Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 156367 May 16, 2005

AUTO BUS TRANSPORT SYSTEMS, INC., petitioner,

vs.
ANTONIO BAUTISTA, respondent.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision1 and Resolution2 of the
Court of Appeals affirming the Decision3 of the National Labor Relations Commission (NLRC).
The NLRC ruling modified the Decision of the Labor Arbiter (finding respondent entitled to the
award of 13th month pay and service incentive leave pay) by deleting the award of 13 th month
pay to respondent.

THE FACTS

Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus
Transport Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao
via Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid
on commission basis, seven percent (7%) of the total gross income per travel, on a twice a month
basis.

On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva
Vizcaya, the bus he was driving accidentally bumped the rear portion of Autobus No. 124, as the
latter vehicle suddenly stopped at a sharp curve without giving any warning.

Respondent averred that the accident happened because he was compelled by the management to
go back to Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he had
just arrived in Manila from Roxas, Isabela. Respondent further alleged that he was not allowed to
work until he fully paid the amount of P75,551.50, representing thirty percent (30%) of the cost
of repair of the damaged buses and that despite respondents pleas for reconsideration, the same
was ignored by management. After a month, management sent him a letter of termination.

Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money
Claims for nonpayment of 13th month pay and service incentive leave pay against Autobus.

Petitioner, on the other hand, maintained that respondents employment was replete with
offenses involving reckless imprudence, gross negligence, and dishonesty. To support its claim,
petitioner presented copies of letters, memos, irregularity reports, and warrants of arrest
pertaining to several incidents wherein respondent was involved.

Furthermore, petitioner avers that in the exercise of its management prerogative, respondents
employment was terminated only after the latter was provided with an opportunity to explain his
side regarding the accident on 03 January 2000.

On 29 September 2000, based on the pleadings and supporting evidence presented by the parties,
Labor Arbiter Monroe C. Tabingan promulgated a Decision,4 the dispositive portion of which
reads:

WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal
Dismissal has no leg to stand on. It is hereby ordered DISMISSED, as it is hereby
DISMISSED.
 However, still based on the above-discussed premises, the respondent must pay to the
complainant the following:

a. his 13th month pay from the date of his hiring to the date of his dismissal,
presently computed at P78,117.87;

b. his service incentive leave pay for all the years he had been in service with the
respondent, presently computed at P13,788.05.

All other claims of both complainant and respondent are hereby dismissed for lack of
merit.5

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the
NLRC which rendered its decision on 28 September 2001, the decretal portion of which reads:

[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec.
3 provides:

"Section 3. Employers covered. The Decree shall apply to all employers except
to:

xxx xxx xxx

e) employers of those who are paid on purely commission, boundary, or task

basis, performing a specific work, irrespective of the time consumed in the
performance thereof. xxx."

Records show that complainant, in his position paper, admitted that he was paid on a
commission basis.

In view of the foregoing, we deem it just and equitable to modify the assailed Decision
by deleting the award of 13th month pay to the complainant.

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the

award of 13th month pay. The other findings are AFFIRMED.6

In other words, the award of service incentive leave pay was maintained. Petitioner thus sought a
reconsideration of this aspect, which was subsequently denied in a Resolution by the NLRC
dated 31 October 2001.

Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of
said decision with the Court of Appeals which was subsequently denied by the appellate court in
a Decision dated 06 May 2002, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and
the assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is
hereby AFFIRMED in toto. No costs.7

Hence, the instant petition.

ISSUES

1. Whether or not respondent is entitled to service incentive leave;

2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor
Code, as amended, is applicable to respondents claim of service incentive leave pay.

RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation of Article 95 of the
Labor Code vis--visSection 1(D), Rule V, Book III of the Implementing Rules and Regulations
of the Labor Code which provides:

Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE

(a) Every employee who has rendered at least one year of service shall be entitled
to a yearly service incentive leave of five days with pay.

Book III, Rule V: SERVICE INCENTIVE LEAVE

SECTION 1. Coverage. This rule shall apply to all employees except:

(d) Field personnel and other employees whose performance is unsupervised by

the employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid in a fixed amount for performing work
irrespective of the time consumed in the performance thereof; . . .

A careful perusal of said provisions of law will result in the conclusion that the grant of service
incentive leave has been delimited by the Implementing Rules and Regulations of the Labor
Code to apply only to those employees not explicitly excluded by Section 1 of Rule V.
According to the Implementing Rules, Service Incentive Leave shall not apply to employees
classified as "field personnel." The phrase "other employees whose performance is unsupervised
by the employer" must not be understood as a separate classification of employees to which
service incentive leave shall not be granted. Rather, it serves as an amplification of the
interpretation of the definition of field personnel under the Labor Code as those "whose actual
hours of work in the field cannot be determined with reasonable certainty."8

The same is true with respect to the phrase "those who are engaged on task or contract basis,
purely commission basis." Said phrase should be related with "field personnel," applying the rule
on ejusdem generis that general and unlimited terms are restrained and limited by the particular
terms that they follow.9 Hence, employees engaged on task or contract basis or paid on purely
commission basis are not automatically exempted from the grant of service incentive leave,
unless, they fall under the classification of field personnel.

Therefore, petitioners contention that respondent is not entitled to the grant of service incentive
leave just because he was paid on purely commission basis is misplaced. What must be
ascertained in order to resolve the issue of propriety of the grant of service incentive leave to
respondent is whether or not he is a field personnel.

According to Article 82 of the Labor Code, "field personnel" shall refer to non-agricultural
employees who regularly perform their duties away from the principal place of business or
branch office of the employer and whose actual hours of work in the field cannot be determined
with reasonable certainty. This definition is further elaborated in the Bureau of Working
Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees
Association10 which states that:

As a general rule, [field personnel] are those whose performance of their job/service is
not supervised by the employer or his representative, the workplace being away from the
principal office and whose hours and days of work cannot be determined with reasonable
certainty; hence, they are paid specific amount for rendering specific service or
performing specific work. If required to be at specific places at specific times, employees
including drivers cannot be said to be field personnel despite the fact that they are
performing work away from the principal office of the employee. [Emphasis ours]

To this discussion by the BWC, the petitioner differs and postulates that under said advisory
opinion, no employee would ever be considered a field personnel because every employer, in one
way or another, exercises control over his employees. Petitioner further argues that the only
criterion that should be considered is the nature of work of the employee in that, if the
employees job requires that he works away from the principal office like that of a messenger or
a bus driver, then he is inevitably a field personnel.

We are not persuaded. At this point, it is necessary to stress that the definition of a "field
personnel" is not merely concerned with the location where the employee regularly performs his
duties but also with the fact that the employees performance is unsupervised by the employer.
As discussed above, field personnel are those who regularly perform their duties away from the
principal place of business of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty. Thus, in order to conclude whether an employee is a field
employee, it is also necessary to ascertain if actual hours of work in the field can be determined
with reasonable certainty by the employer. In so doing, an inquiry must be made as to whether or
not the employees time and performance are constantly supervised by the employer.

As observed by the Labor Arbiter and concurred in by the Court of Appeals:

It is of judicial notice that along the routes that are plied by these bus companies, there
are its inspectors assigned at strategic places who board the bus and inspect the
passengers, the punched tickets, and the conductors reports. There is also the mandatory
once-a-week car barn or shop day, where the bus is regularly checked as to its
mechanical, electrical, and hydraulic aspects, whether or not there are problems thereon
as reported by the driver and/or conductor. They too, must be at specific place as [sic]
specified time, as they generally observe prompt departure and arrival from their point of
origin to their point of destination. In each and every depot, there is always the
Dispatcher whose function is precisely to see to it that the bus and its crew leave the
premises at specific times and arrive at the estimated proper time. These, are present in
the case at bar. The driver, the complainant herein, was therefore under constant
supervision while in the performance of this work. He cannot be considered a field
personnel.11

We agree in the above disquisition. Therefore, as correctly concluded by the appellate court,
respondent is not a field personnel but a regular employee who performs tasks usually necessary
and desirable to the usual trade of petitioners business. Accordingly, respondent is entitled to the
grant of service incentive leave.

The question now that must be addressed is up to what amount of service incentive leave pay
respondent is entitled to.

The response to this query inevitably leads us to the correlative issue of whether or not the three
(3)-year prescriptive period under Article 291 of the Labor Code is applicable to respondents
claim of service incentive leave pay.

Article 291 of the Labor Code states that all money claims arising from employer-employee
relationship shall be filed within three (3) years from the time the cause of action accrued;
otherwise, they shall be forever barred.

In the application of this section of the Labor Code, the pivotal question to be answered is when
does the cause of action for money claims accrue in order to determine the reckoning date of the
three-year prescriptive period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of
the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation
on the part of the named defendant to respect or not to violate such right; and (3) an act or
omission on the part of such defendant violative of the right of the plaintiff or constituting a
breach of the obligation of the defendant to the plaintiff.12

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the
third element of a cause of action transpired. Stated differently, in the computation of the three-
year prescriptive period, a determination must be made as to the period when the act constituting
a violation of the workers right to the benefits being claimed was committed. For if the cause of
action accrued more than three (3) years before the filing of the money claim, said cause of
action has already prescribed in accordance with Article 291.13
Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is
established that the benefits being claimed have been withheld from the employee for a period
longer than three (3) years, the amount pertaining to the period beyond the three-year
prescriptive period is therefore barred by prescription. The amount that can only be demanded by
the aggrieved employee shall be limited to the amount of the benefits withheld within three (3)
years before the filing of the complaint.14

It is essential at this point, however, to recognize that the service incentive leave is a curious
animal in relation to other benefits granted by the law to every employee. In the case of service
incentive leave, the employee may choose to either use his leave credits or commute it to its
monetary equivalent if not exhausted at the end of the year.15 Furthermore, if the employee
entitled to service incentive leave does not use or commute the same, he is entitled upon his
resignation or separation from work to the commutation of his accrued service incentive leave.
As enunciated by the Court in Fernandez v. NLRC:16

The clear policy of the Labor Code is to grant service incentive leave pay to workers in
all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the
Implementing Rules and Regulations provides that "[e]very employee who has rendered
at least one year of service shall be entitled to a yearly service incentive leave of five
days with pay." Service incentive leave is a right which accrues to every employee who
has served "within 12 months, whether continuous or broken reckoned from the date the
employee started working, including authorized absences and paid regular holidays
unless the working days in the establishment as a matter of practice or policy, or that
provided in the employment contracts, is less than 12 months, in which case said period
shall be considered as one year." It is also "commutable to its money equivalent if not
used or exhausted at the end of the year." In other words, an employee who has served
for one year is entitled to it. He may use it as leave days or he may collect its monetary
value. To limit the award to three years, as the solicitor general recommends, is to unduly
restrict such right.17 [Italics supplied]

Correspondingly, it can be conscientiously deduced that the cause of action of an entitled

employee to claim his service incentive leave pay accrues from the moment the employer refuses
to remunerate its monetary equivalent if the employee did not make use of said leave credits but
instead chose to avail of its commutation. Accordingly, if the employee wishes to accumulate his
leave credits and opts for its commutation upon his resignation or separation from employment,
his cause of action to claim the whole amount of his accumulated service incentive leave shall
arise when the employer fails to pay such amount at the time of his resignation or separation
from employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave,
we can conclude that the three (3)-year prescriptive period commences, not at the end of the year
when the employee becomes entitled to the commutation of his service incentive leave, but from
the time when the employer refuses to pay its monetary equivalent after demand of commutation
or upon termination of the employees services, as the case may be.

The above construal of Art. 291, vis--vis the rules on service incentive leave, is in keeping with
the rudimentary principle that in the implementation and interpretation of the provisions of the
Labor Code and its implementing regulations, the workingmans welfare should be the
primordial and paramount consideration.18 The policy is to extend the applicability of the decree
to a greater number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and protection to labor.19

In the case at bar, respondent had not made use of his service incentive leave nor demanded for
its commutation until his employment was terminated by petitioner. Neither did petitioner
compensate his accumulated service incentive leave pay at the time of his dismissal. It was only
upon his filing of a complaint for illegal dismissal, one month from the time of his dismissal, that
respondent demanded from his former employer commutation of his accumulated leave credits.
His cause of action to claim the payment of his accumulated service incentive leave thus accrued
from the time when his employer dismissed him and failed to pay his accumulated leave credits.

Therefore, the prescriptive period with respect to his claim for service incentive leave pay only
commenced from the time the employer failed to compensate his accumulated service incentive
leave pay at the time of his dismissal. Since respondent had filed his money claim after only one
month from the time of his dismissal, necessarily, his money claim was filed within the
prescriptive period provided for by Article 291 of the Labor Code.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed
Decision of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 111744 September 8, 1995

LOURDES G. MARCOS, ALEJANDRO T. ANDRADA, BALTAZARA J. LOPEZ AND

VILMA L. CRUZ, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and INSULAR LIFE ASSURANCE
CO., LTD., respondents.

REGALADO, J.:

This petition for certiorari seeks the nullification of the decision1 of the National Labor
Relations Commission (NLRC) promulgated on May 31, 1992 in NLRC NCR CA No. 004120-
92, and its resolution dated August 27, 1993 denying petitioner's motion for reconsideration
thereof. The said decision set aside on appeal, the decision of Labor Arbiter Alex Arcadio Lopez
ordering private respondent to pay petitioners their service awards, anniversary bonus and
prorated performance bonus in the amount of P144,579.00 and 10% attorney's fees in the amount
of P14,457.90.2

First, the undisputed facts.

Petitioners were regular employees of private respondent Insular Life Assurance Co:, Ltd., but
they were dismissed on November 1, 1990 when their positions were declared redundant. A
special redundancy benefit was paid to them, which included payment of accrued vacation leave
and fifty percent (50%) of unused current sick leave, special redundancy benefit, equivalent to
three (3) months salary for every year of service; and additional cash benefits, in lieu of other
benefits provided by the company or required by law.3

Before the termination of their services, petitioner Marcos had been in the employ of private
respondent for more than twenty (20) years, from August 26, ]970; petitioner Andrada, more
than twenty-five (25) years, from July 26, 1965; petitioner Lopez, exactly thirty (30) years, from
October 31, 1960; and petitioner Cruz, more than twenty (20) years, from March 1, 1970.4

Petitioners, particularly Baltazara J. Lopez, sent a letter dated October 23, 1990 to respondent
company questioning the redundancy package, She claimed that they should receive their
respective service awards and other prorated bonuses which they had earned at the time they
were dismissed. In addition, Lopez argued that "the cash service awards have already been
budgeted in a fund distinct and apart from redundancy fund.5

Thereafter, private respondent required petitioners to execute a "Release and Quitclaim,"6 and
petitioners complied but with a written protest reiterating their previous demand that they were
nonetheless entitled to receive their service awards.

On March 21, 1991, petitioners inquired from the Legal Service of the Department of Labor and
Employment7whether respondent corporation could legally refuse the payment of their service
awards as mandated in their Employee's Manual.

About three months later the labor department issued its opinion, with pertinent authorities,
responding to petitioners' query as follows:

xxx xxx xxx

 This Department believes that your query presents several issues. These shall be
addressed point by point, thus:

First, the Department deems the service award to be part of the

benefits of the employees of Insular Life. Company policies and
practices are fertile sources of employee's rights. These must be
applied uniformly as interpretation cannot vary from one employee
to another. . . .

xxx xxx xxx

While it may be argued that the above-cited case applies only to retirement
benefits, we find solace in the cases of Liberation Steamship Co., Inc. vs. CIR and
National Development Company vs. Unlicensed Crew members of Three Dons
vessels (23 SCRA 1105) where the Supreme Court held that a gratuity or bonus,
by reason of its long and regular concession indicating company practice, may
become regarded as part of regular compensation and thus demandable.

xxx xxx xxx

Second, the award is earned at the pertinent anniversary date. At this time,
entitlement to the award becomes vested. The anniversary date is the only crucial
determining factor. Since the award accrues on that date, it is of no moment that
the entitled employee is separated from service (for whatever cause) before the
awards are physically handed out.

xxx xxx xxx

Third, even if the award has not accrued as when an employee is separated
from service because of redundancy before the applicable 5th year anniversary,
the material benefits of the award must be given, prorated, by Insular Life. This is
especially true (in) redundancy, wherein he/she had no control.

xxx xxx xxx

Fourth, the fact that you were required to sign "Release and Quitclaim" does not
affect your right to the material benefits of the service award. . . .8

Meanwhile, in the same year, private respondent celebrated its 80th anniversary wherein the
management approved the grant of an anniversary bonus equivalent to one (1) month salary only
to permanent and probationary employees as of November 15, 1990.9

On March 26, 1991, respondent company announced the grant of performance bonus to both
rank and file employees and supervisory specialist grade and managerial staff equivalent to two
(2) months salary and 2.75 basic salary, respectively, as of December 30, 1990. The performance
bonus, however, would be given only to permanent employees as of March 30, 1991. 10

Despite the aforequoted opinion of the Department of Labor and Employment, private
respondent refused to pay petitioners service awards. This prompted the latter to file a
consolidated complaint, which was assigned to NLRC Labor Arbiter Lopez, for payment of their
service awards, including performance and anniversary bonuses.

In their complaint, petitioners contended that they are likewise entitled to the performance and
anniversary bonuses because, at the time the performance bonus was announced to be given, they
were only short of two (2) months service to be entitled to the full amount thereof as they had
already served the company for ten (10) months prior to the declaration of the grant of said
benefit. Also, they lacked only fifteen (15) days to be entitled to the full amount of the
anniversary bonus when it was announced to be given to employees as of November 15, 1990.

In a decision dated October 8, 1992, the labor arbiter ordered respondent company to pay
petitioners their service awards, anniversary bonuses and prorated performance bonuses,
including ten percent (10%) thereof as attorney's fees.
Respondent company appealed to public respondent NLRC claiming grave abuse of discretion
committed by the labor arbiter in holding it liable to pay said service award, performance and
anniversary bonuses, and in not finding that petitioners were estopped from claiming the same as
said benefits had already been given to them.

In setting aside the decision of the labor arbiter, respondent NLRC upheld the validity of the
quitclaim document executed by petitioners. For this conclusion, it rationalized that "(c)ertainly,
before complainants signed the quitclaim and release, they are aware of the nature of such
document. In fact, they never assailed the genuineness and due execution of the same. Hence, we
can safely say that they were not placed under duress or were compelled by means of force to
sign the document." 11

Furthermore, the NLRC held that "(n)either was there any unwritten agreement between
complainants and respondent upon separation, which entitled the former to other renumerations
or benefits. On the contrary, they voluntarily accepted the redundancy benefit package,
otherwise, they would not have been separated from employment." 12

Hence, this petition wherein it is postulated that the basic issue is whether or not respondent
NLRC committed reversible error or grave abuse of discretion in affirming the validity of the
"Release and Quitclaim" and, consequently, that petitioners are not entitled to payment of service
awards and other bonuses. 13 The Solicitor General public respondent NLRC and private
respondent company duly filed their respective comments. 14

In their petition, petitioners stress that they have actually devoted much, if not all, of their
employable life with private respondent; that given their length of service, their loyalty to the
latter is easily demonstrable; and that the same length of service had rendered slim, if not
eliminated, their chances of getting employed somewhere else." 15

On the other hand, respondent company reiterates its basic contention that the consideration for
the settlement of petitioners' claim is credible and reasonable, more than satisfies the legal
requirement therefor, and that petitioners, in executing the release and quitclaim, did so
voluntarily and with full knowledge of the consequences thereof. 16

The petition being meritorious, we find for petitioners.

Under prevailing jurisprudence, the fact that an employee has signed a satisfaction receipt for his
claims does not necessarily result in the waiver thereof. The law does not consider as valid any
agreement whereby a worker agrees to receive less compensation than what he is entitled to
recover. A deed of release or quitclaim cannot bar an employee from demanding benefits to
which he is legally entitled. 17

We have heretofore explained that the reason why quitclaims commonly frowned upon as
contrary to public policy, and why they are held to be ineffective to bar claims for the full
measure of the workers' legal rights, is the fact that the employer and the employee obviously do
not stand on the same footing. The employer drove the employee to the wall. The latter must
have harsh necessities of life. He thus found himself in no position to resist money proffered.
His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did
not relent on their claim. They pressed it. They are deemed not have waived any of their
rights. Renuntiatio non praesumitur. 18

Along this line, we have more trenchantly declared that quitclaims and/or complete releases
executed by the employees do not estop them from pursuing their claims arising from unfair
labor practices of the employer. The basic reason for this is that such quitclaims and/or complete
releases are against public policy and, therefore, null and void. The acceptance of termination
does not divest a laborer of the right to prosecute his employer for unfair labor practice
acts. 19 While there maybe possible exceptions to this holding, we do not perceive any in the case
at bar.

Furthermore, in the instant case, it is an undisputed fact that when petitioners signed the
instrument of release and quitclaim, they made a written manifestation reserving their right to
demand the payment of their service awards. 20The element of total voluntariness in executing
that instrument is negated by the fact that they expressly stated therein their claim for the service
awards, a manifestation equivalent to a protest and a disavowal of any waiver thereof.

As earlier stated, petitioners even sought the opinion of the Department of Labor and
Employment to determine where and how they stood in the controversy. This act only shows
their adamant desire to obtain their service awards and to underscore their disagreement with the
"Release and Quitclaim" they were virtually forced to sign in order to receive their separation
pay.

We have pointed out in Veloso, et al., vs. Department of Labor and Employment, et al.,21 that:

While rights may be waived, the same must not be contrary to law, public order,
public policy, morals or good customs or prejudicial to a third person with a right
recognized by law.

Article 6 of the Civil Code renders a quitclaim agreement void ab initio where the
quitclaim obligates the workers concerned to forego their benefits while at the
same time exempting the employer from any liability that it may choose to reject.
This runs counter to Art. 22 of the Civil Code which provides that no one shall be
unjustly enriched at the expense of another.

We agree with the further observations of the Solicitor General who, in

recommending the setting aside of the decision of respondent NLRC, called
attention to the fact that "contrary to private respondent's contention, the
"additional" redundancy package does not and could not have covered the
payment of the service awards, performance and anniversary bonuses since the
private respondent company has initially maintained the position that petitioners
are not legally entitled to the same. . . . Surprisingly, in a sudden turnabout,
private respondent now claims . . . that the subject awards and bonuses are
integrated in the redundancy package. It is evident, therefore, that private
respondent has not truly consolidated the payment of the subject awards and
bonuses in the redundancy package paid to the petitioners. 22

We are likewise in accord with the findings of the labor arbiter that petitioners are
indeed entitled to receive service awards and other benefits, thus:

Since each of the complainants have rendered services to respondent in

multiple(s) of five years prior to their separation from employment, respondent
should be paid their service awards for 1990.

We are not impressed with the contention of the respondent that service award is a
bonus and therefore is an act of gratuity which the complainants have no right to
demand. Service awards are governed by respondent's employee's manual and
(are) therefore contractual in nature.

On the matter of anniversary and performance bonuses, it is not disputed that it is

respondent's practice to give an anniversary bonus every five years from its
incorporation; that pursuant to this practice, respondent declared an anniversary
bonus for its 80th Anniversary in 1990; that per terms of this declaration, only the
employees of respondent as of 15 November 1990 will be given the bonus; and
that complainants were separated from respondent only 25 days before :the
respondent's anniversary. On the other hand, it is also (not) disputed that
respondent regularly gives performance bonuses; that for its commendable
performance in 1990, respondent declared a performance bonus; that per terms of
this declaration, only permanent employees of respondent as of March 30, 1991
will be given this bonus; and that complainants were employees of respondents
for the first 10 months of 1990.

We cannot see any cogent reason why an anniversary bonus which respondent
gives only once in every five years were given to all employees of respondent as
of 15 November 1990 (pro rata even to probationary employees; Annex 9) and
not to complainants who have rendered service to respondent for most of the five
 year cycle. This is also true in the case of performance bonus which were given to
permanent employees of respondent as of 30 March 1991 and not to employees
who have been connected with respondent for most of 1990 but were separated
prior to 30 March 1991.

We believe that the prerogative of the employer to determine who among its
employee shall be entitled to receive bonuses which are, as a matter of practice,
given periodically cannot be exercised arbitrarily. 23 (Emphasis and corrections in
parentheses supplied.)

The grant of service awards in favor of petitioners is more importantly underscored in the
precedent case of Insular Life Assurance Co., Ltd., et al. vs. NLRC, et al., 24 where this Court
ruled that "as to the service award differentials claimed by some respondent union members, the
company policy shall likewise prevail, the same being based on the employment contracts or
collective bargaining agreements between the parties. As the petitioners had explained, pursuant
to their policies on the matter, the service award differential is given at the end of the year to an
employee who has completed years of service divisible by 5.

A bonus is not a gift or gratuity, but is paid for some services or consideration and is in addition
to what would ordinarily be given. 25 The term "bonus" as used in employment contracts, also
conveys an idea of something which is gratuitous, or which may be claimed to be gratuitous,
over and above the prescribed wage which the employer agrees to pay.

While there is a conflict of opinion as to the validity of an agreement to pay additional sums for
the performance of that which the promisee is already under obligation to perform, so as to give
the latter the right to enforce such promise after performance, the authorities hold that if one
enters into a contract of employment under an agreement that he shall be paid a certain salary by
the week or some other stated period and, in addition, a bonus, in case he serves for a specified
length of time, there is no reason for refusing to enforce the promise to pay the bonus, if the
employee has served during the stipulated time, on the ground that it was a promise of a mere
gratuity.

This is true if the contract contemplates a continuance of the employment for a definite term, and
the promise of the bonus is made at the time the contract is entered into. If no time is fixed for
the duration of the contract of employment, but the employee enters upon or continues in service
under an offer of a bonus if he remains therein for a certain time, his service, in case he remains
for the required time, constitutes an acceptance of the offer of the employer to pay the bonus and,
after that acceptance, the offer cannot be withdrawn, but can be enforced by the employee. 26

The weight of authority in American jurisprudence, with which we are persuaded to agree, is that
after the acceptance of a promise by an employer to pay the bonus, the same cannot be
withdrawn, but may be enforced by the employee. 27 However, in the case at bar, equity demands
that the performance and anniversary bonuses should be prorated to the number of months that
petitioners actually served respondent company in the year 1990. This observation should be
taken into account in the computation of the amounts to be awarded to petitioners.

WHEREFORE, the assailed decision and resolution of respondent National Labor Relations
Commission are hereby SET ASIDE and the decision of Labor Arbiter Alex Arcadio Lopez is
REINSTATED.

SO ORDERED.

Narvasa, C.J., Puno, Mendoza and Francisco, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 110068 February 15, 1995

PHILIPPINE DUPLICATORS, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS
EMPLOYEES UNION-TUPAS, respondents.

RESOLUTION

FELICIANO, J.:

On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the
Petition for Certiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No.
110068. The Court upheld the decision of public respondent National Labor Relations
Commission (NLRC), which affirmed the order of Labor Arbiter Felipe T. Garduque II directing
petitioner to pay 13th month pay to private respondent employees computed on the basis of their
fixed wages plus sales commissions. The Third Division also denied with finality on 15
December 1993 the Motion for Reconsideration filed (on 12 December 1993) by petitioner.

On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion
for Reconsideration and (b) a Second Motion for Reconsideration. This time, petitioner invoked
the decision handed down by this Court, through its Second Division, on 10 December 1993 in
the two (2) consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la
Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B. Trajano, in G.R. Nos. 92174 and
102552, respectively. In its decision, the Second Division inter alia declared null and void the
second paragraph of Section 5 (a)1 of the Revised Guidelines issued by then Secretary of Labor
Drilon. Petitioner submits that the decision in the Duplicators case should now be considered as
having been abandoned or reversed by the Boie-Takeda decision, considering that the latter went
"directly opposite and contrary to" the conclusion reached in the former. Petitioner prays that the
decision rendered in Duplicators be set aside and another be entered directing the dismissal of
the money claims of private respondent Philippine Duplicators' Employees' Union.

In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's
Second Motion for Reconsideration, and its Motion for Leave to Admit the Second Motion for
Reconsideration, to the Court en banc en consulta. The Court en banc, after preliminary
deliberation, and inorder to settle the condition of the relevant case law, accepted G.R. No.
110068 as a banc case.

Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as
well as its Motion for Leave to Admit the Second Motion for Reconsideration, and after review
of the doctrines embodied, respectively, in Duplicators and Boie-Takeda, we consider that these
Motions must fail.

The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare
decisis. The Boie-Takeda decision was promulgated a month after this Court, (through its Third
Division), had rendered the decision in the instant case. Also, the petitioner's (first) Motion for
Reconsideration of the decision dated 10 November 1993 had already been denied, with finality,
on 15 December 1993, i.e.; before the Boie-Takeda decision became final on 5 January 1994.

Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised
Guidelines on the Implementary on of the 13th Month Pay Law, issued on November 16, 1987,
by then Labor Secretary Franklin M. Drilon, either in its Petition for Certiorari or in its (First)
Motion for Reconsideration. In fact, petitioner's counsel relied upon these Guidelines and
asserted their validity in opposing the decision rendered by public respondent NLRC. Any
attempted change in petitioner's theory, at this late stage of the proceedings, cannot be allowed.

More importantly, we do not agree with petitioner that the decision in Boie-Takeda is "directly
opposite or contrary to" the decision in the present (Philippine Duplicators). To the contrary, the
doctrines enunciated in these two (2) cases in fact co-exist one with the other. The two (2) cases
present quite different factual situations (although the same word "commissions" was used or
invoked) the legal characterizations of which must accordingly differ.

The Third Division in Durplicators found that:

In the instant case, there is no question that the sales commission earned by the
salesmen who make or close a sale of duplicating machines distributed by
petitioner corporation, constitute part of the compensation or remuneration paid to
salesmen for serving as salesmen, and hence as part of the "wage" or salary of
petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small
fixed or guaranteed wage; the greater part of the salesmen's wages or salaries
being composed of the sales or incentive commissions earned on actual sales
closed by them. No doubt this particular galary structure was intended for the
benefit of the petitioner corporation, on the apparent assumption that thereby its
salesmen would be moved to greater enterprise and diligence and close more sales
in the expectation of increasing their sales commissions. This, however, does not
detract from the character of such commissions as part of the salary or wage paid
to each of its salesmen for rendering services to petitioner corporation.

In other words, the sales commissions received for every duplicating machine sold constituted
part of the basic compensation or remuneration of the salesmen of Philippine Duplicators for
doing their job. The portion of the salary structure representing commissions simply comprised
an automatic increment to the monetary value initially assigned to each unit of work rendered by
a salesman. Especially significant here also is the fact that the fixed or guaranteed portion of the
wages paid to the Philippine Duplicators' salesmen represented only 15%-30% of an employee's
total earnings in a year. We note the following facts on record:

Salesmen's Total Earnings and 13th Month Pay

For the Year 19862

Name of Total Amount Paid Montly Fixed

Salesman Earnings as 13th Month Pay Wages x 123

Baylon, P76,610.30 P1,350.00 P16,200.00

Benedicto

Bautista 90,780.85 1,182.00 14,184.00

Salvador

Brito, 64,382.75 1,238.00 14,856.00

Tomas

Bunagan, 89,287.75 1,266.00 15,192.00

Jorge

Canilan, 74,678.17 1,350.00 16,200.00

Rogelio

Dasig, 54,625.16 1,378,00 16,536.00

Jeordan

Centeno, 51,854.15 1,266.04 15,192.00

Melecio, Jr.

De los Santos 73,551.39 1,322.00 15,864.00

Ricardo
 del Mundo, 108,230.35 1,406.00 16,872.00
Wilfredo

Garcia, 93,753.75 1,294.00 15,528.00

Delfin

Navarro, 98,618.71 1,266.00 15,192.00

Ma. Teresa

Ochosa, 66,275.65 1,406.00 16,872.00

Rolano

Quisumbing, 101,065.75 1,406.00 16,872.00

Teofilo

Rubina, 42,209.73 1,266.00 15,192.00

Emma

Salazar, 64,643.65 1,238.00 14,856.00

Celso

Sopelario, 52,622.27 1,350.00 16,200.00

Ludivico

Tan, 30,127.50 1,238.00 14,856.00

Leynard

Talampas, 146,510.25 1,434.00 17,208.00

Pedro

Villarin, 41,888.10 1,434.00 17,208.00

Constancio

Carrasco, 50,201.20 403.75*

Cicero

Punzalan, 24,351.89 1,266.00 15,192.00

Reynaldo

Poblador, 25,516.75 323.00*

Alberto

Cruz, 32,950.45 323.00*

Danilo

Baltazar, 15,681.35 323.00*

Carlito

Considering the above circumstances, the Third Division held, correctly, that the sales
commissions were an integral part of the basic salary structure of Philippine Duplicators'
employees salesmen. These commissions are not overtime payments, nor profit-sharing
payments nor any other fringe benefit. Thus, the salesmen's commissions, comprising a pre-
determined percent of the selling price of the goods sold by each salesman, were properly
included in the term "basic salary" for purposes of computing their 13th month pay.

In Boie-Takeda the so-called commissions "paid to or received by medical representatives of

Boie-Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.," were
excluded from the term "basic salary" because these were paid to the medical representatives and
rank-and-file employees as "productivity bonuses."4 The Second Division characterized these
payments as additional monetary benefits not properly included in the term "basic salary" in
computing their 13th month pay. We note that productivity bonuses are generally tied to the
productivity, or capacity for revenue production, of a corporation; such bonuses closely resemble
profit-sharing payments and have no clear director necessary relation to the amount of work
actually done by each individual employee. More generally, a bonus is an amount granted and
paid ex gratia to the employee; its payment constitutes an act of enlightened generosity and self-
interest on the part of the employer, rather than as a demandable or enforceable obligation.
In Philippine Education Co. Inc. (PECO) v. Court of Industrial Relations,5 the Court explained
the nature of a bonus in the following general terms:

As a rule a bonus is an amount granted and paid to an employee for his industry
loyalty which contributed to the success of the employer's business and made
possible the realization of profits. It is an act of generosity of the employer for
which the employee ought to be thankful and grateful. It is also granted by an
enlightened employer to spur the employee to greater efforts for the success of the
business and realization of bigger profits. . . . . From the legal point of view a
bonus is not and mandable and enforceable obligation. It is so when It is made
part of the wage or salary or compensation. In such a case the latter would be a
fixed amount and the former would be a contingent one dependent upon the
realization of profits. . . .6 (Emphasis supplied)

In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association,7 the Court
amplified:

. . . . Whether or not [a] bonus forms part of waqes depends upon the
circumstances or conditions for its payment. If it is an additional compensation
which the employer promised and agreed to give without any conditions imposed
for its payment, such as success of business or greater production or output, then
it is part of the wage. But if it is paid only if profits are realized or a certain
amount of productivity achieved, it cannot be considered part of wages. . . . It is
also paid on the basis of actual or actual work accomplished. If the desired goal of
production is not obtained, or the amount of actual work accomplished, the bonus
does not accrue. . . . 8 (Emphasis supplied)

More recently, the non-demandable character of a bonus was stressed by the Court in Traders
Royal Bank v.National Labor Relations Commission:9

A bonus is a "gratuity or act of liberality of the giver which the recipient has no
right to demand as a matter of right." (Aragon v. Cebu Portland Cement Co., 61
O.G. 4567). "It is something given in addition to what is ordinarily received by or
strictly due the recipient." The granting of a bonus is basically a management
prerogative which cannot be forced upon the employer "who may not be obliged
to assume the onerous burden of granting bonuses or other benefits aside from the
employee's basic salaries or wages . . ." (Kamaya Point Hotel v. NLRC, 177
SCRA 160 [1989]). 10 (Emphasis supplied)

If an employer cannot be compelled to pay a productivity bonus to his employees, it should

follow that such productivity bonus, when given, should not be deemed to fall within the "basic
salary" of employees when the time comes to compute their 13th month pay.

It is also important to note that the purported "commissions" paid by the Boie-Takeda Company
to its medical representatives could not have been "sales commissions" in the same sense that
Philippine Duplicators paid its salesmen Sales commissions. Medical representatives
are not salesmen; they do not effect any sale of any article at all. In common commercial
practice, in the Philippines and elsewhere, of which we take judicial notice, medical
representatives are employees engaged in the promotion of pharmaceutical products or medical
devices manufactured by their employer. They promote such products by visiting identified
physicians and inform much physicians, orally and with the aid of printed brochures, of the
existence and chemical composition and virtues of particular products of their company. They
commonly leave medical samples with each physician visited; but those samples are not "sold"
to the physician and the physician is, as a matter of professional ethics, prohibited from selling
such samples to their patients. Thus, the additional payments made to Boie-Takeda's medical
representatives were not in fact sales commissions but rather partook of the nature of profit-
sharing bonuses.
The doctrine set out in the decision of the Second Division is, accordingly, that additional
payments made to employees, to the extent they partake of the nature of profit-sharing payments,
are properly excluded from the ambit of the term "basic salary" for purposes of computing the
13th month pay due to employees. Such additional payments are not "commissions" within the
meaning of the second paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th
Month Pay.

The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by
former Labor Minister Ople sought to clarify the scope of items excluded in the computation of
the 13th month pay; viz.:

Sec. 4. Overtime pay, earnings and other remunerations which are not part of the
basic salary shall not be included in the computation of the 13th month pay.

We observe that the third item excluded from the term "basic salary" is cast in open ended and
apparently circular terms: "other remunerations which are not part of the basic salary." However,
what particular types of earnings and remuneration are or are not properly included or integrated
in the basic salary are questions to be resolved on a case to case basis, in the light of the specific
and detailed facts of each case. In principle, where these earnings and remuneration are closely
akin to fringe benefits, overtime pay or profit-sharing payments, they are properly excludedin
computing the 13th month pay. However, sales commissions which are effectively an integral
portion of the basic salary structure of an employee, shall be included in determining his 13th
month pay.

We recognize that both productivity bonuses and sales commissions may have an incentive
effect. But there is reason to distinguish one from the other here. Productivity bonuses are
generally tied to the productivity or profit generation of the employer corporation. Productivity
bonuses are not directly dependent on the extent an individual employee exerts himself. A
productivity bonus is something extra for which no specific additional services are rendered by
any particular employee and hence not legally demandable, absent a contractual undertaking to
pay it. Sales commissions, on the other hand, such as those paid in Duplicators, are intimately
related to or directly proportional to the extent or energy of an employee's endeavors.
Commissions are paid upon the specific results achieved by a salesman-employee. It is a
percentage of the sales closed by a salesman and operates as an integral part of such salesman's
basic pay.

Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second
paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay issued by
former Labor Secretary Drilon, is properly understood as holding that that second paragraph
provides no legal basis for including within the term "commission" there used additional
payments to employees which are, as a matter of fact, in the nature of profit-sharing payments or
bonuses. If and to the extent that such second paragraph is so interpreted and applied, it must be
regarded as invalid as having been issued in excess of the statutory authority of the Secretary of
Labor. That same second paragraph however, correctly recognizes that commissions, like those
paid in Duplicators, may constitute part of the basic salary structure of salesmen and hence
should be included in determining the 13th month pay; to this extent, the second paragraph is and
remains valid.

ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and
the (b) aforesaid Second Reconsideration are DENIED for lack of merit. No further pleadings
will be entertained.

Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno,
Vitug, Kapunan, Mendoza and Francisco, JJ., concur.
 FIRST DIVISION

G.R. No. 149013 August 31, 2006

HOUSE OF SARA LEE, Petitioner,

vs.
CYNTHIA F. REY, Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before this Court is a Petition for Certiorari under Rule 45 seeking to reverse and set aside the
Decision1 dated August 25, 2000 of the Court of Appeals (CA) in CA-G.R. SP No. 51653 which
affirmed the Decision dated October 29, 1998 of the National Labor Relations Commission
(NLRC); and the CA Resolution2 dated July 4, 2001 which denied the petitioner's3 Motion for
Reconsideration.

The case originated from a Complaint for illegal dismissal instituted on September 24, 1996 by
the respondent against the petitioner before the NLRC Arbitration Branch No. 10 in Cagayan de
Oro City. The Complaint prayed for reinstatement with full backwages without loss of seniority
rights, payment of 13th, 14th and 15th month pay, and the award of moral damages and
attorneys fees.

The essential facts:

The House of Sara Lee (petitioner) is engaged in the direct selling of a variety of product lines
for men and women, including cosmetics, intimate apparels, perfumes, ready to wear clothes and
other novelty items, through its various outlets nationwide. In the pursuit of its business, the
petitioner engages and contracts with dealers to sell the aforementioned merchandise. These
dealers, known either as "Independent Business Managers" (IBMs) or "Independent Group
Supervisors" (IGSs), depending on whether they sell individually or through their own group,
would obtain at discounted rates the merchandise from the petitioner on credit and then sell the
same products to their own customers at fixed prices also determined by the petitioner. In turn,
the dealers are paid "Services Fees," or sales commissions, the amount of which depends on the
volume and value of their sales. Under existing company policy, the dealers must remit to the
petitioner the proceeds of their sales within a designated credit period, which would either be 38
days for IGSs or 52 days for IBMs, counted from the day the said dealers acquired the
merchandise from the petitioner. To discourage late remittances, the petitioner imposes a "Credit
Administration Charge," or simply, a penalty charge, on the value of the unremitted payment.
Additionally, if the dealer concerned has overdue payments or is said to be in "default," he or she
cannot purchase additional products from the petitioner. The dealers under this system earn
income through a profit margin between the discounted purchase price they pay on credit to the
petitioner and the fixed selling price their customers will have to pay. On top of this margin, the
dealer is given the Service Fee, a sales commission, based on the volume of sales generated by
him or her. Due to the sheer volume of sales generated by all of its outlets, the petitioner has
found the need to strictly monitor the 38- or 52-day "rolling due date" of each of its IBMs and
IGSs through the employment of "Credit Administration Supervisors" (CAS) for each branch.
The primary duty of the CAS is to strictly monitor each of these deadlines, to supervise the credit
and collection of payments and outstanding accounts due to the petitioner from its independent
dealers and various customers, and to screen prospective IBMs. To discharge these
responsibilities, the CAS is provided with a computer equipped with control systems through
which data is readily generated. Under this organizational setup, the CAS is under the direct and
immediate supervision of the Branch Operations Manager (BOM).

Cynthia Rey (respondent), at the time of her dismissal from employment, or on June 25, 1996,
held the position of Credit Administration Supervisor or CAS at the Cagayan de Oro City branch
of the petitioner. Respondent was first employed by the petitioner in July 16, 1993 as an
Accounts Receivable Clerk at its Caloocan City branch. In November 1993, respondent was
transferred to the Cagayan de Oro City branch retaining the same position. In January 1994,
respondent was elevated to the position of CAS. At that time, the Branch Operations Manager or
BOM of the Cagayan de Oro City branch was a certain Mr. Jeremiah Villagracia. In March 1995,
respondent was temporarily assigned to the Butuan City branch.

Sometime in June 1995, while respondent was still working in Butuan City, she allegedly
instructed the Accounts Receivable Clerk of the Cagayan de Oro outlet, a certain Ms. Magi
Caroline Mendoza, to change the credit term of one of the IBMs of the petitioner, a certain Ms.
Mariam Rey-Petilla, who happens to be respondents sister-in-law, from the 52-day limit to an
"unauthorized" term of 60 days. The respondent made the instruction, the petitioner avers, just
before the computer data for the computation of the Service Fee accruing to Ms. Rey-Petilla was
about to be generated. Ms. Mendoza then reported this allegedly unauthorized act of respondent
to her Branch Operations Manager, Mr. Villagracia. Acting on the report, as the petitioner
alleges, BOM Villagracia discreetly verified the records and discovered that it was not only the
52-day credit term of IBM Rey-Petilla that had been extended by the respondent, but there were
several other IBMs whose credit terms had been similarly extended beyond the periods allowed
by company policy. BOM Villagracia then summoned the respondent and required her to explain
the unauthorized credit extensions. The petitioner alleges that during that confrontation,
respondent admitted her infractions and begged the BOM not to elevate or disclose the matter
further to higher authorities. In a letter dated June 22, 1995, Villagracia formally reported the
matter to higher management, stating that respondent, "in tears and remorse" and confiding "her
sincerest apology," personally admitted that the credit terms of certain IBMs were adjusted in the
computer for purposes of computing the Service Fees.4 On June 24, 1995, Villagracia formally
served a "show-cause" letter to respondent and placed her on "indefinite suspension" effective on
the same day.5On June 27, 1995, respondent submitted her explanation denying the accusations
made against her and stated that the "discrepancies" in the service fees may have been the result
of deadlines falling on holidays, after "reconsiderations" had been requested by the IBM
concerned and with the full knowledge of and approval by BOM Villagracia as part of his
campaign to increase collections.6 Additionally, in the same letter-response, respondent
vehemently denied that she waived her right to explain as well as any admission she allegedly
made before Villagracia, and she pointed to the latter as the author of the "discrepancies."7

As a consequence of the discovery of the foregoing alleged "anomalous practice" of extending

the credit terms of certain IBMs, management undertook an audit of the Cagayan de Oro City
and Butuan City branches. During the process, the petitioner alleges, respondent was interviewed
by the auditors before whom she again openly admitted her infractions. Upon being furnished a
copy of the Auditors Report, portions of which read:

xxxx

OBJECTIVE OF THE AUDIT UNDERTAKEN

This activity has been conducted to establish facts that would determine whether Ms. Cynthia
Rey did change the credit terms or not for whatever reason resulting in the companys payments
of undue service fees.

AUDIT FINDINGS

We conducted examination of Service Fee Report for 15 selected IBMs with the largest service
fee pay-outs from November 1993 up to April 1995 for Cagayan de Oro Branch and
from February 1995 to March 1995 for Butuan Service Center. Set forth are the results of this
activity:

CAGAYAN DE ORO BRANCH

FINDING

In all 15 samples, credit terms were changed by then CAS Cynthia Rey beyond 52 days to as
high as 90 days as evidenced by the IBM Credit Terms Exception Report . . . . The exception
report revealed that the CAS with User ID "credit1" often changes/increases the credit terms of
several IBMs, since February 1994, usually a day before or during SF cut-off dates (20th, 21st,
22nd, or 23rd of the month) and would return it to original credit terms after completion of SF
print-outs. Total SF discrepancy for the 15 samples as a result of credit term adjustment amounts
to P 211K x x x x
It is apparent that credit term adjustments resulted in payment of significant amount of undue
service fees. Such fraudulent practice clearly favors the interest of the IBMs to the detriment of
the company. This constitutes conflict of interest and should be dealt with accordingly.

xxx

FINDING

Ms. Cynthia Rey was on maternity leave from March 07, 1994 up to May 30, 1994 during which
time no changing of credit term was recorded by the parameter 23.8.2. This simply means that no
credit term adjustment was made during the period Ms. Rey was on leave. Again, this confirms
that without Ms. Rey around, nobody ever changed/adjusted the credit terms beyond 52 days.

xxxx

BUTUAN SERVICE CENTER

FINDING

On a concurrent capacity as OIC and CAS of Butuan Service Center starting sometime February
1995, Ms. Cynthia Rey changed the credit terms of IBMs as shown in the IBM Credit Terms
Exception Report . . . . Total discrepancies for February and March 1995 Service Fees as a result
of the credit term adjustments amounts to P3,716.44 . . . . Analysis showed that credit terms used
by Cynthia for each of the IBMs/IBMC/IGSs ranged from 55 to 90 days x x x x

Surprised with the Exception Reports, Ms. Rey admitted having done the credit term adjustments
at Butuan. Her statements therefore showed inconsistencies as she previously denied this
allegation. However, she cited no clear reasons for such malpractice.

Recommendation

Materiality of the amount involved is not the issue at hand. Her admission to the auditor of the
violation committed does not absolve her from being meted disciplinary actions as determined
by management. We would like to emphasize that any leniency on this case might have far
reaching implications to the branch operations and the company as a whole.

x x x.8

Petitioner, on July 29, 1995, directed respondent again to explain, but in more detail, the alleged
"anomalies" uncovered by the audit. After requesting more time to review the report and submit
her comment, on July 31, 1995, respondent requested instead that a formal investigation be
conducted in the presence of her lawyer.9 In the meantime, respondents suspension was lifted,
but without prejudice to the outcome of the administrative investigation.10 On September 7,
1995, the petitioner conducted a formal hearing which was attended by respondent and her
counsel of record.11 Subsequently, respondent and her counsel affixed their respective signatures
on the transcripts of the hearing.12

Meanwhile, on April 15, 1996, BOM Villagracia resigned. Upon his resignation, respondent
managed the Cagayan de Oro branch for three months pending the appointment of a new BOM.

On the basis of the hearing, the alleged voluntary admissions of respondent, and the findings of
the auditors report, the petitioner, on June 25, 1996, formally dismissed the respondent for
breach of trust and confidence.13

On September 24, 1996, as stated above, respondent filed her Complaint for illegal dismissal,
backwages and damages, with the Labor Arbiter. On April 30, 1998, the Labor Arbiter rendered
a decision in favor of the respondent, the dispositive portion of which states:

WHEREFORE, in view of all the foregoing, judgment is hereby entered ordering [petitioner]
House of Sara Lee to immediately pay [respondent] Cynthia F. Rey the sum of P177,052.05 as
full backwages from July 1, 1996 up to the date of this decision; 13th month pay in the sum of
P18,666.67 and separation pay in the sum of P40,000.00 and likewise to pay the sum of
P23,571.72 equivalent to 10% of the aggregate monetary award as attorneys fees.

The rest of the claims are dismissed for lack of merit.

SO ORDERED.14

To the Labor Arbiter, the question to be resolved is whether the petitioner validly terminated
respondents employment on the ground of loss of trust and confidence. In declaring the
termination illegal, the Labor Arbiter held that the petitioner, as employer, failed to discharge its
burden of proof in showing that the dismissal was for a just or authorized cause; that, in
particular, the petitioner failed to establish that respondent was the very person who allegedly
manipulated the credit terms of certain IBMs through the computer terminals, since other
employees had access to the same; that respondents alleged admissions before Villagracia, her
BOM, and M.D. Sabayle, the company auditor, are based on self-serving evidence; that the
petitioner failed to substantiate the loss of P211,000.00 which it imputed to the respondent; that
the petitioner failed to show that it apprised its employees of the terms of the company policy
which respondent allegedly violated, or, in other words, that respondent was not fully informed
of the possible sanctions for such acts; that reinstatement would be impractical under the
circumstances since the relations of the parties were already strained, hence, the award of full
backwages and separation pay is justified; that petitioner failed to refute the claim for 13th
month pay, hence, as a statutory relief, respondent should be awarded the same; and that the
claims for 14th and 15th month pay as well as moral and exemplary damages should be denied
for having no legal basis.

Aggrieved, the petitioner appealed to the NLRC. On October 29, 1998, the NLRC rendered its
Decision dismissing the appeal. In affirming the Decision of the Labor Arbiter, the NLRC
additionally held that if indeed benefits accrued to the IBMs by virtue of the credit term
extensions, it was BOM Villagracia who benefited from this scheme which he himself adopted;
that the auditors report showed that the scheme had been a "long standing practice" of the
branch office of the petitioner; that after Villagracia resigned, respondent was left to manage the
Cagayan de Oro branch which, at that time, registered the highest growth rate and for which
reason respondent earned a commendation from the petitioner; and that the loss of trust and
confidence advanced by the petitioner is negated by the fact that respondent, after Villagracias
resignation, was allowed to manage the Cagayan de Oro City branch and by the fact that she was
commended for her good performance.

The petitioner appealed to the CA under Rule 65. On August 25, 2000, the CA dismissed the
Petition on the sole ground that factual issues are not proper subjects for a special civil action of
certiorari.

The petitioner is now before this Court under Rule 45, assigning the following errors:

I.

IN DISMISSING THE PETITION FOR CERTIORARI ASSAILING THE RESOLUTIONS OF

THE NATIONAL LABOR RELATIONS COMMISSION IN THE LABOR CASE BELOW ON
THE GROUND THAT FACTUAL ISSUES ARE NOT THE PROPER SUBJECT OF
CERTIORARI, THE COURT OF APPEALS HAS IN EFFECT DECIDED A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE.

II.

IN DOING SO, THE COURT OF APPEALS DEVIATED FROM ESTABLISHED

DOCTRINES LONG SETTLED BY CONSISTENT JURISPRUDENCE ENUNCIATED BY
THIS HONORABLE COURT.15

We grant the petition.

As a preliminary matter, we shall resolve the procedural concern raised by the respondent. She
maintains that no grave abuse of discretion was committed by the NLRC. This is incorrect.
In the recent case of Manila Memorial Park Cemetery, Inc. v. Panado,16 we held that where the
NLRC or the labor arbiter acted capriciously and whimsically in total disregard of evidence
material to or even decisive of the controversy, the extraordinary writ of certiorari will
lie.17 While as a general rule, the factual findings of administrative agencies are not subject to
review by this Court, it is equally established that we will not uphold erroneous conclusions
which are contrary to the evidence, because the agency a quo, for that reason, would be guilty of
a grave abuse of discretion. Nor is this Court bound by conclusions which are not supported by
substantial evidence.18 The substantial evidence rule does not authorize any finding just as long
as there is any evidence to support it. It does not excuse administrative agencies from
considering contrary evidence which fairly detracts from the evidence supporting a finding.19

In this case, the NLRC and the CA consistently ignored the following facts established in the
record:

a) respondent, during the formal hearing on September 7, 1995, in the presence of her counsel,
clearly admitted in several instances that, beginning June 1994, she herself actually extended, on
a monthly basis, the credit terms of certain IBMs from the company-fixed 52 days to as high as
90 days;20

b) as Credit Administration Supervisor, she knew the appropriate credit terms (38 days for IGSs
and 52 days for IBMs) under the company guidelines and which would serve as the bases for the
computation of the correct Service Fees or sales commissions;21

c) she was fully aware of the financial implications whenever she would extend the credit terms,
in that all late remittances by the IBMs concerned would be considered in the computation of
their Service Fees which would not otherwise be due to them under company guidelines;22

d) the computation of the Service Fees, on many occasions, had been finalized, processed, and
printed out;23

e) she changed the credit terms in the Cagayan de Oro branch under the alleged "blanket
approval" of BOM Villagracia;24

f) she changed the credit terms in the Cagayan de Oro branch since it was a "standard practice"
in Caloocan City where she had been previously assigned;25

g) during her stint in the Butuan City branch, she admitted that there had been no such "blanket
approval," but she nonetheless kept changing the credit terms because, according to her, this had
become "standard practice" in the Cagayan de Oro branch as well;26

h) in several instances, she acted on her own accord and without the requisite authority in
extending the credit terms, since there were no specific nor direct instructions from Villagracia to
change those terms;27

i) she even assisted Mr. Villagracia and Ms. Mendoza in the process of changing the credit terms
since they were ignorant of the procedure;28

j) she would change the credit terms whenever the IBMs concerned would ask for
"reconsideration;"29 and finally,

k) her statements suffered notable inconsistencies, oscillating between denying or not

remembering the alleged act and categorically admitting having done them.30

The consideration of the foregoing facts, as disclosed in the record, justifies a different
conclusion. Although numerous exceptions to the general rule have been fairly established in
case law, it must be stressed that the meticulous constitution of the factual findings are functions
that principally lie with the NLRC and the CA as well as the other tribunals that may come under
the review power of the Supreme Court. It is a strict judicial policy to hand down an incisive
ruling in the first instance in order to relieve this Court from exercising its extraordinary powers
of excavating the facts, so that the Court may thoroughly devote its energies to the disposition of
questions of law, and only questions of law, under the extent of Rule 45.
Contrary to the findings of the NLRC and the CA, the Court holds that respondent was dismissed
for a just cause.

Law31 and jurisprudence have long recognized the right of employers to dismiss employees by
reason of loss of trust and confidence.32 More so, in the case of supervisors or personnel
occupying positions of responsibility, loss of trust justifies termination.33 Loss of confidence as a
just cause for dismissal is premised on the fact that an employee concerned holds a position of
trust and confidence. This situation applies where a person is entrusted with confidence on
delicate matters, such as the custody, handling, or care and protection of the employers property.
But, in order to constitute a just cause for dismissal, the act complained of must be "work-
related," such that the employee concerned is unfit to continue working for the employer.34

The degree of proof required in labor cases is not as stringent as in other types of cases.35 It must
be noted, however, that recent decisions of this Court have distinguished the treatment of
managerial employees from that of rank-and-file personnel in the application of the doctrine of
loss of trust and confidence.36 With respect to rank-and-file personnel, loss of trust and
confidence as ground for valid dismissal requires proof of involvement in the alleged events in
question, and that mere uncorroborated assertions and accusations by the employer will not be
sufficient. But as to a managerial employee, the mere existence of a basis for believing that such
employee has breached the trust of his employer would suffice for his dismissal. Hence, in the
case of managerial employees, proof beyond reasonable doubt is not required; it is sufficient that
there is some basis for the loss of confidence, as when the employer has reasonable ground to
believe that the employee concerned is responsible for the purported misconduct, and the nature
of his participation therein renders him unworthy of the trust and confidence demanded by his
position.37

In the present case, the respondent is not an ordinary rank-and-file employee. The nature of her
work requires a substantial amount of trust and confidence on the part of the employer. Being the
Credit Administration Supervisor of the Cagayan de Oro and Butuan City branches of the
petitioner, respondent occupied a highly sensitive and critical position and may thus be dismissed
on the ground of loss of trust and confidence. The duties of the respondent included the strict
monitoring of the 38- or 52-day "rolling due date" of each of its IBMs and IGSs, as well as the
supervision of the credit and collection of payments and outstanding accounts due to the
petitioner from its dealers. More importantly, respondent has a direct hand in the preparation and
computation of the Service Fees or sales commissions accruing to each dealer. The computation
of these commissions depends on whether the dealer concerned was able to remit the sales
proceeds within the 38-day or 52-day rolling deadline.

Clearly, respondents position involves a high degree of responsibility requiring trust and
confidence. The position carried with it the duty to observe proper company procedures in the
fulfillment of her job, as it relates closely to the financial interests of the company. Respondents
unauthorized extensions of the credit periods of the dealers are prejudicial to the interest of the
petitioner and bear serious financial implications: First, the dealer concerned is allowed to
withhold remittances to the company for his or her credit purchases beyond the expiration of the
38- or 52-day rolling deadline; second, the Credit Administration Charges or interest penalties
are not imposed on the erring dealer; third, the dealer concerned is allowed to purchase goods on
credit despite the fact that he or she has not remitted payment, which is against company policy;
and fourth, undue Service Fees were unknowingly paid by the company to certain IBMs.
Moreover, respondent was not guilty of one-time unauthorized extension of the credit terms, but
of repeated acts over the course of several months. Her bare, unsubstantiated and uncorroborated
denial of her participation in the anomalies does not prove her innocence nor disprove her
alleged guilt,38 especially considering that she would vacillate between admitting and denying
the charges. On the contrary, such denial or failure to rebut the serious accusations hurled against
her militate against her innocence and strengthen the adverse averments of the petitioner.39 The
requirement that there must be some basis or reasonable ground to believe that the employee is
responsible for the misconduct was sufficiently met in this case.

The NLRC and the CA held that there were other co-employees who had access to the same
computer terminals, hence, it cannot be pinpointed who was responsible. Even if this is true, as
respondent argues, this point is not material. It must be stressed that the respondent was the
Credit Administration Supervisor, one tasked to directly supervise each and every collectible due
to the petitioner. Recently, this Court has held that even if the employee had no actual and direct
participation in the alleged anomalies, his failure to detect any anomaly that would normally fall
within the scope of his work reflects his ineffectiveness and amounts to gross negligence and
incompetence, which are, likewise, justifiable grounds for his dismissal; and that it is not
necessary to prove the employees direct participation in the irregularity, for what is material is
that his actuations were more than sufficient to sow in his employer the seed of mistrust and loss
of confidence.40 The records show that respondent, by her very own admission, actually
participated in the foregoing irregularities. Although the petitioner could not directly and wholly
attribute the monetary loss of P211,000.00 linked to the 15 samples as reflected in the Auditors
Report, to the actuations of the respondent, it is conceded in all quarters that the repeated and
unauthorized extensions of the credit terms no doubt have serious financial implications that
affect the company as a whole. Whether the petitioner was financially prejudiced is
immaterial.41 What matters is not the amount involved, rather, it is the fraudulent scheme in
which the respondent was involved, and which constitutes a clear betrayal of trust and
confidence. In fact, there are indications that these acts had been done before, and probably
would have continued had it not been discovered.42

The Court is not impressed with respondents claim that Villagracia, her BOM at that time,
"cleverly pinned her down" as the culprit; that he deleted from the computer files all the credit
extensions that took place; and that he "created a scenario" for a graceful exit. There is nothing in
the record that would substantiate these bare allegations. Nor can the Court accept respondents
assertion that she was never apprised of the company policies with respect to the allowable credit
terms. As Credit Administration Supervisor, the respondent cannot feign ignorance of the
irregularity as she was sufficiently aware that the credit extensions she made were beyond
acceptable limits. By her very own admission, and in the presence of her counsel, she was fully
aware of the company-fixed rolling due dates for the dealers and that their commissions were to
be determined by their timely remittances of the sales proceeds. In other words, respondent was
aware of the financial implications of her extension of the credit terms, especially the outcome
where the consideration of late remittances, after the extension, would unduly inflate the sales
commissions. It is also an established fact that the petitioner, to ensure the correct computation
of the commissions, installed internal control systems in the computer terminals and that
respondent, through "practice" and "experience," acquired the proficiency and computer literacy
as to be able to override these control systems in order to make the changes43 in clear deviation
from company policy.

But the respondent, quoting the agencies a quo, insists that her extensions of the credit terms of
certain dealers were predicated on a "long standing policy" in the Cagayan de Oro branch, and
that this "arrangement" had the "blessings of the manager." She did not prove these allegations.
While case law provides that where a violation of company policy or breach of company rules
and regulations was found to have been tolerated by management, then the same could not serve
as a basis for termination,44 in this case respondent failed to show that her extensions of the
credit terms were condoned by management. Her BOM, Mr. Villagracia, categorically denied
that he had given her the requisite and direct authority to change the credit terms. When the
respondent, while in Butuan City, instructed Ms. Mendoza, the Accounts Receivable Clerk of the
Cagayan de Oro outlet, to change the credit terms of IBM Mariam Rey-Petilla, respondents
sister-in-law,45 to an unauthorized term of 60 days, she reported this instruction to Villagracia
who, in turn, verified the records and reported his findings to higher management. Villagracia
even reprimanded Ms. Mendoza for carrying out respondents instructions.46 As a consequence,
higher management immediately undertook an audit of the Cagayan de Oro and Butuan City
branches where the respondent had been assigned. And, as a consequence, an Auditors Report
was issued, expressly finding the respondent guilty of violating company policy. Respondent was
again directed by the higher authorities to explain, in more detail, the anomalies uncovered by
the audit. The foregoing activities negate the suggestion that management tolerated respondents
unauthorized extension of credit terms. Despite the marked inconsistencies of her statements
during the formal investigation, respondent only offered the following explanation: because of
the alleged "standard practice" in the Caloocan City branch where she worked as an Accounts
Receivable Clerk, she assumed that the extensions can be done in the Cagayan de Oro City
branch and where she allegedly procured the "blanket approval" of BOM Villagracia; and that,
since this "standard practice" had allegedly taken root in Cagayan de Oro City (mainly owing to
her activities), she assumed that the same can be carried over to the Butuan City branch, even
without any "blanket approval" of her BOM. These declarations, self-serving as they are, taken
together, are also not demonstrative of any acquiescence on the part of management. Even if the
Court were to accept her allegation that Villagracia deleted the pertinent files and destroyed
evidence otherwise favorable to her, she must at least show how such evidence, if hypothetically
produced, would constitute an adequate defense against the charge of carrying out unauthorized
acts. At any rate, even if the Court finds credible her accusation that Villagracia "cleverly pinned
her down" as the culprit, she will not be exonerated for that reason alone, since it is established
that she directly and actively participated in the acts which amounted to violations of company
policy. Certainly the prerogative lies with the company to hold Villagracia accountable, if indeed
he was: the option to discipline lies with the employer. But since Villagracia was not made a
party in this proceeding, further discussion on the point is useless.

Respondent argues that the loss of trust and confidence as Credit Administration Supervisor had
been effectively negated by the fact that she was made to occupy the position of Branch
Operations Manager for three months immediately after Villagracia resigned. This act of the
petitioner, respondent reasons, is an express recognition of her capability and integrity or
trustworthiness as an employee.47 To support this contention, she adduces several cash advance
slips which she signed as BOM as evidence of her appointment.48 Even in light of this
"promotion," it must be noted that at the time she occupied this position, which the petitioner
asserts was done in an acting capacity only, the investigation over the anomalies committed by
respondent had been pending. The Memorandum dated August 21, 1995 reinstating respondent
and granting her request to conduct a formal investigation with the presence of counsel expressly
stated that the reinstatement is "without prejudice" to "a reinvestigation" of her case.49 Pending
the final outcome of the investigation, respondent, as with all persons, has in her favor the
presumption of innocence, and for this reason she may even be entitled to a promotion in due
course. But after due investigation and marshalling of facts, after the employer forms a moral
conviction that indeed the employee breached its trust and confidence, and despite such
promotion, the employer may then proceed to dismiss the erring employee.

As stated, the rules on termination of employment and the penalties for infractions, insofar as
fiduciary employees are concerned, are not necessarily the same as those applicable to the
termination of employment of ordinary employees. Employers, generally, are allowed a wider
latitude of discretion in terminating the employment of managerial personnel or those of similar
rank performing functions which by their nature require the employers trust and confidence,
than in the case of ordinary rank-and-file employees.50 There can be no doubt that the
respondents continuance in the sensitive fiduciary position of Credit Administration Supervisor
would be patently inimical to the interests of the petitioner. It would be oppressive and unjust to
order the petitioner to take her back, for the law, in protecting the rights of the employee,
authorizes neither oppression nor self-destruction of the employer.51

The award of 13th month pay must be deleted. Respondent is not a rank-and-file employee and
is, therefore, not entitled to thirteenth-month pay.52

However, the NLRC and the CA are correct in refusing to award 14th and 15th month pay as
well as the "monthly salary increase of 10 percent per year for two years based on her latest
salary rate." The respondent must show that these benefits are due to her as a matter of
right.53 The rule in these cases is, she who alleges, not she who denies, must prove. Mere
allegations by the respondent do not suffice in the absence of proof supporting the same.54 With
respect to salary increases in particular, the respondent must likewise show that she has a vested
right to the same, such that her salary increases can be made a component in the computation of
backwages. What is evident is that salary increases are a mere expectancy. They are by nature
volatile and dependent on numerous variables, including the companys fiscal situation, the
employees future performance on the job, or the employees continued stay in a position. 55 In
short, absent any proof, there is no vested right to salary increases.56

The claims for moral and exemplary damages, as correctly held by the NLRC and the
CA, should be denied for having no basis in fact and law.57 The award of attorneys fees should
likewise be deleted for the same reason.58

And last, the Court is constrained to delete the award of separation pay. Well-settled is the rule
that separation pay shall be allowed only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those reflecting on her moral
character.59 Inasmuch as the reason for which the respondent was validly separated involves her
integrity, which is required for the position of Credit Administration Supervisor, she is not
worthy of compassion as to deserve separation pay for her length of service.60
WHEREFORE, the petition is GRANTED. The challenged Decision and Resolution of the Court
of Appeals are hereby SET ASIDE and a new one entered DECLARING respondents dismissal
valid. The complaint of respondent is DISMISSED.

No pronouncement as to costs.

SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice

Chairperson

CONSUELO YNARES-SANTIAGO, ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions
in the above Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN
Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 79004-08 October 4, 1991

FRANKLIN BAGUIO AND 15 OTHERS, BONIFACIO IGOT AND 6 OTHERS, ROY

MAGALLANES AND 4 OTHERS, CLAUDIO BONGO, EDUARDO ANDALES and 4
OTHERS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (3rd DIVISION), GENERAL
MILLING CORPORATION and/or FELICIANO LUPO, respondents.

Public Attorney's Office for petitioners.

Joseph M. Baduel & Steve R. Siclot for private respondents.

MELENCIO-HERRERA, J.:

The liability of an employer in job contracting, vis-a-vis his contractor's employees, is the sole
issue brought to the fore in this labor dispute.

This Petition for certiorari seeks to set aside the Resolution, dated 27 February 1987, of public
respondent National Labor Relations Commission (NLRC), Third Division, which reversed the
Resolution of its First Division, dated 27 December 1985, and absolved private respondent
General Milling Corporation (GMC) from any and all liability to petitioners.

Sometime in 1983, private respondent Feliciano LUPO, a building contractor, entered into a
contract with GMC, a domestic corporation engaged in flour and feeds manufacturing, for the
construction of an annex building inside the latter's plant in Cebu City. In connection with the
aforesaid contract, LUPO hired herein petitioners either as carpenters, masons or laborers.

Subsequently, LUPO terminated petitioners' services, on different dates. As a result, petitioners

filed Complaints against LUPO and GMC before the NLRC Regional Arbitration Branch No.
VII, Cebu City, for unpaid wages, COLA differentials, bonus and overtime pay.

In a Decision, dated 21 November 1984, the Executive Labor Arbiter, Branch VII, found LUPO
and GMC jointly and severally liable to petitioners, premised on Article 109 of the Labor
Code, infra, and ordered them to pay the aggregate amount of P95,382.92. Elevated on appeal on
14 December 1984, the NLRC (First Division) denied the same for lack of merit in a Resolution,
dated 27 December 1985.

Upon Motion for Reconsideration, filed on 27 February 1986, the case was reassigned to the
Third Division. In a Resolution of 27 February 1987, that Division absolved GMC from any
liability. It opined that petitioners were only hired by LUPO as workers in his construction
contract with GMC and were never meant to be employed by the latter.

Petitioners now assail that judgment in this Petition for Certiorari.

Petitioners contend that GMC is jointly and severally liable with LUPO for the latter's
obligations to them. They seek recovery from GMC based on Article 106 of the Labor
Code, infra, which holds the employer jointly and severally liable with his contractor for unpaid
wages of employees of the latter.

In his "Manifestation in lieu of Comment," the Solicitor General recognizes the solidary liability
of GMC and LUPO but bases recovery on Article 108 of the Labor Code, infra, contending that
inasmuch as GMC failed to require them LUPO a bond to answer for the latter's obligations to
his employees, as required by said provision, GMC should, correspondingly, be deemed
solidarily liable.

In their respective Comments, both GMC and the NLRC maintain that Article 106 finds no
application in the instant case because it is limited to situations where the work being performed
by the contractor's employees are directly related to the principal business of the employer. The
NLRC further opines that Article 109 on "Solidary Liability" finds no application either because
GMC was neither petitioners' employer nor indirect employer.

Upon the facts and circumstances, we uphold the solidary liability of GMC and LUPO for the
latter's liabilities in favor of employees whom he had earlier employed and dismissed.

Recovery, however, should not be based on Article 106 of the Labor Code. This provision treats
specifically of "labor-only" contracting, which is not the set-up between GMC and LUPO.

Article 106 provides:

Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract

with another person for the performance of the former's work, the employees of the
contractor and of the latter's subcontractor, if any, shall be paid in accordance with the
provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly
employed by him.

xxx xxx xxx

There is "labor-only" contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such
persons are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him (Emphasis supplied).

In other words, a person is deemed to be engaged in "labor only" contracting where (1) the
person supplying workers to an employer does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others; and (2) the workers
recruited and placed by such person are performing activities which are directly related to the
principal business of such employer (See Section 9, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code; emphasis supplied).

Since the construction of an annex building inside the company plant has no relation whatsoever
with the employer's business of flour and feeds manufacturing, "labor-only" contracting does not
exist. Article 106 is thus inapplicable.

Instead, it is "job contracting," covered by Article 107, which is involved, reading:

Art. 107. Indirect Employer. The provisions of the immediately preceding Article
shall likewise apply to any person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor for the performance of any
work, task, job or project. (Emphasis supplied).

Specifically, there is "job contracting" where (1) the contractor carries on an independent
business and undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as to the results
thereof; and (2) the contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in the conduct
of his business. It may be that LUPO subsequently ran out of capital and was unable to satisfy
the award to petitioners. That was an after-the-fact development, however, and does not detract
from his status as an independent contractor.

Based on the foregoing, GMC qualifies as an "indirect employer." It entered into a contract with
an independent contractor, LUPO, for the construction of an annex building, a work, task, job or
project not directly related to GMC's business of flour and feeds manufacturing. Being an
"indirect employer," GMC is solidarily liable with LUPO for any violation of the Labor Code
pursuant to Article 109 thereof, reading:

Art. 109. Solidary Liability. The provisions of existing laws to the contrary
notwithstanding, every employer or indirect employer shall be held responsible with a
contractor or subcontractor for any violation of any provision of this Code. For purposes
of determining the extent of their civil liability under this Chapter, they shall be
considered as direct employers.

The provision of existing law referred to is Article 1728 of the Civil Code, which states, among
others, that "the contractor is liable for all the claims of laborers and others employed by him ..."

The foregoing interpretation finds a precedent in the case o Deferia v. NLRC (G.R. No. 78713,
27 February 1991) per Sarmiento, J., where Articles 107 and 109 were applied as the statutory
basis for the joint and several liability of the employer with his contractor, in addition to Article
106, since the situation in that case was clearly one of "labor-only" contracting.

The NLRC submission that Article 107 is not applicable in the instant case for the reason that the
coverage thereof is limited to one "not an employer" whereas GMC is such an employer as
defined in Article 97 (b) of the Labor Code,1 is not well-taken. Under the peculiar set-up herein,
GMC is, in fact, "not an employer" (in the sense of not being a direct employer) as understood in
Article 106 of the Labor Code, but qualifies as an "indirect employer" under Article 107 of said
Code.

The distinction between Articles 106 and 107 was in the fact that Article 106 deals with "labor-
only" contracting. Here, by operation of law, the contractor is merely considered as an agent of
the employer, who is deemed "responsible to the workers to the same extent as if the latter were
directly employed by him." On the other hand, Article 107 deals with "job contracting." In the
latter situation, while the contractor himself is the direct employer of the employees, the
employer is deemed, by operation of law, as an indirect employer.

In other words, the phrase "not an employer" found in Article 107 must be read in conjunction
with Article 106. A contrary interpretation would render the provisions of Article 107
meaningless considering that everytime an employer engages a contractor, the latter is always
acting in the interest of the former, whether directly or indirectly, in relation to his employees.

It should be recalled that a finding that a contractor is a "labor-only" contractor is equivalent to

declaring that there is an employer-employee relationship between the owner of the project and
the employees of the "labor-only" contractor (Associated Anglo-American Tobacco Corp. v.
Clave, G.R. No. 50915, 30 August 1990, 189 SCRA 127; Industrial Timber Corp. v. NLRC,
G.R. No. 83616, 20 January 1989, 169 SCRA 341). This is evidently because, as heretofore
stated, the "labor-only" contractor is considered as a mere agent of an employer. In contrast, in
"job contracting," no employer-employee relationship exists between the owner and the
employees of his contractor. The owner of the project is not the direct employer but merely an
indirect employer, by operation of law, of his contractor's employees.

As an indirect employer, and for purposes of determining the extent of its civil liability, GMC is
deemed a "direct employee" of his contractor's employees pursuant to the last sentence of Article
109 of the Labor Code. As a consequence, GMC can not escape its joint and solidary liability to
petitioners.

Further, Article 108 of the Labor Code requires the posting of a bond to answer for wages that a
contractor fails to pay, thus:
 Article 108. Posting of Bond. An employer or indirect employer may require the
contractor or subcontractor to furnish a bond equal to the cost of labor under contract, on
condition that the bond will answer for the wages due the employees showed the
contractor or subcontractor, as the case may be, fails to pay the same.

Having failed to require LUPO to post such a bond, GMC must answer for whatever liabilities
LUPO may have incurred to his employees. This is without prejudice to its seeking
reimbursement from LUPO for whatever amount it will have to pay petitioners.

WHEREFORE, the Petition for certiorari is GRANTED. The Resolution of respondent NLRC,
Third Division, dated 27 February 1987, is hereby SET ASIDE, and the Decision of the Labor
Arbiter, dated 21 November 1984, is hereby REINSTATED.

SO ORDERED.

Paras, Sarmiento and Regalado, JJ., concur.

Separate Opinions

PADILLA, J.,:

The present petition seeks to have General Milling Corporation (the Company) held liable for the
unpaid wages of the petitioners in solidum with the contractor (Lupo) who recruited the
petitioners' services. This majority finds for the petitioners in the total adjudged sum of
P95,382.92, a conclusion with which I am in complete accord. But I am not quite comfortable,
and therefore disagree, with the legal basis on which the company's liability is determined.

As determined by the majority, such liability of the company is called for by Article 107, Chapter
III, Title II, Book III of the Labor Code, which is as follows:

ART. 107. Indirect employer. The provisions of the immediately preceding Article
shall likewise apply to any person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor for the performance of any
work, task, job, or project. (emphasis supplied)

It is strongly urged by the majority that the phrase "not being an employer" found in said Article
107 be given a circumspect appraisal. To my mind, there is no other interpretation of this
provision of the Code than that an indirect employer, to be categorized as such, must not be an
EMPLOYER as this term is defined under the Code. Article 97 of the same Title of the Labor
Code defines an EMPLOYER as

ART. 97. Definition. As used in this Title

a) ...

b) "Employer" includes any person acting directly or indirectly in the interest of an

employer in relation to an employee and shall include the Government and all its
branches, subdivision and instrumentalities, all government-owned or controlled
corporations and institutions, as well as non-profit private institutions, or organizations.

... (emphasis supplied)

From the foregoing basic premises, it is my submission that the company (General Milling
Corporation) is an employer in every sense of the word. It engages in the primary enterprise of
manufacturing flour and feeds, it definitely employs employees and workers in its plant and
outlets to work in various capacities. Therefore, the company cannot, in any way, be considered
an indirect employer, as the term is defined, for purposes of the petitioner's cause of action
against it.

To hold as the majority does, that Article 107 does apply in this case, would, in my view, render
useless the phrase "not being an employer" contained therein. Evidently, the framers of the Labor
Code had a purpose in mind in providing for such qualification. Such a qualification, as I see it,
gives protection to those workers hired or recruited by a contractor to work on some job for a
person who is not himself engaged in any enterprise. An example easily comes to mind: a person
who wishes to have a residential house built. He engages an architect or engineer to undertake
the project who, in turn, hires laborers, masons and carpenters. Should the architect or engineer
renege on his obligations to the workers he shall have recruited, to whom will the latter seek
relief? By mandate of Article 107, above-quoted, the owner of the house, who is not
himself an employer as defined by law, shall be held accountable. This is where, in my view,
Article 107 properly applies.

In the present case, however, the company's liability to the petitioners properly comes under
Article 106, Chapter III, Title II, Book III of the Code, which, in its entirety, provides:

ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract

with another person for the performance of the former's work, the employees of the
contractor and of the latter's subcontractor, if any, shall be paid in accordance with the
provisions of the Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with the
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly
employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the

contracting out of labor to protect the rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such
persons are performing activities which are directly related to the principal business of
such employer. In such case, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.

It appears abundantly clear that the juridical relationship envisioned in Article 106 involves an
employer, as defined by the Code. It thus applies to the juridical situation involved in this case,
where the actors are General Milling Corporation (as the employer), Lupo (as the contractor) and
the petitioners (as the employees or workers). Article 106, upon careful examination, deals with
three (3) situations in the juridical relationship between employer-contractor-employee. It does
not deal solely with "labor-only" contracting.

The first situation in Article 106 is where the employer (project owner) enters into a contract
with a contractor for the performance of some job or work; the employees recruited by such
contractor shall be paid, according to Article 106, first paragraph, in accordance with the
requirements of the Labor Code. Stated in another way, the first paragraph of Article 106,
provides the manner by which such employees shall be paid their wages and that is, in
compliance with the provisions of the Labor Code. This, therefore, would include the rules on
manner of payment, minimum wage, place of payment, etc.

In an employer-contractor-employee relationship, it is clear that the contractor is the real

employer and, therefore, responsible to his workers for their wages. However, should such
contractor fail or renege on his said obligation, to whom will the unpaid worker have recourse?
The second paragraph of Article 106 resolves the seeming dilemma of the workers by providing
that the EMPLOYER, (i.e., the project owner) shall be solidarily liable to such workers to the
extent of the work performed by them, meaning that the EMPLOYER shall solidarily answer for
the payment of wages corresponding to the amount of work undertaken by the contractor's
employees in the project. This is the second situation contemplated by Article 106.

The third and final situation treated in Article 106 is contained in the fourth paragraph thereof. It
pertains to what the majority perceives (erroneously, in my view) as the sole coverage of Article 106-
that of a "labor-only" contracting and the extent of the rights and liabilities of the parties involved in
such a relationship. As explained in the ponencia,for this scheme or situation to exist, two (2)
circumstances must concur: one, the contractor who recruits the workers must have 'no substantial
capital or investment in the form of tools, equipment, machineries and work premises,' and two, 'such
workers are so engaged to perform activities directly related to the employer's principal business.'
Should there be a finding of 'labor-only' contracting, the law expressly provides that the EMPLOYER (or
project owner) shall be considered the direct employer of such workers. Such juridical relationship
would then spawn a whole gamut of employer's obligations, including obligations under the workmen's
compensation, social security, medicare, minimum wage, termination pay and unionism. 1

From the facts of this case as presented, the second paragraph of article 106 finds clear
application. Because of contractor Lupo's default in the payment of petitioners' wages, owing to
his insolvency, the employer (company) must comply with its joint and several obligation to
answer for Lupo's accountability to his employees for their unpaid wages. Thereafter, should the
company be inclined to do so, it may seek reimbursement from Lupo.

In sum, it is my submission that the company's solidary liability to the petitioners ought to be
predicated on the basis, not of Article 107 of the Labor Code (which applies only to non-
employers while the company in this case is an employer) but rather, upon the express
declaration of paragraph 2, Article 106 of the Labor Code, which covers employers (not non-
employers) as the company in the case at bar.

# Separate Opinions

PADILLA, J.,

The present petition seeks to have General Milling Corporation (the Company) held liable for the
unpaid wages of the petitioners in solidum with the contractor (Lupo) who recruited the
petitioners' services. This majority finds for the petitioners in the total adjudged sum of
P95,382.92, a conclusion with which I am in complete accord. But I am not quite comfortable,
and therefore disagree, with the legal basis on which the company's liability is determined.

As determined by the majority, such liability of the company is called for by Article
107, Chapter III, Title II, Book III of the Labor Code, which is as follows:

ART. 107. Indirect employer. The provisions of the immediately preceding Article shall
likewise apply to any person, partnership, association or corporation which, not being an
employer, contracts with an independent contractor for the performance of any work, task, job,
or project. (emphasis supplied)

It is strongly urged by the majority that the phrase "not being an employer" found in said Article
107 be given a circumspect appraisal. To my mind, there is no other interpretation of this
provision of the Code than that an indirect employer, to be categorized as such, must not be an
EMPLOYER as this term is defined under the Code. Article 97 of the same Title of the Labor
Code defines an EMPLOYER as

ART. 97. Definition. As used in this Title

a) ...

b) "Employer" includes any person acting directly or indirectly in the interest of an employer in
relation to an employee and shall include the Government and all its branches, subdivision and
instrumentalities, all government-owned or controlled corporations and institutions, as well as
non-profit private institutions, or organizations.

... (emphasis supplied)

From the foregoing basic premises, it is my submission that the company (General Milling
Corporation) is an employer in every sense of the word. It engages in the primary enterprise of
manufacturing flour and feeds, it definitely employs employees and workers in its plant and
outlets to work in various capacities. Therefore, the company cannot, in any way, be considered
an indirect employer, as the term is defined, for purposes of the petitioner's cause of action
against it.

To hold as the majority does, that Article 107 does apply in this case, would, in my view, render
useless the phrase "not being an employer" contained therein. Evidently, the framers of the Labor
Code had a purpose in mind in providing for such qualification. Such a qualification, as I see it,
gives protection to those workers hired or recruited by a contractor to work on some job for a
person who is not himself engaged in any enterprise. An example easily comes to mind: a person
who wishes to have a residential house built. He engages an architect or engineer to undertake
the project who, in turn, hires laborers, masons and carpenters. Should the architect or engineer
renege on his obligations to the workers he shall have recruited, to whom will the latter seek
relief? By mandate of Article 107, above-quoted, the owner of the house, who is not
himself an employer as defined by law, shall be held accountable. This is where, in my view,
Article 107 properly applies.

In the present case, however, the company's liability to the petitioners properly comes under
Article 106, Chapter III, Title II, Book III of the Code, which, in its entirety, provides:

ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with
another person for the performance of the former's work, the employees of the contractor and of
the latter's subcontractor, if any, shall be paid in accordance with the provisions of the Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with the contractor
or subcontractor to such employees to the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting,
he may make appropriate distinctions between labor-only contracting and job contracting as well
as differentiations within these types of contracting and determine who among the parties
involved shall be considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such persons are performing
activities which are directly related to the principal business of such employer. In such case, the
person or intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed
by him.

It appears abundantly clear that the juridical relationship envisioned in Article 106 involves an
employer, as defined by the Code. It thus applies to the juridical situation involved in this case,
where the actors are General Milling Corporation (as the employer), Lupo (as the contractor) and
the petitioners (as the employees or workers). Article 106, upon careful examination, deals with
three (3) situations in the juridical relationship between employer-contractor-employee. It does
not deal solely with "labor-only" contracting.

The first situation in Article 106 is where the employer (project owner) enters into a contract
with a contractor for the performance of some job or work; the employees recruited by such
contractor shall be paid, according to Article 106, first paragraph, in accordance with the
requirements of the Labor Code. Stated in another way, the first paragraph of Article 106,
provides the manner by which such employees shall be paid their wages and that is, in
compliance with the provisions of the Labor Code. This, therefore, would include the rules on
manner of payment, minimum wage, place of payment, etc.

In an employer-contractor-employee relationship, it is clear that the contractor is the real

employer and, therefore, responsible to his workers for their wages. However, should such
contractor fail or renege on his said obligation, to whom will the unpaid worker have recourse?
The second paragraph of Article 106 resolves the seeming dilemma of the workers by providing
that the EMPLOYER, (i.e., the project owner) shall be solidarily liable to such workers to the
extent of the work performed by them, meaning that the EMPLOYER shall solidarily answer for
the payment of wages corresponding to the amount of work undertaken by the contractor's
employees in the project. This is the second situation contemplated by Article 106.

The third and final situation treated in Article 106 is contained in the fourth paragraph thereof. It
pertains to what the majority perceives (erroneously, in my view) as the sole coverage of Article
106-that of a "labor-only" contracting and the extent of the rights and liabilities of the parties
involved in such a relationship. As explained in the ponencia, for this scheme or situation to
exist, two (2) circumstances must concur: one, the contractor who recruits the workers must have
'no substantial capital or investment in the form of tools, equipment, machineries and work
premises,' and two, 'such workers are so engaged to perform activities directly related to the
employer's principal business.' Should there be a finding of 'labor-only' contracting, the law
expressly provides that the EMPLOYER (or project owner) shall be considered the direct
employer of such workers. Such juridical relationship would then spawn a whole gamut of
employer's obligations, including obligations under the workmen's compensation, social security,
medicare, minimum wage, termination pay and unionism. 1

From the facts of this case as presented, the second paragraph of article 106 finds clear
application. Because of contractor Lupo's default in the payment of petitioners' wages, owing to
his insolvency, the employer (company) must comply with its joint and several obligation to
answer for Lupo's accountability to his employees for their unpaid wages. Thereafter, should the
company be inclined to do so, it may seek reimbursement from Lupo.

In sum, it is my submission that the company's solidary liability to the petitioners ought to be
predicated on the basis, not of Article 107 of the Labor Code (which applies only to non-
employers while the company in this case is an employer) but rather, upon the express
declaration of paragraph 2, Article 106 of the Labor Code, which covers employers (not non-
employers) as the company in the case at bar.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 79351 November 28, 1989

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,

vs.
THE HON. SECRETARY OF LABOR, CRESENCIA DIFONTORUM, ET
AL., respondents.

The Chief Legal Counsel for petitioner.

Dante P. Sindac for private respondents.

CORTES, J.:

Petitioner Development Bank of the Philippines seeks the nullification of an order dated July 29,
1987 and issued by the Undersecretary of Labor and Employment, affirming that of National
Capital Region Officer-in-Charge Romeo A. Young, directing the petitioner to deliver the
properties of Riverside Mills Corporation (RMC) which it had in its possession to the Ministry
(now Department) of Labor and Employment (MOLE) for proper disposition in Case No. NCR-
LSED-7-334-84 pursuant to Article 110 of the Labor Code.

Labor Case No. NCR-LSED-7-334-84 involves a complaint for illegal dismissal, unfair labor
practice, illegal deductions from salaries and violation of the minimum wage law filed by private
respondents herein against RMC. On July 3, 1985, a decision was rendered by Director Severo
M. Pucan of the National Capital Region, MOLE, ordering RMC to pay private respondents
backwages and separation benefits. A corresponding writ of execution was issued on October 22,
1985 directing the sheriff to collect the amount of ONE MILLION TWO HUNDRED FIFTY-
SIX THOUSAND SIX HUNDRED SEVENTY-EIGHT PESOS AND SEVENTY SIX
CENTAVOS (P1,256,678.76) from RMC and, in case of failure to collect, to execute the writ by
selling the goods and chattel of RMC not exempt from execution or, in case of insufficiency
thereof, the real or immovable properties of RMC.

However, on May 23, 1986, the writ of execution was returned unserved and unsatisfied, with
the information that the company premises of RMC had been padlocked and foreclosed by
petitioner. It appears that petitioner had instituted extra-judicial foreclosure proceedings as early
as 1983 on the properties and other assets of RMC as a result of the latter's failure to meet its
obligations on the loans it secured from petitioner.

Consequently, private respondents filed with the MOLE a "Motion for Delivery of Properties of
the [RMC] in the Possession of the [DBP] to the [MOLE] for Proper Disposition," stating that
pursuant to Article 110 of the Labor Code, they enjoy first preference over the mortgaged
properties of RMC for the satisfaction of the judgment rendered in their favor notwithstanding
the foreclosure of the same by petitioner as mortgage creditor [Rollo, pp. 16-17]. Petitioner filed
its opposition.

In an order signed by Officer-in-Charge Romeo A. Young and dated December 11, 1986, private
respondents' motion was granted based on the finding that Article 110 of the Labor Code and the
ruling laid down in Philippine Commercial and Industrial Bank v. Natural Mines and Allied
Workers' (NAMAWU-MIF) [G.R. No. 50402, August 19, 1982, 115 SCRA 873] support the
conclusion that private respondents still enjoyed a preferential lien for the payment of their
backwages and separation benefits over the properties of RMC which were foreclosed by
petitioner [Rollo, pp. 21-22].

Petitioner then filed its motion for reconsideration on December 24,1986 contending that Article
110 of the Labor Code finds no application in the case at bar for the following reasons: (1) The
properties sought to be delivered have ceased to belong to RMC in view of the fact that
petitioner had foreclosed on the mortgage, and the properties have been sold and delivered to
third parties; (2) The requisite condition for the application of Article 110 of the Labor Code is
not present since no bankruptcy or insolvency proceedings over RMC properties and assets have
been undertaken [Rollo, pp. 24-28]. In an order dated July 29, 1987, petitioner's motion for
reconsideration was denied for lack of merit by Undersecretary Dionisio C. dela Serna.

Hence, petitioner filed this special civil action for certiorari with prayer for the issuance of a writ
of preliminary injunction. On August 27, 1987, this Court issued a temporary restraining order
enjoining public respondent from enforcing or carrying out its order dated July 29, 1987. After
considering the allegations made and issues raised in the petition, comments thereto and reply,
the Court, on March 14, 1988, resolved to give due course to the petition and to require the
parties to submit their respective memoranda. Petitioner and private respondent submitted their
memoranda, while public respondent adopted as its memorandum the comment it had previously
submitted.

After a careful study of the various arguments adduced, as well as the legal provisions and
jurisprudence on the matter, the Court finds the petition impressed with merit. Indeed, the
assailed Order suffers from infirmities which must be rectified by the grant of a writ
of certiorari in favor of petitioner.

Firstly, public respondent acted with grave abuse of discretion amounting to lack or excess of
jurisdiction in enforcing private respondents' right of first preference under Article 110 of the
Labor Code notwithstanding the absence of bankruptcy, liquidation or insolvency proceedings
against RMC.

Article 110 of the Labor Code and Section 10, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code provide the following:

Article 110. WORKER PREFERENCE IN CASE OF BANKRUPTCY.In the

event of bankruptcy or liquidation of an employer's business, his workers shall
enjoy first preference as regards wages due them for services rendered during the
period prior to the bankruptcy or liquidation, any provision of law to the contrary
notwithstanding. Unpaid wages shall be paid in full before other creditors may
establish any claim to a share in the assets of the employer [Emphasis supplied].

Section 10. PAYMENT OF WAGES IN CASE OF BANKRUPTCY. Unpaid

wages earned by the employees before the declaration of bankruptcy or judicial
liquidation of the employer's business shall be given first preference and shall be
paid in full before other creditors may establish any claim to a share in the assets
of the employer.

It is clear from the wording of the law that the preferential right accorded to employees and
workers under Article 110 may be invoked only during bankruptcy or judicial liquidation
proceedings against the employer. The law is unequivocal and admits of no other construction.

Respondents contend that the terms "bankruptcy" or "liquidation" are broad enough to cover a
situation where there is a cessation of the operation of the employer's business as in the case at
bar. However, this very same contention was struck down as unmeritorious in the case
of Development Bank of the Philippines vs. Hon. Labor Arbiter Ariel C. Santos [G.R. Nos.
78261-62, March 8, 1989] involving a group of RMC employees which sought to enforce its
preference of credit Article 110 against DBP over certain RMC real properties. In that case, the
Court laid down the ruling that Article 110 of the Labor Code, which cannot be viewed in
isolation of, and must always be reckoned with the provisions of the Civil Code on concurrence
and preference of credits, may not be invoked by employees or workers of RMC like private
respondents herein, in the absence of a formal declaration of bankruptcy or a judicial liquidation
order of RMC.

The rationale for making the application of Article 110 of the Labor Code contingent upon the
institution of bankruptcy or judicial liquidation proceedings against the employer is premised
upon the very nature of a preferential right of credit. A preference of credit bestows upon the
preferred creditor an advantage of having his credit satisfied first ahead of other claims which
may be established against the debtor. Logically, it becomes material only when the properties
and assets of the debtor are insufficient to pay his debts in full; for if the debtor is amply able to
pay his various creditors in full, how can the necessity exist to determine which of his creditors
shall be paid first or whether they shall be paid out of the proceeds of the sale of the debtor's
specific property? Indubitably, the preferential right of credit attains significance only after the
properties of the debtor have been inventoried and liquidated, and the claims held by his various
creditors have been established [Kuenzle & Streiff (Ltd.) v. Villanueva, 41 Phil. 611 (1916);
Barrette v. Villanueva, G.R. No. L-14938, December 29, 1962, 6 SCRA 928; Philippine Savings
Bank v. Lantin, G.R. No. L-33929, September 2, 1983, 124 SCRA 476].

In this jurisdiction, bankruptcy, insolvency and general judicial liquidation proceedings provide
the only proper venue for the enforcement of a creditor's preferential right such as that
established in Article 110 of the Labor Code, for these are in rem proceedings binding against
the whole world where all persons having any interest in the assets of the debtor are given the
opportunity to establish their respective credits [Philippine Savings Bank v. Lantin, supra;
Development Bank of the Philippines v. Santos supra].

Secondly, public respondent's Order directing petitioner to deliver to the MOLE the properties it
had foreclosed from RMC for the purpose of executing the judgment rendered against RMC in
Case No. NCR-LSED 7-334-84 violates the basic rule that the power of a court or tribunal in the
execution of its judgment extends only over properties unquestionably belonging to the judgment
debtor [Special Services Corporation v. Centro La Paz, G.R. No. L- 44100, April 28, 1983, 121
SCRA 748; National Mines and Allied Workers' Union v. Vera, G.R. No. L-44230, November
19, 1984, 133 SCRA 295].

It appears on record, and remains undisputed by respondents, that petitioner had extra-judicially
foreclosed the subject properties from RMC as early as 1983 and purchased the same at public
auction, and that RMC had failed to exercise its right to redeem. Thus, when Officer-in-Charge
Young issued on December 11, 1986 the order which directed the delivery of these properties to
the MOLE, RMC had ceased to be the absolute owner thereof [See Dizon v. Gaborra, G.R. No.
L-36821, June 22, 1978, 83 SCRA 688]. Consequently, the order was directed against properties
which no longer belonged to the judgment debtor RMC.

However, respondents, in citing the case of PCIB v. NAMAWU-MIF [supra], argue that by virtue
of Article 110 of the Labor Code, an "automatic first lien" was created in favor of private
respondents on RMC propertiesa "lien" which predated the foreclosure of the subject
properties by petitioner, and remained vested on these properties even after its sale to petitioner
and other parties.

There is no merit to this contention. It proceeds from a misconception which must be corrected.

What Article 110 of the Labor Code establishes is not a lien, but a preference of credit in favor of
employees [See Republic v. Peralta, G.R. No. 56568, May 20, 1987, 150 SCRA 37]. This simply
means that during bankruptcy, insolvency or liquidation proceedings involving the existing
properties of the employer, the employees have the advantage of having their unpaid wages
satisfied ahead of certain claims which may be proved therein.

It bears repeating that a preference of credit points out solely the order in which creditors would
be paid from the properties of a debtor inventoried and appraised during bankruptcy, insolvency
or liquidation proceedings. Moreover, a preference does not exist in any effective way prior to,
and apart from, the institution of these proceedings, for it is only then that the legal provisions on
concurrence and preference of credits begin to apply. Unlike a lien, a preference of credit does
not create in favor of the preferred creditor a charge or proprietary interest upon any particular
property of the debtor. Neither does it vest as a matter of course upon the mere accrual of a
money claim against the debtor. Certainly, the debtor could very well sell, mortgage or pledge
his property, and convey good title thereon, to third parties free from such preference [Kuenzle
& Streiff v. Villanueva, supra].

Incidentally, the Court is not unmindful of the 1989 amendments to the article introduced by
Section 1, R.A. No. 6715 [March 21, 1989]. Article 110 of the Labor Code as amended reads:
 WORKER PREFERENCE IN CASE OF BANKRUPTCY. In the event of
bankruptcy or liquidation of an employer's business, his workers shall enjoy first
preference as regards their unpaid wages and other monetary claims, any
provision of law to the contrary notwithstanding. Such unpaid wages and
monetary claims shall be paid in full before the claims of the Government and
other creditors may be paid. [Amendments indicated.]

However, these amendments only relate to the scheme of concurrence and preference of credits;
they do not affect the issues heretofore discussed regarding the applicability of Article 110 to the
attendant facts.

WHEREFORE, considering the foregoing, the present petition is hereby GRANTED. The
assailed order dated July 29, 1987 is SET ASIDE and the temporary restraining order issued by
the Court on August 27, 1987 is made PERMANENT.

SO ORDERED.

Fernan (C.J.), Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 117378 March 26, 1997

GIL CAPILI and RICARDO CAPILI, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, National Capital Region (First
Division), BENIGNO SANTOS, DELFIN YUSON, LUISITO SANTOS, URSINO
BASISTER, RICARDO REYES, JOSELITO SANTOS, JORGE BINUYA and NICOLAS
MULINGBAYAN, respondents.

BELLOSILLO, J.:

Respondents Benigno Santos, Delfin Yuson, Luisito Santos, Ursino Basister, Ricardo Reyes,
Joselito Santos, Jorge Binuya and Nicolas Mulingbayan are licensed drivers of public utility
jeepneys plying the Libertad-Sta. Cruz route in Manila. The jeepneys were formerly owned by
petitioner Gil Capili. For the use of the jeepney for twelve hours a driver would pay rent or so-
called "boundary" of P280.00 and earn a net profit of P200.00 per day.

On 7 May 1991, at a time when petitioner Ricardo Capili jointly with his wife had assumed
ownership and operation of the jeepneys driven by private respondents, the latter and the other
drivers similarly situated were required by the jeepney operators to sign individually contracts of
lease of the jeepneys to formalize their lessor-lessee relationship. However, having gathered the
impression that the signing of the contracts of lease was a condition precedent before they could
continue driving for petitioners, all the drivers stopped plying their assigned routes beginning 7
May 1991.

A week later or on 14 May 1991 the drivers, numbering twenty-two (22), filed a complaint for
illegal dismissal before the Labor Arbiter praying not for reinstatement but for separation pay.1

In the interim, fourteen (14) of the complainants desisted and resumed plying their routes. The
remaining eight (8) complainants with their reckoning dates of employment follow: (a) Benigno
Santos, 1972; (b) Jorge Binuya, 1965; (c) Luisito Santos, 1982; (d) Delfin Yuson, 1983; (e)
Ursino Basister, 1980; (f) Ricardo Reyes, 1985; (g) Joselito Santos, 1989; and, (h) Nicolas
Mulingbayan, 1978.

Petitioners opposed the claim of private respondents before the Labor Arbiter alleging that the
latter voluntarily abandoned their respective jobs without any valid cause and thereafter refused
and still continue to refuse to return to work despite repeated demands and/or notices given to
them to return to work.

In resolving the dispute, the Labor Arbiter ruled

On the issue of dismissal versus abandonment, we are inclined to believe that the
latter scenario happened. It is not sound business practice to dismiss many
employees at the same time since it would cripple the operations.

What was more likely was that the drivers, all 22 of them . . . boycotted
respondents on May 7, 1991 by not reporting for work on that day.

xxx xxx xxx

From the viewpoint of complainants, their signing of the lease contract was a
condition sine qua non to the continuous driving of their respective drivers
 (jeepneys?). But from the point of view of respondent Capili and as shown in the
aforequoted paragraph 5 of his affidavit, and as further shown in the notices
(Exhibits "3-B" and "3-B-1") which merely asked complainants to return to work
without mentioning any condition like the signing of the contract, the signing of
the lease contract by the drivers was merely intended as a confirmation of the
original concept of a no employer-employee relationship, and to streamline the
operation by indicating the amount of the boundary per driver, depending on the
number of hours they drive and their obligation to check on the motor/engine, oil,
tires, brakes and other routinary requirements in order to insure the vehicles'
roadworthiness. It was never meant to be that if a driver refuses to sign the
contract, he would not be allowed to continue driving.

To our mind, both parties misappreciated the situation. Respondents' erroneous

insistence of a no employer-employee relationship even in the face of a well-
established contrary doctrine as postulated in the Dinglasan case2 (98 Phil. 649)
and complainants' erroneous apprehension of the loss of such employer-employee
relationship if they sign the lease contract propelled the complainants to file the
instant complaint.

In short, this is merely a simple case of misunderstanding.

To remedy the situation, we feel that the most prudent approach would be to let
the parties return to the relationship that existed between them prior to May 7,
1991.3

The Labor Arbiter thus concluded

WHEREFORE, decision is hereby rendered declaring the breakage (sic), of

relationship between respondent Ricardo Capili and complainants Benigno T.
Santos, Delfin Yuson, Luisito Santos, Ursino Basister, Ricardo Reyes, Joselito
Santos, Jorge Binuya and Nicholas Mulingbayan, as a product of
misunderstanding and misappreciation of the situation by both parties and,
therefore, respondents are hereby directed to reinstate them to their former
position without loss of seniority rights and other benefits, but without back
wages (p. 7, Annex "F", emphasis supplied).4

Private respondents appealed to the National Labor Relations Commission. They reiterated their
prayer for separation pay equivalent to one (1) month salary for every year of service and, in
addition, three (3) years back wages.

Respondent NLRC upheld the finding of the Labor Arbiter that the case arose due to simple
misunderstanding between the complaining drivers on one hand and their employers on the
other. However, it took exception to the relief granted to private respondents and modified the
appealed decision accordingly by holding that

Since there was misunderstanding between the parties and this misunderstanding
resulted in animosity and strained relationship between them, we deem it proper
and most prudent approach to maintain industrial peace for respondents to pay the
complainants their separation pay of one half (1/2) month for every year of
service, based on their daily earnings of P200.00.5

The petitioners moved to have the above disquisition of respondent NLRC reconsidered but the
latter denied the motion. They now come to us arguing that since there was a clear finding of
abandonment by the Labor Arbiter consisting in the failure of private respondents to report for
work without justifiable reason, the award of separation pay could not be warranted.

The NLRC brushed aside the arguments of petitioners. It emphasized that if it were the finding
of the Labor Arbiter that private respondents were guilty of abandonment he would not have
ordered reinstatement but dismissal of the case. Thus on 9 August 1994 NLRC denied
reconsideration.
Petitioners impute grave abuse of discretion on the part of respondent NLRC in awarding
separation pay to private respondents.

We agree with petitioners. The legal basis for the award of separation pay is clearly provided by
Art. 279 of the Labor Code which states that the remedy for illegal dismissal is reinstatement
without loss of seniority rights plus back wages computed from the time compensation was
withheld up to reinstatement. However there may be instances where reinstatement is not a
viable remedy as where the relations between employer and employee have been so severely
strained that it is no longer advisable to order reinstatement or where the employee decides not to
be reinstated. In such events, the employer will instead be ordered to pay separation pay.6

A reading of Art. 279 in relation to Art. 282 of the Labor Code reveals that an employee who is
dismissed for cause after appropriate proceedings in compliance with the due process
requirements is not entitled to an award of separation pay. Under Arts. 283 and 284 of the same
Code, separation pay is authorized only in cases of dismissals due to any of these reasons: (a)
installation of labor saving devices; (b) redundancy; (c) retrenchment; (d) cessation of the
employer's business, and, (e) when the employee is suffering from a disease and his continued
employment is prohibited by law or is prejudicial to his health and to the health of his co-
employees.7 However, separation pay shall be allowed as a measure of social justice in those
cases where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character, but only when he was illegally dismissed.

The common denominator of those instances where payment of separation pay is warranted is
that the employee was dismissed by the employer. In the instant case there was no dismissal at
all. Respondent NLRC affirmed the factual findings of the Labor Arbiter that there was only
a misunderstanding between petitioners and private respondents which caused the latter to stop
reporting for work. If the Labor Arbiter ordered reinstatement it should not be construed as relief
proceeding from illegal dismissal; instead, it should be considered as a declaration or affirmation
that private respondents may return to work because they were not dismissed in the first place,
and they should be happy that their employers are accepting them back. This could be the reason
why complainants asked only for separation pay not for reinstatement in their complaint
before the Labor Arbiter.

The award of separation pay cannot be justified solely because of the existence of "strained
relations" between the employer and the employee. It must be given to the employee only as an
alternative to reinstatement emanating from illegal dismissal. When there is no illegal dismissal,
even if the relations are strained, separation pay has no legal basis. Besides, the doctrine on
"strained relations" cannot be applied indiscriminately since every labor dispute almost
invariably results in "strained relations;" otherwise, reinstatement can never be possible simply
because some hostility is engendered between the parties as a result of their disagreement. That
is human nature.8

The constitutional policy of providing full protection to labor is not intended to oppress or
destroy management. The commitment of this Court to the cause of labor does not prevent us
from sustaining the employer when it is in the right, as in this case.9

When respondents filed their complaint, and taking account of the allegations therein, they
foreclosed reinstatement as a relief, since they prayed only for an award of separation pay. This
is confirmed in their appeal to the NLRC where they prayed for a modification of the decision of
the Labor Arbiter, from reinstatement without back wages to payment of three (3) years back
wages and separation pay equivalent to one (1) month salary for every year of service. 10 It is
therefore clear that respondents never desired to be reinstated. This being so, the Court cannot
order them to return to work. 11 If private respondents voluntarily chose not to return to work
anymore they must be considered as having resigned from their employment. This is without
prejudice however to the willingness of both parties to continue with their former contract of
employment or enter into a new one whenever they so desire.

WHEREFORE, the petition is GRANTED and the employer-employee relationship between

petitioners on one hand and each private respondent on the other is deemed voluntarily
terminated. Consequently, the decision of respondent National Labor Relations Commission
dated 28 February 1994 is REVERSED and SET ASIDE.
SO ORDERED.

Padilla, Vitug, Kapunan and Hermosisima, Jr., JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 163891 May 21, 2009

CHARTER CHEMICAL AND COATING CORPORATION, Petitioner,

vs.
HERBERT TAN and AMALIA SONSING, Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the 9 March 2004 Decision2 and 4 June 2004 Resolution3 of the
Court of Appeals in CA-G.R. SP No. 72086. In the 9 March 2004 Decision, the Court of Appeals
ruled that the National Labor Relations Commission (NLRC) acted with grave abuse of
discretion when it reversed its earlier dismissal of and, subsequently, gave due course to the
appeal of petitioner Charter Chemical and Coating Corporation (petitioner). The 4 June 2004
Resolution denied petitioners motion for reconsideration.

The Facts

Respondents Herbert Tan and Amalia Sonsing (respondents) were employed as officer-in-charge
and office secretary, respectively, at petitioners Davao branch. On 4 March 2000, respondents
were placed under preventive suspension for their failure to satisfactorily explain the
discrepancies in the stock inventory at the Davao depot warehouse. Respondents were also asked
to explain the alleged dishonesty in the punching of their time cards. On 24 March 2000,
petitioner advised respondents that they were being terminated from the service. On 7 June 2000,
respondents filed a complaint for illegal dismissal and money claims against petitioner.

On 18 January 2001, Labor Arbiter Nicolas S. Sayson ruled in favor of respondents. The
dispositive portion of the 18 January 2001 Decision4 provides:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered declaring the dismissal
of complainants Herbert Tan and Amalia Sonsing as ILLEGAL.

Respondent Charter Chemical and Coating Corporation is hereby directed to pay herein
complainants their separation pay, backwages, 13th month pay and damages, to wit:

1. Herbert Tan - 372,800.00; and

2. Amalia Sonsing - 136,800.00

or in the total amount of Five Hundred Nine Thousand Six Hundred Pesos (509,600)
plus ten (10%) per cent thereof as attorneys fees.

Total award: 560,560.00

SO ORDERED.5

Petitioner received a copy of the Labor Arbiters Decision on 7 February 2001. On 16 February
2001, petitioner sent its notice of appeal to the NLRC through Luzon Brokerage Corporation
(LBC). The NLRC received the notice of appeal on 26 February 2001.

In its 11 October 2001 Resolution,6 the NLRC dismissed petitioners appeal for having been
filed beyond the 10-day reglementary period.
Petitioner filed a motion for reconsideration. In its 6 February 2002 Resolution, 7 the NLRC
granted the motion and gave due course to petitioners appeal. Subsequently, the NLRC
dismissed respondents complaint for illegal dismissal.

Respondents filed a motion for reconsideration. In its 22 April 2002 Resolution, the NLRC
denied respondents motion.

Respondents then filed a petition for certiorari before the Court of Appeals. In its 9 March 2004
Decision, the Court of Appeals granted respondents petition and ruled that the NLRC acted with
grave abuse of discretion in admitting petitioners belated appeal.

Petitioner filed a motion for reconsideration. In its 4 June 2004 Resolution, the Court of Appeals
denied the motion.

Hence, this petition.

The 6 February 2002 Resolution of the NLRC

In its 6 February 2002 Resolution, the NLRC reversed its earlier dismissal of petitioners appeal.
According to the NLRC, in the ordinary course of events, the NLRC would have received
petitioners notice of appeal on time because of LBCs assurance that delivery shall be made
within 24 hours. However, the NLRC transferred its office to another location and the DOLE
refused to accept petitioners notice of appeal when it was delivered by LBC. The NLRC said
these unforeseen circumstances led to the failure of the NLRC to receive the notice of appeal on
time. The NLRC added that strict observance of the period to appeal need not be exacted on
petitioner since it exerted diligent efforts to file its notice of appeal on time but failed to do so
through no fault of its own. The NLRC said the supervening events constitute excusable
negligence which would vest the NLRC with discretion to admit the appeal which was filed out
of time.

The Ruling of the Court of Appeals

According to the Court of Appeals, the NLRC acted with grave abuse of discretion in admitting
petitioners belated appeal. The Court of Appeals said that the NLRC should have adhered to the
rule that the appeal should be filed within 10 calendar days from the receipt of the decision as
mandated by Article 2238 of the Labor Code. The Court of Appeals added that the delay in the
delivery of the notice of appeal committed by LBC did not fall under any of the circumstances
that would justify the relaxation of the rigid technicality of the rule on appeal.

The Issue

Petitioner raises the issue of whether the 9 March 2004 Decision and the 4 June 2004 Resolution
of the Court of Appeals are contrary to existing law and jurisprudence.

The Courts Ruling

The petition has no merit.

Petitioner argues that the NLRC acted within its jurisdiction when it relaxed the application of
the rules on appeal in labor cases because the failure to comply with the reglementary period to
appeal was brought about by LBCs difficulty in finding the new address of the NLRC.
Petitioner adds that there was substantial compliance with the rules on appeal as the notice of
appeal was consigned for delivery to LBC on 16 February 2001 or three days before the
expiration of the period to appeal. Petitioner also insists that the date of delivery to LBC was the
date of filing of its notice of appeal.

Article 223 of the Labor Code, the governing law on the timeliness of an appeal from the
decisions, awards or orders of the Labor Arbiter, is explicit that the aggrieved party has 10
calendar days from receipt thereof to appeal to the NLRC. Accordingly, this 10-day
reglementary period to perfect an appeal is mandatory and jurisdictional in nature. The failure to
file an appeal within the reglementary period renders the assailed decision final and executory
and deprives the appellate court of jurisdiction to alter the judgment, much less to entertain the
appeal.91awphi1

There is no dispute that petitioner received a copy of the Labor Arbiters decision on 7 February
2001. Thus, pursuant to Article 223 of the Labor Code, petitioner had only until 17 February
2001, the 10th calendar day from 7 February 2001, within which to file an appeal. However, as
17 February 2001 fell on a Saturday, petitioner had until the next working day, or until 19
February 2001, to file its appeal. On 16 February 2001, petitioner consigned its notice of appeal
to LBC for delivery to the NLRC. The NLRC received petitioners notice of appeal only on 26
February 2001.1avvphi1

In Benguet Electric Cooperative, Inc. v. NLRC,10 we ruled:

The established rule is that the date of delivery of pleadings to a private letter-forwarding agency
is not to be considered as the date of filing thereof in court, and that in such cases, the date of
actual receipt by the court, and not the date of delivery to the private carrier, is deemed the date
of filing of that pleading.11

In this case, petitioner availed of the services of LBC, a private carrier, to deliver its notice of
appeal to the NLRC. Had petitioner sent its notice of appeal by registered mail, the date of
mailing would have been deemed the date of filing with the NLRC.12 But petitioner, for reasons
of its own, chose to send its notice of appeal through a private letter-forwarding agency.
Therefore, the date of actual receipt by the NLRC of the notice of appeal, and not the date of
delivery to LBC, is deemed to be the date of the filing of the notice of appeal. Since the NLRC
received petitioners notice of appeal on 26 February 2001, the appeal was clearly filed out of
time. Petitioner had thus lost its right to appeal from the decision of the Labor Arbiter and the
NLRC should have dismissed its notice of appeal.

WHEREFORE, we DENY the petition and AFFIRM the 9 March 2004 Decision and 4 June
2004 Resolution of the Court of Appeals in CA-G.R. SP No. 72086.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE
RENATO C. CORONA
CASTRO
Associate Justice
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 84433 June 2, 1992

ALEXANDER REYES, ALBERTO M. NERA, EDGARDO M. GECA, and 138

others, petitioners,
vs.
CRESENCIANO B. TRAJANO, as Officer-in-Charge, Bureau of Labor Relations, Med.
Arbiter PATERNO ADAP, and TRI-UNION EMPLOYEES UNION, et al., respondent.

NARVASA, C.J.:

The officer-in-charge of the Bureau of Labor Relations (Hon. Cresenciano Trajano) sustained the
denial by the Med Arbiter of the right to vote of one hundred forty-one (141) members of the
"Iglesia ni Kristo" (INK), all employed in the same company, at a certification election at which
two (2) labor organizations were contesting the right to be the exclusive representative of the
employees in the bargaining unit. That denial is assailed as having been done with grave abuse of
discretion in the special civil action of certiorari at bar, commenced by the INK members
adversely affected thereby.

The certification election was authorized to be conducted by the Bureau of Labor Relations
among the employees of Tri-Union Industries Corporation on October 20, 1987. The competing
unions were Tri-Union Employees Union-Organized Labor Association in Line Industries and
Agriculture (TUEU-OLALIA), and Trade Union of the Philippines and Allied Services
(TUPAS). Of the 348 workers initially deemed to be qualified voters, only 240 actually took part
in the election, conducted under the provision of the Bureau of Labor Relations. Among the 240
employees who cast their votes were 141 members of the INK.

The ballots provided for three (3) choices. They provided for votes to be cast, of course, for
either of the two (2) contending labor organizations, (a) TUPAS and (b) TUEU-OLALIA; and,
conformably with established rule and practice, 1 for (c) a third choice: "NO UNION."

The final tally of the votes showed the following results:

TUPAS 1

TUEU-OLALIA 95

NO UNION 1

SPOILED 1

CHALLENGED 141

The challenged votes were those cast by the 141 INK members. They were segregated
and excluded from the final count in virtue of an agreement between the competing
unions, reached at the pre-election conference, that the INK members should not be
allowed to vote "because they are not members of any union and refused to participate in
the previous certification elections."

The INK employees promptly made known their protest to the exclusion of their votes. They
filed f a petition to cancel the election alleging that it "was not fair" and the result thereof did
"not reflect the true sentiments of the majority of the employees." TUEU-OLALIA opposed the
petition. It contended that the petitioners "do not have legal personality to protest the results of
the election," because "they are not members of either contending unit, but . . . of the INK"
which prohibits its followers, on religious grounds, from joining or forming any labor
organization . . . ."

The Med-Arbiter saw no merit in the INK employees 1 petition. By Order dated December 21,
1987, he certified the TUEU-OLALIA as the sole and exclusive bargaining agent of the rank-
and-file employees. In that Order he decided the fact that "religious belief was (being) utilized to
render meaningless the rights of the non-members of the Iglesia ni Kristo to exercise the rights to
be represented by a labor organization as the bargaining agent," and declared the petitioners as
"not possessed of any legal personality to institute this present cause of action" since they were
not parties to the petition for certification election.

The petitioners brought the matter up on appeal to the Bureau of Labor Relations. There they
argued that the Med-Arbiter had "practically disenfranchised petitioners who had an
overwhelming majority," and "the TUEU-OLALIA certified union cannot be legally said to have
been the result of a valid election where at least fifty-one percent of all eligible voters in the
appropriate bargaining unit shall have cast their votes." Assistant Labor Secretary Cresenciano
B. Trajano, then Officer-in-Charge of the Bureau of Labor Relations, denied the appeal in his
Decision of July 22, 1988. He opined that the petitioners are "bereft of legal personality to
protest their alleged disenfrachisement" since they "are not constituted into a duly organized
labor union, hence, not one of the unions which vied for certification as sole and exclusive
bargaining representative." He also pointed out that the petitioners "did not participate in
previous certification elections in the company for the reason that their religious beliefs do not
allow them to form, join or assist labor organizations."

It is this Decision of July 22, 1988 that the petitioners would have this Court annul and set aside
in the present special civil action of certiorari.

The Solicitor General having expressed concurrence with the position taken by the petitioners,
public respondent NLRC was consequently required to file, and did thereafter file, its own
comment on the petition. In that comment it insists that "if the workers who are members of the
Iglesia ni Kristo in the exercise of their religious belief opted not to join any labor organization
as a consequence of which they themselves can not have a bargaining representative, then the
right to be representative by a bargaining agent should not be denied to other members of the
bargaining unit."

Guaranteed to all employees or workers is the "right to self-organization and to form, join, or
assist labor organizations of their own choosing for purposes of collective bargaining." This is
made plain by no less than three provisions of the Labor Code of the Philippines. 2 Article 243 of
the Code provides as follows: 3

ART. 243. Coverage and employees right to self-organization. All persons

employed in commercial, industrial and agricultural enterprises and in religious,
charitable, medical, or educational institutions whether operating for profit or not,
shall have the right to self-organization and to form, join, or assist labor
organizations of their own choosing for purposes or collective
bargaining. Ambulant, intermittent and itinerant workers, self-employed people,
rural workers and those without any definite employers may form labor
organizations for their mutual aid and protection.

Article 248 (a) declares it to be an unfair labor practice for an employer, among others, to
"interfere with, restrain or coerce employees in the exercise of their right to self-organization."
Similarly, Article 249 (a) makes it an unfair labor practice for a labor organization to "restrain or
coerce employees in the exercise of their rights to self-organization . . . "

The same legal proposition is set out in the Omnibus Rules Implementing the Labor Code, as
amended, as might be expected Section 1, Rule II (Registration of Unions), Book V (Labor
Relations) of the Omnibus Rules provides as follows; 4

Sec. 1. Who may join unions; exception. All persons employed in commercial,
industrial and agricultural enterprises, including employees of government
corporations established under the Corporation Code as well as employees of
 religious, medical or educational institutions, whether operating for profit or not,
except managerial employees, shall have the right to self-organization and to
form, join or assist labor organizations for purposes of collective
bargaining. Ambulant, intermittent and without any definite employers people,
rural workers and those without any definite employers may form labor
organizations for their mutual aid and protection.

xxx xxx xxx

The right of self-organization includes the right to organize or affiliate with a labor union or
determine which of two or more unions in an establishment to join, and to engage in concerted
activities with co-workers for purposes of collective bargaining through representatives of their
own choosing, or for their mutual aid and protection, i.e., the protection, promotion, or
enhancement of their rights and interests. 5

Logically, the right NOT to join, affiliate with, or assist any union, and to disaffiliate or
resign from a labor organization, is subsumed in the right to join, affiliate with, or assist any
union, and to maintain membership therein. The right to form or join a labor organization
necessarily includes the right to refuse or refrain from exercising said right. It is self-evident that
just as no one should be denied the exercise of a right granted by law, so also, no one should be
compelled to exercise such a conferred right. The fact that a person has opted to acquire
membership in a labor union does not preclude his subsequently opting to renounce such
membership. 6

As early as 1974 this Court had occasion to expatiate on these self-evident propositions
in Victoriano v. Elizalde Rope Workers' Union, et al., 7 viz.:

. . .What the Constitution and Industrial Peace Act recognize and guarantee is the
"right" to form or join associations. Notwithstanding the different theories
propounded by the different schools of jurisprudence regarding the nature and
contents of a "right," it can be safely said that whatever theory one subscribes to,
a right comprehends at least two broad notions, namely: first, liberty or
freedom, i.e., the absence of legal restraint, whereby an employee may act for
himself being prevented by law; second, power, whereby an employee may, as he
pleases, join or refrain from joining an association. It is therefore the employee
who should decide for himself whether he should join or not an association; and
should he choose to join; and even after he has joined, he still retains the liberty
and the power to leave and cancel his membership with said organization at any
time (Pagkakaisa Samahang Manggagawa ng San Miguel Brewery vs. Enriquez,
et al., 108 Phil. 1010, 1019). It is clear, therefore, that the right to join a union
includes the right to abstain from joining any union (Abo, et al. vs. PHILAME
[KG] Employees Union, et al., L-19912, January 20, 1965, 13 SCRA 120, 123,
quoting Rothenberg, Labor Relations). Inasmuch as what both the Constitution
and the Industrial Peace Act have recognized, the guaranteed to the employee, is
the "right" to join associations of his choice, it would be absurd to say that the law
also imposes, in the same breath, upon the employee the duty to join associations.
The law does not enjoin an employee to sign up with any association.

The right to refuse to join or be represented by any labor organization is recognized not only by
law but also in the rules drawn up for implementation thereof. The original Rules on
Certification promulgated by the defunct Court of Industrial Relations required that the ballots to
be used at a certification election to determine which of two or more competing labor unions
would represent the employees in the appropriate bargaining unit should contain, aside from the
names of each union, an alternative choice of the employee voting, to the effect that he desires
not to which of two or more competing labor unions would represent the employees in the
appropriate bargaining unit should contain, aside from the names of each union, an alternative
choice of the employee voting, to the effect that he desires not to be represented by any
union. 8 And where only one union was involved, the ballots were required to state the question
"Do you desire to be represented by said union?" as regards which the employees voting
would mark an appropriate square, one indicating the answer, "Yes" the other, "No."
To be sure, the present implementing rules no longer explicitly impose the requirement that the
ballots at a certification election include a choice for "NO UNION" Section 8 (rule VI, Book V
of the Omnibus Rules) entitled "Marketing and canvassing of votes," pertinently provides that:

. . . (a) The voter must write a cross (X) or a check (/) in the square opposite the
union of his choice. If only one union is involved, the voter shall make his cross
or check in the square indicating "YES" or "NO."

xxx xxx xxx

Withal, neither the quoted provision nor any other in the Omnibus Implementing Rules expressly
bars the inclusion of the choice of "NO UNION" in the ballots. Indeed it is doubtful if the
employee's alternative right NOT to form, join or assist any labor organization or withdraw or
resign from one may be validly eliminated and he be consequently coerced to vote for one or
another of the competing unions and be represented by one of them. Besides, the statement in the
quoted provision that "(i)f only one union is involved, the voter shall make his cross or check in
the square indicating "YES" or "NO," is quite clear acknowledgment of the alternative
possibility that the "NO" votes may outnumber the "YES" votes indicating that the majority
of the employees in the company do not wish to be represented by any union in which case,
no union can represent the employees in collective bargaining. And whether the prevailing "NO"
votes are inspired by considerations of religious belief or discipline or not is beside the point, and
may not be inquired into at all.

The purpose of a certification election is precisely the ascertainment of the wishes of the
majority of the employees in the appropriate bargaining unit: to be or not to be represented by a
labor organization, and in the affirmative case, by which particular labor organization. If the
results of the election should disclose that the majority of the workers do not wish to be
represented by any union, then their wishes must be respected, and no union may properly be
certified as the exclusive representative of the workers in the bargaining unit in dealing with the
employer regarding wages, hours and other terms and conditions of employment. The minority
employees who wish to have a union represent them in collective bargaining can do
nothing but wait for another suitable occasion to petition for a certification election and hope that
the results will be different. They may not and should not be permitted, however, to impose their
will on the majority who do not desire to have a union certified as the exclusive workers'
benefit in the bargaining unit upon the plea that they, the minority workers, are being denied
the right of self-organization and collective bargaining. As repeatedly stated, the right of self-
organization embraces not only the right to form, join or assist labor organizations, but the
concomitant, converse right NOT to form, join or assist any labor union.

That the INK employees, as employees in the same bargaining unit in the true sense of the term,
do have the right of self-organization, is also in truth beyond question, as well as the fact that
when they voted that the employees in their bargaining unit should be represented by "NO
UNION," they were simply exercising that right of self-organization, albeit in its negative aspect.

The respondents' argument that the petitioners are disqualified to vote because they "are not
constituted into a duly organized labor union" "but members of the INK which prohibits its
followers, on religious grounds, from joining or forming any labor organization" and "hence,
not one of the unions which vied for certification as sole and exclusive bargaining
representative," is specious. Neither law, administrative rule nor jurisprudence requires that only
employees affiliated with any labor organization may take part in a certification election. On the
contrary, the plainly discernible intendment of the law is to grant the right to vote to all bona
fide employees in the bargaining unit, whether they are members of a labor organization or not.
As held in Airtime Specialists, Inc. v. Ferrer-Calleja: 9

In a certification election all rank-and-file employees in the appropriate

bargaining unit are entitled to vote. This principle is clearly stated in Art. 255 of
the Labor Code which states that the "labor organization designated or selected by
the majority of the employees in an appropriate bargaining unit shall be the
exclusive representative of the employees in such unit for the purpose of
collective bargaining." Collective bargaining covers all aspects of the
employment relation and the resultant CBA negotiated by the certified union
binds all employees in the bargaining unit. Hence, all rank-and-file employees,
 probationary or permanent, have a substantial interest in the selection of the
bargaining representative. The Code makes no distinction as to their employment
for certification election. The law refers to "all" the employees in the bargaining
unit. All they need to be eligible to support the petition is to belong to the
"bargaining unit".

Neither does the contention that petitioners should be denied the right to vote because they "did
not participate in previous certification elections in the company for the reason that their
religious beliefs do not allow them to form, join or assist labor organizations," persuade
acceptance. No law, administrative rule or precedent prescribes forfeiture of the right to vote by
reason of neglect to exercise the right in past certification elections. In denying the petitioners'
right to vote upon these egregiously fallacious grounds, the public respondents exercised their
discretion whimsically, capriciously and oppressively and gravely abused the same.

WHEREFORE, the petition for certiorari is GRANTED; the Decision of the then Officer-in-
Charge of the Bureau of Labor Relations dated December 21, 1987 (affirming the Order of the
Med-Arbiter dated July 22, 1988) is ANNULLED and SET ASIDE; and the petitioners are
DECLARED to have legally exercised their right to vote, and their ballots should be canvassed
and, if validly and properly made out, counted and tallied for the choices written therein. Costs
against private respondents.

SO ORDERED.

Paras, Padilla and Regalado, JJ., concur.

Nocon, J., is on leave.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 179652 May 8, 2009

PEOPLE'S BROADCASTING (BOMBO RADYO PHILS., INC.), Petitioner,

vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE
REGIONAL DIRECTOR, DOLE REGION VII, and JANDELEON
JUEZAN, Respondents.

DECISION

TINGA, J.:

The present controversy concerns a matter of first impression, requiring as it does the
determination of the demarcation line between the prerogative of the Department of Labor and
Employment (DOLE) Secretary and his duly authorized representatives, on the one hand, and the
jurisdiction of the National Labor Relations Commission, on the other, under Article 128 (b) of
the Labor Code in an instance where the employer has challenged the jurisdiction of the DOLE
at the very first level on the ground that no employer-employee relationship ever existed between
the parties.

I.

The instant petition for certiorari under Rule 65 assails the decision and the resolution of the
Court of Appeals dated 26 October 2006 and 26 June 2007, respectively, in C.A. G.R. CEB-SP
No. 00855.1

The petition traces its origins to a complaint filed by Jandeleon Juezan (respondent) against
Peoples Broadcasting Service, Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal deduction,
non-payment of service incentive leave, 13th month pay, premium pay for holiday and rest day
and illegal diminution of benefits, delayed payment of wages and non-coverage of SSS, PAG-
IBIG and Philhealth before the Department of Labor and Employment (DOLE) Regional Office
No. VII, Cebu City.2 On the basis of the complaint, the DOLE conducted a plant level inspection
on 23 September 2003. In the Inspection Report Form,3 the Labor Inspector wrote under the
heading "Findings/Recommendations" "non-diminution of benefits" and "Note: Respondent deny
employer-employee relationship with the complainant- see Notice of Inspection results." In the
Notice of Inspection Results4 also bearing the date 23 September 2003, the Labor Inspector made
the following notations:

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

On the other hand, complainant Juezans alleged violation of non-diminution of benefits is

computed as follows:

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

(August 1/03 to Sept 15/03)

Note: Recommend for summary investigation or whatever action deem proper.5

Petitioner was required to rectify/restitute the violations within five (5) days from receipt. No
rectification was effected by petitioner; thus, summary investigations were conducted, with the
parties eventually ordered to submit their respective position papers.6

In his Order dated 27 February 2004,7 DOLE Regional Director Atty. Rodolfo M. Sabulao
(Regional Director) ruled that respondent is an employee of petitioner, and that the former is
entitled to his money claims amounting to 203,726.30. Petitioner sought reconsideration of the
Order, claiming that the Regional Director gave credence to the documents offered by
respondent without examining the originals, but at the same time he missed or failed to consider
petitioners evidence. Petitioners motion for reconsideration was denied.8 On appeal to the
DOLE Secretary, petitioner denied once more the existence of employer-employee relationship.
In its Order dated 27 January 2005, the Acting DOLE Secretary dismissed the appeal on the
ground that petitioner did not post a cash or surety bond and instead submitted a Deed of
Assignment of Bank Deposit.9

Petitioner elevated the case to the Court of Appeals, claiming that it was denied due process
when the DOLE Secretary disregarded the evidence it presented and failed to give it the
opportunity to refute the claims of respondent. Petitioner maintained that there is no employer-
employee relationship had ever existed between it and respondent because it was the drama
directors and producers who paid, supervised and disciplined respondent. It also added that the
case was beyond the jurisdiction of the DOLE and should have been considered by the labor
arbiter because respondents claim exceeded 5,000.00.

The Court of Appeals held that petitioner was not deprived of due process as the essence thereof
is only an opportunity to be heard, which petitioner had when it filed a motion for
reconsideration with the DOLE Secretary. It further ruled that the latter had the power to order
and enforce compliance with labor standard laws irrespective of the amount of individual claims
because the limitation imposed by Article 29 of the Labor Code had been repealed by Republic
Act No. 7730.10 Petitioner sought reconsideration of the decision but its motion was denied.11

Before this Court, petitioner argues that the National Labor Relations Commission (NLRC), and
not the DOLE Secretary, has jurisdiction over respondents claim, in view of Articles 217 and
128 of the Labor Code.12 It adds that the Court of Appeals committed grave abuse of discretion
when it dismissed petitioners appeal without delving on the issues raised therein, particularly the
claim that no employer-employee relationship had ever existed between petitioner and
respondent. Finally, petitioner avers that there is no appeal, or any plain, speedy and adequate
remedy in the ordinary course of law available to it.

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

II.

The significance of this case may be reduced to one simple questiondoes the Secretary of
Labor have the power to determine the existence of an employer-employee relationship?

To resolve this pivotal issue, one must look into the extent of the visitorial and enforcement
power of the DOLE found in Article 128 (b) of the Labor Code, as amended by Republic Act
7730. It reads:

Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The Secretary or his duly authorized
representative shall issue writs of execution to the appropriate authority for the enforcement of
their orders, except in cases where the employer contests the findings of the labor employment
and enforcement officer and raises issues supported by documentary proofs which were not
considered in the course of inspection. (emphasis supplied)

xxx

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

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

The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of
Labor Standards Cases15 issued by the DOLE Secretary. It reads:

Rule II MONEY CLAIMS ARISING FROM COMPLAINT/ROUTINE INSPECTION

Sec. 3. Complaints where no employer-employee relationship actually exists. Where employer-

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

In the recent case of Bay Haven, Inc. v. Abuan,16 this Court recognized the first situation and
accordingly ruled that a complainants allegation of his illegal dismissal had deprived the DOLE
of jurisdiction as per Article 217 of the Labor Code.17

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

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

office are the primary source materials, what may prove decisive are factors related to the history
of the employers business operations, its current state as well as accepted contemporary
practices in the industry. More often than not, the question of employer-employee relationship
becomes a battle of evidence, the determination of which should be comprehensive and intensive
and therefore best left to the specialized quasi-judicial body that is the NLRC.
It can be assumed that the DOLE in the exercise of its visitorial and enforcement power
somehow has to make a determination of the existence of an employer-employee relationship.
Such prerogatival determination, however, cannot be coextensive with the visitorial and
enforcement power itself. Indeed, such determination is merely preliminary, incidental and
collateral to the DOLEs primary function of enforcing labor standards provisions. The
determination of the existence of employer-employee relationship is still primarily lodged with
the NLRC. This is the meaning of the clause "in cases where the relationship of employer-
employee still exists" in Art. 128 (b).

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

The existence of an employer-employee relationship is a statutory prerequisite to and a limitation

on the power of the Secretary of Labor, one which the legislative branch is entitled to impose.
The rationale underlying this limitation is to eliminate the prospect of competing conclusions of
the Secretary of Labor and the NLRC, on a matter fraught with questions of fact and law, which
is best resolved by the quasi-judicial body, which is the NRLC, rather than an administrative
official of the executive branch of the government. If the Secretary of Labor proceeds to exercise
his visitorial and enforcement powers absent the first requisite, as the dissent proposes, his office
confers jurisdiction on itself which it cannot otherwise acquire.

The approach suggested by the dissent is frowned upon by common law. To wit:

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

A more liberal interpretative mode, "pragmatic or functional analysis," has also emerged in
ascertaining the jurisdictional boundaries of administrative agencies whose jurisdiction is
established by statute. Under this approach, the Court examines the intended function of the
tribunal and decides whether a particular provision falls within or outside that function, rather
than making the provision itself the determining centerpiece of the analysis.19Yet even under this
more expansive approach, the dissent fails.

A reading of Art. 128 of the Labor Code reveals that the Secretary of Labor or his authorized
representatives was granted visitorial and enforcement powers for the purpose of determining
violations of, and enforcing, the Labor Code and any labor law, wage order, or rules and
regulations issued pursuant thereto. Necessarily, the actual existence of an employer-employee
relationship affects the complexion of the putative findings that the Secretary of Labor may
determine, since employees are entitled to a different set of rights under the Labor Code from the
employer as opposed to non-employees. Among these differentiated rights are those accorded by
the "labor standards" provisions of the Labor Code, which the Secretary of Labor is mandated to
enforce. If there is no employer-employee relationship in the first place, the duty of the employer
to adhere to those labor standards with respect to the non-employees is questionable.

This decision should not be considered as placing an undue burden on the Secretary of Labor in
the exercise of visitorial and enforcement powers, nor seen as an unprecedented diminution of
the same, but rather a recognition of the statutory limitations thereon. A mere assertion of
absence of employer-employee relationship does not deprive the DOLE of jurisdiction over the
claim under Article 128 of the Labor Code. At least a prima facie showing of such absence of
relationship, as in this case, is needed to preclude the DOLE from the exercise of its power. The
Secretary of Labor would not have been precluded from exercising the powers under Article 128
(b) over petitioner if another person with better-grounded claim of employment than that which
respondent had. Respondent, especially if he were an employee, could have very well enjoined
other employees to complain with the DOLE, and, at the same time, petitioner could ill-afford to
disclaim an employment relationship with all of the people under its aegis.
Without a doubt, petitioner, since the inception of this case had been consistent in maintaining
that respondent is not its employee. Certainly, a preliminary determination, based on the
evidence offered, and noted by the Labor Inspector during the inspection as well as submitted
during the proceedings before the Regional Director puts in genuine doubt the existence of
employer-employee relationship. From that point on, the prudent recourse on the part of the
DOLE should have been to refer respondent to the NLRC for the proper dispensation of his
claims. Furthermore, as discussed earlier, even the evidence relied on by the Regional Director in
his order are mere self-serving declarations of respondent, and hence cannot be relied upon as
proof of employer-employee relationship.

III.

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

It is not enough that the evidence be simply considered. The standard is substantial evidence as
in all other quasi-judicial agencies. The standard employed in the last sentence of Article 128(b)
of the Labor Code that the documentary proofs be "considered in the course of inspection" does
not apply. It applies only to issues other than the fundamental issue of existence of employer-
employee relationship. A contrary rule would lead to controversies on the part of labor officials
in resolving the issue of employer-employee relationship. The onset of arbitrariness is the advent
of denial of substantive due process.

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

At the onset, it is the Courts considered view that the existence of employer- employee
relationship could have been easily resolved, or at least prima facie determined by the labor
inspector, during the inspection by looking at the records of petitioner which can be found in the
work premises. Nevertheless, even if the labor inspector had noted petitioners manifestation and
documents in the Notice of Inspection Results, it is clear that he did not give much credence to
said evidence, as he did not find the need to investigate the matter further. Considering that the
documents shown by petitioner, namely: cash vouchers, checks and statements of account,
summary billings evidencing payment to the alleged real employer of respondent, letter-contracts
denominated as "Employment for a Specific Undertaking," prima facie negate the existence of
employer-employee relationship, the labor inspector could have exerted a bit more effort and
looked into petitioners payroll, for example, or its roll of employees, or interviewed other
employees in the premises. After all, the labor inspector, as a labor regulation officer is given
"access to employers records and premises at any time of day or night whenever work is being
undertaken therein, and the right to copy therefrom, to question any employee and investigate
any fact, condition or matter which may be necessary to determine violations or which may aid
in the enforcement of this Code and of any labor law, wage order or rules and regulations
pursuant thereto."22 Despite these far-reaching powers of labor regulation officers, records reveal
that no additional efforts were exerted in the course of the inspection.

The Court further examined the records and discovered to its dismay that even the Regional
Director turned a blind eye to the evidence presented by petitioner and relied instead on the self-
serving claims of respondent.

In his position paper, respondent claimed that he was hired by petitioner in September 1996 as a
radio talent/spinner, working from 8:00 am until 5 p.m., six days a week, on a gross rate of
60.00 per script, earning an average of 15,0000.00 per month, payable on a semi-monthly
basis. He added that the payment of wages was delayed; that he was not given any service
incentive leave or its monetary commutation, or his 13th month pay; and that he was not made a
member of the Social Security System (SSS), Pag-Ibig and PhilHealth. By January 2001, the
number of radio programs of which respondent was a talent/spinner was reduced, resulting in the
reduction of his monthly income from 15,000.00 to only 4,000.00, an amount he could barely
live on. Anent the claim of petitioner that no employer-employee relationship ever existed,
respondent argued that that he was hired by petitioner, his wages were paid under the payroll of
the latter, he was under the control of petitioner and its agents, and it was petitioner who had the
power to dismiss him from his employment.23 In support of his position paper, respondent
attached a photocopy of an identification card purportedly issued by petitioner, bearing
respondents picture and name with the designation "Spinner"; at the back of the I.D., the
following is written: " This certifies that the card holder is a duly Authorized MEDIA
Representative of BOMBO RADYO PHILIPPINES THE NO.1 Radio Network in the
Country ***BASTA RADYO BOMBO***"24 Respondent likewise included a Certification
which reads:

This is to certify that MR. JANDELEON JUEZAN is a program employee of PEOPLES

BROADCASTING SERVICES, INC. (DYMF- Bombo Radyo Cebu) since 1990 up to the
present.

Furtherly certifies that Mr. Juezan is receiving a monthly salary of FIFTEEN THOUSAND
(15,000.00) PESOS.

This certification is issued upon the request of the above stated name to substantiate loan
requirement.

Given this 18th day of April 2000, Cebu City , Philippines.

(signed)
GREMAN B. SOLANTE
Station Manager

On the other hand, petitioner maintained in its position paper that respondent had never been its
employee. Attached as annexes to its position paper are photocopies of cash vouchers it issued to
drama producers, as well as letters of employment captioned "Employment for a Specific
Undertaking", wherein respondent was appointed by different drama directors as spinner/narrator
for specific radio programs.25

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

Furthermore, respondents pieces of evidencethe identification card and the certification

issued by petitioners Greman Solante are not even determinative of an employer-employee
relationship. The certification, issued upon the request of respondent, specifically stated that
"MR. JANDELEON JUEZAN is a program employee of PEOPLES BROADCASTING
SERVICES, INC. (DYMF- Bombo Radyo Cebu)," it is not therefore "crystal clear that
complainant is a station employee rather than a program employee hence entitled to all the
benefits appurtenant thereto,"26 as found by the DOLE Regional Director. Respondent should be
bound by his own evidence. Moreover, the classification as to whether one is a "station
employee" and "program employee," as lifted from Policy Instruction No. 40, 27 dividing the
workers in the broadcast industry into only two groups is not binding on this Court, especially
when the classification has no basis either in law or in fact.28

Even the identification card purportedly issued by petitioner is not proof of employer-employee
relationship since it only identified respondent as an "Authorized Representative of Bombo
Radyo," and not as an employee. The phrase gains significance when compared vis a vis the
following notation in the sample identification cards presented by petitioner in its motion for
reconsideration:
 1. This is to certify that the person whose picture and signature appear hereon is an
employee of Bombo Radio Philippines.

2. This ID must be worn at all times within Bombo Radyo Philippines premises for
proper identification and security. Furthermore, this is the property of Bombo Radyo
Philippines and must be surrendered upon separation from the company.

HUMAN RESOURCE DEPARMENT

(Signed)
JENALIN D. PALER
HRD HEAD

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

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

In the instant case, save for respondents self-serving allegations and self-defeating evidence,
there is no substantial basis to warrant the Regional Directors finding that respondent is an
employee of petitioner. Interestingly, the Order of the Secretary of Labor denying petitioners
appeal dated 27 January 2005, as well as the decision of the Court of Appeals dismissing the
petition for certiorari, are silent on the issue of the existence of an employer-employee
relationship, which further suggests that no real and proper determination the existence of such
relationship was ever made by these tribunals. Even the dissent skirted away from the issue of
the existence of employer-employee relationship and conveniently ignored the dearth of
evidence presented by respondent.

Although substantial evidence is not a function of quantity but rather of quality, the peculiar
environmental circumstances of the instant case demand that something more should have been
proffered.33 Had there been other proofs of employment, such as respondents inclusion in
petitioners payroll, or a clear exercise of control, the Court would have affirmed the finding of
employer-employee relationship. The Regional Director, therefore, committed grievous error in
ordering petitioner to answer for respondents claims. Moreover, with the conclusion that no
employer-employee relationship has ever existed between petitioner and respondent, it is crystal-
clear that the DOLE Regional Director had no jurisdiction over respondents complaint. Thus,
the improvident exercise of power by the Secretary of Labor and the Regional Director behooves
the court to subject their actions for review and to invalidate all the subsequent orders they
issued.

IV.

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

The Court does not agree.

The provision on appeals from the DOLE Regional Offices to the DOLE Secretary is in the last
paragraph of Art. 128 (b) of the Labor Code, which reads:

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

While the requirements for perfecting an appeal must be strictly followed as they are considered
indispensable interdictions against needless delays and for orderly discharge of judicial business,
the law does admit exceptions when warranted by the circumstances. Technicality should not be
allowed to stand in the way of equitably and completely resolving the rights and obligations of
the parties.37 Thus, in some cases, the bond requirement on appeals involving monetary awards
had been relaxed, such as when (i) there was substantial compliance with the Rules; (ii) the
surrounding facts and circumstances constitute meritorious ground to reduce the bond; (iii) a
liberal interpretation of the requirement of an appeal bond would serve the desired objective of
resolving controversies on the merits; or (iv) the appellants, at the very least exhibited their
willingness and/or good faith by posting a partial bond during the reglementary period.38

A review of the documents submitted by petitioner is called for to determine whether they should
have been admitted as or in lieu of the surety or cash bond to sustain the appeal and serve the
ends of substantial justice.

The Deed of Assignment reads:

DEED OF ASSIGNMENT OF BANK DEPOSIT

WITH SPECIAL POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That I, GREMAN B. SOLANTE in my capacity as Station Manager of DYMF Cebu City,

PEOPLES BROADCASTING SERVICES, INC., a corporation duly authorized and existing
under and by virtue of the laws of the Philippines, for and in consideration of the sum of PESOS:
TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100
ONLY (203,726.30) Phil. Currency, as CASH BOND GUARANTEE for the monetary award
in favor to the Plaintiff in the Labor Case docketed as LSED Case No. R0700-2003-09-CI-09,
now pending appeal.

That Respondent-Appellant do hereby undertake to guarantee available and sufficient funds

covered by Platinum Savings Deposit (PSD) No. 010-8-00038-4 of PEOPLES
BROADCASTING SERVICES, INC. in the amount of PESOS: TWO HUNDRED THREE
THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (203,726.30)
payable to Plaintiff-Appellee/Department of Labor and Employment Regional Office VII at
Queen City Development Bank, Cebu Branch, Sanciangko St. Cebu City.

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

FURTHER, this Deed of Assignment is limited to the principal amount of PESOS: TWO
HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100
ONLY (203,726.30) Phil. Currency, therefore, any interest to be earned from the said Deposit
will be for the account holder.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 18th day if June, 2004, in
the City of Cebu, Philippines.

PEOPLES BROADCASTING SERVICES, INC.

By:

(Signed)
GREMAN B. SOLANTE
Station Manager

As priorly mentioned, the Deed of Assignment was accompanied by a Letter Agreement between
Queen City Development Bank and petitioner concerning Platinum Savings Deposit (PSD) No.
010-8-00038-4,39 and a Cash Voucher issued by petitioner showing the amount of 203,726.30
deposited at the said bank.

Casting aside the technical imprecision and inaptness of words that mark the three documents, a
liberal reading reveals the documents petitioner did assign, as cash bond for the monetary award
in favor of respondent in LSED Case NO. RO700-2003-CI-09, the amount of 203,726.30
covered by petitioners PSD Account No. 010-8-00038-4 with the Queen City Development
Bank at Sanciangko St. Cebu City, with the depositary bank authorized to remit the amount to,
and upon withdrawal by respondent and or the Department of Labor and Employment Regional
Office VII, on the basis of the proper writ of execution. The Court finds that the Deed of
Assignment constitutes substantial compliance with the bond requirement.

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

The Deed of Assignment must be distinguished from the type of bank certification submitted by
appellants in Cordova v. Keysas Boutique,41 wherein this Court found that such bank
certification did not come close to the cash or surety bond required by law. The bank
certification in Cordova merely stated that the employer maintains a depository account with a
balance of 23,008.19, and that the certification was issued upon the depositors request for
whatever legal purposes it may serve. There was no indication that the said deposit was made
specifically for the pending appeal, as in the instant case. Thus, the Court ruled that the bank
certification had not in any way ensured that the award would be paid should the appeal fail.
Neither was the appellee in the case prevented from making withdrawals from the savings
account. Finally, the amount deposited was measly compared to the total monetary award in the
judgment.42

V.

Another question of technicality was posed against the instant petition in the hope that it would
not be given due course. Respondent asserts that petitioner pursued the wrong mode of appeal
and thus the instant petition must be dismissed.1avvphi1.zw+ Once more, the Court is not
convinced.

A petition for certiorari is the proper remedy when any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal, nor any
plain speedy, and adequate remedy at law. There is "grave abuse of discretion" when respondent
acts in a capricious or whimsical manner in the exercise of its judgment as to be equivalent to
lack of jurisdiction.43
Respondent may have a point in asserting that in this case a Rule 65 petition is a wrong mode of
appeal, as indeed the writ of certiorari is an extraordinary remedy, and certiorari jurisdiction is
not to be equated with appellate jurisdiction. Nevertheless, it is settled, as a general proposition,
that the availability of an appeal does not foreclose recourse to the extraordinary remedies, such
as certiorari and prohibition, where appeal is not adequate or equally beneficial, speedy and
sufficient, as where the orders of the trial court were issued in excess of or without jurisdiction,
or there is need to promptly relieve the aggrieved party from the injurious effects of the acts of
an inferior court or tribunal, e.g., the court has authorized execution of the judgment.44 This
Court has even recognized that a recourse to certiorari is proper not only where there is a clear
deprivation of petitioners fundamental right to due process, but so also where other special
circumstances warrant immediate and more direct action.45

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

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

therein.50 The rules were also relaxed by the Court after considering the public interest involved
in the case;51 when public welfare and the advancement of public policy dictates; when the
broader interest of justice so requires; when the writs issued are null and void; or when the
questioned order amounts to an oppressive exercise of judicial authority.52

"The peculiar circumstances of this case warrant, as we held in Republic v. Court of Appeals,
107 SCRA 504, 524, the exercise once more of our exclusive prerogative to suspend our own
rules or to exempt a particular case from its operation as in x x Republic of the Philippines v.
Court of Appeals, et al., (83 SCRA 453, 478-480 [1978]), thus: x x The Rules have been
drafted with the primary objective of enhancing fair trials and expediting justice. As a corollary,
if their applications and operation tend to subvert and defeat instead of promote and enhance it,
their suspension is justified."53

The Regional Director fully relied on the self-serving allegations of respondent and
misinterpreted the documents presented as evidence by respondent. To make matters worse,
DOLE denied petitioners appeal based solely on petitioners alleged failure to file a cash or
surety bond, without any discussion on the merits of the case. Since the petition for certiorari
before the Court of Appeals sought the reversal of the two aforesaid orders, the appellate court
necessarily had to examine the evidence anew to determine whether the conclusions of the
DOLE were supported by the evidence presented. It appears, however, that the Court of Appeals
did not even review the assailed orders and focused instead on a general discussion of due
process and the jurisdiction of the Regional Director. Had the appellate court truly reviewed the
records of the case, it would have seen that there existed valid and sufficient grounds for finding
grave abuse of discretion on the part of the DOLE Secretary as well the Regional Director. In
ruling and acting as it did, the Court finds that the Court of Appeals may be properly subjected to
its certiorari jurisdiction. After all, this Court has previously ruled that the extraordinary writ of
certiorari will lie if it is satisfactorily1avvphi1

established that the tribunal had acted capriciously and whimsically in total disregard of evidence
material to or even decisive of the controversy.54

The most important consideration for the allowance of the instant petition is the opportunity for
the Court not only to set the demarcation between the NLRCs jurisdiction and the DOLEs
prerogative but also the procedure when the case involves the fundamental challenge on the
DOLEs prerogative based on lack of employer-employee relationship. As exhaustively
discussed here, the DOLEs prerogative hinges on the existence of employer-employee
relationship, the issue is which is at the very heart of this case. And the evidence clearly indicates
private respondent has never been petitioners employee. But the DOLE did not address, while
the Court of Appeals glossed over, the issue. The peremptory dismissal of the instant petition on
a technicality would deprive the Court of the opportunity to resolve the novel
controversy.1avvphi1

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

SO ORDERED.

DANTE O. TINGA
Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES*

Associate Justice
Acting Chairperson

TERESITA J. LEONARDO-DE
PRESBITERO J. VELASCO, JR.
CASTRO**
Associate Justice
Associate Justice

ARTURO D. BRION
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

CONCHITA CARPIO MORALES

Associate Justice
Acting Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons
Attestation, it is hereby certified that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice
STEP 3.B: FACTS

Facts are the brief story of the case. You should write
what happened in the case, who are the petitioner and the
respondents, what is the decision of the Court of Appeals
and Lower Courts. Facts should be brief as possible. A
digest is a summary of the full text and not another copy
of the full text.

STEP 3.C: ISSUE

Issue for me, always starts with WHETHER OR NOT followed by

the issue that is related to your topic. For example, the
topic is warrant of arrest and the issue in the case is the
validity of the warrant, then your issue should be, WHETHER
OR NOT the warrant is valid.

STEP 3.D: RULING/HELD

This is the decision of the SUPREME COURT. I repeat, this

is the DECISION OF THE SUPREME COURT not the ruling of any
lower court regarding the issue you raised in your issue
portion. So, The ISSUE is the question, the RULING is the
answer.

You can use Ruling or Held, whatever is comfortable for you.

The point is, you or other people should see the decision
of the court whether it is granted or dismissed and the
rationale for such decision. Decision should answer the
issue as i said earlier, if you put a decision that does
not answer your issue then you have a problem discussing
the case.

STEP 3.E: HOW IT SHOULD LOOK LIKE

TRINIDAD v. GABRIEL
G.R. No. XXXXXXX, August 30, 1950
DE GUZMAN, J.:

FACTS:

ISSUE:
RULING: