents as chief bakers in his three franchise

branches of Julies Bakeshop in Sibalom and San Jose, Antique. On
January 26, 2000, respondents filed separate complaints against
petitioners for underpayment of wages, payment of premium pay for
holiday and rest day, service incentive leave pay, 13 th month pay,
cost of living allowance (COLA) and attorneys fees. These complaints
were later on consolidated.

Subsequently, in a memorandum dated February 16, 2000, Reyes

reassigned respondents as utility/security personnel tasked to clean
the outside vicinity of his bakeshops and to maintain peace and order
in the area. Upon service of the memo, respondents, however,
refused to sign the same and likewise refused to perform their new
assignments by not reporting for work.

In a letter-memorandum dated March 13, 2000, Reyes directed

respondents to report back for work and to explain why they failed to
assume their duties as utility/security personnel. A second lettermemorandum of the same tenor dated March 28, 2000 was also sent
to respondents. Respondents did not heed both memoranda.

Proceedings before the Labor Arbiter

Meanwhile, in the preliminary conference set on February 21, 2000,

respondents with their counsel, Atty. Ronnie V. Delicana (Atty.
Delicana), on one hand, and Reyes on the other, appeared before the
Labor Arbiter to explore the possibility of an amicable settlement. It
was agreed that the parties would enter into a compromise
agreement on March 7, 2000. However, on February 29, 2000,
respondents, who were then represented by a different counsel, Atty.
Mariano R. Pefianco (Atty. Pefianco), amended their complaints by
including in their causes of action illegal dismissal and a claim for
reinstatement and backwages.
The supposed signing of the compromise agreement (which could
have culminated in respondents receiving the total amount
of P54,126.00 as payment for their 13th month pay and separation
pay) was reset to March 28, 2000 because of respondents nonappearance in the hearing of March 7, 2000. On March 28, 2000, Atty.
Pefianco failed to appear despite due notice. On the next hearing
scheduled on April 24, 2000, both Atty. Delicana and Atty. Pefianco
appeared but the latter verbally manifested his withdrawal as counsel
for respondents. Thus, respondents, through Atty. Delicana, and
Reyes, continued to explore the possibility of settling the case
amicably. Manifesting that they need to sleep on the proposed
settlement, respondents requested for continuance of the hearing on
April 26, 2000. Come said date, however, respondents did not appear.

Realizing the futility of further resetting the case to give way to a

possible settlement, the Labor Arbiter ordered the parties to file their
respective position papers.

Despite his earlier withdrawal as counsel, Atty. Pefianco filed a Joint

Position Paper[5] on behalf of respondents alleging that they were
dismissed from employment on February 21, 2000 without valid
cause. As for petitioners, they stated in their position paper[6] that
respondents were never dismissed but that they abandoned their jobs
after filing their complaints. Petitioners denied that Reyes is the
employer of Arnaiz and Napal but admitted such fact insofar as
Tolores is concerned.

In his Decision[7] dated August 25, 2000, the Labor Arbiter expressed
dismay over respondents lack of good faith in negotiating a
settlement. The Labor Arbiter denounced the way respondents dealt
with Atty. Delicana during their discussions for a possible settlement
since respondents themselves later on informed the said tribunal that
at the time of the said discussions, they no longer considered Atty.
Delicana as their counsel. Despite this, the Labor Arbiter still required
the parties to submit their respective position papers. And as
respondents position paper was filed late and no evidence was
attached to prove the allegations therein, the Labor Arbiter resolved
to dismiss the complaints, thus:
WHEREFORE, premises considered the above-entitled
cases should be, as they are hereby dismissed without
prejudice.

SO ORDERED.[8]

Proceedings before the National Labor Relations Commission

Respondents filed a joint appeal[9] with the NLRC. In a

Decision[10] dated January 17, 2002, the NLRC overruled the Decision
of the Labor Arbiter and held that the burden of proof lies on herein
petitioners as Reyes admitted being the employer of Tolores. Hence,
petitioners not Tolores, had the duty to advance proof. With respect to
Arnaiz and Napal, the NLRC noted that since their alleged employer
was not impleaded, said respondents cases should be remanded to
the Labor Arbiter, and tried as new and separate cases. The
dispositive portion of the NLRCs Decision reads:
WHEREFORE, the case is REMANDED for purposes of
identifying the real respondents, to be separated as
discussed, if warranted, and for further proceedings to be
conducted.

SO ORDERED.[11]

Respondents filed a Motion for Reconsideration,[12] alleging that

the NLRC
Decision violated their right to speedy disposition of their cases. They
also insisted that Reyes is their employer as shown by his lettermemorandum dated March 13, 2000 which directed all of them to
report back for work. In addition, the fact that Reyes was willing to
pay all the respondents the amount of P54,126.00 as settlement only
proves that there is an employer-employee relationship between
them and Reyes.

In a Resolution[13] dated September 23, 2003, the NLRC found

merit in respondents Motion for Reconsideration. It held that Reyes
failed to present concrete proof of his allegation that a certain Rodrigo
Gandiongco is the employer of Arnaiz and Napal; hence, Reyes is still
presumed to be their employer as franchise owner of the branches
where these employees were assigned. The NLRC further ruled that
respondents demotion in rank from chief bakers to utility/security
personnel is tantamount to constructive dismissal which entitles them
to the reliefs available to illegally dismissed employees. As for the
money claims, the NLRC granted respondents their salary
differentials, premium pay for rest day, holiday pay, service incentive
leave pay, 13th month pay and COLA. In awarding such monetary
awards, the NLRC ratiocinated that the employer bears the burden of
proving that the employees received their wages and benefits. In this
case, however, no proof of such payment was presented by the
petitioners. The claim for overtime pay though was denied since proof
of overtime work is necessary to warrant such award. Lastly, for
Reyes unjustified act done in bad faith, respondents were awarded
10% attorneys fees. The NLRC ruled as follows:
WHEREFORE, Our previous Decision is VACATED and a
new one rendered declaring complainants to have been
illegally dismissed. Complainants are to be reinstated to their
former positions without loss of seniority rights. Complainants
are further awarded backwages reckoned from the time they
were constructively dismissed up to the time of their actual
reinstatement, whether physically or on payroll.

Complainants being underpaid are to be [paid] their

salary differentials reckoned three (3) years backwards from
the time they filed the instant complaints on January 26,
2000, premium pay for holiday, premium pay for rest day,
holiday pay, service incentive leave pay, 13th month pay and
COLA, if these have not been paid to them yet.

SO ORDERED.[14]

Petitioners sought to reconsider this ruling via a Motion for

Reconsideration,[15] insisting that respondents were not illegally
dismissed and that their reassignment or transfer as utility/security
personnel was indispensable, made in good faith and in the exercise
of a valid management prerogative. Hence, such reassignment does
not amount to constructive dismissal.Reyes claimed that it would be
likely for respondents, after filing complaints against him, to do
something prejudicial to the business as chief bakers, like mixing
harmful ingredients into the bread that they bake. This could be
inimical to the health of the consuming public. Petitioners averred
that respondents reassignment as utility/security personnel is a
preventive measure designed to protect the business and its
customers. They likewise added that the transfer was meant to be
only temporary and besides, same does not involve any diminution in
pay, rights and privileges of the respondents. Petitioners also alleged
that respondents wage of P115.00 per day is in consonance with and
is even higher than the mandated minimum wage of P105.00 under
Wage Order No. RB6-09 for retail and service establishments
employing not more than 10 workers as in his business.

The NLRC, in its Resolution[16] dated December 18, 2003, again

reconsidered its own ruling and held that respondents were not
dismissed, either actually or constructively, but instead willfully
disobeyed the return to work order of their employer. The NLRC
upheld petitioners prerogative to transfer respondents if only to serve
the greater interest, safety and well-being of the buying public by
forestalling irregular acts of said employees. The NLRC then put the
blame on respondents for disobeying the lawful orders of their
employer, noting that it was the same attitude displayed by them in

their dealings with their counsel, Atty. Delicana, in the proceedings

before the Labor Arbiter. It also reversed its previous ruling that
respondents were underpaid their wages and adjudged them to be
even overpaid by P10.00 per Wage Order No. RB 6-09-A. Thus,
respondents complaints were dismissed except for their claims for
premium pay for holiday, and rest day, service incentive leave pay,
13th month pay and COLA, which awards would stand only if no
payment therefor has yet been made.

Respondents filed a Motion for Reconsideration[17] and sought for

the execution of the NLRC Resolution dated September 23, 2003 due
to the alleged finality of the ruling. According to them, petitioners pro
forma Motion for Reconsideration of the said resolution did not
suspend the running of the period for taking an appeal. This motion
was, however, denied in the NLRC Resolution[18] dated April 19, 2004.

Proceedings before the Court of Appeals

Respondents appealed to the CA through a petition for certiorari,

[19]
wherein they imputed grave abuse of discretion on the part of the
NLRC in not declaring them to have been illegally dismissed and
entitled to salary differentials.

The CA, in its Decision[20] dated September 23, 2005, found

merit in the petition, ruling that respondents were constructively
dismissed since their designation from chief bakers to utility/security
personnel is undoubtedly a demotion in rank which involved a drastic
change in the nature of work resulting to a demeaning and
humiliating work condition. It also held that petitioners fear that
respondents might introduce harmful foreign substances in baking
bread is more imaginary than real. Further, respondents could not be
held guilty of abandonment of work as this was negated by their

immediate
filing
of
complaints
to
specifically
ask
for
reinstatement. Nevertheless, the CA denied the claim for salary
differentials by totally agreeing with the NLRCs finding on the
matter. Said court then resolved to award respondents the rest of
their monetary claims for failure of petitioners to present proof of
payment and 10% attorneys fees as respondents dismissal was
attended with bad faith which forced them to litigate, viz:
WHEREFORE, in view of the foregoing premises, judgment
is
hereby
rendered
by
us SETTING
ASIDE and REVERSING the Resolutions dated December
18, 2003 and April 19, 2004 in NLRC Case No. V-0007852000. The record of this case is hereby REMANDED to the
Labor Arbiter for the computation of backwages, premium
pay for holidays and rest days, holiday pay, service incentive
leave pay, 13thmonth pay and attorneys fees due to the
petitioners and, thereafter, for the payment thereof by the
private respondent Reyes.[21]

Petitioners filed a Motion for Reconsideration[22] but the same

was denied by the CA in a Resolution[23] dated May 25, 2006.

Issues

Hence, this present petition raising the following issues for the Courts
consideration:
I.

DID THE HONORABLE COURT OF APPEALS, IN

DISTURBING THE FINDINGS OF FACTS OF THE LABOR
ARBITER AS WELL AS THE NATIONAL LABOR [RELATIONS]
COMMISSION WHO HAVE TRIED THE CASE, [COMMIT]

GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF

JURISDICTION?

II.

DID THE HONORABLE COURT OF APPEALS MANIFESTLY

[OVERLOOK] RELEVANT FACTS NOT DISPUTED BY THE
RESPONDENTS, WHICH, IF PROPERLY CONSIDERED COULD
JUSTIFY A DIFFERENT CONCLUSION?

III.

WAS THE TRANSFER/REASSIGNMENT OF RESPONDENTS

TO ANOTHER POSITION WITHOUT DIMINUTION IN PAY AND
OTHER PRIVILEGES TANTAMOUNT TO CONSTRUCTIVE
DISMISSAL?[24]

Petitioners maintain that the NLRC, in its Resolution dated

December 18, 2003, merely upheld the findings of the Labor Arbiter
that there was no constructive dismissal because of the absence of
any evidence to prove such allegation. As such, Reyes supposition is
that the CA erred in coming up with a contrary finding.

Petitioners insist that the order transferring or reassigning

respondents from chief bakers to utility/security personnel is a valid
exercise of management prerogative for it does not involve any
diminution in pay and privileges and that same is in accordance with
the requirements of the business, viz: to protect its goodwill and
reputation as well as the health and welfare of the consuming public.

Our Ruling

We find no merit in the petition.

The Court of Appeals is correct in

reviewing the findings of the National
Labor Relations Commission.

Petitioners claim that the CA should have accorded respect and

finality to the factual findings rendered by the NLRC in its December
18, 2003 Resolution as the same merely affirmed the findings of the
Labor Arbiter. Citing several jurisprudence on the matter, petitioners
add that factual findings of labor officials who acquired expertise on
matters within their jurisdiction have conclusive effect.

We reject this contention as none of the NLRC divergent rulings

affirmed the findings of the Labor Arbiter. To recall, the Labor
Arbiter dismissed respondents complaints on a technicality, that is, on
the ground that respondents Joint Position Paper was filed late and
that it did not contain any attachments to prove the allegations
therein. Upon appeal, the NLRC rendered its first Decision on January
17, 2002 which remanded the case to the Labor Arbiter for purposes
of identifying the real respondents and separating the consolidated
cases if warranted, and for the conduct of further proceedings due to
Reyess allegation that Arnaiz and Napal have a different
employer. The NLRC also disagreed with the Labor Arbiters
ratiocination that it behooved upon respondents to attach proof of
their illegal dismissal. According to the NLRC, since Reyes admitted
that he is Toloress employer, the burden to prove that the termination
is valid as well as the due payment of money claims falls upon
petitioners. Upon petitioners motion, however, the NLRC reconsidered
this ruling and resolved the case on the merits. In so doing, it found
the respondents to have been constructively dismissed through its
Resolution dated September 23, 2003. The NLRC, however, once
again reversed itself in a Resolution dated December 18, 2003 upon

Reyess filing of a Motion for Reconsideration. This time, the NLRC held
that respondents were not illegally dismissed but instead abandoned
their jobs. It was at this point that respondents sought recourse from
the CA.
Indeed, factual findings of labor officials who are deemed to
have acquired expertise in matters within their respective jurisdictions
are generally accorded not only respect, but even finality. [25] It is a
well-entrenched rule that findings of facts of the NLRC, affirming those
of the Labor Arbiter, are accorded respect and due consideration
when supported by substantial evidence.[26] We, however, find that
the doctrine of great respect and finality has no application to the
case at bar. As stated, the Labor Arbiter dismissed respondents
complaints on mere technicality. The NLRC, upon appeal, then came
up with three divergent rulings. At first, it remanded the case to the
Labor Arbiter. However, in a subsequent resolution, it decided to
resolve the case on the merits by ruling that respondents were
constructively dismissed. But later on, it again reversed itself in its
third and final resolution of the case and ruled in petitioners
favor.Therefore, contrary to Reyess claim, the NLRC did not, on any
occasion, affirm any factual findings of the Labor Arbiter. The CA is
thus correct in reviewing the entire records of the case to determine
which findings of the NLRC is sound and in accordance with
law. Besides, the CA, at any rate, may still resolve factual issues by
express mandate of the law despite the respect given to
administrative findings of fact.[27]
The
transfer/reassignment
of
respondents constitutes constructive
dismissal.

Petitioners contend that the order transferring or reassigning

respondents from their position as chief bakers to utility/security

personnel is within the ambit of management prerogative as

employer. They harp on the fact that no evidence was presented by
respondents to show that they were dismissed from employment.

We have held that management is free to regulate, according to

its own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, time, place and manner
of work, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay off of
workers and discipline, dismissal and recall of workers. The exercise
of management prerogative, however, is not absolute as it must be
exercised in good faith and with due regard to the rights of labor.[28]

In constructive dismissal cases, the employer has the burden of proving that the
transfer of an employee is for just or valid ground, such as genuine business
necessity. The employer must demonstrate that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee and that the transfer does not involve a
demotion in rank or a diminution in salary and other benefits. If the employer fails to
overcome this burden of proof, the employees transfer is tantamount to unlawful
constructive dismissal.[29]

In this case, petitioners insist that the transfer of respondents was a measure of
self-preservation and was prompted by a desire to protect the health of the buying public,
claiming that respondents should be transferred to a position where they could not
sabotage the business pending resolution of their cases. According to petitioners, the
possibility that respondents might introduce harmful substances to the bread while in the
performance of their duties as chief bakers is not imaginary but real as borne out by what
Tolores did in one of the bakeshops in Culasi, Antique where he was assigned as baker.

This postulation is not well-taken. On the contrary, petitioners failed to satisfy the
burden of proving that the transfer was based on just or valid ground. Petitioners bare
assertions of imminent threat from the respondents are mere accusations which are not
substantiated by any proof. This Court is proscribed from making conclusions based on
mere presumptions or suppositions. An employees fate cannot be justly hinged upon
conjectures and surmises.[30] The act attributed against Tolores does not even convince us
as he was merely a suspected culprit in the alleged sabotage for which no investigation
took place to establish his guilt or culpability. Besides, Reyes still retained Tolores as an
employee and chief baker when he could have dismissed him for cause if the allegations
were indeed found true. In view of these, this Court finds no compelling reason to justify
the transfer of respondents from chief bakers to utility/security personnel. What appears
to this Court is that respondents transfer was an act of retaliation on the part of petitioners
due to the formers filing of complaints against them, and thus, was clearly made in bad
faith. In fact, petitioner Reyes even admitted that he caused the reassignments due to the
pending complaints filed against him. As the CA aptly held:

In the case at bench, respondent Reyes failed to justify petitioners

transfer from the position of chief bakers to utility/security personnel. We find
that the threat being alluded to by respondent Reyes that the petitioners might
introduce harmful foreign substances in baking bread is imaginary and not
real. We recall that what triggered the petitioners reassignment was the filing
of their complaints against private respondents in the NLRC. The petitioners
were not even given an opportunity to refute the reason for the transfer. The
drastic change in petitioners nature of work unquestionably resulted in, as
rightly perceived by them, a demeaning and humiliating work condition. The
transfer was a demotion in rank, beyond doubt. There is demotion when an
employee is transferred from a position of dignity to a servile or menial job.
One does not need to stretch the imagination to distinguish the work of a chief
baker to that of a security cum utility man.[31]

[D]emotion involves a situation in which an employee is

relegated to a subordinate or less important position constituting a

reduction to a lower grade or rank, with a corresponding decrease in

duties and responsibilities, and usually accompanied by a decrease in
salary.[32] When there is a demotion in rank and/or a diminution in pay;
when a clear discrimination, insensibility or disdain by an employer
becomes unbearable to the employee; or when continued
employment is rendered impossible, unreasonable or unlikely, the
transfer of an employee may constitute constructive dismissal.[33]

We agree with the CA in ruling that the transfer of respondents

amounted to a demotion. Although there was no diminution in pay,
there was undoubtedly a demotion in titular rank. One cannot deny
the disparity between the duties and functions of a chief baker to that
of a utility/security personnel tasked to clean and manage the
orderliness of the outside premises of the bakeshop. Respondents
were even prohibited from entering the bakeshop. The change in the
nature of their work undeniably resulted to a demeaning and
humiliating work condition.

In Globe Telecom, Inc. v. Florendo-Flores,[34] we held:

The managerial prerogative to transfer personnel must
be exercised without grave abuse of discretion. It must
always bear in mind the basic elements of justice and fair
play. Having the right must not be confused with the manner
that right is exercised. Thus, it cannot be used as a
subterfuge by the employer to rid himself of an undesirable
worker.

Petitioners claim that respondents abandoned their job stands

on shallow grounds. Respondents cannot be faulted for refusing to
report for work as they were compelled to quit their job due to a

demotion without any just cause. Moreover, we have consistently

held that a charge of abandonment is inconsistent with the filing of a
complaint for constructive dismissal.[35]Respondents demand to
maintain their positions as chief bakers by filing a case and asking for
the relief of reinstatement belies abandonment.[36]

As the transfer proves unbearable to respondents as to foreclose

any choice on their part except to forego continued employment,
same amounts to constructive dismissal for which reinstatement
without loss of seniority rights, full backwages, inclusive of
allowances, and other benefits or their monetary equivalent,
computed from the time their compensation was withheld up to the
time of their actual reinstatement, should be granted. [37] The CA,
therefore, did not err in awarding the reliefs prayed for by the
respondents as they were, without a doubt, constructively dismissed.

WHEREFORE, the petition is DENIED. The September 23,

2005 Decision of the Court of Appeals in CA-G.R. SP No. 86257
is AFFIRMED.
SO ORDERED.
FIRST DIVISION

ARNULFO O. ENDICO,

G.R. No. 161615

Petitioner,
Present:
CARPIO, J., Acting
Chairperson,*

AUSTRIA-MARTINEZ,**
CORONA,
- versus -

CARPIO MORALES,*** and

LEONARDO-DE CASTRO, JJ.

QUANTUM FOODS

Promulgated:

DISTRIBUTION CENTER,
Respondent.

January 30, 2009

x--------------------------------------------------x

DECISION

CARPIO, J.:
The Case

This is a petition for review[1] of the 23 December 2003

Decision[2] of the Court of Appeals in CA-G.R. SP No. 69929. The
Court of Appeals reversed the 31 August 2001 Decision [3] and the
28 November 2001 Resolution[4] of the National Labor Relations
Commission (NLRC). The NLRC affirmed with modification the 17
January 2000 Decision[5] of the Labor Arbiter which held that
Quantum
Foods
Distribution
Center
(Quantum
Foods)

constructively dismissed Arnulfo O. Endico (Endico). The NLRC

awarded Endico separation pay, backwages, moral and exemplary
damages, and other amounts totaling P559,021.65.[6] The NLRC
also affirmed the transfer of possession and ownership of the
service vehicle but ordered Endico to pay Quantum Foods 10% of
its purchase price.

The Facts

On 2 January 1995, Quantum Foods hired Endico as Field

Supervisor of Davao City. Quantum Foods provided Endico with a
service vehicle on the understanding that after five years of
continuous service to the company and upon payment of 10% of
the vehicles book value, Quantum Foods would turn over
possession and ownership of the vehicle to Endico.

In June 1995, Endico was transferred to Cebu. On 2 January 1996,

Endico was promoted as Area Manager of Cebu. In 1997, in
recognition of Endicos achievements and contributions to
Quantum Foods, he was awarded Master Awards for Sales
Excellence as the most outstanding Area Manager and was also
rewarded with an all-expense paid trip to Thailand. In the same
year, Endico was also given a plaque of recognition for the elite
100% Achievers Award. In 1998, Endico was again rewarded with
an all-expense paid trip to Hong Kong for his very good
performance that year.

In 1999, due to the economic slowdown and to save on

operational costs, Quantum Foods streamlined its operations
through
the
reduction
of
the
companys
contractual
merchandisers. Endicos merchandisers were reduced from twelve
to five.

In a fax message[7] dated 11 June 1999, Edred Almero, National

Sales Manager of Quantum Foods, instructed Pol H. Acuros
(Acuros), Regional Sales Manager and Endicos immediate
supervisor, to
immediately
relieve
Endico
from
his
position. Acuros was also instructed to handle the vacated
position and to be responsible in the turn over of all company
properties issued to Endico including the service vehicle. Acuros
was likewise ordered to advise Endico to report to the head office
on 14 June 1999. Endico complied with the order and proceeded
to the head office in Paraaque.

In the show cause memorandum[8] dated 14 June 1999, Quantum

Foods asked Endico to explain in writing, within 24 hours, why no
administrative action should be taken against him because of
serious misconduct due to mismanagement of sales area resulting
to lost sales and goodwill with number one major account. The
memorandum stated that, from 1 May to 11 June 1999 at
Shoemart Supermarket, Cebu (SM account), Endico violated Rules
16[9] and 17[10] of Quantum Foods general policies and procedure.

On the same day, Endico filed an application for leave of

absence[11] effective 17 June to 2 July 1999.

In his answer[12] dated 16 June 1999, Endico denied that there was
serious misconduct and mismanagement in his area as far as the
deployment of merchandisers was concerned.Endico said that he
properly coordinated all his actions with Acuros. Endico presented
a letter[13] dated 3 May 1999, where he informed Acuros and the
head office that the SM account wanted a merchandiser assigned
to it for a whole day coverage and rejected the merchandiser
assigned to it with a half-day schedule. In another letter[14] dated
7 May 1999, Endico gave the head office an update on the status
of the SM account. Endico added that Quantum Foods did not

accord him due process because he was immediately relieved

without being given the opportunity to explain his side. On the
same day, Endico also withdrew his application for leave of
absence.[15]

On 17 June 1999, Quantum Foods recalled Endicos application for

leave of absence and required him to report to the head office.
[16]
Quantum
Foods
also
issued
a
Personnel
Action
[17]
Request
dated 11 June 1999, which provided for Endicos
transfer as Area Sales Manager of Cebu to Area Sales Manager of
the head office effective 14 June 1999.However, Endico failed to
report for work. In telegrams dated 30 June[18] and 6 July 1999,
[19]
Quantum Foods reiterated its directive for Endico to report to
the head office.

Also on 17 June 1999, Endico, believing that Quantum Foods

intended to ease him out of the company, filed a complaint [20] for
constructive illegal dismissal. Endico also prayed for the payment
of separation pay, backwages, other monetary benefits, damages,
attorneys fees and recovery of the service vehicle.

Ruling of the Labor Arbiter

On 17 January 2000, the Labor Arbiter rendered a decision in

Endicos favor. The dispositive portion of the 17 January 2000
Decision provides:

WHEREFORE, premises considered, judgment is hereby

rendered declaring as illegal the constructive dismissal of
complainant and ordering the respondent Quantum
Foods, Inc. to pay him as follows:

1)

Separation Pay Php 121,800.00

2)

Backwages 176,136.00

3)

Proportionate 13th month pay 13,038.00

4)

Unused sick leave 42,120.00

5)

Unused vacation leave 42,120.00

6)

Performance bonus 10,150.00

7)

Productivity bonus 22,837.50

8)

Moral and exemplary damages 50,000.00

9)

Attorneys fees (10%) 50,820.15

---------------Total Php 559,021.65[21]

The respondent Quantum Foods, Inc. or its authorized
representative is hereby ordered to transfer to
complainant the possession and ownership of one (1)
motor vehicle, a Mitsubishi L-200 with plate no. TTC 934 in
a running and serviceable condition together with its
accessories.

The other claims and the case against respondents Cesar

Lota, Edred Almero and Rogelio de la Cruz are dismissed
for lack of merit.

SO ORDERED.[22]

The Labor Arbiter ruled that Quantum Foods constructively

dismissed Endico because its actions made Endicos continued
employment impossible, unreasonable and unlikely.The Labor
Arbiter said that Endico was the subject of a highhanded transfer
of assignment because Endico was given neither a copy of the
order for his relief nor the reason for his immediate relief. The
Labor Arbiter added that Endico was relieved not because the
head office needed his services but as a form of disciplinary
action for some baseless charges. According to the Labor Arbiter,
the loss of the SM account was due to the decision of Quantum
Foods to reduce the number of merchandisers and its inaction
when Endico raised this concern.

Quantum Foods appealed to the NLRC.

Ruling of the National Labor Relations Commission

In its 31 August 2001 Decision, the NLRC affirmed the Labor

Arbiters decision with modification that Endico pay 10% of the
purchase price of the service vehicle. The dipositive portion of the
31 August 2001 Decision provides:
WHEREFORE, in view of the foregoing, the decision of the
Labor Arbiter dated January 17, 2000 is hereby AFFIRMED
with a modification on the order to transfer the
possession and ownership of the service vehicle,
Mitsubishi L-200 with plate no. TCC 934 to complainant,
as such complainant is likewise directed to pay
respondent ten percent (10%) of the purchase price
thereof.

SO ORDERED.[23]

The NLRC agreed with the Labor Arbiter that Quantum Foods
constructively dismissed Endico. The NLRC said that Endico was
not just recalled but was immediately transferred to the head
office, which was tantamount to dismissal. The NLRC ruled that
Quantum Foods failed to observe the twin requirements of notice
and hearing. The NLRC declared that Endico was immediately
relieved from his functions and was given the opportunity to
explain his side only three days after the order for his relief was
issued. The NLRC also ruled that the Labor Arbiter did not err in
awarding separation pay to Endico since reinstatement was no
longer possible due to strained relations. With respect to the
award of unused vacation and sick leave credits, performance
bonus, and productivity bonus, the NLRC said that these should
be granted because they had become company policy or practice
which could not just be withdrawn.

Quantum Foods filed a motion for reconsideration. In its 28

November 2001 Resolution,[24] the NLRC denied the motion.

Quantum Foods filed a petition for certiorari before the Court of

Appeals.

Ruling of the Court of Appeals

In its 23 December 2003 Decision, the Court of Appeals ruled in

favor of Quantum Foods. The dispositive portion of the 23
December 2003 Decision provides:
WHEREFORE, the petition is GRANTED. The Decision of
the NLRC dated August 31, 2002 as well as its Resolution
dated November 28, 2001 are hereby REVERSED AND SET
ASIDE.The complaint for illegal dismissal filed by private
respondent is DISMISSED.

SO ORDERED.[25]

The Court of Appeals declared that the NLRC gravely abused its
discretion when it ruled that Endico was constructively
dismissed. The Court of Appeals found nothing in the 11 June
1999 fax message and the show-cause memorandum that
supported the NLRCs conclusion that Endico was outrightly
dismissed. The Court of Appeals noted that Quantum Foods even
approved Endicos application for leave of absence and, after
Endico recalled his leave application, ordered Endico to report to
the head office for his new job assignment.

The Court of Appeals said that it is settled that the employer has
the prerogative to transfer and reassign employees for valid
reasons and according to the requirements of its business,
provided that there is no demotion in rank or diminution of his
salary, benefits and other privileges. The Court of Appeals
declared that Quantum Foods acted in good faith and was in the
legitimate pursuit of its best interests when it transferred Endico
from Cebu to the head office. The Court of Appeals maintained
that Endicos claim that the transfer would result in a diminution of

his pay or benefits was unsubstantiated. The Court of Appeals

added that Quantum Foods had yet to decide on the
administrative case when Endico immediately filed the complaint
for constructive dismissal. The Court of Appeals concluded that
Endico filed the complaint in anticipation of what he perceived to
be the final outcome of the administrative investigation.

Hence, this petition.

The Issues

Endico raises the following issues:

1.

Whether he was constructively dismissed;

2.
Whether he is entitled to separation pay, backwages,
other monetary benefits, damages and attorneys fees; and
3.

Whether he is entitled to acquire the service vehicle.

The Ruling of the Court

The petition has no merit.

As a general rule, a petition for review on certiorari under Rule 45

of the Rules of Court is limited to questions of law. However, this
rule admits of exceptions, such as in this case where the findings
of the Labor Arbiter and the NLRC vary from the findings of the
Court of Appeals.[26]

Endico maintains that he was constructively dismissed because

he did not commit any offense that would justify his relief. Endico
adds that his transfer was intended to unreasonably
inconvenience him and his family because of its substantial effect
on their finances and quality of family life, which would ultimately
force him to quit.

On the other hand, Quantum Foods insists that Endico was not
transferred but was only temporarily recalled to the head office
pending investigation. Quantum Foods argues that if it did
transfer Endico, it was merely exercising a management
prerogative.

Jurisprudence
recognizes
the
exercise
of
management
prerogatives. Labor laws also discourage interference with an
employers judgment in the conduct of its business. [27] For this
reason, the Court often declines to interfere in legitimate business
decisions of employers.[28] The law must protect not only the
welfare of employees, but also the right of employers. [29]

In the pursuit of its legitimate business interests, especially during

adverse business conditions, management has the prerogative to
transfer or assign employees from one office or area of operation
to another provided there is no demotion in rank or diminution of
salary, benefits and other privileges and the action is not
motivated by discrimination, bad faith, or effected as a form of
punishment or demotion without sufficient cause. [30] This privilege
is inherent in the right of employers to control and manage their
enterprises effectively.[31] The right of employees to security of
tenure does not give them vested rights to their positions to the

extent of depriving management of its prerogative to change their

assignments or to transfer them.[32]

Managerial prerogatives, however, are subject to limitations

provided by law, collective bargaining agreements, and general
principles of fair play and justice. [33] The test for determining the
validity of the transfer of employees was explained in Blue Dairy
Corporation v. NLRC[34] as follows:
Like other rights, there are limits thereto. The managerial
prerogative to transfer personnel must be exercised
without grave abuse of discretion, bearing in mind the
basic elements of justice and fair play. Having the right
should not be confused with the manner in which that
right is exercised. Thus, it cannot be used as a subterfuge
by the employer to rid himself of an undesirable worker. In
particular, the employer must be able to show that the
transfer is not unreasonable, inconvenient or prejudicial to
the employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges and other
benefits. Should the employer fail to overcome this
burden of proof, the employees transfer shall be
tantamount to constructive dismissal, which has been
defined as a quitting because continued employment is
rendered impossible, unreasonable or unlikely; as an offer
involving a demotion in rank and diminution in
pay. Likewise, constructive dismissal exists when an act of
clear discrimination, insensibility or disdain by an
employer has become so unbearable to the employee
leaving him with no option but to forego with his
continued employment.[35]

In this case, we find no reason to disturb the conclusion of the

Court
of
Appeals
that
there
was
no
constructive
dismissal. Reassignments made by management pending
investigation of violations of company policies and procedures
allegedly committed by an employee fall within the ambit of
management prerogative.[36] The decision of Quantum Foods to
transfer Endico pending investigation was a valid exercise of
management prerogative to discipline its employees. The
transfer, while incidental to the charges against Endico, was not
meant as a penalty, but rather as a preventive measure to avoid
further loss of sales and the destruction of Quantum Foods image
and goodwill. It was not designed to be the culmination of the
then on-going administrative investigation against Endico.

Neither was there any demotion in rank or any diminution of

Endicos salary, privileges and other benefits. Endico was being
transferred to the head office as area sales manager, the same
position Endico held in Cebu.[37] There was also no proof that the
transfer involved a diminution of Endicos salary, privileges and
other benefits.

On the alleged inconvenience on Endico and his family because of

the transfer from Cebu to the head office in Paraaque, we rule
that the transfer is valid, there being no showing that there was
bad faith on the part of Quantum Foods. [38] Moreover, we find that
Quantum Foods, considering the declining sales and the loss of a
major account in Cebu, was acting in the legitimate pursuit of
what it considered its best interest in deciding to transfer Endico
to the head office.

Since we have ruled that Quantum Foods did not constructively

dismiss Endico, there is no need to discuss the other issues raised
by Endico.

WHEREFORE,
we DENY the
petition. We AFFIRM the
23
December 2003 Decision of the Court of Appeals in CA-G.R. SP No.
69929.

SO ORDERED.
ANTONIO T. CARPIO
Associate Justice

WE CONCUR:
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 163269

April 19, 2006

ROLANDO C. RIVERA, Petitioner,

vs.
SOLIDBANK CORPORATION, Respondent.
DECISION
CALLEJO, SR., J.:
Assailed in this Petition for Review on Certiorari is the Decision 1 of the Court of Appeals (CA) in CAG.R. CV No. 52235 as well as its Resolution2 denying the Motion for Partial Reconsideration of
petitioner Rolando C. Rivera.
Petitioner had been working for Solidbank Corporation since July 1, 1977. 3 He was initially employed
as an Audit Clerk, then as Credit Investigator, Senior Clerk, Assistant Accountant, and Assistant

Manager. Prior to his retirement, he became the Manager of the Credit Investigation and Appraisal
Division of the Consumers Banking Group. In the meantime, Rivera and his brother-in-law put up a
poultry business in Cavite.
In December 1994, Solidbank offered two retirement programs to its employees: (a) the Ordinary
Retirement Program (ORP), under which an employee would receive 85% of his monthly basic
salary multiplied by the number of years in service; and (b) the Special Retirement Program (SRP),
under which a retiring employee would receive 250% of the gross monthly salary multiplied by the
number of years in service.4 Since Rivera was only 45 years old, he was not qualified for retirement
under the ORP. Under the SRP, he was entitled to receiveP1,045,258.95 by way of benefits.5
Deciding to devote his time and attention to his poultry business in Cavite, Rivera applied for
retirement under the SRP. Solidbank approved the application and Rivera was entitled to receive the
net amount of P963,619.28. This amount included his performance incentive award (PIA), and his
unearned medical, dental and optical allowances in the amount of P1,666.67, minus his total
accountabilities to Solidbank amounting to P106,973.00.6 Rivera received the amount and confirmed
his separation from Solidbank on February 25, 1995. 7
Subsequently, Solidbank required Rivera to sign an undated Release, Waiver and Quitclaim, which
was notarized on March 1, 1995.8 Rivera acknowledged receipt of the net proceeds of his separation
and retirement benefits and promised that "[he] would not, at any time, in any manner whatsoever,
directly or indirectly engage in any unlawful activity prejudicial to the interest of Solidbank, its parent,
affiliate or subsidiary companies, their stockholders, officers, directors, agents or employees, and
their successors-in-interest and will not disclose any information concerning the business of
Solidbank, its manner or operation, its plans, processes, or data of any kind." 9
Aside from acknowledging that he had no cause of action against Solidbank or its affiliate
companies, Rivera agreed that the bank may bring any action to seek an award for damages
resulting from his breach of the Release, Waiver and Quitclaim, and that such award would include
the return of whatever sums paid to him by virtue of his retirement under the SRP.10 Rivera was
likewise required to sign an undated Undertaking as a supplement to the Release, Waiver and
Quitclaim in favor of Solidbank in which he declared that he received in full his entitlement under the
law (salaries, benefits, bonuses and other emoluments), including his separation pay in accordance
with the SRP. In this Undertaking, he promised that "[he] will not seek employment with a competitor
bank or financial institution within one (1) year from February 28, 1995, and that any breach of the
Undertaking or the provisions of the Release, Waiver and Quitclaim would entitle Solidbank to a
cause of action against him before the appropriate courts of law.11 Unlike the Release, Waiver and
Quitclaim, the Undertaking was not notarized.
On May 1, 1995, the Equitable Banking Corporation (Equitable) employed Rivera as Manager of its
Credit Investigation and Appraisal Division of its Consumers Banking Group. 12 Upon discovering this,
Solidbank First Vice-President for Human Resources Division (HRD) Celia J.L. Villarosa wrote a
letter dated May 18, 1995, informing Rivera that he had violated the Undertaking. She likewise
demanded the return of all the monetary benefits he received in consideration of the SRP within five
(5) days from receipt; otherwise, appropriate legal action would be taken against him. 13
When Rivera refused to return the amount demanded within the given period, Solidbank filed a
complaint for Sum of Money with Prayer for Writ of Preliminary Attachment 14 before the Regional
Trial Court (RTC) of Manila on June 26, 1995. Solidbank, as plaintiff, alleged therein that in

accepting employment with a competitor bank for the same position he held in Solidbank before his
retirement, Rivera violated his Undertaking under the SRP. Considering that Rivera accepted
employment with Equitable barely three months after executing the Undertaking, it was clear that he
had no intention of honoring his commitment under said deed.
Solidbank prayed that Rivera be ordered to return the net amount of P963,619.28 plus interests
therein, and attorneys fees, thus:
WHEREFORE, it is respectfully prayed that:
1. At the commencement of this action and upon the filing of a bond in such amount as this
Honorable Court may fix, a writ of preliminary attachment be forthwith issued against the
properties of the defendant as satisfaction of any judgment that plaintiff may secure;
2. After trial, judgment be rendered ordering defendant to pay plaintiff the following sums:
NINE HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED NINETEEN AND 28/100
ONLY (P963,619.28) PESOS, Philippine Currency, as of 23 May 1995, plus legal interest of
12% per annum until fully paid;
3. Such sum equivalent to 10% of plaintiffs claims plus P2,000.00 for every appearance by
way of attorneys fees; and
4. Costs of suit.
PLAINTIFF prays for other reliefs just and equitable under the premises.15
Solidbank appended the Affidavit of HRD First Vice-President Celia Villarosa and a copy of the
Release, Waiver and Quitclaim and Undertaking which Rivera executed. 16
In an Order dated July 6, 1995, the trial court issued a Writ of Preliminary Attachment 17 ordering
Deputy Sheriff Eduardo Centeno to attach all of Riveras properties not exempt from execution.
Thus, the Sheriff levied on a parcel of land owned by Rivera.
In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted that he received the net
amount ofP963,619.28 as separation pay. However, the employment ban provision in the
Undertaking was never conveyed to him until he was made to sign it on February 28, 1995. He
emphasized that, prior to said date, Solidbank never disclosed any condition to the retirement
scheme, nor did it impose such employment ban on the bank officers and employees who had
previously availed of the SRP. He alleged that the undertaking not to "seek employment with any
competitor bank or financial institution within one (1) year from February 28, 1995" was void for
being contrary to the Constitution, the law and public policy, that it was unreasonable, arbitrary,
oppressive, discriminatory, cruel, unjust, inhuman, and violative of his human rights. He further
claimed that the Undertaking was a contract of adhesion because it was prepared solely by
Solidbank without his participation; considering his moral and economic disadvantage, it must be
liberally construed in his favor and strictly against the bank.
On August 15, 1995, Solidbank filed a Verified Motion for Summary Judgment, alleging therein that
Rivera raised no genuine issue as to any material fact in his Answer except as to the amount of

damages. It prayed that the RTC render summary judgment against Rivera. Solidbank alleged that
whether or not the employment ban provision contained in the Undertaking is unreasonable,
arbitrary, or oppressive is a question of law. It insisted that Rivera signed the Undertaking voluntarily
and for valuable consideration; and under the Release, Waiver and Quitclaim, he was obliged to
return the P963,619.28 upon accepting employment from a competitor bank within the one-year
proscribed period. Solidbank appended to its motion the Affidavit of Villarosa, where she declared
that Rivera was employed by Equitable on May 1, 1995 for the same position he held before his
retirement from Solidbank.
Rivera opposed the motion contending that, as gleaned from the pleadings of the parties as well as
Villarosas Affidavit, there are genuine issues as to material facts which call for the presentation of
evidence. He averred that there was a need for the parties to adduce evidence to prove that he did
not sign the Undertaking voluntarily. He claimed that he would not have been allowed to avail of the
SRP if he had not signed it, and consequently, his retirement benefits would not have been paid.
This was what Ed Nallas, Solidbank Assistant Vice-President for HRD and Personnel, told him when
he received his check on February 28, 1995. Senior Vice-President Henry Valdez, his superior in the
Consumers Banking Group, also did not mention that he would have to sign such Undertaking which
contained the assailed provision. Thus, he had no choice but to sign it. He insisted that the question
of whether he violated the Undertaking is a genuine issue of fact which called for the presentation of
evidence during the hearing on the merits of the case. He also asserted that he could not cause
injury or prejudice to Solidbanks interest since he never acquired any sensitive or delicate
information which could prejudice the banks interest if disclosed.
Rivera averred that he had the right to adduce evidence to prove that he had been faithful to the
provisions of the Release, Waiver and Quitclaim, and the Undertaking, and had not committed any
act or done or said anything to cause injury to Solidbank.18
Rivera appended to his Opposition his Counter-Affidavit in which he reiterated that he had to sign
the Undertaking containing the employment ban provision, otherwise his availment of the SRP would
not push through. There was no truth to the banks allegation that, "in exchange for receiving the
larger amount of P1,045,258.95 under the SRP, instead of the very much smaller amount
of P224,875.81 under the ORP, he agreed that he will not seek employment in a competitor bank or
financial institution within one year from February 28, 1995." It was the bank which conceived the
SRP to streamline its organization and all he did was accept it. He stressed that the decision
whether to allow him to avail of the SRP belonged solely to Solidbank. He also pointed out that the
employment ban provision in the Undertaking was not a consideration for his availment of the SRP,
and that if he did not avail of the retirement program, he would have continued working for Solidbank
for at least 15 more years, earning more than what he received under the SRP. He alleged that he
intended to go full time into the poultry business, but after about two months, found out that, contrary
to his expectations, the business did not provide income sufficient to support his family. Being the
breadwinner, he was then forced to look for a job, and considering his training and experience as a
former bank employee, the job with Equitable was all he could find. He insisted that he had remained
faithful to Solidbank and would continue to do so despite the case against him, the attachment of his
family home, and the resulting mental anguish, torture and expense it has caused them. 19
In his Supplemental Opposition, Rivera stressed that, being a former bank employee, it was the only
kind of work he knew. The ban was, in fact, practically absolute since it applied to all financial
institutions for one year from February 28, 1995. He pointed out that he could not work in any other
company because he did not have the qualifications, especially considering his age. Moreover, after

one year from February 28, 1995, he would no longer have any marketable skill, because by then, it
would have been rendered obsolete by non-use and rapid technological advances. He insisted that
the ban was not necessary to protect the interest of Solidbank, as, in the first place, he had no
access to any "secret" information which, if revealed would be prejudicial to Solidbanks interest. In
any case, he was not one to reveal whatever knowledge or information he may have acquired during
his employment with said bank.20
In its Reply, Solidbank averred that the wisdom of requiring the Undertaking from the 1995 SRP is
purely a management prerogative. It was not for Rivera to question and decry the banks policy to
protect itself from unfair competition and disclosure of its trade secrets. The substantial monetary
windfall given the retiring officers was meant to tide them over the one-year period of hiatus, and did
not prevent them from engaging in any kind of business or bar them from being employed except
with competitor banks/financial institutions.21
On December 18, 1995, the trial court issued an Order of Summary Judgment. 22 The fallo of the
decision reads:
WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of plaintiff and against
defendant ordering the latter to pay to plaintiff bank the amount of NINE HUNDRED SIXTY-THREE
THOUSAND SIX HUNDRED NINETEEN AND 28/100 (P963,619.28) PESOS, Philippine Currency,
as of May 23, 1995, plus legal interest at 12% per annum until fully paid, and the costs of the suit.
FURTHER, NEVERTHELESS, both parties are hereby encouraged as they are directed to meet
again and sit down to find out how they can finally end this rift and litigation, all in the name of equity,
for after all, defendant had worked for the bank for some 18 years.23
The trial court declared that there was no genuine issue as to a matter of fact in the case since
Rivera voluntarily executed the Release, Waiver and Quitclaim, and the Undertaking. He had a
choice not to retire, but opted to do so under the SRP, and, in fact, received the benefits under it.
According to the RTC, the prohibition incorporated in the Undertaking was not unreasonable. To
allow Rivera to be excused from his undertakings in said deed and, at the same time, benefit
therefrom would be to allow him to enrich himself at the expense of Solidbank. The RTC ruled that
Rivera had to return the P963,619.28 he received from Solidbank, plus interest of 12% per annum
from May 23, 1998 until fully paid.
Aggrieved, Rivera appealed the ruling to the CA which rendered judgment on June 14, 2002 partially
granting the appeal. The fallo of the decision reads:
WHEREFORE, the appeal is PARTIALLY GRANTED. The decision appealed from is AFFIRMED
with the modification that the attachment and levy upon the family home covered by TCT No. 51621
of the Register of Deeds, Las Pias, Metro Manila, is hereby SET ASIDE and DISCHARGED.
SO ORDERED.24
The CA declared that there was no genuine issue regarding any material fact except as to the
amount of damages. It ratiocinated that the agreement between Rivera and Solidbank was the law
between them, and that the interpretation of the stipulations therein could not be left upon the whims
of Rivera. According to the CA, Rivera never denied signing the Release, Waiver, and Quitclaim,

including the Undertaking regarding the employment prohibition. He even admitted joining Equitable
as an employee within the proscribed one-year period. The alleged defenses of Rivera, the CA
declared, could not prevail over the admissions in his pleadings. Moreover, Riveras justification for
taking the job with Equitable, "dire necessity," was not an acceptable ground for annulling the
Undertaking since there were no earmarks of coercion, undue influence, or fraud in its execution.
Having executed the said deed and thereafter receiving the benefits under the SRP, he is deemed to
have waived the right
1avvphil.net

to assail the same, hence, is estopped from insisting or retaining the said amount of P963,619.28.
However, the CA ruled that the attachment made upon Riveras family home was void, and, pursuant
to the mandate of Article 155, in relation to Article 153 of the Family Code, must be discharged.
Hence, this recourse to the Court.
Petitioner avers that
I.
THE COURT OF APPEALS ERRED IN UPHOLDING THE PROPRIETY OF THE SUMMARY
JUDGMENT RENDERED BY THE TRIAL COURT CONSIDERING THE EXISTENCE OF GENUINE
ISSUES AS TO MATERIAL FACTS WHICH CALL FOR THE PRESENTATION OF EVIDENCE IN A
TRIAL ON THE MERITS.
II.
THE COURT OF APPEALS ERRED IN NOT DECLARING THE ONE-YEAR EMPLOYMENT BAN
IMPOSED BY RESPONDENT SOLIDBANK UPON HEREIN PETITIONER NULL AND VOID FOR
BEING UNREASONABLE AND OPPRESSIVE AND FOR CONSTITUTING RESTRAINT OF TRADE
WHICH VIOLATES PUBLIC POLICY AS ENUNCIATED IN OUR CONSTITUTION AND LAWS.
III.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS DECISION ORDERING
HEREIN RESPONDENT TO PAY SOLIDBANK THE AMOUNT OF P963,619.28 AS OF MAY 23,
1995, PLUS LEGAL INTEREST OF 12% PER ANNUM UNTIL FULLY PAID.
IV.
MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN AFFIRMING THE PORTION OF
THE SUMMARY JUDGMENT ORDERING PETITIONER TO PAY SOLIDBANK LEGAL INTEREST
OF 12% PER ANNUM UNTIL FULLY PAID ON THE AFOREMENTIONED SUM [OF] P963,619.28.25
The issues for resolution are: (1) whether the parties raised a genuine issue in their pleadings,
affidavits, and documents, that is, whether the employment ban incorporated in the Undertaking
which petitioner executed upon his retirement is unreasonable, oppressive, hence, contrary to public
policy; and (2) whether petitioner is liable to respondent for the restitution of P963,619.28

representing his retirement benefits, and interest thereon at 12% per annum as of May 23, 1995 until
payment of the full amount.
On the first issue, petitioner claims that, based on the pleadings of the parties, and the documents
and affidavits appended thereto, genuine issues as to matters of fact were raised therein. He insists
that the resolution of the issue of whether the employment ban is unreasonable requires the
presentation of evidence on the circumstances which led to respondent banks offer of the SRP and
ORP, and petitioners eventual acceptance and signing of the Undertaking on March 1, 1995. There
is likewise a need to adduce evidence on whether the employment ban is necessary to protect
respondents interest, and whether it is an undue restraint on petitioners constitutional right to earn a
living to support his family. He further insists that respondent is burdened to prove that it sustained
damage or injury by reason of his alleged breach of the employment ban since neither the Release,
Waiver and Quitclaim, and Undertaking he executed contain any provision that respondent is
automatically entitled to the restitution of the P963,619.28. Petitioner points out that all the deeds
provide is that, in case of breach thereof, respondent is entitled to protection before the appropriate
courts of law.
On the second issue, petitioner avers that the prohibition incorporated in the Release, Waiver and
Quitclaim barring him as retiree from engaging directly or indirectly in any unlawful activity and
disclosing any information concerning the business of respondent bank, as well as the employment
ban contained in the Undertaking he executed, are oppressive, unreasonable, cruel and inhuman
because of its overbreath. He reiterates that it is against public policy, an unreasonable restraint of
trade, because it prohibits him to work for one year in the Philippines, ultimately preventing him from
supporting his family. He points out that a breadwinner in a family of four minor daughters who are
all studying, with a wife who does not work, one would have a very difficult time meeting the financial
obligations even with a steady, regular-paying job. He insists that the Undertaking deprives him of
the means to support his family, and ultimately, his childrens chance for a good education and
future. He reiterates that the returns in his poultry business fell short of his expectations, and
unfortunately, the business was totally destroyed by typhoon "Rosing" in November 1995.
Petitioner further maintains that respondents management prerogative does not give it a license to
entice its employees to retire at a very young age and prohibit them from seeking employment in a
so-called competitor bank or financial institution, thus prevent them from working and supporting
their families (considering that banking is the only kind of work they know). Petitioner avers that
"managements prerogative must be without abuse of discretion. A line must be drawn between
management prerogative regarding business operations per se and those which affect the rights of
the employees. In treating its employees, management should see to it that its employees are at
least properly informed of its decision or modes of action."
On the last issue, petitioner alleges that the P1,045,258.95 he received was his retirement benefit
which he earned after serving the bank for 18 years. It was not a mere gift or gratuity given by
respondent bank, without the latter giving up something of value in return. On the contrary,
respondent bank received "valuable consideration," that is, petitioner quit his job at the relatively
young age of 45, thus enabling respondent to effect its reorganization plan and forego the salary,
benefits, bonuses, and promotions he would have received had he not retired early.
Petitioner avers that, under the Undertaking, respondent would be entitled to a cause of action
against him before the appropriate courts of law if he had violated the employment ban. He avers
that respondent must prove its entitlement to the P963,619.28. The Undertaking contains no

provision that he would have to return the amount he received under the SRP; much less does it
provide that he would have to pay 12% interest per annum on said amount. On the other hand, the
Release, Waiver and Quitclaim does not contain the provision prohibiting him from being employed
with any competitor bank or financial institution within one year from February 28, 1995. Petitioner
insists that he acted in good faith when he received his retirement benefits; hence, he cannot be
punished by being ordered to return the sum of P963,619.28 which was given to him for and in
consideration of his early retirement.
Neither can petitioner be subjected to the penalty of paying 12% interest per annum on his
retirement pay ofP963,619.28 from May 23, 1995, as it is improper and oppressive to him and his
family. As of July 3, 2002, the interest alone would amount to P822,609.67, thus doubling the
amount to be returned to respondent bank under the decision of the RTC and the CA. The imposition
of interest has no basis because the Release, Waiver and Quitclaim, and the Undertaking do not
provide for payment of interest. The deeds only state that breach thereof would entitle respondent to
bring an action to seek damages, to include the return of the amount that may have been paid to
petitioner by virtue thereof. On the other hand, any breach of the Undertaking or the Release, Waiver
and Quitclaim would only entitle respondent to a cause of action before the appropriate courts of law.
Besides, the amount received by petitioner was not a loan and, therefore, should not earn interest
pursuant to Article 1956 of the Civil Code.
Finally, petitioner insists that he acted in good faith in seeking employment with another bank within
one year from February 28, 1995 because he needed to earn a living to support his family and
finance his childrens education. Hence, the imposition of interest, which is a penalty, is unwarranted.
By way of Comment on the petition, respondent avers that the Undertaking is the law between it and
petitioner. As such, the latter could not assail the deed after receiving the retirement benefit under
the SRP. As gleaned from the averments in his petition, petitioner admitted that he executed the
Undertaking after having been informed of the nature and consequences of his refusal to sign the
same, i.e., he would not be able to receive the retirement benefit under the SRP.
Respondent maintains that courts have no power to relieve parties of obligations voluntarily entered
into simply because their contracts turned out to be disastrous deeds. Citing the ruling of this Court
in Eastern Shipping Lines, Inc. v. Court of Appeals,26 respondent avers that petitioner is obliged to
pay 12% per annum interest of theP963,619.28 from judicial or extrajudicial demand.
In reply, petitioner asserts that respondent failed to prove that it sustained damages, including the
amount thereof, and that neither the Release, Waiver and Quitclaim nor the Undertaking obliged him
to pay interest to respondent.
The petition is meritorious.
Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure provide:
Section 1. Summary judgment for claimant. A party seeking to recover upon a claim, counterclaim,
or cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto
has been served, move with supporting affidavits, depositions or admissions for a summary
judgment in his favor upon all or any part thereof.
xxxx

Sec. 3. Motion and proceedings thereon. The motion shall be served at least ten (10) days before
the time specified for the hearing. The adverse party may serve opposing affidavits, depositions, or
admissions at least three (3) days before the hearing. After the hearing, the judgment sought shall
be rendered forthwith if the pleadings, supporting affidavits, depositions, and admissions on file,
show that, except as to the amount of damages, there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a matter of law.
For a summary judgment to be proper, the movant must establish two requisites: (a) there must be
no genuine issue as to any material fact, except for the amount of damages; and (b) the party
presenting the motion for summary judgment must be entitled to a judgment as a matter of
law.27 Where, on the basis of the pleadings of a moving party, including documents appended
thereto, no genuine issue as to a material fact exists, the burden to produce a genuine issue shifts to
the opposing party. If the opposing party fails, the moving party is entitled to a summary judgment. 28
A genuine issue is an issue of fact which requires the presentation of evidence as distinguished from
an issue which is a sham, fictitious, contrived or a false claim. The trial court can determine a
genuine issue on the basis of the pleadings, admissions, documents, affidavits or counteraffidavits
submitted by the parties. When the facts as pleaded appear uncontested or undisputed, then there is
no real or genuine issue or question as to any fact and summary judgment called for. On the other
hand, where the facts pleaded by the parties are disputed or contested, proceedings for a summary
judgment cannot take the place of a trial.29 The evidence on record must be viewed in light most
favorable to the party opposing the motion who must be given the benefit of all favorable inferences
as can reasonably be drawn from the evidence.30
Courts must be critical of the papers presented by the moving party and not of the
papers/documents in opposition thereto.31 Conclusory assertions are insufficient to raise an issue of
material fact.32 A party cannot create a genuine dispute of material fact through mere speculations or
compilation of differences.33 He may not create an issue of fact through bald assertions, unsupported
contentions and conclusory statements.34 He must do more than rely upon allegations but must
come forward with specific facts in support of a claim. Where the factual context makes his claim
implausible, he must come forward with more persuasive evidence demonstrating a genuine issue
for trial.35
Where there are no disputed material facts, the determination of whether a party breached a
contract is a question of law and is appropriate for summary judgment. 36 When interpreting an
ambiguous contract with extrinsic evidence, summary judgment is proper so long as the extrinsic
evidence presented to the court supports only one of the conflicting interpretations. 37 Where
reasonable men could differ as to the contentions shown from the evidence, summary judgment
might be denied.
In United Rentals (North America), Inc. v. Keizer,38 the U.S. Circuit Court of Appeals resolved the
issue of whether a summary judgment is proper in a breach of contract action involving the
interpretation of such contract, and ruled that:
[A] contract can be interpreted by the court on summary judgment if (a) the contracts terms are
clear, or (b) the evidence supports only one construction of the controverted provision,
notwithstanding some ambiguity. x x x If the court finds no ambiguity, it should proceed to interpret
the contract and it may do so at the summary judgment stage. If, however, the court discerns an
ambiguity, the next step involving an examination of extrinsic evidence becomes essential. x x x

Summary judgment may be appropriate even if ambiguity lurks as long as the extrinsic evidence
presented to the court supports only one of the conflicting interpretations. 39
In this case, there is no dispute between the parties that, in consideration for his availment of the
SRP, petitioner executed the Release, Waiver and Quitclaim, and the Undertaking as supplement
thereto, and that he received retirement pay amounting to P963,619.28 from respondent. On May 1,
1995, within the one-year ban and without prior knowledge of respondent, petitioner was employed
by Equitable as Manager of its Credit Investigation and Appraisal Division, Consumers Banking
Group. Despite demands, petitioner failed to return the P963,619.28 to respondent on the latters
allegation that he had breached the one-year ban by accepting employment from Equitable, which
according to respondent was a competitor bank.
We agree with petitioners contention that the issue as to whether the post-retirement competitive
employment ban incorporated in the Undertaking is against public policy is a genuine issue of fact,
requiring the parties to present evidence to support their respective claims.
As gleaned from the records, petitioner made two undertakings. The first is incorporated in the
Release, Waiver and Quitclaim that he signed, to wit:
4. I will not, at any time, in any manner whatsoever, directly or indirectly engage in any unlawful
activity prejudicial to the interest of the BANK, its parent, affiliate or subsidiary companies, their
stockholders, officers, directors, agents or employees, and their successors-in-interest and will not
disclose any information concerning the business of the BANK, its manner or operation, its plans,
processes or data of any kind.40
The second undertaking is incorporated in the Undertaking following petitioners execution of the
Release, Waiver and Quitclaim which reads:
4. That as a supplement to the Release and Quitclaim, I executed in favor of Solidbank
on FEBRUARY 28, 1995, I hereby expressly undertake that I will not seek employment with any
competitor bank or financial institution within one (1) year from February 28, 1995. 41
In the Release, Waiver and Quitclaim, petitioner declared that respondent may bring "an action for
damages which may include, but not limited to the return of whatever sums he may have received
from respondent under said deed if he breaks his undertaking therein." 42 On the other hand,
petitioner declared in the Undertaking that "any breach on his part of said Undertaking or the terms
and conditions of the Release, Waiver and Quitclaim will entitle respondent to a cause of action
against [petitioner] for protection before the appropriate courts of law." 43
Article 1306 of the New Civil Code provides that the contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order or public policy. The freedom of contract is both
a constitutional and statutory right.44 A contract is the law between the parties and courts have no
choice but to enforce such contract as long as it is not contrary to law, morals, good customs and
against public policy.
The well-entrenched doctrine is that the law does not relieve a party from the effects of an unwise,
foolish or disastrous contract, entered into with full awareness of what he was doing and entered into
and carried out in good faith. Such a contract will not be discarded even if there was a mistake of law

or fact. Courts have no jurisdiction to look into the wisdom of the contract entered into by and
between the parties or to render a decision different therefrom. They have no power to relieve
parties from obligation voluntarily assailed, simply because their contracts turned out to be
disastrous deals.45
On the other hand, retirement plans, in light of the constitutional mandate of affording full protection
to labor, must be liberally construed in favor of the employee, it being the general rule that pension
or retirement plans formulated by the employer are to be construed against it. 46 Retirement benefits,
after all, are intended to help the employee enjoy the remaining years of his life, releasing him from
the burden of worrying for his financial support, and are a form of reward for being loyal to the
employer.47
In Ferrazzini v. Gsell,48 the Court defined public policy in civil law countries and in the United States
and the Philippines:
By "public policy," as defined by the courts in the United States and England, is intended that
principle of the law which holds that no subject or citizen can lawfully do that which has a tendency
to be injurious to the public or against the public good, which may be termed the "policy of the law,"
or "public policy in relation to the administration of the law." (Words & Phrases Judicially Defined, vol.
6, p. 5813, and cases cited.) Public policy is the principle under which freedom of contract or private
dealing is restricted by law for the good of the public. (Id., Id.) In determining whether a contract is
contrary to public policy the nature of the subject matter determines the source from which such
question is to be solved. (Hartford Fire Ins. Co. v. Chicago, M. & St. P. Ry. Co., 62 Fed. 904, 906.)
The foregoing is sufficient to show that there is no difference in principle between the public policy
(orden publico) in the two jurisdictions (the United States and the Philippine Islands) as determined
by the Constitution, laws, and judicial decisions. 49
The Court proceeded to define "trade" as follows:
x x x In the broader sense, it is any occupation or business carried on for subsistence or profit.
Andersons Dictionary of Law gives the following definition: "Generally equivalent to occupation,
employment, or business, whether manual or mercantile; any occupation, employment or business
carried on for profit, gain, or livelihood, not in the liberal arts or in the learned professions." In
Abbotts Law Dictionary, the word is defined as "an occupation, employment or business carried on
for gain or profit." Among the definitions given in the Encyclopaedic Dictionary is the following: "The
business which a person has learnt, and which he carries on for subsistence or profit; occupation;
particularly employment, whether manual or mercantile, as distinguished from the liberal arts or the
learned professions and agriculture." Bouvier limits the meaning to commerce and traffic, and the
handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to adopt and apply the broader
meaning given by the lexicographers.50
In the present case, the trial court ruled that the prohibition against petitioner accepting employment
with a competitor bank or financial institution within one year from February 28, 1995 is not
unreasonable. The appellate court held that petitioner was estopped from assailing the postretirement competitive employment ban because of his admission that he signed the Undertaking
and had already received benefits under the SRP.
The rulings of the trial court and the appellate court are incorrect.

There is no factual basis for the trial courts ruling, for the simple reason that it rendered summary
judgment and thereby foreclosed the presentation of evidence by the parties to prove whether the
restrictive covenant is reasonable or not. Moreover, on the face of the Undertaking, the postretirement competitive employment ban is unreasonable because it has no geographical limits;
respondent is barred from accepting any kind of employment in any competitive bank within the
proscribed period. Although the period of one year may appear reasonable, the matter of whether
the restriction is reasonable or unreasonable cannot be ascertained with finality solely from the
terms and conditions of the Undertaking, or even in tandem with the Release, Waiver and Quitclaim.
Undeniably, petitioner retired under the SRP and received P963,619.28 from respondent. However,
petitioner is not proscribed, by waiver or estoppel, from assailing the post-retirement competitive
employment ban since under Article 1409 of the New Civil Code, those contracts whose cause,
object or purpose is contrary to law, morals, good customs, public order or public policy are
inexistent or void from the beginning. Estoppel cannot give validity to an act that is prohibited by law
or one that is against public policy.51
Respondent, as employer, is burdened to establish that a restrictive covenant barring an employee
from accepting a competitive employment after retirement or resignation is not an unreasonable or
oppressive, or in undue or unreasonable restraint of trade, thus, unenforceable for being repugnant
to public policy. As the Court stated in Ferrazzini v. Gsell, 52 cases involving contracts in restraint of
trade are to be judged according to their circumstances, to wit:
x x x There are two principal grounds on which the doctrine is founded that a contract in restraint of
trade is void as against public policy. One is, the injury to the public by being deprived of the
restricted partys industry; and the other is, the injury to the party himself by being precluded from
pursuing his occupation, and thus being prevented from supporting himself and his family.
And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated the rule thus:
Public welfare is first considered, and if it be not involved, and the restraint upon one party is not
greater than protection to the other party requires, the contract may be sustained. The question is,
whether, under the particular circumstances of the case and the nature of the particular contract
involved in it, the contract is, or is not, unreasonable.53
In cases where an employee assails a contract containing a provision prohibiting him or her from
accepting competitive employment as against public policy, the employer has to adduce evidence to
prove that the restriction is reasonable and not greater than necessary to protect the employers
legitimate business interests.54The restraint may not be unduly harsh or oppressive in curtailing the
employees legitimate efforts to earn a livelihood and must be reasonable in light of sound public
policy.55
Courts should carefully scrutinize all contracts limiting a mans natural right to follow any trade or
profession anywhere he pleases and in any lawful manner. But it is just as important to protect the
enjoyment of an establishment in trade or profession, which its employer has built up by his own
honest application to every day duty and the faithful performance of the tasks which every day
imposes upon the ordinary man. What one creates by his own labor is his. Public policy does not
intend that another than the producer shall reap the fruits of labor; rather, it gives to him who labors
the right by every legitimate means to protect the fruits of his labor and secure the enjoyment of
them to himself.56 Freedom to contract must not be unreasonably abridged. Neither must the right to

protect by reasonable restrictions that which a man by industry, skill and good judgment has built up,
be denied.57
The Court reiterates that the determination of reasonableness is made on the particular facts and
circumstances of each case.58 In Esmerson Electric Co. v. Rogers,59 it was held that the question of
reasonableness of a restraint requires a thorough consideration of surrounding circumstances,
including the subject matter of the contract, the purpose to be served, the determination of the
parties, the extent of the restraint and the specialization of the business of the employer. The court
has to consider whether its enforcement will be injurious to the public or cause undue hardships to
the employee, and whether the restraint imposed is greater than necessary to protect the employer.
Thus, the court must have before it evidence relating to the legitimate interests of the employer
which might be protected in terms of time, space and the types of activity proscribed. 60
Consideration must be given to the employees right to earn a living and to his ability to determine
with certainty the area within which his employment ban is restituted. A provision on territorial
limitation is necessary to guide an employee of what constitutes as violation of a restrictive covenant
and whether the geographic scope is co-extensive with that in which the employer is doing business.
In considering a territorial restriction, the facts and circumstances surrounding the case must be
considered.61
Thus, in determining whether the contract is reasonable or not, the trial court should consider the
following factors: (a) whether the covenant protects a legitimate business interest of the employer;
(b) whether the covenant creates an undue burden on the employee; (c) whether the covenant is
injurious to the public welfare; (d) whether the time and territorial limitations contained in the
covenant are reasonable; and (e) whether the restraint is reasonable from the standpoint of public
policy.62
Not to be ignored is the fact that the banking business is so impressed with public interest where the
trust and interest of the public in general is of paramount importance such that the appropriate
standard of diligence must be very high, if not the highest degree of diligence. 63
We are not impervious of the distinction between restrictive covenants barring an employee to
accept a post-employment competitive employment or restraint on trade in employment contracts
and restraints on post-retirement competitive employment in pension and retirement plans either
incorporated in employment contracts or in collective bargaining agreements between the employer
and the union of employees, or separate from said contracts or collective bargaining agreements
which provide that an employee who accepts post retirement competitive employment will forfeit
retirement and other benefits or will be obliged to restitute the same to the employer. The strong
weight of authority is that forfeitures for engaging in subsequent competitive employment included in
pension and retirement plans are valid even though unrestricted in time or geography. The raison
detre is explained by the United States Circuit Court of Appeals in Rochester Corporation v. W.L.
Rochester, Jr.:64
x x x The authorities, though, generally draw a clear and obvious distinction between restraints on
competitive employment in employment contracts and in pension plans. The strong weight of
authority holds that forfeitures for engaging in subsequent competitive employment, included in
pension retirement plans, are valid, even though unrestricted in time or geography. The reasoning
behind this conclusion is that the forfeiture, unlike the restraint included in the employment contract,
is not a prohibition on the employees engaging in competitive work but is merely a denial of the right

to participate in the retirement plan if he does so engage. A leading case on this point is Van Pelt v.
Berefco, Inc., supra, 208 N.E.2d at p. 865, where, in passing on a forfeiture provision similar to that
here, the Court said:
"A restriction in the contract which does not preclude the employee from engaging in competitive
activity, but simply provides for the loss of rights or privileges if he does so is not in restraint of
trade." (emphasis added)65
A post-retirement competitive employment restriction is designed to protect the employer against
competition by former employees who may retire and obtain retirement or pension benefits and, at
the same time, engage in competitive employment.66
We have reviewed the Undertaking which respondent impelled petitioner to sign, and find that in
case of failure to comply with the promise not to accept competitive employment within one year
from February 28, 1995, respondent will have a cause of action against petitioner for "protection in
the courts of law." The words "cause of action for protection in the courts of law" are so broad and
comprehensive, that they may also include a cause of action for prohibitory and mandatory
injunction against petitioner, specific performance plus damages, or a damage suit (for actual, moral
and/or exemplary damages), all inclusive of the restitution of the P963,619.28 which petitioner
received from respondent. The Undertaking and the Release, Waiver and Quitclaim do not provide
for the automatic forfeiture of the benefits petitioner received under the SRP upon his breach of said
deeds. Thus, the post-retirement competitive employment ban incorporated in the Undertaking of
respondent does not, on its face, appear to be of the same class or genre as that contemplated in
Rochester.
It is settled that actual damages or compensatory damages may be awarded for breach of contracts.
Actual damages are primarily intended to simply make good or replace the loss covered by said
breach.67 They cannot be presumed. Even if petitioner had admitted to having breached the
Undertaking, respondent must still prove that it suffered damages and the amount thereof. 68 In
determining the amount of actual damages, the Court cannot rely on mere assertions, speculations,
conjectures or guesswork but must depend on competent proof and on the best evidence obtainable
regarding the actual amount of losses.69 The benefit to be derived from a contract which one of the
parties has absolutely failed to perform is of necessity to some extent a matter of speculation of the
injured party.
On the assumption that the competitive employment ban in the Undertaking is valid, petitioner is not
automatically entitled to return the P963,619.28 he received from respondent. To reiterate, the terms
of the Undertaking clearly state that any breach by petitioner of his promise would entitle respondent
to a cause of action for protection in the courts of law; as such, restitution of the P963,619.28 will not
follow as a matter of course. Respondent is still burdened to prove its entitlement to the aforesaid
amount by producing the best evidence of which its case is susceptible. 70
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 52235 is SET ASIDE. Let this case be REMANDED to the Regional Trial
Court of Manila for further proceedings conformably with this decision of the Court.
SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice

FIRST DIVISION

UNITED KIMBERLY-CLARK G.R. No. 162957

EMPLOYEES UNION
PHILIPPINE TRANSPORT Present:
GENERAL WORKERS
ORGANIZATION (UKCEU- PANGANIBAN, C.J., Chairperson,
PTGWO), YNARES-SANTIAGO,
Petitioner, AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
- versus -

KIMBERLY CLARK Promulgated:

PHILIPPINES, INC.,
Respondent. March 6, 2006

x--------------------------------------------------x

DECISION

CALLEJO, SR., J.:

Before the Court is a Petition for Review on Certiorari of the

Decision[1] of the Court of Appeals (CA) which partially reversed
and set aside the March 19, 2001 Resolution [2] of the Voluntary
Arbitrator (VA).

Following are the factual antecedents:

United Kimberly-Clark Employees Union (UKCEU), a local

chapter affiliate of the Philippine Transport General Workers
Organization (PTGWO), is the certified collective bargaining agent
of all rank-and-file employees of the San Pedro milling plant of
Kimberly-Clark Philippines, Inc. (KCPI), a multinational corporation
engaged in the manufacture of bathroom and facial tissues, paper
napkins, feminine care products, disposable diapers and
absorbent cotton.

Way back in 1980, KCPI and the UKCEU executed a Collective

Bargaining Agreement (CBA). Article XX, Section 1 of the CBA
reads:

Section 1. The Company agrees to employ,

regardless of sex, the immediate member of the family of
an
employee provided
qualified,
upon
the
employee's resignation, retirement, disability or death. In
case of resignation, however, employment of an
immediate member of the family of an employee may be
allowed provided the employee has rendered a service of
ten (10) years and above and the resignation is not a
forced resignation. For the purpose of this section, the
phrase immediate member of the family of an employee
shall refer to the employee's legitimate children and in
default thereof to the employee's collateral relative within
the third civil degree. The recommendee of the
retired/resigned employee shall, if qualified, be hired on
probationary status. (Emphasis added)[3]

However, KCPI did not set any other employment qualifying

standards for the recommendees of retired, resigned, deceased or
disabled employees and agreed to hire such recommendees who
were high school graduates as an act of liberality and
generosity. The provision remained unchanged.[4] Through the
years, several UKCEU members who resigned or were disabled
availed of the said benefits and recommended their
successors. Although such recommendees were merely high
school graduates, KCPI nonetheless employed them.

Sometime in 1991, Danilo L. Guerrero retired and

recommended his nephew as his replacement. KCPI rejected
Guerreros recommendation because his nephew was not a
member of his (Guerreros) immediate family. The matter was
brought to Voluntary Arbitrator Danilo Lorredo who ruled that
Guerreros nephew should be employed as his replacement in
accordance with the CBA. KCPI brought the matter to the
Court. On September 21, 1993, the Court affirmed the ruling of

the VA in Kimberly Clark Philippines v. Lorredo,[5] where it was held

that:
As we see it, the phrase in default thereof has not been
intended or contemplated by the parties as having a
preclusive effect within the group. It simply sets a priority
on who can possibly be recommendees for employment.
The employee, in fine, need not be childless at all for him
to be allowed to nominate a third degree collateral
relative; otherwise, his ability to designate such relative is
all but suddenly lost by the birth of an only child and
regained by the latter's demise. This situation could not
have been intended.[6]

However, the Court also ruled that KCPI was not obliged
to unconditionally accept the recommendee since the
latter must still meet the required employment standard
theretofore set by it. Even a qualified recommendee would be
hired only on a probationary status. As such, KCPI was not left
without its own safeguards under the agreement. [7]

On November 7, 1995, KCPI issued Guidelines on the Hiring

of Replacements of Retired/Resigned Employees [8] for the effective
implementation of Article XX, Section 1 of the existing CBA, to
take effect on January 1, 1996. The Guidelines require, among
others, that: (a) such recommendees must be at least 18 years of
age but not more than 30 years old at the time of the hiring, and
(b) have completed, after graduating from high school, at least a
two-year technical/vocational course or a third year level of
college education. Moreover, where both husband and wife are
employees of the company, they shall be treated as one family;
hence, only one of the spouses would be allowed to avail of the
benefit.[9]

UKCEU, through its President, Reynaldo B. Hermoso,

requested for a grievance meeting, which was held on November
22,
1995.[10] During
the
meeting, UKCEU specifically requested the deferment of the
implementation of the Guidelines until January 1, 1997, after the
next CBA negotiations in 1997 during which the matter will be
taken up. KCPI agreed to postpone the implementation of the
Guidelines until January 1, 1997 but only with respect to the
educational qualification.[11]

During the negotiation for the 1997 CBA, UKCEU proposed

the amendment of Article XX, Section 1 of the existing CBA. After
the negotiation, KCPI and UKCEU executed a CBA to cover the
period from July 1, 1997 to June 30, 1999. The educational
qualifications contained in the Guidelines prepared and issued by
KCPI were not incorporated in the CBA. Neither were the proposed
amendment of UKCEU. Article XX, Section 1 of the preceding CBA
was retained without any modification.[12] KCPI continued to hire
employees pursuant to the CBA up to 1998. It had employed 44
employees from 1995 to 1998.[13]

However, in the second half of 1998, KCPI started to suspend

the implementation of the CBA. This was partly due to the
depressed economic conditions then prevailing in the Philippines,
and in compliance with the freeze hiring policy of its Asia-Pacific
headquarters.[14] It refused to hire, as regular employees, 80
recommendees of retiring employees.[15] KCPI and UKCEU failed to
settle the matter through the existing grievance machinery.

On April 23, 1999, the parties filed before the National

Conciliation and Mediation Board (NCMB), a Submission

Agreement referring to arbitration the issue of whether KCPI

violated Article XX, Section 1 of the CBA. The parties agreed not
to appeal any resolution/decision of the VA. [16]

Meantime, in August 1999, KCPI and UKCEU executed a new

CBA. Article XX, Section 1 of the preceding CBA was incorporated
in the new CBA, governing the relation of the parties up to June
30, 2002.[17]

UKCEU averred in its pleadings that the qualification in terms

of education, that is, admitting recommendees who were at least
high school graduates, had been an established practice of KCPI
since 1980. They appended to their position paper as Annexes A,
A-1 to A-5 thereof, a list of such recommendees who were hired
by KCPI.[18] This being the case, KCPI could not just unilaterally
revoke such practice without its (UKCEU) consent and
approval. UKCEU explained that while KCPI, in general, had the
discretion to raise the educational qualification of its applicants
for employment, this did not apply to recommendees due to the
manner by which Article XX, Section 1 was implemented in the
past. UKCEU emphasized that its benefits had already been
institutionalized in the CBAs executed by the parties through the
years. Thus, in refusing to hire the 80 recommendees as regular
employees, KCPI violated its CBA with the union, [19] equivalent to
breach of contract and unfair labor practice. It was further pointed
out that contrary to its claim that KCPI was implementing a freeze
hiring policy, KCPI even hired more or less 400 casuals, most of
whom were only high school graduates who performed activities
necessary and desirable to KCPIs regular and usual business. They
averred that the hiring of such employees was continuous, and on
a five-month contract without extension or rehiring. UKCEU
insisted that it was not estopped to question the move to upgrade
the academic standards of recommendees, and that KCPI should
have indicated its counter-proposal during the 1997 and 1999

CBA negotiations. Since KCPI preferred to retain Article XX,

Section 1 where the dispute and ambiguity developed, the union
opined that such provision should be strictly construed against
the company.

UKCEU averred that either the husband or wife had the right
of replacement, and to the benefits offered by Article XX, Section
1; to deny them the right would be a clear discrimination and
violation of the CBA, since both are paying members of union
dues and individually vote for any policy determination.

In its pleadings, KCPI maintained that pursuant to its

management prerogative, it had the right to determine hiring
standards under Article XX, Section 1 of the CBA without the
consent or approval of UKCEU. It argued that like applicants for
regular positions, recommendees of retiring employees must also
be college graduates, in accordance with its November 7, 1995
Guidelines. It explained that such recommendees are applying for
regular positions and not as casual, who are hired on a temporary
basis.KCPI averred that the employment educational standards in
the Guidelines it issued on November 7, 1995 took effect
on January 1, 1997 and that after its implementation was
deferred, the union did not take any action. Hence, UKCEU was
estopped from questioning the implementation of Article XX,
Section 1 in the 1999 CBA. In fact, such upgraded educational
qualifications under the November 7, 1995 Guidelines were never
brought up by UKCEU, and were never discussed during the 1997
CBA negotiations. It asserted, however, that it was justified to
temporarily suspend the implementation because the freeze
hiring policy of its Asia-Pacific headquarters had affected both
existing and new regular positions in the company. It pointed out
that, in order to enforce the CBA provision, it normally fills up two

regular positions because the recommendee of a union member

who resigns, retires, dies or is disabled does not usually possess
the same qualifications and skills of his/her predecessor. KCPI
averred that it never anticipated this undue burden and was not
in a position to sustain the practice, considering the lower volume
in sales and a reduction in the number of working days in some
areas of its operations.

With respect to spouses who are both employed in KCPI, it

was maintained that the policy regarding the availment of their
benefits had always been consistent since 1980: only one of the
spouses is entitled thereto, like the CBA provisions on the
employees medical and funeral benefits. It pointed out that at the
time Article XX, Section 1 was adopted, there was already an
existing policy in KCPI prohibiting the hiring of a relative of an
employee within the fourth civil degree of consanguinity or
affinity. Thus, if the interpretation of UKCEU would be considered,
an unwarranted and anomalous situation would result, since
children of spouses who are both employed in the company fall
within the second degree of consanguinity. Moreover, spouses
should be treated as one family, much like the tax treatment on
the claim for additional dependents. KCPI stressed that, as stated
in the guidelines, the rationale for the policy is to maintain
fairness and equality since the intended or actual beneficiary is
the child of an employee.

On May 8, 1999, the VA visited the premises of KCPI with prior

notice to the parties, and discovered that KCPI employed casuals
who performed the work of certain regular employees covered by
the CBA.[20]

On March 19, 2001, the VA issued a Resolution in favor of

UKCEU. The dispositive portion of the resolution reads:

WHEREFORE, premises considered, this Voluntary

Arbitrator, finds that (a) the Company cannot suspend
implementation of Section 1, Article XX of the existing
CBA
unilaterally
by
upgrading
the
educational
qualifications of applicants-replacements than are
required previously, and (b) the husband and the wife,
under the said provision, are each entitled separately to
recommend an applicant-replacement.

SO ORDERED.[21]

The VA ruled that since the CBA is the law between the
parties, KCPI could not just unilaterally change or suspend the
implementation
of
the
existing employment requirements, even in the light of the
business situation then prevailing in the Philippines. Moreover, an
unambiguous CBA provision must be interpreted according to its
literal meaning and not beyond the parties' actual intendment,
and, in case of doubts, the same should be resolved in favor of
labor. The VA declared that management prerogative does not
give license to a company to set aside or ignore what had been
agreed upon through negotiation. According to the VA, since KCPI
failed to explain why it continued to hire casual workers doing the
jobs of regular employees, it failed to substantiate its contention
that the economic crisis did not warrant the hiring of regular
employees.[22]

As to the applicability of Article XX, Section 1 to spouses

employed by KCPI, the VA referred to Article I of the CBA, which
provides that the Agreement covers all regular rank-and-file
employees. Had the intention of the parties been to grant
husband and wife employees the privilege of recommending only

one applicant-replacement, it should have been stated in

unequivocal terms.[23]

KCPI assailed the decision of

review[24] before the CA. It alleged that:

the

VA via petition

A.

Contrary to the ruling of the Honorable Voluntary

Arbitrator, petitioner may validly suspend the
implementation of Section 1, Article XX, by reason of
economic difficulty.

B.

Contrary to the ruling of the Honorable Voluntary

Arbitrator,
law
and
jurisprudence
[recognize]
management's prerogative to set the qualifications for
[the] hiring of employees, including those hired as
replacements under Section 1, Article XX.

C.

Contrary to the ruling of the Honorable Voluntary

Arbitrator, reasonable application of statutory and
contractual
interpretation
supports
only
one
conclusion - that, in case of both spouses being KCPI
employees, only one of them may avail himself or
herself of the benefits of Section 1, Article XX. [25]

for

On July 23, 2003, the CA partially set aside the Resolution of

the VA.[26] The fallo of the decision reads:
WHEREFORE, the petition is PARTIALLY GRANTED, and
the Resolution of Voluntary Arbitrator Jose A. Cabatuando,

Jr. dated March 19, 2001 is PARTIALLY REVERSED AND

SET
ASIDE. Petitioner
may
not
suspend
the
implementation of Section 1, Article XX of the Collective
Bargaining Agreement on account of alleged economic
distress. Petitioner,
however,
may
require
that
recommendees under the said provision must have
completed at least a two-year technical/vocational course
or reached the third year of any college-level course, as a
valid exercise of management prerogative. And when
spouses are both employed by petitioner, each may
recommend a replacement in case of his death, disability,
retirement or voluntary resignation pursuant to Section 1,
Article XX of the Collective Bargaining Agreement.
SO ORDERED.[27]

The CA ruled that KCPI may validly exercise its management

prerogative and impose the requirement that recommendees
should have at least completed a two-year technical/vocational
course or reached the third year of any college-level course. While
the right of KCPI to set hiring standards for recommendees under
the disputed provision of the CBA is apparent in the ruling of the
Court in Kimberly Clark Philippines v. Lorredo,[28] the CA concluded
that the right of retired, resigned, disabled or deceased
employees to recommend their replacements is not absolute. It
emphasized that the recommendees must still meet the standard
set by petitioner. The CA further opined that Article XX, Section 1
is not an inheritance the right to which attaches immediately
upon an employee's death, disability, retirement or voluntary
resignation. However, as to whether spouses employed by
petitioner may separately recommend a replacement, the CA
affirmed the observation of the VA that the provision was literally
made to apply to all employees, and does not mean that only one
of the spouses may avail of said benefit. [29]

The CA rejected the claim of KCPI that it (the court) should

take judicial notice of the adverse effects of the Asian economic
crisis to the operation of its business in thePhilippines. As in the
case of retrenchment, it was ruled that the company must still
prove
financial
distress
by
sufficient
and
convincing
evidence. Moreover, the CA held that for the theory of rebus sic
stantibus to apply, it must be shown that the economic crisis
made it extremely difficult for the company to comply with Article
XX, Section 1 of the CBA, and that the change in the
circumstances of the parties must be one which could not be
foreseen at the time the contract was executed. [30]

Only UKCEU moved for a partial reconsideration of the CA

Decision with respect to its ruling on the upgraded educational
qualification of the recommendees. [31] The CA denied the motion in
a Resolution[32] dated March 23, 2004.

UKCEU, now petitioner, seeks relief from this Court in the

instant petition.

The issue in this case is whether or not the CA erred in ruling that,
under Article XX, Section 1 of the 1997 CBA, respondent is
required to hire only those recommendees of retired/resigned,
deceased or disabled members of petitioner who had completed
at least a two-year technical/vocational course or a third-year
level of college education. This is anchored on the resolution of
the issue of whether the November 7, 1995 Guidelines issued by
respondent took effect on January 1, 1997.

Petitioner avers that the CA erred in holding that, under Article

XX, Section 1 of the 1997 CBA and the ruling of this Court

in Kimberly Clark Philippines v. Lorredo, respondent is required to

hire recommendees of retired/resigned, deceased or disabled
employees who possess the educational qualification standards
for employees contained in the November 7, 1995 Guidelines
issued by respondent.

Petitioner asserts that the employment qualification standards

in Article XX, Section 1 of the CBA requiring the recommendees to
be at least high school graduates is contrary to the practice that
had been followed by respondent since 1980 up to
1998. Petitioner further avers that such practice, which had been
established by respondent in implementing the CBA, cannot be
unilaterally revoked by it. Petitioner argues that to allow
respondent to set higher educational standards for employment
of such recommendees is to render nugatory the right granted to
them under the CBA and would defeat the ruling of the Court
in Kimberly Clark Philippines v. Lorredo. Petitioner avers that 70%
of the employees of respondent are mere high school graduates
who did not finish any technical or vocational course. This,
notwithstanding, respondent had a profit of P527,000,000.00 in
1999.Petitioner stresses that the exercise of management
prerogative must be circumscribed by the CBA of the parties.

For its part, respondent maintains that under Article XX, Section 1
of its CBA with petitioner, a recommendee of retired/resigned,
deceased or disabled members of petitioner must also be
qualified for the position. Respondent also invokes Kimberly Clark
Philippines v. Lorredo, insisting that the Court ruled therein that
such recommendees must meet the employment standards set by
respondent; conformably with such ruling, it issued said
Guidelines on November 7, 1995. Thus, it is not proscribed from
setting out higher qualification standards for said recommendees,
such as those set forth in said Guidelines. Contrary to petitioners
claim of employing recommendees who were only high school

graduates, was not an established practice, as its policy had

always
been
to
hire
college
graduates
for
regular
employment. Finally, respondent avers that the implementation of
qualifications for the recommendees is a valid exercise of its
management prerogative.

Respondent also points out during their 1997 CBA negotiations,

petitioner proposed the following revisions of Article XX, Section
1:
Section 1. A replacement of a deceased employee or
recommendee of a retiring or resigning employee with at
least 10 years of service, when at least High School
Graduate and able bodied, shall be hired by the Company
as Trainee for the first six (6) months, and then
probationary employee to a permanent position and if
passed to qualifications made known to him shall be hired
as a regular employee of the Company. Recommendee
entitled to this right shall be limited to up to the third civil
degree only.[33]

However, said proposal was not incorporated in the CBA of the

parties since by then, the November 7, 1995 Guidelines had
already taken effect.

We rule against petitioner.

As a general proposition, an arbitrator is confined to the

interpretation and application of the collective bargaining

agreement. He does not sit to dispense his own brand of industrial

justice: his award is legitimate only in so far as it draws its
essence from the CBA,[34] i.e., when there is a rational nexus
between the award and the CBA under consideration. [35] It is said
that an arbitral award does not draw its essence from the CBA;
hence, there is an unauthorized amendment or alteration thereof,
if:

1. It is so unfounded in reason and fact;

2. It is so unconnected with the working and purpose
of the agreement;
3. It is without factual support in view of its language,
its context, and any other indicia of the parties'
intention;[36]
4. It ignores or abandons the plain language of the
contract;[37]
5. It is mistakenly based on a crucial assumption which
concededly is a nonfact;[38]
6. It is unlawful, arbitrary or capricious; [39] and
7. It is contrary to public policy.[40]

A CBA is more than a contract; it is a generalized code to

govern a myriad of cases which the draftsmen cannot wholly
anticipate. It covers the whole employment relationship and
prescribes the rights and duties of the parties. It is a system of
industrial self-government with the grievance machinery at the
very heart of the system. [41] The parties solve their problems by
molding a system of private law for all the problems which may
arise and to provide for their solution in a way which will generally
accord with the variant needs and desires of the parties.

If the terms of a CBA are clear and have no doubt upon the
intention of the contracting parties, the literal meaning of its
stipulation shall prevail.[42] However, if, in a CBA, the parties
stipulate that the hirees must be presumed of employment
qualification standards but fail to state such qualification
standards in said CBA, the VA may resort to evidence extrinsic of
the CBA to determine the full agreement intended by the
parties. When a CBA may be expected to speak on a matter, but
does not, its sentence imports ambiguity on that subject. [43] The
VA is not merely to rely on the cold and cryptic words on the face
of the CBA but is mandated to discover the intention of the
parties. Recognizing the inability of the parties to anticipate or
address all future problems, gaps may be left to be filled in by
reference to the practices of the industry, and the step which is
equally a part of the CBA although not expressed in it. [44] In order
to ascertain the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally
considered.[45] The VA may also consider and rely upon
negotiating and contractual history of the parties, evidence of
past practices interpreting ambiguous provisions. The VA has to
examine such practices to determine the scope of their
agreement,[46] as where the provision of the CBA has been loosely
formulated.[47] Moreover, the CBA must be construed liberally
rather than narrowly and technically and the Court must place a
practical and realistic construction upon it.

In the present case, the parties are in agreement that, on its face,
Article XX, Section 1 of their 1997 CBA does not contain any
provision relative to the employment qualification standards of
recommendees of retired/resigned, deceased or disabled
employees
of
respondent
who
are
members
of
petitioner. However, in determining the employment qualification
standards for said recommendees, the VA should have relied on
the November 7, 1995 Guidelines issued by respondent, which
reads:

D. Definition of the phrase immediate member of the

family of an employee

1. The phrase immediate member of the family of

an employee shall refer to the employees
legitimate children and in default thereof to the
employees collateral relatives within the third
civil degree.

2. A resigned/retired employee may be allowed to

recommend a collateral relative within the third
civil degree (e.g., brother, sister, nephew or
niece) as his/her replacement only in the
following cases:

a. Where the retired/resigned employee is

single or if married has no legitimate
children.
b. Where the retired/resigned employees
children are still minors (below 18 years
old) at the time of his/her separation from
the company. (Emphasis added)

E. General Provisions

1. The privilege to recommend a replacement can

be exercised by the employee concerned only
once. Thus,
in
the
following
cases,
a
recommendee who has been hired on
probationary status can no longer be substituted
with another recommendee.

a. where the recommendee fails to pass in

his performance evaluation.
b. where the recommendee resigns without
completing his probationary period.
c. where the recommendee is dismissed for
cause.
d. where the recommendee dies during his
probationary period.[48]

Respondent issued said Guidelines in light of the ruling of this

Court in Kimberly Clark Philippines v. Lorredo. Respondent saw it
imperative to do away with its practice of accommodating
recommendees who were mere high school graduates, and to
require higher employment standards for them.

By agreement of the parties, the implementation of the

Guidelines was deferred until January 1, 1997, unless revoked or
amended by the 1997 CBA. Petitioner proposed that the practice
of hiring recommendees of retired/resigned, deceased or disabled
employees who were union members, who were at least high
school graduates, be included in their CBA, but respondent did
not agree. Hence, Article XX, Section 1 of the 1997 CBA of the
parties remained intact. There was thus no more legal bar for
respondent to implement the November 7, 1995 Guidelines. By
executing the 1997 CBA, in its present form, petitioner is bound
by the terms and conditions therein set forth.

The VA, however, ignored the plain language of the 1997 CBA of
the parties, as well as the Guidelines issued by respondent. He
capriciously based his resolution on the respondents practice of

hiring which, however, by

respondent, was discontinued.

agreement

of

petitioner

and

The Court has recognized in numerous instances the

undoubted right of the employer to regulate, according to his own
discretion and best judgment, all aspects of employment,
including but not limited to, work assignments and supervision,
working methods and regulations, time, place and manner of
work, processes to be followed, and hiring, supervision, transfer,
discipline, lay off, dismissal and recall of workers. Encompassing
though it could be, the exercise of this right is not
absolute. Management prerogative must be exercised in good
faith for the advancement of the employers interest and not for
the purpose of defeating or circumventing the rights of the
employees under special laws, valid agreements such as the
individual contract of employment and the collective bargaining
agreement, and general principles of justice and fair play. [49] In this
case, the Court finds that respondent acted in accord with the
CBA and the November 7, 1995 Guidelines, which, by agreement
of the parties, may be implemented by respondent after January
1, 1997.

IN LIGHT OF ALL THE FOREGOING, the

is DENIED for lack of merit. Costs against petitioner.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice

petition

WE CONCUR:
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162994

September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners,

vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.
RESOLUTION
TINGA, J.:
Confronting the Court in this petition is a novel question, with constitutional overtones, involving the
validity of the policy of a pharmaceutical company prohibiting its employees from marrying
employees of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and
the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434. 2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc.
(Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training and
orientation.
Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees
to study and abide by existing company rules; to disclose to management any existing or future
relationship by consanguinity or affinity with co-employees or employees of competing drug
companies and should management find that such relationship poses a possible conflict of interest,
to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform
management of any existing or future relationship by consanguinity or affinity with co-employees or
employees of competing drug companies. If management perceives a conflict of interest or a
potential conflict between such relationship and the employees employment with the company, the
management and the employee will explore the possibility of a "transfer to another department in a
non-counterchecking position" or preparation for employment outside the company after six months.
Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines Norte
sales area.

Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra
Pharmaceuticals3(Astra), a competitor of Glaxo. Bettsy was Astras Branch Coordinator in Albay. She
supervised the district managers and medical representatives of her company and prepared
marketing strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District Manager
regarding the conflict of interest which his relationship with Bettsy might engender. Still, love
prevailed, and Tecson married Bettsy in September 1998.
In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict
of interest. Tecsons superiors reminded him that he and Bettsy should decide which one of them
would resign from their jobs, although they told him that they wanted to retain him as much as
possible because he was performing his job well.
Tecson requested for time to comply with the company policy against entering into a relationship with
an employee of a competitor company. He explained that Astra, Bettsys employer, was planning to
merge with Zeneca, another drug company; and Bettsy was planning to avail of the redundancy
package to be offered by Astra. With Bettsys separation from her company, the potential conflict of
interest would be eliminated. At the same time, they would be able to avail of the attractive
redundancy package from Astra.
In August 1999, Tecson again requested for more time resolve the problem. In September 1999,
Tecson applied for a transfer in Glaxos milk division, thinking that since Astra did not have a milk
division, the potential conflict of interest would be eliminated. His application was denied in view of
Glaxos "least-movement-possible" policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales
area. Tecson asked Glaxo to reconsider its decision, but his request was denied.
Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos
Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon until February
7, 2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as
medical representative in the Camarines Sur-Camarines Norte sales area.
During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued
samples of products which were competing with similar products manufactured by Astra. He was
also not included in product conferences regarding such products.
Because the parties failed to resolve the issue at the grievance machinery level, they submitted the
matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half () month pay for
every year of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the
National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxos
policy on relationships between its employees and persons employed with competitor companies,
and affirming Glaxos right to transfer Tecson to another sales territory.
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the
NCMB Decision.
On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on
the ground that the NCMB did not err in rendering its Decision. The appellate court held that Glaxos

policy prohibiting its employees from having personal relationships with employees of competitor
companies is a valid exercise of its management prerogatives.4
Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was
denied by the appellate court in its Resolution dated March 26, 2004.5
Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the
NCMBs finding that the Glaxos policy prohibiting its employees from marrying an employee of a
competitor company is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was
constructively dismissed when he was transferred to a new sales territory, and deprived of the
opportunity to attend products seminars and training sessions.6
Petitioners contend that Glaxos policy against employees marrying employees of competitor
companies violates the equal protection clause of the Constitution because it creates invalid
distinctions among employees on account only of marriage. They claim that the policy restricts the
employees right to marry.7
They also argue that Tecson was constructively dismissed as shown by the following circumstances:
(1) he was transferred from the Camarines Sur-Camarines Norte sales area to the Butuan-SurigaoAgusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from attending seminars
and training sessions for medical representatives, and (4) he was prohibited from promoting
respondents products which were competing with Astras products.8
In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from
having a relationship with and/or marrying an employee of a competitor company is a valid exercise
of its management prerogatives and does not violate the equal protection clause; and that Tecsons
reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City
and Agusan del Sur sales area does not amount to constructive dismissal. 9
Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it
has a genuine interest in ensuring that its employees avoid any activity, relationship or interest that
may conflict with their responsibilities to the company. Thus, it expects its employees to avoid having
personal or family interests in any competitor company which may influence their actions and
decisions and consequently deprive Glaxo of legitimate profits. The policy is also aimed at
preventing a competitor company from gaining access to its secrets, procedures and policies. 10
It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or
future relationships with employees of competitor companies, and is therefore not violative of the
equal protection clause. It maintains that considering the nature of its business, the prohibition is
based on valid grounds.11
According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and potential
conflict of interest. Astras products were in direct competition with 67% of the products sold by
Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case was a valid exercise of
its management prerogatives.12 In any case, Tecson was given several months to remedy the
situation, and was even encouraged not to resign but to ask his wife to resign form Astra instead. 13
Glaxo also points out that Tecson can no longer question the assailed company policy because
when he signed his contract of employment, he was aware that such policy was stipulated therein. In
said contract, he also agreed to resign from respondent if the management finds that his relationship
with an employee of a competitor company would be detrimental to the interests of Glaxo. 14

Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from
seminars regarding respondents new products did not amount to constructive dismissal.
It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines SurCamarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area. Glaxo
asserts that in effecting the reassignment, it also considered the welfare of Tecsons family. Since
Tecsons hometown was in Agusan del Sur and his wife traces her roots to Butuan City, Glaxo
assumed that his transfer from the Bicol region to the Butuan City sales area would be favorable to
him and his family as he would be relocating to a familiar territory and minimizing his travel
expenses.15
In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new anti-asthma
drug was due to the fact that said product was in direct competition with a drug which was soon to
be sold by Astra, and hence, would pose a potential conflict of interest for him. Lastly, the delay in
Tecsons receipt of his sales paraphernalia was due to the mix-up created by his refusal to transfer to
the Butuan City sales area (his paraphernalia was delivered to his new sales area instead of Naga
City because the supplier thought he already transferred to Butuan). 16
The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling
that Glaxos policy against its employees marrying employees from competitor companies is valid,
and in not holding that said policy violates the equal protection clause of the Constitution; (2)
Whether Tecson was constructively dismissed.
The Court finds no merit in the petition.
The stipulation in Tecsons contract of employment with Glaxo being questioned by petitioners
provides:

10. You agree to disclose to management any existing or future relationship you may have,
either by consanguinity or affinity with co-employees or employees of competing drug
companies. Should it pose a possible conflict of interest in management discretion, you
agree to resign voluntarily from the Company as a matter of Company policy.
17
The same contract also stipulates that Tescon agrees to abide by the existing company rules of
Glaxo, and to study and become acquainted with such policies.18 In this regard, the Employee
Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship, or interest that may run
counter to the responsibilities which they owe Glaxo Wellcome.
Specifically, this means that employees are expected:
a. To avoid having personal or family interest, financial or otherwise, in any
competitor supplier or other businesses which may consciously or unconsciously

influence their actions or decisions and thus deprive Glaxo Wellcome of legitimate
profit.
b. To refrain from using their position in Glaxo Wellcome or knowledge of Company
plans to advance their outside personal interests, that of their relatives, friends and
other businesses.
c. To avoid outside employment or other interests for income which would impair their
effective job performance.
d. To consult with Management on such activities or relationships that may lead to
conflict of interest.
1.1. Employee Relationships
Employees with existing or future relationships either by consanguinity or affinity with coemployees of competing drug companies are expected to disclose such relationship to the
Management. If management perceives a conflict or potential conflict of interest, every effort
shall be made, together by management and the employee, to arrive at a solution within six
(6) months, either by transfer to another department in a non-counter checking position, or
by career preparation toward outside employment after Glaxo Wellcome. Employees must
be prepared for possible resignation within six (6) months, if no other solution is feasible. 19
No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy
prohibiting an employee from having a relationship with an employee of a competitor company is a
valid exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other
confidential programs and information from competitors, especially so that it and Astra are rival
companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor companies
upon Glaxos employees is reasonable under the circumstances because relationships of that nature
might compromise the interests of the company. In laying down the assailed company policy, Glaxo
only aims to protect its interests against the possibility that a competitor company will gain access to
its secrets and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the
Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right
to reasonable returns on investments and to expansion and growth. 20 Indeed, while our laws
endeavor to give life to the constitutional policy on social justice and the protection of labor, it does
not mean that every labor dispute will be decided in favor of the workers. The law also recognizes
that management has rights which are also entitled to respect and enforcement in the interest of fair
play.21
As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business
confidentiality and protect a competitive position by even-handedly disqualifying from jobs male and
female applicants or employees who are married to a competitor. Consequently, the court ruled than
an employer that discharged an employee who was married to an employee of an active competitor
did not violate Title VII of the Civil Rights Act of 1964. 23The Court pointed out that the policy was

applied to men and women equally, and noted that the employers business was highly competitive
and that gaining inside information would constitute a competitive advantage.
The challenged company policy does not violate the equal protection clause of the Constitution as
petitioners erroneously suggest. It is a settled principle that the commands of the equal protection
clause are addressed only to the state or those acting under color of its authority.24 Corollarily, it has
been held in a long array of U.S. Supreme Court decisions that the equal protection clause erects no
shield against merely private conduct, however, discriminatory or wrongful. 25 The only exception
occurs when the state29 in any of its manifestations or actions has been found to have become
entwined or involved in the wrongful private conduct.27 Obviously, however, the exception is not
present in this case. Significantly, the company actually enforced the policy after repeated requests
to the employee to comply with the policy. Indeed, the application of the policy was made in an
impartial and even-handed manner, with due regard for the lot of the employee.
In any event, from the wordings of the contractual provision and the policy in its employee handbook,
it is clear that Glaxo does not impose an absolute prohibition against relationships between its
employees and those of competitor companies. Its employees are free to cultivate relationships with
and marry persons of their own choosing. What the company merely seeks to avoid is a conflict of
interest between the employee and the company that may arise out of such relationships. As
succinctly explained by the appellate court, thus:
The policy being questioned is not a policy against marriage. An employee of the company
remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a
personal prerogative that belongs only to the individual. However, an employees personal
decision does not detract the employer from exercising management prerogatives to ensure
maximum profit and business success. . .28
The Court of Appeals also correctly noted that the assailed company policy which forms part of
respondents Employee Code of Conduct and of its contracts with its employees, such as that signed
by Tescon, was made known to him prior to his employment. Tecson, therefore, was aware of that
restriction when he signed his employment contract and when he entered into a relationship with
Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo, the
stipulations therein have the force of law between them and, thus, should be complied with in good
faith."29 He is therefore estopped from questioning said policy.
The Court finds no merit in petitioners contention that Tescon was constructively dismissed when he
was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao
City-Agusan del Sur sales area, and when he was excluded from attending the companys seminar
on new products which were directly competing with similar products manufactured by Astra.
Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued
employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or
diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee.30 None of these conditions are present in the instant case. The record
does not show that Tescon was demoted or unduly discriminated upon by reason of such transfer.
As found by the appellate court, Glaxo properly exercised its management prerogative in reassigning
Tecson to the Butuan City sales area:
. . . In this case, petitioners transfer to another place of assignment was merely in keeping
with the policy of the company in avoidance of conflict of interest, and thus validNote that
[Tecsons] wife holds a sensitive supervisory position as Branch Coordinator in her employercompany which requires her to work in close coordination with District Managers and
Medical Representatives. Her duties include monitoring sales of Astra products, conducting

sales drives, establishing and furthering relationship with customers, collection, monitoring
and managing Astras inventoryshe therefore takes an active participation in the market
war characterized as it is by stiff competition among pharmaceutical companies. Moreover,
and this is significant, petitioners sales territory covers Camarines Sur and Camarines Norte
while his wife is supervising a branch of her employer in Albay. The proximity of their areas of
responsibility, all in the same Bicol Region, renders the conflict of interest not only possible,
but actual, as learning by one spouse of the others market strategies in the region would be
inevitable. [Managements] appreciation of a conflict of interest is therefore not merely
illusory and wanting in factual basis31
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved a
complaint filed by a medical representative against his employer drug company for illegal dismissal
for allegedly terminating his employment when he refused to accept his reassignment to a new area,
the Court upheld the right of the drug company to transfer or reassign its employee in accordance
with its operational demands and requirements. The ruling of the Court therein, quoted hereunder,
also finds application in the instant case:
By the very nature of his employment, a drug salesman or medical representative is
expected to travel. He should anticipate reassignment according to the demands of their
business. It would be a poor drug corporation which cannot even assign its representatives
or detail men to new markets calling for opening or expansion or to areas where the need for
pushing its products is great. More so if such reassignments are part of the employment
contract.33
As noted earlier, the challenged policy has been implemented by Glaxo impartially and
disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave Tecson
several chances to eliminate the conflict of interest brought about by his relationship with Bettsy.
When their relationship was still in its initial stage, Tecsons supervisors at Glaxo constantly
reminded him about its effects on his employment with the company and on the companys interests.
After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the
company or asking his wife to resign from Astra. Glaxo even expressed its desire to retain Tecson in
its employ because of his satisfactory performance and suggested that he ask Bettsy to resign from
her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the
conflict of interest. When the problem could not be resolved after several years of waiting, Glaxo was
constrained to reassign Tecson to a sales area different from that handled by his wife for Astra.
Notably, the Court did not terminate Tecson from employment but only reassigned him to another
area where his home province, Agusan del Sur, was included. In effecting Tecsons transfer, Glaxo
even considered the welfare of Tecsons family. Clearly, the foregoing dispels any suspicion of
unfairness and bad faith on the part of Glaxo.34
WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario*, JJ., concur.
Footnotes

SECOND DIVISION

STAR PAPER CORPORATION, G.R. No. 164774

JOSEPHINE ONGSITCO &
SEBASTIAN CHUA,
Petitioners, Present:
PUNO, J., Chairman,
SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
-versus- GARCIA, JJ.
Promulgated:
RONALDO D. SIMBOL, April 12, 2006
WILFREDA N. COMIA &
LORNA E. ESTRELLA,
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

PUNO, J.:

We are called to decide an issue of first impression: whether the

policy of the employer banning spouses from working in the same

company violates the rights of the employee under the

Constitution and the Labor Code or is a valid exercise of
management prerogative.
At bar is a Petition for Review on Certiorari of the Decision of
the Court of Appeals dated August 3, 2004 in CA-G.R. SP No.
73477 reversing the decision of the National Labor Relations
Commission (NLRC) which affirmed the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation
engaged in trading principally of paper products. Josephine
Ongsitco is its Manager of the Personnel and Administration
Department while Sebastian Chua is its Managing Director.
The
evidence
for
the
petitioners
show
that
respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia
(Comia) and Lorna E. Estrella (Estrella) were all regular employees
of the company.[1]
Simbol was employed by the company on October 27, 1993. He
met Alma Dayrit, also an employee of the company, whom he
married on June 27, 1998. Prior to the marriage, Ongsitco advised
the couple that should they decide to get married, one of them
should resign pursuant to a company policy promulgated in 1995,
[2]
viz.:
1. New applicants will not be allowed to be hired if in case he/she has
[a] relative, up to [the] 3rd degree of relationship, already employed by
the company.

2.
In case of two of our employees (both singles [sic], one
male and another female) developed a friendly relationship during the
course of their employment and then decided to get married, one of
them should resign to preserve the policy stated above. [3]

Simbol resigned on June 20, 1998 pursuant to the company policy.

[4]

Comia was hired by the company on February 5, 1997. She met

Howard Comia, a co-employee, whom she married on June 1,
2000. Ongsitco likewise reminded them that pursuant to company
policy, one must resign should they decide to get married. Comia
resigned on June 30, 2000.[5]
Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga),
also a co-worker. Petitioners stated that Zuiga, a married man, got
Estrella pregnant. The company allegedly could have terminated
her services due to immorality but she opted to resign
on December 21, 1999.[6]
The respondents each signed a Release and Confirmation
Agreement. They stated therein that they have no money and
property accountabilities in the company and that they release
the latter of any claim or demand of whatever nature. [7]

Respondents
offer
a
different
version
of
their
dismissal. Simbol and Comia allege that they did not resign
voluntarily; they were compelled to resign in view of an illegal
company policy. As to respondent Estrella, she alleges that she
had a relationship with co-worker Zuiga who misrepresented
himself as a married but separated man. After he got her
pregnant, she discovered that he was not separated. Thus, she
severed her relationship with him to avoid dismissal due to the
company policy. On November 30, 1999, she met an accident and
was advised by the doctor at the Orthopedic Hospital to
recuperate for twenty-one (21) days. She returned to work
on December 21, 1999 but she found out that her name was onhold at the gate. She was denied entry. She was directed to
proceed to the personnel office where one of the staff handed her
a memorandum. The memorandum stated that she was being
dismissed for immoral conduct. She refused to sign the
memorandum because she was on leave for twenty-one (21) days
and has not been given a chance to explain. The management
asked her to write an explanation. However, after submission of
the explanation, she was nonetheless dismissed by the company.

Due to her urgent need for money, she later submitted a letter of
resignation in exchange for her thirteenth month pay. [8]
Respondents later filed a complaint for unfair labor practice,
constructive dismissal, separation pay and attorneys fees. They
averred that the aforementioned company policy is illegal and
contravenes Article 136 of the Labor Code. They also contended
that they were dismissed due to their union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario
dismissed the complaint for lack of merit, viz.:
[T]his company policy was decreed pursuant to what the
respondent corporation perceived as management prerogative. This
management prerogative is quite broad and encompassing for it
covers hiring, work assignment, working method, time, place and
manner of work, tools to be used, processes to be followed, supervision
of workers, working regulations, transfer of employees, work
supervision, lay-off of workers and the discipline, dismissal and recall
of workers. Except as provided for or limited by special law, an
employer is free to regulate, according to his own discretion and
judgment all the aspects of employment.[9] (Citations omitted.)

On appeal to the NLRC, the Commission affirmed the decision of

the Labor Arbiter on January 11, 2002. [10]

Respondents filed a Motion for Reconsideration but was denied by

the NLRC in a Resolution[11] dated August 8, 2002. They appealed
to respondent court via Petition for Certiorari.
In its assailed Decision dated August 3, 2004, the Court of
Appeals reversed the NLRC decision, viz.:
WHEREFORE, premises considered, the May 31, 2002 (sic)[12] Decision
of the National Labor Relations Commission is hereby REVERSED and
SET ASIDE and a new one is entered as follows:

(1) Declaring illegal, the petitioners dismissal from

employment and ordering private respondents to
reinstate petitioners to their former positions without loss
of seniority rights with full backwages from the time of
their dismissal until actual reinstatement; and

(2) Ordering private respondents to pay petitioners

attorneys fees amounting to 10% of the award and the
cost of this suit.[13]

On appeal to this Court, petitioners contend that the Court of

Appeals erred in holding that:
1. X X X THE SUBJECT 1995 POLICY/REGULATION IS VIOLATIVE OF THE
CONSTITUTIONAL RIGHTS TOWARDS MARRIAGE AND THE FAMILY OF
EMPLOYEES AND OF ARTICLE 136 OF THE LABOR CODE; AND
2. X X X RESPONDENTS RESIGNATIONS WERE FAR FROM VOLUNTARY.
[14]

We affirm.

The 1987 Constitution[15] states our policy towards the

protection of labor under the following provisions, viz.:

Article II, Section 18. The State affirms labor as a primary social
economic force. It shall protect the rights of workers and promote their
welfare.
xxx

Article XIII, Sec. 3. The State shall afford full protection to labor, local
and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law. They
shall be entitled to security of tenure, humane conditions of work, and
a living wage. They shall also participate in policy and decision-making
processes affecting their rights and benefits as may be provided by
law.

The State shall promote the principle of shared responsibility between

workers and employers, recognizing the right of labor to its just share
in the fruits of production and the right of enterprises to reasonable
returns on investments, and to expansion and growth.

The Civil Code likewise protects labor

provisions:

with

the following

Art. 1700. The relation between capital and labor are not merely
contractual. They are so impressed with public interest that labor
contracts must yield to the common good. Therefore, such contracts
are subject to the special laws on labor unions, collective bargaining,
strikes and lockouts, closed shop, wages, working conditions, hours of
labor and similar subjects.
Art. 1702. In case of doubt, all labor legislation and all labor contracts
shall be construed in favor of the safety and decent living for the
laborer.

The Labor Code is the most comprehensive piece of legislation

protecting labor. The case at bar involves Article 136 of the Labor
Code which provides:
Art. 136. It shall be unlawful for an employer to require as a condition
of employment or continuation of employment that a woman employee
shall not get married, or to stipulate expressly or tacitly that upon
getting married a woman employee shall be deemed resigned or

separated, or to actually dismiss, discharge, discriminate or otherwise

prejudice a woman employee merely by reason of her marriage.

Respondents submit that their dismissal violates the above

provision. Petitioners allege that its policy may appear to be
contrary to Article 136 of the Labor Code but it assumes a new
meaning if read together with the first paragraph of the rule. The
rule does not require the woman employee to resign. The
employee spouses have the right to choose who between them
should resign. Further, they are free to marry persons other than
co-employees. Hence, it is not the marital status of the
employee, per se, that is being discriminated. It is only intended
to carry out its no-employment-for-relatives-within-the-thirddegree-policy which is within the ambit of the prerogatives of
management.[16]
It is true that the policy of petitioners prohibiting close relatives
from working in the same company takes the nature of an antinepotism employment policy. Companies adopt these policies to
prevent the hiring of unqualified persons based on their status as
a relative, rather than upon their ability. [17] These policies focus
upon the potential employment problems arising from the
perception of favoritism exhibited towards relatives.
With more women entering the workforce, employers are also
enacting employment policies specifically prohibiting spouses
from working for the same company. We note that two types of
employment policies involve spouses: policies banning only
spouses from working in the same company (no-spouse
employment policies), and those banning all immediate family
members, including spouses, from working in the same
company (anti-nepotism employment policies).[18]

Unlike in our jurisdiction where there is no express prohibition on

marital discrimination,[19] there are twenty state statutes[20] in
the United States prohibiting marital discrimination. Some state
courts[21] have been confronted with the issue of whether nospouse policies violate their laws prohibiting both marital status
and sex discrimination.
In challenging the anti-nepotism employment policies in
the United States, complainants utilize two theories of
employment
discrimination:
the disparate treatment and
thedisparate
impact. Under
the disparate
treatment
analysis, the plaintiff must prove that an employment policy is
discriminatory on its face. No-spouse employment policies
requiring an employee of a particular sex to either quit, transfer,
or be fired are facially discriminatory. For example, an
employment policy prohibiting the employer from hiring wives of
male employees, but not husbands of female employees, is
discriminatory on its face.[22]
On the other hand, to establish disparate impact, the
complainants must prove that a facially neutral policy has a
disproportionate effect on a particular class. For example,
although most employment policies do not expressly indicate
which spouse will be required to transfer or leave the
company, the policy often disproportionately affects one sex. [23]
The state courts rulings on the issue depend on their
interpretation of the scope of marital status discrimination within
the meaning of their respective civil rights acts. Though
they agree that the term marital status encompasses
discrimination based on a person's status as either married,
single, divorced, or widowed, they are divided on whether the
term has a broader meaning. Thus, their decisions vary.[24]
The courts narrowly[25] interpreting marital status to refer only to
a person's status as married, single, divorced, or widowed reason
that if the legislature intended a broader definition it would have
either chosen different language or specified its intent. They hold
that the relevant inquiry is if one is married rather than to whom
one is married. They construe marital status discrimination to

include only whether a person is single, married, divorced, or

widowed and not the identity, occupation, and place of
employment of one's spouse. These courts have upheld the
questioned policies and ruled that they did not violate the marital
status discrimination provision of their respective state statutes.
The courts that have broadly[26] construed the term marital
status rule that it encompassed the identity, occupation and
employment of one's spouse. They strike down the no-spouse
employment policies based on the broad legislative intent of the
state statute. They reason that the no-spouse employment policy
violate the marital status provision because it arbitrarily
discriminates against all spouses of present employees without
regard to the actual effect on the individual's qualifications or
work performance.[27] These courts also find the no-spouse
employment policy invalid for failure of the employer to present
any evidence of business necessity other than the general
perception that spouses in the same workplace might adversely
affect the business.[28] They hold that the absence of such a bona
fide occupational qualification[29] invalidates a rule denying
employment to one spouse due to the current employment of the
other spouse in the same office.[30] Thus, they rule that unless the
employer can prove that the reasonable demands of the business
require a distinction based on marital status and there is no better
available or acceptable policy which would better accomplish the
business purpose, an employer may not discriminate against an
employee based on the identity of the employees spouse. [31] This
is known as the bona fide occupational qualification
exception.
We note that since the finding of a bona fide occupational
qualification justifies an employers no-spouse rule, the exception
is interpreted strictly and narrowly by these state courts. There
must be a compelling business necessity for which no alternative
exists other than the discriminatory practice. [32] To justify a bona
fide occupational qualification, the employer must prove two
factors: (1) that the employment qualification is reasonably
related to the essential operation of the job involved; and, (2) that
there is a factual basis for believing that all or substantially all

persons meeting the qualification would be unable to properly

perform the duties of the job.[33]
The concept of a bona fide occupational qualification is not
foreign in our jurisdiction. We employ the standard
of reasonableness of the company policy which is parallel to the
bona fide occupational qualification requirement. In the recent
case of Duncan Association of Detailman-PTGWO and
Pedro Tecson v. Glaxo Wellcome Philippines,
Inc.,
[34]
we passed on the validity of the policy of a pharmaceutical
company prohibiting its employees from marrying employees of
any competitor company. We held that Glaxohas a right to guard
its trade secrets, manufacturing formulas, marketing strategies
and other confidential programs and information from
competitors. We considered the prohibition against personal or
marital relationships with employees of competitor companies
upon Glaxos employees reasonable under the circumstances
because relationships of that nature might compromise the
interests of Glaxo. In laying down the assailed company policy, we
recognized that Glaxo only aims to protect its interests against
the possibility that a competitor company will gain access to its
secrets and procedures.[35]

The requirement that a company policy must be reasonable under the

circumstances to qualify as a valid exercise of management prerogative was also at
issue in the 1997 case of Philippine Telegraph and Telephone Company v.
NLRC.[36] In said case, the employee was dismissed in violation of petitioners
policy of disqualifying from work any woman worker who contracts marriage. We
held that the company policy violates the right against discrimination afforded all
women workers under Article 136 of the Labor Code, but established a permissible
exception, viz.:
[A] requirement that a woman employee must remain unmarried could be
justified as a bona fide occupational qualification, or BFOQ, where the
particular requirements of the job would justify the same, but not on the ground of
a general principle, such as the desirability of spreading work in the workplace. A
requirement of that nature would be valid provided it reflects an inherent

quality reasonably necessary for satisfactory job performance.[37] (Emphases

supplied.)

The cases of Duncan and PT&T instruct us that the requirement of

reasonableness must be clearly established to uphold the questioned employment
policy. The employer has the burden to prove the existence of a reasonable
business necessity. The burden was successfully discharged in Duncan but not in
PT&T.

We do not find a reasonable business necessity in the case at bar.

Petitioners sole contention that the company did not just want to have two
(2) or more of its employees related between the third degree by affinity and/or
consanguinity[38] is lame. That the second paragraph was meant to give teeth to the
first paragraph of the questioned rule[39] is evidently not the valid reasonable
business necessity required by the law.

It is significant to note that in the case at bar, respondents were hired after
they were found fit for the job, but were asked to resign when they married a coemployee. Petitioners failed to show how the marriage of Simbol, then a Sheeting
Machine Operator, to Alma Dayrit, then an employee of the Repacking Section,
could be detrimental to its business operations. Neither did petitioners explain how
this detriment will happen in the case of Wilfreda Comia, then a Production Helper
in the Selecting Department, who married Howard Comia, then a helper in the
cutter-machine. The policy is premised on the mere fear that employees married to
each other will be less efficient. If we uphold the questioned rule without valid
justification, the employer can create policies based on an unproven presumption
of a perceived danger at the expense of an employees right to security of tenure.

Petitioners contend that their policy will apply only when one
employee marries a co-employee, but they are free to marry

persons other than co-employees. The questioned policy may not

facially violate Article 136 of the Labor Code but it creates a
disproportionate effect and under the disparate impact theory,
the only way it could pass judicial scrutiny is a showing that it
is reasonable despite the discriminatory, albeit disproportionate,
effect. The failure of petitioners to prove a legitimate business
concern in imposing the questioned policy cannot prejudice the
employees right to be free from arbitrary discrimination based
upon stereotypes of married persons working together in one
company.[40]

Lastly, the absence of a statute expressly prohibiting marital

discrimination in our jurisdiction cannot benefit the petitioners.
The protection given to labor in our jurisdiction is vast and
extensive that we cannot prudently draw inferences from the
legislatures silence[41] that married persons are not protected
under our Constitution and declare valid a policy based on a
prejudice or stereotype. Thus, for failure of petitioners to present
undisputed proof of a reasonable business necessity, we rule that
the questioned policy is an invalid exercise of management
prerogative. Corollarily, the issue as to whether respondents
Simbol and Comia resigned voluntarily has become moot and
academic.
As to respondent Estrella, the Labor Arbiter and the NLRC
based their ruling on the singular fact that her resignation letter
was written in her own handwriting. Both ruled that her
resignation was voluntary and thus valid. The respondent court
failed to categorically rule whether Estrella voluntarily resigned
but ordered that she be reinstated along with Simbol and Comia.

Estrella claims that she was pressured to submit a

resignation letter because she was in dire need of money. We
examined the records of the case and find Estrellascontention to

be more in accord with the evidence. While findings of fact by

administrative tribunals like the NLRC are generally given not only
respect but, at times, finality, this rule admits of exceptions, [42] as
in the case at bar.

Estrella avers that she went back to work on December 21,

1999 but was dismissed due to her alleged immoral conduct. At
first, she did not want to sign the termination papers but she was
forced to tender her resignation letter in exchange for her
thirteenth month pay.

The contention of petitioners that Estrella was pressured to

resign because she got impregnated by a married man and she
could not stand being looked upon or talked about as
immoral[43] is incredulous. If she really wanted to avoid
embarrassment and humiliation, she would not have gone back to
work at all. Nor would she have filed a suit for illegal dismissal
and pleaded for reinstatement. We have held that in voluntary
resignation, the employee is compelled by personal reason(s) to
dissociate himself from employment. It is done with the intention
of relinquishing an office, accompanied by the act of
abandonment. [44] Thus, it is illogical for Estrella to resign and then
file a complaint for illegal dismissal. Given the lack of sufficient
evidence on the part of petitioners that the resignation was
voluntary, Estrellas dismissal is declared illegal.

IN VIEW WHEREOF, the Decision of the Court of Appeals in

CA-G.R. SP No. 73477 dated August 3, 2004 is AFFIRMED.

SO ORDERED.

REYNATO S. PUNO
Associate Justice

WE CONCUR:

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

RENATO C. CORONA ADO

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 118978 May 23, 1997

PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, * petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and GRACE DE GUZMAN, respondents.

REGALADO, J.:
Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and
Telephone Company (hereafter, PT & T) invokes the alleged concealment of civil status and
defalcation of company funds as grounds to terminate the services of an employee. That employee,
herein private respondent Grace de Guzman, contrarily argues that what really motivated PT & T to
terminate her services was her having contracted marriage during her employment, which is
prohibited by petitioner in its company policies. She thus claims that she was discriminated against
in gross violation of law, such a proscription by an employer being outlawed by Article 136 of the
Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever, specifically as a "Supernumerary
Project Worker," for a fixed period from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio
who went on maternity leave.1 Under the Reliever Agreement which she signed with petitioner company,
her employment was to be immediately terminated upon expiration of the agreed period. Thereafter, from
June 10, 1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, private respondent's services as
reliever were again engaged by petitioner, this time in replacement of one Erlinda F. Dizon who went on
leave during both periods. 2 After August 8, 1991, and pursuant to their Reliever Agreement, her services
were terminated.
On September 2, 1991, private respondent was once more asked to join petitioner company as a
probationary employee, the probationary period to cover 150 days. In the job application form that
was furnished her to be filled up for the purpose, she indicated in the portion for civil status therein
that she was single although she had contracted marriage a few months earlier, that is, on May 26,
1991. 3
It now appears that private respondent had made the same representation in the two successive
reliever agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner
supposedly learned about the same later, its branch supervisor in Baguio City, Delia M. Oficial, sent
to private respondent a memorandum dated January 15, 1992 requiring her to explain the
discrepancy. In that memorandum, she was reminded about the company's policy of not accepting
married women for employment. 4
In her reply letter dated January 17, 1992, private respondent stated that she was not aware of
PT&T's policy regarding married women at the time, and that all along she had not deliberately
hidden her true civil status. 5Petitioner nonetheless remained unconvinced by her explanations. Private
respondent was dismissed from the company effective January 29, 1992, 6 which she readily contested by
initiating a complaint for illegal dismissal, coupled with a claim for non-payment of cost of living
allowances (COLA), before the Regional Arbitration Branch of the National Labor Relations Commission
in Baguio City.
At the preliminary conference conducted in connection therewith, private respondent volunteered the
information, and this was incorporated in the stipulation of facts between the parties, that she had
failed to remit the amount of P2,380.75 of her collections. She then executed a promissory note for

that amount in favor of petitioner 7. All of these took place in a formal proceeding and with the agreement
of the parties and/or their counsel.
On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring that
private respondent, who had already gained the status of a regular employee, was illegally
dismissed by petitioner. Her reinstatement, plus payment of the corresponding back wages and
COLA, was correspondingly ordered, the labor arbiter being of the firmly expressed view that the
ground relied upon by petitioner in dismissing private respondent was clearly insufficient, and that it
was apparent that she had been discriminated against on account of her having contracted marriage
in violation of company rules.
On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld the
labor arbiter and, in its decision dated April 29, 1994, it ruled that private respondent had indeed
been the subject of an unjust and unlawful discrimination by her employer, PT & T. However, the
decision of the labor arbiter was modified with the qualification that Grace de Guzman deserved to
be suspended for three months in view of the dishonest nature of her acts which should not be
condoned. In all other respects, the NLRC affirmed the decision of the labor arbiter, including the
order for the reinstatement of private respondent in her employment with PT & T.
The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC in
its resolution of November 9, 1994, hence this special civil action assailing the aforestated decisions
of the labor arbiter and respondent NLRC, as well as the denial resolution of the latter.
1. Decreed in the Bible itself is the universal norm that women should be regarded with love and
respect but, through the ages, men have responded to that injunction with indifference, on the
hubristic conceit that women constitute the inferior sex. Nowhere has that prejudice against
womankind been so pervasive as in the field of labor, especially on the matter of equal employment
opportunities and standards. In the Philippine setting, women have traditionally been considered as
falling within the vulnerable groups or types of workers who must be safeguarded with preventive
and remedial social legislation against discriminatory and exploitative practices in hiring, training,
benefits, promotion and retention.
The Constitution, cognizant of the disparity in rights between men and women in almost all phases
of social and political life, provides a gamut of protective provisions. To cite a few of the primordial
ones, Section 14, Article II 8on the Declaration of Principles and State Policies, expressly recognizes the
role of women in nation-building and commands the State to ensure, at all times, the fundamental equality
before the law of women and men. Corollary thereto, Section 3 of Article XIII 9 (the progenitor whereof
dates back to both the 1935 and 1973 Constitution) pointedly requires the State to afford full protection to
labor and to promote full employment and equality of employment opportunities for all, including an
assurance of entitlement to tenurial security of all workers. Similarly, Section 14 of Article XIII 10 mandates
that the State shall protect working women through provisions for opportunities that would enable them to
reach their full potential.
2. Corrective labor and social laws on gender inequality have emerged with more frequency in the
years since the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442, largely
due to our country's commitment as a signatory to the United Nations Convention on the Elimination
of All Forms of Discrimination Against Women (CEDAW). 11
Principal among these laws are Republic Act No. 6727 12 which explicitly prohibits discrimination
against women with respect to terms and conditions of employment, promotion, and training
opportunities; Republic Act No. 6955 13 which bans the "mail-order-bride" practice for a fee and the export
of female labor to countries that cannot guarantee protection to the rights of women workers; Republic Act
No. 7192 14 also known as the "Women in Development and Nation Building Act," which affords women

equal opportunities with men to act and to enter into contracts, and for appointment, admission, training,
graduation, and commissioning in all military or similar schools of the Armed Forces of the Philippines and
the Philippine National Police; Republic Act No. 7322 15 increasing the maternity benefits granted to
women in the private sector; Republic Act No. 7877 16 which outlaws and punishes sexual harassment in
the workplace and in the education and training environment; and Republic Act No. 8042, 17 or the
"Migrant Workers and Overseas Filipinos Act of 1995," which prescribes as a matter of policy, inter alia,
the deployment of migrant workers, with emphasis on women, only in countries where their rights are
secure. Likewise, it would not be amiss to point out that in the Family Code, 18 women's rights in the field
of civil law have been greatly enhanced and expanded.

In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to
138 thereof. Article 130 involves the right against particular kinds of night work while Article 132
ensures the right of women to be provided with facilities and standards which the Secretary of Labor
may establish to ensure their health and safety. For purposes of labor and social legislation, a
woman working in a nightclub, cocktail lounge, massage clinic, bar or other similar establishments
shall be considered as an employee under Article 138. Article 135, on the other hand, recognizes a
woman's right against discrimination with respect to terms and conditions of employment on account
simply of sex. Finally, and this brings us to the issue at hand, Article 136 explicitly prohibits
discrimination merely by reason of the marriage of a female employee.
3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of
protection to labor and security of tenure. Thus, an employer is required, as a condition sine qua
non prior to severance of the employment ties of an individual under his employ, to convincingly
establish, through substantial evidence, the existence of a valid and just cause in dispensing with the
services of such employee, one's labor being regarded as constitutionally protected property.
On the other hand, it is recognized that regulation of manpower by the company falls within the socalled management prerogatives, which prescriptions encompass the matter of hiring, supervision of
workers, work assignments, working methods and assignments, as well as regulations on the
transfer of employees, lay-off of workers, and the discipline, dismissal, and recall of employees. 19 As
put in a case, an employer is free to regulate, according to his discretion and best business judgment, all
aspects of employment, "from hiring to firing," except in cases of unlawful discrimination or those which
may be provided by law. 20
In the case at bar, petitioner's policy of not accepting or considering as disqualified from work any
woman worker who contracts marriage runs afoul of the test of, and the right against, discrimination,
afforded all women workers by our labor laws and by no less than the Constitution. Contrary to
petitioner's assertion that it dismissed private respondent from employment on account of her
dishonesty, the record discloses clearly that her ties with the company were dissolved principally
because of the company's policy that married women are not qualified for employment in PT & T,
and not merely because of her supposed acts of dishonesty.
That it was so can easily be seen from the memorandum sent to private respondent by Delia M.
Oficial, the branch supervisor of the company, with the reminder, in the words of the latter, that
"you're fully aware that the company is not accepting married women employee (sic), as it was
verbally instructed to you." 21 Again, in the termination notice sent to her by the same branch supervisor,
private respondent was made to understand that her severance from the service was not only by reason
of her concealment of her married status but, over and on top of that, was her violation of the company's
policy against marriage ("and even told you that married women employees are not applicable [sic] or
accepted in our company.") 22 Parenthetically, this seems to be the curious reason why it was made to
appear in the initiatory pleadings that petitioner was represented in this case only by its said supervisor
and not by its highest ranking officers who would otherwise be solidarily liable with the corporation. 23

Verily, private respondent's act of concealing the true nature of her status from PT & T could not be
properly characterized as willful or in bad faith as she was moved to act the way she did mainly
because she wanted to retain a permanent job in a stable company. In other words, she was
practically forced by that very same illegal company policy into misrepresenting her civil status for
fear of being disqualified from work. While loss of confidence is a just cause for termination of
employment, it should not be simulated. 24 It must rest on an actual breach of duty committed by the
employee and not on the employer's caprices. 25 Furthermore, it should never be used as a subterfuge for
causes which are improper, illegal, or unjustified. 26
In the present controversy, petitioner's expostulations that it dismissed private respondent, not
because the latter got married but because she concealed that fact, does have a hollow ring. Her
concealment, so it is claimed, bespeaks dishonesty hence the consequent loss of confidence in her
which justified her dismissal.
Petitioner would asseverate, therefore, that while it has nothing against marriage, it nonetheless
takes umbrage over the concealment of that fact. This improbable reasoning, with interstitial
distinctions, perturbs the Court since private respondent may well be minded to claim that the
imputation of dishonesty should be the other way around.
Petitioner would have the Court believe that although private respondent defied its policy against its
female employees contracting marriage, what could be an act of insubordination was
inconsequential. What it submits as unforgivable is her concealment of that marriage yet, at the
same time, declaring that marriage as a trivial matter to which it supposedly has no objection. In
other words, PT & T says it gives its blessings to its female employees contracting marriage, despite
the maternity leaves and other benefits it would consequently respond for and which obviously it
would have wanted to avoid. If that employee confesses such fact of marriage, there will be no
sanction; but if such employee conceals the same instead of proceeding to the confessional, she will
be dismissed. This line of reasoning does not impress us as reflecting its true management policy or
that we are being regaled with responsible advocacy.
This Court should be spared the ennui of strained reasoning and the tedium of propositions which
confuse through less than candid arguments. Indeed, petitioner glosses over the fact that it was its
unlawful policy against married women, both on the aspects of qualification and retention, which
compelled private respondent to conceal her supervenient marriage. It was, however, that very
policy alone which was the cause of private respondent's secretive conduct now complained of. It is
then apropos to recall the familiar saying that he who is the cause of the cause is the cause of the
evil caused.
Finally, petitioner's collateral insistence on the admission of private respondent that she supposedly
misappropriated company funds, as an additional ground to dismiss her from employment, is
somewhat insincere and self-serving. Concededly, private respondent admitted in the course of the
proceedings that she failed to remit some of her collections, but that is an altogether different story.
The fact is that she was dismissed solely because of her concealment of her marital status, and not
on the basis of that supposed defalcation of company funds. That the labor arbiter would thus
consider petitioner's submissions on this supposed dishonesty as a mere afterthought, just to bolster
its case for dismissal, is a perceptive conclusion born of experience in labor cases. For, there was no
showing that private respondent deliberately misappropriated the amount or whether her failure to
remit the same was through negligence and, if so, whether the negligence was in nature simple or
grave. In fact, it was merely agreed that private respondent execute a promissory note to refund the
same, which she did, and the matter was deemed settled as a peripheral issue in the labor case.

Private respondent, it must be observed, had gained regular status at the time of her dismissal.
When she was served her walking papers on January 29, 1992, she was about to complete the
probationary period of 150 days as she was contracted as a probationary employee on September
2, 1991. That her dismissal would be effected just when her probationary period was winding down
clearly raises the plausible conclusion that it was done in order to prevent her from earning security
of tenure. 27 On the other hand, her earlier stints with the company as reliever were undoubtedly those of
a regular employee, even if the same were for fixed periods, as she performed activities which were
essential or necessary in the usual trade and business of PT & T. 28 The primary standard of determining
regular employment is the reasonable connection between the activity performed by the employee in
relation to the business or trade of the employer. 29
As an employee who had therefore gained regular status, and as she had been dismissed without
just cause, she is entitled to reinstatement without loss of seniority rights and other privileges and to
full back wages, inclusive of allowances and other benefits or their monetary equivalent. 30 However,
as she had undeniably committed an act of dishonesty in concealing her status, albeit under the
compulsion of an unlawful imposition of petitioner, the three-month suspension imposed by respondent
NLRC must be upheld to obviate the impression or inference that such act should be condoned. It would
be unfair to the employer if she were to return to its fold without any sanction whatsoever for her act which
was not totally justified. Thus, her entitlement to back wages, which shall be computed from the time her
compensation was withheld up to the time of her actual reinstatement, shall be reduced by deducting
therefrom the amount corresponding to her three months suspension.
4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by
petitioner PT & T. The Labor Code state, in no uncertain terms, as follows:
Art. 136. Stipulation against marriage. It shall be unlawful for an employer to
require as a condition of employment or continuation of employment that a woman
shall not get married, or to stipulate expressly or tacitly that upon getting married, a
woman employee shall be deemed resigned or separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee merely by reason
of marriage.
This provision had a studied history for its origin can be traced to Section 8 of Presidential Decree
No. 148, 31better known as the "Women and
Child Labor Law," which amended paragraph (c), Section 12 of Republic Act No. 679, 32 entitled "An Act to
Regulate the Employment of Women and Children, to Provide Penalties for Violations Thereof, and for
Other Purposes." The forerunner to Republic Act No. 679, on the other hand, was Act No. 3071 which
became law on March 16, 1923 and which regulated the employment of women and children in shops,
factories, industrial, agricultural, and mercantile establishments and other places of labor in the then
Philippine Islands.
It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et
al. vs. Philippine Air Lines,33 a decision that emanated from the Office of the President. There, a policy of
Philippine Air Lines requiring that prospective flight attendants must be single and that they will be
automatically separated from the service once they marry was declared void, it being violative of the clear
mandate in Article 136 of the Labor Code with regard to discrimination against married women. Thus:
Of first impression is the incompatibility of the respondent's policy or regulation with
the codal provision of law. Respondent is resolute in its contention that Article 136 of
the Labor Code applies only to women employed in ordinary occupations and that
the prohibition against marriage of women engaged in extraordinary occupations, like
flight attendants, is fair and reasonable, considering the pecularities of their chosen
profession.

We cannot subscribe to the line of reasoning pursued by respondent. All along, it

knew that the controverted policy has already met its doom as early as March 13,
1973 when Presidential Decree No. 148, otherwise known as the Women and Child
Labor Law, was promulgated. But for the timidity of those affected or their labor
unions in challenging the validity of the policy, the same was able to obtain a
momentary reprieve. A close look at Section 8 of said decree, which amended
paragraph (c) of Section 12 of Republic Act No. 679, reveals that it is exactly the
same provision reproduced verbatim in Article 136 of the Labor Code, which was
promulgated on May 1, 1974 to take effect six (6) months later, or on November 1,
1974.
It cannot be gainsaid that, with the reiteration of the same provision in the new Labor
Code, all policies and acts against it are deemed illegal and therefore abrogated.
True, Article 132 enjoins the Secretary of Labor to establish standards that will
ensure the safety and health of women employees and in appropriate cases shall by
regulation require employers to determine appropriate minimum standards for
termination in special occupations, such as those of flight attendants, but that is
precisely the factor that militates against the policy of respondent. The standards
have not yet been established as set forth in the first paragraph, nor has the
Secretary of Labor issued any regulation affecting flight attendants.
It is logical to presume that, in the absence of said standards or regulations which
are as yet to be established, the policy of respondent against marriage is patently
illegal. This finds support in Section 9 of the New Constitution, which provides:
Sec. 9. The State shall afford protection to labor, promote full employment and
equality in employment, ensure equal work opportunities regardless of sex, race, or
creed, and regulate the relations between workers and employees. The State shall
assure the rights of workers to self-organization, collective bargaining, security of
tenure, and just and humane conditions of work . . . .
Moreover, we cannot agree to the respondent's proposition that termination from
employment of flight attendants on account of marriage is a fair and reasonable
standard designed for their own health, safety, protection and welfare, as no basis
has been laid therefor. Actually, respondent claims that its concern is not so much
against the continued employment of the flight attendant merely by reason of
marriage as observed by the Secretary of Labor, but rather on the consequence of
marriage-pregnancy. Respondent discussed at length in the instant appeal the
supposed ill effects of pregnancy on flight attendants in the course of their
employment. We feel that this needs no further discussion as it had been adequately
explained by the Secretary of Labor in his decision of May 2, 1976.
In a vain attempt to give meaning to its position, respondent went as far as invoking
the provisions of Articles 52 and 216 of the New Civil Code on the preservation of
marriage as an inviolable social institution and the family as a basic social institution,
respectively, as bases for its policy of non-marriage. In both instances, respondent
predicates absence of a flight attendant from her home for long periods of time as
contributory to an unhappy married life. This is pure conjecture not based on actual
conditions, considering that, in this modern world, sophisticated technology has
narrowed the distance from one place to another. Moreover, respondent overlooked
the fact that married flight attendants can program their lives to adapt to prevailing
circumstances and events.

Article 136 is not intended to apply only to women employed in ordinary occupations,
or it should have categorically expressed so. The sweeping intendment of the law, be
it on special or ordinary occupations, is reflected in the whole text and supported by
Article 135 that speaks of non-discrimination on the employment of women.
The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial
Corporation 34considered as void a policy of the same nature. In said case, respondent, in dismissing
from the service the complainant, invoked a policy of the firm to consider female employees in the project
it was undertaking as separated the moment they get married due to lack of facilities for married women.
Respondent further claimed that complainant was employed in the project with an oral understanding that
her services would be terminated when she gets married. Branding the policy of the employer as an
example of "discriminatory chauvinism" tantamount to denying equal employment opportunities to women
simply on account of their sex, the appellate court struck down said employer policy as unlawful in view of
its repugnance to the Civil Code, Presidential Decree No. 148 and the Constitution.
Under American jurisprudence, job requirements which establish employer preference or conditions
relating to the marital status of an employee are categorized as a "sex-plus" discrimination where it
is imposed on one sex and not on the other. Further, the same should be evenly applied and must
not inflict adverse effects on a racial or sexual group which is protected by federal job discrimination
laws. Employment rules that forbid or restrict the employment of married women, but do not apply to
married men, have been held to violate Title VII of the United States Civil Rights Act of 1964, the
main federal statute prohibiting job discrimination against employees and applicants on the basis of,
among other things, sex. 35
Further, it is not relevant that the rule is not directed against all women but just against married
women. And, where the employer discriminates against married women, but not against married
men, the variable is sex and the discrimination is unlawful. 36 Upon the other hand, a requirement that a
woman employee must remain unmarried could be justified as a "bona fide occupational qualification," or
BFOQ, where the particular requirements of the job would justify the same, but not on the ground of a
general principle, such as the desirability of spreading work in the workplace. A requirement of that nature
would be valid provided it reflects an inherent quality reasonably necessary for satisfactory job
performance. Thus, in one case, a no-marriage rule applicable to both male and female flight attendants,
was regarded as unlawful since the restriction was not related to the job performance of the flight
attendants. 37
5. Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on
the right of a woman to be free from any kind of stipulation against marriage in connection with her
employment, but it likewise assaults good morals and public policy, tending as it does to deprive a
woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual
as an intangible and inalienable right. 38 Hence, while it is true that the parties to a contract may
establish any agreements, terms, and conditions that they may deem convenient, the same should not be
contrary to law, morals, good customs, public order, or public policy. 39 Carried to its logical consequences,
it may even be said that petitioner's policy against legitimate marital bonds would encourage illicit or
common-law relations and subvert the sacrament of marriage.
Parenthetically, the Civil Code provisions on the contract of labor state that the relations between the
parties, that is, of capital and labor, are not merely contractual, impressed as they are with so much
public interest that the same should yield to the common good. 40 It goes on to intone that neither
capital nor labor should visit acts of oppression against the other, nor impair the interest or convenience of
the public. 41 In the final reckoning, the danger of just such a policy against marriage followed by petitioner
PT & T is that it strikes at the very essence, ideals and purpose of marriage as an inviolable social
institution and, ultimately, of the family as the foundation of the nation. 42 That it must be effectively

interdicted here in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of
the laws of the land is not only in order but imperatively required.

ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone Company is
hereby DISMISSED for lack of merit, with double costs against petitioner.
SO ORDERED.
Romero, Puno, Mendoza and Torres, Jr., JJ., concur.
Footnotes

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 145587

October 26, 2007

EDI-STAFFBUILDERS INTERNATIONAL, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and ELEAZAR S. GRAN, respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari1 seeks to set aside the October 18, 2000 Decision2 of the Court
of Appeals (CA) in CA-G.R. SP No. 56120 which affirmed the January 15, 1999 Decision 3 and
September 30, 1999 Resolution4 rendered by the National Labor Relations Commission (NLRC)
(Third Division) in POEA ADJ (L) 94-06-2194, ordering Expertise Search International (ESI), EDIStaffbuilders International, Inc. (EDI), and Omar Ahmed Ali Bin Bechr Est. (OAB) jointly and severally
to pay Eleazar S. Gran (Gran) the amount of USD 16,150.00 as unpaid salaries.
The Facts
Petitioner EDI is a corporation engaged in recruitment and placement of Overseas Filipino Workers
(OFWs).5 ESI is another recruitment agency which collaborated with EDI to process the
documentation and deployment of private respondent to Saudi Arabia.
Private respondent Gran was an OFW recruited by EDI, and deployed by ESI to work for OAB, in
Riyadh, Kingdom of Saudi Arabia.6

It appears that OAB asked EDI through its October 3, 1993 letter for curricula vitae of qualified
applicants for the position of "Computer Specialist." 7 In a facsimile transmission dated November 29,
1993, OAB informed EDI that, from the applicants' curricula vitae submitted to it for evaluation, it
selected Gran for the position of "Computer Specialist." The faxed letter also stated that if Gran
agrees to the terms and conditions of employment contained in it, one of which was a monthly salary
of SR (Saudi Riyal) 2,250.00 (USD 600.00), EDI may arrange for Gran's immediate dispatch. 8
After accepting OAB's offer of employment, Gran signed an employment contract 9 that granted him a
monthly salary of USD 850.00 for a period of two years. Gran was then deployed to Riyadh,
Kingdom of Saudi Arabia on February 7, 1994.
Upon arrival in Riyadh, Gran questioned the discrepancy in his monthly salaryhis employment
contract stated USD 850.00; while his Philippine Overseas Employment Agency (POEA) Information
Sheet indicated USD 600.00 only. However, through the assistance of the EDI office in Riyadh, OAB
agreed to pay Gran USD 850.00 a month.10
After Gran had been working for about five months for OAB, his employment was terminated through
OAB's July 9, 1994 letter,11 on the following grounds:
1. Non-compliance to contract requirements by the recruitment agency primarily on your
salary and contract duration.
2. Non-compliance to pre-qualification requirements by the recruitment agency[,] vide OAB
letter ref. F-5751-93, dated October 3, 1993.12
3. Insubordination or disobedience to Top Management Order and/or instructions (nonsubmittal of daily activity reports despite several instructions).
On July 11, 1994, Gran received from OAB the total amount of SR 2,948.00 representing his final
pay, and on the same day, he executed a Declaration13 releasing OAB from any financial obligation
or otherwise, towards him.
After his arrival in the Philippines, Gran instituted a complaint, on July 21, 1994, against ESI/EDI,
OAB, Country Bankers Insurance Corporation, and Western Guaranty Corporation with the NLRC,
National Capital Region, Quezon City, which was docketed as POEA ADJ (L) 94-06-2194 for
underpayment of wages/salaries and illegal dismissal.
The Ruling of the Labor Arbiter
In his February 10, 1998 Decision,14 Labor Arbiter Manuel R. Caday, to whom Gran's case was
assigned, ruled that there was neither underpayment nor illegal dismissal.
The Labor Arbiter reasoned that there was no underpayment of salaries since according to the
POEA-Overseas Contract Worker (OCW) Information Sheet, Gran's monthly salary was USD
600.00, and in his Confirmation of Appointment as Computer Specialist, his monthly basic salary
was fixed at SR 2,500.00, which was equivalent to USD 600.00.

Arbiter Caday also cited the Declaration executed by Gran, to justify that Gran had no claim for
unpaid salaries or wages against OAB.
With regard to the issue of illegal dismissal, the Labor Arbiter found that Gran failed to refute EDI's
allegations; namely, (1) that Gran did not submit a single activity report of his daily activity as
dictated by company policy; (2) that he was not qualified for the job as computer specialist due to his
insufficient knowledge in programming and lack of knowledge in ACAD system; (3) that Gran refused
to follow management's instruction for him to gain more knowledge of the job to prove his worth as
computer specialist; (4) that Gran's employment contract had never been substituted; (5) and that
Gran was paid a monthly salary of USD 850.00, and USD 350.00 monthly as food allowance.
Accordingly, the Labor Arbiter decided that Gran was validly dismissed from his work due to
insubordination, disobedience, and his failure to submit daily activity reports.
Thus, on February 10, 1998, Arbiter Caday dismissed Gran's complaint for lack of merit.
Dissatisfied, Gran filed an Appeal15 on April 6, 1998 with the NLRC, Third Division. However, it
appears from the records that Gran failed to furnish EDI with a copy of his Appeal Memorandum.
The Ruling of the NLRC
The NLRC held that EDI's seemingly harmless transfer of Gran's contract to ESI is actually
"reprocessing," which is a prohibited transaction under Article 34 (b) of the Labor Code. This scheme
constituted misrepresentation through the conspiracy between EDI and ESI in misleading Gran and
even POEA of the actual terms and conditions of the OFW's employment. In addition, it was found
that Gran did not commit any act that constituted a legal ground for dismissal. The alleged noncompliance with contractual stipulations relating to Gran's salary and contract duration, and the
absence of pre-qualification requirements cannot be attributed to Gran but to EDI, which dealt
directly with OAB. In addition, the charge of insubordination was not substantiated, and Gran was
not even afforded the required notice and investigation on his alleged offenses.
Thus, the NLRC reversed the Labor Arbiter's Decision and rendered a new one, the dispositive
portion of which reads:
WHEREFORE, the assailed decision is SET ASIDE. Respondents Expertise Search
International, Inc., EDI Staffbuilders Int'l., Inc. and Omar Ahmed Ali Bin Bechr Est. (OAB) are
hereby ordered jointly and severally liable to pay the complainant Eleazar Gran the
Philippine peso equivalent at the time of actual payment of SIXTEEN THOUSAND ONE
HUNDRED FIFTY US DOLLARS (US$16,150.00) representing his salaries for the unexpired
portion of his contract.
SO ORDERED.16
Gran then filed a Motion for Execution of Judgment17 on March 29, 1999 with the NLRC and
petitioner receiving a copy of this motion on the same date.18
To prevent the execution, petitioner filed an Opposition19 to Gran's motion arguing that the Writ of
Execution cannot issue because it was not notified of the appellate proceedings before the NLRC

and was not given a copy of the memorandum of appeal nor any opportunity to participate in the
appeal.
Seeing that the NLRC did not act on Gran's motion after EDI had filed its Opposition, petitioner filed,
on August 26, 1999, a Motion for Reconsideration of the NLRC Decision after receiving a copy of the
Decision on August 16, 1999.20
The NLRC then issued a Resolution21 denying petitioner's Motion for Reconsideration, ratiocinating
that the issues and arguments raised in the motion "had already been amply discussed, considered,
and ruled upon" in the Decision, and that there was "no cogent reason or patent or palpable error
that warrant any disturbance thereof."
Unconvinced of the NLRC's reasoning, EDI filed a Petition for Certiorari before the CA. Petitioner
claimed in its petition that the NLRC committed grave abuse of discretion in giving due course to the
appeal despite Gran's failure to perfect the appeal.
The Ruling of the Court of Appeals
The CA subsequently ruled on the procedural and substantive issues of EDI's petition.
On the procedural issue, the appellate court held that "Gran's failure to furnish a copy of his appeal
memorandum [to EDI was] a mere formal lapse, an excusable neglect and not a jurisdictional defect
which would justify the dismissal of his appeal."22 The court also held that petitioner EDI failed to
prove that private respondent was terminated for a valid cause and in accordance with due process;
and that Gran's Declaration releasing OAB from any monetary obligation had no force and effect.
The appellate court ratiocinated that EDI had the burden of proving Gran's incompetence; however,
other than the termination letter, no evidence was presented to show how and why Gran was
considered to be incompetent. The court held that since the law requires the recruitment agencies to
subject OFWs to trade tests before deployment, Gran must have been competent and qualified;
otherwise, he would not have been hired and deployed abroad.
As for the charge of insubordination and disobedience due to Gran's failure to submit a "Daily
Activity Report," the appellate court found that EDI failed to show that the submission of the "Daily
Activity Report" was a part of Gran's duty or the company's policy. The court also held that even if
Gran was guilty of insubordination, he should have just been suspended or reprimanded, but not
dismissed.
The CA also held that Gran was not afforded due process, given that OAB did not abide by the twin
notice requirement. The court found that Gran was terminated on the same day he received the
termination letter, without having been apprised of the bases of his dismissal or afforded an
opportunity to explain his side.
Finally, the CA held that the Declaration signed by Gran did not bar him from demanding benefits to
which he was entitled. The appellate court found that the Declaration was in the form of a quitclaim,
and as such is frowned upon as contrary to public policy especially where the monetary
consideration given in the Declaration was very much less than what he was legally entitled tohis
backwages amounting to USD 16,150.00.

As a result of these findings, on October 18, 2000, the appellate court denied the petition to set
aside the NLRC Decision.
Hence, this instant petition is before the Court.
The Issues
Petitioner raises the following issues for our consideration:
I. WHETHER THE FAILURE OF GRAN TO FURNISH A COPY OF HIS APPEAL
MEMORANDUM TO PETITIONER EDI WOULD CONSTITUTE A JURISDICTIONAL
DEFECT AND A DEPRIVATION OF PETITIONER EDI'S RIGHT TO DUE PROCESS AS
WOULD JUSTIFY THE DISMISSAL OF GRAN'S APPEAL.
II. WHETHER PETITIONER EDI HAS ESTABLISHED BY WAY OF SUBSTANTIAL
EVIDENCE THAT GRAN'S TERMINATION WAS JUSTIFIABLE BY REASON OF
INCOMPETENCE. COROLLARY HERETO, WHETHER THE PRIETO VS. NLRC RULING,
AS APPLIED BY THE COURT OF APPEALS, IS APPLICABLE IN THE INSTANT CASE.
III. WHETHER PETITIONER HAS ESTABLISHED BY WAY OF SUBSTANTIAL EVIDENCE
THAT GRAN'S TERMINATION WAS JUSTIFIABLE BY REASON OF INSUBORDINATION
AND DISOBEDIENCE.
IV. WHETHER GRAN WAS AFFORDED DUE PROCESS PRIOR TO TERMINATION.
V. WHETHER GRAN IS ENTITLED TO BACKWAGES FOR THE UNEXPIRED PORTION
OF HIS CONTRACT.23
The Court's Ruling
The petition lacks merit except with respect to Gran's failure to furnish EDI with his Appeal
Memorandum filed with the NLRC.
First Issue: NLRC's Duty is to Require Respondent to Provide Petitioner a Copy of the Appeal
Petitioner EDI claims that Gran's failure to furnish it a copy of the Appeal Memorandum constitutes a
jurisdictional defect and a deprivation of due process that would warrant a rejection of the appeal.
This position is devoid of merit.
In a catena of cases, it was ruled that failure of appellant to furnish a copy of the appeal to the
adverse party is not fatal to the appeal.
In Estrada v. National Labor Relations Commission,24 this Court set aside the order of the NLRC
which dismissed an appeal on the sole ground that the appellant did not furnish the appellee a
memorandum of appeal contrary to the requirements of Article 223 of the New Labor Code and
Section 9, Rule XIII of its Implementing Rules and Regulations.

Also, in J.D. Magpayo Customs Brokerage Corp. v. NLRC, the order of dismissal of an appeal to the
NLRC based on the ground that "there is no showing whatsoever that a copy of the appeal was
served by the appellant on the appellee"25was annulled. The Court ratiocinated as follows:
The failure to give a copy of the appeal to the adverse party was a mere formal lapse, an
excusable neglect. Time and again We have acted on petitions to review decisions of the
Court of Appeals even in the absence of proof of service of a copy thereof to the Court of
Appeals as required by Section 1 of Rule 45, Rules of Court. We act on the petitions and
simply require the petitioners to comply with the rule.26 (Emphasis supplied.)
The J.D. Magpayo ruling was reiterated in Carnation Philippines Employees Labor Union-FFW v.
National Labor Relations Commission,27 Pagdonsalan v. NLRC,28 and in Sunrise Manning Agency,
Inc. v. NLRC.29
Thus, the doctrine that evolved from these cases is that failure to furnish the adverse party with a
copy of the appeal is treated only as a formal lapse, an excusable neglect, and hence, not a
jurisdictional defect. Accordingly, in such a situation, the appeal should not be dismissed; however, it
should not be given due course either. As enunciated in J.D. Magpayo, the duty that is imposed on
the NLRC, in such a case, is to require the appellant to comply with the rule that the opposing
party should be provided with a copy of the appeal memorandum.
While Gran's failure to furnish EDI with a copy of the Appeal Memorandum is excusable, the abject
failure of the NLRC to order Gran to furnish EDI with the Appeal Memorandum constitutes grave
abuse of discretion.
The records reveal that the NLRC discovered that Gran failed to furnish EDI a copy of the Appeal
Memorandum. The NLRC then ordered Gran to present proof of service. In compliance with the
order, Gran submitted a copy of Camp Crame Post Office's list of mail/parcels sent on April 7,
1998.30 The post office's list shows that private respondent Gran sent two pieces of mail on the same
date: one addressed to a certain Dan O. de Guzman of Legaspi Village, Makati; and the other
appears to be addressed to Neil B. Garcia (or Gran),31 of Ermita, Manilaboth of whom are not
connected with petitioner.
This mailing list, however, is not a conclusive proof that EDI indeed received a copy of the Appeal
Memorandum.
Sec. 5 of the NLRC Rules of Procedure (1990) provides for the proof and completeness of service in
proceedings before the NLRC:
Section 5.32 Proof and completeness of service.The return is prima facie proof of the facts
indicated therein.Service by registered mail is complete upon receipt by the addressee
or his agent; but if the addressee fails to claim his mail from the post office within five (5)
days from the date of first notice of the postmaster, service shall take effect after such time.
(Emphasis supplied.)
Hence, if the service is done through registered mail, it is only deemed complete when the
addressee or his agent received the mail or after five (5) days from the date of first notice of the
postmaster. However, the NLRC Rules do not state what would constitute proper proof of service.

Sec. 13, Rule 13 of the Rules of Court, provides for proofs of service:
Section 13. Proof of service.Proof of personal service shall consist of a written admission
of the party served or the official return of the server, or the affidavit of the party serving,
containing a full statement of the date, place and manner of service. If the service is by
ordinary mail, proof thereof shall consist of an affidavit of the person mailing of facts showing
compliance with section 7 of this Rule. If service is made by registered mail, proof shall
be made by such affidavit and registry receipt issued by the mailing office. The
registry return card shall be filed immediately upon its receipt by the sender, or in lieu
thereof the unclaimed letter together with the certified or sworn copy of the notice
given by the postmaster to the addressee (emphasis supplied).
Based on the foregoing provision, it is obvious that the list submitted by Gran is not conclusive proof
that he had served a copy of his appeal memorandum to EDI, nor is it conclusive proof that EDI
received its copy of the Appeal Memorandum. He should have submitted an affidavit proving that he
mailed the Appeal Memorandum together with the registry receipt issued by the post office;
afterwards, Gran should have immediately filed the registry return card.
Hence, after seeing that Gran failed to attach the proof of service, the NLRC should not have simply
accepted the post office's list of mail and parcels sent; but it should have required Gran to
properly furnish the opposing parties with copies of his Appeal Memorandum as prescribed
in J.D. Magpayo and the other cases. The NLRC should not have proceeded with the adjudication
of the case, as this constitutes grave abuse of discretion.
The glaring failure of NLRC to ensure that Gran should have furnished petitioner EDI a copy of the
Appeal Memorandum before rendering judgment reversing the dismissal of Gran's complaint
constitutes an evasion of the pertinent NLRC Rules and established jurisprudence. Worse, this
failure deprived EDI of procedural due process guaranteed by the Constitution which can serve as
basis for the nullification of proceedings in the appeal before the NLRC. One can only surmise the
shock and dismay that OAB, EDI, and ESI experienced when they thought that the dismissal of
Gran's complaint became final, only to receive a copy of Gran's Motion for Execution of Judgment
which also informed them that Gran had obtained a favorable NLRC Decision. This is not level
playing field and absolutely unfair and discriminatory against the employer and the job recruiters.
The rights of the employers to procedural due process cannot be cavalierly disregarded for they too
have rights assured under the Constitution.
However, instead of annulling the dispositions of the NLRC and remanding the case for further
proceedings we will resolve the petition based on the records before us to avoid a protracted
litigation.33
The second and third issues have a common matterwhether there was just cause for Gran's
dismissalhence, they will be discussed jointly.
Second and Third Issues: Whether Gran's dismissal is justifiable by reason of incompetence,
insubordination, and disobedience
In cases involving OFWs, the rights and obligations among and between the OFW, the local
recruiter/agent, and the foreign employer/principal are governed by the employment contract. A
contract freely entered into is considered law between the parties; and hence, should be respected.

In formulating the contract, the parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.34
In the present case, the employment contract signed by Gran specifically states that Saudi Labor
Laws will govern matters not provided for in the contract (e.g. specific causes for termination,
termination procedures, etc.). Being the law intended by the parties (lex loci intentiones) to apply to
the contract, Saudi Labor Laws should govern all matters relating to the termination of the
employment of Gran.
In international law, the party who wants to have a foreign law applied to a dispute or case has the
burden of proving the foreign law. The foreign law is treated as a question of fact to be properly
pleaded and proved as the judge or labor arbiter cannot take judicial notice of a foreign law. He is
presumed to know only domestic or forum law.35
Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter; thus, the
International Law doctrine ofpresumed-identity approach or processual presumption comes into
play.36 Where a foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that
foreign law is the same as ours.37 Thus, we apply Philippine labor laws in determining the issues
presented before us.
Petitioner EDI claims that it had proven that Gran was legally dismissed due to incompetence and
insubordination or disobedience.
This claim has no merit.
In illegal dismissal cases, it has been established by Philippine law and jurisprudence that the
employer should prove that the dismissal of employees or personnel is legal and just.
Section 33 of Article 277 of the Labor Code38 states that:
ART. 277. MISCELLANEOUS PROVISIONS39
(b) Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just and authorized cause and without prejudice to
the requirement of notice under Article 283 of this Code, the employer shall furnish the
worker whose employment is sought to be terminated a written notice containing a statement
of the causes for termination and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of his representative if he so desires in accordance with
company rules and regulations promulgated pursuant to guidelines set by the Department of
Labor and Employment. Any decision taken by the employer shall be without prejudice to the
right of the workers to contest the validity or legality of his dismissal by filing a complaint with
the regional branch of the National Labor Relations Commission.The burden of proving
that the termination was for a valid or authorized cause shall rest on the employer. x x
x
In many cases, it has been held that in termination disputes or illegal dismissal cases, the employer
has the burden of proving that the dismissal is for just and valid causes; and failure to do so would
necessarily mean that the dismissal was not justified and therefore illegal. 40 Taking into account the

character of the charges and the penalty meted to an employee, the employer is bound to adduce
clear, accurate, consistent, and convincing evidence to prove that the dismissal is valid and
legal.41 This is consistent with the principle of security of tenure as guaranteed by the Constitution
and reinforced by Article 277 (b) of the Labor Code of the Philippines. 42
In the instant case, petitioner claims that private respondent Gran was validly dismissed for just
cause, due to incompetence and insubordination or disobedience. To prove its allegations, EDI
submitted two letters as evidence. The first is the July 9, 1994 termination letter,43 addressed to
Gran, from Andrea E. Nicolaou, Managing Director of OAB. The second is an unsigned April 11,
1995 letter44 from OAB addressed to EDI and ESI, which outlined the reasons why OAB had
terminated Gran's employment.
Petitioner claims that Gran was incompetent for the Computer Specialist position because he had
"insufficient knowledge in programming and zero knowledge of [the] ACAD system." 45 Petitioner also
claims that Gran was justifiably dismissed due to insubordination or disobedience because he
continually failed to submit the required "Daily Activity Reports."46However, other than the
abovementioned letters, no other evidence was presented to show how and why Gran was
considered incompetent, insubordinate, or disobedient. Petitioner EDI had clearly failed to overcome
the burden of proving that Gran was validly dismissed.
Petitioner's imputation of incompetence on private respondent due to his "insufficient knowledge in
programming and zero knowledge of the ACAD system" based only on the above mentioned letters,
without any other evidence, cannot be given credence.
An allegation of incompetence should have a factual foundation. Incompetence may be shown by
weighing it against a standard, benchmark, or criterion. However, EDI failed to establish any such
bases to show how petitioner found Gran incompetent.
In addition, the elements that must concur for the charge of insubordination or willful disobedience to
prosper were not present.
In Micro Sales Operation Network v. NLRC, we held that:
For willful disobedience to be a valid cause for dismissal, the following twin elements must
concur: (1) the employee's assailed conduct must have been willful, that is, characterized by
a wrongful and perverse attitude; and (2) the order violated must have been reasonable,
lawful, made known to the employee and must pertain to the duties which he had been
engaged to discharge.47
EDI failed to discharge the burden of proving Gran's insubordination or willful disobedience. As
indicated by the second requirement provided for in Micro Sales Operation Network, in order to
justify willful disobedience, we must determine whether the order violated by the employee is
reasonable, lawful, made known to the employee, and pertains to the duties which he had been
engaged to discharge. In the case at bar, petitioner failed to show that the order of the company
which was violatedthe submission of "Daily Activity Reports"was part of Gran's duties as a
Computer Specialist. Before the Labor Arbiter, EDI should have provided a copy of the company
policy, Gran's job description, or any other document that would show that the "Daily Activity
Reports" were required for submission by the employees, more particularly by a Computer
Specialist.

Even though EDI and/or ESI were merely the local employment or recruitment agencies and not the
foreign employer, they should have adduced additional evidence to convincingly show that Gran's
employment was validly and legally terminated. The burden devolves not only upon the foreignbased employer but also on the employment or recruitment agency for the latter is not only an agent
of the former, but is also solidarily liable with the foreign principal for any claims or liabilities arising
from the dismissal of the worker.48
Thus, petitioner failed to prove that Gran was justifiably dismissed due to incompetence,
insubordination, or willful disobedience.
Petitioner also raised the issue that Prieto v. NLRC,49 as used by the CA in its Decision, is not
applicable to the present case.
In Prieto, this Court ruled that "[i]t is presumed that before their deployment, the petitioners were
subjected to trade tests required by law to be conducted by the recruiting agency to insure
employment of only technically qualified workers for the foreign principal." 50 The CA, using the ruling
in the said case, ruled that Gran must have passed the test; otherwise, he would not have been
hired. Therefore, EDI was at fault when it deployed Gran who was allegedly "incompetent" for the
job.
According to petitioner, the Prieto ruling is not applicable because in the case at hand, Gran
misrepresented himself in his curriculum vitae as a Computer Specialist; thus, he was not qualified
for the job for which he was hired.
We disagree.
The CA is correct in applying Prieto. The purpose of the required trade test is to weed out
incompetent applicants from the pool of available workers. It is supposed to reveal applicants with
false educational backgrounds, and expose bogus qualifications. Since EDI deployed Gran to
Riyadh, it can be presumed that Gran had passed the required trade test and that Gran is qualified
for the job. Even if there was no objective trade test done by EDI, it was still EDI's responsibility to
subject Gran to a trade test; and its failure to do so only weakened its position but should not in any
way prejudice Gran. In any case, the issue is rendered moot and academic because Gran's
incompetency is unproved.
Fourth Issue: Gran was not Afforded Due Process
As discussed earlier, in the absence of proof of Saudi laws, Philippine Labor laws and regulations
shall govern the relationship between Gran and EDI. Thus, our laws and rules on the requisites of
due process relating to termination of employment shall apply.
Petitioner EDI claims that private respondent Gran was afforded due process, since he was allowed
to work and improve his capabilities for five months prior to his termination. 51 EDI also claims that the
requirements of due process, as enunciated in Santos, Jr. v. NLRC,52 and Malaya Shipping Services,
Inc. v. NLRC,53 cited by the CA in its Decision, were properly observed in the present case.
This position is untenable.

In Agabon v. NLRC,54 this Court held that:

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer
must give the employee two written notices and a hearing or opportunity to be heard if
requested by the employee before terminating the employment: a notice specifying the
grounds for which dismissal is sought a hearing or an opportunity to be heard and after
hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the
dismissal is based on authorized causes under Articles 283 and 284, the employer must give
the employee and the Department of Labor and Employment written notices 30 days prior to
the effectivity of his separation.
Under the twin notice requirement, the employees must be given two (2) notices before their
employment could be terminated: (1) a first notice to apprise the employees of their fault, and (2) a
second notice to communicate to the employees that their employment is being terminated. In
between the first and second notice, the employees should be given a hearing or opportunity to
defend themselves personally or by counsel of their choice.55
A careful examination of the records revealed that, indeed, OAB's manner of dismissing Gran fell
short of the two notice requirement. While it furnished Gran the written notice informing him of his
dismissal, it failed to furnish Gran the written notice apprising him of the charges against him, as
prescribed by the Labor Code.56 Consequently, he was denied the opportunity to respond to said
notice. In addition, OAB did not schedule a hearing or conference with Gran to defend himself and
adduce evidence in support of his defenses. Moreover, the July 9, 1994 termination letter was
effective on the same day. This shows that OAB had already condemned Gran to dismissal, even
before Gran was furnished the termination letter. It should also be pointed out that OAB failed to give
Gran the chance to be heard and to defend himself with the assistance of a representative in
accordance with Article 277 of the Labor Code. Clearly, there was no intention to provide Gran with
due process. Summing up, Gran was notified and his employment arbitrarily terminated on the same
day, through the same letter, and for unjustified grounds. Obviously, Gran was not afforded due
process.
Pursuant to the doctrine laid down in Agabon,57 an employer is liable to pay nominal damages as
indemnity for violating the employee's right to statutory due process. Since OAB was in breach of the
due process requirements under the Labor Code and its regulations, OAB, ESI, and EDI, jointly and
solidarily, are liable to Gran in the amount of PhP 30,000.00 as indemnity.
Fifth and Last Issue: Gran is Entitled to Backwages
We reiterate the rule that with regard to employees hired for a fixed period of employment, in cases
arising before the effectivity of R.A. No. 804258 (Migrant Workers and Overseas Filipinos Act) on
August 25, 1995, that when the contract is for a fixed term and the employees are dismissed without
just cause, they are entitled to the payment of their salaries corresponding to the unexpired portion
of their contract.59 On the other hand, for cases arising after the effectivity of R.A. No. 8042, when the
termination of employment is without just, valid or authorized cause as defined by law or contract,
the worker shall be entitled to the full reimbursement of his placement fee with interest of twelve
percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or
for three (3) months for every year of the unexpired term whichever is less. 60

In the present case, the employment contract provides that the employment contract shall be valid
for a period of two (2) years from the date the employee starts to work with the employer.61 Gran
arrived in Riyadh, Saudi Arabia and started to work on February 7, 1994; 62 hence, his employment
contract is until February 7, 1996. Since he was illegally dismissed on July 9, 1994, before the
effectivity of R.A. No. 8042, he is therefore entitled to backwages corresponding to the unexpired
portion of his contract, which was equivalent to USD 16,150.
Petitioner EDI questions the legality of the award of backwages and mainly relies on the Declaration
which is claimed to have been freely and voluntarily executed by Gran. The relevant portions of the
Declaration are as follows:
I, ELEAZAR GRAN (COMPUTER SPECIALIST) AFTER RECEIVING MY FINAL
SETTLEMENT ON THIS DATE THE AMOUNT OF:
S.R. 2,948.00 (SAUDI RIYALS TWO THOUSAND NINE
HUNDRED FORTY EIGHT ONLY)
REPRESENTING COMPLETE PAYMENT (COMPENSATION) FOR THE SERVICES I
RENDERED TO OAB ESTABLISHMENT.
I HEREBY DECLARE THAT OAB EST. HAS NO FINANCIAL OBLIGATION IN MY FAVOUR
AFTER RECEIVING THE ABOVE MENTIONED AMOUNT IN CASH.
I STATE FURTHER THAT OAB EST. HAS NO OBLIGATION TOWARDS ME IN WHATEVER
FORM.
I ATTEST TO THE TRUTHFULNESS OF THIS STATEMENT BY AFFIXING MY SIGNATURE
VOLUNTARILY.
SIGNED.
ELEAZAR GRAN
Courts must undertake a meticulous and rigorous review of quitclaims or waivers, more particularly
those executed by employees. This requirement was clearly articulated by Chief Justice Artemio V.
Panganiban in Land and Housing Development Corporation v. Esquillo:
Quitclaims, releases and other waivers of benefits granted by laws or contracts in favor of
workers should be strictly scrutinized to protect the weak and the disadvantaged. The
waivers should be carefully examined, in regard not only to the words and terms used,
but also the factual circumstances under which they have been executed.63 (Emphasis
supplied.)
This Court had also outlined in Land and Housing Development Corporation, citing Periquet v.
NLRC,64 the parameters for valid compromise agreements, waivers, and quitclaims:
Not all waivers and quitclaims are invalid as against public policy. If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the parties

and may not later be disowned simply because of a change of mind. It is only where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person, or the
terms of settlement are unconscionable on its face, that the law will step in to annul the
questionable transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for
the quitclaim is credible and reasonable, the transaction must be recognized as a valid
and binding undertaking. (Emphasis supplied.)
Is the waiver and quitclaim labeled a Declaration valid? It is not.
The Court finds the waiver and quitclaim null and void for the following reasons:
1. The salary paid to Gran upon his termination, in the amount of SR 2,948.00, is unreasonably low.
As correctly pointed out by the court a quo, the payment of SR 2,948.00 is even lower than his
monthly salary of SR 3,190.00 (USD 850.00). In addition, it is also very much less than the USD
16,150.00 which is the amount Gran is legally entitled to get from petitioner EDI as backwages.
2. The Declaration reveals that the payment of SR 2,948.00 is actually the payment for Gran's salary
for the services he rendered to OAB as Computer Specialist. If the Declaration is a quitclaim, then
the consideration should be much much more than the monthly salary of SR 3,190.00 (USD 850.00)
although possibly less than the estimated Gran's salaries for the remaining duration of his contract
and other benefits as employee of OAB. A quitclaim will understandably be lower than the sum total
of the amounts and benefits that can possibly be awarded to employees or to be earned for the
remainder of the contract period since it is a compromise where the employees will have to forfeit a
certain portion of the amounts they are claiming in exchange for the early payment of a compromise
amount. The court may however step in when such amount is unconscionably low or unreasonable
although the employee voluntarily agreed to it. In the case of the Declaration, the amount is
unreasonably small compared to the future wages of Gran.
3. The factual circumstances surrounding the execution of the Declaration would show that Gran did
not voluntarily and freely execute the document. Consider the following chronology of events:
a. On July 9, 1994, Gran received a copy of his letter of termination;
b. On July 10, 1994, Gran was instructed to depart Saudi Arabia and required to pay his
plane ticket;65
c. On July 11, 1994, he signed the Declaration;
d. On July 12, 1994, Gran departed from Riyadh, Saudi Arabia; and
e. On July 21, 1994, Gran filed the Complaint before the NLRC.
The foregoing events readily reveal that Gran was "forced" to sign the Declaration and constrained
to receive the amount of SR 2,948.00 even if it was against his willsince he was told on July 10,
1994 to leave Riyadh on July 12, 1994. He had no other choice but to sign the Declaration as he
needed the amount of SR 2,948.00 for the payment of his ticket. He could have entertained some
apprehensions as to the status of his stay or safety in Saudi Arabia if he would not sign the quitclaim.

4. The court a quo is correct in its finding that the Declaration is a contract of adhesion which should
be construed against the employer, OAB. An adhesion contract is contrary to public policy as it
leaves the weaker partythe employeein a "take-it-or-leave-it" situation. Certainly, the employer is
being unjust to the employee as there is no meaningful choice on the part of the employee while the
terms are unreasonably favorable to the employer.66
Thus, the Declaration purporting to be a quitclaim and waiver is unenforceable under Philippine laws
in the absence of proof of the applicable law of Saudi Arabia.
In order to prevent disputes on the validity and enforceability of quitclaims and waivers of employees
under Philippine laws, said agreements should contain the following:
1. A fixed amount as full and final compromise settlement;
2. The benefits of the employees if possible with the corresponding amounts, which the employees
are giving up in consideration of the fixed compromise amount;
3. A statement that the employer has clearly explained to the employee in English, Filipino, or in the
dialect known to the employeesthat by signing the waiver or quitclaim, they are forfeiting or
relinquishing their right to receive the benefits which are due them under the law; and
4. A statement that the employees signed and executed the document voluntarily, and had fully
understood the contents of the document and that their consent was freely given without any threat,
violence, duress, intimidation, or undue influence exerted on their person.
It is advisable that the stipulations be made in English and Tagalog or in the dialect known to the
employee. There should be two (2) witnesses to the execution of the quitclaim who must also sign
the quitclaim. The document should be subscribed and sworn to under oath preferably before any
administering official of the Department of Labor and Employment or its regional office, the Bureau of
Labor Relations, the NLRC or a labor attach in a foreign country. Such official shall assist the
parties regarding the execution of the quitclaim and waiver.67 This compromise settlement becomes
final and binding under Article 227 of the Labor Code which provides that:
[A]ny compromise settlement voluntarily agreed upon with the assistance of the Bureau of
Labor Relations or the regional office of the DOLE, shall be final and binding upon the parties
and the NLRC or any court "shall not assume jurisdiction over issues involved therein except
in case of non-compliance thereof or if there is prima facieevidence that the settlement was
obtained through fraud, misrepresentation, or coercion.
It is made clear that the foregoing rules on quitclaim or waiver shall apply only to labor contracts of
OFWs in the absence of proof of the laws of the foreign country agreed upon to govern said
contracts. Otherwise, the foreign laws shall apply.
WHEREFORE, the petition is DENIED. The October 18, 2000 Decision in CA-G.R. SP No. 56120 of
the Court of Appeals affirming the January 15, 1999 Decision and September 30, 1999 Resolution of
the NLRC

is AFFIRMED with the MODIFICATION that petitioner EDI-Staffbuilders International, Inc. shall pay
the amount of PhP 30,000.00 to respondent Gran as nominal damages for non-compliance with
statutory due process.
No costs.
SO ORDERED.
Quisumbing, Carpio, Tinga, Nachura, JJ., concur.

Footnotes
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 167225

October 22, 2014

RADIO MINDANAO NETWORK, INC., Petitioner,

vs.
MICHAEL MAXIMO R. AMURAO III, Respondent.
DECISION
BERSAMIN, J.:
This appeal deals with the issue of whether the quitclaim executed by the employee was valid and
effective against him.
Antecedents
On February 16, 1989, petitioner Radio Mindanao Network, Inc. (RMN) hired respondent Michael
Maximo R. Amurao III (Michael) as a radio broadcaster for its DWKC-FM station and production
manager for its metropolitan radio operations at a monthly salary of P28,400.00.
1

Years later, RMN decided to reformat and restructure the programming of its DWKC-FM station to
meet the demands of the broadcasting industry. On April 25, 2002, the president of RMN met with
Michael and other personnel of the station to inform them of the management's decision, advising
them that the reformatting and restructuring of the station's programs would necessarily affect their
employment; but assuring that they would be paid their retirement pay and other benefits. To
formalize the discussions had in their meeting, RMN furnished Michael and other personnel separate
letters dated May 14, 2002 reading as follows:
2

This is to formalize your meeting with our President Mr. Eric S. Canoy, last April 25, 2002. During
said meeting, you have been informed that in line with the Networks reformatting/restructuring
program for operations, your services are deemedended effective June 15, 2002. However, effective
May 16, 2002, you will no longer [be] required to report for work. And for the services you have
rendered, Radio Mindanao Network, Inc. will pay your separation benefits, service incentive leave
pay, proportionate 13th month pay and salary for the month of May 16 to June 15, 2002.
Radio Mindanao Network, Inc. extends its gratitude and prayers to you and to your loved ones.
Thank you and God bless.
3

However, Michael and the other personnel refused to sign in receipt when the letters were served on
them. Not long after, however, they accepted the offer of RMN and executed affidavits relinquishing
all their claims against the employer. In Michaels case, the Affidavit of Release/Quitclaim Dated May
30, 2002 (quitclaim) stated as follows:
AFFIDAVIT OF RELEASE/QUITCLAIM
That I, MICHAEL MAXIMO R. AMURAO III, of legal age, Filipino, and a resident of Manila after
having been duly sworn to according to law, hereby depose and say:
1. That I have retired from my position as Production Manager from RADIO MINDANAO
NETWORK INC.EFFECTIVE June 15, 2002;
2. That for and in consideration of sum THREE HUNDRED ELEVEN THOUSAND NINE
HUNDRED TWENTY-TWO PESOS & 00 CENTS. (P311,922.00)in Philippine Currency, to
me in hand paid by RADIO MINDANAO NETWORK, INC. in additional retirement benefits
per corrected employment period, receipt of which is hereby acknowledged to my complete
and full satisfaction;
3. That I hereby RELEASE AND DISCHARGE RADIO MINDANAO NETWORK, INC., its
Officers, Directors, and Managers from any and all claims and demands whatsoever as
maybe due to me incident to employment with radio station DWKC-FMand/or cessation of
the same with Radio Mindanao Network, Inc., on June 15, 2002.
4. That I hereby state further that I have no more claims, right or action whatsoever nature
whether past, present or contingent against said corporation;
5. That, I manifest that the terms of this release and quitclaim have been read and
thoroughly understoodby me and accepted said terms on my own consent."
4

On October 14, 2002, or 5 months after receiving his benefits and his execution of the quitclaim,
Michael filed a complaint against RMN for illegal dismissal with money claims in the National Labor
Relations Commission (NLRC).
5

Decision of the Labor Arbiter

On November 12, 2002, the Labor Arbiter rendered a decision declaring the dismissal of Michael as
illegal on the ground that the reformatting and restructuring of RMNs radio programming did not fall
6

under any of the just or authorized causes specified under Article 282, Article 283 and Article 284 of
the Labor Codethat would make the termination of his employment valid; and holding the quitclaim
Michael signed as void because it was not voluntarily executed. The decision disposed thusly:
WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of
the complainant from the respondents employment is illegal and that the Affidavit of
Release/Quitclaim is null and void.
Accordingly, the respondent is ordered as follows:
1) To reinstate the complainant tohis former position as radio broadcaster and production
manager without loss of seniority rights;
2) To pay the complainant backwages which as of the date of this decision already amounts
to P159,040.00 until his actual reinstatement;
3) To pay the complainant moral damages in the amount of Php100,000.00 and exemplary
damages in the amount of Php100,000.00 and
4) To pay the complainant attorneys fees equivalent to 10 percent of the award as stated
above.
The complainants claim for regular holiday pay and premiums on holiday pay and rest day are
dismissed for lack of sufficient evidence.
7

Ruling of the NLRC

RMN appealed to the NLRC, contending that the decision of the Labor Arbiter was premature for
being rendered without first issuing an order either setting the case for hearing or declaring the same
submitted for decision in violation of Rule V, Section II of the Rules of Procedure of the NLRC, as
amended; that the quitclaim signed in its favor was valid and binding because it represented a
voluntary and reasonable settlement of Michaels claims; and that Michael was estopped from filing
the illegal dismissal case against it.
8

In its decision rendered on November 28, 2003, the NLRC found no merit in the contention of RMN
that the appealed decision was prematurely rendered. It noted that the constancia dated October 28,
2002, which stated "counsel for respondent appeared and asked for a period of ten (10) days from
today within which to file reply and after the lapse of the allotted period, with or without said pleading,
case shall be submitted for resolution," clearly showed that RMN was sufficiently apprised that the
case would be decided after the lapse of the 10-day period RMN prayed for regardless of whether it
filed its reply or not. It held that the quitclaim was null and void for not being voluntarily executed;
modified the decision of the Labor Arbiter in that the amount already received by Michael was to be
deducted from the monetary benefits awarded to him;and deleted the awards for moral and
exemplary damages.
10

RMN moved for reconsideration, but the NLRC denied its motion.
Decision of the Court of Appeals

11

Consequently, RMN filed with the Court of Appeals (CA) its petition for certiorari, submitting that the
NLRC thereby committed a grave abuse of its discretion amounting to lackor excess of its
jurisdiction.
12

On August 31, 2004, however, the CA denied due course to the petition and dismissed it for lack of
merit.
13

RMN sought for reconsideration of the resolution of the CA, but its motion for that purpose was
similarly denied by the CA.
Issues
Hence, this appeal by petition for review on certiorari, with RMN raising the following issues, to wit:
14

1. Whether or not the November 12, 2002 decision of the Labor Arbiter was prematurely
rendered;
2. Whether or not the November 12, 2002 decision of the Labor Arbiter was rendered in
violation of petitioners right to due process;
3. Whether or not the Affidavit of Release/Quitclaim executed by Michael was valid and
binding; and
4. Whether or not private respondents dismissal is legal.

15

Ruling of the Court

That Michael was illegally dismissed from his employment is beyond question. RMN does not
dispute this. Its only submission now is that it was discharged from whatever claims Michael had
against it arising from his employment by virtue of the Affidavit of Release/Quitclaim he signed in its
favor. Accordingly, the remaining question to resolve is whether the quitclaim was valid and binding.
This Court recognizes that the issue concerning the validity of the quitclaim was a question of fact
that isnot within the province of a review on certiorari under Rule 45. However, there is reason to
hold that the CA manifestly overlooked certain relevant and undisputed facts that, if properly
considered, would justify a different conclusion herein. On that basis, the Court has to delve into the
factual issue, and has to review the evidence again to ensure that its ruling on the issue jibes with
the evidence on record. Its doing so is an acceptable exception to the general rule of nonreview of
factual matters.
16

17

The CA was quick to rule that Michael had been coerced into signing the quitclaim. It did so because
he had assailed the voluntariness of the execution of the quitclaim. It noted thatthe fact that Michael
had refused to sign the May 14, 2002 letter and thereby indicate his acceptance of the terms of his
termination stated therein was proof enough of the quitclaim not being freely signed.
18

The Court finds and considers the CAs ruling unfounded.

RMN consistently contended that a series of negotiations between Michael and the management
preceded the giving of the settlement pay that they had considered as reasonable. Not once did
Michael refute this contention. Worth noting is that Michael signed the quitclaim to release RMN from
any and all claims that could be due to him by reason of his employment after he receiving the
agreed settlement pay of P311,922.00.
19

Not all quitclaims are per sein valid or against public policy. A quitclaim is invalid or contrary to public
policy only: (1) where there is clear proof that the waiver was wrangled from an unsuspecting or
gullible person; or (2) where the terms of settlementare unconscionable on their face. In instances of
invalid quitclaims, the law steps in to annul the questionable waiver. Indeed, there are legitimate
waivers that represent the voluntary and reasonable settlements of laborers claims that should be
respected by the Court as the law between the parties. Where the party has voluntarily made the
waiver, with a full understanding of its terms as well as its consequences, and the consideration for
the quitclaimis credible and reasonable, the transaction must be recognized as a valid and binding
undertaking, and may not later be disowned simply because of a change of mind. A waiver is
essentially contractual.
20

In our view, the requisites for the validity of Michaels quitclaim were satisfied. We explain.
1wphi1

Firstly, Michael acknowledged in his quitclaim that he had read and thoroughly understood the terms
of his quitclaim and signed it of his own volition. Being a radio broadcaster and production manager,
he occupied a highly responsible position in the company.It would be implausible to hold, therefore,
that he could be easily duped into simply signing away his rights. Besides, the language and content
ofthe quitclaim were clear and uncomplicated such that he could not claim that he did not
understand what he was signing.
Secondly, the settlement pay of P311,922.00 was credible and reasonable considering that Michael
did not even assail such amount as unconscionably low, or even state that he was entitled to a
higher amount.
Thirdly, that he was required to sign the quitclaim as a condition to the release of the settlement
pay did not prove that its execution was coerced. Having agreed to part with a substantial amount
of money, RMN took steps to protect its interest and obtain its release from all obligations once it
paid Michael his settlement pay, which it did in this case.
21

And, lastly, that he signed the quitclaim out of fear of not being able to provide for the needs of his
family and for the schooling of his children did not immediately indicate that he had been forced to
sign the same. Dire necessity should not necessarily be an acceptable ground for annulling the
quitclaim, especially because it was not at all shown that he had been forced to execute it. Nor was it
even proven that the consideration for the quitclaim was unconscionably low, and that he had been
tricked into accepting the consideration.
22

23

With the quitclaim having been freely and voluntarily signed, RMN was released and absolved from
any liability in favor of Michael. Suffice it to say that the quitclaim is ineffective in barring recovery of
the full measure of an employee's rights only when the transaction is shown to be questionable and
the consideration is scandalously low and inequitable. Such is not true here.
24

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS
ASIDE the decision promulgated on August 31, 2004; DECLARES the Affidavit of Release/Quitclaim

executed by and between respondent Michael Maximo R. Amurao III and petitioner Radio Mindanao
Network, Inc. valid and binding; and DISMISSES the complaint for illegal dismissal of Michael
Maximo R. Amurao III. No pronouncement on costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice