Lapanday Agricultura Development Corp vs CA

Facts:

The evidence shows that in June 1986, plaintiff Commando Security Service Agency, Inc., and defendant
Lapanday Agricultural Development Corporation entered into a Guard Service Contract.

Plaintiff provided security guards in defendants banana plantation.

The contract called for the payment to a guard of P754.28 on a daily 8-hour basis and an additional P565.72
for a four hour overtime while the shift-in-charge was to be paid P811.40 on a daily 8-hour basis and
P808.60 for the 4-hour overtime.

Wage Orders increasing the minimum wage in 1983 were complied with by the defendant. On June 16,
1984, Wage Order No. 5 was promulgated directing an increase of P3.00 per day on the minimum wage of
workers in the private sector and a P5.00 increase on the ECOLA.

This was followed on November 1, 1984 by Wage Order No. 6 which further increased said minimum
wage by P3.00 on the ECOLA.

Plaintiff demanded that its Guard Service Contract with defendant be upgraded in compliance with Wage
Order Nos. 5 and 6.

Defendant refused.

Their Contract expired on June 6, 1986 without the rate adjustment called for Wage Order Nos. 5 and 6
being implemented. By the time of the filing of plaintiffs Complaint, the rate adjustment payable by
defendant amounted to P462,346.25.

Defendant opposed the Complaint by raising the following defenses:

(1) the rate adjustment is the obligation of the plaintiff as employer of the security guards;

(2) assuming its liability, the sum it should pay is less in amount; and

(3) the Wage Orders violate the impairment clause of the Constitution.

Trial Court ruled in favor of Plaintiff

Issue: Whether or not the petitioner is liable to pay private respondent the wage and allowance increases mandated
under Wage Order 5 and 6.
Held:

It is clear also from the foregoing that it is only when contractor pays the increases mandated that it can
claim an adjustment from the principal to cover the increases payable to the security guards. The

conclusion that the right of the contractor (as principal debtor) to recover from the principal as solidary codebtor) arises only if he has paid the amounts for which both of them are jointly and severally liable is in
line with Article 1217 of the Civil Code which provides:
o

"Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or
more solidary debtors offer to pay, the creditor may choose which offer to accept.

He who made payment may claim from his codebtors only the share which corresponds to each,
with interest for the payment already made. If the payment is made before the debt is due, no
interest for the intervening period may be demanded. xxx"

Pursuant to the above provision, the right of reimbursement from a co-debtor is recognized in favor of the
one who paid.

It will be seen that the liability of the petitioner to reimburse the respondent only arises if and when
respondent actually pays its employees the increases granted by Wage Order Nos. 5 and 6.

Payment, which means not only the delivery of money but also the performance, in any other manner, of
the obligation, is the operative fact which will entitle either of the solidary debtors to seek reimbursement
for the share which corresponds to each of the debtors.

The records show that judgment was rendered by Labor Arbiter Newton R. Sancho holding both petitioner
and private respondent jointly and solidarily liable to the security guards in a Decisiondated October 17,
1986 (NLRC Case No. 2849-MC-XI-86).

However, it is not disputed that the private respondent has not actually paid the security guards the wage
increases granted under the Wage Orders in question.

Neither is it alleged that there is an extant claim for such wage adjustments from the security guards
concerned, whose services have already been terminated by the contractor.

Accordingly, private respondent has no cause of action against petitioner to recover the wage increases.

Needless to stress, the increases in wages are intended for the benefit of the laborers and the contractor may
not assert a claim against the principal for salary wage adjustments that it has not actually paid.

Otherwise, as correctly put by the respondent, the contractor would be unduly enriching itself by
recovering wage increases, for its own benefit.

Sentinel Security Agency Inc vs NLRC

Facts:

The complainants were employees of Sentinel

They were assigned to render guard duty at the premises of [Philippine American Life Insurance Company]
at Jones Avenue, Cebu City.

On December 16, 1993 Philippine American Life Insurance Company [the Client, for brevity], through
Carlos De Pano, Jr., sent notice to all concerned that the [Agency] was again awarded the contract of

[s]ecurity [s]ervices together with a request to replace all the security guards in the companys offices at the
cities of Cebu, Bacolod, Cagayan de Oro, Dipolog and Ilagan.

In compliance therewith, [the Agency] issued on January 12, 1994, a Relief and Transfer Order replacing
the complainants as guards [of the Client] and for then to be re-assigned [to] other clients effective January
16, 1994.

As ordered, the complainants reported but were never given new assignments but instead they were told in
the vernacular, gui-ilisa mo kay mga tigulang naman mo which when translated means, you were replace[d]
because you are already old.

Precisely, the complainants lost no time but filed the subject illegal dismissal cases on January 18, January
26 and February 4, 1994 and prayed for payment of separation pay and other labor standard benefits.

[The Client and the Agency] maintained there was no dismissal on the part of the complainants,
constructive or otherwise, as they were protected by the contract of security services which allows the
recall of security guards from their assigned posts at the will of either party.

It also advanced that the complainants prematurely filed the subject cases without giving the [Agency] a
chance to give them some assignments.

On the part of [the Client], it averred further that there [was] no employer-employee relationship between it
and the complainants as the latter were merely assigned to its Cebu Branch under a job contract; that [the
Agency] ha[d] its own separate corporate personality apart from that of [the Client

Issue: Whether or not petitioner is jointly and severally liable with Sentinel Security Agency, Inc., in the latters
payment of backwages, 13th month pay and service incentive leave pay to its employees
Held: NO

The Client did not, as it could not, illegally dismiss the complainants.

Thus, it should not be held liable for separation pay and back wages.

But even if the Client is not responsible for the illegal dismissal of the complainants, it is jointly and
severally liable with the Agency for the complainants service incentive leave pay.

In Rosewood Processing, Inc. vs. National Labor Relations Commission, [27] the Court explained that,
notwithstanding the service contract between the client and the security agency, the two are solidarily liable
for the proper wages prescribed by the Labor Code, pursuant to Article 106, 107 and 109

Under these provisions, the indirect employer, who is the Client in the case at bar, is jointly and severally
liable with the contractor for the workers wages, in the same manner and extent that it is liable to its direct
employees.

This liability of the Client covers the payment of the service incentive leave pay of the complainants during
the time they were posted at the Cebu branch of the Client.

As service had been rendered, the liability accrued, even if the complainants were eventually transferred or
reassigned.

The service incentive leave is expressly granted by these pertinent provisions of the Labor Code: ( ART 95)

The award of the thirteenth-month pay is deleted in view of the evidence presented by the Agency that such
claim has already been paid to the complainants. Obviously then, the award of such benefit in the
dispositive portion of the assailed Decision is merely an oversight, considering that Respondent
Commission itself deleted it from the main body of the said Decision.

OSM Shipping Phil Inc vs NLRC

Facts:

Private respondent was hired by Petitioner OSM for and in behalf of its principal, Phil Carrier Shipping
Agency Services Co. (PC-SLC) to board its vessel M/V [Princess] Hoa as a Master Mariner for a contract
period of ten (10) months

[Private respondent] alleged that from the start of his work with M/V Princess Hoa, he was not paid any
compensation at all and was forced to disembark the vessel sometime in January 1995 because he cannot
even buy his basic personal necessities.

For almost seven (7) months, i.e. from July 1994 to January 1995, despite the services he rendered, no
compensation or remuneration was ever paid to him.

Hence, this case for illegal dismissal, [non-payment] of salaries, overtime pay and vacation pay.

[Petitioner] OSM, for its part, alleged that on July 26, 1994, Concorde Pacific, an American company
which owns M/V Princess Hoa, then a foreign registered vessel, appointed Philippine Carrier Shipping
Agency Services Co. (PC-SASCO) as ship manager particularly to negotiate, transact and deal with any
third persons, entities or corporations in the planning of crewing selection or determination of qualifications
of Filipino Seamen.

On the same date, [Petitioner] OSM entered into a Crew Agreement with PC-SASCO for the purpose of
processing the documents of crew members of M/V Princess Hoa.

The initial plan of the [s]hip-owner was to use the vessel in the overseas trade, particularly the East Asian
Growth Area.

Thereafter, the contract of [private respondent] was processed before the POEA on September 20, 1994.

OSM alleged further that the shipowner changed its plans on the use of the vessel.

Instead of using it for overseas trade, it decided to use it in the coastwise trade, thus, the crewmembers
hired never left the Philippines and were merely used by the shipowner in the coastwise trade.

Considering that the M/V Princess Hoa was a foreign registered vessel and could not be used in the
coastwise trade, the shipowner converted the vessel to Philippine registry on September 28, 1994 by way of
bareboat chartering it out to another entity named Philippine Carrier Shipping Lines Co. (PCSLC).

To do this, the shipowner through Conrado V. Tendido had to terminate its management agreement with
PC-SASCO on September 28, 1994 by a letter of termination dated September 20, 1994.

In the same letter of termination, the ship owner stated that it has bareboat chartered out the vessel to said
[PCSLC] and converted it into Philippine registry.

Consequently, PC-SASCO terminated its crew agreement with OSM in a letter dated December 5, 1994.

Because of the bareboat charter of the vessel to PCSLC and its subsequent conversion to Philippine registry
and use in coastwise trade as well as to the termination of the management agreement and crew agency
agreement, a termination of contract ensued whereby PCSLC, the bareboat charterer, became the disponent
owner/employer of the crew.

Issue: Whether or not the petitioner is liable to pay private respondent

Held: YES

It is worthwhile to note that what is involved in this case is the recovery of unpaid salaries and other
monetary benefits.

The Court is mindful of the plight of private respondent and, indeed, of workers in general who are seeking
to recover wages that are being unlawfully withheld from them.

Such recovery should not be needlessly delayed at the expense of their survival.

This case is now on its ninth year since its inception at the LAs office. Its remand to the CA will only
unduly delay its disposition.

In the interest of substantial justice, this Court will decide the case on the merits based upon the records of
the case, particularly those relating to the OSM Shipping Philippines Petition before the CA.

On behalf of its principal, PC-SASCO, petitioner does not deny hiring Private Respondent Guerrero as
master mariner.

However, it argues that since he was not deployed overseas, his employment contract became ineffective,
because its object was allegedly absent.

Petitioner contends that using the vessel in coastwise trade and subsequently chartering it to another
principal had the effect of novating the employment contract.

We are not persuaded.

As approved by the Philippine Overseas Employment Agency (POEA), petitioner was the legitimate
manning agent of PC-SASCO.

As such, it was allowed to select, recruit, hire and deploy seamen on board the vessel M/V Princess
Hoa, which was managed by its principal, PC-SASCO.

It was in this capacity that petitioner hired private respondent as master mariner.

They then executed and agreed upon an employment contract.

Based on the perfected contract, Private Respondent Guerrero complied with his obligations thereunder
and rendered his services on board the vessel.

Contrary to petitioners contention, the contract had an object, which was the rendition of service by private
respondent on board the vessel.

The non-deployment of the ship overseas did not affect the validity of the perfected employment contract.
After all, the decision to use the vessel for coastwise shipping was made by petitioner only and did not bear
the written conformity of private respondent.

A contract cannot be novated by the will of only one party.

T he claim of petitioner that it processed the contract of private respondent with the POEA only after he had
started working is also without merit. Petitioner cannot use its own misfeasance to defeat his claim.

Petitioner, as manning agent, is jointly and severally liable with its principal, PC-SASCO, for private
respondents claim.

This conclusion is in accordance with Section 1 of Rule II of the POEA Rules and Regulations.

Joint and solidary liability is meant to assure aggrieved workers of immediate and sufficient payment of
what is due them.

The fact that petitioner and its principal have already terminated their agency agreement does not relieve
the former of its liability

Manila Electric Co vs Benamira

Facts:

The individual respondents are licensed security guards formerly employed by Peoples Security, Inc. (PSI)
and deployed as such at MERALCOs head office in Ortigas Avenue,Pasig, Metro Manila.

On November 30, 1990, the security service agreement between PSI and MERALCO was terminated.

Immediately thereafter, fifty-six of PSIs security guards, including herein eight individual respondents,
filed a complaint for unpaid monetary benefits against PSI and MERALCO, docketed as NLRC-NCR Case
No. 05-02746-90.

Meanwhile, the security service agreement between respondent Armed Security & Detective Agency, Inc.,
(ASDAI) and MERALCO took effect on December 1, 1990. In the agreement, ASDAI was designated as
the AGENCY while MERALCO was designated as the COMPANY.

Subsequently, the individual respondents were absorbed by ASDAI and retained at MERALCOs head
office.

LA ruled in favor of the security guards

Less than a month later, or on July 21, 1992, the individual respondents filed another complaint for unpaid
monetary benefits, this time against ASDAI and MERALCO, docketed as NLRC-NCR Case No. 00-0703953-92.

On July 25, 1992, the security service agreement between respondent Advance Forces Security &
Investigation Services, Inc. (AFSISI) and MERALCO took effect, terminating the previous security service
agreement with ASDAI.[7] Except as to the number of security guards, [8] the amount to be paid the agency,
[9]
and the effectivity of the agreement,[10] the terms and conditions were substantially identical with the
security service agreement with ASDAI.

On July 29, 1992, the individual respondents amended their complaint to implead AFSISI as party
respondent. On August 11, 1992 they again amended their complaint to allege that AFSISI terminated their
services on August 6, 1992 without notice and just cause and therefore guilty of illegal dismissal.

The individual respondents alleged that: MERALCO and ASDAI never paid their overtime pay, service
incentive leave pay, premium pay for Sundays and Holidays, P50.00 monthly uniform allowance and
underpaid their 13th month pay;

on July 24, 1992, when the security service agreement of ASDAI was terminated and AFSISI took over the
security functions of the former on July 25, 1992, respondent security guard Benamira was no longer given
any work assignment when AFSISI learned that the former has a pending case against PSI, in effect,
dismissing him from the service without just cause; and, the rest of the individual respondents were
absorbed by AFSISI but were not given any assignments, thereby dismissing them from the service without
just cause.

With regard to the sixth ground, MERALCO asserts that since it is not the direct employer of the individual
respondents, it has a right of reimbursement from ASDAI for the full amount it may pay to the individual
respondents under Articles 106 and 107 of the Labor Code.

Issue: Whether or not the petitioner is liable to the security guards

Held:

In this case, the terms and conditions embodied in the security service agreement between MERALCO and
ASDAI expressly recognized ASDAI as the employer of individual respondents.

The individual respondents can not be considered as regular employees of the MERALCO for, although
security services are necessary and desirable to the business of MERALCO, it is not directly related to its
principal business and may even be considered unnecessary in the conduct of MERALCOs principal
business, which is the distribution of electricity.

Furthermore, the fact that the individual respondents filed their claim for unpaid monetary benefits against
ASDAI is a clear indication that the individual respondents acknowledge that ASDAI is their employer.

The fact that there is no actual and direct employer-employee relationship between MERALCO and the
individual respondents does not exonerate MERALCO from liability as to the monetary claims of the
individual respondents. When MERALCO contracted for security services with ASDAI as the security
agency that hired individual respondents to work as guards for it, MERALCO became an indirect employer
of individual respondents pursuant to Article 107 of the Labor Code,

When ASDAI as contractor failed to pay the individual respondents, MERALCO as principal becomes
jointly and severally liable for the individual respondents wages, under Articles106 and 109 of the Labor
Code

ASDAI is held liable by virtue of its status as direct employer, while MERALCO is deemed the indirect
employer of the individual respondents for the purpose of paying their wages in the event of failure of

ASDAI to pay them. This statutory scheme gives the workers the ample protection consonant with labor
and social justice provisions of the 1987 Constitution.

the solidary liability of MERALCO with that of ASDAI does not preclude the application of Article 1217
of the Civil Code on the right of reimbursement from his co-debtor by the one who paid

SDAI may not seek exculpation by claiming that MERALCOs payments to it were inadequate for the
individual respondents lawful compensation. As an employer, ASDAI is charged with knowledge of labor
laws and the adequacy of the compensation that it demands for contractual services is its principal concern
and not any others

Phil Export etc vs CA

Facts:

On 13 May 1988, private respondent Raimund Diehl, a resident alien, lodged a complaint for illegal
dismissal against the Philippine German Wire Mesh Reinforcing Corporation ("FILFORCE") with the
National Labor Relations Commission ("NLRC")

Parenthetically, five (5) years earlier, or on 28 July 1983, FILFORCE had mortgaged its plant and other
property located at EPZA, Mariveles, Bataan, in favor of herein petitioner Philippine Export and Foreign
Loan Guarantee Corporation a government owned and controlled corporation, to secure a guarantee which
the latter executed in favor of Kuwait Asia Bank, E.C., over fifty one percent (51%) of the
US$1,357,600.00 loan which had been extended to FILFORCE by the bank.

The mortgage in PHILGUARANTEE's favor was duly registered, on 29 July 1983, with the Register of
Deeds of Bataan.

Issue:
Held:

Labor Law; National Labor Relations Commission; Court has responded in the negative when queried on
whether or not a civil court may interfere by injunction with the execution of a final and executory
judgment of the National Labor Relations Commission.
o

Same; Same; Levy; Indemnity bond that must be posted up by the prevailing party should be in a sum not
less than the value of the property levied.
o

In Pucan v. Bengzon and in Guimoc v. Rosales, the Court has thus responded in the negative when
queried on whether or not a civil court may interfere by injunction with the execution of a final
and executory judgment of the NLRC.

The Manual (second paragraph of Section 1 of Rule VI) requires that the indemnity bond that must
be posted up by the prevailing party should be in a sum not less than the value of the property
levied.

Same; Same; Same; In case of disagreement on the value of the property levied, the matter shall be
determined by the Labor Arbiter.
o

The Manual provides that in case of disagreement on the value of the property levied, the matter
shall be determined by the Labor Arbiter.

Not only did PHILGUARANTEE promptly challenge the integrity of the bond submitted by Diehl
but it also did question the amount of the bond.

Since the difference is substantial, it should have behooved the Labor Arbiter to take more than
just a passing glance on the claim of PHILGUARANTEE. Philippine Export and Foreign Loan

Guarantee Corporation vs. Court of Appeals, 251 SCRA 354, G.R. No. 118701 December 12,
1995

Barayoga vs Asset Privatization Trust

Facts:

Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia Sugar Development

Corporation (BISUDECO), a sugar plantation mill located in Himaao, Pili, Camarines Sur.

On December 8, 1986, [Respondent] Asset Privatization Trust (APT), a public trust was created under
Proclamation No. 50, as amended, mandated to take title to and possession of, conserve, provisionally
manage and dispose of non-performing assets of the Philippine government identified for privatization or
disposition.

Pursuant to Section 23 of Proclamation No. 50, former President Corazon Aquino issued Administrative
Order No. 14 identifying certain assets of government institutions that were to be transferred to the
National Government. Among the assets transferred was the financial claim of the Philippine National
Bank against BISUDECO in the form of a secured loan.

Consequently, by virtue of a Trust Agreement executed between the National Government and APT on
February 27, 1987, APT was constituted as trustee over BISUDECOs account with the PNB.

Sometime later, on August 28, 1988, BISUDECO contracted the services of Philippine Sugar Corporation
(Philsucor) to take over the management of the sugar plantation and milling operations until August 31,
1992.

Meanwhile, because of the continued failure of BISUDECO to pay its outstanding loan with PNB, its
mortgaged properties were foreclosed and subsequently sold in a public auction to APT, as the sole bidder.
On April 2, 1991, APT was issued a Sheriffs Certificate of Sale.

On July 23, 1991, the union filed a complaint for unfair labor practice, illegal dismissal, illegal deduction
and underpayment of wages and other labor standard benefits plus damages.

Issue: whether Respondent APT is liable for petitioners monetary claims

Held: The Petition has no merit.

It was only in April 1991 that APT foreclosed the assets and chattels of BISUDECO because of the latters
continued failure to pay outstanding loan obligations to PNB/APT.

The properties were sold at public auction to APT, the highest bidder,

In the present case, petitioner-unions members who were not recalled to work by Philsucor in May 1991
seek to hold APT liable for their monetary claims and allegedly illegal dismissal.

Significantly, prior to the actual sale of BISUDECO assets to BAPCI on October 30, 1992, the APT board
of trustees had approved a Resolution on September 23, 1992.

The Resolution authorized the payment of separation benefits to the employees of the corporation in the
event of its privatization. Not included in the Resolution, though, were petitioner-unions members who had
not been recalled to work in May 1991.

The duties and liabilities of BISUDECO, including its monetary liabilities to its employees, were not all
automatically assumed by APT as purchaser of the foreclosed properties at the auction sale.

Any assumption of liability must be specifically and categorically agreed upon.

No succession of employment rights and obligations can be said to have taken place between the two.
Between the employees of BISUDECO and APT, there is no privity of contract that would make the latter a
substitute employer that should be burdened with the obligations of the corporation.

To rule otherwise would result in unduly imposing upon APT an unwarranted assumption of accounts not
contemplated in Proclamation No. 50 or in the Deed of Transfer between the national government and
PNB.

Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or substantially all,
the properties of the seller or transferor is not obliged to absorb the latters employees.

The most that the purchasing company may do, for reasons of public policy and social justice, is to give
preference of reemployment to the selling companys qualified separated employees, who in its judgment
are necessary to the continued operation of the business establishment

In other words, the liabilities of the previous owner to its employees are not enforceable against the buyer
or transferee, unless (1) the latter unequivocally assumes them; or (2) the sale or transfer was made in bad
faith. Thus, APT cannot be held responsible for the monetary claims of petitioners who had been dismissed
even before it actually took over BISUDECOs assets.

This Court has ruled in a long line of cases that under Articles 2241 and 2242 of the Civil Code, a mortgage
credit is a special preferred credit that enjoys preference with respect to a specific/determinate property of
the debtor.

On the other hand, the workers preference under Article 110 of the Labor Code is an ordinary preferred
credit.

While this provision raises the workers money claim to first priority in the order of preference established
under Article 2244 of the Civil Code, the claim has no preference over special preferred credits.

Thus, the right of employees to be paid benefits due them from the properties of their employer cannot have
any preference over the latters mortgage credit.

In other words, being a mortgage credit, APTs lien on BISUDECOs mortgaged assets is a special preferred
lien that must be satisfied first before the claims of the workers.

Republic vs Peralta
Facts:

In the voluntary insolvency proceedings commenced in May 1977 by private respondent Quality Tobacco
Corporation (the "Insolvent"), the following claims of creditors were filed:
o

(i) P2,806,729.92, by the USTC Association of Employees and workers Union-PTGWO USTC as
separation pay for their members

(ii) P53,805.05 by the Federacion de la Industria Tabaquera y Otros Trabajadores de Filipinas

("FOITAF), as separation pay for their members, an amount similarly awarded by the NLRC in the
same NLRC Case.

(iii) P1,085,188.22 by the Bureau of Internal Revenue for tobacco inspection fees covering the
period 1 October 1967 to 28 February 1973;

(iv) P276,161.00 by the Bureau of Customs for customs duties and taxes payable on various
importations by the Insolvent. These obligations appear to be secured by surety bonds

In its questioned Order of 17 November 1980, the trial court held that the above-enumerated claims of
USTC and FOITAF for separation pay of their respective members embodied in final awards of the
National Labor Relations Commission were to be preferred over the claims of the Bureau of Customs
and the Bureau of Internal Revenue.

The Solicitor General, in seeking the reversal of the questioned Orders, argues that Article 110 of the Labor
Code is not applicable as it speaks of "wages," a term which he asserts does not include the separation
pay claimed by the Unions.

Issue: Whether or not the claims of USTC and FOITAF for separation pay were to be preferred over BIR and
Customs
Held: NO

The resolution of the issue of priority among the several claims filed in the insolvency proceedings
instituted by the Insolvent cannot, however, rest on a reading of Article 110 of the labor Code alone.

Article 110 of the Labor Code, in determining the reach of its terms, cannot be viewed in isolation. Rather,
Article 110 must be read in relation to the provisions of the Civil Code concerning the classification,
concurrence and preference of credits, which provisions find particular application in insolvency
proceedings where the claims of all creditors, preferred or non-preferred, may be adjudicated in a binding
manner. 7 It is thus important to begin by outlining the scheme constituted by the provisions of the Civil
Code on this subject.

Those provisions may be seen to classify credits against a particular insolvent into three general categories,
namely:

(a) special preferred credits listed in Articles 2241 and 2242,

constitute liens or encumbrances on the specific movable or immovable property to

which they relate. Article 2243 makes clear that these credits "shall be considered
as mortgages or pledges of real or personal property, or liens within the purview of legal
provisions governing insolvency."

(b) ordinary preferred credits listed in Article 2244; and

(c) common credits under Article 2245.

We come to the question of what impact Article 110 of the Labor Code has had upon the complete scheme
of classification, concurrence and preference of credits in insolvency set out in the Civil Code.

We believe and so hold that Article 110 of the Labor Code did not sweep away the overriding preference
accorded under the scheme of the Civil Code to tax claims of the government or any subdivision thereof
which constitute a lien upon properties of the Insolvent.

It is frequently said that taxes are the very lifeblood of government.

The effective collection of taxes is a task of highest importance for the sovereign.

It is critical indeed for its own survival. It follows that language of a much higher degree of specificity than
that exhibited in Article 110 of the Labor Code is necessary to set aside the intent and purpose of the
legislator that shines through the precisely crafted provisions of the Civil Code.

It cannot be assumed simpliciter that the legislative authority, by using in Article 110 the words "first
preference" and "any provision of law to the contrary notwithstanding" intended to disrupt the elaborate
and symmetrical structure set up in the Civil Code.

Neither can it be assumed casually that Article 110 intended to subsume the sovereign itself within the
term "other creditors" in stating that "unpaid wages shall be paid in full before other creditors may
establish any claim to a share in the assets of employer."

Insistent considerations of public policy prevent us from giving to "other creditors" a linguistically
unlimited scope that would embrace the universe of creditors save only unpaid employees.

the use of the phrase "first preference" in Article 110 indicates that what Article 110 intended to modify
is the order of preference found in Article 2244, which order relates, as we have seen, to property of the
Insolvent that is not burdened with the liens or encumbrances created or recognized by Articles 2241 and
2242.

Article 110 of the Labor Code establishes "first preference" for services rendered "during the period prior to
the bankruptcy or liquidation, " a period not limited to the year immediately prior to the bankruptcy or
liquidation.

Thus, very substantial effect may be given to the provisions of Article 110 without grievously distorting the
framework established in the Civil Code by holding, as we so hold, that Article 110 of the Labor Code has
modified Article 2244 of the Civil Code in two respects:
o

(a) firstly, by removing the one year limitation found in Article 2244, number 2; and

(b) secondly, by moving up claims for unpaid wages of laborers or workers of the Insolvent from
second priority to first priority in the order of preference established I by Article 2244.

In respect of (a), if the Insolvent has inventories of processed or manufactured tobacco products, such
inventories must be subjected firstly to the claim of the Bureau of Internal Revenue for unpaid tobacco
inspection fees.

The remaining value of such inventories after satisfaction of such fees (or should such inspection fees be
satisfied out of other properties of the Insolvent) will be subject to a lien in favor of the Unions by virtue of
Article 2241, number 6.

In case, upon the other hand, the Insolvent no longer has any inventory of processed or manufactured
product, then the claim of the Unions for separation pay would have to be satisfied out of the "free
property" of the Insolvent under Article 2244 of the Civil Code. as modified by Article 110 of the Labor
Code.

Turning to (b), should the Bureau of Customs no longer have any importations by the Insolvent still within
customs custody or control, or should the importations still held by the Bureau of Customs be or have
become insufficient in value for the purpose, customs duties and taxes remaining unpaid would have only
ninth priority by virtue of Article 2244, number 9.

In respect therefore of the Insolvent's "free property, " the claims of the Unions will enjoy first priority
under Article 2244 as modified and will be paid ahead of the claims of the Bureau of Customs for any
customs duties and taxes still remaining unsatisfied.

It is understood that the claims of the Unions referred to above do not include the 10% claim for attorney's
fees. Attorney's fees incurred by the Unions do not stand on the same footing as the Unions' claims for
separation pay of their members.

Rubberworld Inc vs NLRC

Facts:

Petitioner Rubberworld (Phils.), Inc. [hereinafter Rubberworld], a corporation established in 1965, was
engaged in manufacturing footwear, bags and garments.

Aquilino Magsalin, Pedro Manibo, Ricardo Borja, Benjamin Camitan, Alicia M. San Pedro, and Felomena
Tolin were employed as dispatcher, warehouseman, issue monitor, foreman, jacks cementer and outer sole
attacher, respectively.

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

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

On November 22, 1994, Rubberworld filed with the Securities and Exchange Commission (SEC) a petition
for declaration of suspension of payments with a proposed rehabilitation plan.

On January 24, 1995, petitioners submitted to the labor arbiter a motion to suspend the proceedings
invoking the SEC order dated December 28, 1994. The labor arbiter did not act on the motion and ordered
the parties to submit their respective position papers.

LA ruled an illegal shutdown hence pay separation pay

NLRC affirmed LA

Issue: The issue is whether or not the Department of Labor and Employment, the Labor Arbiter and the National
Labor Relations Commission may legally act on the claims of respondents despite the order of the Securities and
Exchange Commission suspending all actions against a company under rehabilitation by a management committee
created by the Securities and Exchange Commission.
Held:

Presidential Decree No. 902-A is clear that "all actions for claims against corporations, partnerships or
associations under management or receivership pending before any court, tribunal, board or body shall be
suspended accordingly." The law did not make any exception in favor of labor claims.

Thus, the labor case would defeat the purpose of an automatic stay. To rule otherwise would open the
floodgates to numerous claims and would defeat the rescue efforts of the management committee.

Besides, even if an award is given to private respondents, the ruling could not be enforced as long as
petitioner is under management committee

This finds ratiocination in that the power to hear and decide labor disputes is deemed suspended when the
Securities and Exchange Commission puts the corporation under rehabilitation.

Thus, when NLRC proceeded to decide the case despite the SEC suspension order, the NLRC acted
without or in excess of its jurisdiction to hear and decide cases. As a consequence, any resolution, decision
or order that it rendered or issued without jurisdiction is a nullity.

From earlier case 1999

It is plain from the foregoing provisions of law that "upon the appointment [by, the SEC] of a management
committee or a rehabilitation receiver," all actions for claims against the corporation pending before any
court, tribunal or board shall ipso jure be suspended.

The justification for the automatic stay of all pending actions for claims "is to enable the management
committee or the rehabilitation receiver to effectively exercise its/his powers free from any judicial or
extra-judicial interference that might unduly hinder or prevent the 'rescue' of the debtor company.

To allow such other actions to continue would only add to the burden of the management committee or
rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the
corporation instead of being directed toward its restructuring and rehabilitation."

Parenthetically, the rehabilitation of a financially distressed corporation benefits its employees, creditors,
stockholders and, in a larger sense, the general public.

And in considering whether to rehabilitate or not, the SEC gives preference to the interest of creditors,
including employees.

The reason that shareholders can recover their investments only upon liquidation of' the corporation, and
only if there are assets remaining after all corporate creditors ire paid

Placewell International etc vs Camote

Facts:

petitioner Placewell International Services Corporation (PISC) deployed respondent Ireneo B. Camote to
work as building carpenter for SAAD Trading and Contracting Co. (SAAD) at the Kingdom of Saudi
Arabia (KSA) for a contract duration of two years, with a corresponding salary of US$370.00 per month.

At the job site, respondent was allegedly found incompetent by his foreign employer; thus the latter decided
to terminate his services.

However, respondent pleaded for his retention and consented to accept a lower salary of SR 800.00 per
month. Thus, SAAD retained respondent until his return to the Philippines two years after.

On November 27, 2001, respondent filed a sworn Complaint for monetary claims against petitioner
alleging that when he arrived at the job site, he and his fellow Filipino workers were required to sign
another employment contract written in Arabic under the constraints of losing their jobs if they refused; that

for the entire duration of the new contract, he received only SR 590.00 per month; that he was not given his
overtime pay
Issue: Whether or not the carpenter can recover his money claims
Held: Yes.

R.A. No. 8042 explicitly prohibits the substitution or alteration to the prejudice of the worker, of
employment contracts already approved and verified by the Department of Labor and Employment (DOLE)
from the time of actual signing thereof by the parties up to and including the period of the expiration of the
same without the approval of the DOLE.

Applying the same rule in the case at bar, the unauthorized alteration in the employment contract of
respondent, particularly the diminution in his salary from US$370.00 to SR 800.00 per month, is void for
violating the POEA-approved contract which set the minimum standards, terms, and conditions of his
employment.

Moreover, we find that there was no proper dismissal of respondent by SAAD; the termination of
respondent was clearly a ploy to pressure him to agree to a lower wage rate for continued employment.

Thus, the original POEA-approved employment contract of respondent subsists despite the so-called new
agreement with SAAD. Consequently, the solidary liability of petitioner with SAAD for respondents
money claims continues in accordance with Section 10 of R.A. 8042.

Servando vs Secretary of Labor

Facts:

Respondents invoke the visitorial and enforcement power of the Secretary of Labor under Art. 128(b) of the
Labor Code which, according to them, is entirely separate and distinct from the Regional Director's power
to adjudicate simple money claims under Art. 129 of the same Code;
o

and that Art. 217 (a) (6) of the Labor Code granting original and exclusive jurisdiction to Labor
Arbiters over all money claims arising from employer-employee relations involving an amount
exceeding P5,000.00, whether or not accompanied with a claim for reinstatement, should not be
interpreted as an amendment to Art. 128(b), i.e. as providing an additional exception to the
visitorial and enforcement power of the Secretary of Labor.

Issue: Whether or not the Labor Arbiter has jurisdiction over money claims arising from employer-employee
relations
Held: YES

A careful consideration of the above-quoted three (3) provisions of the Labor Code leads the Court to
reiterate its ruling that the exclusive jurisdiction to hear and decide employees' claims arising from
employer-employee relations, exceeding the aggregate amount of P5,000.00 for each employee, is vested in
the Labor Arbiter (Article 217 (a) (6)).

This exclusive jurisdiction of the Labor Arbiter is confirmed by the provisions of Article 129
which excludes from the jurisdiction of the Regional Director or any hearing officer of the Department of
Labor the power to hear and decide claims of employees arising from employer-employee relations
exceeding the amount of P5,000.00 for each employee.

To construe the visitorial power of the Secretary of Labor to order and enforce compliance with labor laws
as including the power to hear and decide cases involving employees' claims for wages, arising from
employer-employee relations, even if the amount of said claims exceed P5,000.00 for each employee,
would, in our considered opinion, emasculate and render meaningless, if not useless, the provisions of
Article 217(a) (6) and Article 129 of the Labor Code which as above-pointed out,
confer exclusive jurisdiction on the Labor Arbiter to hear and decide such employees' claims (exceeding
P5,000.00 for each employee). To sustain the respondents' position would, in effect, sanction a situation
where all employees' claims, regardless of amount, can be heard and determined by the Secretary of Labor
under his visitorial power. This does not, however, appear to be the legislative intent.

In other words, the inspection conducted by the Secretary of Labor, through labor regulation officers or
industrial safety engineers, may yield findings of violations through labor standards under labor laws; the
Secretary of Labor may order compliance with said labor standards, if necessary, through appropriate writs
of execution but when the findings disclose an employee claim of over P5,000.00, the matter should be
referred to the Labor Arbiter in recognition of his exclusive jurisdiction over such claims.

In addition to all the foregoing, the Court cannot overlook the fact that petitioner contests the findings of
the labor regulation officer, upon which, the respondents based their questioned orders.

Nor can it be argued with persuasion that the issues raised by petitioner are not evidentiary in nature and
unverifiable in the course of inspection.

Moreover, the total amount of the respondents' award against petitioner, is P964,952.50

The total award of P964,952.50 is a tidy sum sufficient to knock-off any viable enterprise. What is worse is
that all this is done through summary proceedings.

The elementary demands of due process upon which the express exception to the visitorial powers of the
Secretary of Labor1 is obviously anchored, would require something more than a summary disposition

Guico Jr vs Quisumbing
Facts:

The case started when the Office of the Regional Director, Department of Labor and Employment (DOLE),
Region I, San Fernando, La Union, received a letter-complaint dated April 25, 1995, requesting for an
investigation of petitioner's establishment, Copylandia Services & Trading, for violation of labor standards
laws.

Pursuant to the visitorial and enforcement powers of the Secretary of Labor and Employment or his duly
authorized representative under Article 128 of the Labor Code, as amended, inspections were conducted at
Copylandia's outlets on April 27 and May 2, 1995.

The inspections yielded the following violations involving twenty-one (21) employees who are copier
operators:
o

(1) underpayment of wages;

(2) underpayment of 13th month pay; and

(3) no service incentive leave with pay

On October 30, 1995, Regional Director Guerrero N. Cirilo issued an Order [6] favorable to the 21
employees.

First, he ruled that the purported Receipt, Waiver and Quitclaim dated December 21 and 22, 1994, could
not cause the dismissal of the labor standards case against the petitioner since the same were executed
before the filing of the said case.
o

Moreover, the employees repudiated said waiver and quitclaim.

Second, he held that despite the salary increase granted by the petitioner, the daily salary of the employees
was still below the minimum daily wage rate of P119.00 under Wage Order No. RB-I-03.

Thirdly, he held that the removal of the commission and incentive schemes during the pendency of the case
violated the prohibition against elimination or diminution of benefits under Article 100 of the Labor Code,
as amended.

On January 10, 1996, District Labor Officer Adonis Peralta forwarded a Report showing that the petitioner
and most of the 21 employees had reached a compromise agreement

Four (4) employees did not sign in the compromise agreement. They insisted that they be paid what is due
to them according to the Order of the Regional Director in the total amount of P231,841.06.

Issue: whether or not the Regional Director has jurisdiction over the instant labor standards case,
Held: YES

We sustain the jurisdiction of the respondent Secretary.

As the respondent correctly pointed out, this Court's ruling in Servando --- that the visitorial power of the
Secretary of Labor to order and enforce compliance with labor standard laws cannot be exercised where the
individual claim exceeds P5,000.00, can no longer be applied in view of the enactment of R.A. No. 7730
amending Article 128 (b) of the Labor Code,

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this
article may be appealed to the latter.

In case said order involves a monetary award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of
Labor and Employment in the amount equivalent to the monetary award in order appealed from

In his sponsorship speech, Congressman Veloso categorically declared that "this bill seeks to do away with
the jurisdictional limitations imposed through said ruling (referring to Servando) and to finally settle any
lingering doubts on the visitorial and enforcement powers of the Secretary of Labor and
Employment." Petitioner's reliance on Servando is thus untenable.

The next issue is whether petitioner was able to perfect his appeal to the Secretary of Labor and
Employment. Article 128 (b) of the Labor Code clearly provides that the appeal bond must be "in the
amount equivalent to the monetary award in the order appealed from." The records show that petitioner
failed to post the required amount of the appeal bond. His appeal was therefore not perfected.

Batong Buhay vs Dela Serna

Facts:

On 5 February 1987, Elsie Rosalinda B. Ty, Antonia L. Mendelebar, Ma. Concepcion O. Reyes and 1,247
others filed a complaint against Batong Buhay Gold Mines, Inc. for:
o

(1) Non-payment of their basic pay and allowances for the period of 6 July 1983 to 5 July 1984,
inclusive, under Wage Order No. 2;

(2) Non-payment of their basic pay and allowances for the period 16 June 1984 to 5 October 1986,
inclusive under Wage Order No. 5;

(3) Non-payment of their salaries for the period 16 March 1986 to the present;

(4) Non-payment of their 13th month pay for 1985, 1986 and 1987;

(5) Non-payment of their vacation and sick leave, and the compensatory leaves of mine site
employees; and

(6) Non-payment of the salaries of employees who were placed on forced leaves since November,
1985 to the present, if this is not feasible, the affected employees be awarded corresponding
separation pay.

the Labor Standards and Welfare Officers submitted their report stating Order of Compliance be issued
directing respondent Batong Buhay Gold Mines Inc. to pay complainants Elsie Rosalina Ty, et al.
(P4,818,746.40.

When the respondent failed to post a cash/surety bond, and upon motion for the issuance of a writ of
execution by the complainants, the Regional Director, on 14 September 1987 issued a writ of execution
appointing Mr. John Espiridion C. Ramos as Special Sheriff

The Special Sheriff proceeded to execute the appealed Order on 17 September 1987 and seized three (3)
units of Peterbuilt trucks and then sold the same by public auction. Various materials and motor vehicles
were also seized on different dates and sold at public auction by said sheriff.

On 11 December 1987, the respondent finally posted a supersedeas bond which prompted this Office to
issue an Order dated 26 January 1988, restraining the complainants and sheriff Ramos from enforcing the
writ of execution.

Issue: whether the Regional Director has jurisdiction over subject labor standards case.
Held: YES

We agree with the complainants that the regional office a quo has jurisdiction to hear and decide the instant
labor standard case.

E.O. No. 111 was issued on December 24, 1986 or three(3) months after the promulgation of the Secretary
of Labors decision upholding private respondents salary differentials and ECOLAs on September 24,
1986.The amendment of the visitorial and enforcement powers of the Regional Director (Article 128(b)) by
said E.O. 111 reflects the intention enunciated in Policy Instructions Nos. 6 and 37 to empower the
Regional Directors to resolve uncontested money claims in cases where an employer-employee relationship
still exists

The proceedings before the Regional Director must, perforce be upheld on the basis of Article 128(b) as
amended by E.O. No. 111, dated December 24, 1986, this executive order to be considered in the nature of
a curative statute with retrospective application.

Petitioners refusal to allow the Labor Standards and Welfare Officers to conduct inspection in the premises
of their head office in Makati and the failure to file their position paper is equivalent to a waiver of its right
to contest the claims of the employees.

This Court had occasion to hold there is no violation of due process where the Regional Director merely
required the submission of position papers and resolved the case summarily thereafter.

Furthermore, the issuance of the compliance order was well within the jurisdiction of the Regional
Director, as Section 14 of the Rules on the Disposition of Labor Standards Cases

It bears stressing that this petition involves a labor standards case and it is in keeping with the law that the
worker need not litigate to get what legally belongs to him, for the whole enforcement machinery of the
Department of Labor exists to insure its expeditious delivery to him free of charge.

The Servando ruling, in effect, expanded the jurisdictional limitation provided for by RA 6715 as to include
labor standards cases under Article 128 (b) and no longer limited to ordinary monetary claims under Article
129.

The present law, RA 7730, can be considered a curative statute to reinforce the conclusion that the Regional
Director has jurisdiction over the present labor standards case.

Well-settled is the rule that jurisdiction over the subject matter is determined by the law in force when the
action was commenced, unless a subsequent statute provides for its retroactive application, as when it is a
curative legislation.[

Parenthetically, the same rationale applies in treating RA 7730 as a curative statute. Explicit in its title[22] is
the legislative intent to rectify the error brought about by this Courts ruling that RA 6715 covers even labor
standards cases where the amounts to be awarded by the Regional Director exceed P5,000 as provided for
under RA 6715.

Congressional records relative to Republic Act 7730 reveal that, this bill seeks to do away with the
jurisdictional limitations imposed thru said ruling (referring to Servando) and to finally settle any lingering
doubts on the visitorial and enforcement powers of the Secretary of Labor and Employment.

All the foregoing studiedly considered, the ineluctable conclusion is that the application of RA 7730 to the
case under consideration is proper.

Thus, it is decisively clear that the public respondent did not act with grave abuse of discretion in issuing
the Order dated September 16, 1988.

VL Enterprises vs CA
Facts:
On 10 March 1998, the DOLE conducted an inspection of the establishment of petitioner company V.L.
Enterprises. On 5 May 1999, then Regional Director Maximo Lim issued an Order
Petitioners appealed the aforequoted Order of the Regional Director.
On 23 June 1999, DOLE Undersecretary Jose M. Espaol, Jr. rendered an Order directing petitioners V.L. Enterprises
and/or Faustino J. Visitacion, to post cash or surety bond in the amount equivalent to the monetary award; otherwise,
the appeal will be dismissed for not having been perfected.
On 29 July 1999, petitioners filed an Urgent Motion for Reconsideration, invoking therein that in a similar case
pending with the National Labor Relations Commission (NLRC NCR Case No. 00-10-0762-27) involving the same
parties and issues, petitioners had already posted a supersedeas bond.
Issue: Whether or not the the regional director of DOLE has jurisdiction
Held: YES

Petitioners must have been unmindful of the fact that one year from the issuance of the Halili Decision, or
on 2 June 1994, Republic Act No. 7730 amended Article 128(b) to its present wording so as to free it from
the jurisdictional limitations found in Articles 129[13] and 217.[14] Thus, as it is now worded, the authority

under Article 128[15] may be exercised by DOLE regardless of the monetary value involved, unlike in
Article 129 where the authority is only for claims not exceeding P5,000.00 per claimant.

This was further affirmed by our ruling in Guico v. Quisumbing,[17] which stated categorically the
abandonment of the Servando ruling:
o

We sustain the jurisdiction of the respondent Secretary. As the respondent correctly pointed out,
this Court's ruling in Servando that the visitorial power of the Secretary of Labor to order and
enforce compliance with labor standard laws cannot be exercised where the individual claim
exceeds P5,000.00, can no longer be applied in view of the enactment of R.A. No. 7730 amending
Article 128 (b) of the Labor Code

An order issued by the duly authorized representative of the Secretary of Labor and Employment
under this article may be appealed to the latter. In case said order involves a monetary award, an
appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by
a reputable bonding company duly accredited by the Secretary of Labor and Employment in the
amount equivalent to the monetary award in the order appealed from

Ex-Bataan Veterans vs Secretary of Labor

Facts:

Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in the business of providing security services while
private respondents are EBVSAIs employees assigned to the National Power Corporation
at Ambuklao Hydro Electric Plant, Bokod, Benguet (Ambuklao Plant).

On 20 February 1996, private respondents led by Alexander Pocding (Pocding) instituted a complaint[4] for
underpayment of wages against EBVSAI before the Regional Office of the Department of Labor and
Employment (DOLE).

On 7 March 1996, the Regional Office conducted a complaint inspection at the Ambuklao Plant where the
following violations were noted:

(1) non-presentation of records;

(2) non-payment of holiday pay;

(3) non-payment of rest day premium;

(4) underpayment of night shift differential pay;

(5) non-payment of service incentive leave;

(6) underpayment of 13thmonth pay;

(7) no registration;

(8) no annual medical report;

(9) no annual work accidental report;

(10) no safety committee; and

(11) no trained first aider.

On the same date, the Regional Office issued a notice of hearing [6] requiring EBVSAI and private
respondents to attend the hearing on 22 March 1996. Other hearings were set for 8 May 1996, 27 May 1996
and 10 June 1996.

On 19 August 1996, the Director of the Regional Office (Regional Director) issued an Order,
the dispositive portion of which reads:
o

WHEREFORE, premises considered, respondent EX-BATAAN VETERANS SECURITY

AGENCY is hereby ORDERED to pay the computed deficiencies owing to the affected
employees in the total amount of SEVEN HUNDRED SIXTY THREE THOUSAND NINE
HUNDRED NINETY SEVEN PESOS and 85/PESOS

Secretary of Labor affirmed Regional Director and CA affirmed as well

Issues: Whether the Secretary of Labor or his duly authorized representatives acquired jurisdiction over EBVSAI
Whether the Secretary of Labor or his duly authorized representatives have jurisdiction over the money claims of
private respondents which exceed P5,000
Held: YES. YES

In this case, EBVSAI does not deny having received the notices of hearing. In fact, on 29 March and 13
June 1996, Danilo Burgos and Edwina Manao, detachment commander and bookkeeper of EBVSAI,
respectively, appeared before the Regional Director.

They claimed that the 22 March 1996 notice of hearing was received late and manifested that the notices
should be sent to the Manila office.

Thereafter, the notices of hearing were sent to the Manila office. They were also informed
of EBVSAIs violations and were asked to present the employment records of the private respondents for
verification.

They were, moreover, asked to submit, within 10 days, proof of compliance or their position paper. The
Regional Director validly acquired jurisdiction over EBVSAI. EBVSAI can no longer question the
jurisdiction of the Regional Director after receiving the notices of hearing and after appearing before the
Regional Director

we sustained the jurisdiction of the DOLE Regional Director and held that the visitorial and enforcement
powers of the DOLE Regional Director to order and enforce compliance with labor standard laws
can be exercised even where the individual claim exceeds P5,000.

In this case, the Regional Director validly assumed jurisdiction over the money claims of private
respondents even if the claims exceeded P5,000 because such jurisdiction was exercised in accordance with
Article 128(b) of the Labor Code and the case does not fall under the exception clause.

The Court notes that EBVSAI did not contest the findings of the labor regulations officer during the
hearing or after receipt of the notice of inspection results.

It was only in its supplemental motion for reconsideration before the Regional Director that EBVSAI
questioned the findings of the labor regulations officer and presented documentary evidence to controvert
the claims of private respondents.

But even if this was the case, the Regional Director and the Secretary of Labor still looked into and
considered EBVSAIs documentary evidence and found that such did not warrant the reversal of the
Regional Directors order.

The Secretary of Labor also doubted the veracity and authenticity of EBVSAIs documentary evidence.

Moreover, the pieces of evidence presented by EBVSAI were verifiable in the normal course of inspection
because all employment records of the employees should be kept and maintained in or about the premises
of the workplace, which in this case is in Ambuklao Plant, the establishment where private respondents
were regularly assigned

Rizal Security vs Maraan

Facts;

Petitioner Rizal Security and Protective Service, Inc. (Rizal Security) is a corporation organized under
Philippine laws and is doing business as a security agency. Petitioner Rufino S. Antonio, Jr. (Antonio) is the
president of the aforesaid corporation.

On the other hand, private respondents were formerly employed by petitioner Rizal Security as security
guards detailed at Rainbow End Village in Baguio City.

The instant case arose on 19 May 1995, when private respondents Rico Gomez (Gomez) and Edwin O.
Tupas (Tupas), who were then still employed as security guards of petitioner Rizal Security, filed a
Complaint with the DOLE-CAR Regional Office, docketed as CAR00-9507-CI-25, to seek assistance
regarding petitioners alleged violation of laws on labor standards, such as illegal deduction of wages,
underpayment and nonpayment

Pursuant to the visitorial and enforcement powers of the Secretary of Labor and Employment or his duly
authorized representative under Article 128 of the Labor Code, as amended, an inspection was conducted
on petitioner Rizal Securitys establishment by the Labor Inspector on 1 June 1995.

The said inspection yielded the following violations as indicated in the Notice of Inspection Results

In the meantime, two significant events apparently took place.

First, private respondents signed and submitted a resignation letter addressed to the personnel
manager of petitioner Rizal Security on 10 July 1995, to be effective 1 September 1995.

And second, a notice of Termination of Services dated 25 July 1995 was sent by Dominador N.
Valmonte, Jr., Resident Manager of Rainbow End Village to petitioner Antonio, President of copetitioner Rizal Security.[4] Through the said Notice, Rainbow End Village informed petitioner
Rizal Security of the termination of their Security Services also effective 1 September 1995.

petitioner Rizal Security submitted a Manifestation and Motion assailing the jurisdiction of the DOLECAR Regional Office over the case. Petitioner Rizal Security alleged that the DOLE-CAR Regional Office
had lost its jurisdiction to try the case considering there was no longer any employer-employee relationship
between petitioner Rizal Security and private respondents when the latter ceased to be employees of
petitioner Rizal Security due to their resignation effective 1 September 1995.

Thereafter, on 24 January 1996, the DOLE-CAR Regional Office, through public respondent Director
Maraan, issued the assailed Order denying petitioner Rizal Securitys Manifestation and Motion.

It further ordered the payment of the deficiencies owing the private respondents amounting to P560,989.70

Petitioners are now asking for the issuance of a writ of certiorari and a Temporary Restraining Order to
enjoin public respondents from executing the Order of 24 January 1996 and from enforcing the Writ of
Execution

Issue: Whether or not s whether public respondent DOLE-CAR Regional Director Maraan acted without jurisdiction
in issuing the Order dated 24 January 1996.
Held: YES

While it is true that the quoted provision states that where employee-employer relations have been severed,
complaints or claims for payment of monetary benefits fall within the exclusive and original jurisdiction of
Labor Arbiters; however, such is not the case in the present Petition.

To emphasize, at the time private respondents instituted CAR00-9507-CI-25 by filing a complaint with the
DOLE-CAR Regional Office, they were still employees of petitioners.

As alleged by petitioner Rizal Security itself, deemed as an admission on its part, the employer-employee
relations between petitioner Rizal Security and private respondents were terminated on 1 September 1995,
or more than three months after the institution of CAR00-9507-CI-25 before the DOLE Regional Office.

Well-settled is the rule that the jurisdiction of a court over the subject matter of an action is determined by
the allegations of the complaint at the time of its filing, irrespective of whether or not the plaintiff is
entitled to recover upon all or some of the claims asserted therein

It is but axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or government
agency, over the nature and subject matter of a petition or complaint is determinedby the material
allegations therein, the character of the relief prayed for, and the law existing at the time of the filing of the
complaint or petition

Regarding the validity of the order, it is invalid

Without receipt by the petitioners of the notice and copy of the Order dated 24 January 1996, the same has
not yet become final and executory and the Writ of Execution issued pursuant thereto on 12 March 1996
was premature and without legal basis. This renders the Writ of Execution fatally defective and, thus, null.

Catholic Vicariate vs Sto Thomas

Facts:

Petitioner contracted Kunwha Luzon Construction (KUNWHA) to construct the retaining wall of the
Baguio Cathedral. KUNWHA, in turn, subcontracted CEREBA Builders (CEREBA) to do the formworks
of the church. The contract between KUNWHA and CEREBA lasted up to the completion of the project or
on 8 September 2000.

KUNWHA failed to pay CEREBA. Consequently, the latter failed to pay its employees.

On 29 August 2000, respondent George Agbucay, along with 81 other employees, lodged a complaint
against CEREBA, KUNWHA and petitioner before the DOLE-CAR Regional Office for nonpayment of
wages, special and legal holiday premium pay.

An inspection of the premises resulted in the discovery of violations of labor standards law, such as
nonpayment of wages and holiday pay from 28 June 2000 to 5 September 2000, non-presentation of
employment records, and others.

Petitioner, KUNWHA and CEREBA were given five (5) days from receipt of the notice of inspection
results to rectify its violations. Despite the notice, the parties failed to comply.

A hearing was set wherein CEREBA manifested its willingness to pay the affected employees on the
condition that KUNWHA would pay its obligation to CEREBA.

Petitioner meanwhile manifested that the retention fee due to KUNWHA was sufficient to pay the
deficiencies due the affected employees.

On 12 March 2001, the DOLE-CAR Regional Director issued an Order holding CEREBA, KUNWHA and
petitioner jointly and severally liable to the 82 affected workers in the amount of P1,029,952.80
or P12,560.40 for each employee.

On appeal, the Secretary of Labor reversed the ruling of the Regional Director and held that pursuant to
Articles 106 and 107 of the Labor Code, the liability of KUNWHA, CEREBA and the Catholic Vicariate is
solidary notwithstanding the absence of an employer-employee relationship.
o

The Secretary of Labor ruled, however, that there existed an employer-employee relationship
between the parties since the records show that the subcontracting agreement was terminated only
on 28 September 2000, almost a month after the complaint was filed on 29 August 2000

Issue: whether the Secretary of Labor acquired jurisdiction over the appeal considering that this case falls within the
exception stated in Article 128(b) of the Labor Code
Held: YES. He has jurisdiction as ruled by the Appellate court

The appellate court held that petitioner was estopped from questioning the jurisdiction of the Secretary of
Labor, it having attended the initial hearing and therein manifested that it had in its possession the retention
fee of KUNWHA sufficient to answer for the deficiencies due the affected workers.

The appellate court noted that it was only when the judgment imposed joint and several liability that
petitioner began to question the jurisdiction of the Secretary of Labor.

The appellate court further sustained the finding of the Secretary of Labor that the settlement is not legally
acceptable as it defied public policy for being unconscionable.

Moreover, the appellate court succinctly stated that parties who did not appeal may be benefited by the
judgment of said court insofar as it is favorable and applicable to them

Assuming arguendo the absence of an employer-employee relationship between the parties, the Secretary
of Labor, invoking Odin Security Agency v. De la Serna,[21] correctly declared that petitioner is now
estopped from questioning the jurisdiction of the Regional Director when it actively participated in the
proceedings held therein.

In said case, petitioner also submitted to the jurisdiction of the Regional Director by taking part in the
hearings before him and by submitting a position paper.

Similarly, it was only when the order of the Regional Director was modified did petitioner question the
formers jurisdiction to hear and decide the case.

This Court declares that petitioner is barred by estoppel from raising the issue of jurisdiction.

Meteoro vs Creative Creatures

Facts:

Respondent is a domestic corporation engaged in the business of producing, providing, or procuring the
production of set designs and set construction services for television exhibitions, concerts, theatrical
performances, motion pictures and the like.

It primarily caters to the production design requirements of ABS-CBN Broadcasting Corporation in Metro
Manila and nationwide.

On the other hand, petitioners were hired by respondent on various dates as artists, carpenters and
welders. They were tasked to design, create, assemble, set-up and dismantle props, and provide sound
effects to respondents various TV programs and movies.

Sometime in February and March 1999, petitioners filed their respective complaints for non-payment of
night shift differential pay, overtime pay, holiday pay, 13 th month pay, premium pay for Sundays and/or rest
days, service incentive leave pay, paternity leave pay, educational assistance, rice benefits, and illegal
and/or unauthorized deductions from salaries against respondent, before the Department of Labor and
Employment (DOLE), National Capital Region (NCR). Their complaints were consolidated and docketed
as NCR00-9902-IS-011.

After the inspection conducted at respondents premises, the labor inspector noted that the records were not
made available at the time of the inspection; that respondent claimed that petitioners were contractual
employees and/or independent talent workers; and that petitioners were required to punch their cards.

respondent argued that the DOLE-NCR had no jurisdiction over the complaint of the petitioners because of
the absence of an employer-employee relationship.
o

It added that petitioners were free-lance individuals, performing special services with skills and
expertise inherently exclusive to them like actors, actresses, directors, producers, and script
writers, such that they were treated as special types of workers.

Petitioners, on the other hand, averred that they were employees of respondent, as the elements of an
employer-employee relationship existed.

Meanwhile, on April 12, 1999, petitioners filed a complaint for illegal dismissal against petitioner, with
prayer for payment of overtime pay, premium pay for holiday and rest day, holiday pay, service incentive
leave pay, 13th month pay and attorneys fees before the National Labor Relations Commission
(NLRC). The case was docketed as NLRC-NCR Case No. 00-04-04459-9.

On October 11, 1999, DOLE Regional Director Maximo Baguyot Lim issued an Order [9] directing
respondent to pay petitioners the total amount of P2,694,709.00.

While recognizing the visitorial and enforcement powers of the Regional Director and his jurisdiction to
entertain money claims, the appellate court noted that Article 128 of the Labor Code provides an instance
when he (Regional Director) may be divested of jurisdiction.

The CA pointed out that respondent had consistently disputed the existence of employer-employee
relationship, thereby placing the case beyond the jurisdiction of the Regional Director.

Issue: Whether or not the case is an exception clause to Article 128(b) of the Labor Code
Held: YES. The jurisdiction lies with the NLRC

As it is now worded, and as consistently held in a number of cases, [17] the visitorial and enforcement powers
of the Secretary, exercised through his representatives, encompass compliance with all labor standards laws
and other labor legislation, regardless of the amount of the claims filed by workers.

In order to do away with the jurisdictional limitations imposed by the Servando ruling and to finally settle
any lingering doubts on the extent of the visitorial and enforcement powers of the Secretary of Labor and
Employment, R.A. 7730 was enacted, amending Article 128 (b) to its present formulation, so as to free it
from the jurisdictional restrictions found in Articles 129 and 217.

This notwithstanding, the power of the Regional Director to hear and decide the monetary claims of
employees is not absolute.

The last sentence of Article 128 (b) of the Labor Code, otherwise known as the exception clause, provides
an instance when the Regional Director or his representatives may be divested of jurisdiction over a labor
standards case.

In the present case, the CA aptly applied the exception clause. At the earliest opportunity, respondent
registered its objection to the findings of the labor inspector.

The labor inspector, in fact, noted in its report that respondent alleged that petitioners were contractual
workers and/or independent and talent workers without control or supervision and also supplied with tools
and apparatus pertaining to their job.

In its position paper, respondent again insisted that petitioners were not its employees. It then questioned
the Regional Directors jurisdiction to entertain the matter before it, primarily because of the absence of an
employer-employee relationship.

Finally, it raised the same arguments before the Secretary of Labor and the appellate court.

It is, therefore, clear that respondent contested and continues to contest the findings and conclusions of the
labor inspector.

In sum, respondent contested the findings of the labor inspector during and after the inspection and raised
issues the resolution of which necessitated the examination of evidentiary matters not verifiable in the
normal course of inspection.

Hence, the Regional Director was divested of jurisdiction and should have endorsed the case to the
appropriate Arbitration Branch of the NLRC.

Considering, however, that an illegal dismissal case had been filed by petitioners wherein the existence or
absence of an employer-employee relationship was also raised, the CA correctly ruled that such
endorsement was no longer necessary.

Urbanes vs Secretary of Labor

Facts:

Petitioner Placido O. Urbanes, Jr., doing business under the name and style of Catalina Security Agency,
entered into an agreement[1] to provide security services to respondent Social Security System (SSS).

During the effectivity of the agreement, petitioner, by letter of May 16, 1994, [2] requested the SSS for the
upward adjustment of their contract rate in view of Wage Order No. NCR-03 which was issued by the
Regional Tripartite Wages and Productivity Board-NCR pursuant to Republic Act 6727 otherwise known as
the Wage Rationalization Act,

As his May 16, 1994 letter to the SSS remained unheeded, petitioner sent another letter, dated June 7, 1994,
reiterating the request, which was followed by still another letter, dated June 8, 1994.

On June 24, 1994, petitioner pulled out his agencys services from the premises of the SSS and another
security agency, Jaguar, took over.

On June 29, 1994, petitioner filed a complaint with the DOLE-NCR against the SSS seeking the
implementation of Wage Order No. NCR-03.

In its position paper,[7] the SSS prayed for the dismissal of the complaint on the ground that petitioner is not
the real party in interest and has no legal capacity to file the same. In any event, it argued that if it had any
obligation, it was to the security guards.

On the other hand, petitioner in his position paper, citing Eagle Security Agency, Inc. v. NLRC, contended
that the security guards assigned to the SSS do not have any legal basis to file a complaint against it for
lack of contractual privity.

Finding for petitioner, the Regional Director of the DOLE-NCR issued an Order
o

WHEREFORE, premises considered, the respondent Social Security System (SSS) is hereby
Ordered to pay Complainant the total sum of ONE MILLION SIX HUNDRED THOUSAND

EIGHT HUNDRED FIFTY EIGHT AND 46/100 (P 1,600,858.46) representing the wage
differentials under Wage Order No. NCR-03 of the ONE HUNDRED SIXTY EIGHT (168)
Security Guards of Catalina Security Agency covering the period from December 16, 1993 to June
24, 1994

Petitioner asserts that the Secretary of Labor does not have jurisdiction to review appeals from decisions of
the Regional Directors in complaints filed under Article 129 of the Labor Code

Any decision or resolution of the regional director or officer pursuant to this provision may be
appealed on the same grounds provided in Article 223 of this Code, within five (5) calendar days from
receipt of a copy of said decision or resolution, to the National Labor Relations Commission which shall
resolve the appeal within ten (10) calendar days from submission of the last pleading required or allowed
under its rules.

Issue: Whether or not Secretary of Labor has jurisdiction

Held: NO it is the RTC. Same with Lapanday case.
Article 128 states

Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue compliance orders to give effect to labor legislation
based on the findings of labor employment and enforcement officers or industrial safety engineers made in
the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this
article may be appealed to the latter.

In the case at bar, even if petitioner filed the complaint on his and also on behalf of the security guards,
[22]
the relief sought has to do with the enforcement of the contract between him and the SSS which was
deemed amended by virtue of Wage Order No. NCR-03. The controversy subject of the case at bar is thus a
civil dispute, the proper forum for the resolution of which is the civil courts.

Universal Robina Sugar Milling Corporation vs Caballeda

Facts:

Petitioner Universal Robina Sugar Milling Corporation (URSUMCO) is a domestic corporation engaged in
the sugar milling business and petitioner Renato Cabati4 is URSUMCO's manager.

Respondent Agripino Caballeda (Agripino) worked as welder for URSUMCO from March 1989 until June
23, 1997 with a salary of P124.00 per day, while respondent Alejandro Cadalin (Alejandro) worked for
URSUMCO as crane operator from 1976 up to June 15, 1997 with a salary of P209.30 per day.

On April 24, 1991, John Gokongwei, Jr., President of URSUMCO, issued a Memorandum 5 establishing the
company policy on "Compulsory Retirement" (Memorandum) of its employees. The memorandum
provides:

All employees corporate-wide who attain 60 years of age on or before April 30, 1991 shall be considered
retired on May 31, 1991.

Henceforth, any employee shall be considered retired 30 days after he attains age 60.

Personnel department shall prepare the retirement notices to be co-signed and served by respective
Department managers to employees concerned. The notices must be served as least 30 days before the
designated retirement date.

Vacation and sick leave credits remaining unused by the employees designated retirement date shall be
converted into cash

Subsequently, on December 9, 1992, Republic Act (RA) No. 7641 6 was enacted into law, and it took effect
on January 7, 1993,7 amending Article 287 of the Labor Code,
o

In case of retirement, the employee shall be entitled to receive such retirement benefits as he may
have earned under existing laws and any collective bargaining agreement and other agreements:
Provided, however, That an employee's retirement benefits under any collective bargaining and
other agreements shall not be less than those provided herein.

Agripino and Alejandro (respondents), having reached the age of 60, were allegedly forced to retire by
URSUMCO. Agripino averred that URSUMCO illegally dismissed him from employment on June 24,
1997 when he was forced to retire upon reaching the age of sixty (60) years old. Upon the termination of
his employment, he accepted his separation pay and applied for retirement benefits with the Social Security
System (SSS).

Thereafter, on August 6, 1997, Agripino filed a Complaint 10 for illegal dismissal, damages and attorneys
fees before the Labor Arbiter (LA) of Dumaguete City. He alleged that his compulsory retirement was in
violation of the provisions of Republic Act (R.A.) 7641 and, was in effect, a form of illegal dismissal.

LA ruled in favor of employees, NLRC reversed, saying the retirement was voluntary, CA reinstated LA

Indubitably, the voluntariness of the respondents' retirement is the meat of the instant controversy.
Petitioners postulate that respondents voluntarily retired particularly when Alejandro filed his application
for retirement, submitted all the documentary requirements, accepted the retirement benefits and executed a
quitclaim in favor of URSUMCO.

Respondents claim otherwise, contending that they were merely forced to comply as they were no longer
given any work assignment and considering that the severance of their employment with URSUMCO is a
condition precedent for them to receive their retirement benefits.

Issue: Whether or not there is illegal dismissal

Held:

Third. Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer
and the employee whereby the latter, after reaching a certain age, agrees to sever his or her employment
with the former.

The age of retirement is primarily determined by the existing agreement between the employer and the
employees. However, in the absence of such agreement, the retirement age shall be fixed by law.

Under Art. 287 of the Labor Code as amended, the legally mandated age for compulsory retirement is 65
years, while the set minimum age for optional retirement is 60 years.

In this case, it may be stressed that the CBA does not per se specifically provide for the compulsory
retirement age nor does it provide for an optional retirement plan. It merely provides that the retirement
benefits accorded to an employee shall be in accordance with law. Thus, we must apply Art. 287 of the
Labor Code which provides for two types of retirement:
o

(a) compulsory and

(b) optional.

The first takes place at age 65, while

the second is primarily determined by the collective bargaining agreement or other

employment contract or employer's retirement plan

Generally, the law looks with disfavor on quitclaims and releases by employees who have been inveigled or
pressured into signing them by unscrupulous employers seeking to evade their legal responsibilities and
frustrate just claims of employees.

They are frowned upon as contrary to public policy.

A quitclaim is ineffective in barring recovery of the full measure of a worker's rights, and the acceptance of
benefits therefrom does not amount to estoppels

The reason is plain. Employer and employee, obviously, do not stand on the same footing.

The employer drove the employee to the wall. The latter must have to get hold of money. Because, out of
the job, he had to face harsh necessities of life.

He thus found himself in no position to resist money proferred.

His, then, is a case of adherence, not of choice.

One thing sure, however, is that petitioners did not relent their claim. They pressed it.

They are deemed not to have waived any of their rights. Renuntiatio non praesumitur.

In exceptional cases, the Court has accepted the validity of quitclaims executed by employees if the
employer is able to prove the following requisites:
o

(1) the employee executes a deed of quitclaim voluntarily;

(2) there is no fraud or deceit on the part of any of the parties;

(3) the consideration of the quitclaim is credible and reasonable; and

(4) the contract is not contrary to law, public order, public policy, morals or good customs or
prejudicial to a third person with a right recognized by law

To be precise, only Alejandro was able to claim a partial amount of his retirement benefit. Thus, it is clear
from the decisions of the LA, NLRC and CA that petitioners are still liable to pay Alejandro the differential
on his retirement benefits. On the other hand, Agripino was actually and totally deprived of his retirement
benefit.

Moreover, the petitioners, not the respondents, have the burden of proving that the quitclaim was
voluntarily entered into

It is worth mentioning that the respondents are rank-and-file employees.

They are simple folks who rely on their work for the daily sustenance of their respective families.

Absent any convincing proof of voluntariness in the submission of the documentary requirements and in
the execution of the quitclaim, we cannot simply assume that respondents were not subjected to the very
same pressure mentioned in Becton.

Furthermore, the fact that respondents filed a complaint for illegal dismissal against petitioners completely
negates their claim that respondents voluntarily retired.

To note, respondents vigorously pursued this case against petitioners, all the way up to this Court.

Without doubt, this is a manifestation that respondents had no intention of relinquishing their employment,
wholly incompatible to petitioners' assertion that respondents voluntarily retired

Flight attendants and stewards association of the Philippines vs PAL

Facts:

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

On June 15, 1998, PAL retrenched 5,000 of its employees, including more than 1,400 of its cabin crew
personnel, to take effect on July 15, 1998. PAL adopted the retrenchment scheme allegedly to cut costs and
mitigate huge financial losses as a result of a downturn in the airline industry brought about by the Asian
financial crisis.

During said period, PAL claims to have incurred P90 billion in liabilities, while its assets stood at P85
billion

In implementing the retrenchment scheme, PAL adopted its so-called "Plan 14" whereby PALs fleet of
aircraft would be reduced from 54 to 14, thus requiring the services of only 654 cabin crew personnel.

PAL admits that the retrenchment is wholly premised upon such reduction in fleet, 5 and to "the strike
staged by PAL pilots since this action also translated into a reduction of flights."

PAL claims that the scheme resulted in "savings x x x amounting to approximately P24 million per month
savings that would greatly alleviate PALs financial crisis.

PAL determined the cabin crew personnel efficiency ratings through an evaluation of the individual cabin
crew members overall performance for the year 1997 alone.

While consultations between FASAP and PAL were ongoing, the latter began implementing its
retrenchment program by initially terminating the services of 140 probationary cabin attendants only to
rehire them in April 1998. Moreover, their employment was made permanent and regular

On July 15, 1998, however, PAL carried out the retrenchment of its more than 1,400 cabin crew personnel.

On September 23, 1998, PAL ceased its operations and sent notices of termination to its employees. Two
days later, PAL employees, through the Philippine Airlines Employees Association (PALEA) board, sought
the intervention of then President Joseph E. Estrada. PALEA offered a 10-year moratorium on strikes and
similar actions and a waiver of some of the economic benefits in the existing CBA. Lucio Tan, however,
rejected this counter-offer.

On June 22, 1998, FASAP filed a Complaint 24 against PAL and Patria T. Chiong 25 (Chiong) for unfair labor
practice, illegal retrenchment with claims for reinstatement and payment of salaries, allowances and
backwages of affected FASAP members, actual, moral and exemplary damages with a prayer to enjoin the
retrenchment program then being implemented

Issue: Whether or not the retrenchment is valid

Held: It is illegal

FIRST, the record shows that PAL failed or neglected to adopt less drastic cost-cutting measures before
resorting to retrenchment. No less than the Supreme Court held that resort to less drastic cost-cutting
measures is an indispensable requirement for a valid retrenchment

SECOND, PAL arbitrarily and capriciously singled out the year 1997 as a reference in its alleged
assessment of employee efficiency. With this, it totally disregarded the employees performance during the
years prior to 1997. This resulted in the unreasonable and unfair retrenchment or demotion of several flight
pursers and attendants who showed impeccable service records during the years prior to 1997.

THIRD, seniority was totally disregarded in the selection of employees to be retrenched, which is a clear
and willful violation of the CBA.

FOURTH, PAL maliciously represented in the proceedings below that it could only operate on a fleet of
fourteen (14) planes in order to justify the retrenchment scheme. Yet, the evidence on record revealed that
PAL operated a fleet of twenty two (22) planes. In fact, after having illegally retrenched the unfortunate
flight attendants and pursers, PAL rehired those who were capriciously dismissed and even hired from the
outside just to fulfill their manning requirements.

FIFTH, PAL did not use any fair and reasonable criteria in effecting retrenchment. If there really was any,
the same was applied arbitrarily, if not discriminatorily.

FINALLY, and perhaps the worst transgression of FASAPs rights, PAL used retrenchment to veil its unionbusting motives and struck at the heart of FASAP when it retrenched seven (7) of its twelve (12) officers
and demoted three (3) others.

Nevertheless, while it is true that the exercise of this right is a prerogative of management, there must be
faithful compliance with substantive and procedural requirements of the law and jurisprudence, for
retrenchment strikes at the very heart of the workers employment, the lifeblood upon which he and his
family owe their survival. Retrenchment is only a measure of last resort, when other less drastic means
have been tried and found to be inadequate

The burden clearly falls upon the employer to prove economic or business losses with sufficient supporting
evidence. Its failure to prove these reverses or losses necessarily means that the employees dismissal was
not justified.43 Any claim of actual or potential business losses must satisfy certain established standards, all
of which must concur, before any reduction of personnel becomes legal.
o

(1) That retrenchment is reasonably necessary and likely to prevent business losses which, if
already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only
expected, are reasonably imminent as perceived objectively and in good faith by the employer;

(2) That the employer served written notice both to the employees and to the Department of Labor
and Employment at least one month prior to the intended date of retrenchment;

(3) That the employer pays the retrenched employees separation pay equivalent to one (1) month
pay or at least one-half () month pay for every year of service, whichever is higher;

(4) That the employer exercises its prerogative to retrench employees in good faith for the
advancement of its interest and not to defeat or circumvent the employees right to security of
tenure;

(5) That the employer used fair and reasonable criteria in ascertaining who would be dismissed
and who would be retained among the employees, such as status, efficiency, seniority, physical
fitness, age, and financial hardship for certain workers.

The employer must also exhaust all other means to avoid further losses without retrenching its employees.

Retrenchment is a means of last resort; it is justified only when all other less drastic means have been tried
and found insufficient. Even assuming that the employer has actually incurred losses by reason of the Asian
economic crisis, the retrenchment is not completely justified if there is no showing that the retrenchment
was the last recourse resorted to

In the instant case, PAL failed to substantiate its claim of actual and imminent substantial losses which
would justify the retrenchment of more than 1,400 of its cabin crew personnel. Although the Philippine
economy was gravely affected by the Asian financial crisis, however, it cannot be assumed that it has
likewise brought PAL to the brink of bankruptcy. Likewise, the fact that PAL underwent corporate
rehabilitation does not automatically justify the retrenchment of its cabin crew personnel.

This only proves that PAL was not aware of the true state of its finances at the time it implemented the
assailed massive retrenchment scheme.

It embarked on the mass dismissal without first undertaking a well-considered study on the proposed
retrenchment scheme. This view is underscored by the fact that previously, PAL terminated the services of
140 probationary cabin attendants, but rehired them almost immediately and even converted their
employment into permanent and regular, even as a massive retrenchment was already looming in the
horizon.

Likewise, PAL has not shown to the Courts satisfaction that the pilots strike had gravely affected its
operations. It offered no proof to show the correlation between the pilots strike and its alleged financial
difficulties.

he only manifestation of PALs attempt at exhausting other possible measures besides retrenchment was
when it conducted negotiations and consultations with FASAP which, however, ended nowhere.

Also, the claim that PAL saved P24 million monthly due to the implementation of the retrenchment
program does not prove anything; it has not been shown to what extent or degree such savings benefited
PAL, vis--vis its total expenditures or its overall financial position.

Neither could PAL claim to suffer from imminent or resultant losses had it not implemented the
retrenchment scheme in 1998. It could not have proved that retrenchment was necessary to prevent further
losses, because immediately thereafter or in February 1999 PAL was on the road to recovery;

Respondents might have confused the right to retrench with its actual retrenchment program, treating them
as one and the same.

The first, no doubt, is a valid prerogative of management; it is a right that exists for all employers.

As to the second, it is always subject to scrutiny in regard to faithful compliance with substantive
and procedural requirements which the law and jurisprudence have laid down.

The right of an employer to dismiss an employee differs from and should not be confused with the
manner in which such right is exercised.

On the requirement that the prerogative to retrench must be exercised in good faith, we have ruled that the
hiring of new employees and subsequent rehiring of "retrenched" employees constitute bad faith; 87 that the
failure of the employer to resort to other less drastic measures than retrenchment seriously belies its claim
that retrenchment was done in good faith to avoid losses;

When PAL implemented Plan 22, instead of Plan 14, which was what it had originally made known to its
employees, it could not be said that it acted in a manner compatible with good faith.

It offered no satisfactory explanation why it abandoned Plan 14; instead, it justified its actions of
subsequently recalling to duty retrenched employees by making it appear that it was a show of good faith;
that it was due to its good corporate nature that the decision to consider recalling employees was made. The
truth, however, is that it was unfair for PAL to have made such a move; it was capricious and arbitrary,
considering that several thousand employees who had long been working for PAL had lost their jobs, only
to be recalled but assigned to lower positions

In sum, we find that PAL had implemented its retrenchment program in an arbitrary manner and with
evident bad faith, which prejudiced the tenurial rights of the cabin crew personnel.

Sarocam vs Interiorient Maritime Enterprises

Facts:

On June 27, 2000 petitioner Benjamin L. Sarocam was hired by Interorient Maritime Ent., Inc. and Demaco
United Ltd., for a twelve-month contract as bosun on board M/V Despina.

His basic monthly salary was US$450.00 on a 48-hour work week, with a fixed overtime pay of US$180.00
per month for 105 hours, supplementary wage of US$70.00, and vacation leave with pay of 2.5 days.4

While the vessel was navigating to China, petitioner suffered lumbar sprain when he accidentally fell from
a ladder.5 On November 15, 2000, he was examined and found to have neuromyositis with the waist and
diabetes. The examining physician prescribed medicine and recommended the signing off and
hospitalization of petitioner.

His employers agreed to repatriate him on November 30,2000.

On December 5, 2000, petitioner was referred to the company-designated physician, Dr. Teodoro F.
Pidlaoan, Medical Director of the Our Lady of Fatima Medical Clinic.

The x-ray of his lumbosacral spine revealed normal results and his Fasting Blood Sugar test revealed 9.1
(NV 4.1-6.1 umol/1).

Petitioner was given Alaxan tablet for his back pain and Euglocon for his elevated blood sugar. He was also
advised to return for follow-up evaluation.

On December 13, 2000, he returned to the clinic with no more complaints of back pains. His sugar
examination likewise revealed normal results.

Petitioner was then declared fit for duty effective on that day.

On March 20, 2001, or barely three months from being pronounced fit to work, petitioner executed a
release and quitclaim8 in favor of his employers where he acknowledged the receipt of US$405.00 as his
sickwages and freed his employers from further liability.

However, on November 27, 2001, petitioner filed a complaint with the labor arbitration branch of the
NLRC for disability benefit, illness allowance/reimbursement of medical expenses, damages and attorneys
fees.

Issue: Whether or not the petitioner is entitled to disability benefits

Held:

Petitioner avers that the quitclaim he executed is invalid, as the amount he received as consideration
therefor was much lower than what he should have received under the POEA Standard Employment
Contract.

He went on to argue that quitclaims are frowned upon by this Court as they are contrary to public policy.

In the instant case, the CA, the NLRC and the Labor Arbiter are one in their findings that based on the
evidence on record, petitioner is not entitled to disability benefits.

Prescinding from the foregoing, the Court finds and so rules that under the Standard Terms and Conditions
Governing the Employment of Filipino Seafarers On-Board Ocean-Going Vessel or the POEA Standard
Employment Contract issued pursuant to DOLE Department Order No. 4, and POEA Memorandum
Circular No. 9, both Series of 2000, petitioner is not entitled to disability benefits.

In the instant case, Dr. Pidlaoan diagnosed petitioner as fit for duty as gleaned from his December 13,
2000 Medical Report, to wit:

Since he was declared fit for work, petitioned has no more right to claim disability benefits under the
contractual provisions of the POEA Standard Employment Contract

Petitioner did not question the findings of Dr. Pidlaoan and his recommendation. He questioned the
doctors competency and the correctness of his findings only when he filed the complaint against
respondents before the Labor Arbiter, roughly 11 months after petitioner was examined by the doctor.

Petitioner consulted his personal doctors only in July and August 2001, long after he had been examined by
the company-designated physician.

The only requirement stated in the POEA Standard Employment Contract, as explained in the German
Marine case, is that the doctor be company-designated, and no other.

Though it is prudent and advisable to have a doctor specialized in his field to examine the seafarers
condition or degree of illness, the contractual provisions of the parties only require that the doctor be
company-designated.

When the language of the contract is explicit, as in the case at bar, leaving no doubt as to the intention of
the drafters thereof, the courts may not read into it any other intention that would contradict its plain
import.

Additionally, petitioner, instead of questioning the assessment of the company-designated doctor, executed
a release and quitclaim in favor of respondents, around three months after the assessment.

In executing the said document, petitioner thus impliedly admitted the correctness of the assessment of the
company-designated physician, and acknowledged that he could no longer claim for disability benefits.

While petitioner may be correct in stating that quitclaims are frowned upon for being contrary to public
policy, the Court has, likewise, recognized legitimate waivers that represent a voluntary and reasonable
settlement of a workers claim which should be respected as the law between the parties.

Where the person making the waiver has done so voluntarily, with a full understanding thereof, and the
consideration for the quitclaim is credible and reasonable, the transaction must be recognized as being a
valid and binding under-taking.

From the document itself, the element of voluntariness in its execution is evident. Petitioner also appears to
have fully understood the contents of the document he was signing, as the important provision thereof had
been relayed to him in Filipino

Likewise, the US$405.00 which he received in consideration of the quitclaim is a credible and reasonable
amount. He was truly entitled thereto, no more and no less, given that he was sick for only less than a
month or from November 15, 2000 to December 13, 2000. The same would not, therefore, invalidate the
said quitclaim.

As a final note, let it be emphasized that the constitutional policy to provide full protection to labor is not
meant to be a sword to oppress employers. The commitment of this Court to the cause of labor does not
prevent us from sustaining the employer when it is in the right