FIRST DIVISION

ROQUE S. DUTERTE,
Petitioner,

G.R. No. 160325

Present:

- versus -

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.

KINGSWOOD TRADING
CO.,
INC.,
FILEMON
LIM
and Promulgated:
NATIONAL LABOR RELATIONS
COMMISSION,
October 4, 2007
Respondents.
x------------------------------------------------------------------------------------x
DECISION
GARCIA, J.:
By this petition for review on certiorari, petitioner Roque S. Duterte seeks the
review and setting aside of the decision [1] dated June 20, 2003 of the Court of
Appeals (CA) in CA-G.R. SP No. 71729, as reiterated in its resolution[2] of
October 5, 2003, affirming an earlier resolution [3] of the National Labor
Relations Commission (NLRC) which ruled that petitioner was not illegally
dismissed from employment due to disease under Article 284 of the Labor
Code.
The facts:
In September 1993, petitioner was hired as truck/trailer driver by respondent
Kingswood Trading Company, Inc. (KTC) of which co-respondent Filemon Lim
is the President. Petitioner was on the 6:00 a.m. 6:00 p.m. shift. He averaged
21 trips per month, getting P700 per trip. When not driving, petitioner was
assigned to clean and maintain respondent KTCs equipment and vehicles for
which he was paid P125 per day. Regularly, petitioner would be seconded by
respondent Filemon Lim to drive for one of KTCs clients, the Philippine
National Oil Corporation, but always subject to respondents convenience.
On November 8, 1998, petitioner had his first heart attack and was confined
for two weeks at the Philippine Heart Center (PHC). This was confirmed by

respondent KTC which admitted that petitioner was declared on sick leave
with corresponding notification.
A month later, petitioner returned to work armed with a medical certificate
signed by his attending physician at the PHC, attesting to petitioners fitness
to work. However, said certificate was not honored by the respondents who
refused to allow petitioner to work.
In February 1999, petitioner suffered a second heart attack and was again
confined at the PHC. Upon release, he stayed home and spent time to
recuperate.
In June 1999, petitioner attempted to report back to work but was told to look
for another job because he was unfit. Respondents refused to declare
petitioner fit to work unless physically examined by the company physician.
Respondents promise to pay petitioner his separation pay turned out to be an
empty one. Instead, petitioner was presented, for his signature, a document
as proof of his receipt of the amount of P14,375.00 as first installment of his
Social Security System (SSS) benefits. Having received no such amount,
petitioner refused to affix his signature thereon and instead requested for the
necessary documents from respondents to enable him to claim his SSS
benefits, but the latter did not heed his request.
On November 11, 1999, petitioner filed against his employer a complaint for
illegal dismissal and damages.
In a decision[4] dated September 26, 2000, the labor arbiter found for the
petitioner. However, while categorically declaring that petitioners dismissal
was illegal, the labor arbiter, instead of applying Article 279 [5] of the Labor
Code on illegal dismissals, applied Article 284 on Disease as ground for
termination on the rationale that since the respondents admitted that
petitioner could not be allowed back to work because of the latters disease,
the case fell within the ambit of Article 284. We quote the fallo of the labor
arbiters decision:
WHEREFORE, in the light of the foregoing, judgment is
hereby rendered declaring complainant to have been terminated
from employment on the ground that he has been suffering from
a disease.
Respondents are hereby directed to pay complainant as
follows:

1. Separation pay equivalent to one-half (1/2)

month salary for every year of service computed at
six (6) years of service in the amount of Forty-Two
Thousand (P42,000.00) Pesos.
2. Holiday pay for three (3) years in the amount
of Twenty-One Thousand (P21,000.00) Pesos; and
3. Service Incentive Leave pay for three (3)
years in the amount of Ten Thousand (P10,000.00)
Pesos.
All other claims herein sought are hereby
denied for lack of merit and factual basis.
SO ORDERED.
On respondents appeal, the NLRC, in its Resolution [6] of April 24, 2002, set
aside the labor arbiters decision, ruling that Article 284 of the Labor Code has
no application to this case, there being no illegal dismissal to speak of. The
NLRC accordingly dismissed petitioners complaint for illegal dismissal, thus:
WHEREFORE, the decision appealed from is VACATED and SET
ASIDE.[7] A new one is hereby entered DISMISSING the instant
case for lack of merit.
Therefrom, petitioner went on certiorari to the CA in CA-G.R. SP No. 71729. In
the herein assailed decision dated June 20, 2003, the CA upheld the NLRC
Resolution, saying that the Commission committed no grave abuse of
discretion in holding that petitioner was not illegally dismissed and could not
be granted any relief. With his motion for a reconsideration having been
denied by the CA in its resolution of October 5, 2003, petitioner is now with
this Court via the present recourse.
We REVERSE.
At bottom, this case involves the simple issue of the legality of ones
termination from employment made complicated, however, by over
analysis. Simply put, the question at hand pivots on who has the onus of
presenting the necessary medical certificate to justify what would otherwise
be classified as legal or illegal, as the case may be, dismissal from the
service. The following may be another formulation of the issue: For purposes
of Article 284 of the Labor Code, would the dismissal of an employee on the
ground of disease under the said Article 284 still require the employer to
present a certification from a competent public health authority that the
disease is of such a nature that it could not be cured within a period of six
months even with proper medical treatment? To both the NLRC and the CA, a
dismissal on the ground of disease under Article 284 of the Code is illegal

only if the employee himself presents the required certification from the
proper health authority. Since, as in this case, petitioner failed to produce
such certification, his dismissal could not be illegal.
In the precise words of the NLRC which the CA effectively affirmed:
Neither can it be gainsaid that Article 284 of the Labor Code
applies in the instant case since the complainant [petitioner]
failed to establish that he is suffering from a disease and
his continued employment is prohibited by law or
prejudicial to his health or to the health of his co-employees
nor was he able to prove that his illness is of such nature or at
such stage that itcannot be cured within a period of six
months even with proper treatment.[8]
In order for the complainant to be covered by Article 284
of the Labor Code, he must first present a certification by
a competent public health authority that his continued
employment will result in the aforesaid consequences, but
unfortunately for the complainant, we find none in the
instant case. For the respondents to require the complainant to
submit a medical certificate showing that he is already physically
fit as a condition of his continued employment under the
prevailing circumstance cannot be considered as neither harsh
nor oppressive.xxx
Prescinding from the above, there is no illegal dismissal to speak
of. This finding is further strengthened by the fact that no
termination letter or formal notice of dismissal was adduced to
prove
that
complainants
services
have
been
terminated. Considering that no illegal dismissal took place, the
complainants claim that his right to due process of law had been
violated finds no application to the case at bar. (Emphasis
added).
The Court disagrees with the NLRC and CA.
Article 284 of the Labor Code explicitly provides:
Art. 284. DISEASE AS GROUND FOR TERMINATION. -- An employer
may terminate the services of an employee who has been found
to be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as
well as to the health of his co-employees: Provided, That he is
paid separation pay equivalent to at least one (1) month salary or
to one-half (1/2) month salary for every year of service,

whichever is greater, a fraction of at least six (6) months being

considered as one (1) whole year.
Corollarily, in order to validly terminate employment on the basis of disease,
Book VI, Rule I, Section 8 of the Omnibus Implementing Rules of the Labor
Code requires:
Disease as a ground for dismissal. -- Where the employee suffers
from a disease and his continued employment is prohibited by
law or prejudicial to his health or to the health of his coemployees,
the
employer
shall
not
terminate
his
employment unless there is a certification by a competent
public health authority that the disease is of such nature
or at such a stage that it cannot be cured within a period
of six (6) months even with proper medical treatment. If
the disease or ailment can be cured within the period, the
employer shall not terminate the employee but shall ask the
employee to take a leave. The employer shall reinstate such
employee to his former position immediately upon the restoration
of his normal health. (Book VI, Rule 1, Sec. 8 of the Implementing
Rules)
In a very real sense, both the NLRC and the appellate court placed on the
petitioner the burden of establishing, by a certification of a competent public
authority, that his ailment is such that it cannot be cured within a period of
six months even with proper medical treatment. And pursuing their logic,
petitioner could not claim having been illegally dismissed due to
disease, failing, as he did, to present such certification.
To be sure, the NLRCs above posture is, to say the least, without basis in law
and jurisprudence. And when the CA affirmed the NLRC, the appellate court in
effect placed on the petitioner the onus of proving his entitlement to
separation pay and thereby validated herein respondents act of dismissing
him from employment even without proof of existence of a legal ground for
dismissal.
The law is unequivocal: the employer, before it can legally dismiss its
employee on the ground of disease, must adduce a certification from a
competent public authority that the disease of which its employee is suffering
is of such nature or at such a stage that it cannot be cured within a period of
six months even with proper treatment.
Here, the record does not contain the required certification. And when the
respondents asked the petitioner to look for another job because he was unfit
to work, such unilateral declaration, even if backed up by the findings of its

company doctors, did not meet the quantum requirement mandated by the
law, i.e., there must be a certification by a competent public authority.[9]
For sure, the posture taken by both the NLRC and the CA is inconsistent with
this Courts pronouncement in Tan v. National Labor Relations Commission,
[10]
thus:
Consistent with the Labor Code state policy of affording
protection to labor and of liberal construction of labor laws in
favor of the working class, Sec. 8, Rule 1, Book VI, of the Omnibus
Rules Implementing the Labor Code provides Where the
employee suffers from a disease and his continued employment
is prohibited by law or prejudicial to his health or to the health of
his co-employees, the employer shall not terminate his
employment, unless there is a certification by a competent public
authority that the disease is of such nature or at such a stage,
that it cannot be cured within a period of six (6) months even
with proper medical treatment.. There is absolutely nothing
on record to show that such a certification was ever
obtained by [the employer] much less that one was issued
by a competent public authority [o]n the contrary, what
appears on record is a Medical Certificate dated May 5, 1999
issued by Dr. Lenita C. de Castro certifying to the contrary, i.e.,
that [the employee] was in fact already fit to return to
work. However, [the employer] did not accept the certificate and
insisted that [the employee] present one issued by a government
physician. For his failure to present such a certificate, [the
employee] was penalized with dismissal. Obviously, the
condition imposed by [the employer] finds no basis under
the law. To reiterate, contrary to [the employers]
insistence that [the employee] first obtain a medical
certificate attesting that he was already cured of
pulmonary tuberculosis, the abovequoted Sec. 9, Rule 1,
Book VI, of the Omnibus Rules is clear that the burden is
upon [the employer] not [the employee] to justify the
dismissal with a certificate public authority that [the
employees] disease is at such stage or of such nature that
it cannot be cured within six (6) months even with proper
medical treatment. For [the employers] blatant failure to
present one, we can only rule that [the employees]
dismissal, like that of Garrido, is illegal, invalid and
unjustified. (Emphasis and words in brackets supplied.)
In Triple Eight Integrated Services, Inc. v. NLRC,[11] the Court explains why the
submission of the requisite medical certificate is for the employers
compliance, thus:

The requirement for a medical certificate under Article 284 of the

Labor Code cannot be dispensed with; otherwise, it would
sanction the unilateral and arbitrary determination by the
employer of the gravity or extent of the employees illness and
thus defeat the public policy on the protection of labor.
In thus ruling out an illegal dismissal situation in the instant case, the CA
effectively agreed with the NLRCs view that the fact of dismissal must be
evidenced by positive and overt acts, citing Veterans Phil. Scout Security
Agency v. NLRC.[12] Said case, however, is not on all fours with the present
one. In Veterans, the employer offered the complainant-employee a monthly
cash allowance and other benefit pending a new assignment. Therein, the
employee was not forthrightly nor constructively dismissed. In fact, the
employee in Veterans was found to be in bad faith as he filed his complaint
for illegal dismissal the day immediately after he accepted the companys
offer of employment benefits. Hence, the Courts ruling in Veterans that the
fact of dismissal must be evidenced by positive and overt acts indicating the
intention to dismiss. These considerations do not obtain here. Petitioner was
not allowed back to work. Neither did he receive any monetary assistance
from his employer, and, worse, respondents refused to give him the
necessary documents to enable him to claim his SSS benefits.
Much was made by the NLRC and the CA about petitioners refusal to comply
with respondents order to submit a medical certificate irresistibly implying
that such refusal is what constrained them to refuse to take petitioner back
in.
We are not persuaded.
Even assuming, in gratia argumenti, that petitioner committed what may be
considered an act of insubordination for refusing to present a medical
certificate, such offense, without more, certainly did not warrant the latters
placement in a floating status, a veritable dismissal, and deprived of his only
source of livelihood.
We are not unmindful of the connection between the nature of petitioners
disease and his job as a truck/trailer driver. We are also fully aware that
petitioners job places at stake the safety of the public. However, we do not
agree with the NLRC that petitioner was validly dismissed because his
continued employment was prohibited by the basic legal mandate that
reasonable diligence must be exercised to prevent prejudice to the public,
which justified respondents in refusing work to petitioner. Petitioner could
have been admitted back to work performing other tasks, such as cleaning
and maintaining respondent companys machine and transportation assets.

As a final consideration, the Court notes that the NLRC, as sustained by the
CA, considered the petitioner as a field worker and, on that basis, denied his
claim for benefits under Articles 94[13] to 95[14] of the Labor Code, such as
holiday pay and service incentive leave pay. Article 82 of the Code lists
personnel who are not entitled to the benefits aforementioned. [15] Among the
excluded
group
are
field
personnel, referring
to nonagricultural employees who regularly perform their duties away from the
principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty.
As a general proposition, field personnel are those whose job/service are not
or
cannot
be
effectively
monitored
by
the
employer
or his representative, their workplace being away from the principal office
and whose hours and days of work cannot be determined with reasonable
certainty. Field personnel are paid specific amount for rendering specific
service or performing specific work.
If required to be at specific places at specific times, employees, including
drivers, cannot be said to be field personnel despite the fact that they are
performing work away from the principal office of the employer. Thus, to
determine whether an employee is a field employee, it is also necessary to
ascertain if actual hours of work in the field can be determined with
reasonable certainty by the employer. In so doing, an inquiry must be made
as to whether or not the employees time and performance are constantly
supervised by the employer.[16]
Guided by the foregoing norms, petitioner was definitely a regular employee
of respondent company and not its field personnel, as the term is used in the
Labor Code. As it were, he was based at the principal office of the
respondent company. His actual work hours, i.e., from 6:00 a.m. to 6:00 p.m.,
were ascertainable with reasonable
certainty.
He
averaged21 trips per month. And if not driving for the company, he was
paid P125.00 per day for cleaning and maintaining KTCs equipment. Not
falling under the category of field personnel, petitioner is consequently
entitled to both holiday pay and service incentive leave pay, as mandated by
Articles 94 and 95 of the Labor Code.
All told, we rule and so hold that petitioners dismissal did not comply with
both the substantive and procedural aspects of due process. Clearly, his
dismissal is tainted within validity.[17]
WHEREFORE, the assailed decision of
the CA
in CA-G.R.
SP
No.
71729 is REVERSED and SET ASIDE. Respondents are declared guilty of
illegal dismissal and are ordered to pay petitioner separation pay
equivalent to one (1) month pay for every year of service, in lieu of his
reinstatement, plus his full backwages from the time his employment was
terminated up to the time this Decision becomes final. For this purpose, let
this case be REMANDED to the labor arbiter for the computation

of petitioners separation pay, backwages and other monetary awards due

him.
Costs against respondents.
SO ORDERED.
SECOND DIVISION

[G.R. No. 156367. May 16, 2005]

AUTO BUS TRANSPORT SYSTEMS, INC., petitioner, vs. ANTONIO

BAUTISTA, respondent.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari assailing the
Decision[1] and Resolution[2] of the Court of Appeals affirming the Decision [3] of
the National Labor Relations Commission (NLRC). The NLRC ruling modified
the Decision of the Labor Arbiter (finding respondent entitled to the award of
13th month pay and service incentive leave pay) by deleting the award of
13th month pay to respondent.
THE FACTS
Since 24 May 1995, respondent Antonio Bautista has been employed by
petitioner Auto Bus Transport Systems, Inc. (Autobus), as driver-conductor
with travel routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via
Manila and Manila-Tabuk via Baguio. Respondent was paid on commission
basis, seven percent (7%) of the total gross income per travel, on a twice a
month basis.
On 03 January 2000, while respondent was driving Autobus No. 114 along
Sta. Fe, Nueva Vizcaya, the bus he was driving accidentally bumped the rear
portion of Autobus No. 124, as the latter vehicle suddenly stopped at a sharp
curve without giving any warning.
Respondent averred that the accident happened because he was
compelled by the management to go back to Roxas, Isabela, although he had
not slept for almost twenty-four (24) hours, as he had just arrived in Manila
from Roxas, Isabela. Respondent further alleged that he was not allowed to

work until he fully paid the amount of P75,551.50, representing thirty percent
(30%) of the cost of repair of the damaged buses and that despite
respondents pleas for reconsideration, the same was ignored by
management. After a month, management sent him a letter of termination.
Thus, on 02 February 2000, respondent instituted a Complaint for Illegal
Dismissal with Money Claims for nonpayment of 13 th month pay and service
incentive leave pay against Autobus.
Petitioner, on the other hand, maintained that respondents employment
was replete with offenses involving reckless imprudence, gross negligence,
and dishonesty. To support its claim, petitioner presented copies of letters,
memos, irregularity reports, and warrants of arrest pertaining to several
incidents wherein respondent was involved.
Furthermore, petitioner avers that in the exercise of its management
prerogative, respondents employment was terminated only after the latter
was provided with an opportunity to explain his side regarding the accident
on 03 January 2000.
On 29 September 2000, based on the pleadings and supporting evidence
presented by the parties, Labor Arbiter Monroe C. Tabingan promulgated a
Decision,[4] the dispositive portion of which reads:
WHEREFORE, all premises considered, it is hereby found that the complaint
for Illegal Dismissal has no leg to stand on. It is hereby ordered DISMISSED,
as it is hereby DISMISSED.
However, still based on the above-discussed premises, the respondent must
pay to the complainant the following:
a. his 13th month pay from the date of his hiring to the date of his
dismissal, presently computed at P78,117.87;
b. his service incentive leave pay for all the years he had been in
service with the respondent, presently computed at
P13,788.05.
All other claims of both complainant and respondent are hereby dismissed for
lack of merit.[5]
Not satisfied with the decision of the Labor Arbiter, petitioner appealed
the decision to the NLRC which rendered its decision on 28 September 2001,
the decretal portion of which reads:
[T]he Rules and Regulations Implementing Presidential Decree No. 851,
particularly Sec. 3 provides:

Section 3. Employers covered. The Decree shall apply to all employers except
to:
xxx xxx xxx
e) employers of those who are paid on purely commission, boundary, or task
basis, performing a specific work, irrespective of the time consumed in the
performance thereof. xxx.
Records show that complainant, in his position paper, admitted that he was
paid on a commission basis.
In view of the foregoing, we deem it just and equitable to modify the assailed
Decision by deleting the award of 13th month pay to the complainant.
WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting
the award of 13th month pay. The other findings are AFFIRMED.[6]
In other words, the award of service incentive leave pay was maintained.
Petitioner thus sought a reconsideration of this aspect, which was
subsequently denied in a Resolution by the NLRC dated 31 October 2001.
Displeased with only the partial grant of its appeal to the NLRC, petitioner
sought the review of said decision with the Court of Appeals which was
subsequently denied by the appellate court in a Decision dated 06 May 2002,
the dispositive portion of which reads:
WHEREFORE, premises considered, the Petition is DISMISSED for lack of
merit; and the assailed Decision of respondent Commission in NLRC NCR CA
No. 026584-2000 is hereby AFFIRMED in toto. No costs.[7]
Hence, the instant petition.
ISSUES
1. Whether or not respondent is entitled to service incentive leave;
2. Whether or not the three (3)-year prescriptive period provided under
Article 291 of the Labor Code, as amended, is applicable to
respondents claim of service incentive leave pay.
RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation
of Article 95 of the Labor Code vis--vis Section 1(D), Rule V, Book III of the
Implementing Rules and Regulations of the Labor Code which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service
shall be entitled to a yearly service incentive leave of five days
with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage. This rule shall apply to all employees except:
(d) Field personnel and other employees whose performance is
unsupervised by the employer including those who are engaged on
task or contract basis, purely commission basis, or those who are
paid in a fixed amount for performing work irrespective of the time
consumed in the performance thereof; . . .
A careful perusal of said provisions of law will result in the conclusion that
the grant of service incentive leave has been delimited by the Implementing
Rules and Regulations of the Labor Code to apply only to those employees
not explicitly excluded by Section 1 of Rule V. According to the Implementing
Rules, Service Incentive Leave shall not apply to employees classified as field
personnel. The phrase other employees whose performance is unsupervised
by the employer must not be understood as a separate classification of
employees to which service incentive leave shall not be granted. Rather, it
serves as an amplification of the interpretation of the definition of field
personnel under the Labor Code as those whose actual hours of work in the
field cannot be determined with reasonable certainty.[8]
The same is true with respect to the phrase those who are engaged on
task or contract basis, purely commission basis. Said phrase should be
related with field personnel, applying the rule on ejusdem generis that
general and unlimited terms are restrained and limited by the particular
terms that they follow.[9] Hence, employees engaged on task or contract basis
or paid on purely commission basis are not automatically exempted from the
grant of service incentive leave, unless, they fall under the classification of
field personnel.
Therefore, petitioners contention that respondent is not entitled to the
grant of service incentive leave just because he was paid on purely
commission basis is misplaced. What must be ascertained in order to resolve
the issue of propriety of the grant of service incentive leave to respondent is
whether or not he is a field personnel.

According to Article 82 of the Labor Code, field personnel shall refer to

non-agricultural employees who regularly perform their duties away from the
principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty.
This definition is further elaborated in the Bureau of Working Conditions
(BWC), Advisory Opinion to Philippine Technical-Clerical Commercial
Employees Association[10] which states that:
As a general rule, [field personnel] are those whose performance of their
job/service is not supervised by the employer or his representative, the
workplace being away from the principal office and whose hours and days of
work cannot be determined with reasonable certainty; hence, they are paid
specific amount for rendering specific service or performing specific work. If
required to be at specific places at specific times, employees including
drivers cannot be said to be field personnel despite the fact that they are
performing work away from the principal office of the employee. [Emphasis
ours]
To this discussion by the BWC, the petitioner differs and postulates that
under said advisory opinion, no employee would ever be considered a field
personnel because every employer, in one way or another, exercises control
over his employees. Petitioner further argues that the only criterion that
should be considered is the nature of work of the employee in that, if the
employees job requires that he works away from the principal office like that
of a messenger or a bus driver, then he is inevitably a field personnel.
We are not persuaded. At this point, it is necessary to stress that the
definition of a field personnel is not merely concerned with the location where
the employee regularly performs his duties but also with the fact that the
employees performance is unsupervised by the employer. As discussed
above, field personnel are those who regularly perform their duties away
from the principal place of business of the employer and whose actual hours
of work in the field cannot be determined with reasonable certainty. Thus, in
order to conclude whether an employee is a field employee, it is also
necessary to ascertain if actual hours of work in the field can be determined
with reasonable certainty by the employer. In so doing, an inquiry must be
made as to whether or not the employees time and performance are
constantly supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of
Appeals:
It is of judicial notice that along the routes that are plied by these bus
companies, there are its inspectors assigned at strategic places who board
the bus and inspect the passengers, the punched tickets, and the conductors
reports. There is also the mandatory once-a-week car barn or shop day,
where the bus is regularly checked as to its mechanical, electrical, and

hydraulic aspects, whether or not there are problems thereon as reported by

the driver and/or conductor. They too, must be at specific place as [sic]
specified time, as they generally observe prompt departure and arrival from
their point of origin to their point of destination. In each and every depot,
there is always the Dispatcher whose function is precisely to see to it that the
bus and its crew leave the premises at specific times and arrive at the
estimated proper time. These, are present in the case at bar. The driver, the
complainant herein, was therefore under constant supervision while in the
performance of this work. He cannot be considered a field personnel. [11]
We agree in the above disquisition. Therefore, as correctly concluded by
the appellate court, respondent is not a field personnel but a regular
employee who performs tasks usually necessary and desirable to the usual
trade of petitioners business. Accordingly, respondent is entitled to the grant
of service incentive leave.
The question now that must be addressed is up to what amount of service
incentive leave pay respondent is entitled to.
The response to this query inevitably leads us to the correlative issue of
whether or not the three (3)-year prescriptive period under Article 291 of the
Labor Code is applicable to respondents claim of service incentive leave pay.
Article 291 of the Labor Code states that all money claims arising from
employer-employee relationship shall be filed within three (3) years from the
time the cause of action accrued; otherwise, they shall be forever barred.
In the application of this section of the Labor Code, the pivotal question to
be answered is when does the cause of action for money claims accrue in
order to determine the reckoning date of the three-year prescriptive period.
It is settled jurisprudence that a cause of action has three elements, to
wit, (1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of the
named defendant to respect or not to violate such right; and (3) an act or
omission on the part of such defendant violative of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the plaintiff.[12]
To properly construe Article 291 of the Labor Code, it is essential to
ascertain the time when the third element of a cause of action transpired.
Stated differently, in the computation of the three-year prescriptive period, a
determination must be made as to the period when the act constituting a
violation of the workers right to the benefits being claimed was committed.
For if the cause of action accrued more than three (3) years before the filing
of the money claim, said cause of action has already prescribed in
accordance with Article 291.[13]
Consequently, in cases of nonpayment of allowances and other monetary
benefits, if it is established that the benefits being claimed have been

withheld from the employee for a period longer than three (3) years, the
amount pertaining to the period beyond the three-year prescriptive period is
therefore barred by prescription. The amount that can only be demanded by
the aggrieved employee shall be limited to the amount of the benefits
withheld within three (3) years before the filing of the complaint.[14]
It is essential at this point, however, to recognize that the service
incentive leave is a curious animal in relation to other benefits granted by the
law to every employee. In the case of service incentive leave, the employee
may choose to either use his leave credits or commute it to its monetary
equivalent if not exhausted at the end of the year. [15] Furthermore, if the
employee entitled to service incentive leave does not use or commute the
same, he is entitled upon his resignation or separation from work to the
commutation of his accrued service incentive leave. As enunciated by the
Court in Fernandez v. NLRC:[16]
The clear policy of the Labor Code is to grant service incentive leave pay to
workers in all establishments, subject to a few exceptions. Section 2, Rule V,
Book III of the Implementing Rules and Regulations provides that [e]very
employee who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay. Service incentive leave is
a right which accrues to every employee who has served within 12 months,
whether continuous or broken reckoned from the date the employee started
working, including authorized absences and paid regular holidays unless the
working days in the establishment as a matter of practice or policy, or that
provided in the employment contracts, is less than 12 months, in which case
said period shall be considered as one year. It is also commutable to its
money equivalent if not used or exhausted at the end of the year. In other
words, an employee who has served for one year is entitled to it. He may use
it as leave days or he may collect its monetary value. To limit the award to
three years, as the solicitor general recommends, is to unduly restrict such
right.[17] [Italics supplied]
Correspondingly, it can be conscientiously deduced that the cause of
action of an entitled employee to claim his service incentive leave pay
accrues from the moment the employer refuses to remunerate its monetary
equivalent if the employee did not make use of said leave credits but instead
chose to avail of its commutation. Accordingly, if the employee wishes to
accumulate his leave credits and opts for its commutation upon his
resignation or separation from employment, his cause of action to claim the
whole amount of his accumulated service incentive leave shall arise when the
employer fails to pay such amount at the time of his resignation or
separation from employment.
Applying Article 291 of the Labor Code in light of this peculiarity of the
service incentive leave, we can conclude that the three (3)-year prescriptive
period commences, not at the end of the year when the employee becomes

entitled to the commutation of his service incentive leave, but from the time
when the employer refuses to pay its monetary equivalent after demand of
commutation or upon termination of the employees services, as the case
may be.
The above construal of Art. 291, vis--vis the rules on service incentive
leave, is in keeping with the rudimentary principle that in the implementation
and interpretation of the provisions of the Labor Code and its implementing
regulations, the workingmans welfare should be the primordial and
paramount consideration.[18] The policy is to extend the applicability of the
decree to a greater number of employees who can avail of the benefits under
the law, which is in consonance with the avowed policy of the State to give
maximum aid and protection to labor.[19]
In the case at bar, respondent had not made use of his service incentive
leave nor demanded for its commutation until his employment was
terminated by petitioner. Neither did petitioner compensate his accumulated
service incentive leave pay at the time of his dismissal. It was only upon his
filing of a complaint for illegal dismissal, one month from the time of his
dismissal, that respondent demanded from his former employer commutation
of his accumulated leave credits. His cause of action to claim the payment of
his accumulated service incentive leave thus accrued from the time when his
employer dismissed him and failed to pay his accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for service
incentive leave pay only commenced from the time the employer failed to
compensate his accumulated service incentive leave pay at the time of his
dismissal. Since respondent had filed his money claim after only one month
from the time of his dismissal, necessarily, his money claim was filed within
the prescriptive period provided for by Article 291 of the Labor Code.
WHEREFORE, premises considered, the instant petition is hereby
DENIED. The assailed Decision of the Court of Appeals in CA-G.R. SP. No.
68395
is
hereby
AFFIRMED.
No
Costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION
G.R. No. 78210 February 28, 1989
TEOFILO ARICA, DANILO BERNABE, MELQUIADES DOHINO, ABONDIO
OMERTA, GIL TANGIHAN, SAMUEL LABAJO, NESTOR NORBE, RODOLFO
CONCEPCION, RICARDO RICHA, RODOLFO NENO, ALBERTO BALATRO,
BENJAMIN JUMAMOY, FERMIN DAAROL, JOVENAL ENRIQUEZ, OSCAR
BASAL, RAMON ACENA, JAIME BUGTAY, and 561 OTHERS, HEREIN
REPRESENTED BY KORONADO B. APUZEN, petitioners
vs.
NATIONAL LABOR RELATIONS COMMISSION, HONORABLE FRANKLIN
DRILON, HONORABLE CONRADO B. MAGLAYA, HONORABLE ROSARIO
B. ENCARNACION, and STANDARD (PHILIPPINES) FRUIT
CORPORATION, respondents.
Koronado B. Apuzen and Jose C. Espinas for petitioners.
The Solicitor General for public respondent.
Dominguez & Paderna Law Offices Co. for private respondent.

PARAS, J.:
This is a petition for review on certiorari of the decision of the National Labor
Relations Commission dated December 12, 1986 in NLRC Case No. 2327 MCXI-84 entitled Teofilo Arica et al. vs. Standard (Phil.) Fruits Corporation
(STANFILCO) which affirmed the decision of Labor Arbiter Pedro C. Ramos,
NLRC, Special Task Force, Regional Arbitration Branch No. XI, Davao City
dismissing the claim of petitioners.
This case stemmed from a complaint filed on April 9, 1984 against private
respondent Stanfilco for assembly time, moral damages and attorney's fees,
with the aforementioned Regional Arbitration Branch No. XI, Davao City.
After the submission by the parties of their respective position papers (Annex
"C", pp. 30-40; Annex "D", Rollo, pp. 41-50), Labor Arbiter Pedro C. Ramos
rendered a decision dated October 9, 1985 (Annex 'E', Rollo, pp. 51-58) in
favor of private respondent STANFILCO, holding that:

Given these facts and circumstances, we cannot but agree with

respondent that the pronouncement in that earlier case, i.e. the
thirty-minute assembly time long practiced cannot be considered
waiting time or work time and, therefore, not compensable, has
become the law of the case which can no longer be disturbed
without doing violence to the time- honored principle of resjudicata.
WHEREFORE, in view of the foregoing considerations, the instant
complaint should therefore be, as it is hereby, DISMISSED.
SO ORDERED. (Rollo, p. 58)
On December 12, 1986, after considering the appeal memorandum of
complainant and the opposition of respondents, the First Division of public
respondent NLRC composed of Acting Presiding Commissioner Franklin Drilon,
Commissioner Conrado Maglaya, Commissioner Rosario D. Encarnacion as
Members, promulgated its Resolution, upholding the Labor Arbiters' decision.
The Resolution's dispositive portion reads:
'Surely, the customary functions referred to in the above- quoted
provision of the agreement includes the long-standing practice
and institutionalized non-compensable assembly time. This, in
effect, estopped complainants from pursuing this case.
The Commission cannot ignore these hard facts, and we are
constrained to uphold the dismissal and closure of the case.
WHEREFORE, let the appeal be, as it is hereby dismissed, for lack
of merit.
SO ORDERED. (Annex "H", Rollo, pp. 86-89).
On January 15, 1987, petitioners filed a Motion for Reconsideration which was
opposed by private respondent (Annex "I", Rollo, pp. 90-91; Annex J Rollo, pp.
92-96).
Public respondent NLRC, on January 30, 1987, issued a resolution denying for
lack of merit petitioners' motion for reconsideration (Annex "K", Rollo, p. 97).
Hence this petition for review on certiorari filed on May 7, 1987.

The Court in the resolution of May 4, 1988 gave due course to this petition.
Petitioners assign the following issues:
1) Whether or not the 30-minute activity of the petitioners before
the scheduled working time is compensable under the Labor
Code.
2) Whether or not res judicata applies when the facts obtaining in
the prior case and in the case at bar are significantly different
from each other in that there is merit in the case at bar.
3) Whether or not there is finality in the decision of Secretary
Ople in view of the compromise agreement novating it and the
withdrawal of the appeal.
4) Whether or not estoppel and laches lie in decisions for the
enforcement of labor standards (Rollo, p. 10).
Petitioners contend that the preliminary activities as workers of respondents
STANFILCO in the assembly area is compensable as working time (from 5:30
to 6:00 o'clock in the morning) since these preliminary activities are
necessarily and primarily for private respondent's benefit.
These preliminary activities of the workers are as follows:
(a) First there is the roll call. This is followed by getting their
individual work assignments from the foreman.
(b) Thereafter, they are individually required to accomplish the
Laborer's Daily Accomplishment Report during which they are
often made to explain about their reported accomplishment the
following day.
(c) Then they go to the stockroom to get the working materials,
tools and equipment.
(d) Lastly, they travel to the field bringing with them their tools,
equipment and materials.
All these activities take 30 minutes to accomplish (Rollo, Petition, p. 11).

Contrary to this contention, respondent avers that the instant complaint is

not new, the very same claim having been brought against herein respondent
by the same group of rank and file employees in the case of Associated Labor
Union and Standard Fruit Corporation, NLRC Case No. 26-LS-XI-76 which was
filed way back April 27, 1976 when ALU was the bargaining agent of
respondent's rank and file workers. The said case involved a claim for
"waiting time", as the complainants purportedly were required to assemble at
a designated area at least 30 minutes prior to the start of their scheduled
working hours "to ascertain the work force available for the day by means of
a roll call, for the purpose of assignment or reassignment of employees to
such areas in the plantation where they are most needed." (Rollo, pp. 64- 65)
Noteworthy is the decision of the Minister of Labor, on May 12, 1978 in the
aforecited case (Associated Labor Union vs. Standard (Phil.) Fruit Corporation,
NLRC Case No. 26-LS-XI-76 where significant findings of facts and conclusions
had already been made on the matter.
The Minister of Labor held:
The thirty (30)-minute assembly time long practiced and
institutionalized by mutual consent of the parties under Article IV,
Section 3, of the Collective Bargaining Agreement cannot be
considered as waiting time within the purview of Section 5, Rule I,
Book III of the Rules and Regulations Implementing the Labor
Code. ...
Furthermore, the thirty (30)-minute assembly is a deeply- rooted,
routinary practice of the employees, and the proceedings
attendant thereto are not infected with complexities as to deprive
the workers the time to attend to other personal pursuits. They
are not new employees as to require the company to deliver long
briefings regarding their respective work assignments. Their
houses are situated right on the area where the farm are located,
such that after the roll call, which does not necessarily require
the personal presence, they can go back to their houses to attend
to some chores. In short, they are not subject to the absolute
control of the company during this period, otherwise, their failure
to report in the assembly time would justify the company to
impose disciplinary measures. The CBA does not contain any
provision to this effect; the record is also bare of any proof on this
point. This, therefore, demonstrates the indubitable fact that the

thirty (30)-minute assembly time was not primarily intended for

the interests of the employer, but ultimately for the employees to
indicate their availability or non-availability for work during every
working day. (Annex "E", Rollo, p. 57).
Accordingly, the issues are reduced to the sole question as to whether public
respondent National Labor Relations Commission committed a grave abuse of
discretion in its resolution of December 17, 1986.
The facts on which this decision was predicated continue to be the facts of
the case in this questioned resolution of the National Labor Relations
Commission.
It is clear that herein petitioners are merely reiterating the very same claim
which they filed through the ALU and which records show had already long
been considered terminated and closed by this Court in G.R. No. L-48510.
Therefore, the NLRC can not be faulted for ruling that petitioners' claim is
already barred by res-judicata.
Be that as it may, petitioners' claim that there was a change in the factual
scenario which are "substantial changes in the facts" makes respondent firm
now liable for the same claim they earlier filed against respondent which was
dismissed. It is thus axiomatic that the non-compensability of the claim
having been earlier established, constitute the controlling legal rule or
decision between the parties and remains to be the law of the case making
this petition without merit.
As aptly observed by the Solicitor General that this petition is "clearly
violative of the familiar principle of res judicata. There will be no end to this
controversy if the light of the Minister of Labor's decision dated May 12, 1979
that had long acquired the character of finality and which already resolved
that petitioners' thirty (30)-minute assembly time is not compensable, the
same issue can be re-litigated again." (Rollo, p. 183)
This Court has held:
In this connection account should be taken of the cognate
principle that res judicata operates to bar not only the relitigation
in a subsequent action of the issues squarely raised, passed upon
and adjudicated in the first suit, but also the ventilation in said
subsequent suit of any other issue which could have been raised

in the first but was not. The law provides that 'the judgment or
order is, with respect to the matter directly adjudged or as to any
other matter that could have been raised in relation thereto,
conclusive between the parties and their successors in interest
by title subsequent to the commencement of the action ..
litigating for the same thing and in the same capacity.' So, even if
new causes of action are asserted in the second action (e.g.
fraud, deceit, undue machinations in connection with their
execution of the convenio de transaccion), this would not
preclude the operation of the doctrine of res judicata. Those
issues are also barred, even if not passed upon in the first. They
could have been, but were not, there raised. (Vda. de Buncio v.
Estate of the late Anita de Leon, 156 SCRA 352 [1987]).
Moreover, as a rule, the findings of facts of quasi-judicial agencies which
have acquired expertise because their jurisdiction is confined to specific
matters are accorded not only respect but at times even finality if such
findings are supported by substantial evidence (Special Events & Central
Shipping Office Workers Union v. San Miguel Corporation, 122 SCRA 557
[1983]; Dangan v. NLRC, 127 SCRA 706 [1984]; Phil. Labor Alliance Council v.
Bureau of Labor Relations, 75 SCRA 162 [1977]; Mamerto v. Inciong, 118
SCRA 265 (1982]; National Federation of Labor Union (NAFLU) v. Ople, 143
SCRA 124 [1986]; Edi-Staff Builders International, Inc. v. Leogardo, Jr., 152
SCRA 453 [1987]; Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219
[1987]).
The records show that the Labor Arbiters' decision dated October 9, 1985
(Annex "E", Petition) pointed out in detail the basis of his findings and
conclusions, and no cogent reason can be found to disturb these findings nor
of those of the National Labor Relations Commission which affirmed the
same.
PREMISES CONSIDERED, the petition is DISMISSED for lack of merit and the
decision of the National Labor Relations Commission is AFFIRMED.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla and Regalado, JJ., concur.

Separate Opinions
SARMIENTO, J., Dissenting:
It is my opinion that res judicata is not a bar.
The decision penned by then Minister Blas Ople in ALU v. STANFILCO (NLRC
Case No. 26-LS-XI-76) relied upon by the respondents as basis for claims
of res judicata, is not, to my mind, a controlling precedent. In that case, it
was held that the thirty-minute "waiting time" complained of was a mere
"assembly time" and not a waiting time as the term is known in law, and
hence, a compensable hour of work. Thus:
The thirty (30)-minute assembly time long practiced and
institutionalized by mutual consent of the parties under Article IV,
Section 3, of the Collective Bargaining Agreement cannot be
considered as 'waiting time' within the purview of Section 5, Rule
1, Book III of the Rules and Regulations Implementing the Labor
Code. ...
Furthermore, the thirty (30)-minute assembly is a deeply- rooted,
routinary practice of the employees, and the proceedings
attendant thereto are not infected with complexities as to deprive
the workers the time to attend to other personal pursuits. They
are not new employees as to require the company to deliver long
briefings regarding their respective work assignments. Their
houses are situated right on the area where the farms are
located, such that after the roll call, which does not necessarily
require the personal presence, they can go back to their houses
to attend to some chores.
In short, they are not subject to the absolute control of the
company during this period, otherwise, their failure to report in
the assembly time would justify the company to impose
disciplinary measures. The CBA does not contain any provision to
this effect; the record is also bare of any proof on this point. This,
therefore, demonstrates the indubitable fact that the thirty (30)minute assembly time was not primarily intended for the
interests of the employer, but ultimately for the employees to
indicate their availability or non-availability for work during every
working day. (Decision, 6.)

Precisely, it is the petitioners' contention that the assembly time in question

had since undergone dramatic changes, thus:
(a) First there is the roll call. This is followed by getting their
individual work assignments from the foreman.
(b) Thereafter,they are individually required to accomplish the
Laborer's Daily Accomplishment Report during which they are
often made to explain about their reported accomplishment the
following day.
(c) Then they go to the stockroom to get the working materials,
tools and equipment.
(d) Lastly, they travel to the field bringing with them their tools,
equipment and materials. (Supra, 4-5.)
The petitioners have vehemently maintained that in view thereof, the instant
case should be distinguished from the first case. And I do not believe that the
respondents have successfully rebutted these allegations. The Solicitor
General relies solely on the decision of then Minister Ople, the decision the
petitioners precisely reject in view of the changes in the conditions of the
parties. The private respondent on the other hand insists that these practices
were the same practices taken into account in ALU v. STANFILCO. If this were
so, the Ople decision was silent thereon.
It is evident that the Ople decision was predicated on the absence of any
insinuation of obligatoriness in the course or after the assembly activities on
the part of the employees.(" . . [T]hey are not subject to the absolute control
of the company during this period, otherwise, their failure to report in the
assembly time would justify the company to impose disciplinary
measures;" supra, 6.) As indicated, however, by the petitioners, things had
since changed, and remarkably so, and the latter had since been placed
under a number of restrictions. My considered opinion is that the thirtyminute assembly time had become, in truth and fact, a "waiting time" as
contemplated by the Labor Code.
I vote, then, to grant the petition.

SECOND DIVISION

FAR
EAST
AGRICULTURAL G.R. No. 162813
SUPPLY,
INC.
and/or
ALEXANDER UY,
Present:
Petitioners,
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
- versus -

TINGA, and
VELASCO, JR., JJ.

JIMMY LEBATIQUE and THE Promulgated:

HONORABLE
COURT
OF
APPEALS,
Respondents.

February 12, 2007

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

DECISION

QUISUMBING, J.:
Before us is a petition for review on certiorari assailing the
Decision[1] dated September 30, 2003 of the Court of Appeals in CA-G.R. SP
No. 76196 and its Resolution[2] datedMarch 15, 2004 denying the motion
for reconsideration. The
appellate
court
had
reversed
the
[3]
Decision dated October 15, 2002 of the National Labor Relations
Commission (NLRC) setting aside the Decision [4] dated June 27, 2001 of the
Labor Arbiter.
Petitioner Far East Agricultural Supply, Inc. (Far East) hired on March 4, 1996
private respondent Jimmy Lebatique as truck driver with a daily wage
of P223.50. He delivered animal feeds to the companys clients.
On January 24, 2000, Lebatique complained of nonpayment of overtime work
particularly on January 22, 2000, when he was required to make a second
delivery in Novaliches,Quezon City. That same day, Manuel Uy, brother of Far
Easts
General
Manager
and
petitioner
Alexander
Uy,
suspended Lebatique apparently for illegal use of company vehicle.Even
so, Lebatique reported for work the next day but he was prohibited from
entering the company premises.
On January 26, 2000, Lebatique sought the assistance of the Department of
Labor and Employment (DOLE) Public Assistance and Complaints Unit
concerning the nonpayment of his overtime pay. According to Lebatique, two
days later, he received a telegram from petitioners requiring him to report for
work. When he did the next day, January 29, 2000, Alexander asked him why
he was claiming overtime pay. Lebatique explained that he had never been
paid for overtime work since he started working for the company. He also told
Alexander that Manuel had fired him. After talking to Manuel, Alexander
terminated Lebatique and told him to look for another job.
On March 20, 2000, Lebatique filed a complaint for illegal dismissal and
nonpayment of overtime pay. The Labor Arbiter found that Lebatique was
illegally dismissed, and ordered his reinstatement and the payment of his full

back wages, 13th month pay, service incentive leave pay, and overtime
pay. The dispositive portion of the decision is quoted herein in full, as follows:
WHEREFORE, we find the termination of complainant
illegal. He should thus be ordered reinstated with full
backwages. He is likewise ordered paid his 13 th month pay,
service incentive leave pay and overtime pay as computed by the
Computation
and
Examination
Unit
as
follows:
a) Backwages:
01/25/00 - 10/31/00 = 9.23 mos.
P 223.50 x 26 x 9.23 = P 53,635.53
11/01/00 06/26/01 = 7.86 mos.
P 250.00 x 26 x 7.86 = 51,090.00 P 104,725.53
13th Month Pay: 1/12 of P 104,725.53 = 8,727.13
Service Incentive Leave Pay
01/25/00 10/31/00 = 9.23 mos.
P 223.50 x 5/12 x 9.23 = P 859.54
11/01/00 06/26/01 = 7.86 mos.
P 250.00 x 5/12 x 7.86 = [818.75] 1,678.29 115,130.95

b) Overtime Pay: (3 hours/day)

03/20/97 4/30/97 = 1.36 mos.
P 180/8 x 1.25 x 3 x 26 x 1.36 = P 2,983.50
05/01/97 02/05/98 = 9.16 mos.
P 185/8 x 1.25 x 3 x 26 x 9.16 = 20,652.94
02/06/98 10/30/99 = 20.83 mos.
P 198/8 x 1.25 x 3 x 26 x [20.83] = 50,265.39

10/31/99 01/24/00 = 2.80 mos.

P 223.50/8 x 1.25 x 3 x 26 x 2.80 = 7,626.94 81,528.77
TOTAL AWARD P 196,659.72
SO ORDERED.[5]
On appeal, the NLRC reversed the Labor Arbiter and dismissed the complaint
for lack of merit. The NLRC held that there was no dismissal to speak of
since Lebatique was
merely
suspended. Further,
it
found
that Lebatique was a field personnel, hence, not entitled to overtime pay and
service incentive leave pay. Lebatique sought reconsideration but was
denied.
Aggrieved, Lebatique filed a petition for certiorari with the Court of Appeals.
The Court of Appeals, in reversing the NLRC decision, reasoned
that Lebatique was suspended on January 24, 2000 but was illegally
dismissed on January 29, 2000when Alexander told him to look for another
job. It also found that Lebatique was not a field personnel and therefore
entitled to payment of overtime pay, service incentive leave pay, and
13th month pay.
It reinstated the decision of the Labor Arbiter as follows:
WHEREFORE, premises considered, the decision of the
NLRC dated 27 December 2002 is hereby REVERSED and the
Labor Arbiters decision dated 27 June 2001 REINSTATED.
SO ORDERED.[6]
Petitioners moved for reconsideration but it was denied.
Hence, the instant petition wherein petitioners assign the following errors:
THE COURT OF APPEALS ERRED IN REVERSING THE DECISION
OF THE NATIONAL LABOR RELATIONS COMMISSION DATED 15
OCTOBER 2002 AND IN RULING THAT THE PRIVATE
RESPONDENT WAS ILLEGALLY DISMISSED.

THE COURT OF APPEALS ERRED IN REVERSING THE DECISION

OF THE NATIONAL LABOR RELATIONS COMMISSION DATED 15
OCTOBER 2002 AND IN RULING THAT PRIVATE RESPONDENT IS
NOT A FIELD PERSONNEL AND THER[E]FORE ENTITLED TO
OVERTIME PAY AND SERVICE INCENTIVE LEAVE PAY.
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE
PETITION FOR CERTIORARI FOR FAILURE OF PRIVATE
RESPONDENT TO ATTACH CERTIFIED TRUE COPIES OF THE
QUESTIONED DECISION AND RESOLUTION OF THE PUBLIC
RESPONDENT.[7]
Simply stated, the principal issues in this case are: (1) whether Lebatique was
illegally dismissed; and (2) whether Lebatique was a field personnel, not
entitled to overtime pay.
Petitioners contend that, (1) Lebatique was not dismissed from service
but merely suspended for a day due to violation of company rules;
(2) Lebatique was not barred from entering the company premises since he
never reported back to work; and (3) Lebatique is estopped from claiming
that he was illegally dismissed since his complaint before the DOLE was only
on the nonpayment of his overtime pay.
Also, petitioners maintain that Lebatique, as a driver, is not entitled to
overtime pay since he is a field personnel whose time outside the company
premises cannot be determined with reasonable certainty. According to
petitioners, the drivers do not observe regular working hours unlike the other
office employees. The drivers may report early in the morning to make their
deliveries or in the afternoon, depending on the production of animal feeds
and the traffic conditions. Petitioners also aver that Lebatique worked for less
than eight hours a day.[8]
Lebatique for his part insists that he was illegally dismissed and was not
merely suspended. He argues that he neither refused to work nor abandoned
his job. He further contends that abandonment of work is inconsistent with
the filing of a complaint for illegal dismissal. He also claims that he is not a
field personnel, thus, he is entitled to overtime pay and service incentive
leave pay.

After consideration of the submission of the parties, we find that the petition
lacks merit. We are in agreement with the decision of the Court of Appeals
sustaining that of the Labor Arbiter.
It is well settled that in cases of illegal dismissal, the burden is on the
employer to prove that the termination was for a valid cause. [9] In this case,
petitioners
failed
to
discharge
such
burden. Petitioners
aver
that Lebatique was merely suspended for one day but he abandoned his work
thereafter. To constitute abandonment as a just cause for dismissal, there
must be: (a) absence without justifiable reason; and (b) a clear intention, as
manifested by some overt act, to sever the employer-employee relationship.
[10]

The records show that petitioners failed to prove that Lebatique abandoned
his job. Nor was there a showing of a clear intention on the part
of Lebatique to
sever
the
employer-employee
relationship. When Lebatique was verbally told by Alexander Uy, the
companys General Manager, to look for another job, Lebatique was in effect
dismissed. Even assuming earlier he was merely suspended for illegal use of
company vehicle, the records do not show that he was afforded the
opportunity to explain his side. It is clear also from the sequence of the
events leading to Lebatiques dismissal that it was Lebatiques complaint for
nonpayment of his overtime pay that provoked the management to dismiss
him, on the erroneous premise that a truck driver is a field personnel not
entitled to overtime pay.
An employee who takes steps to protest his layoff cannot by any stretch of
imagination be said to have abandoned his work and the filing of the
complaint is proof enough of his desire to return to work, thus negating any
suggestion of abandonment.[11] A contrary notion would not only be illogical
but also absurd.
It is immaterial that Lebatique had filed a complaint for nonpayment of
overtime pay the day he was suspended by managements unilateral
act. What matters is that he filed the complaint for illegal dismissal on March
20, 2000, after he was told not to report for work, and his filing was well
within the prescriptive period allowed under the law.
On the second issue, Article 82 of the Labor Code is decisive on the question
of who are referred to by the term field personnel. It provides, as follows:

ART. 82. Coverage. - The provisions of this title [Working

Conditions and Rest Periods] shall apply to employees in all
establishments and undertakings whether for profit or not, but
not to government employees, managerial employees, field
personnel, members of the family of the employer who are
dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results
as determined by the Secretary of Labor in appropriate
regulations.
xxxx
Field personnel shall refer to non-agricultural employees who
regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours
of work in the field cannot be determined with reasonable
certainty.
In Auto Bus Transport Systems, Inc. v. Bautista, [12] this Court emphasized that
the definition of a field personnel is not merely concerned with the location
where the employee regularly performs his duties but also with the fact that
the employees performance is unsupervised by the employer. We held that
field personnel are those who regularly perform their duties away from the
principal place of business of the employer and whose actual hours of work in
the field cannot be determined with reasonable certainty. Thus, in order to
determine whether an employee is a field employee, it is also necessary to
ascertain if actual hours of work in the field can be determined with
reasonable certainty by the employer. In so doing, an inquiry must be made
as to whether or not the employees time and performance are constantly
supervised by the employer.[13]
As correctly found by the Court of Appeals, Lebatique is not a field personnel
as defined above for the following reasons: (1) company drivers,
including Lebatique, are directed to deliver the goods at a specified time and
place; (2) they are not given the discretion to solicit, select and contact
prospective clients; and (3) Far East issued a directive that company drivers
should stay at the clients premises during truck-ban hours which is from 5:00
to 9:00 a.m. and 5:00 to 9:00 p.m. [14] Even petitioners admit that the drivers
can report early in the morning, to make their deliveries, or in the afternoon,
depending on the production of animal feeds. [15] Drivers, like Lebatique, are

under the control and supervision of management officers. Lebatique,

therefore, is a regular employee whose tasks are usually necessary and
desirable to the usual trade and business of the company.Thus, he is entitled
to the benefits accorded to regular employees of Far East, including overtime
pay and service incentive leave pay.
Note that all money claims arising from an employer-employee relationship
shall be filed within three years from the time the cause of action accrued;
otherwise, they shall be forever barred. [16] Further, if it is established that the
benefits being claimed have been withheld from the employee for a period
longer than three years, the amount pertaining to the period beyond the
three-year prescriptive period is therefore barred by prescription. The
amount that can only be demanded by the aggrieved employee shall be
limited to the amount of the benefits withheld within three years before the
filing of the complaint.[17]
Lebatique timely filed his claim for service incentive leave pay, considering
that in this situation, the prescriptive period commences at the time he was
terminated.[18] On the other hand, his claim regarding nonpayment of
overtime pay since he was hired in March 1996 is a different matter. In the
case of overtime pay, he can only demand for the overtime pay withheld for
the period within three years preceding the filing of the complaint on March
20, 2000. However, we find insufficient the selected time records presented
by petitioners to compute properly his overtime pay. The Labor Arbiter should
have required petitioners to present the daily time records, payroll, or other
documents in managements control to determine the correct overtime pay
due Lebatique.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated
September 30, 2003 of the Court of Appeals in CA-G.R. SP No. 76196 and
its Resolution dated March 15, 2004 are AFFIRMED with MODIFICATION to
the effect that the case is hereby REMANDED to the Labor Arbiter for further
proceedings to determine the exact amount of overtime pay and other
monetary benefits due Jimmy Lebatique which herein petitioners should pay
without further delay.
Costs against petitioners.
SO ORDERED.

FIRST DIVISION

[G. R. No. 123938. May 21, 1998]

LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in behalf of its

members, ANA MARIE OCAMPO, MARY INTAL, ANNABEL
CARESO, MARLENE MELQIADES, IRENE JACINTO, NANCY GARCIA,
IMELDA SARMIENTO, LENITA VIRAY, GINA JACINTO, ROSEMARIE
DEL ROSARIO, CATHERINE ASPURNA, WINNIE PENA, VIVIAN
BAA, EMILY LAGMAN, LILIAN MARFIL, NANCY DERACO, JANET
DERACO,
MELODY
JACINTO,
CAROLYN
DIZON,
IMELDA
MANALOTO, NORY VIRAY, ELIZA SALAZAR, GIGI MANALOTO,
JOSEFINA BASILIO, MARY ANN MAYATI, ZENAIDA GARCIA, MERLY
CANLAS, ERLINDA MANALANG, ANGELINA QUIAMBAO, LANIE
GARCIA,
ELVIRA
PIEDRA,
LOURDES
PANLILIO,
LUISA
PANLILIO, LERIZA PANLILIO, ALMA CASTRO, ALDA DAVID, MYRA
T. OLALIA, MARIFE PINLAC, NENITA DE GUZMAN, JULIE GACAD,
EVELYN MANALO, NORA PATIO, JANETH CARREON, ROWENA
MENDOZA, ROWENA MANALO, LENY GARCIA, FELISISIMA PATIO,
SUSANA SALOMON, JOYDEE LANSANGAN, REMEDIOS AGUAS,
JEANIE LANSANGAN, ELIZABETH MERCADO, JOSELYN MANALESE,
BERNADETH RALAR, LOLITA ESPIRITU, AGNES SALAS, VIRGINIA
MENDIOLA, GLENDA SALITA, JANETH RALAR, ERLINDA BASILIO,
CORA PATIO, ANTONIA CALMA, AGNES CARESO, GEMMA BONUS,
MARITESS OCAMPO, LIBERTY GELISANGA, JANETH MANARANG,
AMALIA DELA CRUZ, EVA CUEVAS, TERESA MANIAGO, ARCELY
PEREZ, LOIDA BIE, ROSITA CANLAS, ANALIZA ESGUERRA, LAILA
MANIAGO, JOSIE MANABAT, ROSARIO DIMATULAC, NYMPA
TUAZON,
DAIZY
TUASON,
ERLINDA
NAVARRO,
EMILY
MANARANG, EMELITA CAYANAN, MERCY CAYANAN, LUZVIMINDA

CAYANAN, ANABEL MANALO, SONIA DIZON, ERNA CANLAS,

MARIAN BENEDICTA, DOLORES DOLETIN, JULIE DAVID, GRACE
VILLANUEVA, VIRGINIA MAGBAG, CORAZON RILLION, PRECY
MANALILI, ELENA RONOZ, IMELDA MENDOZA, EDNA CANLAS
and
ANGELA
CANLAS,petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION, EMPIRE FOOD PRODUCTS, its
Proprietor/President & Manager, MR. GONZALO KEHYENG and
MRS. EVELYN KEHYENG, respondents.
DECISION
DAVIDE, JR., J.:
In this special civil action for certiorari under Rule 65, petitioners seek to
reverse the 29 March 1995 resolution [1] of the National Labor Relations
Commission (NLRC) in NLRC RAB III Case No. 01-1964-91 which affirmed the
Decision[2] of Labor Arbiter Ariel C. Santos dismissing their complaint for utter
lack of merit.
The antecedents of this case as summarized by the Office of the Solicitor
General in its Manifestation and Motion in Lieu of Comment,[3] are as follows:
The 99 persons named as petitioners in this proceeding were rank-and-file
employees of respondent Empire Food Products, which hired them on various
dates (Paragraph 1, Annex A of Petition, Annex B; Page 2, Annex F of
Petition).
Petitioners filed against private respondents a complaint for payment of
money claim[s] and for violation of labor standard[s] laws (NLRC Case No.
RAB-111-10-1817-90). They also filed a petition for direct certification of
petitioner Labor Congress of the Philippines as their bargaining
representative (Case No. R0300-9010-RU-005).
On October 23, 1990, petitioners represented by LCP President Benigno B.
Navarro, Sr. and private respondents Gonzalo Kehyeng and Evelyn Kehyeng
in behalf of Empire Food Products, Inc. entered into a Memorandum of
Agreement which provided, among others, the following:
1. That in connection with the pending Petition for Direct Certification filed by
the Labor Congress with the DOLE, Management of the Empire Food Products
has no objection [to] the direct certification of the LCP Labor Congress and is
now recognizing the Labor Congress of the Philippines (LCP) and its Local
Chapter as the SOLE and EXCLUSIVE Bargaining Agent and Representative for
all rank and file employees of the Empire Food Products regarding WAGES,
HOURS OF WORK, AND OTHER TERMS AND CONDITIONS OF EMPLOYMENT;

2. That with regards [sic] to NLRC CASE NO. RAB-III-10-1817-90 pending with
the NLRC parties jointly and mutually agreed that the issues thereof, shall be
discussed by the parties and resolve[d] during the negotiation of the
Collective Bargaining Agreement;
3. That Management of the Empire Food Products shall make the proper
adjustment of the Employees Wages within fifteen (15) days from the signing
of this Agreement and further agreed to register all the employees with the
SSS;
4. That Employer, Empire Food Products thru its Management agreed to
deduct thru payroll deduction UNION DUES and other Assessment[s] upon
submission by the LCP Labor Congress individual Check-Off Authorization[s]
signed by the Union Members indicating the amount to be deducted and
further agreed all deduction[s] made representing Union Dues and
Assessment[s] shall be remitted immediately to the LCP Labor Congress
Treasurer or authorized representative within three (3) or five (5) days upon
deductions [sic], Union dues not deducted during the period due, shall be
refunded or reimbursed by the
Employer/Management. Employer/Management further agreed to deduct
Union dues from non-union members the same amount deducted from union
members without need of individual Check-Off Authorizations [for] Agency
Fee;
5. That in consideration [of] the foregoing covenant, parties jointly and
mutually agreed that NLRC CASE NO. RAB-III-10-1817-90 shall be considered
provisionally withdrawn from the Calendar of the National Labor Relations
Commission(NLRC), while the Petition for direct certification of the LCP Labor
Congress parties jointly move for the direct certification of the LCP Labor
Congress;
6. That parties jointly and mutually agreed that upon signing of this
Agreement, no Harassments [sic], Threats, Interferences [sic] of their
respective rights under the law, no Vengeance or Revenge by each partner
nor any act of ULP which might disrupt the operations of the business;
7. Parties jointly and mutually agreed that pending negotiations or
formalization of the propose[d] CBA, this Memorandum of Agreement shall
govern the parties in the exercise of their respective rights involving the
Management of the business and the terms and condition[s] of employment,
and whatever problems and grievances may arise by and between the
parties shall be resolved by them, thru the most cordial and good harmonious
relationship by communicating the other party in writing indicating said
grievances before taking any action to another forum or government
agencies;

8. That parties [to] this Memorandum of Agreement jointly and mutually

agreed to respect, abide and comply with all the terms and conditions
hereof. Further agreed that violation by the parties of any provision herein
shall constitute an act of ULP. (Annex A of Petition).
In an Order dated October 24, 1990, Mediator Arbiter Antonio Cortez
approved the memorandum of agreement and certified LCP as the sole and
exclusive bargaining agent among the rank-and-file employees of Empire
Food Products for purposes of collective bargaining with respect to wages,
hours of work and other terms and conditions of employment (Annex B of
Petition).
On November 9, 1990, petitioners through LCP President Navarro submitted
to private respondents a proposal for collective bargaining (Annex C of
Petition).
On January 23, 1991, petitioners filed a complaint docketed as NLRC Case No.
RAB-III-01-1964-91 against private respondents for:
a. Unfair Labor Practice by way of Illegal Lockout and/or Dismissal;
b. Union busting thru Harassments [sic], threats, and interfering with the
rights of employees to self-organization;
c. Violation of the Memorandum of Agreement dated October 23, 1990;
d. Underpayment of Wages in violation of R.A. No. 6640 and R.A. No. 6727,
such as Wages promulgated by the Regional Wage Board;
e. Actual, Moral and Exemplary Damages. (Annex D of Petition)
After the submission by the parties of their respective position papers and
presentation of testimonial evidence, Labor Arbiter Ariel C. Santos absolved
private respondents of the charges of unfair labor practice, union busting,
violation of the memorandum of agreement, underpayment of wages and
denied petitioners prayer for actual, moral and exemplary damages. Labor
Arbiter Santos, however, directed the reinstatement of the individual
complainants:
The undersigned Labor Arbiter is not oblivious to the fact that respondents
have violated a cardinal rule in every establishment that a payroll and other
papers evidencing hours of work, payments, etc. shall always be maintained
and subjected to inspection and visitation by personnel of the Department of
Labor and Employment. As such penalty, respondents should not escape
liability for this technicality, hence, it is proper that all individual
complainants except those who resigned and executed quitclaim[s] and

releases prior to the filing of this complaintshould be reinstated to their

former position[s] with the admonition to respondents that any harassment,
intimidation, coercion or any form of threat as a result of this immediately
executory reinstatement shall be dealt with accordingly.
SO ORDERED. (Annex G of Petition)
On appeal, the National Labor Relations Commission vacated the Decision
dated April 14, 1972 [sic] and remanded the case to the Labor Arbiter for
further proceedings for the following reasons:
The Labor Arbiter, through his decision, noted that xxx complainant did not
present any single witness while respondent presented four (4) witnesses in
the persons of Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira
Bulagan xxx (p. 183, Records), that xxx complainant before the National
Labor Relations Commission must prove with definiteness and clarity the
offense charged. xxx (Record, p. 183); that xxx complainant failed to specify
under what provision of the Labor Code particularly Art. 248 did respondents
violate so as to constitute unfair labor practice xxx (Record, p. 183); that
complainants failed to present any witness who may describe in what manner
respondents have committed unfair labor practice xxx (Record, p. 185); that
xxx complainant LCP failed to present anyone of the so-called 99
complainants in order to testify who committed the threats and intimidation
xxx (Record, p. 185).
Upon review of the minutes of the proceedings on record, however, it
appears that complainant presented witnesses, namely, BENIGNO NAVARRO,
JR. (28 February 1991, RECORD, p. 91; 8 March 1991, RECORD, p. 92, who
adopted its POSITION PAPER AND CONSOLIDATED AFFIDAVIT, as Exhibit A and
the annexes thereto as Exhibit B, B-1 to B-9, inclusive. Minutes of the
proceedings on record show that complainant further presented other
witnesses, namely: ERLINDA BASILIO (13 March 1991, RECORD, p. 93;
LOURDES PANTILLO, MARIFE PINLAC, LENIE GARCIA (16 April 1991, Record, p.
96, see back portion thereof; 2 May 1991, Record, p. 102; 16 May 1991,
Record, p. 103; 11 June 1991, Record, p. 105). Formal offer of Documentary
and Testimonial Evidence was made by complainant on June 24, 1991
(Record, p. 106-109)
The Labor Arbiter must have overlooked the testimonies of some of the
individual complainants which are now on record. Other individual
complainants should have been summoned with the end in view of receiving
their testimonies. The complainants should be afforded the time and
opportunity to fully substantiate their claims against the
respondents. Judgment should be rendered only based on the conflicting
positions of the parties. The Labor Arbiter is called upon to consider and pass
upon the issues of fact and law raised by the parties.

Toward this end, therefore, it is Our considered view [that] the case should be
remanded to the Labor Arbiter of origin for further proceedings.(Annex H of
Petition)
In a Decision dated July 27, 1994, Labor Arbiter Santos made the following
determination:
Complainants failed to present with definiteness and clarity the particular act
or acts constitutive of unfair labor practice.
It is to be borne in mind that a declaration of unfair labor practice connotes a
finding of prima facie evidence of probability that a criminal offense may
have been committed so as to warrant the filing of a criminal information
before the regular court. Hence, evidence which is more than a scintilla is
required in order to declare respondents/employers guilty of unfair labor
practice. Failing in this regard is fatal to the cause of complainants. Besides,
even the charge of illegal lockout has no leg to stand on because of the
testimony of respondents through their guard Orlando Cairo (TSN, July 31,
1991 hearing; p. 5-35) that on January 21, 1991, complainants refused and
failed to report for work, hence guilty of abandoning their post without
permission from respondents. As a result of complainants[] failure to report
for work, the cheese curls ready for repacking were all spoiled to the
prejudice of respondents. Under cross-examination, complainants failed to
rebut the authenticity of respondents witness testimony.
As regards the issue of harassments [sic], threats and interference with the
rights of employees to self-organization which is actually an ingredient of
unfair labor practice, complainants failed to specify what type of threats or
intimidation was committed and who committed the same. What are the acts
or utterances constitutive of harassments [sic] being complained of?These
are the specifics which should have been proven with definiteness and clarity
by complainants who chose to rely heavily on its position paper through
generalizations to prove their case.
Insofar as violation of [the] Memorandum of Agreement dated October 23,
1990 is concerned, both parties agreed that:
2 - That with regards [sic] to the NLRC Case No. RAB III-10-1817-90
pending with the NLRC, parties jointly and mutually agreed that
the issues thereof shall be discussed by the parties and
resolve[d] during the negotiation of the CBA.
The aforequoted provision does not speak of [an] obligation on the part of
respondents but on a resolutory condition that may occur or may not
happen. This cannot be made the basis of an imposition of an obligation over

which the National Labor Relations Commission has exclusive jurisdiction

thereof.
Anent the charge that there was underpayment of wages, the evidence
points to the contrary. The enumeration of complainants wages in their
consolidated Affidavits of merit and position paper which implies
underpayment has no leg to stand on in the light of the fact that
complainants admission that they are piece workers or paid on
a pakiao [basis] i.e. a certain amount for every thousand pieces of cheese
curls or other products repacked. The only limitation for piece workers
or pakiao workers is that they should receive compensation no less than the
minimum wage for an eight (8) hour work [sic]. And compliance therewith
was satisfactorily explained by respondent Gonzalo Kehyeng in his testimony
(TSN, p. 12-30) during the July 31, 1991 hearing. On cross-examination,
complainants failed to rebut or deny Gonzalo Kehyengs testimony that
complainants have been even receiving more than the minimum wage for an
average workers [sic]. Certainly, a lazy worker earns less than the minimum
wage but the same cannot be attributable to respondents but to the lazy
workers.
Finally, the claim for moral and exemplary damages has no leg to stand on
when no malice, bad faith or fraud was ever proven to have been
perpetuated by respondents.
WHEREFORE, premises considered, the complaint is hereby DISMISSED for
utter lack of merit. (Annex I of Petition).[4]
On appeal, the NLRC, in its Resolution dated 29 March 1995, [5] affirmed in
toto the decision of Labor Arbiter Santos. In so doing, the NLRC sustained the
Labor Arbiters findings that: (a) there was a dearth of evidence to prove the
existence of unfair labor practice and union busting on the part of private
respondents; (b) the agreement of 23 October 1990 could not be made the
basis of an obligation within the ambit of the NLRCs jurisdiction, as the
provisions thereof, particularly Section 2, spoke of a resolutory condition
which could or could not happen; (c) the claims for underpayment of wages
were without basis as complainants were admittedly pakiao workers and paid
on the basis of their output subject to the lone limitation that the payment
conformed to the minimum wage rate for an eight-hour workday; and (d)
petitioners were not underpaid.
Their motion for reconsideration having been denied by the NLRC in its
Resolution of 31 October 1995, [6] petitioners filed the instant special civil
action for certiorari raising the following issues:
I

WHETHER OR NOT THE PUBLIC RESPONDENT NATIONAL LABOR

RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION WHEN IT
DISREGARDED OR IGNORED NOT ONLY THE EVIDENCE FAVORABLE TO
HEREIN PETITIONERS, APPLICABLE JURISPRUDENCE BUT ALSO ITS OWN
DECISIONS AND THAT OF THIS HONORABLE HIGHEST TRIBUNAL WHICH
[WAS] TANTAMOUNT NOT ONLY TO THE DEPRIVATION OF PETITIONERS
RIGHT TO DUE PROCESS BUT WOULD RESULT [IN] MANIFEST INJUSTICE.
II
WHETHER OR NOT THE PUBLIC RESPONDENT GRAVELY ABUSED ITS
DISCRETION WHEN IT DEPRIVED THE PETITIONERS OF THEIR
CONSTITUTIONAL RIGHT TO SELF-ORGANIZATION, SECURITY OF TENURE,
PROTECTION TO LABOR, JUST AND HUMANE CONDITIONS OF WORK AND
DUE PROCESS.
III
WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY EASED OUT [OF]
OR CONSTRUCTIVELY DISMISSED FROM THEIR ONLY MEANS OF
LIVELIHOOD.
IV
WHETHER OR NOT PETITIONERS SHOULD BE REINSTATED FROM THE DATE
OF THEIR DISMISSAL UP TO THE TIME OF THEIR REINSTATEMENT, WITH
BACKWAGES, STATUTORY BENEFITS, DAMAGES AND ATTORNEYS FEES.[7]
We required respondents to file their respective Comments.
In their Manifestation and Comment, private respondents asserted that
the petition was filed out of time. As petitioners admitted in their Notice to
File petition for Review on Certiorarithat they received a copy of the
resolution (denying their motion for reconsideration) on 13 December 1995,
they had only until 29 December 1995 to file the petition. Having failed to do
so, the NLRC thus already entered judgment in private respondents favor.
In their Reply, petitioners averred that Mr. Navarro, a non-lawyer who filed
the notice to file a petition for review on their behalf, mistook which
reglementary period to apply. Instead of using the reasonable time criterion
for certiorari under Rule 65, he used the 15-day period for petitions for review
on certiorari under Rule 45. They hastened to add that such was a mere
technicality which should not bar their petition from being decided on the
merits in furtherance of substantial justice, especially considering that
respondents neither denied nor contradicted the facts and issues raised in
the petition.

In its Manifestation and Motion in Lieu of Comment, the Office of the

Solicitor General (OSG) sided with petitioners. It pointed out that the Labor
Arbiter, in finding that petitioners abandoned their jobs, relied solely on the
testimony of Security Guard Rolando Cairo that petitioners refused to work on
21 January 1991, resulting in the spoilage of cheese curls ready for
repacking. However, the OSG argued, this refusal to report for work for a
single day did not constitute abandonment, which pertains to a clear,
deliberate and unjustified refusal to resume employment, and not mere
absence. In fact, the OSG stressed, two days after allegedly abandoning their
work, petitioners filed a complaint for, inter alia, illegal lockout or illegal
dismissal.Finally, the OSG questioned the lack of explanation on the part of
Labor Arbiter Santos as to why he abandoned his original decision to
reinstate petitioners.
In view of the stand of the OSG, we resolved to require the NLRC to file its
own Comment.
In its Comment, the NLRC invokes the general rule that factual findings of
an administrative agency bind a reviewing court and asserts that this case
does not fall under the exceptions. The NLRC further argues that grave abuse
of discretion may not be imputed to it, as it affirmed the factual findings and
legal conclusions of the Labor Arbiter only after carefully reviewing, weighing
and evaluating the evidence in support thereof, as well as the pertinent
provisions of law and jurisprudence.
In their Reply, petitioners claim that the decisions of the NLRC and the
Labor Arbiter were not supported by substantial evidence; that abandonment
was not proved; and that much credit was given to self-serving statements of
Gonzalo Kehyeng, owner of Empire Foods, as to payment of just wages.
On 7 July 1997, we gave due course to the petition and required the
parties to file their respective memoranda. However, only petitioners and
private respondents filed their memoranda, with the NLRC merely adopting
its Comment as its Memorandum.
We find for petitioners.
Invocation of the general rule that factual findings of the NLRC bind this
Court is unavailing under the circumstances. Initially, we are unable to
discern any compelling reason justifying the Labor Arbiters volte face from
his 14 April 1992 decision reinstating petitioners to his diametrically opposed
27 July 1994 decision, when in both instances, he had before him
substantially the same evidence. Neither do we find the 29 March 1995 NLRC
resolution to have sufficiently discussed the facts so as to comply with the
standard of substantial evidence.For one thing, the NLRC confessed its
reluctance to inquire into the veracity of the Labor Arbiters factual findings,
staunchly declaring that it was not about to substitute [its] judgment on
matters that are within the province of the trier of facts. Yet, in the 21 July
1992 NLRC resolution,[8] it chastised the Labor Arbiter for his errors both in

judgment and procedure, for which reason it remanded the records of the
case to the Labor Arbiter for compliance with the pronouncements therein.
What cannot escape from our attention is that the Labor Arbiter did not
heed the observations and pronouncements of the NLRC in its resolution of
21 July 1992, neither did he understand the purpose of the remand of the
records to him. In said resolution, the NLRC summarized the grounds for the
appeal to be:
1. that there is a prima facie evidence of abuse of discretion and acts of gross
incompetence committed by the Labor Arbiter in rendering the decision.
2. that the Labor Arbiter in rendering the decision committed serious errors in
the findings of facts.
After which, the NLRC observed and found:
Complainant alleged that the Labor Arbiter disregarded the testimonies of the
99 complainants who submitted their Consolidated Affidavit of Merit and
Position Paper which was adopted as direct testimonies during the hearing
and cross-examined by respondents counsel.
The Labor Arbiter, through his decision, noted that x x x complainant did not
present any single witness while respondent presented four (4) witnesses in
the persons of Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira
Bulagan x x x (Records, p. 183), that x x x complainant before the National
Labor Relations Commission must prove with definiteness and clarity the
offense charged. x x x (Record, p. 183; that x x x complainant failed to
specify under what provision of the Labor Code particularly Art. 248 did
respondents violate so as to constitute unfair labor practice x x x (Record, p.
183); that complainants failed to present any witness who may describe in
what manner respondents have committed unfair labor practice x x x
(Record, p. 185); that x x x complainant a [sic] LCP failed to present anyone
of the so called 99 complainants in order to testify who committed the
threats and intimidation x x x (Record, p. 185).
Upon review of the minutes of the proceedings on record, however, it
appears that complainant presented witnesses, namely BENIGNO NAVARRO,
JR. (28 February 1991, RECORD, p. 91; 8 March 1991, RECORD, p. 92), who
adopted its POSITION PAPER AND CONSOLIDATED AFFIDAVIT, as Exhibit A and
the annexes thereto as Exhibit B, B-1 to B-9, inclusive.Minutes of the
proceedings on record show that complainant further presented other
witnesses, namely: ERLINDA BASILIO (13 March 1991, RECORD, p. 93;
LOURDES PANTILLO, MARIFE PINLAC, LENI GARCIA (16 April 1991, Record, p.
96, see back portion thereof; 2 May 1991, Record, p. 102; 16 May 1991,
Record, p. 103; 11 June 1991, Record, p. 105). Formal offer of

Documentary and Testimonial Evidence was made by the complainant on

June 24, 1991 (Record, p. 106-109).
The Labor Arbiter must have overlooked the testimonies of some of the
individual complainants which are now on record. Other individual
complainants should have been summoned with the end in view of receiving
their testimonies. The complainants should [have been] afforded the time
and opportunity to fully substantiate their claims against the
respondents. Judgment should [have been] rendered only based on the
conflicting positions of the parties. The Labor Arbiter is called upon to
consider and pass upon the issues of fact and law raised by the parties.
Toward this end, therefore, it is Our considered view the case should be
remanded to the Labor Arbiter of origin for further proceedings.
Further, We take note that the decision does not contain a dispositive portion
or fallo. Such being the case, it may be well said that the decision does not
resolve the issues at hand. On another plane, there is no portion of the
decision which could be carried out by way of execution.
It may be argued that the last paragraph of the decision may be categorized
as the dispositive portion thereof:
xxxxx
The undersigned Labor Arbiter is not oblivious [to] the fact that respondents
have violated a cardinal rule in every establishment that a payroll and other
papers evidencing hour[s] of work, payment, etc. shall always be maintained
and subjected to inspection and visitation by personnel of the Department of
Labor and Employment. As such penalty, respondents should not escape
liability for this technicality, hence, it is proper that all the individual
complainants except those who resigned and executed quitclaim[s] and
release[s] prior to the filing of this complaint should be reinstated to their
former position with the admonition to respondents that any harassment,
intimidation, coercion or any form of threat as a result of this immediately
executory reinstatement shall be dealt with accordingly.
SO ORDERED.
It is Our considered view that even assuming arguendo that the respondents
failed to maintain their payroll and other papers evidencing hours of work,
payment etc., such circumstance, standing alone, does not warrant the
directive to reinstate complainants to their former positions. It is [a] well
settled rule that there must be a finding of illegal dismissal before
reinstatement be mandated.

In this regard, the LABOR ARBITER is hereby directed to include in his

clarificatory decision, after receiving evidence, considering and resolving the
same, the requisite dispositive portion.[9]
Apparently, the Labor Arbiter perceived that if not for petitioners, he
would not have fallen victim to this stinging rebuke at the hands of the
NLRC. Thus does it appear to us that the Labor Arbiter, in concluding in his 27
July 1994 Decision that petitioners abandoned their work, was moved by, at
worst, spite, or at best, lackadaisically glossed over petitioners evidence.On
this score, we find the following observations of the OSG most persuasive:
In finding that petitioner employees abandoned their work, the Labor Arbiter
and the NLRC relied on the testimony of Security Guard Rolando Cairo that on
January 21, 1991, petitioners refused to work. As a result of their failure to
work, the cheese curls ready for repacking on said date were spoiled.
The failure to work for one day, which resulted in the spoilage of cheese curls
does not amount to abandonment of work. In fact two (2) days after the
reported abandonment of work or on January 23, 1991, petitioners filed a
complaint for, among others, unfair labor practice, illegal lockout and/or
illegal dismissal. In several cases, this Honorable Court held that one could
not possibly abandon his work and shortly thereafter vigorously pursue his
complaint for illegal dismissal (De Ysasi III v. NLRC, 231 SCRA 173; Ranara v.
NLRC, 212 SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA 328; Atlas
Consolidated Mining and Development Corp. v. NLRC, 190 SCRA 505; Hua Bee
Shirt Factory v. NLRC, 186 SCRA 586; Mabaylan v. NLRC, 203 SCRA 570
and Flexo Manufacturing v. NLRC, 135 SCRA 145). In Atlas Consolidated,
supra, this Honorable Court explicitly stated:
It would be illogical for Caballo, to abandon his work and then immediately
file an action seeking for his reinstatement. We can not believe that Caballo,
who had worked for Atlas for two years and ten months, would simply walk
away from his job unmindful of the consequence of his act, i.e. the forfeiture
of his accrued employment benefits. In opting to finally to [sic] contest the
legality of his dismissal instead of just claiming his separation pay and other
benefits, which he actually did but which proved to be futile after all, ably
supports his sincere intention to return to work, thus negating Atlas stand
that he had abandoned his job.
In De Ysasi III v. NLRC (supra), this Honorable Court stressed that it is the
clear, deliberate and unjustified refusal to resume employment and not mere
absence that constitutes abandonment. The absence of petitioner employees
for one day on January 21, 1991 as testified [to] by Security Guard Orlando
Cairo did not constitute abandonment.

In his first decision, Labor Arbiter Santos expressly directed the reinstatement
of the petitioner employees and admonished the private respondents that
any harassment, intimidation, coercion or any form of threat as a result of
this immediately executory reinstatement shall be dealt with accordingly.
In his second decision, Labor Arbiter Santos did not state why he was
abandoning his previous decision directing the reinstatement of petitioner
employees.
By directing in his first decision the reinstatement of petitioner employees,
the Labor Arbiter impliedly held that they did not abandon their work but
were not allowed to work without just cause.
That petitioner employees are pakyao or piece workers does not imply that
they are not regular employees entitled to reinstatement. Private respondent
Empire Food Products, Inc. is a food and fruit processing company. In Tabas v.
California Manufacturing Co., Inc. (169 SCRA 497), this Honorable Court held
that the work of merchandisers of processed food, who coordinate with
grocery stores and other outlets for the sale of the processed food is
necessary in the day-to-day operation[s] of the company. With more reason,
the work of processed food repackers is necessary in the day-to-day
operation[s] of respondent Empire Food Products.[10]
It may likewise be stressed that the burden of proving the existence of
just cause for dismissing an employee, such as abandonment, rests on the
employer, [11] a burden private respondents failed to discharge.
Private respondents, moreover, in considering petitioners employment to
have been terminated by abandonment, violated their rights to security of
tenure and constitutional right to due process in not even serving them with
a written notice of such termination. [12] Section 2, Rule XIV, Book V of the
Omnibus Rules Implementing the Labor Code provides:
SEC. 2. Notice of Dismissal. - Any employer who seeks to dismiss a worker
shall furnish him a written notice stating the particular acts or omission
constituting the grounds for his dismissal.In cases of abandonment of work,
the notice shall be served at the workers last known address.
Petitioners are therefore entitled to reinstatement with full back wages
pursuant to Article 279 of the Labor Code, as amended by R.A. No.
6715. Nevertheless, the records disclose that taking into account the number
of employees involved, the length of time that has lapsed since their
dismissal, and the perceptible resentment and enmity between petitioners
and private respondents which necessarily strained their relationship,
reinstatement would be impractical and hardly promotive of the best
interests of the parties. In lieu of reinstatement then, separation pay at the

rate of one month for every year of service, with a fraction of at least six (6)
months of service considered as one (1) year, is in order.[13]
That being said, the amount of back wages to which each petitioner is
entitled, however, cannot be fully settled at this time. Petitioners, as piecerate workers having been paid by the piece, [14] there is need to determine the
varying degrees of production and days worked by each worker. Clearly, this
issue is best left to the National Labor Relations Commission.
As to the other benefits, namely, holiday pay, premium pay, 13 th month
pay and service incentive leave which the labor arbiter failed to rule on but
which petitioners prayed for in their complaint, [15] we hold that petitioners are
so entitled to these benefits. Three (3) factors lead us to conclude that
petitioners, although piece-rate workers, were regular employees of private
respondents. First, as to the nature of petitioners tasks, their job of repacking
snack food was necessary or desirable in the usual business of private
respondents, who were engaged in the manufacture and selling of such food
products; second, petitioners worked for private respondents throughout the
year, their employment not having been dependent on a specific project or
season; and third, the length of time [16] that petitioners worked for private
respondents. Thus, while petitioners mode of compensation was on a per
piece basis, the status and nature of their employment was that of regular
employees.
The Rules Implementing the Labor Code exclude certain employees from
receiving benefits such as nighttime pay, holiday pay, service incentive
leave[17] and 13th month pay,[18] inter alia, field personnel and other
employees whose time and performance is unsupervised by the employer,
including those who are engaged on task or contract basis, purely
commission basis, or those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof. Plainly,
petitioners as piece-rate workers do not fall within this group. As mentioned
earlier, not only did petitioners labor under the control of private respondents
as their employer, likewise did petitioners toil throughout the year with the
fulfillment of their quota as supposed basis for compensation. Further, in
Section 8 (b), Rule IV, Book III which we quote hereunder, piece workers are
specifically mentioned as being entitled to holiday pay.
SEC. 8. Holiday pay of certain employees.(b) Where a covered employee is paid by results or output, such as
payment on piece work, his holiday pay shall not be less than his
average daily earnings for the last seven (7) actual working days
preceding the regular holiday: Provided, however, that in no case shall
the holiday pay be less than the applicable statutory minimum wage
rate.

In addition, the Revised Guidelines on the Implementation of the

13 Month Pay Law, in view of the modifications to P.D. No. 851 [19] by
Memorandum Order No. 28, clearly exclude the employer of piece rate
workers from those exempted from paying 13th month pay, to wit:
th

2. EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:
d. Employers of those who are paid on purely commission, boundary
or task basis, and those who are paid a fixed amount for
performing specific work, irrespective of the time consumed in
the performance thereof, except where the workers are paid on
piece-rate basis in which case the employer shall grant the
required 13th month pay to such workers. (italics supplied)
The Revised Guidelines as well as the Rules and Regulations identify those
workers who fall under the piece-rate category as those who are paid a
standard amount for every piece or unit of work produced that is more or less
regularly replicated, without regard to the time spent in producing the same.
[20]

As to overtime pay, the rules, however, are different. According to Sec.

2(e), Rule I, Book III of the Implementing Rules, workers who are paid by
results including those who are paid on piece-work, takay, pakiao, or task
basis, if their output rates are in accordance with the standards prescribed
under Sec. 8, Rule VII, Book III, of these regulations, or where such rates have
been fixed by the Secretary of Labor in accordance with the aforesaid
section, are not entitled to receive overtime pay. Here, private respondents
did not allege adherence to the standards set forth in Sec. 8 nor with the
rates prescribed by the Secretary of Labor. As such, petitioners are beyond
the ambit of exempted persons and are therefore entitled to overtime
pay. Once more, the National Labor Relations Commission would be in a
better position to determine the exact amounts owed petitioners, if any.
As to the claim that private respondents violated petitioners right to selforganization, the evidence on record does not support this claim. Petitioners
relied almost entirely on documentary evidence which, per se, did not prove
any wrongdoing on private respondents part. For example, petitioners
presented their complaint[21] to prove the violation of labor laws committed
by private respondents. The complaint, however, is merely the pleading
alleging the plaintiffs cause or causes of action. [22] Its contents are merely
allegations, the verity of which shall have to be proved during the trial. They
likewise offered their Consolidated Affidavit of Merit and Position
Paper[23] which, like the offer of their Complaint, was a tautological exercise,
and did not help nor prove their cause. In like manner, the petition for
certification election[24] and the subsequent order of certification [25] merely

proved that petitioners sought and acquired the status of bargaining agent
for all rank-and-file employees. Finally, the existence of the memorandum of
agreement[26] offered to substantiate private respondents non-compliance
therewith, did not prove either compliance or non-compliance, absent
evidence of concrete, overt acts in contravention of the provisions of the
memorandum.
IN VIEW WHEREOF, the instant petition is hereby GRANTED. The
Resolution of the National Labor Relations Commission of 29 March 1995 and
the Decision of the Labor Arbiter of 27 July 1994 in NLRC Case No. RAB-III-011964-91 are hereby SET ASIDE, and another is hereby rendered:
1. DECLARING petitioners to have been illegally dismissed by private
respondents, thus entitled to full back wages and other privileges,
and separation pay in lieu of reinstatement at the rate of one
months salary for every year of service with a fraction of six months
of service considered as one year;
2. REMANDING the records of this case to the National Labor Relations
Commission for its determination of the back wages and other
benefits and separation pay, taking into account the foregoing
observations; and
3. DIRECTING the National Labor Relations Commission to resolve the
referred issues within sixty (60) days from its receipt of a copy of
this decision and of the records of the case and to submit to this
Court a report of its compliance hereof within ten (10) days from
the rendition of its resolution.
Costs against private respondents.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

ASSOCIATION OF G.R. No. 172029

INTERNATIONAL SHIPPING
LINES, INC., in its own behalf and
in representation of its members: Present:
AMERICAN TRANSPORT LINES,
INC., AUSTRALIAN NATIONAL YNARES-SANTIAGO, J.,
LINE, FLEET TRANS Chairperson,
INTERNATIONAL AND UNITED AUSTRIA-MARTINEZ,
ARAB SHIPPING CO., CHICO-NAZARIO,

DONGNAMA SHIPPING CO., NACHURA, and

HANJIN SHIPPING COMPANY, REYES, JJ.
LTD., HAPAG-LLOYD A/G,
KNUTSEN LINE, KYOWA LINE,
NEPTUNE ORIENT LINE, ORIENT
OVERSEAS CONTAINER LINE,
P & O CONTAINERS, LTD., P & O
SWIRE CONTAINERS AND WILH
WILHELMSEN LINE A/S,
REGIONAL CONTAINERS LINES
(PTE), LTD., SENATOR LINE
BREMEN GERMANY, TOKYO
SENPAKU KAISHA, LTD.,
UNIGLORY LINE, WAN HAI LINES,
LTD., WESTWIND LINE, ZIM
ISRAEL NAVIGATION CO., LTD.,
COMPANIA SUD AMERICANA DE
VAPORES S.A., DEUTSCHE
SEEREEDEREI ROSTOCK (DSR)
GERMANY AND ARIMURA
SANGYO COMPANY, LTD.,
PACIFIC INTERNATIONAL

LINES (PTE), LTD., COMPAGNIE

MARITIME D AFFRETEMENT
(CMA), YANGMING MARINE
TRANSPORT CORP., NIPON
YUSEN KAISHA, HYUNDAI
MERCHANT MARINE CO., LTD.,
MALAYSIAN INTERNATIONAL
SHIPPING CORPORATION
BERHAD, BOLT ORIENT LINE,
MITSUI O.S.K. LINES, LTD.,
PHILS. MICRONESIA & ORIENT
NAVIGATION CO. (PMSO LINE),
LLOYD TRIESTINO DI
NAVIGAZIONE S.P.A.N.,
HEUNG-A SHIPPING COMPANY,
KAWASAKI KISEN
KAISHAARIMURA SANGYO
COMPANY, LTD., AMERICAN
PRESIDENT LINES, LTD.,
MAERSK FILIPINAS, INC.,
EASTERN SHIPPING LINES,
INC., NEDLLOYD LINES, INC.,

PHILIPPINE PRESIDENT LINES,

LTD., SEA-LAND SERVICE, INC.,
MADRIGAL-WAN HAI LINES,
Petitioners,

- versus -

UNITED HARBOR PILOTS

ASSOCIATION OF THE Promulgated:
PHILIPPINES, INC.,
Respondent. August 6, 2008

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

DECISION

REYES, R.T., J.:

PAYMENT of nighttime and overtime differential of harbor pilots is the

object of this petition for review on certiorari[1] of the Decision[2] of the Court
of Appeals (CA) partly setting aside the Order[3] of the Regional Trial Court
(RTC), Branch 36, Manila pertaining to a motion for execution.

The Facts
On March 1, 1985, the Philippine Ports Authority (PPA) issued PPA
Administrative Order (AO) No. 03-85 substantially adopting the provisions of
Customs Administrative Order (CAO) No. 15-65[4] on the payment of
additional charges for pilotage service[5] rendered between 1800H to 1600H,
or on Sundays or Holidays, practically referring to nighttime and overtime
pay. Section 16 of the AO reads:
Section 16. Payment of Pilotage Service Fees. Any vessel
which employs a Harbor Pilot shall pay the pilotage
fees prescribed in this Order and shall comply with the following
conditions:
xxxx
c) When pilotage service is rendered at any port between
1800H to 1600H, Sundays or Holidays, an additional charge of
one hundred (100%) percentum over the regular pilotage
fees shall be paid by vessels engaged in foreign trade,
and fifty (50%) percentum by coastwise vessels. This
additional charge or premium fee for nighttime pilotage
service shall likewise be paid when the pilotage service is
commenced before and terminated after sunrise.
Provided, however, that no premium fee shall be
considered for service rendered after 1800H if it shall be proven
that the service can be undertaken before such hours after the
one (1) hour grace period, as provided in paragraph (d) of this
section, has expired. (Emphasis supplied)
On February 3, 1986, responding to the clamor of harbor pilots for the
increase and rationalization of pilotage service charges, then President
Ferdinand E. Marcos issued Executive Order (EO) No. 1088 providing for
uniform and modified rates for pilotage services rendered in all Philippine
ports. It fixed the rate of pilotage fees on the basis of the vessels tonnage
and provided that the rate for docking and undocking anchorage, conduction
and shifting and other related special services is equal to 100%. EO No. 1088

also contained a repealing clause stating that all orders, letters of instruction,
rules, regulations, and issuances inconsistent with it are repealed or
amended accordingly.[6]
Subsequently, pursuant to EO No. 1088, the PPA issued several
resolutions disallowing overtime premium or charge and recalling its
recommendation for a reasonable night premium pay or night differential
pay, viz.:

RESOLUTION NO. 1486[7]

RESOLVED, That on motion duly seconded, and in
consideration of the proper court order(s) mandating PPA to
implement the pilotage rates under Executive Order No.
1088, the overtime premium or charge collected by Harbor
Pilots is hereby disallowed and Section 16(c) of Article III of
PPA Administrative Order No. 03-85, prescribing general
guidelines on pilotage services, be, as it is hereby repealed and
modified accordingly;
RESOLVED FURTHER, That the General Manager, be, as he
is hereby authorized, to issue the corresponding amendatory
guidelines.
RESOLUTION NO. 1541[8]
RESOLVED, That on motion duly seconded, and after taking
into consideration the respective positions of the various Harbor
Pilot associations and shipping groups, Board Resolution No.
1486, be, as it is hereby reiterated and affirmed, and
Management, be, as it is hereby directed to adopt a policy
of no overtime pay for pilotage services;
RESOLVED FURTHER, That in lieu of the no overtime pay
policy, Management be, as it is hereby directed, to
recommend a reasonable night premium pay or night
differential pay for the conduct of the basic pilotage
services.
RESOLUTION NO. 1554[9]

RESOLVED, That on motion duly seconded, and taking into

consideration the arguments raised by the Association of
International Shipping Lines, Inc., raising certain legal issues on
the adoption of Resolution No. 1541, as adopted on November
13, 1995, the proposed PPA Administrative Order No. 19-95,
hereto attached and incorporated by reference, recommending
amendments to Section 16(c) of PPA Administrative Order No. 0385, disallowing overtime pay and authorizing instead the
collection of nighttime premium pay for pilotage services
rendered during nighttime (1800H to 0600H), be, as it is hereby
deferred, for further legal review;
RESOLVED
FURTHER,
That pending
review
and
clarification by the Office of the Government Corporate
Counsel of the legal issues on overtime pay/nighttime
premium pay, Resolution No. 1541, be, as it is hereby
recalled and Resolution No. 1486, as adopted on May 19,
1995, be, as it is hereby reaffirmed.
On the strength of PPA Resolution No. 1486, petitioners Association of
International Shipping Lines (AISL) and its members refused to pay
respondent United Harbor Pilots Association of the Philippines, Inc. (UHPAP)s
claims for nighttime and overtime pay.[10] In response, UHPAP threatened to
discontinue pilotage services should their claims be continually ignored.[11]
Petitioners then filed a petition for declaratory relief with the RTC, Branch
36, Manila, docketed as Civil Case No. 96-78400. The issues raised there
were: (1) whether EO No. 1088 authorized the payment of nighttime
and overtime pay; and (2) whether the rate of pilotage fees enumerated in
EO No. 1088 were for every pilotage maneuver or for the entire package of
pilotage services.
On January 26, 1998, the RTC granted the petition and declared that
respondent UHPAP is not authorized to collect any overtime or night shift
differential for pilotage services rendered. The RTC disposed as follows:

WHEREFORE, judgment is hereby rendered granting

the petition herein and it is hereby declared that (1)
respondent PPA is bereft of authority to impose and
respondent UHPAP is not authorized to collect any
overtime or night shift differential for pilotage services
rendered; and (2) the rates of fees for pilotage services

rendered refer to the totality of pilotage services

rendered and respondent UHPAP cannot legally charge
separate fees for each pilotage service rendered. All
billings inconsistent with this decision are declared null and void
and petitioners are not liable therefor.
SO ORDERED.[12] (Emphasis supplied)
The trial court said that in view of the repealing clause in EO No. 1088,
it was axiomatic that all prior issuances inconsistent with it were deemed
repealed. Thus, the provisions of Section 16 of PPA AO No. 03-85 on nighttime
and overtime pay were effectively stricken-off the books. It further held that
since the rate of pilotage fees enumerated in EO No. 1088 was based on the
vessels tonnage, it meant that such rate referred to the entire package of
pilotage services. According to the trial court, to rule otherwise is to frustrate
the uniformity envisioned by the rationalization scheme.
Respondent UHPAP moved for reconsideration but the motion was
denied.

Desiring to secure for its members the payment of nighttime and

overtime pay, respondent UHPAP filed directly before this Court a petition for
review on certiorari, docketed as G.R. No. 133763, raising the following legal
issues for determination: (1) whether EO No. 1088 repealed the
provisions of CAO No. 15-65 and PPA AO No. 03-85, as amended, on
payment of additional pay for holidays work and premium pay for
nighttime service; (2) whether the rates, as fixed in the schedule of fees
based on tonnage in EO No. 1088, are to be imposed on every pilotage
movement; and (3) whether EO No. 1088 deprived the PPA of its right, duty
and obligation to promulgate new rules and rates for payment of fees,
including additional pay for holidays and premium pay for nighttime services.
On November 13, 2002, this Court granted the petition and reversed
the RTC. This Court held then:
Section 3 of E.O. No. 1088 is a general repealing
clause, the effect of which falls under the category of an
implied repeal as it does not identify the orders, rules or
regulations it intends to abrogate. A repeal by implication
is frowned upon in this jurisdiction. It is not favored, unless it
is manifest that the legislative authority so intended or unless it
is convincingly and unambiguously demonstrated that the subject
laws or orders are clearly repugnant and patently inconsistent
that they cannot co-exist. This is because the legislative authority

is presumed to know the existing law so that if repeal is intended,

the proper step is to express it.
There is nothing in E.O. No. 1088 that reveals any
intention on the part of Former President Marcos to
amend or supersede the provisions of PPA AO No. 03-85
on nighttime and overtime pay. While it provides a
general repealing clause, the same is made dependent
upon its actual inconsistency with other previous orders,
rules, regulations or other issuance.Unfortunately for
AISL, we find no inconsistency between E.O. No. 1088 and
the provisions of PPA AO No. 03-85. At this juncture, it
bears pointing out that these two orders dwell on entirely
different subject matters. E.O. No. 1088 provides for
uniform and modified rates for pilotage services rendered
to foreign and coastwise vessels in all Philippine ports,
public or private. The purpose is to rationalize and
standardize
the
pilotage
service
charges
nationwide. Upon the other hand, the subject matter of
the controverted provisions of PPA AO No. 03-85 is the
payment of the additional charges of nighttime and
overtime pay. Plainly, E.O. No. 1088 involves the basic
compensation for pilotage service while PPA AO No. 03-85
provides for the additional charges where pilotage service is
rendered under certain circumstances. Just as the various
wage orders do not repeal the provisions of the Labor
Code on nighttime and overtime pay, the same principle
holds true with respect to E.O. No. 1088 and PPA AO 0385. Moreover, this Court adheres to the rule that every statute
must be so construed and harmonized with other statutes as to
form a uniform system of jurisprudence. E.O. No. 1088 and PPA
AO No. 03-85 should thus be read together and harmonized to
give effect to both.
xxxx
While E.O. No. 1088 prescribes the rates of pilotage fees
on the basis of the vessels tonnage, however, this does
not necessarily mean that the said rate shall apply to the
totality of pilotage services. If it were so, the benefit
intended by E.O. No. 1088 to harbor pilots would be

rendered useless and ineffectual. It would create an

unjust if not an absurd situation of reducing take home
pay of the harbor pilots to a single fee, regardless of the
number of services they rendered from the time a vessel
arrives up to its departure. It must be remembered that
pilotage services cover a variety of maneuvers such as docking,
undocking anchorage, conduction, shifting and other related
special services. To say that the rate prescribed by E.O. No.
1088 refers to the totality of all these maneuvers is to
defeat the benefit intended by the law for harbor pilots. It
should be stressed that E.O. No. 1088 was enacted in
response to the clamor of harbor pilots for the increase
and rationalization of pilotage service charges through
the imposition of uniform and adjusted rates. Hence, in
keeping with the benefit intended by E.O. No. 1088, the
schedule of fees fixed therein based on tonnage should be
interpreted as applicable to each pilotage maneuver and
not to the totality of the pilotage services.
The use of the word and between the words docking and
undocking in paragraph 2 of Section 1 of E.O. No. 1088 should
not override the above-mentioned purpose of said law. It is a
basic precept of statutory construction that statutes should be
construed not so much according to the letter that killeth but in
line with the purpose for which they have been enacted. Statutes
are to be given such construction as will advance the object,
suppress the mischief, and secure the benefits intended.
Furthermore, as can be gleaned from the drafts submitted
by the PPA on the guidelines pertaining to the uniform pilotage
services to be rendered in all pilotage districts, the PPA is of the
interpretation that the rate of pilotage fees fixed by E.O. No. 1088
is to be separately imposed on every pilotage maneuver done by
the harbor pilots. This interpretation is likewise made clear in PPA
Memorandum Circular No. 42-98, dated October 8, 1998, which
clarifies pilotage charges for docking and undocking, as follows:
To prevent disruption in pilotage service and
considering the pendency of the final and executory
decision of the Supreme Court on the pilotage rates
issue, it is hereby clarified that pilotage fees for

docking and undocking of vessels shall be paid as two

(2) separate services x x x.
The PPA is the proper government agency tasked with the
duty of implementing E.O. No. 1088. As such, its interpretation of
said law carries great weight and consideration. In a catena of
cases, we ruled that the construction given to a statute by an
administrative agency charged with the interpretation and
application of a statute is entitled to great respect and should be
accorded great weight by the courts. The exception, which does
not obtain in the present case, is when such construction is
clearly shown to be in sharp conflict with the governing statute or
the Constitution and other laws. The rationale for this rule relates
not only to the emergence of the multifarious needs of a modern
or modernizing society and the establishment of diverse
administrative agencies for addressing and satisfying those
needs, it also relates to accumulation of experience and growth
of specialized capabilities by the administrative agency charged
with implementing a particular statute.
The charges and fees provided for in E.O. No. 1088
are therefore to be imposed for every pilotage maneuver
performed by the harbor pilots, as properly interpreted by
the PPA, the agency charged with its implementation.
xxxx
Finally, on the third issue, we rule that E.O. No. 1088
does not deprive the PPA of its power and authority to
promulgate new rules and rates for payment of fees,
including additional charges. As we held in Philippine
Interisland Shipping Association of the Philippines v. Court of
Appeals:
The power of the PPA to fix pilotage rates
and its authority to regulate pilotage still
remain notwithstanding the fact that a
schedule for pilotage fees has already been
prescribed by the questioned executive order
(referring to E.O. No. 1088). PPA is at liberty to
fix new rates of pilotage subject only to the

limitation that such new rates should not go

below the rates fixed under E.O. No. 1088. x x x.

Our pronouncement is clearly in consonance with the

provisions of Presidential Decree 857 which vests upon the PPA
the power and authority (1) to supervise, control, regulate x x x
such services as are necessary in the ports vested in, or
belonging to the Authority; (2) to control, regulate and supervise
pilotage and the conduct of pilots in any Port District; and (3) to
impose, fix, prescribe, increase or decrease such rates, charges
or fees x x x for the services rendered by it or by any private
organization within a Port District.[13] (Emphasis supplied)
The decision became final and executory on February 14, 2003.
On April 8, 2003, respondent UHPAP filed a motion for the issuance of a writ
of execution with the RTC.[14] Petitioners opposed[15] the motion.
On September 25, 2003, the RTC issued an Order[16] denying respondent
UHPAPs motion and declaring that pursuant to the decision of the Supreme
Court in G.R. No. 133763, PPA Resolution Nos. 1486, 1541, and 1554 are valid
and effective thereby disallowing the collection of overtime pay.
[17]
The RTC explained:
x x x [W]hen the Supreme Court ruled and declared
that Executive Order 1088 does not deprive the PPA of its
power and authority to promulgate rules and rates for
payment of fees including additional charges, it had
effectively ruled on the validity of PPA resolutions 1486,
1541, and 1554. Said resolutions did not violate any provision of
Executive Order 1088 and did not constitute any diminution of
the rates provided by said Executive Order. They merely repealed
the collection of overtime premiums or charges which is provided
not by Executive Order 1088 but by another PPA Administrative
Order 03-85. This is not inconsistent with the ruling of the
Supreme Court that Executive Order 1088 did not repeal the
additional pay for holiday work and premium pay for nighttime
service, collectively referred to as overtime pay provided in
Customs Administrative Order No. 15-65 and PPA Administrative
Order 03-85.The Supreme Court did not consider subsequent PPA

resolutions or administrative orders affecting overtime pay

because this was not brought out as an issue.
Resolutions 1486, 1541, and 1554 have no effect on
Executive Order 1088 whatsoever.[18] (Emphasis supplied)
Respondent UHPAP then filed a petition for certiorari[19] under Rule 65
with the CA, docketed as CA-G.R. SP No. 87892. It contended that
the RTC committed grave abuse of discretion amounting to lack of jurisdiction
when it practically overturned the final and executory decision of this Court in
G.R. No. 133763 by declaring in itsSeptember 25, 2003 Order that PPA
Resolution Nos. 1486, 1541, and 1554 were valid and effective.[20]
CA Disposition

In a Decision dated October 19, 2005, the CA partly granted respondents

petition in that it affirmed the denial of the motion for the issuance of a writ
of execution while, at the same time, deleting portions of the challenged
Order. The decretal portion of the CA Decision states:
IN VIEW OF ALL THE FOREGOING, the herein petition is
hereby PARTLY GRANTED, in such a way that the denial of
UHPAPs motion for the issuance of a writ of execution is
AFFIRMED, while the declaration in the assailed Order
of September 25, 2003 stating that pursuant to the decision
of the Supreme Court in G.R. No. 133763, PPA resolutions
1486, 1541, and 1554 are valid and effective thereby
disallowing the collection of overtime pay, is RECALLED
and SET ASIDE and ordered DELETED from the said
Order. No pronouncement as to cost.
SO ORDERED.

SECOND DIVISION

[G.R. No. 157634. May 16, 2005]

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

LAM, petitioners, vs. ROLANDO ADANA, CHONA BUMALAY,
ROGER BURCE, EDUARDO ALAMARES, AMADO ALAMARES,
EDGARDO TORREFRANCA, LOURDES CAMIGLA, TEODORO
LAURENARIA, WENEFREDO LOVERES, LUIS GUADES, AMADO
MACANDOG, PATERNO LLARENA, GREGORIO NICERIO, JOSE
ATRACTIVO,
MIGUEL
TORREFRANCA,
and
SANTOS
BROOLA, respondents.
DECISION
PUNO, J.:
This is a petition for certiorari to reverse and set aside the Decision issued
by the Court of Appeals (CA)[1] in CA-G.R. SP No. 68642, entitled Rolando
Adana, Wenefredo Loveres, et. al. vs. National Labor Relations Commission
(NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al., and the
Resolution[2] denying petitioners motion for reconsideration. The assailed CA
decision reversed the NLRC Decision which had dismissed all of respondents
complaints,[3] and reinstated the Joint Decision of the Labor Arbiter [4] which
ruled that respondents were illegally dismissed and entitled to their money
claims.
The facts, culled from the records, are as follows:[5]

Petitioner Mayon Hotel & Restaurant is a single proprietor business

registered in the name of petitioner Pacita O. Po, [6] whose mother, petitioner
Josefa Po Lam, manages the establishment.[7] The hotel and restaurant
employed about sixteen (16) employees.
Records show that on various dates starting in 1981, petitioner hotel and
restaurant hired the following people, all respondents in this case, with the
following jobs:[8]
1. Wenefredo Loveres

Accountant and Officer-in-charge

2. Paterno Llarena

Front Desk Clerk

3. Gregorio Nicerio

Supervisory Waiter

4. Amado Macandog

Roomboy

5. Luis Guades

Utility/Maintenance Worker

6. Santos Broola

Roomboy

7. Teodoro Laurenaria

Waiter

8. Eduardo Alamares

Roomboy/Waiter

9. Lourdes Camigla

Cashier

10. Chona Bumalay

Cashier

11. Jose Atractivo

Technician

12. Amado Alamares

Dishwasher and Kitchen Helper

13. Roger Burce

Cook

14. Rolando Adana

Waiter

15. Miguel Torrefranca

Cook

16. Edgardo Torrefranca

Cook

Due to the expiration and non-renewal of the lease contract for the rented
space occupied by the said hotel and restaurant at Rizal Street, the hotel
operations of the business were suspended on March 31, 1997.[9] The
operation of the restaurant was continued in its new location at Elizondo
Street, Legazpi City, while waiting for the construction of a new Mayon Hotel
& Restaurant at Pearanda Street, Legazpi City.[10] Only nine (9) of the sixteen
(16) employees continued working in the Mayon Restaurant at its new site.[11]
On various dates of April and May 1997, the 16 employees filed
complaints for underpayment of wages and other money claims against
petitioners, as follows:[12]
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for
illegal dismissal, underpayment of wages, nonpayment of holiday and rest
day pay; service incentive leave pay (SILP) and claims for separation pay
plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for
underpayment of wages; nonpayment of cost of living allowance (COLA) and
overtime pay; premium pay for holiday and rest day; SILP; nightshift
differential pay and separation pay plus damages;
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment
of wages; nonpayment of holiday and rest day pay and SILP;
Rolando Adana, Roger Burce and Amado Alamares for underpayment of
wages; nonpayment of COLA, overtime, holiday, rest day, SILP and nightshift
differential pay;
Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest
day and SILP and night shift differential pay;
Santos Broola for illegal dismissal, underpayment of wages, overtime pay,
rest day pay, holiday pay, SILP, and damages;[13] and

Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and

overtime pay; premium pay for holiday and rest day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a
Joint Decision in favor of the employees. The Labor Arbiter awarded
substantially all of respondents money claims, and held that respondents
Loveres, Macandog and Llarena were entitled to separation pay, while
respondents Guades, Nicerio and Alamares were entitled to their retirement
pay. The Labor Arbiter also held that based on the evidence presented,
Josefa Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and the
proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was reversed,
and all the complaints were dismissed.
Respondents filed a motion for reconsideration with the NLRC and when
this was denied, they filed a petition for certiorari with the CA which rendered
the now assailed decision.
After their motion for reconsideration was denied, petitioners now come
to this Court, seeking the reversal of the CA decision on the following
grounds:
I. THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE
DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION
(SECOND DIVISION) BY HOLDING THAT THE FINDINGS OF FACT OF
THE NLRC WERE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE
DESPITE AMPLE AND SUFFICIENT EVIDENCE SHOWING THAT THE
NLRC DECISION IS INDEED SUPPORTED BY SUBSTANTIAL EVIDENCE;
II. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE
JOINT DECISION OF THE LABOR ARBITER WHICH RULED THAT
PRIVATE RESPONDENTS WERE ILLEGALLY DISMISSED FROM THEIR
EMPLOYMENT, DESPITE THE FACT THAT THE REASON WHY PRIVATE
RESPONDENTS WERE OUT OF WORK WAS NOT DUE TO THE FAULT
OF PETITIONERS BUT TO CAUSES BEYOND THE CONTROL OF
PETITIONERS.
III. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE
AWARD OF MONETARY BENEFITS BY THE LABOR ARBITER IN HIS
JOINT DECISION IN FAVOR OF THE PRIVATE RESPONDENTS,
INCLUDING THE AWARD OF DAMAGES TO SIX (6) OF THE PRIVATE
RESPONDENTS,
DESPITE
THE
FACT
THAT
THE
PRIVATE
RESPONDENTS HAVE NOT PROVEN BY SUBSTANTIAL EVIDENCE
THEIR ENTITLEMENT THERETO AND ESPECIALLY THE FACT THAT
THEY WERE NOT ILLEGALLY DISMISSED BY THE PETITIONERS.
IV. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PACITA ONG PO IS THE OWNER OF THE BUSINESS ESTABLISHMENT,

PETITIONER MAYON HOTEL AND RESTAURANT, THUS DISREGARDING

THE
CERTIFICATE
OF
REGISTRATION
OF
THE
BUSINESS
ESTABLISHMENT ISSUED BY THE LOCAL GOVERNMENT, WHICH IS A
PUBLIC DOCUMENT, AND THE UNQUALIFIED ADMISSIONS OF
COMPLAINANTS-PRIVATE RESPONDENTS.[14]
In essence, the petition calls for a review of the following issues:
1.

Was it correct for petitioner Josefa Po Lam to be held liable as the

owner of petitioner Mayon Hotel & Restaurant, and the proper
respondent in this case?

2.

Were respondents Loveres, Guades, Macandog, Atractivo, Llarena

and Nicerio illegally dismissed?

3.

Are respondents entitled to their money claims due to

underpayment of wages, and nonpayment of holiday pay, rest day
premium, SILP, COLA, overtime pay, and night shift differential
pay?

It is petitioners contention that the above issues have already been

threshed out sufficiently and definitively by the NLRC. They therefore assail
the CAs reversal of the NLRC decision, claiming that based on the ruling
in Castillo v. NLRC,[15] it is non sequitur that the CA should re-examine the
factual findings of both the NLRC and the Labor Arbiter, especially as in this
case the NLRCs findings are allegedly supported by substantial evidence.
We do not agree.
There is no denying that it is within the NLRCs competence, as an
appellate agency reviewing decisions of Labor Arbiters, to disagree with and
set aside the latters findings.[16] But it stands to reason that the NLRC should
state an acceptable cause therefore, otherwise it would be a whimsical,
capricious, oppressive, illogical, unreasonable exercise of quasi-judicial
prerogative, subject to invalidation by the extraordinary writ of certiorari.
[17]
And when the factual findings of the Labor Arbiter and the NLRC are
diametrically opposed and this disparity of findings is called into question,
there is, necessarily, a re-examination of the factual findings to ascertain
which opinion should be sustained.[18] As ruled in Asuncion v. NLRC,[19]
Although, it is a legal tenet that factual findings of administrative bodies are
entitled to great weight and respect, we are constrained to take a second
look at the facts before us because of the diversity in the opinions of the
Labor Arbiter and the NLRC. A disharmony between the factual findings of the
Labor Arbiter and those of the NLRC opens the door to a review thereof by
this Court.[20]

The CA, therefore, did not err in reviewing the records to determine which
opinion was supported by substantial evidence.
Moreover, it is explicit in Castillo v. NLRC[21] that factual findings of
administrative bodies like the NLRC are affirmed only if they are
supported by substantial evidence that is manifest in the decision
and on the records. As stated in Castillo:
[A]buse of discretion does not necessarily follow from a reversal by the NLRC
of a decision of a Labor Arbiter. Mere variance in evidentiary assessment
between the NLRC and the Labor Arbiter does not automatically call for a full
review of the facts by this Court. The NLRCs decision, so long as it is not
bereft of substantial support from the records, deserves respect from this
Court. As a rule, the original and exclusive jurisdiction to review a decision or
resolution of respondent NLRC in a petition for certiorari under Rule 65 of the
Rules of Court does not include a correction of its evaluation of the evidence
but is confined to issues of jurisdiction or grave abuse of discretion. Thus,
the NLRCs factual findings, if supported by substantial evidence, are entitled
to great respect and even finality, unless petitioner is able to show that it
simply and arbitrarily disregarded the evidence before it or had
misappreciated the evidence to such an extent as to compel a contrary
conclusion if such evidence had been properly appreciated. (citations
omitted)[22]
After careful review, we find that the reversal of the NLRCs decision was in
order precisely because it was not supported by substantial evidence.
1.

Ownership by Josefa Po Lam

The Labor Arbiter ruled that as regards the claims of the employees,
petitioner Josefa Po Lam is, in fact, the owner of Mayon Hotel & Restaurant.
Although the NLRC reversed this decision, the CA, on review, agreed with the
Labor Arbiter that notwithstanding the certificate of registration in the name
of Pacita Po, it is Josefa Po Lam who is the owner/proprietor of Mayon Hotel &
Restaurant, and the proper respondent in the complaints filed by the
employees. The CA decision states in part:
[Despite] the existence of the Certificate of Registration in the name of Pacita
Po, we cannot fault the labor arbiter in ruling that Josefa Po Lam is the owner
of the subject hotel and restaurant. There were conflicting documents
submitted by Josefa herself. She was ordered to submit additional documents
to clearly establish ownership of the hotel and restaurant, considering the
testimonies given by the [respondents] and the non-appearance and failure
to submit her own position paper by Pacita Po. But Josefa did not comply with
the directive of the Labor Arbiter. The ruling of the Supreme Court in

Metropolitan Bank and Trust Company v. Court of Appeals applies to Josefa Po

Lam which is stated in this wise:
When the evidence tends to prove a material fact which imposes a liability on
a party, and he has it in his power to produce evidence which from its very
nature must overthrow the case made against him if it is not founded

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 172161

March 2, 2011

SLL INTERNATIONAL CABLES SPECIALIST and SONNY L.

LAGON, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, 4th DIVISION, ROLDAN
LOPEZ, EDGARDO ZUIGA and DANILO CAETE, Respondents.
DECISION

MENDOZA, J.:
Assailed in this petition for review on certiorari are the January 11, 2006
Decision1 and the March 31, 2006 Resolution2 of the Court of Appeals (CA), in
CA-G.R. SP No. 00598 which affirmed with modification the March 31, 2004
Decision3 and December 15, 2004 Resolution4 of the National Labor Relations
Commission (NLRC).The NLRC Decision found the petitioners, SLL
International Cables Specialist (SLL) and its manager, Sonny L.
Lagon (petitioners), not liable for the illegal dismissal of Roldan Lopez, Danilo
Caete and Edgardo Zuiga(private respondents) but held them jointly and
severally liable for payment of certain monetary claims to said respondents.
A chronicle of the factual antecedents has been succinctly summarized by
the CA as follows:
Sometime in 1996, and January 1997, private respondents Roldan Lopez
(Lopez for brevity) and Danilo Caete (Caete for brevity), and Edgardo
Zuiga (Zuiga for brevity) respectively, were hired by petitioner Lagon as
apprentice or trainee cable/lineman. The three were paid the full minimum
wage and other benefits but since they were only trainees, they did not
report for work regularly but came in as substitutes to the regular workers or
in undertakings that needed extra workers to expedite completion of work.
After their training, Zuiga, Caete and Lopez were engaged as project
employees by the petitioners in their Islacom project in Bohol. Private
respondents started on March 15, 1997 until December 1997. Upon the
completion of their project, their employment was also terminated. Private
respondents received the amount of P145.00, the minimum prescribed daily
wage for Region VII. In July 1997, the amount of P145 was increased
to P150.00 by the Regional Wage Board (RWB) and in October of the same
year, the latter was increased to P155.00. Sometime in March 1998, Zuiga
and Caete were engaged again by Lagon as project employees for its PLDT
Antipolo, Rizal project, which ended sometime in (sic) the late September
1998. As a consequence, Zuiga and Caetes employment was terminated.
For this project, Zuiga and Caete received only the wage of P145.00 daily.
The minimum prescribed wage for Rizal at that time was P160.00.
Sometime in late November 1998, private respondents re-applied in the
Racitelcom project of Lagon in Bulacan. Zuiga and Caete were reemployed. Lopez was also hired for the said specific project. For this, private
respondents received the wage of P145.00. Again, after the completion of
their project in March 1999, private respondents went home to Cebu City.
On May 21, 1999, private respondents for the 4th time worked with Lagons
project in Camarin, Caloocan City with Furukawa Corporation as the general
contractor. Their contract would expire on February 28, 2000, the period of
completion of the project. From May 21, 1997-December 1999, private

respondents received the wage of P145.00. At this time, the minimum

prescribed rate for Manila was P198.00. In January to February 28, the three
received the wage of P165.00. The existing rate at that time was P213.00.
For reasons of delay on the delivery of imported materials from Furukawa
Corporation, the Camarin project was not completed on the scheduled date of
completion. Face[d] with economic problem[s], Lagon was constrained to cut
down the overtime work of its worker[s][,] including private respondents.
Thus, when requested by private respondents on February 28, 2000 to work
overtime, Lagon refused and told private respondents that if they insist, they
would have to go home at their own expense and that they would not be
given anymore time nor allowed to stay in the quarters. This prompted
private respondents to leave their work and went home to Cebu. On March 3,
2000, private respondents filed a complaint for illegal dismissal, non-payment
of wages, holiday pay, 13th month pay for 1997 and 1998 and service
incentive leave pay as well as damages and attorneys fees.
In their answers, petitioners admit employment of private respondents but
claimed that the latter were only project employees[,] for their services were
merely engaged for a specific project or undertaking and the same were
covered by contracts duly signed by private respondents. Petitioners further
alleged that the food allowance ofP63.00 per day as well as private
respondents allowance for lodging house, transportation, electricity, water
and snacks allowance should be added to their basic pay. With these,
petitioners claimed that private respondents received higher wage rate than
that prescribed in Rizal and Manila.
Lastly, petitioners alleged that since the workplaces of private respondents
were all in Manila, the complaint should be filed there. Thus, petitioners
prayed for the dismissal of the complaint for lack of jurisdiction and utter lack
of merit. (Citations omitted.)
On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) rendered his
decision5 declaring that his office had jurisdiction to hear and decide the
complaint filed by private respondents. Referring to Rule IV, Sec. 1 (a) of the
NLRC Rules of Procedure prevailing at that time,6 the LA ruled that it had
jurisdiction because the "workplace," as defined in the said rule, included the
place where the employee was supposed to report back after a temporary
detail, assignment or travel, which in this case was Cebu.
As to the status of their employment, the LA opined that private respondents
were regular employees because they were repeatedly hired by petitioners
and they performed activities which were usual, necessary and desirable in
the business or trade of the employer.

With regard to the underpayment of wages, the LA found that private

respondents were underpaid. It ruled that the free board and lodging,
electricity, water, and food enjoyed by them could not be included in the
computation of their wages because these were given without their written
consent.
The LA, however, found that petitioners were not liable for illegal dismissal.
The LA viewed private respondents act of going home as an act of
indifference when petitioners decided to prohibit overtime work. 7
In its March 31, 2004 Decision, the NLRC affirmed the findings of the LA. In
addition, the NLRC noted that not a single report of project completion was
filed with the nearest Public Employment Office as required
by the Department of Labor and Employment (DOLE) Department Order No.
19, Series of 1993.8 The NLRC later denied9 the motion for
reconsideration10 subsequently filed by petitioners.
When the matter was elevated to the CA on a petition for certiorari, it
affirmed the findings that the private respondents were regular employees. It
considered the fact that they performed functions which were the regular and
usual business of petitioners. According to the CA, they were clearly
members of a work pool from which petitioners drew their project employees.
The CA also stated that the failure of petitioners to comply with the simple
but compulsory requirement to submit a report of termination to the nearest
Public Employment Office every time private respondents employment was
terminated was proof that the latter were not project employees but regular
employees.
The CA likewise found that the private respondents were underpaid. It ruled
that the board and lodging, electricity, water, and food enjoyed by the
private respondents could not be included in the computation of their wages
because these were given without their written consent. The CA added that
the private respondents were entitled to 13th month pay.
The CA also agreed with the NLRC that there was no illegal dismissal. The CA
opined that it was the petitioners prerogative to grant or deny any request
for overtime work and that the private respondents act of leaving the
workplace after their request was denied was an act of abandonment.
In modifying the decision of the labor tribunal, however, the CA noted that
respondent Roldan Lopez did not work in the Antipolo project and, thus, was
not entitled to wage differentials. Also, in computing the differentials for the
period January and February 2000, the CA disagreed in the award of
differentials based on the minimum daily wage of P223.00, as the prevailing

minimum daily wage then was only P213.00. Petitioners sought

reconsideration but the CA denied it in its March 31, 2006 Resolution.11
In this petition for review on certiorari,12 petitioners seek the reversal and
setting aside of the CA decision anchored on this lone:
GROUND/ASSIGNMENT OF ERROR
THE PUBLIC RESPONDENT NLRC COMMITTED A SERIOUS ERROR IN LAW IN
AWARDING WAGE DIFFERENTIALS TO THE PRIVATE COMPLAINANTS ON THE
BASES OF MERE TECHNICALITIES, THAT IS, FOR LACK OF WRITTEN
CONFORMITY x x x AND LACK OF NOTICE TO THE DEPARTMENT OF LABOR
AND EMPLOYMENT (DOLE)[,] AND THUS, THE COURT OF APPEALS GRAVELY
ERRED IN AFFIRMING WITH MODIFICATION THE NLRC DECISION IN THE LIGHT
OF THE RULING IN THE CASE OF JENNY M. AGABON and VIRGILIO AGABON vs,
NLRC, ET AL., GR NO. 158963, NOVEMBER 17, 2004, 442 SCRA 573, [AND
SUBSEQUENTLY IN THE CASE OF GLAXO WELLCOME PHILIPPINES, INC.
VS. NAGAKAKAISANG EMPLEYADO NG WELLCOME-DFA (NEW DFA), ET AL.,
GR NO. 149349, 11 MARCH 2005], WHICH FINDS APPLICATION IN THE
INSTANT CASE BY ANALOGY.13
Petitioners reiterated their position that the value of the facilities that the
private respondents enjoyed should be included in the computation of the
"wages" received by them. They argued that the rulings in Agabon v.
NLRC14and Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado Ng
Wellcome-DFA15 should be applied by analogy, in the sense that the lack of
written acceptance of the employees of the facilities enjoyed by them should
not mean that the value of the facilities could not be included in the
computation of the private respondents "wages."
On November 29, 2006, the Court resolved to issue a Temporary Restraining
Order (TRO) enjoining the public respondent from enforcing the NLRC and CA
decisions until further orders from the Court.
After a thorough review of the records, however, the Court finds no merit in
the petition.
This petition generally involves factual issues, such as, whether or not there
is evidence on record to support the findings of the LA, the NLRC and the CA
that private respondents were project or regular employees and that their
salary differentials had been paid. This calls for a re-examination of the
evidence, which the Court cannot entertain. Settled is the rule that 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 the Court when supported by substantial
evidence. It is not the Courts function to assess and evaluate the evidence

all over again, particularly where the findings of both the Labor tribunals and
the CA concur. 16
As a general rule, on payment of wages, a party who alleges payment as a
defense has the burden of proving it.17 Specifically with respect to labor
cases, the burden of proving payment of monetary claims rests on the
employer, the rationale being that the pertinent personnel files, payrolls,
records, remittances and other similar documents which will show that
overtime, differentials, service incentive leave and other claims of workers
have been paid are not in the possession of the worker but in the custody
and absolute control of the employer.18
In this case, petitioners, aside from bare allegations that private respondents
received wages higher than the prescribed minimum, failed to present any
evidence, such as payroll or payslips, to support their defense of payment.
Thus, petitioners utterly failed to discharge the onus probandi.
Private respondents, on the other hand, are entitled to be paid the minimum
wage, whether they are regular or non-regular employees.
Section 3, Rule VII of the Rules to Implement the Labor Code19 specifically
enumerates those who are not covered by the payment of minimum wage.
Project employees are not among them.
On whether the value of the facilities should be included in the computation
of the "wages" received by private respondents, Section 1 of DOLE
Memorandum Circular No. 2 provides that an employer may provide
subsidized meals and snacks to his employees provided that the subsidy shall
not be less that 30% of the fair and reasonable value of such facilities. In
such cases, the employer may deduct from the wages of the employees not
more than 70% of the value of the meals and snacks enjoyed by the latter,
provided that such deduction is with the written authorization of the
employees concerned.
Moreover, before the value of facilities can be deducted from the employees
wages, the following requisites must all be attendant: first, proof must be
shown that such facilities are customarily furnished by the trade; second, the
provision of deductible facilities must be voluntarily accepted in writing by
the employee; and finally, facilities must be charged at reasonable
value.20 Mere availment is not sufficient to allow deductions from employees
wages.21
These requirements, however, have not been met in this case. SLL failed to
present any company policy or guideline showing that provisions for meals
and lodging were part of the employees salaries. It also failed to provide
proof of the employees written authorization, much less show how they

arrived at their valuations. At any rate, it is not even clear whether private
respondents actually enjoyed said facilities.
The Court, at this point, makes a distinction between "facilities" and
"supplements." It is of the view that the food and lodging, or the electricity
and water allegedly consumed by private respondents in this case were not
facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big
Wedge Co.,22 the two terms were distinguished from one another in this wise:
"Supplements," therefore, constitute extra remuneration or special privileges
or benefits given to or received by the laborers over and above their ordinary
earnings or wages. "Facilities," on the other hand, are items of expense
necessary for the laborer's and his family's existence and subsistence so that
by express provision of law (Sec. 2[g]), they form part of the wage and when
furnished by the employer are deductible therefrom, since if they are not so
furnished, the laborer would spend and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an
extra remuneration above and over his basic or ordinary earning or wage is
supplement; and when said benefit or privilege is part of the laborers' basic
wages, it is a facility. The distinction lies not so much in the kind of benefit or
item (food, lodging, bonus or sick leave) given, but in the purpose for which it
is given.23 In the case at bench, the items provided were given freely by SLL
for the purpose of maintaining the efficiency and health of its workers while
they were working at their respective projects.1avvphi1
For said reason, the cases of Agabon and Glaxo are inapplicable in this case.
At any rate, these were cases of dismissal with just and authorized causes.
The present case involves the matter of the failure of the petitioners to
comply with the payment of the prescribed minimum wage.
The Court sustains the deletion of the award of differentials with respect to
respondent Roldan Lopez. As correctly pointed out by the CA, he did not work
for the project in Antipolo.
WHEREFORE, the petition is DENIED. The temporary restraining order issued
by the Court on November 29, 2006 is deemed, as it is hereby
ordered, DISSOLVED.
SO ORDERED.

[G.R. No. 118506. April 18, 1997]

NORMA MABEZA, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, PETER NG/HOTEL SUPREME, respondents.
DECISION
KAPUNAN, J.:
This petition seeking the nullification of a resolution of public respondent
National Labor Relations Commission dated April 28, 1994 vividly illustrates
why courts should be ever vigilant in the preservation of the constitutionally
enshrined rights of the working class. Without the protection accorded by our
laws and the tempering of courts, the natural and historical inclination of
capital to ride roughshod over the rights of labor would run unabated.
The facts of the case at bar, culled from the conflicting versions of
petitioner and private respondent, are illustrative.
Petitioner Norma Mabeza contends that around the first week of May,
1991, she and her co-employees at the Hotel Supreme in Baguio City were
asked by the hotel's management to sign an instrument attesting to the
latter's compliance with minimum wage and other labor standard provisions
of law.[1] The instrument provides:[2]
JOINT AFFIDAVIT
We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA
JUGUETA, ADELAIDA NONOG, NORMA MABEZA, JONATHAN PICART and
JOSE DIZON, all of legal ages (sic), Filipinos and residents of Baguio
City, under oath, depose and say:

1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at

No. 416 Magsaysay Ave., Baguio City;
2. That the said Hotel is separately operated from the Ivy's Grill and
Restaurant;
3. That we are all (8) employees in the hotel and assigned in each respective
shifts;
4. That we have no complaints against the management of the Hotel
Supreme as we are paid accordingly and that we are treated well.
5. That we are executing this affidavit voluntarily without any force or
intimidation and for the purpose of informing the authorities concerned and
to dispute the alleged report of the Labor Inspector of the Department of
Labor and Employment conducted on the said establishment on February 2,
1991.
IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of
May, 1991 at Baguio City, Philippines.
(Sgd.) (Sgd.) (Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY
(Sgd) (Sgd.) (Sgd.)
MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA
(Sgd) (Sgd.)
JONATHAN PICART JOSE DIZON
SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at
Baguio City, Philippines.
Asst. City Prosecutor
Petitioner signed the affidavit but refused to go to the City Prosecutor's
Office to swear to the veracity and contents of the affidavit as instructed by
management. The affidavit was nevertheless submitted on the same day to

the Regional Office of the Department of Labor and Employment in Baguio

City.
As gleaned from the affidavit, the same was drawn by management for
the sole purpose of refuting findings of the Labor Inspector of DOLE (in an
inspection of respondent's establishment on February 2, 1991) apparently
adverse to the private respondent.[3]
After she refused to proceed to the City Prosecutor's Office - on the same
day the affidavit was submitted to the Cordillera Regional Office of DOLE petitioner avers that she was ordered by the hotel management to turn over
the keys to her living quarters and to remove her belongings from the hotel
premises.[4] According to her, respondent strongly chided her for refusing to
proceed to the City Prosecutor's Office to attest to the affidavit. [5] She
thereafter reluctantly filed a leave of absence from her job which was denied
by management. When she attempted to return to work on May 10, 1991, the
hotel's cashier, Margarita Choy, informed her that she should not report to
work and, instead, continue with her unofficial leave of absence.
Consequently, on May 13, 1991, three days after her attempt to return to
work, petitioner filed a complaint for illegal dismissal before the Arbitration
Branch of the National Labor Relations Commission - CAR Baguio City. In
addition to her complaint for illegal dismissal, she alleged underpayment of
wages, non-payment of holiday pay, service incentive leave pay, 13th month
pay, night differential and other benefits. The complaint was docketed as
NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P.
Pati.
Responding to the allegations made in support of petitioner's complaint
for illegal dismissal, private respondent Peter Ng alleged before Labor Arbiter
Pati that petitioner "surreptitiously left (her job) without notice to the
management"[6] and that she actually abandoned her work. He maintained
that there was no basis for the money claims for underpayment and other
benefits as these were paid in the form of facilities to petitioner and the
hotel's other employees.[7] Pointing to the Affidavit of May 7, 1991, the
private respondent asserted that his employees actually have no problems
with management. In a supplemental answer submitted eleven (11) months
after the original complaint for illegal dismissal was filed, private respondent
raised a new ground, loss of confidence, which was supported by a criminal
complaint for Qualified Theft he filed before the prosecutor's office of the City
of Baguio against petitioner on July 4, 1991.[8]

On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing

petitioner's complaint on the ground of loss of confidence. His disquisitions in
support of his conclusion read as follows:
It appears from the evidence of respondent that complainant carted
away or stole one (1) blanket, 1 piece bedsheet, 1 piece thermos, 2
pieces towel (Exhibits '9', '9-A,' '9-B,' '9-C' and '10' pages 12-14 TSN,
December 1, 1992).
In fact, this was the reason why respondent Peter Ng lodged a criminal
complaint against complainant for qualified theft and perjury. The
fiscal's office finding a prima facie evidence that complainant
committed the crime of qualified theft issued a resolution for its filing
in court but dismissing the charge of perjury (Exhibit '4' for respondent
and Exhibit 'B-7' for complainant). As a consequence, complainant was
charged in court for the said crime (Exhibit '5' for respondent and
Exhibit 'B-6' for the complainant).
With these pieces of evidence, complainant committed serious
misconduct against her employer which is one of the just and valid
grounds for an employer to terminate an employee (Article 282 of the
Labor Code as amended).[9]
On April 28, 1994, respondent NLRC promulgated its assailed
Resolution[10] affirming the Labor Arbiter's decision. The resolution
substantially incorporated the findings of the Labor Arbiter. [11] Unsatisfied,
petitioner instituted the instant special civil action for certiorari under Rule 65
of the Rules of Court on the following grounds:[12]
1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION COMMITTED A PATENT AND
PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN ITS FAILURE TO CONSIDER THAT THE ALLEGED
LOSS OF CONFIDENCE IS A FALSE CAUSE AND AN
AFTERTHOUGHT ON THE PART OF THE RESPONDENTEMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL OF
THE COMPLAINANT FROM HER EMPLOYMENT;
2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION COMMITTED A PATENT AND
PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF

DISCRETION IN ADOPTING THE RULING OF THE LABOR

ARBITER THAT THERE WAS NO UNDERPAYMENT OF WAGES
AND BENEFITS ON THE BASIS OF EXHIBIT "8" (AN UNDATED
SUMMARY OF COMPUTATION PREPARED BY ALLEGEDLY BY
RESPONDENT'S EXTERNAL ACCOUNTANT) WHICH IS TOTALLY
INADMISSIBLE AS AN EVIDENCE TO PROVE PAYMENT OF
WAGES AND BENEFITS;
3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION COMMITTED A PATENT AND
PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN FAILING TO CONSIDER THE EVIDENCE
ADDUCED BEFORE THE LABOR ARBITER AS CONSTITUTING
UNFAIR LABOR PRACTICE COMMITTED BY THE RESPONDENT.
The Solicitor General, in a Manifestation in lieu of Comment dated August
8, 1995 rejects private respondent's principal claims and defenses and urges
this Court to set aside the public respondent's assailed resolution.[13]
We agree.
It is settled that in termination cases the employer bears the burden of
proof to show that the dismissal is for just cause, the failure of which would
mean that the dismissal is not justified and the employee is entitled to
reinstatement.[14]
In the case at bar, the private respondent initially claimed that petitioner
abandoned her job when she failed to return to work on May 8,
1991. Additionally, in order to strengthen his contention that there existed
sufficient cause for the termination of petitioner, he belatedly included a
complaint for loss of confidence, supporting this with charges that petitioner
had stolen a blanket, a bedsheet and two towels from the hotel. [15] Appended
to his last complaint was a suit for qualified theft filed with the Baguio City
prosecutor's office.
From the evidence on record, it is crystal clear that the circumstances
upon which private respondent anchored his claim that petitioner
"abandoned" her job were not enough to constitute just cause to sanction the
termination of her services under Article 283 of the Labor Code. For
abandonment to arise, there must be concurrence of two things: 1) lack of

intention to work;[16] and 2) the presence of overt acts signifying the

employee's intention not to work.[17]
In the instant case, respondent does not dispute the fact that petitioner
tried to file a leave of absence when she learned that the hotel management
was displeased with her refusal to attest to the affidavit. The fact that she
made this attempt clearly indicates not an intention to abandon but an
intention to return to work after the period of her leave of absence, had it
been granted, shall have expired.
Furthermore, while absence from work for a prolonged period may
suggest abandonment in certain instances, mere absence of one or two days
would not be enough to sustain such a claim. The overt act (absence) ought
to unerringly point to the fact that the employee has no intention to return to
work,[18] which is patently not the case here. In fact, several days after she
had been advised to take an informal leave, petitioner tried to resume
working with the hotel, to no avail. It was only after she had been repeatedly
rebuffed that she filed a case for illegal dismissal. These acts militate against
the private respondent's claim that petitioner abandoned her job. As the
Solicitor General in his manifestation observed:
Petitioner's absence on that day should not be construed as
abandonment of her job. She did not report because the cashier told
her not to report anymore, and that private respondent Ng did not
want to see her in the hotel premises. But two days later or on the
10th of May, after realizing that she had to clarify her employment
status, she again reported for work. However, she was prevented from
working by private respondents.[19]
We now come to the second cause raised by private respondent to
support his contention that petitioner was validly dismissed from her job.
Loss of confidence as a just cause for dismissal was never intended to
provide employers with a blank check for terminating their employees. Such
a vague, all-encompassing pretext as loss of confidence, if unqualifiedly
given the seal of approval by this Court, could readily reduce to barren form
the words of the constitutional guarantee of security of tenure. Having this in
mind, loss of confidence should ideally apply only to cases involving
employees occupying positions of trust and confidence or to those situations
where the employee is routinely charged with the care and custody of the
employer's money or property. To the first class belong managerial

employees, i.e., those vested with the powers or prerogatives to lay down
management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees or effectively recommend such
managerial actions; and to the second class belong cashiers, auditors,
property custodians, etc., or those who, in the normal and routine exercise of
their functions, regularly handle significant amounts of money or
property. Evidently, an ordinary chambermaid who has to sign out for linen
and other hotel property from the property custodian each day and who has
to account for each and every towel or bedsheet utilized by the hotel's guests
at the end of her shift would not fall under any of these two classes of
employees for which loss of confidence, if ably supported by evidence, would
normally apply. Illustrating this distinction, this Court, in Marina Port Services,
Inc. vs. NLRC,[20] has stated that:
To be sure, every employee must enjoy some degree of trust and
confidence from the employer as that is one reason why he was
employed in the first place. One certainly does not employ a person he
distrusts. Indeed, even the lowly janitor must enjoy that trust and
confidence in some measure if only because he is the one who opens
the office in the morning and closes it at night and in this sense is
entrusted with the care or protection of the employer's property. The
keys he holds are the symbol of that trust and confidence.
By the same token, the security guard must also be considered as
enjoying the trust and confidence of his employer, whose property he
is safeguarding. Like the janitor, he has access to this property. He too,
is charged with its care and protection.
Notably, however, and like the janitor again, he is entrusted only with
the physical task of protecting that property. The employer's trust and
confidence in him is limited to that ministerial function. He is not
entrusted, in the Labor Arbiter's words, 'with the duties of safekeeping
and safeguarding company policies, management instructions, and
company secrets such as operation devices.' He is not privy to these
confidential matters, which are shared only in the higher echelons of
management. It is the persons on such levels who, because they
discharge these sensitive duties, may be considered holding positions
of trust and confidence. The security guard does not belong in such
category.[21]

More importantly, we have repeatedly held that loss of confidence should

not be simulated in order to justify what would otherwise be, under the
provisions of law, an illegal dismissal. "It should not be used as a subterfuge
for causes which are illegal, improper and unjustified. It must be genuine, not
a mere afterthought to justify an earlier action taken in bad faith."[22]
In the case at bar, the suspicious delay in private respondent's filing of
qualified theft charges against petitioner long after the latter exposed the
hotel's scheme (to avoid its obligations as employer under the Labor Code)
by her act of filing illegal dismissal charges against the private respondent
would hardly warrant serious consideration of loss of confidence as a valid
ground for dismissal. Notably, the Solicitor General has himself taken a
position opposite the public respondent and has observed that:
If petitioner had really committed the acts charged against her by
private respondents (stealing supplies of respondent hotel), private
respondents should have confronted her before dismissing her on that
ground. Private respondents did not do so. In fact, private respondent
Ng did not raise the matter when petitioner went to see him on May 9,
1991, and handed him her application for leave. It took private
respondents 52 days or up to July 4, 1991 before finally deciding to file
a criminal complaint against petitioner, in an obvious attempt to build
a case against her.
The manipulations of private respondents should not be
countenanced.[23]
Clearly, the efforts to justify petitioner's dismissal - on top of the private
respondent's scheme of inducing his employees to sign an affidavit absolving
him from possible violations of the Labor Code - taints with evident bad faith
and deliberate malice petitioner's summary termination from employment.
Having said this, we turn to the important question of whether or not the
dismissal by the private respondent of petitioner constitutes an unfair labor
practice.
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice on the part of
the employer is alleged is whether or not the employer has exerted pressure,
in the form of restraint, interference or coercion, against his employee's right

to institute concerted action for better terms and conditions of

employment. Without doubt, the act of compelling employees to sign an
instrument indicating that the employer observed labor standards provisions
of law when he might have not, together with the act of terminating or
coercing those who refuse to cooperate with the employer's scheme
constitutes unfair labor practice. The first act clearly preempts the right of
the hotel's workers to seek better terms and conditions of employment
through concerted action.
We agree with the Solicitor General's observation in his manifestation that
"[t]his actuation... is analogous to the situation envisaged in paragraph (f) of
Article 248 of the Labor Code" [24]which distinctly makes it an unfair labor
practice "to dismiss, discharge or otherwise prejudice or discriminate against
an employee for having given or being about to give testimony" [25]under the
Labor Code. For in not giving positive testimony in favor of her employer,
petitioner had reserved not only her right to dispute the claim and proffer
evidence in support thereof but also to work for better terms and conditions
of employment.
For refusing to cooperate with the private respondent's scheme,
petitioner was obviously held up as an example to all of the hotel's
employees, that they could only cause trouble to management at great
personal inconvenience. Implicit in the act of petitioner's termination and the
subsequent filing of charges against her was the warning that they would not
only be deprived of their means of livelihood, but also possibly, their personal
liberty.
This Court does not normally overturn findings and conclusions of quasijudicial agencies when the same are ably supported by the evidence on
record. However, where such conclusions are based on a misperception of
facts or where they patently fly in the face of reason and logic, we will not
hesitate to set aside those conclusions. Going into the issue of petitioner's
money claims, we find one more salient reason in this case to set things
right: the labor arbiter's evaluation of the money claims in this case
incredibly ignores existing law and jurisprudence on the matter. Its blatant
one-sidedness simply raises the suspicion that something more than the
facts, the law and jurisprudence may have influenced the decision at the
level of the Arbiter.
Labor Arbiter Pati accepted hook, line and sinker the private respondent's
bare claim that the reason the monetary benefits received by petitioner

between 1981 to 1987 were less than minimum wage was because petitioner
did not factor in the meals, lodging, electric consumption and water she
received during the period in her computations.[26] Granting that meals and
lodging were provided and indeed constituted facilities, such facilities could
not be deducted without the employer complying first with certain legal
requirements. Without satisfying these requirements, the employer simply
cannot deduct the value from the employee's wages. First, proof must be
shown that such facilities are customarily furnished by the trade. Second, the
provision of deductible facilities must be voluntarily accepted in writing by
the employee. Finally, facilities must be charged at fair and reasonable value.
[27]

These requirements were not met in the instant case. Private respondent
"failed to present any company policy or guideline to show that the meal and
lodging . . . (are) part of the salary;" [28] he failed to provide proof of the
employee's written authorization; and, he failed to show how he arrived at
the valuations.[29]
Curiously, in the case at bench, the only valuations relied upon by the
labor arbiter in his decision were figures furnished by the private
respondent's own accountant, without corroborative evidence. On the pretext
that records prior to the July 16, 1990 earthquake were lost or destroyed,
respondent failed to produce payroll records, receipts and other relevant
documents, where he could have, as has been pointed out in the Solicitor
General's manifestation, "secured certified copies thereof from the nearest
regional office of the Department of Labor, the SSS or the BIR."[30]
More significantly, the food and lodging, or the electricity and water
consumed by the petitioner were not facilities but supplements. A benefit or
privilege granted to an employee for the convenience of the employer is not
a facility. The criterion in making a distinction between the two not so much
lies in the kind (food, lodging) but the purpose.[31] Considering, therefore, that
hotel workers are required to work different shifts and are expected to be
available at various odd hours, their ready availability is a necessary matter
in the operations of a small hotel, such as the private respondent's hotel.
It is therefore evident that petitioner is entitled to the payment of the
deficiency in her wages equivalent to the full wage applicable from May 13,
1988 up to the date of her illegal dismissal.

Additionally, petitioner is entitled to payment of service incentive leave

pay, emergency cost of living allowance, night differential pay, and 13th
month pay for the periods alleged by the petitioner as the private respondent
has never been able to adduce proof that petitioner was paid the aforestated
benefits.
However, the claims covering the period of October 1987 up to the time
of filing the case on May 13, 1988 are barred by prescription as P.D. 442 (as
amended) and its implementing rules limit all money claims arising out of
employer-employee relationship to three (3) years from the time the cause of
action accrues.[32]
We depart from the settled rule that an employee who is unjustly
dismissed from work normally should be reinstated without loss of seniority
rights and other privileges. Owing to the strained relations between petitioner
and private respondent, allowing the former to return to her job would only
subject her to possible harassment and future embarrassment. In the instant
case, separation pay equivalent to one month's salary for every year of
continuous service with the private respondent would be proper, starting with
her job at the Belfront Hotel.
In addition to separation pay, backwages are in order. Pursuant to R.A.
6715 and our decision in Osmalik Bustamante, et al. vs. National Labor
Relations Commission,[33] petitioner is entitled to full backwages from the
time of her illegal dismissal up to the date of promulgation of this decision
without qualification or deduction.
Finally, in dismissal cases, the law requires that the employer must
furnish the employee sought to be terminated from employment with two
written notices before the same may be legally effected. The first is a written
notice containing a statement of the cause(s) for dismissal; the second is a
notice informing the employee of the employer's decision to terminate him
stating the basis of the dismissal. During the process leading to the second
notice, the employer must give the employee ample opportunity to be heard
and defend himself, with the assistance of counsel if he so desires.
Given the seriousness of the second cause (qualified theft) of the
petitioner's dismissal, it is noteworthy that the private respondent never even
bothered to inform petitioner of the charges against her. Neither was
petitioner given the opportunity to explain the loss of the articles. It was only
almost two months after petitioner had filed a complaint for illegal dismissal,

as an afterthought, that the loss was reported to the police and added as a
supplemental answer to petitioner's complaint. Clearly, the dismissal of
petitioner without the benefit of notice and hearing prior to her termination
violated her constitutional right to due process. Under the circumstances, an
award of One Thousand Pesos (P1,000.00) on top of payment of the
deficiency in wages and benefits for the period aforestated would be proper.
WHEREFORE, premises considered, the RESOLUTION of the National
Labor Relations Commission dated April 24, 1994 is REVERSED and SET
ASIDE, with costs. For clarity, the economic benefits due the petitioner are
hereby summarized as follows:
1) Deficiency wages and the applicable ECOLA from May 13, 1988 up
to the date of petitioner's illegal dismissal;
2) Service incentive leave pay; night differential pay and 13th month
pay for the same period;
3) Separation pay equal to one month's salary for every year of
petitioner's continuous service with the private respondent starting
with her job at the Belfront Hotel;
4) Full backwages, without qualification or deduction, from the date of
petitioner's illegal dismissal up to the date of promulgation of this
decision pursuant to our ruling in Bustamante vs. NLRC.[34]
5) P1.000.00.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
FIRST DIVISION
BPI EMPLOYEES UNION
METRO MANILA and
ZENAIDA UY,
Petitioners,

G.R. No. 178699

- versus BANK OF THE PHILIPPINE

ISLANDS,
Respondent.
x---------------------x
BANK OF THE PHILIPPINE
ISLANDS,
Petitioner,

- versus -

BPI EMPLOYEES UNION

METRO MANILA and
ZENAIDA UY,

G.R. No. 178735

Present:
CORONA, C.J., Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
PEREZ, JJ.
Promulgated:

Respondents.
September 21, 2011
x------------------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
The base figure in computing the award of back wages to an illegally
dismissed employee is the employees basic salary plus regular allowances and
benefits received at the time of dismissal, unqualified by any wage and benefit
increases granted in the interim.[1]
By these consolidated Petitions for Review on Certiorari,[2] the Bank of the
Philippine Islands (BPI), BPI Employees Union-Metro Manila (the Union) and
Zenaida Uy (Uy) seek modification of the Court of Appeals' (CA) Amended
Decision[3] dated July 4, 2007 in CA-G.R. SP No. 92631. Said Amended Decision
computed Uy's back wages and other monetary awards pursuant to the final and
executory Decision[4] dated March 31, 2005 of this Court in G.R. No. 137863 based
on her salary rate at the time of her dismissal and disregarded the salary increases
granted in the interim as well as other benefits which were not proven to have
been granted at the time of Uy's dismissal from the service.
Factual Antecedents
On December 14, 1995, Uys services as a bank teller in BPIs Escolta Branch was
terminated on grounds of gross disrespect/discourtesy towards an officer,
insubordination and absence without leave. Uy, together with the Union, thus filed
a case for illegal dismissal.
On December 31, 1997, the Voluntary Arbitrator[5] rendered a Decision[6] finding
Uy's dismissal as illegal and ordering BPI to immediately reinstate Uy and to pay
her full back wages,including all her other benefits under the Collective Bargaining
Agreement (CBA) and attorneys fees.[7]
On October 28, 1998, the CA affirmed with modification the Decision of the
Voluntary Arbitrator. Instead of reinstatement, the CA ordered BPI to pay Uy her
separation pay. Further, instead of full back wages, the CA fixed Uy's back wages
to three years.[8]
The case eventually reached this Court when both parties separately filed
petitions for review on certiorari. While BPIs petition which was docketed as G.R.
No. 137856 was denied for failure to comply with the requirements of a valid
certification of non-forum shopping,[9] Uys and the Unions petition which was
docketed as G.R. No. 137863 was given due course.

On March 31, 2005, the Court rendered its Decision[10] in G.R. No. 137863,
the dispositive portion of which reads:
WHEREFORE, the instant petition is GRANTED. The assailed
28 October 1998 Decision and 8 March 1999 Resolution of the Court
of Appeals are hereby MODIFIED as follows: 1) respondent BPI
is DIRECTED to pay petitioner Uy backwages from the time of her
illegal dismissal until her actual reinstatement; and 2) respondent BPI
is ORDERED to reinstate petitioner Uy to her former position, or to a
substantially equivalent one, without loss of seniority right and other
benefits attendant to the position.
SO ORDERED.[11]
Ruling of the Voluntary Arbitrator
After the Decision in G.R. No. 137863 became final and executory, Uy and
the Union filed with the Office of the Voluntary Arbitrator a Motion for the Issuance
of a Writ of Execution.[12]
In Uys computation, she based the amount of her back wages on
the current wage level and included all the increases in wages and benefits under
the CBA that were granted during the entire period of her illegal dismissal. These
include the following: Cost of Living Allowance (COLA), Financial Assistance,
Quarterly Bonus, CBA Signing Bonus, Uniform Allowance, Medicine Allowance,
Dental Care, Medical and Doctors Allowance, Tellers Functional Allowance, Vacation
Leave, Sick Leave, Holiday Pay, Anniversary Bonus, Burial Assistance and Omega
watch.[13]
BPI disputed Uy's/Unions computation arguing that it contains items which
are not included in the term back wages and that no proof was presented to show
that Uy was receiving all the listed items therein before her termination. It claimed
that the basis for the computation of back wages should be the employees wage
rate at the time of dismissal.[14]
In an Order dated December 6, 2005,[15] the Voluntary Arbitrator agreed with
Uys/Unions contention that full back wages should include all wage and benefit
increases, including new benefits granted during the period of dismissal. The
Voluntary Arbitrator opined that this Courts March 31, 2005 Decision in G.R. No.
137863 reinstated his December 31, 1997 Decision which ordered the payment of
full back wages computed from the time of dismissal until actual reinstatement
including all benefits under the CBA. Nonetheless, the Voluntary Arbitrator
excluded the claims for uniform allowance, anniversary bonus and Omega watch
for want of basis for their grant.

The Voluntary Arbitrator thus granted the motion for issuance of writ of
execution and computed Uys back wages in the total amount of P3,897,197.89 as
follows:
Basic Monthly Salary (BMS) ..............................................P 2,062,
087.50
Cost of Living Allowance.......................................................... 56,
100.00
Financial
Assistance.................................................................... 39,000.00
Total Quarterly Bonuses ....................................................... 693, 820.00
CBA Signing Bonus................................................................... 32,
500.00
Medicine Allowance................................................................... 58,
400.00
Dental
Care .............................................................................. 14,
120.00
Medical and Doctors Allowance.................................... 58, 400.00
Tellers Functional Allowance........................................ 25, 500.00
Vacation
Leave............................................................................ 187,
085.50
Sick
Leave.................................................................................... 187,
085.50
Holiday
Pay.................................................................................. 128,
808.65
Attorneys
Fee.............................................................................. 354,
290.72
Grand
Total....................................................................................P 3,8
97,197.89[16]
A Writ of Execution[17] and a Notice of Garnishment[18] were subsequently
issued.
Ruling of the Court of Appeals
Imputing grave abuse of discretion on the part of the Voluntary Arbitrator, BPI filed
with the CA a Petition for Certiorari with urgent Motion for the Issuance of a
Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction. [19] BPI
alleged that the Voluntary Arbitrators erroneous computation of back wages
amended and varied the terms of the March 31, 2005 final and executory Decision
in G.R. No. 137863.

Specifically, it averred that the Voluntary Arbitrator erred in computing back wages
based on the current rate and in including the wage increases or benefits given in
the interim as well as attorney's fees. BPI further argued that there was no basis
for the award of tellers functional allowance, cash conversion of vacation and sick
leaves and dental care allowance.
In their Comment,[20] Uy and the Union alleged that BPIs remedy is not
a certiorari petition under Rule 65 of the Rules of Court but an appeal from
judgments, final orders and resolutions of voluntary arbitrators under Rule 43 of
the Rules of Court. They also contended that BPIs petition is wanting in substance.
Meanwhile, the CA issued a TRO[21] restraining the implementation of the
December 6, 2005 Order of the Voluntary Arbitrator and the corresponding Writ of
Execution issued on December 12, 2005. Upon receipt of the TRO, Uy and the
Union filed an Urgent Motion for Clarification[22] on whether the TRO encompasses
even the implementation of the reinstatement aspect of the March 31, 2005
Decision of this Court in G.R. No. 137863.
The CA initially rendered a Decision[23] on May 24, 2006. In said Decision, the
CA held that BPI's resort to certiorari was proper and that the award of CBA
benefits and attorney's fees has legal basis. The CA however found that the
Voluntary Arbitrator erroneously computed Uy's back wages based on the current
rate. The CA also deleted the award of dental allowance since it was granted in
2002 or more than six years after Uy's dismissal.
Both
parties
thereafter
filed
their
respective
motions
for
reconsideration. Consequently, on July 4, 2007, the CA issued the herein assailed
Amended Decision.
In its Amended Decision, the CA upheld the propriety of BPIs resort
to certiorari. It also ruled that this Courts March 31, 2005 Decision in G.R. No.
137863 did not reinstate the December 31, 1997 Decision of the Voluntary
Arbitrator awarding full back wages including CBA benefits. The CA ruled that the
computation of Uys full back wages, as defined under Republic Act No. 6715,
should be based on the basic salary at the time of her dismissal plus the regular
allowances that she had been receiving likewise at the time of her dismissal. It
held that any increase in the basic salary occurring after Uys dismissal as well as
all benefits given after said dismissal should not be awarded to her in consonance
with settled jurisprudence on the matter. Accordingly, the CA pronounced that Uys
basic salary, which amounted to P10,895.00 at the time of her dismissal on
December 14, 1995, is to be used as the base figure in computing her back wages,
exclusive of any increases and/or modifications. As Uys entitlement to COLA,
quarterly bonus and financial assistance are not disputed, the CA retained their
award provided that, again, the base figure for the computation of these benefits
should be the rate then prevailing at the time of Uys dismissal.

The CA deleted the award of CBA signing bonus, medicine allowance,

medical and doctors allowance and dental care allowance for lack of sufficient
proof that these benefits were already being received and enjoyed by Uy at the
time of her dismissal. However, it held that the tellers functional allowance should
rightfully be given to Uy as a regular bank teller as well as the holiday pay and
monetary equivalent of vacation and sick leave benefits. As for the attorneys fees,
the CA ruled that Uys right over the same has already been resolved and has
attained finality when it was neither assailed nor raised as an issue after the
Voluntary Arbitrator awarded it in favor of Uy.
Finally, the CA likewise ruled that Uys reinstatement was effectively
restrained by the TRO issued by it. Pertinent portions of the CAs Amended Decision
read:
All told, We find Petitioners Motion for Reconsideration to be
partly meritorious and so hold that Private Respondent Uy is entitled
to the following sums to be included in the computation:
1.

Basic Monthly Salary, COLA and Quarterly Bonus,

with P10,895.00 as the base figure, computed from the time
of her dismissal up to her actual reinstatement;

2.

Tellers Functional Allowance, based on the rate at

the time of her dismissal;

3.

Monetary Equivalent of Vacation and Sick Leaves,

and Holiday Pay, based on the rate at the time of her
dismissal;

4.

Attorneys Fees, which is 10% of the total amount of

the award.

Anent the Private Respondents Urgent Motion for Clarification,

Private Respondent asked whether the TRO issued by this Court on
January 3, 2006 restrained the reinstatement of Private Respondent
Uy.
We answer in the affirmative.
The wordings of the Resolution ordering the issuance of a
temporary restraining order are clear. The TRO was issued to restrain
the implementation and/or enforcement of the Public Respondents
Order dated December 6, 200[5] and the Writ of Execution, dated
December 12, 200[5]. Considering that said Order and the ensuing
Writ are for the reinstatement of Private Respondent Uy, hence, the
TRO, indeed, effectively restrained Uys reinstatement.

WHEREFORE, Private Respondents Motion for Partial

Reconsideration is DENIED and Petitioners Motion for Partial
Reconsideration is GRANTED IN PART. The Decision of this Court
promulgated on May 24, 2006 is hereby amended, and the Public
Respondent Voluntary Arbitrator is ordered to recompute the
amount of backwages due to Private Respondent Uy consistent with
the foregoing ruling.
SO ORDERED.[24]
From the foregoing Amended Decision, both parties separately filed petitions
before this Court. Uys and the Unions petition is docketed as G.R. No 178699, and
that of BPI is docketed as G.R. No. 178735. The Court resolved to consolidate both
petitions in a Resolution dated September 3, 2007.[25]
Issues
G.R. No. 178699
Uy and the Union argue that the CA effectively amended the final Decision
in G.R. No. 137863. They allege that the issues raised in G.R. No. 137863 were
confined only to the propriety of the CAs award of back wages for a fixed period of
three years as well as the order for the payment of separation pay in lieu of
reinstatement. Hence, the Voluntary Arbitrators award of CBA benefits
as components of Uys back wages and the attorneys fees, which were not raised
as issues in G.R. No. 137863, should no longer be disturbed.
Uy and the Union likewise assail the CAs order restraining Uys reinstatement
despite the finality of this Courts Decision ordering such reinstatement. They also
fault the CA in not dismissing BPIs petition for being an improper mode of
appeal. Finally, Uy and the Union assert that a twelve percent (12%) interest per
annum should be imposed on the total amount due to Uy, computed from the
finality of the Decision of this Court in G.R. No. 137863 until full compliance thereof
by BPI.
G.R. No. 178735
On the other hand, BPI alleges that Uy's/Unions petition should be dismissed
for lack of proof of service of the petition on the lower court concerned as required
by the Rules of Court.BPI also argues that the CA erred in including the tellers
functional allowance and the vacation and sick leave cash equivalent in the
computation of Uys backwages. Also, BPI questions the propriety of the award of
attorneys fees.

Our Ruling
The March 31, 2005 Decision of this Court in
G.R. No. 137863 did not reinstate the
December 31, 1997 Decision of the
Voluntary Arbitrator which ordered the
payment of full back wages including all
benefits under the CBA.
We agree with the CAs finding that the March 31, 2005 Decision of this Court in
G.R. No. 137863 did not in anyway reinstate the Voluntary Arbitrators December
31, 1997 Decision regarding the award of CBA benefits.
To recall, after Uy and the Union filed the case for illegal dismissal, the
Voluntary Arbitrator rendered his Decision [26] on December 31, 1997, the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered
declaring the dismissal of complainant Zenaida Uy as illegal and
ordering the respondent Bank of the Philippine Islands to immediately
reinstate her to her position as bank teller of the Escolta Branch
without loss of seniority rights and with full backwages computed
from the time she was dismissed on December 14, 1995 until she is
actually reinstated in the service, and including all her other benefits
which are benefits under their Collective Bargaining Agreement (CBA).
For reasonable attorneys fees, respondent is also ordered to pay
complainant the equivalent of 10% of the recoverable award in this
case.
SO ORDERED.[27]
On appeal, the CA, in its October 28, 1998 Decision, [28] affirmed with
modification the Decision of the Voluntary Arbitrator. Instead of full back wages,
the CA limited the award to three years. Also, in lieu of reinstatement, the CA
ordered BPI to pay separation pay, thus:
WHEREFORE, the judgment appealed from is AFFIRMED with
the MODIFICATION that instead of reinstatement, the petitioner
Bank of the Philippine Islands is DIRECTED to pay Uy back salaries
not exceeding three (3) years and separation pay of one month for
every year of service. The said judgment is AFFIRMED in all other
respects.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 198935

November 27, 2013

MAYNILAD WATER SUPERVISORS ASSOCIATION, represented by

ROBERTA ESTINO, Petitioners,
vs.
MAYNILAD WATER SERVICES, INC., Respondent.
DECISION
PEREZ, J.:
For resolution is a Petition for Review on Certiorari1 under Rule 45 of the Rules
of Court, seeking to reverse, annul and set aside the Amended Decision and
Resolution issued by the Court of Appeals (CA) in CA-G.R. S.P. No. 101911,
specifically the (a) Amended Decision2 dated 31 January 2011 which reversed
its earlier Decision dated 31 May 2010 and (b) Resolution3 dated 12
September 2011 which denied petitioner s Motion for Reconsideration.
Culled from the records are the following antecedent facts:4
Petitioner Maynilad Water Supervisors Association (MWSA) is an association
composed of former supervisory employees of Metropolitan Waterworks and
Sewerage System (MWSS). These employees claim that during their
employment with MWSS, they were receiving a monthly cost of living
allowance (COLA) equivalent to 40% of their basic pay.

The payment of these allowances and other additional compensation,

including the COLA were, however, discontinued without qualification
effective 1 November 1989 when the Department of Budget and
Management (DBM) issued Corporate Compensation Circular No. 10 (CCC No.
10). In 1997, MWSS was privatized and part of it, MWSS West, was acquired
by Maynilad Water Services, Inc. (Maynilad). Some of the employees of
MWSS, which included members of MWSA, were absorbed by Maynilad
subject to the terms and conditions of a Concession Agreement, a portion of
which reads:
Article 6.1.1 (ii)
One month prior to the Commencement Date, the Concessionaire shall make
an offer to employ each Concessionaire Employee, subject to a probationary
period of six months following the Commencement Date, at a salary or pay
scale and with benefits at least equal to those enjoyed by such Employee on
the date of his or her separation from MWSS. x x x
xxxx
Article 6.1.3. Non-Diminution of Benefits
The Concessionaire shall grant to all Concessionaire Employees employee
benefits no less favorable than those granted to such employees by the
MWSS at the time of their separation from MWSS, particularly those set forth
in Exhibit F and the following:
xxxx
The payment of COLA was not among those listed as benefits in Exhibit "F."
In 1998, the Supreme Court promulgated a Decision5 declaring DBM CCC
No.10 ineffective for failure to comply with the publication requirement.
Consequently, MWSS partially released the COLA payments for its
employees, including members of MWSA, covering the years 1989 to 1997,
and up to year 1999 for its retained employees.
In 2002, MWSA filed a complaint before the Labor Arbiter praying for the
payment of their COLA from the year 1997, the time its members were
absorbed by Maynilad, up to the present. MWSA argued that since DBM CCC
No. 10 was rendered ineffective, the COLA should be paid as part of the

benefits enjoyed by their members at the time of their separation from

MWSS, and which should form part of their salaries and benefits with
Maynilad.
In a decision dated 10 November 2006, the Labor Arbiter granted MWSAs
claim and directed Maynilad to pay the COLA of the supervisors retroactive to
the date when they were hired in 1997, with legal interest from the date of
promulgation of the decision. It also directed Maynilad to take necessary
measures to ensure that the benefit is incorporated in the employees
monthly compensation.6
On 11 December 2006, Maynilad appealed the decision before the National
Labor Relations Commission (NLRC) and filed an Urgent Manifestation and
Motion to Reduce Bond.
The NLRC granted Maynilads motion and reversed on appeal the decision of
the Labor Arbiter. On 28 September 2007, MWSA filed a motion for
reconsideration but this was denied by the NLRC in its 23 October 2007
resolution.
Aggrieved, MWSA filed a petition for certiorari with the CA on 11 January
2008.
In a Decision7 dated 31 May 2010, the CA Ninth Division annulled and set
aside the decision of the NLRC. It thus reinstated the decision of the Labor
Arbiter.
Maynilad filed a motion for reconsideration of the 31 May 2010 CA Decision.
On 31 January 2011, the CA Ninth Division reconsidered its earlier Decision.
The decretal portion of the amended decision reads:
WHEREFORE, premises considered, the Motion for Reconsideration is
GRANTED. Consequently, the Courts 31 May 2010 Decision is REVERSED and
SET ASIDE, and the 07 September 2007 Decision and 23 October 2007
Resolution of the NLRC are AFFIRMED, and are thus REINSTATED.8
MWSA filed a Motion for Reconsideration of the amended decision. Pending
resolution of the Motion for Reconsideration, MWSA moved for the inhibition
of the members of the Ninth Division of the CA. The members of the division
recused from the case in a Resolution dated 3 June 2011. Thereafter, the

Second Division of the CA, to which the case was raffled, issued a
Resolution9 on 12 September 2011 denying MWSAs Motion for
Reconsideration.
Hence, this Petition for Review on Certiorari under Rule 45 of the Rules of
Court.
ISSUES
Whether the CA erred in not holding that the MWSA members are entitled to
COLA under the Concession Agreement.
Whether the CA erred in not finding grave abuse of discretion on the part of
NLRC when the latter granted Maynilads appeal despite insufficiency of the
appeal bond.
OUR RULING
Simply stated, the main issue in this case is whether Maynilad bound itself
under the Concession Agreement to pay the COLA of the employees it
absorbed from MWSS. A careful review of the Concession Agreement led us
to conclude that both MWSS and Maynilad never intended to include COLA as
one of the benefits to be granted to the absorbed employees.
The benefits agreed upon by the parties are stated in Exhibit "F" of the
Concession Agreement, to wit:
Existing MWSS Fringe Benefits
A. ALLOWANCES
PERA - P500.00 Salary Grade 1 to 23 except those with RATA
ACA P500.00 Salary Grade 1 to 25
RATA- 40% of basic Supervisory Level, Section Chiefs and up or
equivalent ranks. Technical and Executive Assistants
Medical 2,500/year
Rice 500/month

Uniform 2,000/year
Meal 25.00/day (for medical personnel P30.00/day)
Longevity 50.00/year of service/month
Children 30.00/child/month, maximum four (4) children below 21
years old
Hazard 50.00/month
B. BONUSES
Year-End Financial Assistance One (1) month Gross pay (Basic Salary
plus PERA, ACA, rice, meal, longevity, Children and RATA
Mid-Year One (1) month Gross Pay Christmas Bonus and Cash Gift
One (1) month Basic salary plus P1,000 cash gift
Anniversary (Bigay-pala) 4,000.00 or 50% of basic, whichever is
greater
Productivity as of December 1995 Amount equivalent to P5,000 or
60% of gross pay, exclusive of RATA, whichever is higher
C. PREMIUMS
Graveyard 50% (12MN 6:00 AM)
Nightwork 25% (6PM 6AM)
Holiday 125%
Sunday 150%
Overtime 125%
Distress 25% of basic pay (For Sewerage Department only)
D. PAID LEAVES
Vacation 15 days/year

Sick 15 days/year
Maternity 60 calendar days
Paternity 7 working days
Emergency Leave - 3 days/year
(Birthday/Funeral/Mourning/Graduation/Enrollment/Wedding/
Anniversary/Hospitalization/Accident/Relocation)
E. STUDY LEAVE
- Study now pay later scheme
- Grant (with contract to serve MWSS)10
It is clear from the aforesaid enumeration that COLA is not among the
benefits to be received by the absorbed employees. Contrary to the
contention of MWSA, the declaration by the Court of the ineffectiveness of
DBM CCC No. 10 due to its non-publication in the Official Gazette or in a
newspaper of general circulation in the country,11did not give rise to the
employees right to demand payment of the subject benefit from Maynilad.
As far as their employment relationship with Maynilad is concerned, the same
is not affected by the De Jesus ruling because it is governed by a separate
compensation package provided for under the Concession Agreement. It
would be erroneous to presume that had the COLA been received during the
time of the execution of the contract, the benefit would have been included
in Exhibit "F." First of all, we note that the Courts ruling in the De Jesus case
applies only to government-owned and controlled corporations and not to
private entities. Secondly, the parties to the Concession Agreement could not
have thought of including the COLA in Exhibit "F" because as early as 1989,
the government already resolved to remove the COLA, among others, from
the list of allowances being received by government employees. Hence, the
enactment of Republic Act R.A. No. 6758 or the Compensation and Position
Classification Act of 198912 which integrated the COLA into the standardized
salary rate. Section 12 thereof provides:
Consolidation of Allowances and Compensation. All allowances, except for
representation and transportation allowances; clothing and laundry

allowances; subsistence allowance of marine officers and crew on board

government vessels and hospital personnel; hazard pay; allowances of
foreign service personnel stationed abroad; and such other additional
compensation not otherwise specified herein as may be determined by the
DBM, shall be deemed included in the standardized salary rates herein
prescribed. x x x
From the aforesaid provision, we note that all allowances were deemed
integrated into the standardized salary rates except:
(1) representation and transportation allowances;
(2) clothing and laundry allowances;
(3) subsistence allowances of marine officers and crew on board
government vessels;
(4) subsistence allowances of hospital personnel;
(5) hazard pay;
(6) allowances of foreign service personnel stationed abroad; and
(7) such other additional compensation not otherwise specified in
Section 12 as may be determined by the DBM.
In Gutierrez v. DBM,13 which is a consolidated case involving over 20
government-owned and controlled corporations, the Court found proper the
inclusion of COLA in the standardized salary rates. It settled that COLA, not
being an enumerated exclusion, was deemed already incorporated in the
standardized salary rates of government employees under the general rule of
integration. In explaining its inclusion in the standardized salary rates, the
Court cited its ruling in National Tobacco Administration v. COA,14 in that the
enumerated fringe benefits in items (1) to (6) have one thing in common
they belong to one category of privilege called allowances which are usually
granted to officials and employees of the government to defray or reimburse
the expenses incurred in the performance of their official functions.
Consequently, if these allowances are consolidated with the standardized
salary rates, then the government official or employee will be compelled to
spend his personal funds in attending to his duties. On the other hand, item

(7) is a "catch-all proviso" for benefits in the nature of allowances similar to

those enumerated.15
Clearly, COLA is not in the nature of an allowance intended to reimburse
expenses incurred by officials and employees of the government in the
performance of their official functions. It is not payment in consideration of
the fulfillment of official duty.16 As defined, cost of living refers to "the level of
prices relating to a range of everyday items"17 or "the cost of purchasing
those goods and services which are included in an accepted standard level of
consumption."18 Based on this premise, COLA is a benefit intended to cover
increases in the cost of living. Thus, it is and should be integrated into the
standardized salary rates.
From the aforesaid discussion, it is evident therefore, that at the time the
MWSS employees were absorbed by Maynilad in 1997, the COLA was already
part and parcel of their monthly salary. The non-publication of DBM CCC No.
10 in the Official Gazette or newspaper of general circulation did not nullify
the integration of COLA into the standardized salary rates upon the effectivity
of R.A. No. 6758.19 As held by this Court in Phil. International Trading Corp. v.
COA,20 the validity of R.A. No. 6758 should not be made to depend on the
validity of its implementing rules. To grant COLA to herein petitioners now
would create an absurd situation wherein they would be receiving an
additional COLA in the amount equivalent to 40% of their basic salary even if
the Court has already ruled that the COLA is already integrated in the
employees basic salary. Such conclusion would give the absorbed employees
far greater rights than their former co-employees or other government
employees from whom COLA was eventually disallowed.
The ruling of the Labor Arbiter which MWSA insists on is also erroneous in
that it seeks to have the COLA incorporated in the monthly compensation to
be received by the absorbed employees. It failed to consider that the
employment contracts of the MWSA members with MWSS were terminated
prior to their employment with MAYNILAD. Although they may have continued
performing the same function, their employment is already covered by an
entirely new employment contract.
This Court has ruled that unless expressly assumed, labor contracts such as
employment contracts and collective bargaining agreements are not
enforceable against a transferee of an enterprise, labor contracts being in
personam, thus binding only between the parties.21 In the instant case, the
only commitment of Maynilad under the Concession Agreement it entered

with MWSS was to provide the absorbed employees with a compensation

package "no less favorable than those granted to [them] by the MWSS at the
time of their separation from MWSS, particularly those set forth in Exhibit F
x x x."22 It is undisputed that Maynilad complied with such commitment. It
cannot, however, be compelled to assume the payment of an allowance
which was not agreed upon. Such would not only be unreasonable but also
unfair for Maynilad. MWSS and Maynilad could not have presumed that the
COLA was part of the agreement when it was no longer being received by the
employees at the time of the execution of the contract, which is the
reckoning point of their new employment.
In Norton Resources and Development Corporation v. All Asia Bank
Corporation,23 this Court ruled that the agreement or contract between the
parties is the formal expression of the parties rights, duties and obligations.
It is the best evidence of the intention of the parties. Thus, when the terms of
an agreement have been reduced to writing, it is considered as containing all
the terms agreed upon and there can be no evidence of such terms other
than the contents of the written agreement between the parties and their
successors in interest. Time and again, we have stressed the rule that a
contract is the law between the parties, and courts have no choice but to
enforce such contract so long as it is not contrary to law, morals, good
customs or public policy. Otherwise, courts would be interfering with the
freedom of contract of the parties. Simply put, courts cannot stipulate for the
parties or amend the latters agreement, for to do so would be to alter the
real intention of the contracting parties when the contrary function of courts
is to give force and effect to the intention of the parties.
In fine, contrary to the allegation of MWSA, there is no ambiguity in the
Concession Agreement.1wphi1 Thus, there is nothing to be construed.
Anent the issue of the insufficiency of the appeal bond posted by Maynilad,
we agree with the NLRC that there was merit in the arguments forwarded in
support of the prayer for the reduction of the appeal bond. Maynilad sought
the reduction of the appeal bond to ten percent (10%) for the following
reasons: a) that it had filed a Petition for Rehabilitation before the Regional
Trial Court of Quezon City; and b) that as a result thereof, the Rehabilitation
Court issued a Stay Order prohibiting it from selling, encumbering,
transferring or disposing in any manner any of its properties making it
impossible for it to fully comply with the appeal bond requirement.24 Our
ruling in Garcia, et al. v. KJ Commercial25 that the requirement on appeals

may be relaxed when there is substantial compliance with the Rules of

Procedure of the NLRC or when the appellant shows willingness to post a
partial bond. Here, we note that Maynilad s appeal was accompanied by an
appeal bond in the amount of Twenty Five Million Pesos (P25,000,000.00) with
an Urgent Manifestation and Motion to Reduce Bond on the ground that the
labor arbiter failed to specify the exact amount of monetary award from
which the amount of the appeal bond is to be based.
In University Plans v. Solano,26 this Court reiterated the guidelines which the
NLRC must exercise in considering the motions for reduction of bond:
The bond requirement on appeals involving monetary awards has been and
may be relaxed in meritorious cases. These cases include instances in which
(1) there was substantial compliance with the Rules, (2) surrounding facts
and circumstances constitute meritorious grounds to reduce the bond, (3) a
liberal interpretation of the requirement of an appeal bond would serve the
desired objective of resolving controversies on the merits, or (4) the
appellants, at the very least, exhibited their willingness and/or good faith by
posting a partial bond during the reglementary period.
It is evident that the aforesaid instances are present in the instant case.
WHEREFORE, premises considered, the instant Petition is hereby DENIED and
the 31 January 2011 Amended Decision and 12 September 2011 Resolution
of the Court of Appeals in CA-G.R. SP No. 101911 is AFFIRMED in toto.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 204651

August 6, 2014

OUR HAUS REALTY DEVELOPMENT CORPORATION, Petitioner,

vs.
ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER CANLAS, BERNARD
TENEDERO and JERRY SABULAO, Respondents.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the May
7, 2012 decision2 and the November 27, 2012 resolution3 (assailed CA
rulings) of the Court of Appeals (CA) in CA-G.R. SP No. 123273. These
assailed CA rulings affirmed the July 20, 2011 decision4 and the December 2,
2011 resolution5 (NLRC rulings) of the National Labor Relations Commission
(NLRC) in NLRC LAC No. 02-000489-11 (NLRC NCR Case No. 06-08544-10).
The NLRC rulings in turn reversed and set aside the December 10, 2010
decision6 of the labor arbiter (LA).
Factual Antecedents
Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao
and Bernardo Tenederowere all laborers working for petitioner Our Haus
Realty Development Corporation (Our Haus), a company engaged in the
construction business.The respondents respective employment records and
daily wage rates from 2007 to 2010 are summarized in the table7 below:
Name

Date
Hired

Years of
Service

Year and Place of

Assignment

Daily
Rate

Alexander M.
Parian

October
1999

10 years

2007-2010- Quezon City

P353.5
0

Jay C. Erinco

January
2000

10 years

2008- Quezon City 2009Antipolo 2010- Quezon City

P342.0
0

Alexander R.
Canlas

2005

5 years

2007-2010- Quezon City

P312.0
0

Jerry Q.

August

10 years

2008- Quezon City 2009-

P342.0

Sabulao

1999

Bernardo N.
Tenedero

1994

16 years

Antipolo 2010- Quezon City

2007-2010- Quezon City

P383.5
0

Sometime in May 2010, Our Haus experienced financial distress. To alleviate

its condition, Our Haus suspended some of its construction projects and
asked the affected workers, including the respondents, to take vacation
leaves.8
Eventually, the respondents were asked to report back to work but instead of
doing so, they filed with the LA a complaint for underpayment of their daily
wages. They claimed that except for respondent Bernardo N. Tenedero, their
wages were below the minimum rates prescribed in the following wage
orders from 2007 to 2010:
1. Wage Order No. NCR-13, which provides for a daily minimum wage
rate of P362.00for the non-agriculture sector (effective from August 28,
2007 until June 13, 2008); and
2. Wage Order No. NCR-14, which provides for a daily minimum wage
rate of P382.00for the non-agriculture sector (effective from June 14,
2008 until June 30, 2010).
The respondents also alleged thatOur Haus failed to pay them their holiday,
service incentive leave (SIL), 13th month and overtime pays. 9
The Labor Arbitration Rulings
Before the LA, Our Haus primarily argued that the respondents wages
complied with the laws minimum requirement. Aside from paying the
monetary amount of the respondents wages, Our Haus also subsidized their
meals (3 times a day), and gave them free lodging near the construction
project they were assigned to.10 In determining the total amount of the
respondents daily wages, the value of these benefits should be considered,
in line with Article 97(f)11 of the Labor Code.
Our Haus also rejected the respondents other monetary claims for lack of
proof that they were entitled to it.12
On the other hand, the respondents argued that the value of their meals
should not be considered in determining their wages total amount since the
requirements set under Section 413 of DOLE14 Memorandum Circular No.
215were not complied with.

The respondents pointed out that Our Haus never presented any proof that
they agreed in writing to the inclusion of their meals value in their
wages.16 Also, Our Haus failed to prove that the value of the facilities it
furnished was fair and reasonable.17 Finally, instead of deducting the
maximum amount of 70% of the value of the meals, Our Haus actually
withheld its full value (which was Php290.00 per week for each employee).18
The LA ruled in favor of Our Haus. He held that if the reasonable values of the
board and lodging would be taken into account, the respondents daily wages
would meet the minimum wage rate.19 As to the other benefits, the LA found
that the respondents were not able to substantiate their claims for it.20
The respondents appealed the LAs decision to the NLRC, which in turn,
reversed it. Citing the case of Mayon Hotel & Restaurant v. Adana,21 the NLRC
noted that the respondents did not authorize Our Haus in writing to charge
the values of their board and lodging to their wages. Thus, the samecannot
be credited.
The NLRC also ruled that the respondents are entitled to their respective
proportionate 13th month payments for the year 2010 and SIL payments for
at least three years,immediately preceding May 31, 2010, the date when the
respondents leftOur Haus. However, the NLRC sustained the LAs ruling that
the respondents were not entitled to overtime pay since the exact dates and
times when they rendered overtime work had not been proven.22
Our Haus moved for the reconsideration23 of the NLRCs decision and
submitted new evidence (the five kasunduans) to show that the respondents
authorized Our Haus in writing to charge the values of their meals and
lodging to their wages.
The NLRC denied Our Haus motion, thus it filed a Rule 65 petition24 with the
CA. In its petition, Our Haus propounded a new theory. It made a distinction
between deduction and charging. A written authorization is only necessary if
the facilitys value will be deducted and will not be needed if it will merely be
charged or included in the computation of wages.25 Our Haus claimed that it
did not actually deduct the values of the meals and housing benefits. It only
considered these in computing the total amount of wages paid to the
respondents for purposes of compliance with the minimum wage law. Hence,
the written authorization requirement should not apply.
Our Haus also asserted that the respondents claim for SIL pay should be
denied as this was not included in their pro formacomplaint. Lastly, it
questioned the respondentsentitlement to attorneys fees because they were
not represented by a private lawyer but by the Public Attorneys Office (PAO).
The CAs Ruling

The CA dismissed Our Haus certiorari petition and affirmed the NLRC rulings
in toto. It found no real distinction between deduction and charging,26 and
ruled that the legal requirements before any deduction or charging can be
made, apply to both. Our Haus, however, failed to prove that it complied with
any of the requirements laid down in Mabeza v. National Labor Relations
Commission.27 Accordingly, it cannot consider the values of its meal and
housing facilities in the computation of the respondents total wages.
Also, the CA ruled that since the respondents were able to allege nonpayment of SIL in their position paper, and Our Haus, in fact, opposed it in its
various pleadings,28 then the NLRC properly considered it as part of the
respondents causes of action. Lastly, the CA affirmed the respondents
entitlement to attorneys fees.29
Our Haus filed a motion for reconsideration but the CA denied its motion,
prompting it to file the present petition for review on certiorari under Rule 45.
The Petition
Our Haus submits that the CA erred in ruling that the legal requirements
apply without distinction whether the facilitys value will be deducted or
merely included in the computation of the wages. At any rate, it complied
with the requirements for deductibility of the value of the facilities. First, the
five kasunduans executed by the respondents constitute the written
authorization for the inclusion of the board and lodgings values to their
wages. Second, Our Haus only withheld the amount of P290.00 which
represents the foods raw value; the weekly cooking cost (cooks wage, LPG,
water) at P239.40 per person is a separate expense that Our Haus did not
withhold from the respondents wages.30 This disproves the respondents
claim that it deducted the full amount of the meals value.
Lastly, the CA erred in ruling that the claim for SIL pay may still be granted
though not raised in the complaint; and that the respondents are entitled to
an award of attorneys fees.31
The Case for the Respondents
The respondents prayed for the denial of the petition.32 They maintained that
the CA did not err in ruling that the values of the board and lodging cannot be
deducted from their wages for failure to comply with the requirements set by
law.33 And though the claim for SIL pay was not included in their pro forma
complaint, they raised their claims in their position paper and Our Haus had
the opportunity to contradict it in its pleadings.34
Finally, under the PAO law, the availment of the PAOs legal services does not
exempt its clients from an award of attorneys fees.35

The Courts Ruling

We resolve to DENY the petition.
The nature of a Rule 45 petition only questions of law
Basic is the rule that only questions of law may be raised in a Rule 45
petition.36 However, in this case, we are confronted with mixed questions of
fact and law that are subsumed under the issue of whether Our Haus
complied with the legal requirements on the deductibility of the value of
facilities. Strictly, factual issues cannot be considered under Rule 45 except in
the course of resolving if the CA correctly determined whether or not the
NLRC committed grave abuse of discretion in considering and appreciating
the factual issues before it.37
In ruling for legal correctness, we have to view the CA decision in the same
context that the petition for certiorariit ruled upon was presented to it; we
have to examine the CA decision from the prism of whether it correctly
determined the presence or absence of grave abuse of discretion in the NLRC
decision before it, not on the basis of whether the NLRC decision, on the
merits of the case, was correct. In other words, we have to be keenly aware
that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it. This is the approach that should be basic in a
Rule 45 review of a CA ruling in a labor case. In question form, the question
to ask in the present case is: did the CA correctly determine that the NLRC
did not commit grave abuse of discretion in ruling on the case?38 We rule that
the CA correctly did.
No substantial distinction between deducting and charging a facilitys value
from the employees wage; the legal requirements for creditability apply to
both
To justify its non-compliance with the requirements for the deductibility of a
facility, Our Haus asks us to believe that there is a substantial distinction
between the deduction and the charging of a facilitys value to the wages.
Our Haus explains that in deduction, the amount of the wage (which may
already be below the minimum) would still be lessened by the facilitys value,
thus needing the employees consent. On the other hand, in charging, there
is no reduction of the employees wage since the facilitys value will just be
theoretically added to the wage for purposes of complying with the minimum
wage requirement.39
Our Haus argument is a vain attempt to circumvent the minimum wage law
by trying to create a distinction where none exists.

In reality, deduction and charging both operate to lessen the actual takehome pay of an employee; they are two sides of the same coin. In both, the
employee receives a lessened amount because supposedly, the facilitys
value, which is part of his wage, had already been paid to him in kind. As
there is no substantial distinction between the two, the requirements set by
law must apply to both.
As the CA correctly ruled, these requirements, as summarized in Mabeza, are
the following:
a. proof must be shown that such facilities are customarily furnished by
the trade;
b. the provision of deductible facilities must be voluntarily accepted in
writing by the employee; and
c. The facilities must be charged at fair and reasonable value.40
We examine Our Haus compliance with each of these requirements in
seriatim.
a. The facility must be customarily furnished by the trade
In a string of cases, we have concluded that one of the badges to show that a
facility is customarily furnished by the trade is the existence of a company
policy or guideline showing that provisions for a facility were designated as
part of the employees salaries.41 To comply with this, Our Haus presented in
its motion for reconsideration with the NLRC the joint sinumpaang salaysay of
four of its alleged employees. These employees averred that they were
recipients of free lodging, electricity and water, as well as subsidized meals
from Our Haus.42
We agree with the NLRCs finding that the sinumpaang salaysay statements
submitted by Our Haus are self-serving.1wphi1 For one, Our Haus only
produced the documents when the NLRC had already earlier determined that
Our Haus failed to prove that it was traditionally giving the respondents their
board and lodging. This document did not state whether these benefits had
been consistently enjoyed by the rest of Our Haus employees. Moreover, the
records reveal that the board and lodging were given on a per project basis.
Our Haus did not show if these benefits were also provided in its other
construction projects, thus negating its claimed customary nature. Even
assuming the sinumpaang salaysay to be true, this document would still work
against Our Haus case. If Our Haus really had the practice of freely giving
lodging, electricity and water provisions to its employees, then Our Haus
should not deduct its values from the respondents wages. Otherwise, this

will run contrary to the affiants claim that these benefits were traditionally
given free of charge.
Apart from company policy, the employer may also prove compliance with
the first requirement by showing the existence of an industry-wide practice of
furnishingthe benefits in question among enterprises engaged in the same
line of business. If it were customary among construction companies to
provide board and lodging to their workers and treat their values as part of
their wages, we would have more reason to conclude that these benefits
were really facilities.
However, Our Haus could not really be expected to prove compliance with
the first requirement since the living accommodation of workers in the
construction industry is not simply a matter of business practice. Peculiar to
the construction business are the occupational safety and health (OSH)
services which the law itself mandates employers to provide to their workers.
This is to ensure the humane working conditions of construction employees
despite their constant exposure to hazardous working environments. Under
Section 16 of DOLE Department Order (DO) No. 13, series of
1998,43 employers engaged in the construction business are required to
provide the following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitary and washing facilities
16.3 Suitable living accommodation for workers, and as may be
applicable, for their families
16.4 Separate sanitary, washing and sleeping facilities for men and
women workers. [emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for
the implementation of DOLE DO No. 13, mandates that the cost of the
implementation of the requirements for the construction safety and health of
workers, shall be integrated to the overall project cost.44 The rationale behind
this is to ensure that the living accommodation of the workers is not
substandard and is strictly compliant with the DOLEs OSH criteria.
As part of the project cost that construction companies already charge to
their clients, the value of the housing of their workers cannot be charged
again to their employees salaries. Our Haus cannot pass the burden of the
OSH costs of its construction projects to its employees by deducting it as
facilities. This is Our Haus obligation under the law.

Lastly, even if a benefit is customarily provided by the trade, it must still pass
the purpose test set by jurisprudence. Under this test, if a benefit or privilege
granted to the employee is clearly for the employers convenience, it will not
be considered as a facility but a supplement.45 Here, careful consideration is
given to the nature of the employers business in relation to the work
performed by the employee. This test is used to address inequitable
situations wherein employers consider a benefit deductible from the wages
even if the factual circumstances show that it clearly redounds to the
employers greater advantage.
While the rules serve as the initial test in characterizing a benefit as a facility,
the purpose test additionally recognizes that the employer and the employee
do not stand at the same bargaining positions on benefits that must or must
not form part of an employees wage. In the ultimate analysis, the purpose
test seeks to prevent a circumvention of the minimum wage law.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be deducted from the
employees wages but not the value of supplements. Facilities include articles
or services for the benefit of the employee or his family but exclude tools of
the trade or articles or services primarily for the benefit of the employer or
necessary to the conduct of the employers business.47
The law also prescribes that the computation of wages shall exclude
whatever benefits, supplements or allowances given to employees.
Supplements are paid to employees on top of their basic pay and are free of
charge.48 Since it does not form part of the wage, a supplements value may
not be included in the determination of whether an employer complied with
the prescribed minimum wage rates.
In the present case, the board and lodging provided by Our Haus cannot be
categorized as facilities but as supplements. In SLL International Cables
Specialist v. National Labor Relations Commission,49 this Court was confronted
with the issue on the proper characterization of the free board and lodging
provided by the employer. We explained:
The Court, at this point, makes a distinction between "facilities" and
"supplements". It is of the view that the food and lodging, or the electricity
and water allegedly consumed by private respondents in this case were not
facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big
Wedge Co., the two terms were distinguished from one another in this wise:
"Supplements", therefore, constitute extra remuneration or special privileges
or benefits given to or received by the laborers over and above their ordinary
earnings or wages. "Facilities", on the other hand, are items of expense

necessary for the laborer's and his family's existence and subsistence so that
by express provision of law (Sec. 2[g]), they form part of the wage and when
furnished by the employer are deductible there from, since if they are not so
furnished, the laborer would spend and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an
extra remuneration above and over his basic or ordinary earning or wage is
supplement; and when said benefit or privilege is part of the laborers' basic
wages, it is a facility. The distinction lies not so much in the kind of benefit or
item (food, lodging, bonus or sick leave) given, but in the purpose for which it
is given. In the case at bench, the items provided were given freely by SLL for
the purpose of maintaining the efficiency and health of its workers while they
were working at their respective projects.50
Ultimately, the real difference lies not on the kind of the benefit but on the
purpose why it was given by the employer. If it is primarily for the employees
gain, then the benefit is a facility; if its provision is mainly for the employers
advantage, then it is a supplement. Again, this is to ensure that employees
are protected in circumstances where the employer designates a benefit as
deductible from the wages even though it clearly works to the employers
greater convenience or advantage.
Under the purpose test, substantial consideration must be given to the
nature of the employers business in relation to the character or type of work
performed by the employees involved.
Our Haus is engaged in the construction business, a labor intensive
enterprise. The success of its projects is largely a function of the physical
strength, vitality and efficiency of its laborers. Its business will be jeopardized
if its workers are weak, sickly, and lack the required energy to perform
strenuous physical activities. Thus, by ensuring that the workers are
adequately and well fed, the employer is actually investing on its business.
Unlike in office enterprises where the work is focused on desk jobs, the
construction industry relies heavily and directly on the physical capacity and
endurance of its workers. This is not to say that desk jobs do not require
muscle strength; we simply emphasize that in the construction business, bulk
of the work performed are strenuous physical activities.
Moreover, in the construction business, contractors are usually faced with the
problem of meeting target deadlines. More often than not, work is performed
continuously, day and night, in order to finish the project on the designated
turn-over date. Thus, it will be more convenient to the employer if its workers
are housed near the construction site to ensure their ready availability during
urgent or emergency circumstances. Also, productivity issues like tardiness
and unexpected absences would be minimized. This observation strongly

bears in the present case since three of the respondents are not residents of
the National Capital Region. The board and lodging provision might have
been a substantial consideration in their acceptance of employment in a
place distant from their provincial residences.
Based on these considerations, we conclude that even under the purpose
test, the subsidized meals and free lodging provided by Our Haus are actually
supplements. Although they also work to benefit the respondents, an analysis
of the nature of these benefits in relation to Our Haus business shows that
they were given primarily for Our Haus greater convenience and advantage.
If weighed on a scale, the balance tilts more towards Our Haus side.
Accordingly, their values cannot be considered in computing the total amount
of the respondents wages. Under the circumstances, the daily wages paid to
the respondents are clearly below the prescribed minimum wage rates in the
years 2007-2010.
b. The provision of deductible facilities must be voluntarily accepted in
writing by the employee
In Mayon Hotel, we reiterated that a facility may only be deducted from the
wage if the employer was authorized in writing by the concerned
employee.51 As it diminishes the take-home pay of an employee, the
deduction must be with his express consent.
Again, in the motion for reconsideration with the NLRC, Our Haus belatedly
submitted five kasunduans, supposedly executed by the respondents,
containing their conformity to the inclusion of the values of the meals and
housing to their total wages. Oddly, Our Haus only offered these documents
when the NLRC had already ruled that respondents did not accomplish any
written authorization, to allow deduction from their wages. These five
kasunduans were also undated, making us wonder if they had really been
executed when respondents first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus four employees, it
was not mentioned that they also executed a kasunduan for their board and
lodging benefits. Because of these surrounding circumstances and the
suspicious timing when the five kasunduans were submitted as evidence, we
agree with the CA that the NLRC committed no grave abuse of discretion in
disregarding these documents for being self serving.
c. The facility must be charged at a fair and reasonable value
Our Haus admitted that it deducted the amount of P290.00 per week from
each of the respondents for their meals. But it now submits that it did not
actually withhold the entire amount as it did not figure in the computation
the money it expended for the salary of the cook, the water, and the LPG

used for cooking, which amounts toP249.40 per week per person. From these,
it appears that the total meal expense per week for each person
isP529.40,making Our Haus P290.00 deduction within the 70% ceiling
prescribed by the rules.
However, Our Haus valuation cannot be plucked out of thin air. The valuation
of a facility must bes upported by relevant documents such as receipts and
company records for it to be considered as fair and reasonable. In Mabeza,
we noted:
Curiously, in the case at bench, the only valuations relied upon by the labor
arbiter in his decision were figures furnished by the private respondent's own
accountant, without corroborative evidence. On the pretext that records prior
to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he
could have, as has been pointed out in the Solicitor General's manifestation,
"secured certified copies thereof from the nearest regional office of the
Department of Labor, the SSS or the BIR".52 [emphasis ours]
In the present case, Our Haus never explained how it came up with the
values it assigned for the benefits it provided; it merely listed its supposed
expenses without any supporting document. Since Our Haus is using these
additional expenses (cooks salary, water and LPG) to support its claim that it
did not withhold the full amount of the meals value, Our Haus is burdened to
present evidence to corroborate its claim. The records however, are bereft of
any evidence to support Our Haus meal expense computation. Even the
value it assigned for the respondents living accommodations was not
supported by any documentary evidence. Without any corroborative
evidence, it cannot be said that Our Haus complied with this third requisite.
A claim not raised in the pro forma complaint may still be raised in the
position paper.
Our Haus questions the respondents entitlement to SIL pay by pointing out
that this claim was not included in the pro forma complaint filed with the
NLRC. However, we agree with the CA that such omission does not bar the
labor tribunals from touching upon this cause of action since this was raised
and discussed in the respondents position paper. In Samar-Med Distribution
v. National Labor Relations Commission,53 we held:
Firstly, petitioners contention that the validity of Gutangs dismissal should
not be determined because it had not been included in his complaint before
the NLRC is bereft of merit. The complaint of Gutang was a mere checklist of
possible causes of action that he might have against Roleda. Such manner of
preparing the complaint was obviously designed to facilitate the filing of
complaints by employees and laborers who are thereby enabled to

expediently set forth their grievances in a general manner. But the noninclusion in the complaint of the issue on the dismissal did not necessarily
mean that the validity of the dismissal could not be an issue. The rules of the
NLRC require the submission of verified position papers by the parties should
they fail to agree upon an amicable settlement, and bar the inclusion of any
cause of action not mentioned in the complaint or position paper from the
time of their submission by the parties. In view of this, Gutangs cause of
action should be ascertained not from a reading of his complaint alone but
also from a consideration and evaluation of both his complaint and position
paper.54
The respondents entitlement to the other monetary benefits
Generally a party who alleges payment as a defense has the burden of
proving it. Particularly in labor cases, the burden of proving payment of
monetary claims rests on the employer on the reasoning that the pertinent
personnel files, payrolls, records, remittances and other similar documents
which will show that overtime, differentials, service incentive leave and other
claims of workers have been paid are not in the possession of the worker
but in the custody and absolute control of the employer.55
Unfortunately, records will disclose the absence of any credible document
which will show that respondents had been paid their 13th month pay,
holiday and SIL pays. Our Haus merely presented a handwritten certification
from its administrative officer that its employees automatically become
entitled to five days of service incentive leave as soon as they pass
probation. This certification was not even subscribed under oath. Our Haus
could have at least submitted its payroll or copies of the pay slips of
respondents to show payment of these benefits. However, it failed to do so.
Respondents are entitled to attorneys fees.
Finally, we affirm that respondents are entitled to attorneys fees. Our Haus
asserts that respondents availment of free legal services from the PAO
disqualifies them from such award. We find this untenable.
It is settled that in actions for recovery of wages or where an employee was
forced to litigate and, thus, incur expenses to protect his rights and interest,
the award of attorney's fees is legally and morally justifiable.56Moreover,
under the PAO Law or Republic Act No. 9406, the costs of the suit, attorney's
fees and contingent fees imposed upon the adversary of the PAO clients after
a successful litigation shall be deposited in the National Treasury as trust
fund and shall be disbursed for special allowances of authorized officials and
lawyers of the PAO.57

Thus, the respondents are still entitled to attorney's fees. The attorney's fees
awarded to them shall be paid to the PAO. It serves as a token recompense to
the PAO for its provision of free legal services to litigants who have no means
of hiring a private lawyer.
WHEREFORE, in light of these considerations, we conclude that the Court of
Appeals correctly found that the National Labor Relations Commission did not
abuse its discretion in its decision of July 20, 2011 and Resolution of
December 2, 2011.1wphi1 Consequently we DENY the petition and AFFIRM
the Court of Appeals' decision dated May 7, 2012 and resolution dated
November 27, 2012 in CA-G.R. SP No. 123273. No costs.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION
JOEB M. ALIVIADO, ARTHUR
CORPUZ, ERIC ALIVIADO,
MONCHITO AMPELOQUIO,
ABRAHAM BASMAYOR,
JONATHAN MATEO, LORENZO
PLATON, JOSE FERNANDO
GUTIERREZ, ESTANISLAO
BUENAVENTURA, LOPE SALONGA,
FRANZ DAVID, NESTOR IGNACIO,
JULIO REY, RUBEN MARQUEZ, JR.,
MAXIMINO PASCUAL, ERNESTO
CALANAO, ROLANDO
ROMASANTA, RHUEL AGOO,
BONIFACIO ORTEGA, ARSENIO
SORIANO, JR., ARNEL ENDAYA,
ROBERTO ENRIQUEZ, NESTOR
BAQUILA, EDGARDO QUIAMBAO,
SANTOS BACALSO, SAMSON BASCO,
ALADINO GREGORO, JR., EDWIN

G.R. No. 160506

GARCIA, ARMANDO VILLAR, EMIL

TAWAT, MARIO P. LIONGSON,
CRESENTE J. GARCIA, FERNANDO
MACABENTE, MELECIO CASAPAO,
REYNALDO JACABAN, FERDINAND
SALVO, ALSTANDO MONTOS,
RAINER N. SALVADOR, RAMIL
REYES, PEDRO G. ROY, LEONARDO
P. TALLEDO, ENRIQUE F. TALLEDO,
WILLIE ORTIZ, ERNESTO SOYOSA,
ROMEO VASQUEZ, JOEL BILLONES,
ALLAN BALTAZAR, NOLI GABUYO,
EMMANUEL E. LABAN, RAMIR E.
PIAT, RAUL DULAY, TADEO DURAN,
JOSEPH BANICO, ALBERT LEYNES,
ANTONIO DACUNA, RENATO DELA
CRUZ, ROMEO VIERNES, JR., ELAIS
BASEO, WILFREDO TORRES,
MELCHOR CARDANO, MARIANO
NARANIAN, JOHN SUMERGIDO,
ROBERTO ROSALES, GERRY C.
GATPO, GERMAN N. GUEVARRA,
GILBERT Y. MIRANDA, RODOLFO C.
TOLEDO, ARNOLD D. LASTONA,
PHILIP M. LOZA, MARIO N.
CULDAYON, ORLANDO P. JIMENEZ,
FRED P. JIMENEZ, RESTITUTO C.
PAMINTUAN, JR., ROLANDO J. DE
ANDRES, ARTUZ BUSTENERA,
ROBERTO B. CRUZ, ROSEDY O.
YORDAN, DENNIS DACASIN,
ALEJANDRINO ABATON, and
ORLANDO S. BALANGUE,
Petitioners,

Present:
CARPIO, J., Chairperson,
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.

- versus PROCTER & GAMBLE PHILS., INC.,

Promulgated:
and PROMM-GEM INC.,
March 9, 2010
Respondents.
x------------------------------------------------------------------x
DECISION

DEL CASTILLO, J.:

Labor laws expressly prohibit labor-only contracting. To prevent its circumvention,
the Labor Code establishes an employer-employee relationship between the
employer and the employees of the labor-only contractor.
The instant petition for review assails the March 21, 2003 Decision[1] of the Court of
Appeals (CA) in CA-G.R. SP No. 52082 and its October 20, 2003
Resolution[2] denying the motions for reconsideration separately filed by petitioners
and respondent Procter & Gamble Phils. Inc. (P&G). The appellate court affirmed
the July 27, 1998 Decision of the National Labor Relations Commission (NLRC),
which in turn affirmed the November 29, 1996 Decision[3] of the Labor Arbiter. All
these decisions found Promm-Gem, Inc. (Promm-Gem) and Sales and Promotions
Services (SAPS) to be legitimate independent contractors and the employers of the
petitioners.
Factual Antecedents
Petitioners worked as merchandisers of P&G from various dates, allegedly
starting as early as 1982 or as late as June 1991, to either May 5, 1992 or March
11, 1993, more specifically as follows:
Name Date Employed Date Dismissed
1. Joeb M. Aliviado November, 1985 May 5, 1992
2. Arthur Corpuz 1988 March 11, 1993
3. Eric Aliviado 1985 March 11, 1993
4. Monchito Ampeloquio September, 1988 March 11, 1993
5. Abraham Basmayor[, Jr.] 1987 March 11, 1993
6. Jonathan Mateo May, 1988 March 11, 1993
7. Lorenzo Platon 1985 March 11, 1993
8. Jose Fernando Gutierrez 1988 May 5, 1992
9. Estanislao Buenaventura June, 1988 March 11, 1993
10. Lope Salonga 1982 March 11, 1993
11. Franz David 1989 March 11, 1993
12. Nestor Ignacio 1982 March 11, 1993
13. Julio Rey 1989 May 5, 1992
14. Ruben [Vasquez], Jr. 1985 May 5, 1992
15. Maximino Pascual 1990 May 5, 1992
16. Ernesto Calanao[, Jr.] 1987 May 5, 1992
17. Rolando Romasanta 1983 March 11, 1993
18. [Roehl] Agoo 1988 March 11, 1993
19. Bonifacio Ortega 1988 March 11, 1993
20. Arsenio Soriano, Jr. 1985 March 11, 1993
21. Arnel Endaya 1983 March 11, 1993
22. Roberto Enriquez December, 1988 March 11, 1993
23. Nestor [Es]quila 1983 May 5, 1992

24. Ed[g]ardo Quiambao 1989 March 11, 1993

25. Santos Bacalso 1990 March 11, 1993
26. Samson Basco 1984 March 11, 1993
27. Aladino Gregor[e], Jr. 1980 May 5, 1992
28. Edwin Garcia 1987 May 5, 1992
29. Armando Villar 1990 May 5, 1992
30. Emil Tawat 1988 March 11, 1993
31. Mario P. Liongson 1991 May 5, 1992
32. Cresente J. Garcia 1984 March 11, 1993
33. Fernando Macabent[a] 1990 May 5, 1992
34. Melecio Casapao 1987 March 11, 1993
35. Reynaldo Jacaban 1990 May 5, 1992
36. Ferdinand Salvo 1985 May 5, 1992
37. Alstando Montos 1984 March 11, 1993
38. Rainer N. Salvador 1984 May 5, 1992
39. Ramil Reyes 1984 March 11, 1993
40. Pedro G. Roy 1987
41. Leonardo [F]. Talledo 1985 March 11, 1993
42. Enrique [F]. Talledo 1988 March 11, 1993
43. Willie Ortiz 1987 May 5, 1992
44. Ernesto Soyosa 1988 May 5, 1992
45. Romeo Vasquez 1985 March 11, 1993
46. Joel Billones 1987 March 11, 1993
47. Allan Baltazar 1989 March 11, 1993
48. Noli Gabuyo 1991 March 11, 1993
49. Emmanuel E. Laban 1987 May 5, 1992
50. Ramir[o] E. [Pita] 1990 May 5, 1992
51. Raul Dulay 1988 May 5, 1992
52. Tadeo Duran[o] 1988 May 5, 1992
53. Joseph Banico 1988 March 11, 1993
54. Albert Leynes 1990 May 5, 1992
55. Antonio Dacu[m]a 1990 May 5, 1992
56. Renato dela Cruz 1982
57. Romeo Viernes, Jr. 1986
58. El[ia]s Bas[c]o 1989
59. Wilfredo Torres 1986 May 5, 1992
60. Melchor Carda[]o 1991 May 5, 1992
61. [Marino] [Maranion] 1989 May 5, 1992
62. John Sumergido 1987 May 5, 1992
63. Roberto Rosales May, 1987 May 5, 1992
64. Gerry [G]. Gatpo November, 1990 March 11, 1993
65. German N. Guevara May, 1990 March 11, 1993
66. Gilbert Y. Miranda June, 1991 March 11, 1993
67. Rodolfo C. Toledo[, Jr.] May 14, 1991 March 11, 1993
68. Arnold D. [Laspoa] June 1991 March 11, 1993
69. Philip M. Loza March 5, 1992 March 11, 1993

70. Mario N. C[o]ldayon May 14, 1991 March 11, 1993

71. Orlando P. Jimenez November 6, 1992 March 11, 1993
72. Fred P. Jimenez September, 1991 March 11, 1993
73. Restituto C. Pamintuan, Jr. March 5, 1992 March 11, 1993
74. Rolando J. de Andres June, 1991 March 11, 1993
75. Artuz Bustenera[, Jr.] December, 1989 March 11, 1993
76. Roberto B. Cruz May 4, 1990 March 11, 1993
77. Rosedy O. Yordan June, 1991 May 5, 1992
78. Dennis Dacasin May. 1990 May 5, 1992
79. Alejandrino Abaton 1988 May 5, 1992
80. Orlando S. Balangue March, 1989 March 11, 1993[4]
They all individually signed employment contracts with either Promm-Gem or
SAPS for periods of more or less five months at a time. [5] They were assigned at
different outlets, supermarkets and stores where they handled all the products of
P&G. They received their wages from Promm-Gem or SAPS.[6]
SAPS and Promm-Gem imposed disciplinary measures on erring
merchandisers for reasons such as habitual absenteeism, dishonesty or changing
day-off without prior notice.[7]
P&G is principally engaged in the manufacture and production of different
consumer and health products, which it sells on a wholesale basis to various
supermarkets and distributors.[8] To enhance consumer awareness and acceptance
of the products, P&G entered into contracts with Promm-Gem and SAPS for the
promotion and merchandising of its products.[9]
In December 1991, petitioners filed a complaint[10] against P&G for
regularization, service incentive leave pay and other benefits with damages. The
complaint was later amended[11]to include the matter of their subsequent
dismissal.
Ruling of the Labor Arbiter
On November 29, 1996, the Labor Arbiter dismissed the complaint for lack
of merit and ruled that there was no employer-employee relationship between
petitioners and P&G. He found that the selection and engagement of the
petitioners, the payment of their wages, the power of dismissal and control with
respect to the means and methods by which their work was accomplished, were all
done and exercised by Promm-Gem/SAPS. He further found that Promm-Gem and
SAPS were legitimate independent job contractors. The dispositive portion of his
Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered
Dismissing the above-entitled cases against respondent Procter &
Gamble (Phils.), Inc. for lack of merit.
SO ORDERED.[12]

Ruling of the NLRC

Appealing to the NLRC, petitioners disputed the Labor Arbiters
findings. On July 27, 1998, the NLRC rendered a Decision[13] disposing as follows:
WHEREFORE, premises considered, the appeal of complainants is
hereby DISMISSED and the decision appealed from AFFIRMED.
SO ORDERED.[14]
Petitioners filed a motion for reconsideration but the motion was denied in
the November 19, 1998 Resolution.[15]
Ruling of the Court of Appeals
Petitioners then filed a petition for certiorari with the CA, alleging grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the
Labor Arbiter and the NLRC.However, said petition was also denied by the CA
which disposed as follows:
WHEREFORE, the decision of the National Labor Relations Commission
dated July 27, 1998 is AFFIRMED with the MODIFICATION that
respondent Procter & Gamble Phils., Inc. is ordered to pay service
incentive leave pay to petitioners.
SO ORDERED.[16]
Petitioners filed a motion for reconsideration but the motion was also
denied. Hence, this petition.
Issues
Petitioners now come before us raising the following issues:
I.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS
COMMITTED [A] REVERSIBLE ERROR WHEN IT DID NOT FIND THE
PUBLIC RESPONDENTS TO HAVE ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF
JURISDICTION IN RENDERING THE QUESTIONED JUDGMENT WHEN,
OBVIOUSLY, THE PETITIONERS WERE ABLE TO PROVE AND ESTABLISH
THAT RESPONDENT PROCTER & GAMBLE PHILS., INC. IS THEIR
EMPLOYER AND THAT THEY WERE ILLEGALLY DISMISSED BY THE
FORMER.
II.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS
COMMITTED [A] REVERSIBLE ERROR WHEN IT DID NOT DECLARE

THAT THE PUBLIC RESPONDENTS HAD ACTED WITH GRAVE ABUSE OF

DISCRETION WHEN THE LATTER DID NOT FIND THE PRIVATE
RESPONDENTS LIABLE TO THE PETITIONERS FOR PAYMENT OF
ACTUAL, MORAL AND EXEMPLARY DAMAGES AS WELL AS LITIGATION
COSTS AND ATTORNEYS FEES.[17]
Simply stated, the issues are: (1) whether P&G is the employer of
petitioners; (2) whether petitioners were illegally dismissed; and (3) whether
petitioners are entitled for payment of actual, moral and exemplary damages as
well as litigation costs and attorneys fees.
Petitioners Arguments
Petitioners insist that they are employees of P&G. They claim that they were
recruited by the salesmen of P&G and were engaged to undertake merchandising
chores for P&G long before the existence of Promm-Gem and/or SAPS. They
further claim that when the latter had its so-called re-alignment program,
petitioners were instructed to fill up application forms and report to the agencies
which P&G created.[18]
Petitioners further claim that P&G instigated their dismissal from work as
can be gleaned from its letter[19] to SAPS dated February 24, 1993, informing the
latter that their Merchandising Services Contract will no longer be renewed.
Petitioners further assert that Promm-Gem and SAPS are labor-only
contractors providing services of manpower to their client. They claim that the
contractors have neither substantial capital nor tools and equipment to undertake
independent labor contracting. Petitioners insist that since they had been engaged
to perform activities which are necessary or desirable in the usual business or
trade of P&G, then they are its regular employees.[20]
Respondents Arguments
On the other hand, P&G points out that the instant petition raises only
questions of fact and should thus be thrown out as the Court is not a trier of
facts. It argues that findings of facts of the NLRC, particularly where the NLRC and
the Labor Arbiter are in agreement, are deemed binding and conclusive on the
Supreme Court.
P&G further argues that there is no employment relationship between it and
petitioners. It was Promm-Gem or SAPS that (1) selected petitioners and engaged
their services; (2) paid their salaries; (3) wielded the power of dismissal; and (4)
had the power of control over their conduct of work.
P&G also contends that the Labor Code neither defines nor limits which
services or activities may be validly outsourced. Thus, an employer can farm out
any of its activities to an independent contractor, regardless of whether such

activity is peripheral or core in nature. It insists that the determination of whether

to engage the services of a job contractor or to engage in direct hiring is within the
ambit of management prerogative.
At this juncture, it is worth mentioning that on January 29, 2007, we deemed
as waived the filing of the Comment of Promm-Gem on the petition. [21] Also,
although SAPS was impleaded as a party in the proceedings before the Labor
Arbiter and the NLRC, it was no longer impleaded as a party in the proceedings
before the CA.[22] Hence, our pronouncements with regard to SAPS are only for the
purpose of determining the obligations of P&G, if any.
Our Ruling
The petition has merit.
As a rule, the Court refrains from reviewing factual assessments of lower
courts and agencies exercising adjudicative functions, such as the
NLRC. Occasionally, however, the Court is constrained to wade into factual matters
when there is insufficient or insubstantial evidence on record to support those
factual findings; or when too much is concluded, inferred or deduced from the bare
or incomplete facts appearing on record.[23] In the present case, we find the need
to review the records to ascertain the facts.
Labor-only contracting and job contracting
In order to resolve the issue of whether P&G is the employer of petitioners, it is
necessary to first determine whether Promm-Gem and SAPS are labor-only
contractors or legitimate job contractors.
The pertinent Labor Code provision on the matter states:
ART. 106. Contractor or subcontractor. Whenever an employer
enters into a contract with another person for the performance of the
formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions
of this Code.
In the event that the contractor or subcontractor fails to pay the
wages of his employees in accordance with this Code, the employer
shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed
under the contract, in the same manner and extent that he is liable to
employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict
or prohibit the contracting out of labor to protect the rights of workers

established under this Code. In so prohibiting or restricting, he may

make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.
There is labor-only contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the
principal business of such employer. In such cases, the person or
intermediary shall be considered merely as an agent of the employer
who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him. (Emphasis and
underscoring supplied.)
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as
amended by Department Order No. 18-02,[24] distinguishes between legitimate and
labor-only contracting:
xxxx
Section 3. Trilateral Relationship in Contracting Arrangements.
In legitimate contracting, there exists a trilateral relationship under
which there is a contract for a specific job, work or service between
the principal and the contractor or subcontractor, and a contract of
employment between the contractor or subcontractor and its
workers. Hence, there are three parties involved in these
arrangements, the principal which decides to farm out a job or service
to a contractor or subcontractor, the contractor or subcontractor
which has the capacity to independently undertake the performance
of the job, work or service, and the contractual workers engaged by
the contractor or subcontractor to accomplish the job[,] work or
service.
xxxx
Section 5. Prohibition against labor-only contracting. Labor-only
contracting is hereby declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a
job, work or service for a principal, and any of the following elements
are present:

i) The contractor or subcontractor does not have substantial

capital or investment which relates to the job, work or service to be
performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are
directly related to the main business of the principal; or
ii) [T]he contractor does not exercise the right to control over
the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the
application of Article 248 (c) of the Labor Code, as amended.
Substantial capital or investment refers to capital stocks and
subscribed capitalization in the case of corporations, tools, equipment,
implements, machineries and work premises, actually and directly used
by the contractor or subcontractor in the performance or completion of
the job, work or service contracted out.
The right to control shall refer to the right reserved to the person
for whom the services of the contractual workers are performed, to
determine not only the end to be achieved, but also the manner and
means to be used in reaching that end.
x x x x (Underscoring supplied.)
Clearly, the law and its implementing rules allow contracting arrangements
for the performance of specific jobs, works or services. Indeed, it is management
prerogative to farm out any of its activities, regardless of whether such activity is
peripheral or core in nature. However, in order for such outsourcing to be valid, it
must be made to an independent contractor because the current labor rules
expressly prohibit labor-only contracting.
To emphasize, there is labor-only contracting when the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or
service for a principal[25] andany of the following elements are present:
i) The contractor or subcontractor does not have substantial
capital or investment which relates to the job, work or service to be
performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are
directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the
performance of the work of the contractual employee. (Underscoring
supplied)
In the instant case, the financial statements[26] of Promm-Gem show that it

has authorized capital stock of P1 million and a paid-in capital, or capital available
for operations, of P500,000.00 as of 1990.[27] It also has long term assets
worth P432,895.28 and current assets of P719,042.32. Promm-Gem has also
proven that it maintained its own warehouse and office space with a floor area of
870 square meters.[28] It also had under its name three registered vehicles which
were used for its promotional/merchandising business.[29] Promm-Gem also has
other clients[30] aside from P&G.[31] Under the circumstances, we find that PrommGem has substantial investment which relates to the work to be performed. These
factors negate the existence of the element specified in Section 5(i) of DOLE
Department Order No. 18-02.
The records also show that Promm-Gem supplied its complainant-workers
with the relevant materials, such as markers, tapes, liners and cutters, necessary
for them to perform their work. Promm-Gem also issued uniforms to them. It is
also relevant to mention that Promm-Gem already considered the complainants
working under it as its regular, not merely contractual or project, employees.
[32]
This circumstance negates the existence of element (ii) as stated in Section 5 of
DOLE Department Order No. 18-02, which speaks of contractual employees. This,
furthermore, negates on the part of Promm-Gem bad faith and intent to
circumvent labor laws which factors have often been tipping points that lead the
Court to strike down the employment practice or agreement concerned as
contrary to public policy, morals, good customs or public order.[33]
Under the circumstances, Promm-Gem cannot be considered as a labor-only
contractor. We find that it is a legitimate independent contractor.
On the other hand, the Articles of Incorporation of SAPS shows that it has a
paid-in capital of only P31,250.00. There is no other evidence presented to show
how much its working capital and assets are. Furthermore, there is no showing of
substantial investment in tools, equipment or other assets.
In Vinoya v. National Labor Relations Commission,[34] the Court held that
[w]ith the current economic atmosphere in the country, the paid-in capitalization of
PMCI amounting toP75,000.00 cannot be considered as substantial capital and, as
such, PMCI cannot qualify as an independent contractor. [35] Applying the same
rationale to the present case, it is clear that SAPS having a paid-in capital of
only P31,250 - has no substantial capital. SAPS lack of substantial capital is
underlined by the records[36] which show that its payroll for its merchandisers alone
for one month would already total P44,561.00. It had 6-month contracts with P&G.
[37]
Yet SAPS failed to show that it could complete the 6-month contracts using its
own capital and investment. Its capital is not even sufficient for one months
payroll. SAPS failed to show that its paid-in capital of P31,250.00 is sufficient for
the period required for it to generate its needed revenue to sustain its operations
independently. Substantial capital refers to capitalization used in the performance
or completion of the job, work or service contracted out. In the present case, SAPS
has failed to show substantial capital.

Furthermore, the petitioners have been charged with the merchandising and
promotion of the products of P&G, an activity that has already been considered by
the Court as doubtlessly directly related to the manufacturing business,[38] which is
the principal business of P&G. Considering that SAPS has no substantial capital or
investment and the workers it recruited are performing activities which are directly
related to the principal business of P&G, we find that the former is engaged in
labor-only contracting.
Where labor-only contracting exists, the Labor Code itself establishes an
employer-employee relationship between the employer and the employees of the
labor-only contractor.[39] The statute establishes this relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor
is considered merely an agent of the principal employer and the latter is
responsible to the employees of the labor-only contractor as if such employees had
been directly employed by the principal employer.[40]
Consequently, the following petitioners, having been recruited and supplied
by SAPS[41] -- which engaged in labor-only contracting -- are considered as the
employees of P&G: Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham
Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope
Salonga, Franz David, Nestor Ignacio, Jr., Rolando Romasanta, Roehl Agoo,
Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo
Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador,
Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar,
Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert V. Miranda, Rodolfo C. Toledo,
Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P.
Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr.,
Roberto B. Cruz, Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente J.
Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz, Romeo Viernes, Jr.,
Elias Basco and Dennis Dacasin.
The following petitioners, having worked under, and been dismissed by
Promm-Gem, are considered the employees of Promm-Gem, not of P&G: Wilfredo
Torres, John Sumergido, Edwin Garcia, Mario P. Liongson, Jr., Ferdinand Salvo,
Alejandrino Abaton, Emmanuel A. Laban, Ernesto Soyosa, Aladino Gregore, Jr.,
Ramil Reyes, Ruben Vasquez, Jr., Maximino Pascual, Willie Ortiz, Armando Villar,
Jose Fernando Gutierrez, Ramiro Pita, Fernando Macabenta, Nestor Esquila, Julio
Rey, Albert Leynes, Ernesto Calanao, Roberto Rosales, Antonio Dacuma, Tadeo
Durano, Raul Dulay, Marino Maranion, Joseph Banico, Melchor Cardano, Reynaldo
Jacaban, and Joeb Aliviado.[42]
Termination of services
We now discuss the issue of whether petitioners were illegally dismissed. In
cases of regular employment, the employer shall not terminate the services of an
employee except for a just[43] or authorized[44] cause.

In the instant case, the termination letters given by Promm-Gem to its employees
uniformly specified the cause of dismissal as grave misconduct and breach of trust,
as follows:
xxxx
This informs you that effective May 5, 1992, your employment
with our company, Promm-Gem, Inc. has been terminated. We find
your expressed admission, that you considered yourself as an
employee of Procter & Gamble Phils., Inc. and assailing the integrity of
the Company as legitimate and independent promotion firm, is
deemed as an act of disloyalty prejudicial to the interests of our
Company: serious misconduct and breach of trust reposed upon you
as employee of our Company which [co]nstitute just cause for the
termination of your employment.
x x x x[45]
Misconduct has been defined as improper or wrong conduct; the transgression of
some established and definite rule of action, a forbidden act, a dereliction of duty,
unlawful in character implying wrongful intent and not mere error of
judgment. The misconduct to be serious must be of such grave and aggravated
character and not merely trivial and unimportant.[46] To be a just cause for
dismissal, such misconduct (a) must be serious; (b) must relate to the performance
of the employees duties; and (c) must show that the employee has become unfit
to continue working for the employer.[47]
In other words, in order to constitute serious misconduct which will warrant the
dismissal of an employee under paragraph (a) of Article 282 of the Labor Code, it is
not sufficient that the act or conduct complained of has violated some established
rules or policies. It is equally important and required that the act or conduct must
have been performed with wrongful intent.[48] In the instant case, petitionersemployees of Promm-Gem may have committed an error of judgment in claiming
to be employees of P&G, but it cannot be said that they were motivated by any
wrongful intent in doing so. As such, we find them guilty of only simple misconduct
for assailing the integrity of Promm-Gem as a legitimate and independent
promotion firm. A misconduct which is not serious or grave, as that existing in the
instant case, cannot be a valid basis for dismissing an employee.
Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based
on the willful breach of the trust reposed in the employee by his
employer. Ordinary breach will not suffice.A breach of trust is willful if it is done
intentionally, knowingly and purposely, without justifiable excuse, as distinguished
from an act done carelessly, thoughtlessly, heedlessly or inadvertently.[49]

Loss of trust and confidence, as a cause for termination of employment, is

premised on the fact that the employee concerned holds a position of
responsibility or of trust and confidence.As such, he must be invested with
confidence on delicate matters, such as custody, handling or care and protection
of the property and assets of the employer. And, in order to constitute a just cause
for dismissal, the act complained of must be work-related and must show that the
employee is unfit to continue to work for the employer. [50] In the instant case, the
petitioners-employees of Promm-Gem have not been shown to be occupying
positions of responsibility or of trust and confidence. Neither is there any evidence
to show that they are unfit to continue to work as merchandisers for Promm-Gem.
All told, we find no valid cause for the dismissal of petitioners-employees of
Promm-Gem.
While Promm-Gem had complied with the procedural aspect of due process
in terminating the employment of petitioners-employees, i.e., giving two notices
and in between such notices, an opportunity for the employees to answer and
rebut the charges against them, it failed to comply with the substantive aspect of
due process as the acts complained of neither constitute serious misconduct nor
breach of trust. Hence, the dismissal is illegal.
With regard to the petitioners placed with P&G by SAPS, they were given no
written notice of dismissal. The records show that upon receipt by SAPS of P&Gs
letter terminating their Merchandising Services Contact effective March 11, 1993,
they in turn verbally informed the concerned petitioners not to report for work
anymore. The concerned petitioners related their dismissal as follows:
xxxx
5. On March 11, 1993, we were called to a meeting at SAPS office. We
were told by Mr. Saturnino A. Ponce that we should already stop
working immediately because that was the order of Procter and
Gamble.According to him he could not do otherwise because Procter
and Gamble was the one paying us. To prove that Procter and Gamble
was the one responsible in our dismissal, he showed to us the
letter[51] datedFebruary 24, 1993, x x x
February 24, 1993
Sales and Promotions Services
Armons Bldg., 142 Kamias Road,
Quezon City
Attention: Mr. Saturnino A. Ponce
President & General Manager
Gentlemen:

Based on our discussions last 5 and 19 February 1993, this

formally informs you that we will not be renewing our
Merchandising Services Contract with your agency.
Please immediately undertake efforts to ensure that your
services to the Company will terminate effective close of
business hours of 11 March 1993.
This is without prejudice to whatever obligations you may
have to the company under the abovementioned
contract.
Very truly yours,
(Sgd.)
EMMANUEL M. NON
Sales Merchandising III
6. On March 12, 1993, we reported to our respective outlet
assignments. But, we were no longer allowed to work and we were
refused entrance by the security guards posted. According to the
security guards, all merchandisers of Procter and Gamble under
S[APS] who filed a case in the Dept. of Labor are already dismissed as
per letter of Procter and Gamble dated February 25, 1993. x x x[52]
Neither
SAPS
nor
P&G
dispute
the
existence
of
these
circumstances. Parenthetically, unlike Promm-Gem which dismissed its employees
for grave misconduct and breach of trust due to disloyalty, SAPS dismissed its
employees upon the initiation of P&G. It is evident that SAPS does not carry on its
own business because the termination of its contract with P&G automatically
meant for it also the termination of its employees services. It is obvious from its
act that SAPS had no other clients and had no intention of seeking other clients in
order to further its merchandising business. From all indications SAPS, existed to
cater solely to the need of P&G for the supply of employees in the latters
merchandising concerns only. Under the circumstances prevailing in the instant
case, we cannot consider SAPS as an independent contractor.
Going back to the matter of dismissal, it must be emphasized that the onus
probandi to prove the lawfulness of the dismissal rests with the employer. [53] In
termination cases, the burden of proof rests upon the employer to show that the
dismissal is for just and valid cause.[54] In the instant case, P&G failed to discharge
the burden of proving the legality and validity of the dismissals of those petitioners
who are considered its employees. Hence, the dismissals necessarily were not
justified and are therefore illegal.
Damages

We now go to the issue of whether petitioners are entitled to damages. Moral

and exemplary damages are recoverable where the dismissal of an employee was
attended by bad faith or fraud or constituted an act oppressive to labor or was
done in a manner contrary to morals, good customs or public policy.[55]
With regard to the employees of Promm-Gem, there being no evidence of bad
faith, fraud or any oppressive act on the part of the latter, we find no support for
the award of damages.
As for P&G, the records show that it dismissed its employees through SAPS in a
manner oppressive to labor. The sudden and peremptory barring of the concerned
petitioners from work, and from admission to the work place, after just a one-day
verbal notice, and for no valid cause bellows oppression and utter disregard of the
right to due process of the concerned petitioners. Hence, an award of moral
damages is called for.
Attorneys fees may likewise be awarded to the concerned petitioners who
were illegally dismissed in bad faith and were compelled to litigate or incur
expenses to protect their rights by reason of the oppressive acts[56] of P&G.
Lastly, under Article 279 of the Labor Code, an employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and
other privileges, inclusive of allowances, and other benefits or their monetary
equivalent from the time the compensation was withheld up to the time of actual
reinstatement.[57] Hence, all the petitioners, having been illegally dismissed are
entitled to reinstatement without loss of seniority rights and with full back wages
and other benefits from the time of their illegal dismissal up to the time of their
actual reinstatement.
WHEREFORE, the petition is GRANTED. The Decision dated March 21, 2003 of
the Court of Appeals in CA-G.R. SP No. 52082 and the Resolution dated October
20, 2003 areREVERSED and SET ASIDE. Procter & Gamble Phils., Inc. and
Promm-Gem, Inc. are ORDERED to reinstate their respective employees
immediately without loss of seniority rights and with full backwages and other
benefits from the time of their illegal dismissal up to the time of their actual
reinstatement. Procter & Gamble Phils., Inc. is further ORDERED to pay each of
those petitioners considered as its employees, namely Arthur Corpuz, Eric Aliviado,
Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon,
Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Ignacio, Rolando
Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya,
Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando
Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo,
Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert Y.
Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon,
Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De
Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S.

Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez,

Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin, P25,000.00
as moral damages plus ten percent of the total sum as and for attorneys fees.
Let this case be REMANDED to the Labor Arbiter for the computation, within 30
days from receipt of this Decision, of petitioners backwages and other benefits;
and ten percent of the total sum as and for attorneys fees as stated above; and for
immediate execution.
SO ORDERED.

FIRST DIVISION

G.R. No. 113347 June 14, 1996

FILIPINAS SYNTHETIC FIBER CORPORATION (FILSYN), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER
VOLTAIRE A. BALITAAN, FELIPE LOTERTE and DE LIMA TRADING &
GENERAL SERVICES, respondents.
BELLOSILLO, J.:p
Filipinas Synthetic Fiber Corporation (FILSYN) assails the decision of the
National Labor Relations Commission (NLRC) of 16 September
1993 1 upholding the ruling of the Labor Arbiter that there exists an employer-

employee relationship between FILSYN and private respondent Felipe

Loterte. 2
On 4 April 1991 FILSYN, a domestic corporation engaged in the manufacture
of polyester fiber, contracted with De Lima Trading and General Services (DE
LIMA) for the performance of specific janitorial services at the former's plant
in Brgy. Don Jose, Sta. Rosa, Laguna. 3 Pursuant to the agreement Felipe
Loterte, among others, was deployed at FILSYN to take care of the plants and
maintain general cleanliness around the premises.
On 24 February 1992 Loterte sued FILSYN and DE LIMA as alternative
defendants 4 for illegal dismissal, underpayment of wages, non-payment of
legal holiday pay, service incentive leave pay and 13th month pay alleging
that he was first assigned to perform janitorial work at FILSYN in 1981 by the
La Saga General Services; that the La Saga was changed to DE LIMA on
August 1991; that when a movement to demand increased wages and 13th
month pay arose among the workers on December 1991 he was accused by a
certain Dodie La Flores of having posted in the bulletin board at FILSYN an
article attributing to management a secret understanding to block the
demand; and, for denying responsibility, his gate pass was unceremoniously
cancelled on 6 February 1992 and he was subsequently dismissed. 5
The Labor Arbiter ruled in favor of Loterte. He was classified as a regular
employee on the ground that he performed tasks usually necessary or
desirable in the main business of FILSYN for more than ten (10) years or since
1981 under the ruling in Guarin v. NLRC. 6 FILSYN was declared to be the real
employer of Loterte and DE LIMA as a mere labor contractor. 7 Hence, FILSYN
was adjudged liable for Loterte's reinstatement, payment of salary
differentials and back wages from 6 February 1992 up to the date of
judgment, in addition to his unpaid legal holiday pay, service incentive leave
pay and 13th month pay in the total amount of P56,394.90.
FILSYN appealed to the NLRC contending that the application of
the Guarin ruling was misplaced since the contractor in said case was not
able to prove that it had substantial capital, hence the reason for its being
declared as a labor-only contractor. In the case of DE LIMA, however,
sufficient evidence existed consisting of its Certificate of Registration issued
by the Securities & Exchange Commission (SEC) and Articles of Incorporation
and By-Laws to prove that it had substantial capitalization, hence, could not
be considered as a mere labor contractor.

The NLRC debunked the claim of FILSYN and affirmed the Labor Arbiter in
finding DE LIMA as a labor-only contractor. When a motion for reconsideration
proved futile, FILSYN filed the instant petition.
On 23 February 1994 a temporary restraining order to stay the execution of
the NLRC decision was issued by the Court upon approval of a bond in the
amount of P56,000.00 to be effective during the pendency of this petition. 8
Petitioner contends that the NLRC committed grave abuse of discretion in
holding DE LIMA as a labor-only contractor with no substantial capital or
investment. Petitioner insists that the evidence 9 it presented shows DE LIMA
to be a corporation duly registered with the SEC with substantial
capitalization of P1,600,000.00, P400,000.00 of which is actually subscribed.
Hence, DE LIMA cannot possibly be considered as without substantial capital.
But, assuming arguendo that DE LIMA is without substantial capital or
investment, petitioner contends that it cannot still be consider as the real
employer of Loterte since his work is not necessary in the principal business
of FILSYN which is the manufacture of polyester, and that present
jurisprudence holds that the performance of janitorial services, although
directly related to the principal business of the alleged employer, is
nonetheless unnecessary since non-performance thereof will not cause
production and company sales to suffer. 10
In his Comment the Solicitor General agrees with petitioner that DE LIMA is
not a labor-only contractor. However, while he concedes that no employeremployee relationship exists between FILSYN and Loterte, the Solicitor
General opines that the former is still liable solidarily with DE LIMA, its
contractor, for the satisfaction of the Labor Arbiter's awards in favor of
Loterte as an indirect employer under Art. 106 of the Labor Code. 11
In its Consolidated Reply FILSYN contends that Art. 106 of the Labor Code
cited by the Solicitor General applies only in cases where there is failure to
pay wages, not in cases where the employee was illegally dismissed, as in
the case of Loterte.
We agree that there is sufficient evidence to show that private respondent DE
LIMA is an independent job contractor, not a mere labor-only contractor.
Under the Labor Code, two (2) elements must exist for a finding of labor-only
contracting: (a) the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and (b) the workers recruited and

placed by such persons are performing activities directly related to the

principal business of such employer. 12
These two (2) elements do not exist in the instant case. As pointed out by
petitioner, private respondent DE LIMA is a going concern duly registered
with the Securities and Exchange Commission with substantial capitalization
of P1,600,000.00, P400,000.00 of which is actually subscribed. 13 Hence, it
cannot be considered as engaged in labor-only contracting being a highly
capitalized venture. 14 Moreover, while the janitorial services performed by
Felipe Loterte pursuant to the agreement between FILSYN and DE LIMA may
be considered directly related to the principal business of FILSYN which is the
manufacture of polyester fiber, nevertheless, they are not necessary in its
operation. 15 On the contrary, they are merely incidental thereto, as opposed
to being integral, without which production and company sales will not
suffer. 16 Judicial notice has already been taken of the general practice in
private as well as in government institutions and industries of hiring janitorial
services on an independent contractor basis. 17 Consequently, DE LIMA being
an independent job contractor, no direct employer-employee relationship
exists between petitioner FILSYN and private respondent Felipe Loterte. 18
With respect to its liability, however, petitioner cannot totally exculpate itself
from the fact that respondent DE LIMA is an independent job contractor. We
agree with the Solicitor General that notwithstanding the lack of a direct
employer-employee relationship between FILSYN and Felipe Loterte, the
former is still jointly and severally liable with respondent DE LIMA for
Loterte's monetary claims under Art. 109 of the Labor Code 19 which explicitly
provides -The provisions of existing laws to the contrary notwithstanding,
every employer or indirect employer shall be held responsible
with his contractor or subcontractor for any violation of any
provision of this Code. For purposes of determining the extent of
their civil liability under this Chapter, they shall be considered as
direct employers (emphasis supplied).
However, a reduction of the Labor Arbiter's awards is in order. In his decision
of 31 May 1993, the Labor Arbiter in computing the 13th month pay and
service incentive leave pay due Loterte erroneously included the period
starting June 1989 to the date of his decision. From the admission of Loterte
himself, 20 he started working for DE LIMA only in August 1991 and that the
Agreement between FILSYN and DE LIMA is dated 4 April

1991. 21 Consequently, the joint and several liablity of FILSYN and DE LIMA
could not have covered the period before said date. Thus, without prejudice
to the right of petitioner to seek reimbursement from DE LIMA for whatever
amount it will have to pay Loterte, we determine their joint and several
liability on the basis of the computation of the Labor Arbiter, affirmed by the
NLRC (which is not disputed by petitioner except only as to the awards for the
period prior to August 1991), as follows -A. Underpayment:
From August 1991 to 5 Feb. 1992
(P113.00 x 314 = P35,482.00)
(P35,482.00 12 = P2,956.83)
P2,956.83 x 6 mos. & 5 days = P18,233.78
Less: Amount received
(P104 x 314 = P32,656.00)
(P32,656.00 12 = P2,721.33)
P2,721.33 x 6 mos. & 5 days = 16,781.54
Total underpayment due = 1,452.24
B. 13th Month Pay:
From Aug. to Dec. 1991
(P113.00 x 314 = P35,482.00)
(P35,482.00 12 = P2,956.83)
(P2,956.83 x 5 mos. = P14,784.15)
P14,784.15 12 = P1,232.01
C. Service Incentive Leave Pay:
1991 (P113.00 x 5 days) = P565.00
D. Back wages:
From 6 Feb. 1992 to 31 May 1993
(P113.00 x 314 = P35,482.00)
(P35,482.00 12 = P2,956.83)
(P2,956.83 x 15 mos. & 25 days = P46,816.47

1992 13th month pay = 2,956.83

1992 service incentive leave pay = P565.00
Total back wages due = P50,338.30
WHEREFORE, the questioned decision of respondent National Labor Relations
Commission affirming that of the Labor Arbiter as well as its resolution
denying petitioner's motion for reconsideration is REVERSED and SET ASIDE
and a new one entered:
1. Declaring the relationship between petitioner Filipinas Synthetic Fiber
Corporation (FILSYN) and private respondent De Lima Trading and General
Services (DE LIMA) as one of job contractorship;
2. Ordering private respondent De Lima Trading and General Services (DE
LIMA) to reinstate private respondent FELIPE LOTERTE to his former position
or its equivalent without loss of seniority rights; and
3. Ordering private respondent De Lima Trading and General Services (DE
LIMA) jointly and severally with petitioner Filipinas Synthetic Fiber Corporation
(FILSYN) to pay private respondent FELIPE LOTERTE the following amounts:
P1,452.24 for salary differentials, P1,232.01 for 13th month pay, P565.00 for
service incentive leave pay, and P50,338.30 for backwages, or a total of
P53,587.55 due and payable, without prejudice to FILSYN seeking
reimbursement from DE LIMA for whatever amount the former may pay or
have paid the latter by virtue hereof.
SO ORDERED.

SECOND DIVISION

PHILIPPINE AIRLINES, INC.,

Petitioner,

-versus-

G.R. No. 146408

Present:

QUISUMBING,* J., Chairperson,

CARPIO,**

ENRIQUE LIGAN, EMELITO SOCO,

ALLAN
PANQUE,
JOLITO
OLIVEROS,
RICHARD
GONCER,
NONILON
PILAPIL,
AQUILINO
YBANEZ, BERNABE SANDOVAL,
RUEL
GONCER,
VIRGILIO
P.
CAMPOS, JR., ARTHUR M. CAPIN,
RAMEL BERNARDES, LORENZO
BUTANAS, BENSON CARESUSA,

CARPIO MORALES,
AZCUNA,***
TINGA, and
VELASCO, JR., JJ.

JEFFREY LLENOS, ROQUE PILAPIL,

ANTONIO M. PAREJA, CLEMENTE
R. LUMAYNO, NELSON TAMPUS,
ROLANDO
TUNACAO,
CHERRIE
ALEGRES, BENEDICTO AUXTERO,
EDUARDO
MAGDADARAUG,
NELSON M. DULCE, and ALLAN
BENTUZAL,

Promulgated:

February 29, 2008

Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - x

DECISION

CARPIO MORALES, J.:

Petitioner Philippine Airlines as Owner, and Synergy Services Corporation

(Synergy) as Contractor, entered into an Agreement [1] on July 15, 1991
whereby Synergy undertook to provide loading, unloading, delivery of
baggage and cargo and other related services to and from [petitioner]s
aircraft at the Mactan Station.[2]
The Agreement specified the following Scope of Services of Contractor
Synergy:
1.2 CONTRACTOR shall furnish all the necessary capital, workers,
loading, unloading and delivery materials, facilities, supplies,
equipment and tools for the satisfactory performance and
execution of the following services (the Work):
a.

Loading and unloading of baggage and cargo to and from

the aircraft;

b.

Delivering of baggage from the ramp to the baggage claim

area;

c.

Picking up of baggage from the baggage sorting area to the

designated parked aircraft;

d.

Delivering of cargo unloaded from the flight to cargo

terminal;

e.

Other related jobs (but not janitorial functions) as may be

required and necessary;

CONTRACTOR shall perform and execute the aforementioned

Work at the following areas located at Mactan Station, to wit:
a.

Ramp Area

b.

Baggage Claim Area

c.

Cargo Terminal Area, and

d.

Baggage Sorting Area[3] (Underscoring supplied)

And it expressly provided that Synergy was an independent contractor and . .

. that there w[ould] be no employer-employee relationship between
CONTRACTOR and/or its employees on the one hand, and OWNER, on the
other.[4]
On the duration of the Agreement, Section 10 thereof provided:
10. 1 Should at any time OWNER find the services herein
undertaken by CONTRACTOR to be unsatisfactory, it shall
notify CONTRACTOR who shall have fifteen (15) days from
such notice within which to improve the services. If
CONTRACTOR fails to improve the services under this
Agreement according to OWNERS specifications and
standards, OWNER shall have the right to terminate this
Agreement immediately and without advance notice.
10.2

Should
CONTRACTOR fail
to
improve
the
services within the period stated above or should
CONTRACTOR breach the terms of this Agreement and fail
or refuse to perform the Workin such a manner as will be
consistent with the achievement of the result therein
contracted for or in any other way fail to comply strictly
with any terms of this Agreement, OWNER at its option,
shall have the right to terminate this Agreement and to
make other arrangements for having said Work performed
and pursuant thereto shall retain so much of the money
held on the Agreement as is necessary to cover

the OWNERs costs and damages, without prejudice to the

right of OWNER to seek resort to the bond furnished by
CONTRACTOR should the money in OWNERs possession be
insufficient.
x x x x (Underscoring supplied)
Except for respondent Benedicto Auxtero (Auxtero), the rest of the
respondents, who appear to have been assigned by Synergy to petitioner
following the execution of the July 15, 1991 Agreement, filed on March 3,
1992 complaints before the NLRC Regional Office VII at Cebu City against
petitioner, Synergy and their respective officials forunderpayment, nonpayment
of
premium
pay for
holidays, premium
pay for
rest
days, service incentive leave pay, 13th month pay and allowances, and
for regularization of employment status with petitioner, they claiming to be
performing duties for the benefit of [petitioner] since their job is directly
connected with [its] business x x x.[5]
Respondent Auxtero had initially filed a complaint against petitioner and
Synergy and their respective officials for regularization of his employment
status. Later alleging that he was, without valid ground, verbally dismissed,
he filed a complaint against petitioner and Synergy and their respective
officials for illegal dismissal and reinstatement with fullbackwages.[6]
The complaints of respondents were consolidated.
By
Decision[7] of August
29,
1994,
Labor
Arbiter Dominador Almirante found Synergy an independent contractor and
dismissed respondents complaint for regularization against petitioner, but
granted their money claims. The fallo of the decision reads:
WHEREFORE, foregoing premises considered, judgment is hereby
rendered as follows:
(1)

Ordering respondents PAL and Synergy jointly and

severally to pay all the complainants herein their 13 th month
pay and service incentive leave benefits;

xxxx
(3)

Ordering respondent
Synergy
to
pay
complainant Benedicto Auxtero a financial assistance in the
amount of P5,000.00.

The awards hereinabove enumerated in the aggregate total

amount of THREE HUNDRED TWENTY-TWO THOUSAND THREE
HUNDRED FIFTY NINE PESOS AND EIGHTY SEVEN CENTAVOS
(P322,359.87) are computed in detail by our Fiscal Examiner
which computation is hereto attached to form part of this
decision.
The rest of the claims are hereby ordered dismissed for lack of
merit.[8] (Underscoring supplied)
On appeal by respondents, the NLRC, Fourth Division, Cebu City, vacated and
set aside the decision of the Labor Arbiter by Decision [9] of January 5, 1996,
the fallo of whichreads:
WHEREFORE,
the
Decision
of
the
Labor
Arbiter Dominador A. Almirante, dated August 29, 1994, is hereby
VACATED and SET ASIDE and judgment is hereby rendered:
1.

Declaring respondent Synergy Services Corporation to be a

labor-only contractor;

2.

Ordering respondent Philippine Airlines to accept, as its

regular employees, all the complainants, . . . and to give each
of them the salaries, allowances and other employment
benefits and privileges of a regular employee under the
Collective Bargaining Agreement subsisting during the period
of their employment;
xxxx

4. Declaring the dismissal of complainant Benedicto Auxtero to

be illegal and ordering his reinstatement as helper or
utility man with respondent Philippine Airlines, with
full backwages, allowances and other benefits and privileges
from the time of his dismissal up to his actual reinstatement;
and
5. Dismissing the appeal of respondent Synergy Services
Corporation, for lack of merit.[10] (Emphasis and underscoring
supplied)

Only petitioner assailed the NLRC decision via petition for certiorari before
this Court.
By Resolution[11] of January 25, 1999, this Court referred the case to the
Court of Appeals for appropriate action and disposition, conformably with St.
Martin Funeral Homes v. National Labor Relations Commission which was
promulgated on September 16, 1998.
The appellate court, by Decision of September 29, 2000, affirmed the
Decision of the NLRC.[12] Petitioners motion for reconsideration having been
denied by Resolution ofDecember 21, 2000, [13] the present petition was filed,
faulting the appellate court
I.
. . . IN UPHOLDING THE NATIONAL LABOR RELATIONS
COMMISSION DECISION WHICH IMPOSED THE RELATIONSHIP OF
EMPLOYER-EMPLOYEE BETWEEN
PETITIONER
AND
THE
RESPONDENTS HEREIN.
II.
. . . IN AFFIRMING THE RULING OF THE NATIONAL LABOR
RELATIONS COMMISSION ORDERING THE REINSTATEMENT OF
RESPONDENT AUXTERO DESPITE THE ABSENCE [OF] ANY
FACTUAL FINDING IN THE DECISION THAT PETITIONER ILLEGALLY
TERMINATED HIS EMPLOYMENT.
III.
. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND GRAVE
ERROR IN UPHOLDING THE DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION WHICH COMPELLED THE PETITIONER TO
EMPLOY THE RESPONDENTS AS REGULAR EMPLOYEES DESPITE
THE FACT THAT THEIR SERVICES ARE IN EXCESS OF PETITIONER
COMPANYS
OPERATIONAL
REQUIREMENTS.[14] (Underscoring
supplied)
Petitioner argues that the law does not prohibit an employer from engaging
an independent contractor, like Synergy, which has substantial capital in
carrying on an independent business of contracting, to perform specific jobs.
Petitioner further argues that its contracting out to Synergy various
services like janitorial, aircraft cleaning, baggage-handling, etc., which are
directly related to its business, does not make respondents its employees.

Petitioner furthermore argues that none of the four (4) elements of an

employer-employee relationship between petitioner and respondents, viz:
selection and engagement of an employee, payment of wages, power of
dismissal, and the power to control employees conduct, is present in the
case.[15]
Finally, petitioner avers that reinstatement of respondents had been
rendered impossible because it had reduced its personnel due to heavy
losses as it had in fact terminated its service agreement with Synergy
effective June 30, 1998[16] as a cost-saving measure.
The decision of the case hinges on a determination of whether Synergy is a
mere job-only contractor or a legitimate contractor. If Synergy is found to be
a mere job-only contractor, respondents could be considered as regular
employees of petitioner as Synergy would then be a mere agent of petitioner
in which case respondents would be entitled to all the benefits granted to
petitioners regular employees; otherwise, if Synergy is found to be a
legitimate contractor, respondents claims against petitioner must fail as they
would then be considered employees of Synergy.
The statutory basis of legitimate contracting or subcontracting is provided in
Article 106 of the Labor Code which reads:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. Whenever an
employer enters into a contract with another person for the
performance of the former's work, the employees of the
contractor and of the latter's subcontractor, if any, shall be paid
in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the
wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor
or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict
or prohibit the contracting out of labor to protect the rights of
workers established under the Code. In so prohibiting or
restricting, he may make appropriate distinctions between laboronly contracting and job contracting as well as differentiations
within these types of contracting and determine who among the
parties involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any
provision of this Code.

There
is
"labor-only"
contracting
where
the person
supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment,
machineries, work premises, among others, AND the
workers
recruited
and
placed
by
such
person
are performing activities which are directly related to the
principal business of such employer. In such cases, the
person
or
intermediary
shall
be
considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.
(Emphasis, capitalization and underscoring supplied)
Legitimate contracting and labor-only contracting are defined in Department
Order (D.O.) No. 18-02, Series of 2002 (Rules Implementing Articles 106 to
109 of the Labor Code, as amended) as follows:
Section
3. Trilateral
relationship
in
contracting
arrangements. In legitimate contracting, there exists a
trilateral relationship under which there is a contract for a specific
job, work or service between the principal and the contractor or
subcontractor, and a contract of employment between the
contractor or subcontractor and its workers. Hence, there are
three parties involved in these arrangements, the principal which
decides to farm out a job or service to a contractor or
subcontractor, the contractor or subcontractor which has the
capacity to independently undertake the performance of the job,
work or service, and the contractual workers engaged by the
contractor or subcontractor to accomplish the job, work or
service. (Emphasis and underscoring supplied)
Section 5. Prohibition against labor-only contracting. Labor-only
contracting is hereby declared prohibited. For this purpose,
labor-only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a
principal, and any of the following elements are [sic] present:
(i)

The contractor or subcontractor does not have

substantial capital or investment which relates to the
job, work or service to be performed and the employees
recruited, supplied or placed by such contractor or

subcontractor are performing activities which are directly

related to the main business of the principal; OR
(ii)

The contractor does not exercise the right to

control over the performance of the work of the
contractual
employee. (Emphasis,
underscoring
and
capitalization supplied)

Substantial capital or investment and the right to control are defined in

the same Section 5 of the Department Order as follows:
"Substantial capital or investment" refers to capital stocks and
subscribed
capitalization
in
the
case
of
corporations, tools, equipment, implements, machineries and
work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work
or service contracted out.
The "right to control" shall refer to the right reserved to the
person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but
also the manner and means to be used in reaching that
end. (Emphasis and underscoring supplied)
From the records of the case, it is gathered that the work performed by
almost all of the respondents loading and unloading of baggage and cargo of
passengers is directly related to the main business of petitioner. And the
equipment used by respondents as station loaders, such as trailers and
conveyors, are owned by petitioner.[17]
Petitioner asserts, however, that mere compliance with substantial capital
requirement suffices for Synergy to be considered a legitimate contractor,
citing Neri v. National Labor Relations Commission.[18] Petitioners reliance on
said case is misplaced.
In Neri, the Labor Arbiter and the NLRC both determined that Building
Care Corporation had a capital stock of P1 million fully subscribed and paid
for.[19] The corporations status as independent contractor had in fact been
previously confirmed in an earlier case[20] by this Court which found it to be
serving, among others, a university, an international bank, a big local bank, a
hospital center, government agencies, etc.
In stark contrast to the case at bar, while petitioner steadfastly asserted
before the Labor Arbiter and the NLRC that Synergy has a substantial capital
to engage in legitimate contracting, it failed to present evidence thereon. As
the NLRC held:

The decision of the Labor Arbiter merely mentioned on page 5 of

his decision that respondent SYNERGY has substantial capital, but
there is no showing in the records as to how much is that capital.
Neither had respondents shown that SYNERGY has such
substantial capital. x x x[21] (Underscoring supplied)
It was only after the appellate court rendered its challenged Decision of
September 29, 2002 when petitioner, in its Motion for Reconsideration of the
decision, sought to prove, for the first time, Synergys substantial
capitalization by attaching photocopies of Synergys financial statements,
e.g., balance sheets, statements of income and retained earnings, marked as
Annexes A A-4.[22]
More significantly, however, is that respondents worked alongside petitioners
regular employees who were performing identical work. [23] As San Miguel
Corporation v.Aballa[24] and Dole Philippines, Inc. v. Esteva, et al.[25] teach,
such is an indicium of labor-only contracting.
For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which
requires any of two elements to be present is, for convenience, re-quoted:

(i)

The contractor or subcontractor does not

have substantial capital or investment which relates to
the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor
or
subcontractor
are
performing
activities
which
are directly related to the main business of the
principal, OR

(ii)

The contractor does not exercise the right to

control over the performance of the work of the
contractual employee. (Emphasis and CAPITALIZATION
supplied)

Even if only one of the two elements is present then, there is labor-only
contracting.
The control test element under the immediately-quoted paragraph (ii), which
was not present in the old Implementing Rules (Department Order No. 10,
Series of 1997),[26]echoes the prevailing jurisprudential trend [27] elevating
such element as a primary determinant of employer-employee relationship in
job contracting agreements.

One who claims to be an independent contractor has to prove that he

contracted to do the work according to his own methods and without being
subject to the employers control except only as to the results.[28]
While petitioner claimed that it was Synergys supervisors who actually
supervised respondents, it failed to present evidence thereon. It did not even
identify who were the Synergy supervisors assigned at the workplace.
Even the parties Agreement does not lend support to petitioners claim,
thus:
Section
6. Qualified and Experienced Worker: Owners Right to Dismiss Wo
rkers.
CONTRACTOR shall employ capable and experienced workers and
foremen to carry out the loading, unloading and delivery Work as
well as provide all equipment, loading, unloading and delivery
equipment, materials, supplies and tools necessary for the
performance of the Work. CONTRACTOR shall upon OWNERS
request furnish the latter with information regarding the
qualifications of the formers workers, to prove their capability and
experience. Contractor shall require all its workers,
employees, suppliers and visitors to comply with OWNERS
rules, regulations, procedures and directives relative to
the safety and security of OWNERS premises, properties
and operations. For this purpose, CONTRACTOR shall
furnish its employees and workers identification cards to
be countersigned by OWNER and uniforms to be approved
by OWNER. OWNER may require CONTRACTOR to dismiss
immediately and prohibit entry into OWNERS premises of
any person employed therein by CONTRACTOR who in
OWNERS opinion is incompetent or misconducts himself
ordoes
not
comply
with
OWNERS
reasonable
instructions and requests regarding security, safety and other
matters and such person shall not again be employed to perform
the
services
hereunder
without
OWNERS
permission.
[29]
(Underscoring partly in the original and partly supplied;
emphasis supplied
Petitioner in fact admitted that it fixes the work schedule of
respondents as their work was dependent on the frequency of plane arrivals.
[30]
And as the NLRC found, petitioners managers and supervisors approved

respondents weekly work assignments and respondents and other regular

PAL employees were all referred to as station attendants of the cargo
operation and airfreight services of petitioner.[31]
Respondents having performed tasks which are usually necessary and
desirable in the air transportation business of petitioner, they should be
deemed its regular employees and Synergy as a labor-only contractor. [32]
The express provision in the Agreement that Synergy was an independent
contractor and there would be no employer-employee relationship between
[Synergy] and/or its employees on one hand, and [petitioner] on the other
hand is not legally binding and conclusive as contractual provisions are not
valid determinants of the existence of such relationship. For it is the totality
of the facts and surrounding circumstances of the case [33] which is
determinative of the parties relationship.
Respecting the dismissal on November 15, 1992[34] of Auxtero, a regular
employee of petitioner who had been working as utility man/helper since
November 1988, it is not legally justified for want of just or authorized
cause therefor and
for
non-compliance
with
procedural
due
process. Petitioners claim that he abandoned his work does not persuade.
[35]
The elements of abandonment being (1) the failure to report for work or
absence without valid or justifiable reason, and (2) a clear intention to sever
the employer-employee relationship manifested by some overt acts,
[36]
the onus probandi lies with petitioner which, however, failed to discharge
the same.
Auxtero, having been declared to be a regular employee of petitioner, and
found to be illegally dismissed from employment, should be entitled to salary
differential[37] from the time he rendered one year of service until his
dismissal, reinstatement plus backwages until the finality of this decision.
[38]
In view, however, of the long period of time [39] that had elapsed since his
dismissal on November 15, 1992, it would be appropriate to award separation
pay of one (1) month salary for each year of service, in lieu of reinstatement.
[40]

As regards the remaining respondents, the Court affirms the ruling of both
the NLRC and the appellate court, ordering petitioner to accept them as its
regular employees and to give each of them the salaries, allowances and
other employment benefits and privileges of a regular employee under the
pertinent Collective Bargaining Agreement.

Petitioner claims, however, that it has become impossible for it to comply

with the orders of the NLRC and the Court of Appeals, for during
the pendency of this case, it was forced to reduce its personnel due to heavy
losses caused by economic crisis and the pilots strike of June 5, 1998.

[41]

Hence, there are no available positions where respondents could be

placed.
And petitioner informs that the employment contracts of all if not most
of the respondents . . . were terminated by Synergy effective 30 June
1998 when petitioner terminated its contract with Synergy.[42]
Other than its bare allegations, petitioner presented nothing to substantiate
its impossibility of compliance. In fact, petitioner waived this defense by
failing to raise it in its Memorandum filed on June 14, 1999 before the Court
of Appeals.[43] Further, the notice of termination in 1998 was in disregard of a
subsisting temporary restraining order[44]to preserve the status quo, issued by
this Court in 1996 before it referred the case to the Court of Appeals in
January 1999. So as to thwart the attempt to subvert the implementation of
the assailed decision, respondents are deemed to be continuously employed
by petitioner, for purposes of computing the wages and benefits due
respondents.
Finally, it must be stressed that respondents, having been declared to be
regular employees of petitioner, Synergy being a mere agent of the latter,
had acquired security of tenure.As such, they could only be dismissed by
petitioner, the real employer, on the basis of just or authorized cause, and
with observance of procedural due process.
WHEREFORE, the Court of Appeals Decision of September 29,
2000 is AFFIRMED with MODIFICATION.
Petitioner PHILIPPINE AIRLINES, INC. is ORDERED to:
(a) accept respondents ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE,
JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO
YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR.,
ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON
CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA,
CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE
ALEGRES, EDUARDO MAGDADARAUG, NELSON M. DULCE and ALLAN
BENTUZAL as its regular employees in their same or substantially
equivalent positions, and pay thewages and benefits due them as
regular employees plus salary differential corresponding to the
difference between the wages and benefits given them and those
granted to petitioners other regular employees of the same rank; and
(b) pay
respondent
BENEDICTO
AUXTERO salary
differential; backwages from the time of his dismissal until the finality
of this decision; and separation pay, in lieu of reinstatement,
equivalent to one (1) month pay for every year of service until the
finality of this decision.

There being no data from which this Court may determine the monetary
liabilities of petitioner, the case is REMANDED to the Labor Arbiter solely for
that purpose.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162833

June 15, 2007

LAKAS SA INDUSTRIYA NG KAPATIRANG HALIGI NG ALYANSAPINAGBUKLOD NG MANGGAGAWANG PROMO NG

BURLINGAME, petitioner,
vs.
BURLINGAME CORPORATION, respondent.
DECISION
QUISUMBING, J.:
This is an appeal to reverse and set aside both the Decision1 dated August
29, 2003 of the Court of Appeals and its Resolution2 dated March 15, 2004 in
CA-G.R. SP No. 69639. The appellate court had reversed the decision 3dated
December 29, 2000 of the Secretary of Labor and Employment which ordered
the holding of a certification election among the rank-and-file promo
employees of respondent Burlingame Corporation.
The facts are undisputed.
On January 17, 2000, the petitioner Lakas sa Industriya ng Kapatirang Haligi
ng Alyansa-Pinagbuklod ng Manggagawang Promo ng Burlingame (LIKHAPMPB) filed a petition for certification election before the Department of
Labor and Employment (DOLE). LIKHA-PMPB sought to represent all rank-andfile promo employees of respondent numbering about 70 in all. The petitioner
claimed that there was no existing union in the aforementioned
establishment representing the regular rank-and-file promo employees. It
prayed that it be voluntarily recognized by the respondent to be the

collective bargaining agent, or, in the alternative, that a certification/consent

election be held among said regular rank-and-file promo employees.
The respondent filed a motion to dismiss the petition. It argued that there
exists no employer-employee relationship between it and the petitioners
members. It further alleged that the petitioners members are actually
employees of F. Garil Manpower Services (F. Garil), a duly licensed local
employment agency. To prove such contention, respondent presented a copy
of its contract for manpower services with F. Garil.
On June 29, 2000, Med-Arbiter Renato D. Parungo dismissed4 the petition for
lack of employer-employee relationship, prompting the petitioner to file an
appeal5 before the Secretary of Labor and Employment.
On December 29, 2000, the Secretary of Labor and Employment ordered the
immediate conduct of a certification election.6
A motion for reconsideration of the said decision was filed by the respondent
on January 19, 2001, but the same was denied in the Resolution7 of February
19, 2002 of the Secretary of Labor and Employment.
Respondent then filed a complaint with the Court of Appeals, which then
reversed8 the decision of the Secretary. The petitioner then filed a motion for
reconsideration,9 which the Court of Appeals denied10 on March 15, 2004.
Hence the instant petition for review on certiorari.
The issue raised in the petition is:
WHETHER THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
DECLARING THAT THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN PETITIONERS MEMBERS AND BURLINGAME BECAUSE F.
GARIL MANPOWER SERVICES IS AN INDEPENDENT CONTRACTOR. 11
Respondent contends that there is no employer-employee relationship
between the parties.12 Petitioner, on the other hand, insists that there is.13
The resolution of this issue boils down to a determination of the true status of
F. Garil, i.e., whether it is an independent contractor or a labor-only
contractor.

The case of De Los Santos v. NLRC14 succinctly enunciates the statutory

criteria:
Job contracting is permissible only if the following conditions are met:
1) the contractor carries on an independent business and undertakes
the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and 2) the
contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are
necessary in the conduct of the business.15
According to Section 5 of DOLE Department Order No. 18-02, Series of
2002:16
Section 5. Prohibition against labor-only contracting. Laboronly contracting is hereby declared prohibited. For this purpose, laboronly contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a
job, work or service for a principal, and any of the following elements
are [is] present:
i) The contractor or sub-contractor does not have substantial
capital or investment which relates to the job, work or service to
be performed and the employees recruited, supplied or placed by
such contractor or subcontractor are performing activities which
are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the
performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of
Article 248(C) of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and
subscribed capitalization in the case of corporations, tools, equipment,
implements, machineries and work premises, actually and directly used
by the contractor or subcontractor in the performance or completion of
the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for
whom the services of the contractual workers are performed, to
determine not only the end to be achieved, but also the manner and
means to be used in reaching that end.
Given the above criteria, we agree with the Secretary that F. Garil is not an
independent contractor.
First, F. Garil does not have substantial capitalization or investment in the
form of tools, equipment, machineries, work premises, and other materials,
to qualify as an independent contractor. No proof was adduced to show F.
Garils capitalization.
Second, the work of the promo-girls was directly related to the principal
business or operation of Burlingame. Marketing and selling of products is an
essential activity to the main business of the principal.
Lastly, F. Garil did not carry on an independent business or undertake the
performance of its service contract according to its own manner and method,
free from the control and supervision of its principal, Burlingame.
The "four-fold test" will show that respondent is the employer of petitioners
members. The elements to determine the existence 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. The most important element is the
employers control of the employees conduct, not only as to the result of the
work to be done, but also as to the means and methods to accomplish it.17
A perusal of the contractual stipulations between Burlingame and F. Garil
shows the following:
1. The AGENCY shall provide Burlingame Corporation or the CLIENT,
with sufficient number of screened, tested and pre-selected personnel
(professionals, highly-skilled, skilled, semi-skilled and unskilled) who
will be deployed in establishment selling products manufactured by the
CLIENT.
2. The AGENCY shall be responsible in paying its workers under this
contract in accordance with the new minimum wage including the daily

living allowances and shall pay them overtime or remuneration that

which is authorized by law.
3. It is expressly understood and agreed that the worker(s) supplied
shall be considered or treated as employee(s) of the AGENCY.
Consequently, there shall be no employer-employee relationship
between the worker(s) and the CLIENT and as such, the AGENCY shall
be responsible to the benefits mandated by law.
4. For and in consideration of the service to be rendered by the AGENCY
to the CLIENT, the latter shall during the terms of agreement pay to the
AGENCY the sum of Seven Thousand Five Hundred Pesos Only
(P7,500.00) per month per worker on the basis of Eight (8) hours work
payable up-to-date, semi-monthly, every 15th and 30th of each calendar
month. However, these rates may be subject to change proportionately
in the event that there will be revisions in the Minimum Wage Law or
any law related to salaries and wages.
5. The CLIENT shall report to the AGENCY any of its personnel assigned
to it if those personnel are found to be inefficient, troublesome,
uncooperative and not observing the rules and regulations set forth by
the CLIENT. It is understood and agreed that the CLIENT may request
any time the immediate replacement of any personnel(s) assigned to
them.18
It is patent that the involvement of F. Garil in the hiring process was only with
respect to the recruitment aspect,i.e. the screening, testing and pre-selection
of the personnel it provided to Burlingame. The actual hiring itself was done
through the deployment of personnel to establishments by Burlingame.
The contract states that Burlingame would pay the workers through F. Garil,
stipulating that Burlingame shall pay F. Garil a certain sum per worker on the
basis of eight-hour work every 15th and 30th of each calendar month. This
evinces the fact that F. Garil merely served as conduit in the payment of
wages to the deployed personnel. The interpretation would have been
different if the payment was for the job, project, or services rendered during
the month and not on a per worker basis. In Vinoya v. National Labor
Relations Commission,19 we held:
The Court takes judicial notice of the practice of employers who, in
order to evade the liabilities under the Labor Code, do not issue

payslips directly to their employees. Under the current practice, a third

person, usually the purported contractor (service or manpower
placement agency), assumes the act of paying the wage. For this
reason, the lowly worker is unable to show proof that it was directly
paid by the true employer. Nevertheless, for the workers, it is enough
that they actually receive their pay, oblivious of the need for payslips,
unaware of its legal implications. Applying this principle to the case at
bar, even though the wages were coursed through PMCI, we note that
the funds actually came from the pockets of RFC. Thus, in the end, RFC
is still the one who paid the wages of petitioner albeit indirectly.20
The contract also provides that "any personnel found to be inefficient,
troublesome, uncooperative and not observing the rules and regulations set
forth by Burlingame shall be reported to F. Garil and may be replaced upon
request." Corollary to this circumstance would be the exercise of control and
supervision by Burlingame over workers supplied by F. Garil in order to
establish the inefficient, troublesome, and uncooperative nature of
undesirable personnel. Also implied in the provision on replacement of
personnel carried upon request by Burlingame is the power to fire personnel.
These are indications that F. Garil was not left alone in the supervision and
control of its alleged employees. Consequently, it can be concluded that F.
Garil was not an independent contractor since it did not carry a distinct
business free from the control and supervision of Burlingame.
It goes without saying that the contractual stipulation on the nonexistence of
an employer-employee relationship between Burlingame and the personnel
provided by F. Garil has no legal effect. While the parties may freely stipulate
terms and conditions of a contract, such contractual stipulations should not
be contrary to law, morals, good customs, public order or public policy. A
contractual stipulation to the contrary cannot override factual circumstances
firmly establishing the legal existence of an employer-employee relationship.
Under this circumstance, there is no doubt that F. Garil was engaged in laboronly contracting, and as such, is considered merely an agent of Burlingame.
In labor-only contracting, the law creates an employer-employee relationship
to prevent a circumvention of labor laws. The contractor is considered merely
an agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had been
directly employed by the principal employer.21 Since F. Garil is a labor-only

contractor, the workers it supplied should be considered as employees of

Burlingame in the eyes of the law.
WHEREFORE, the challenged Decision of the Court of Appeals dated August
29, 2003 and the Resolution dated March 15, 2004 denying the motion for
reconsideration are REVERSED and SET ASIDE. The decision of the
Secretary of Labor and Employment ordering the holding of a certification
election among the rank-and-file promo employees of Burlingame is
reinstated.
Costs against respondent.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 126586

February 2, 2000

ALEXANDER VINOYA, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, REGENT FOOD
CORPORATION AND/OR RICKY SEE (PRESIDENT), respondents.
KAPUNAN, J.:
This petition for certiorari under Rule 65 seeks to annul and set aside the
decision,1 promulgated on 21 June 1996, of the National Labor Relations
Commission ("NLRC") which reversed the decision2 of the, Labor Arbiter,
rendered on 15 June 1994, ordering Regent Food Corporation ("RFC") to
reinstate Alexander Vinoya to his former position and pay him backwages.
Private respondent Regent Food Corporation is a domestic corporation
principally engaged in the manufacture and sale of various food products.
Private respondent Ricky See, on the other hand, is the president of RFC and
is being sued in that capacity.

Petitioner Alexander Vinoya, the complainant, worked with RFC as sales

representative until his services were terminated on 25 November 1991.
The parties presented conflicting versions of facts.
Petitioner Alexander Vinoya claims that he applied and was accepted by RFC
as sales representative on 26 May 1990. On the same date, a company
identification card3 was issued to him by RFC. Petitioner alleges that he
reported daily to the office of RFC, in Pasig City, to take the latter's van for
the delivery of its products. According to petitioner, during his employ, he
was assigned to various supermarkets and grocery stores where he booked
sales orders and collected payments for RFC. For this task, he was required
by RFC to put up a monthly bond of P200.00 as security deposit to guarantee
the performance of his obligation as sales representative. Petitioner contends
that he was under the direct control and supervision of Mr. Dante So and Mr.
Sadi Lim, plant manager and senior salesman of RFC, respectively. He avers
that on 1 July 1991, he was transferred by RFC to Peninsula Manpower
Company, Inc. ("PMCI"), an agency which provides RFC with additional
contractual workers pursuant to a contract for the supply of manpower
services (hereinafter referred to as the "Contract of Service"). 4 After his
transfer to PMCI, petitioner was allegedly reassigned to RFC as sales
representative. Subsequently, on 25 November 1991, he was informed by Ms.
Susan Chua, personnel manager of RFC, that his services were terminated
and he was asked to surrender his ID card. Petitioner was told that his
dismissal was due to the expiration of the Contract of Service between RFC
and PMCI. Petitioner claims that he was dismissed from employment despite
the absence of any notice or investigation. Consequently, on 3 December
1991, petitioner filed a case against RFC before the Labor Arbiter for illegal
dismissal and non-payment of 13th month pay.5
Private respondent Regent Food Corporation, on the other hand, maintains
that no employer-employee relationship existed between petitioner and itself.
It insists that petitioner is actually an employee of PMCI, allegedly an
independent contractor, which had a Contract of Service6 with RFC. To prove
this fact, RFC presents an Employment Contract7 signed by petitioner on 1
July 1991, wherein PMCI appears as his employer. RFC denies that petitioner
was ever employed by it prior to 1 July 1991. It avers that petitioner was
issued an ID card so that its clients and customers would recognize him as a
duly authorized representative of RFC. With regard to the P200.00 pesos
monthly bond posted by petitioner, RFC asserts that it was required in order

to guarantee the turnover of his collection since he handled funds of RFC.

While RFC admits that it had control and supervision over petitioner, it argues
that such was exercised in coordination with PMCI. Finally, RFC contends that
the termination of its relationship with petitioner was brought about by the
expiration of the Contract of Service between itself and PMCI and not
because petitioner was dismissed from employment.
On 3 December 1991, when petitioner filed a complaint for illegal dismissal
before the Labor Arbiter, PMCI was initially impleaded as one of the
respondents. However, petitioner thereafter withdrew his charge against
PMCI and pursued his claim solely against RFC. Subsequently, RFC filed a
third party complaint against PMCI. After considering both versions of the
parties, the Labor Arbiter rendered a decision,8 dated 15 June 1994, in favor
of petitioner. The Labor Arbiter concluded that RFC was the true employer of
petitioner for the following reasons: (1) Petitioner was originally with RFC and
was merely transferred to PMCI to be deployed as an agency worker and then
subsequently reassigned to RFC as sales representative; (2) RFC had direct
control and supervision over petitioner; (3) RFC actually paid for the wages of
petitioner although coursed through PMCI; and, (4) Petitioner was terminated
per instruction of RFC. Thus, the Labor Arbiter decreed, as follows:
ACCORDINGLY, premises considered respondent RFC is hereby declared
guilty of illegal dismissal and ordered to immediately reinstate
complainant to his former position without loss of seniority rights and
other benefits and pay him backwages in the amount of P103,974.00.
The claim for 13th month pay is hereby DENIED for lack of merit.
This case, insofar as respondent PMCI [is concerned] is DISMISSED, for
lack of merit.
SO ORDERED.9
RFC appealed the adverse decision of the Labor Arbiter to the NLRC. In a
decision,10 dated 21 June 1996, the NLRC reversed the findings of the Labor
Arbiter. The NLRC opined that PMCI is an independent contractor because it
has substantial capital and, as such, is the true employer of petitioner. The
NLRC, thus, held PMCI liable for the dismissal of petitioner. The dispositive
portion of the NLRC decision states:

WHEREFORE, premises considered, the appealed decision is modified

as follows:
1. Peninsula Manpower Company Inc. is declared as employer of the
complainant;
2. Peninsula is ordered to pay complainant his separation pay of
P3,354.00 and his proportionate 13th month pay for 1991 in the
amount of P2,795.00 or the total amount of P6,149.00.
SO ORDERED.11
Separate motions for reconsideration of the NLRC decision were filed by
petitioner and PMCI. In a resolution,12dated 20 August 1996, the NLRC denied
both motions. However, it was only petitioner who elevated the case before
this Court.
In his petition for certiorari, petitioner submits that respondent NLRC
committed grave abuse of discretion in reversing the decision of the Labor
Arbiter, and asks for the reinstatement of the latter's decision.
Principally, this petition presents the following issues:
1. Whether petitioner was an employee of RFC or PMCI.
2. Whether petitioner was lawfully dismissed.
The resolution of the first issue initially boils down to a determination of the
true status of PMCI, whether it is a labor-only contractor or an independent
contractor.
In the case at bar, RFC alleges that PMCI is an independent contractor on the
sole ground that the latter is a highly capitalized venture. To buttress this
allegation, RFC presents a copy of the Articles of Incorporation and the
Treasurer's Affidavit13 submitted by PMCI to the Securities and Exchange
Commission showing that it has an authorized capital stock of One Million
Pesos (P1,000,000.00), of which Three Hundred Thousand Pesos
(P300,000.00) is subscribed and Seventy-Five Thousand Pesos (P75,000.00) is
paid-in. According to RFC, PMCI is a duly organized corporation engaged in
the business of creating and hiring a pool of temporary personnel and,
thereafter, assigning them to its clients from time to time for such duration

as said clients may require. RFC further contends that PMCI has a separate
office, permit and license and its own organization.
Labor-only contracting, a prohibited act, is an arrangement where the
contractor or subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principal.14 In labor-only contracting, the
following elements are present:
(a) The contractor or subcontractor does not have substantial capital or
investment to actually perform the job, work or service under its own
account and responsibility;
(b) The employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal.15
On the other hand, permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to put out or farm out with a
contractor or subcontractor the performance or completion of a specific job,
work or service within a definite or predetermined period, regardless of
whether such job, work or service is to be performed or completed within or
outside the premises of the principal.16 A person is considered engaged in
legitimate job contracting or subcontracting if the following conditions
concur:
(a) The contractor or subcontractor carries on a distinct and
independent business and undertakes to perform the job, work or
service on its own account and under its own responsibility according to
its own manner and method, and 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;
(b) The contractor or subcontractor has substantial capital or
investment; and
(c) The agreement between the principal and contractor or
subcontractor assures the contractual employees entitlement to all
labor and occupational safety and health standards, free exercise of the
right to self-organization, security of tenure, and social and welfare
benefits.17

Previously, in the case of Neri vs. NLRC,18 we held that in order to be

considered as a job contractor it is enough that a contractor has substantial
capital. In other words, once substantial capital established it is no longer
necessary for the contractor to show evidence that it has investment in the
form of tools, equipment, machineries, work premises, among others. The
rational for this is that Article 106 of the Labor Code does not require that the
contractor possess both substantial capital and investment in the form of
tools, equipment, machineries, work premises, among others.19 The decision
of the Court in Neri, thus, states:
Respondent BCC need not prove that it made investments in the form
of tools, equipment, machineries, work premises, among others,
because it has established that it has sufficient capitalization. The
Labor Arbiter and the NLRC both determined that BCC had a capital
stock of P1 million fully subscribed and paid for. BCC is therefore a
highly capitalized venture and cannot be deemed engaged in "laboronly" contracting.20
However, in declaring that Building Care Corporation ("BCC") was an
independent contractor, the Court considered not only the fact that it had
substantial capitalization. The Court noted that BCC carried on an
independent business and undertook the performance of its contract
according to its own manner and method, free from the control and
supervision of its principal in all matters except as to the results
thereof.21 The Court likewise mentioned that the employees of BCC were
engaged to perform specific special services for its principal.22 Thus, the
Court ruled that BCC was an independent contractor.
The Court further clarified the import of the Neri decision in the subsequent
case of Philippine Fuji Xerox Corporation vs. NLRC.23 In the said case,
petitioner Fuji Xerox implored the Court to apply the Neri doctrine to its
alleged job-contractor, Skillpower, Inc., and declare the same as an
independent contractor. Fuji Xerox alleged that Skillpower, Inc. was a highly
capitalized venture registered with the Securities and Exchange Commission,
the Department of Labor and Employment, and the Social Security System
with assets exceeding P5,000,000.00 possessing at least 29 typewriters,
office equipment and service vehicles, and its own pool of employees with 25
clerks assigned to its clients on a temporary basis.24 Despite the evidence
presented by Fuji Xerox the Court refused to apply the Neri case and
explained:

Petitioners cite the case of Neri v. NLRC, in which it was held that the
Building Care Corporation (BCC) was an independent contractor on the
basis of finding that it had substantial capital, although there was no
evidence that it had investments in the form of tools, equipment,
machineries and work premises. But the Court in that case considered
not only the capitalization of the BCC but also the fact that BCC was
providing specific special services (radio/telex operator and janitor) to
the employer; that in another case, the Court had already found that
BCC was an independent contractor; that BCC retained control over the
employees and the employer was actually just concerned with the endresult; that BCC had the power to reassign the employees and their
deployment was not subject to the approval of the employer; and that
BCC was paid in lump sum for the services it rendered. These features
of that case make it distinguishable from the present one.25
Not having shown the above circumstances present in Neri, the Court
declared Skillpower, Inc. to be engaged in labor-only contracting and was
considered as a mere agent of the employer.
From the two aforementioned decisions, it may be inferred that it is not
enough to show substantial capitalization or investment in the form of tools,
equipment, machineries and work premises, among others, to be considered
as an independent contractor. In fact, jurisprudential holdings are to the
effect that in determining the existence of an independent contractor
relationship, several factors might be considered such as, but not necessarily
confined to, whether the contractor is carrying on an independent business;
the nature and extent of the work; the skill required; the term and duration of
the relationship; the right to assign the performance of specified pieces of
work; the control and supervision of the workers; the power of the employer
with respect to the hiring, firing and payment of the workers of the
contractor; the control of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode, manner and terms of
payment.26
Given the above standards and the factual milieu of the case, the Court has
to agree with the conclusion of the Labor Arbiter that PMCI is engaged in
labor-only contracting.
First of all, PMCI does not have substantial capitalization or investment in the
form of tools, equipment, machineries, work premises, among others, to
qualify as an independent contractor. While it has an authorized capital stock

of P1,000,000.00, only P75,000.00 is actually paid-in, which, to our mind,

cannot be considered as substantial capitalization. In the case of Neri, which
was promulgated in 1993, BCC had a capital stock of P1,000,000.00 which
was fully subscribed and paid-for. Moreover, when the Neri case was decided
in 1993, the rate of exchange between the dollar and the peso was only
P27.30 to $127 while presently it is at P40.390 to $1.28 The Court takes judicial
notice of the fact that in 1993, the economic situation in the country was not
as adverse as the present, as shown by the devaluation of our peso. With the
current economic atmosphere in the country, the paid-in capitalization of
PMCI amounting to P75,000,00 cannot be considered as substantial capital
and, as such, PMCI cannot qualify as an independent contractor.
Second, PMCI did not carry on an independent business nor did it undertake
the performance of its contract according to its own manner and method,
free from the control and supervision of its principal, RFC. The evidence at
hand shows that the workers assigned by PMCI to RFC were under the control
and supervision of the latter. The Contract of Service itself provides that RFC
can require the workers assigned by PMCI to render services even beyond the
regular eight hour working day when deemed necessary.29 Furthermore, RFC
undertook to assist PMCI in making sure that the daily time records of its
alleged employees faithfully reflect the actual working hours.30 With regard to
petitioner, RFC admitted that it exercised control and supervision over
him.31 These are telltale indications that PMCI was not left alone to supervise
and control its alleged employees. Consequently, it can be, concluded that
PMCI was not an independent contractor since it did not carry a distinct
business free from the control and supervision of RFC.
Third, PMCI was not engaged to perform a specific and special job or service,
which is one of the strong indicators that an entity is an independent
contractor as explained by the Court in the cases of Neri and Fuji. As stated in
the Contract of Service, the sole undertaking of PMCI was to provide RFC with
a temporary workforce able to carry out whatever service may be required by
it.32 Such venture was complied with by PMCI when the required personnel
were actually assigned to RFC. Apart from that, no other particular job, work
or service was required from PMCI. Obviously, with such an arrangement,
PMCI merely acted as a recruitment agency for RFC. Since the undertaking of
PMCI did not involve the performance of a specific job, but rather the supply
of manpower only, PMCI clearly conducted itself as labor-only contractor.

Lastly, in labor-only contracting, the employees recruited, supplied or placed

by the contractor perform activities which are directly related to the main
business of its principal. In this case, the work of petitioner as sales
representative is directly related to the business of RFC. Being in the business
of food manufacturing and sales, it is necessary for RFC to hire a sales
representative like petitioner to take charge of booking its sales orders and
collecting payments for such. Thus, the work of petitioner as sales
representative in RFC can only be categorized as clearly related to, and in the
pursuit of the latter's business. Logically, when petitioner was assigned by
PMCI to RFC, PMCI acted merely as a labor-only contractor.
Based on the foregoing, PMCI can only be classified as a labor-only contractor
and, as such, cannot be considered as the employer of petitioner.
However, even granting that PMCI is an independent contractor, as RFC
adamantly suggests, still, a finding of the same will not save the day for RFC.
A perusal of the Contract of Service entered into between RFC and PMCI
reveals that petitioner is actually not included in the enumeration of the
workers to be assigned to RFC. The following are the workers enumerated in
the contract:
1. Merchandiser
2. Promo Girl
3. Factory Worker
4. Driver33
Obviously, the above enumeration does not include the position of petitioner
as sales representative. This only shows that petitioner was never intended
to be a part of those to be contracted out. However, RFC insists that despite
the absence of his position in the enumeration, petitioner is deemed included
because this has been agreed upon between itself and PMCI. Such contention
deserves scant consideration. Had it really been the intention of both parties
to include the position of petitioner they should have clearly indicated the
same in the contract. However, the contract is totally silent on this point
which can only mean that petitioner was never really intended to be covered
by it.

Even if we use the "four-fold test" to ascertain whether RFC is the true
employer of petitioner that same result would be achieved. In determining
the existence of employer-employee relationship the following elements of
the "four-fold test" are generally considered, namely: (1) the selection and
engagement of the employee or the power to hire; (2) the payment of wages;
(3) the power to dismiss; and (4) the power to control the employee.34 Of
these four, the "control test" is the most important.35 A careful study of the
evidence at hand shows that RFC possesses the earmarks of being the
employer of petitioner.
With regard to the first element, the power to hire, RFC denies any
involvement in the recruitment and selection of petitioner and asserts that
petitioner did not present any proof that he was actually hired and employed
by RFC.
It should be pointed out that no particular form of proof is required to prove
the existence of an employer-employee relationship.36 Any competent and
relevant evidence may show the relationship.37 If only documentary evidence
would be required to demonstrate that relationship, no scheming employer
would ever be brought before bar of justice.38 In the case at bar, petitioner
presented the identification card issue to him on 26 May 1990 by RFC as
proof that it was the latter who engaged his services. To our mind, the ID card
is enough proof that petitioner was previously hired by RFC prior to his
transfer as agency worker to PMCI. It must be noted that the Employment
Contract between petitioner and PMCI was dated 1 July 1991. On the other
hand, the ID card issued by RFC to petitioner was dated 26 May 1990, or
more than one year before the Employment Contract was signed by
petitioner in favor of PMCI. It makes one wonder why, if petitioner was indeed
recruited by PMCI as its own employee on 1 July 1991, how come he had
already been issued an ID card by RFC a year earlier? While the Employment
Contract indicates the word "renewal," presumably an attempt to show that
petitioner had previously signed a similar contract with PMCI, no evidence of
a prior contract entered into petitioner and PMCI was ever presented by RFC.
In fact, despite the demand made by the counsel of petitioner for production
of the contract which purportedly shows that prior to 1 July 1991 petitioner
was already connected with PMCI, RFC never made a move to furnish the
counsel of petitioner a copy of the alleged original Employment Contract. The
only logical conclusion which may be derived from such inaction is that there
was no such contract end that the only Employment Contract entered into
between PMCI and petitioner was the 1 July 1991 contract and no other.

Since, as shown by the ID card, petitioner was already with RFC on 26 May
1990, prior to the time any Employment Contract was agreed upon between
PMCI and petitioner, it follows that it was RFC who actually hired and
engaged petitioner to be its employee.
With respect to the payment of wages, RFC disputes the argument of
petitioner that it paid his wages on the ground that petitioner did not submit
any evidence to prove that his salary was paid by it, or that he was issued
payslip by the company. On the contrary, RFC asserts that the
invoices39 presented by it, show that it was PMCI who paid petitioner his
wages through its regular monthly billings charged to RFC.
The Court takes judicial notice of the practice of employers who, in order to
evade the liabilities under the Labor Code, do not issue payslips directly to
their employees.40 Under the current practice, a third person, usually the
purported contractor (service or manpower placement agency), assumes the
act of paying the wage.41 For this reason, the lowly worker is unable to show
proof that it was directly paid by the true employer. Nevertheless, for the
workers, it is enough that they actually receive their pay, oblivious of the
need for payslips, unaware of its legal implications.42 Applying this principle
to the case at bar, even though the wages were coursed through PMCI, we
note that the funds actually came from the pockets of RFC. Thus, in the end,
RFC is still the one who paid the wages of petitioner albeit indirectly.
As to the third element, the power to dismiss, RFC avers that it was PMCI who
terminated the employment of petitioner. The facts on record, however,
disprove the allegation of RFC. First of all, the Contract of Service gave RFC
the right to terminate the workers assigned to it by PMCI without the latter's
approval. Quoted hereunder is the portion of the contract stating the power
of RFC to dismiss, to wit:
7. The First party ("RFC") reserves the right to terminate the services of
any worker found to be unsatisfactory without the prior approval of the
second party ("PMCI").43
In furtherance of the above provision, RFC requested PMCI to terminate
petitioner from his employment with the company. In response to the request
of RFC, PMCI terminated petitioner from service. As found by the Labor
Arbiter, to which we agree, the dismissal of petitioner was indeed made
under the instruction of RFC to PMCI.

The fourth and most important requirement in ascertaining the presence of

employer-employee relationship is the power of control. The power of control
refers to the authority of the employer to control the employee not only with
regard to the result of work to be done but also to the means and methods by
which the work is to be accomplished.44 It should be borne in mind, that the
"control test" calls merely for the existence of the right to control the manner
of doing the work, and not necessarily to the actual exercise of the right.45 In
the case at bar, we need not belabor ourselves in discussing whether the
power of control exists. RFC already admitted that it exercised control and
supervision over petitioner.46 RFC, however, raises the defense that the
power of control was jointly exercised with PMCI. The Labor Arbiter, on the
other hand, found that petitioner was under the direct control and
supervision of the personnel of RFC and not PMCI. We are inclined to believe
the findings of the Labor Arbiter which is supported not only by the admission
of RFC but also by the evidence on record. Besides, to our mind, the
admission of RFC that it exercised control and supervision over petitioner, the
same being a declaration against interest, is sufficient enough to prove that
the power of control truly exists.
We, therefore, hold that an employer-employee relationship exists between
petitioner and RFC.
Having determined the real employer of petitioner, we now proceed to
ascertain the legality of his dismissal from employment.
Since petitioner, due to his length of service, already attained the status of a
regular employee,47 he is entitled to the security of tenure provided under the
labor laws. Hence, he may only be validly terminated from service upon
compliance with the legal requisites for dismissal. Under the Labor Code, the
requirements for the lawful dismissal of an employee are two-fold, the
substantive and the procedural aspects. Not only must the dismissal be for a
valid or authorized cause,48 the rudimentary requirements of due process
notice and hearing49 must, likewise, be observed before an employee may
be dismissed. Without the concurrence of the two, the termination would, in
the eyes of the law, be illegal.50
As the employer, RFC has the burden of proving that the dismissal of
petitioner was for a cause allowed under the law and that petitioner was
afforded procedural due process. Sad to say, RFC failed to discharge this
burden. Indeed, RFC never pointed to any valid or authorized cause under the
Labor Code which allowed it to terminate the services of petitioner. Its lone

allegation that the dismissal was due to the expiration or completion of

contract is not even one of the grounds for termination allowed by law.
Neither did RFC show that petitioner was given ample opportunity to contest
the legality of his dismissal. In fact, no notice of such impending termination
was ever given him. Petitioner was, thus, surprised that he was already
terminated from employment without any inkling as to how and why it came
about. Petitioner was definitely denied due process. Having failed to establish
compliance with the requirements on termination of employment under the
Labor Code, the dismissal of petitioner is tainted with illegality.
An employee who has been illegally dismissed is entitled to reinstatement to
his former position without loss of seniority rights and to payment of full
backwages corresponding to the period from his illegal dismissal up to actual
reinstatement.51 Petitioner is entitled to no less.
WHEREFORE, the petition is GRANTED. The decision of the NLRC, dated 21
June 1996, as well as its resolution, promulgated on 20 August 1996, are
ANNULLED and SET ASIDE. The decision of the Labor Arbiter, rendered on 15
June 1994, is hereby REINSTATED and AFFIRMED.1wphi1.nt
SO ORDERED.