Wave 8 F&D

[G.R. No. 158255.
July 8, 2004]
MANILA WATER COMPANY, INC., petitioner, vs. HERMINIO D. PENA, ESTEBAN B. BALDOZA,
JORGE D. CANONIGO, JR., IKE S. DELFIN, RIZALINO M. INTAL, REY T. MANLEGRO,
JOHN L. MARTEJA, MARLON B. MORADA, ALLAN D. ESPINA,
EDUARDO ONG, AGNESIOD. QUEBRAL, EDMUNDO B. VICTA, VICTOR
C. ZAFARALLA, EDILBERTO C. PINGUL and FEDERICO M. RIVERA, respondents.
YNARES-SANTIAGO, J.:
This petition assails the decision[1] of the Court of Appeals dated November
29, 2002, in CA-G.R. SP No. 67134, which reversed the decision of the National
Labor Relations Commission and reinstated the decision of the Labor Arbiter
with modification.
Petitioner Manila Water Company, Inc. is one of the two private
concessionaires contracted by the Metropolitan Waterworks and Sewerage
System (MWSS) to manage the water distribution system in the East Zone of
Metro Manila, pursuant to Republic Act No. 8041, otherwise known as
the National Water Crisis Act of 1995.Under the Concession Agreement,
petitioner undertook to absorb former employees of the MWSS whose names
and positions were in the list furnished by the latter, while the employment of
those not in the list was terminated on the day petitioner took over the
operation of the East Zone, which was on August 1, 1997. Private respondents,
being contractual collectors of the MWSS, were among the 121 employees not
included in the list; nevertheless, petitioner engaged their services without
written contract from August 1, 1997 to August 31, 1997. Thereafter,
on September 1, 1997, they signed a three-month contract to perform
collection services for eight branches of petitioner in the East Zone.[2]
Before the end of the three-month contract, the 121 collectors incorporated
the Association Collectors Group, Inc. (ACGI),[3] which was contracted by
petitioner to collect charges for the Balara Branch. Subsequently, most of the
121 collectors were asked by the petitioner to transfer to the First Classic
Courier Services, a newly registered corporation. Only private respondents
herein remained with ACGI. Petitioner continued to transact with ACGI to do its
collection needs until February 8, 1999, when petitioner terminated its contract
with ACGI.[4]
1 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

Private respondents filed a complaint for illegal dismissal and money claims
against petitioner, contending that they were petitioners employees as all the
methods and procedures of their collections were controlled by the latter.
On the other hand, petitioner asserts that private respondents were
employees of ACGI, an independent contractor. It maintained that it had no
control and supervision over private respondents manner of performing their
work except as to the results. Thus, petitioner did not have an employer-
employee relationship with the private respondents, but only a service
contractor-client relationship with ACGI.
On May 31, 2000, Labor Arbiter Eduardo J. Carpio rendered a decision
finding the dismissal of private respondents illegal. He held that private
respondents were regular employees of petitioner not only because the tasks
performed by them were controlled by it but, also, the tasks were obviously
necessary and desirable to petitioners principal business. The dispositive
portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered, finding that

complainants were employees of respondent [petitioner herein], that they were
illegally dismissed, and respondent [petitioner herein] is hereby ordered to pay
their separation pay based on the following computed amounts:
HERMINIO D. PENA P15,000.00

ESTEBAN BALDOZA P12,000.00
JORGE D. CANONIGO, JR. P16,000.00
IKE S. DELFIN P12,000.00
RIZALINO M. INTAL P16,000.00
REY T. MANLEGRO P16,000.00
JOHN L. MARTEJA P12,000.00
MARLON B. MORADA P16,000.00
ALLAN D. ESPINA P14,000.00
EDUARDO ONG P15,000.00
AGNESIO D. QUEBRAL P16,000.00
EDMUNDO B. VICTA P13,000.00
VICTOR P. ZAFARALLA P15,000.00
EDILBERTO C. PINGUL P19,500.00
FEDERICO M. RIVERA P15,000.00
-------------------------------
TOTAL P222,500.00

Respondent [petitioner herein] is further directed to pay ten (10%) percent of
the total award as attorneys fee or the sum of P22,250.00.
SO ORDERED.[5]
Both parties appealed to the NLRC, which reversed the decision of the
Labor Arbiter and ruled that the documentary evidence, e.g., letters and
memoranda by the petitioner to ACGI regarding the poor performance of the
collectors, did not constitute proof of control since these documents merely
identified the erring collectors; the appropriate disciplinary actions were left to
the corporation to impose.[6] Further, there was no evidence showing that the
incorporation of ACGI was irregular.
Private respondents filed a petition for certiorari with the Court of Appeals,
contending that the NLRC acted with grave abuse of discretion amounting to
lack or excess of jurisdiction when it reversed the decision of the Labor Arbiter.
The Court of Appeals reversed the decision of the NLRC and reinstated with
modification the decision of the Labor Arbiter.[7] It held that petitioner
deliberately prevented the creation of an employment relationship with the
private respondents; and that ACGI was not an independent contractor. It
likewise denied petitioners motion for reconsideration.[8]
Hence, this petition for review raising the following errors:
THE HONORABLE COURT OF APPEALS IN RENDERING THE ASSAILED DECISION

AND RESOLUTION COMMITTED GRAVE REVERSIBLE ERRORS:
A. IN GOING BEYOND ITS JURISDICTION AND PROCEEDING TO GIVE

DUE COURSE TO RESPONDENTS PETITION FOR CERTIORARI UNDER
RULE 65 OF THE RULES OF COURT, NOTWITHSTANDING THE
ABSENCE OF ANY PROOF OF GRAVE ABUSE OF DISCRETION ON THE
PART OF THE NATIONAL LABOR RELATIONS COMMISSION WHEN IT
RENDERED THE DECISION ASSAILED BY HEREIN RESPONDENTS.
B. WHEN IT MANIFESTLY OVERLOOKED THE EVIDENCE PRESENTED BY
THE PETITIONER COMPANY AND RULING THAT THE PETITIONERS
DEFENSE OF LACK OF EMPLOYER-EMPLOYEE RELATIONS IS
WITHOUT MERIT.
C. IN CONCLUDING THAT PETITIONER COMPANY REQUIRED
RESPONDENTS TO INCORPORATE THE ASSOCIATED COLLECTORS

GROUP, INC. [ACGI] NOTWITHSTANDING ABSENCE OF ANY
SPECIFIC EVIDENCE IN SUPPORT OF THE SAME.
D. IN FINDING PETITIONER COMPANY GUILTY OF BAD FAITH
NOTWITHSTANDING ABSENCE OF ANY SPECIFIC EVIDENCE IN
SUPPORT OF THE SAME, AND AWARDING MORAL AND EXEMPLARY
DAMAGES TO HEREIN RESPONDENTS.[9]
The pivotal issue to be resolved in this petition is whether or not there
exists an employer-employee relationship between petitioner and private
respondents. Corollary thereto is the issue of whether or not private
respondents were illegally dismissed by petitioner.
The issue of whether or not an employer-employee relationship exists in a
given case is essentially a question of fact.[10] As a rule, the Supreme Court is
not a trier of facts, and this applies with greater force in labor cases. Hence,
factual findings of quasi-judicial bodies like the NLRC, particularly when they
coincide with those of the Labor Arbiter and if supported by substantial
evidence, are accorded respect and even finality by this Court.[11] However, a
disharmony between the factual findings of the Labor Arbiter and the National
Labor Relations Commission opens the door to a review thereof by this
Court. Factual findings of administrative agencies are not infallible and will be
set aside when they fail the test of arbitrariness. Moreover, when the findings
of the National Labor Relations Commission contradict with those of the labor
arbiter, this Court, in the exercise of its equity jurisdiction, may look into the
records of the case and reexamine the questioned findings.[12]
The resolution of the foregoing issues initially boils down to a determination
of the true status of ACGI, i.e., whether it is an independent contractor or a
labor-only contractor.
Petitioner asserts that ACGI, a duly organized corporation primarily
engaged in collection services, is an independent contractor which entered into
a service contract for the collection of petitioners accounts starting November
30, 1997 until the early part of February 1999. Thus, it has no employment
relationship with private respondents, being employees of ACGI.
The existence of an employment relationship between petitioner and private
respondents cannot be negated by simply alleging that the latter are employees
of ACGIas an independent contractor, it being crucial that ACGIs status,
whether as labor-only contractor or independent contractor, be measured in
terms of and determined by the criteria set by statute.

The case of De los Santos v. NLRC[13] succinctly enunciates this statutory
criteria
Job contracting is permissible only if the following conditions are met: 1) the
contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as
to the results thereof; and 2) the contractor has substantial capital or
investment in the form of tools, equipment, machineries, work premises, and
other materials which are necessary in the conduct of the business.
Labor-only contracting as defined in Section 5, Department Order No. 18-

02, Rules Implementing Articles 106-109 of the Labor Code[14] refers to an
arrangement where the contractor or subcontractor merely recruits, supplies or
places workers to perform job, work or service for a principal, and any of the
following elements is present:
(i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed
and the employees recruited, supplied or placed by such contractor
or subcontractor are performing activities which are directly related
to the main business of the principal; or
(ii) The contractor does not exercise the right to control over the
performance of the work of the contractual employee.
Given the above criteria, we agree with the Labor Arbiter that ACGI was not
an independent contractor.
First, ACGI does not have substantial capitalization or investment in the
form of tools, equipment, machineries, work premises, and other materials, to
qualify as an independent contractor. While it has an authorized capital stock of
P1,000,000.00, only P62,500.00 is actually paid-in, which cannot be considered
substantial capitalization. The 121 collectors subscribed to four shares each and
paid only the amount of P625.00 in order to comply with the incorporation
requirements.[15] Further, private respondents reported daily to the branch
office of the petitioner because ACGI has no office or work premises. In fact,
the corporate address of ACGI was the residence of its president, Mr. Herminio
D. Pea.[16] Moreover, in dealing with the consumers, private respondents used
the receipts and identification cards issued by petitioner.[17]

Second, the work of the private respondents was directly related to the
principal business or operation of the petitioner. Being in the business of
providing water to the consumers in the East Zone, the collection of the
charges therefor by private respondents for the petitioner can only be
categorized as clearly related to, and in the pursuit of the latters business.
Lastly, ACGI did not carry on an independent business or undertake the
performance of its service contract according to its own manner and method,
free from the control and supervision of its principal, petitioner. Prior to private
respondents alleged employment with ACGI, they were already working for
petitioner, subject to its rules and regulations in regard to the manner and
method of performing their tasks. This form of control and supervision never
changed although they were already under the seeming employ
of ACGI. Petitioner issued memoranda regarding the billing methods and
distribution of books to the collectors;[18] it required private respondents to
report daily and to remit their collections on the same day to the branch office
or to deposit them with Bank of the Philippine Islands; it monitored strictly their
attendance as when a collector cannot perform his daily collection, he must
notify petitioner or the branch office in the morning of the day that he will be
absent; and although it was ACGI which ultimately disciplined private
respondents, the penalty to be imposed was dictated by petitioner as shown in
the letters it sent to ACGI specifying the penalties to be meted on the erring
private respondents.[19] These are indications that ACGI was not left alone in
the supervision and control of its alleged employees. Consequently, it can be
concluded that ACGI was not an independent contractor since it did not carry a
distinct business free from the control and supervision of petitioner.
Under this factual milieu, there is no doubt that ACGI was engaged in labor-
only contracting, and as such, is considered merely an agent of the
petitioner. In labor-only contracting, the statute creates an employer-employee
relationship for a comprehensive purpose: to prevent a circumvention of labor
laws. The contractor is considered merely an agent of the principal employer
and the latter is responsible to the employees of the labor-only contractor as if
such employees had been directly employed by the principal
employer. [20]
Since ACGI is only a labor-only contractor, the workers it supplied
should be considered as employees of the petitioner.
Even the four-fold test will show that petitioner is the employer of private
respondents. The elements to determine the existence of an employment
relationship are: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employers power to
control the employees conduct. The most important element is the employers
control of the employees conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it.[21]
We agree with the Labor Arbiter that in the three stages of private
respondents services with the petitioner, i.e., (1) from August 1,
1997 to August 31, 1997; (2) from September 1, 1997 to November 30, 1997;
and (3) from December 1, 1997 to February 8, 1999, the latter exercised
control and supervision over the formers conduct.
Petitioner contends that the employment of private respondents
from August 1, 1997 to August 30, 1997 was only temporary and done to
accommodate their request to be absorbed since petitioner was still undergoing
a transition period. It was only when its business became settled that petitioner
employed private respondents for a fixed term of three months.
Although petitioner was not obliged to absorb the private respondents, by
engaging their services, paying their wages in the form of commission,
subjecting them to its rules and imposing punishment in case of breach thereof,
and controlling not only the end result but the manner of achieving the same as
well, an employment relationship existed between them.
Notably, private respondents performed activities which were necessary or
desirable to its principal trade or business. Thus, they were regular employees
of petitioner, regardless of whether the engagement was merely an
accommodation of their request, pursuant to Article 280 of the Labor Code
which reads:
The provisions of written agreement to the contrary notwithstanding and

regardless of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work
or services to be performed is seasonal in nature and the employment is for the
duration of the season.
As such regular employees, private respondents are entitled to security of

tenure which may not be circumvented by mere stipulation in a subsequent
contract that their employment is one with a fixed period. While this Court has
upheld the legality of fixed-term employment, where from the circumstances it
is apparent that the periods have been imposed to preclude acquisition

of tenurial security by the employee, they should be struck down or
disregarded as contrary to public policy and morals.[22]
In the case at bar, we find that the term fixed in the subsequent contract
was used to defeat the tenurial security which private respondents already
enjoy. Thus, we concur with the Labor Arbiter, as affirmed by the Court of
Appeals, when it held that:
The next question if whether, with respect to the period, the individual
contracts are valid. Not all contracts of employment fixing a period are
invalid. Under Article 280, the evil sought to be prevented is singled out:
agreements entered into precisely to circumvent security of tenure. It has no
application where a fixed period of employment was agreed upon knowingly
and voluntarily by the parties, without any force, duress or improper pressure
being brought upon the employee and absent any circumstances vitiating his
consent, or where it satisfactorily appears that the employer and employee
dealt with each other on more or less terms with no moral dominance whatever
being exercised by the former over the latter. That is the doctrine in Brent
School, Inc. v. Zamora, 181 SCRA 702. The individual contracts in question
were prepared by MWCin the form of the letter addressed to complainants. The
letter-contract is dated September 1, 1997, when complainants were already
working for MWC as collectors. With their employment as their means of
survival, there was no room then for complainants to disagree with the
presented letter-contracts. Their choice then was not to negotiate for the terms
of the contract but to lose or not to lose their employment employment which
they already had at that time. The choice is obvious, as what they did, to sign
the ready made letter-contract to retain their employment, and survive. It is a
defiance of the teaching in Brent School, Inc. v. Zamora if this Office rules that
the individual contracts in question are valid, so, in deference
to Brent School ruling, this Office rules they are null and void.[23]
In view of the foregoing, we hold that an employment relationship exists

between petitioner and private respondents. We now proceed to ascertain
whether private respondents were dismissed in accordance with law.
As private respondents employer, petitioner has the burden of proving that
the dismissal was for a cause allowed under the law and that they were
afforded procedural due process.[24] Petitioner failed to discharge this burden by
substantial evidence as it maintained the defense that it was not the employer
of private respondents. Having established that the schemes employed by
petitioner were devious attempts to defeat the tenurial rights of private

respondents and that it failed to comply with the requirements of termination
under the Labor Code, the dismissal of the private respondent is tainted with
illegality.
Under Article 279 of the Labor Code, an employee who is unjustly dismissed
from work is entitled to reinstatement without loss of seniority rights and other
privileges, and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement. However, if reinstatement is no longer possible, the employer
has the alternative of paying the employee his separation pay in lieu of
reinstatement.[25]
This Court however cannot sustain the award of moral and exemplary
damages in favor of private respondents. Such an award cannot be justified
solely upon the premise that the employer dismissed his employee without just
cause or due process. Additional facts must be pleaded and proved to warrant
the grant of moral damages under the Civil Code. The act of dismissal must be
attended with bad faith, or fraud, or was oppressive to labor or done in a
manner contrary to morals, good customs or public policy and, of course, that
social humiliation, wounded feelings, or grave anxiety resulted
therefrom. Similarly, exemplary damages are recoverable only when the
dismissal was effected in a wanton, oppressive or malevolent manner.[26] Those
circumstances have not been adequately established.
However, private respondents are entitled to attorneys fees as they were
compelled to litigate with petitioners and incur expenses to enforce and protect
their interests.[27] The award by the Labor Arbiter of P22,250.00 as attorneys
fees to private respondents, being reasonable, is sustained.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals
dated November 29, 2002, in CA-G.R. SP No. 67134, reversing the decision of
the National Labor Relations Commission and reinstating the decision of the
Labor Arbiter is AFFIRMED with the MODIFICATION that the awards of
P10,000.00 as moral damages and P5,000.00 as exemplary damages are
DELETED for lack of evidentiary basis.
SO ORDERED.

MANILA WATER COMPANY, INC. V . PENA, et al.
G.R. No. 158255, July 8, 2004, FIRST DIVISION (Ynares-Santiago,
J.)
Manila Water Company, Inc. is contracted by the Metropolitan Waterworks and

Sewerage System (MWSS) tomanage the water distribution system in the East
Zone of Metro Manila. Manila Water absorbed the formeremployees of the
MWSS whose names and positions were in the list furnished by the latter, while
the employment ofthose not in the list was terminated on the day Manila Water
took over the operation of the East Zone. Respondents,being contractual
collectors of the MWSS, were among the 121 employees not included in the list.
Manila Waterengaged their services without written contract. Then, they signed
a three-month contract to perform collectionservices for 8 branches of Manila
Water in the East Zone. Before the end of the three-month contract, the
121collectors incorporated the Association Collectors Group, Inc.
(ACGI), which was contracted by Manila Water tocollect charges for the Balara
Branch. Subsequently, most of the 121 collectors were asked by Manila
Water to transferto the First Classic Courier Services, a newly registered
corporation. Respondents remained with ACGI. Later, Manila Water terminated
its contract with ACGI.Respondents filed a complaint for illegal dismissal and
money claims, contending that they were Manila Water’s employees as all the
methods and procedures of their collections were controlled by the latter.
Manila Waterasserts that respondents were employees of ACGI, an independent
contractor. It maintained that it had no control and supervision over private
respondents’ manner of performing their work except as to the results. Thus,
Manila Water did not have an employer-employee relationship with the private
respondents, but only a service contractor-client relationship with ACGI.
ISSUE:
Is ACGI an independent contractor?
HELD:NO.
ACGI was engaged in labor-
only contracting, and as such, is considered merely an agent of thepetitioner.
Since ACGI is only a labor-only contractor, the workers it supplied should be
considered as employees ofManila Water.
First
, ACGI does not have substantial capitalization or investment in the form of
tools, equipment,machineries, work premises, and other materials, to qualify as
an independent contractor. While it has an authorizedcapital stock of
P1,000,000.00, only P62,500.00 is actually paid-in, which cannot be considered
substantialcapitalization. The 121 collectors subscribed to four shares each and
paid only the amount of P625.00 in order tocomply with the incorporation
requirements. Respondents reported daily to the branch office of Manila
Waterbecause ACGI has no office or work premises. The corporate address
of ACGI was the residence of its president, Mr.Peña. Moreover, in dealing with
the consumers, respondents used the receipts and identification cards issued
byManila Water.
Second, the work of the private respondents was directly related to the
principal business or operation ofManila Water. Being in the business of
providing water to the consumers in the East Zone, the collection of thecharges
by respondents for Manila Water can only be categorized as clearly related
to, and in the pursuit of the latter’s business.
Lastly, ACGI did not carry on an independent business or undertake the

performance of its service contractaccording to its own manner and method,
free from the control and supervision of its principal, petitioner. Prior to
respondents’ alleged employment with ACGI, they were already working for
petitioner, subject to its rules andregulations in regard to the manner and
method of performing their tasks. This form of control and supervision
neverchanged although they were already under the seeming employ of ACGI.
Manila Water issued memoranda regardingthe billing methods and distribution
of books to the collectors; it required respondents to report daily and to
remittheir collections on the same day to the branch office or to deposit them
with Bank of the Philippine Islands; itmonitored strictly their attendance as
when a collector cannot perform his daily collection, he must notify petitioneror
the branch office in the morning of the day that he will be absent; and although
it was ACGI which ultimatelydisciplined respondents, the penalty to be imposed
was dictated by petitioner as shown in the letters it sent to ACGIspecifying the
penalties to be meted on the erring respondents. These are indications that
ACGI was not left alone inthe supervision and control of its alleged employees.
Consequently, it can be concluded that ACGI was not anindependent contractor
since it did not carry a distinct business free from the control and supervision of
petitioner.

[G.R. No. 115920. January 29, 1996]
PCI AUTOMATION CENTER, INC., petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION and HECTOR SANTELICES, respondents.
PUNO, J.:
This is a special civil action for certiorari under Rule 65 of the Revised Rules
of Court for the annulment of the Decision of the National Labor Relations
Commission (NLRC) dated December 29, 1993[1] and its Resolution dated
April 15, 1994.[2]
In 1985, Philippine Commercial International Bank (PCIB) commenced its
4th GL Environment Conversion Project intended to link all existing computer
systems within PCIB and its various branches around the country. It entered
into a Computer Services Agreement with petitioner PCI Automation Center,
Inc. (PCI-AC), under which petitioner obligated itself to direct, supervise and
run the development of the software, computer software applications and
computer system of PCIB. On the other hand, PCIB agreed to provide the
petitioner with encoders and computer attendants, among others.[3]
To comply with its obligation to procure manpower for the petitioner, PCIB
engaged the services of Prime Manpower Resources Development, Inc. (Prime).
PCIB and Prime entered into an External Job Contract[4] which provides:
1. Services - PRIME shall provide qualified and adequate personnel services

required by the CLIENT within two (2) working days from time of receipt of the
notice of the CLIENTs requisition.
2. Selection - The CLIENT shall have the right to select, refuse, or change any
or all of the personnel assigned to deliver these services to the CLIENT upon
two (2) working days notice to PRIME.
3. Supervision - The CLIENT shall be responsible in supervising all PRIME

personnel contracted and assigned to deliver such services to the CLIENT.
However, PRIME shall check the time cards of the assigned personnel for
payroll and other related purposes. Any change or discontinuance in the work
assignment of the assigned personnel shall be conveyed in writing to PRIME by
CLIENT within two (2) days from such change or termination.

4. Liability/Responsibility - It is expressly agreed that the personnel assigned to
the client are not employees of the CLIENT, and as such PRIME shall at all
times stand solely liable and/or responsible for the enforcement of and
compliance with all existing laws, rules and regulations, such as, but not limited
to the Labor Code, Social Security Act, Employers (sic) Compensation
Commission Act as amended, Medical Care; provided finally, that PRIME hereby
agrees and binds itself to save and hold CLIENT free and harmless from any
civil and criminal liability with respect thereof and/or which may arise
therefrom.
5. Direct Hiring/Absorption - Since the personnel assigned to the CLIENT are

PRIME employees, said employees cannot be absorbed or hired directly by the
CLIENT without PRIMEs prior written consent. In which case, CLIENT shall be
charged by PRIME a placement fee equivalent to ten percent (10%) of the
commencing annual gross compensation of the employee concerned if said
employees have worked with CLIENT for less than five (5) months. If said
employees have worked with CLIENT as temporary employee for more than five
(5) months, CLIENT shall not be charged any fee.
6. Injury/Damage - PRIME shall not be responsible for any loss or damage

caused by the assigned personnel to the CLIENTs properties as well as
properties of the customers of the CLIENT unless the loss or damage is caused
by the fact that the assigned personnel lacks the capacity to work by reason of
any mental or physical defect or he was manifestly unfit or unqualified to
perform the tasks for which he has been assigned by PRIME to the client.
In the event of injury to assigned PRIME personnel under this contract, due
to accidents which are work-related, the CLIENT shall reimburse PRIME for
medical expenses incurred which under existing laws are required to be
defrayed by the employers. In the case of assigned PRIME personnel under
regular status, medical expenses due to accidents or illnesses, whether or not
work related, shall be defrayed by PRIME under its Hospitalization Insurance
Scheme.
7. Confidentiality - PRIME shall guarantee the confidentiality of CLIENTs nature

of job where PRIME personnel are involved.
8. Mode/Term of Payment - For and in consideration of the abovementioned

services, the CLIENT shall pay PRIME the corresponding hourly billing rate
listed in Annex A which is an integral part of this contract. Annex A consists of

letter agreement dated May 20, 1986 duly conformed by PRIME and CLIENT as
to the specific hourly rates per job category and status, as well as the
composition of the billing rates, basis for computation and the provision of
reserves for additional benefits granted to assigned regular PRIME employees
whenever those are applicable and/or payable. Such rates apply only to work
done by our employees during the first eight (8) hours on any work day.
For work rendered by the assigned personnel in excess of the regular work
period agreed upon, the CLIENT shall be billed by PRIME the rates on overtime
pay set by the New Labor Code. The schedule of hourly billing rates per job
category for work rendered on overtime, whether done on a regular work day;
legal holiday, special holiday or rest day is herein attached as Annex B and
shall become an integral part of this contract.
PRIME shall bill the CLIENT for actual services rendered by sending CLIENT its
statement of account on the 16th and on the last day of each month. CLIENT
shall make payment within seven (7) working days from receipt of said
statement of account, unless the CLIENT, within the same period,
communicates to PRIME its refusal to pay on some valid grounds, e.g. errors in
computation, etc. In the latter case, CLIENT shall make payment within seven
(7) working days after the cause for non-payment is settled.
9. Provision for Rate Adjustment - In the event that wages are increased and
increased (sic) and additional fringe benefits in favor of the employees are
promulgated by law, decrees or regulation, or granted by mutual agreements
between PRIME and CLIENT, the above mentioned billing rates shall be
automatically adjusted to conform with the new levels set by law or by both
parties.
On September 20, 1985, private respondent Hector Santelices was hired by

Prime and assigned to petitioner as a data encoder to work on the 4th GL
Environment Conversion Project of PCIB.[5] However, on March 18, 1991, Prime
decided to terminate private respondents services after it was informed by the
petitioner that his services were no longer needed in the project.[6]
Private respondent filed before the NLRC a complaint for illegal dismissal
against Prime and PCI-AC.[7] In his position paper, private respondent prayed
for the payment of his 14th month pay, 13th month pay, separation pay,
unpaid service incentive leave, unpaid vacation leave, termination pay, as well
as moral and exemplary damages and attorneys fees.[8]

On April 30, 1993, Labor Arbiter Melquiades Sol Del Rosario rendered a
Decision[9] finding that private respondents dismissal was illegal. The dispositive
portion of the Decision states:
CONFORMABLY with the foregoing, judgment is hereby rendered finding

complainants dismissal to be illegal and without legal basis. Consequently,
complainant should be immediately reinstated to his former or equivalent
position as data encoder at PCI-AC. Should reinstatement be impossible or
impractical due to a strained relation, then in lieu thereof, payment of
separation pay by Prime at one months pay (P3,060.00) per year of service
reckoned from September 20, 1985, a fraction of six (6) months service being
considered as one (1) whole year.
Respondents (sic) companies are further ordered to pay in solidum the

complainant the following amounts:
1. P78,030.00 as backwages (March 16, 1991 to April 30, 1993) not exceeding
3 years without qualification or deduction at P3,060.00 a month;
2. P30,000.00 as moral damages;
3. P10,000.00 as exemplary damages; and
4. P5,000.00 as attorneys fees.
All other claims are hereby denied for lack of merit.[10]
Prime and PCI-AC appealed to the NLRC.

On June 18, 1993, during the pendency of the appeal, Prime paid private
respondent the amount of P24,480.00 as separation pay in lieu of
reinstatement. This was in partial satisfaction of the judgment rendered by the
Labor Arbiter. Private respondent, for his part, waived his right to be reinstated
to his former position in Prime and/or PCI-AC. Accordingly, Prime and private
respondent executed and filed before the office of the Labor Arbiter a document
entitled Partial Satisfaction of Judgment and Waiver of Right.[11]
On December 29, 1993, public respondent NLRC affirmed the Decision of
the Labor Arbiter, but deleted the award of moral and exemplary damages and
attorneys fees.[12]
PCI-AC filed the present petition on the following ground:
. . . the public respondent acted with grave abuse of discretion amounting to
lack of jurisdiction when it disregarded the substantial evidence in this case
clearly showing that private respondent was not illegally dismissed by
petitioner.[13]
The petition must fail.

Petitioner contends that private respondent, being a project employee, was
validly dismissed when the project for which he was hired was completed on
March 15, 1991. Petitioner avers that the 4th GL Environment Conversion
Project involved a phase-by-phase conversion of PCIBs computer
system. Private respondent was assigned to work as data encoder in the
Consolidated Financing System/Budget Monitoring phase of the said computer
conversion project. Allegedly, this phase was completed on March 15,
1991. Petitioner makes the submission that the completion of the work therein
terminated further need for private respondents services.[14]
The public respondent, however, held otherwise after assessing the
evidence on record. It affirmed the findings of the Labor Arbiter, thus:
Going now to the second point of inquiry, which is the completion or non-
completion of the 4GL conversion system project, the testimony of Danilo
Calauag, the assistant vice-president and manager of International Operations
of Prime Manpower is most explicit. He testified on July 22, 1992 as follows:
Mr. Santelices was assigned initially to Tower 2; (p. 33 TSN.) then he was
assigned to Tower I (Ibid) because there was work to be done in Tower I that
necessitated his (complainants) transfer there (p. 35 Ibid) although the work
he (complainant) was performing in Tower II was still existing (supra) and
Tower II is still in progress (supra) meaning his original assignment is still on-
going up to the present (p. 36 Ibid).
The foregoing testimony expressly and clearly admitted that 4th conversion
project, more particularly Tower II to which complainant was originally
assigned is still an on-going project, and not yet completed as posited by
respondents. There was therefore no reason for complainants dismissal on
March 15, 1991 on the pretended ground which is completion of the project.
xxx[15]
We find no valid reason to disturb public respondents findings. No less than
the assistant vice-president and manager for International Operations of Prime
testified that the project for which private respondent was hired was still
existing at the time of his dismissal. It is settled that factual findings of quasi-
judicial agencies like the Labor Arbiter and the NLRC are generally accorded not
only respect but even finality if such findings are supported by substantial
evidence.[16]
The petitioner also faults the public respondent in affirming the disposition
of the Labor Arbiter holding it solidarily liable with Prime for all the monetary
claims of private respondent. It insists that it is not an employer of private
respondent. It contends that private respondent is an employee of Prime and
he was merely assigned by Prime to the petitioner to work on the 4th GL
Environment Conversion Project of PCIB.
We are not persuaded.
The petitioner, through PCIB, contracted Prime to provide it with qualified
personnel to work on the computer conversion project of PCIB.[17] The External
Job Contract between Prime and PCIB must be read in conjunction with the
Computer Services Agreement between PCIB and the petitioner. Under the
Computer Services Agreement, the petitioner shall direct and supervise the
computer conversion project of PCIB while PCIB shall provide the petitioner
with data encoders and computer attendants to work on the project. Pursuant
to said Agreement, PCIB called on Prime to furnish the petitioner with the
needed personnel, one of whom was private respondent. Hence, although the
parties in the External Job Contract are only Prime and PCIB, the legal
consequences of such contract must also be made to apply to the
petitioner. Under the circumstances, PCIB merely acted as a conduit between
the petitioner and Prime. The project was under the management and
supervision of the petitioner and it was the petitioner which exercised control
over the persons working on the project.
Under the law, any person (hereinafter referred to as the principal
employer) who enters into an agreement with a job contractor, either for the
performance of a specified work or for the supply of manpower, assumes
responsibility over the employees of the latter.[18] However, for the purpose of
determining the extent of the principal employers liability, the law makes a
distinction between legitimate job contracting and labor-only contracting.
Article 106 of the Labor Code states:
Article 106. Contractor or subcontractor. -Whenever an employer enters into a

contract with another person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and
extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit
the contracting out of labor to protect the rights of workers established under
this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations
within these types of contracting and determine who among the parties
involved shall be considered the employer for purposes of this Code, to prevent
any violation or circumvention of any provision of this Code.
There is labor-only contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers
recruited and placed by such 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.
In legitimate job contracting, no employer-employee relationship exists
between the employees of the job contractor and the principal employer. Even
then, the principal employer becomes jointly and severally liable with the job
contractor for the payment of the employees wages whenever the contractor
fails to pay the same. In such case, the law creates an employer-employee
relationship between the principal employer and the job contractors employees
for a limited purpose, that is, to ensure that the employees are paid their
wages. Other than the payment of wages, the principal employer is not
responsible for any claim made by the employees.[19]
On the other hand, in labor-only contracting, an employer-employee
relationship is created by law between the principal employer and the
employees of the labor-only contractor. In this case, the labor-only contractor
is considered merely an agent of the principal employer. The principal employer
is responsible to the employees of the labor-only contractor as if such
employees had been directly employed by the principal employer. The principal
employer therefore becomes solidarily liable with the labor-only contractor
for all the rightful claims of the employees.[20]

Thus, in legitimate job contracting, the principal employer is considered
only an indirect employer,[21] while in labor-only contracting, the principal
employer is considered the direct employer of the employees.[22]
Considering the terms of the External Job Contract executed by Prime and
PCIB, it cannot be doubted that Prime is a labor-only contractor. Under the
contract, Prime merely acted as a placement agency providing manpower to
the petitioner through PCIB. The service rendered by Prime in favor of the
petitioner was not the performance of a specific job, but the supply of qualified
personnel to work as data encoders and computer attendants in connection
with the petitioners project.
Rule VIII Book III of the Omnibus Implementing Rules and Regulations of
the Labor Code defines job contracting and labor-only contracting:
Sec. 8. Job contracting. - There is job contracting permissible under the Code if
the following conditions are met:
(1) The contractor carries on an independent business and undertakes the

contract work on his own account under his own responsibility according to his
own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as
to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business.
Sec. 9. Labor-only contracting. - (a) Any person who undertakes to supply

workers to an employer shall be deemed to be engaged in labor-only
contracting when such person:
(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities
which are directly related to the principal business or operations of the
employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the

person acting as contractor shall be considered merely as an agent or

intermediary 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.
xxx xxx xxx

In short, the legitimate job contractor provides services while the labor-only
contractor provides only manpower. The legitimate job contractor undertakes
to perform a specific job for the principal employer while the labor-only
contractor merely provides the personnel to work for the principal employer.
As Prime is a labor-only contractor, the workers it supplied to the
petitioner, including private respondent, should be considered employees of the
petitioner.[23] The admissions made by private respondent in his affidavits and
position paper that he is a regular employee of Prime are not conclusive on this
Court as the existence of an employer-employee relationship is a question of
law which may not be made the subject of stipulation.[24]
We hold that public respondent did not commit grave abuse of discretion in
affirming the ruling of the Labor Arbiter adjudging the petitioner solidarily liable
with Prime for the payment of all the monetary claims of private
respondent. This is in accord with Article 106 of the Labor Code, as amended.
IN VIEW WHEREOF, the petition is DISMISSED. The assailed Decision and
Resolution are hereby AFFIRMED. No costs.
SO ORDERED.

PCI AUTOMATION CENTER, INC. vs. NATIONAL LABOR RELATIONS
COMMISSION and HECTOR SANTELICES
Facts:
In 1985, Philippine Commercial International Bank (PCIB) commenced its 4th
GLEnvironment Conversion Project intended to link all existing computer
systemswithin PCIB and its various branches around the country. It entered
into a ComputerServices Agreement with petitioner PCI Automation Center,
Inc. (PCI-AC), underwhich petitioner obligated itself to direct, supervise and run
the development of thesoftware, computer software applications and computer
system of PCIB. On theother hand, PCIB agreed to provide the petitioner with
encoders and computerattendants, among others.
3
To comply with its obligation to procure manpower for the petitioner, PCIB
engagedthe services of Prime Manpower Resources Development, Inc. (Prime).
PCIB andPrime entered into an External Job ContractOn September 20, 1985,
private respondent Hector Santelices was hired by Primeand assigned to
petitioner as a data encoder to work on the 4th GL EnvironmentConversion
Project of PCIB.
5
However, on March 18, 1991, Prime decided toterminate private respondent's
services after it was informed by the petitioner thathis services were no longer
needed in the project
ISSUE:
Is Hector employee of PCI Automation(Job Contracting vs Labor-Only
Contracting)(extent of liability)
HELD:
The petitioner, through PCIB, contracted Prime to provide it with qualified
personnelto work on the computer conversion project of PCIB.
17
The External Job Contractbetween Prime and PCIB must be read in conjunction
with the Computer
Services Agreement between PCIB and the petitioner. Under the Computer Serv
ices Agreement, the petitioner shall direct and supervise the computer
conversion projectof PCIB while PCIB shall provide the petitioner with data
encoders and computerattendants to work on the project. Pursuant to said
Agreement, PCIB called onPrime to furnish the petitioner with the needed
personnel, one of whom was privaterespondent. Hence, although the parties in

the External Job Contract are only Primeand PCIB, the legal consequences of
such contract must also be made to apply to

G.R. No. 165407 june 5, 2009
HERMINIGILDO INGUILLO AND

ZENAIDA BERGANTE,
Petitioners,
- versus -
FIRST PHILIPPINE SCALES,

INC. and/or AMPARO POLICARPIO,
MANAGER,
Respondents.
PERALTA, J.:
Assailed in this petition for review under Rule 45 of the Rules of Court are the
Court of Appeals (1) Decision[1] dated March 11, 2004 in CA-G.R. SP No.
73992, which dismissed the Petition for Certiorari of petitioners Zenaida
Bergante (Bergante) and Herminigildo Inguillo (Inguillo); and
(2) Resolution dated September 17, 2004 denying petitioners' Motion for
[2]
Reconsideration. The appellate court sustained the ruling of the National Labor
Relations Commission (NLRC) that petitioners were validly dismissed pursuant
to a Union Security Clause in the collective bargaining agreement.
The facts of the case are as follows:
First Philippine Scales, Inc. (FPSI), a domestic corporation engaged in the

manufacturing of weighing scales, employed Bergante and Inguillo as
assemblers on August 15, 1977 and September 10, 1986, respectively.
In 1991, FPSI and First Philippine Scales Industries Labor Union

(FPSILU)[3] entered into a Collective Bargaining Agreement (CBA),[4] the
duration of which was for a period of five (5) years starting on September 12,
1991 until September 12, 1996. On September 19, 1991, the members of
FPSILU ratified the CBA in a document entitled RATIPIKASYON NG
KASUNDUAN.[5] Bergante and Inguillo, who were members of FPSILU, signed
the said document.[6]
During the lifetime of the CBA, Bergante, Inguillo and several FPSI employees
joined another union, the Nagkakaisang Lakas ng Manggagawa (NLM), which
was affiliated with a federation called KATIPUNAN (NLM-KATIPUNAN, for
brevity). Subsequently, NLM-KATIPUNAN filed with the Department of Labor
and Employment (DOLE) an intra-union dispute[7] against FPSILU and FPSI. In
said case, the Med-Arbiter decided[8] in favor of FPSILU. It also ordered the
officers and members of NLM-KATIPUNAN to return to FPSILU the amount
of P90,000.00 pertaining to the union dues erroneously collected from the
employees. Upon finality of the Med-Arbiter's Decision, a Writ of
Execution[9] was issued to collect the adjudged amount from NLM-
KATIPUNAN. However, as no amount was recovered, notices of garnishment
were issued to United Coconut Planters Bank (Kalookan City Branch)[10] and to
FPSI[11] for the latter to hold for FPSILU the earnings of Domingo Grutas, Jr.
(Grutas) and Inguillo, formerly FPSILU's President and Secretary for Finance,
respectively, to the extent of P13,032.18. Resultantly, the amount of P5,140.55
was collected,[12] P1,695.72 of which came from the salary of Grutas, while
the P3,444.83 came from that of Inguillo.
Meanwhile, on March 29, 1996, the executive board and members of the
FPSILU addressed a document dated March 18, 1996 denominated as
Petisyon[13] to FPSI's general manager, Amparo Policarpio (Policarpio), seeking
the termination of the services of the following employees, namely: Grutas,
Yolanda Tapang, Shirley Tapang, Gerry Trinidad, Gilbert Lucero, Inguillo,
Bergante, and Vicente Go, on the following grounds:[14] (1) disloyalty to the
Union by separating from it and affiliating with a rival Union, the NLM-
KATIPUNAN; (2) dereliction of duty by failing to call periodic membership
meetings and to give financial reports; (3) depositing Union funds in the names
of Grutas and former Vice-President Yolanda Tapang, instead of in the name of
FPSILU, care of the President; (4) causing damage to FPSI by deliberately
slowing down production, preventing the Union to even attempt to ask for an
increase in benefits from the former; and (5) poisoning the minds of the rest of
the members of the Union so that they would be enticed to join the rival union.
On May 13, 1996, Inguillo filed with the NLRC a complaint against FPSI and/or
Policarpio (respondents) for illegal withholding of salary and damages, docketed
as NLRC-NCR-Case No. 00-05-03036-96.[15]
On May 16, 1996, respondents terminated the services of the employees
mentioned in the Petisyon.
The following day, two (2) separate complaints for illegal dismissal,
reinstatement and damages were filed against respondents by: (1) NLM-
KATIPUNAN, Grutas, Trinidad, Bergante, Yolanda Tapang, Go, Shirley Tapang
and Lucero[16] (Grutas complaint, for brevity); and (2) Inguillo[17] (Inguillo
complaint). Both complaints were consolidated with Inguillo's prior complaint
for illegal withholding of salary, which was pending before Labor Arbiter Manuel
Manansala. After the preliminary mandatory conference, some of the
complainants agreed to amicably settle their cases. Consequently, the Labor
Arbiter issued an Order[18] dated October 1, 1996, dismissing with prejudice the
complaints of Go, Shirley Tapang, Yolanda Tapang, Grutas,
and Trinidad. [19]
Lucero also settled the case after receiving his settlement
money and executing a Quitclaim and Release in favor of FPSI and
Policarpio.[20]
Bergante and Inguillo, the remaining complainants, were directed to submit

their respective position papers, after which their complaints were submitted
for resolution on February 20, 1997.[21]
In their Position Paper,[22] Bergante and Inguillo claimed that they were not
aware of a petition seeking for their termination, and neither were they
informed of the grounds for their termination. They argued that had they been
informed, they would have impleaded FPSILU in their complaints. Inguillo could
not think of a valid reason for his dismissal except the fact that he was a very
vocal and active member of the NLM-KATIPUNAN. Bergante, for her part,
surmised that she was dismissed solely for being Inguillo's sister-in-law. She
also reiterated the absence of a memorandum stating that she committed an
infraction of a company rule or regulation or a violation of law that would justify
her dismissal.
Inguillo also denounced respondents' act of withholding his salary, arguing that
he was not a party to the intra-union dispute from which the notice of
garnishment arose. Even assuming that he was, he argued that his salary was
exempt from execution.
In their Position Paper,[23] respondents maintained that Bergante and Inguillo's

dismissal was justified, as the same was done upon the demand of FPSILU, and
that FPSI complied in order to avoid a serious labor dispute among its officers
and members, which, in turn, would seriously affect production. They also
justified that the dismissal was in accordance with the Union Security Clause in
the CBA, the existence and validity of which was not disputed by Bergante and
Inguillo. In fact, the two had affixed their signatures to the document which
ratified the CBA.

In his Decision[24] dated November 27, 1997, the Labor Arbiter dismissed the
remaining complaints of Bergante and Inguillo and held that they were not
illegally dismissed. He explained that the two clearly violated the Union Security
Clause of the CBA when they joined NLM-KATIPUNAN and committed acts
detrimental to the interests of FPSILU and respondents. The dispositive portion
of the said Decision states:
WHEREFORE, premises considered, judgment is hereby rendered:
1. Declaring respondents First Philippines

Scales, Inc. (First Philippine Scales Industries [FPSI] and Amparo
Policarpio, in her capacity as President and General Manager of
respondent FPSI, not guilty of illegal dismissal as above
discussed. However, considering the length of services rendered
by complainants Herminigildo Inguillo and Zenaida Bergante as
employees of respondent FPSI, plus the fact that the other
complainants in the above-entitled cases were previously granted
financial assistance/separation pay through amicable settlement,
the afore-named respondents are hereby directed to pay
complainants Herminigildo Inguillo and Zenaida Bergante
separation pay and accrued legal holiday pay, as earlier computed,
to wit:
Herminigildo Inguillo
Separation pay ................P22,490.00
Legal Holiday Pay........... 839.00
Total 23,329.00
Zenaida Bergante
Separation pay.................P43,225.00
Legal Holiday Pay........... 839.00
Total 44,064.00
2. Directing the afore-named respondents to

pay ten (10%) percent attorney's fees based on the total
monetary award to complainants Inguillo and Bergante.
3. Dismissing the claim for illegal withholding of

salary of complainant Inguillo for lack of merit as above discussed.
4. Dismissing the other money claims and/or

other charges of complainants Inguillo and Bergante for lack of
factual and legal basis.
5. Dismissing the complaint of complainant
Gilberto Lucero with prejudice for having executed a Quitclaim and
Release and voluntary resignation in favor of respondents FPSI
and Amparo Policarpio as above-discussed where the former
received the amount of P23,334.00 as financial
assistance/separation pay and legal holiday pay from the latter.
SO ORDERED.[25]
Bergante and Inguillo appealed before the NLRC, which reversed the Labor
Arbiter's Decision in a Resolution[26] dated June 8, 2001, the dispositive portion
of which provides:
WHEREFORE, the assailed decision is set aside. Respondents are
hereby ordered to reinstate complainants Inguillo and Bergante
with full backwages from the time of their dismissal up [to] their
actual reinstatement. Further, respondents are also directed to
pay complainant Inguillo the amount representing his withheld
salary for the period March 15, 1998 to April 16, 1998. The sum
corresponding to ten percent (10%) of the total judgment award
by way of attorney's fees is likewise ordered. All other claims are
ordered dismissed for lack of merit.
SO ORDERED.[27]
In reversing the Labor Arbiter, the NLRC[28] ratiocinated that respondents failed
to present evidence to show that Bergante and Inguillo committed acts inimical
to FPSILU's interest. It also observed that, since the two (2) were not informed
of their dismissal, the justification given by FPSI that it was merely constrained
to dismiss the employees due to persistent demand from the Union clearly
proved the claim of summary dismissal and violation of the employees' right to
due process.
Respondents filed a Motion for Reconsideration, which was referred by the
NLRC to Executive Labor Arbiter Vito C. Bose for report and
recommendation. In its Resolution[29] dated August 26, 2002, the NLRC
adopted in toto the report and recommendation of Arbiter Bose which set aside
its previous Resolution reversing the Labor Arbiter's Decision. This time, the
NLRC held that Bergante and Inguillo were not illegally dismissed as
respondents merely put in force the CBA provision on the termination of the

services of disaffiliating Union members upon the recommendation of
the Union. The dispositive portion of the said Resolution provides:
WHEREFORE, the resolution of the Commission dated June 8,

2001 is set aside. Declaring the dismissal of the complainants as
valid, [t]his complaint for illegal dismissal is dismissed. However,
respondents are hereby directed to pay complainant Inguillo the
amount representing his withheld salary for the period March 15,
1998 to April 16, 1998, plus ten (10%) percent as attorney's fees.
All other claims are ordered dismissed for lack of merit.
SO ORDERED.[30]
Not satisfied with the disposition of their complaints, Bergante and Inguillo filed
a petition for certiorari under Rule 65 of the Rules of Court with the Court of
Appeals (CA). The CA dismissed the petition for lack of merit[31] and denied the
subsequent motion for reconsideration.[32] In affirming the legality of the
dismissal, the CA ratiocinated, thus:
x x x on the merits, we sustain the view adopted by the NLRC

that:
x x x it cannot be said that the stipulation providing

that the employer may dismiss an employee
whenever the union recommends his expulsion either
for disloyalty or for any violation of its by-laws and
constitution is illegal or constitutive of unfair labor
practice, for such is one of the matters on which
management and labor can agree in order to bring
about the harmonious relations between them and the
union, and cohesion and integrity of their
organization.And as an act of loyalty, a union may
certainly require its members not to affiliate with any
other labor union and to consider its infringement as a
reasonable cause for separation.
The employer FPSI did nothing but to put in

force their agreement when it separated the
disaffiliating union members, herein complainants,
upon the recommendation of the union. Such a
stipulation is not only necessary to maintain loyalty
and preserve the integrity of the union, but is allowed
by the Magna Carta of Labor when it provided that
while it is recognized that an employee shall have the
right of self-organization, it is at the same time
postulated that such rights shall not injure the right of
the labor organization to prescribe its own rules with
respect to the acquisition or retention of membership
therein. Having ratified their CBA and being then
members of FPSILU, the complainants owe fealty and
are required under the Union Security clause to
maintain their membership in good standing with it
during the term thereof, a requirement which ceases
to be binding only during the 60-day freedom period
immediately preceding the expiration of the CBA,
which was not present in this case.
x x x the dismissal of the complainants pursuant to

the demand of the majority union in accordance with
their union security [clause] agreement following the
loss of seniority rights is valid and privileged and does
not constitute unfair labor practice or illegal dismissal.
Indeed, the Supreme Court has for so long a time already

recognized a union security clause in the CBA, like the one at bar,
as a specie of closed-shop arrangement and trenchantly upheld
the validity of the action of the employer in enforcing its terms as
a lawful exercise of its rights and obligations under the contract.
The collective bargaining agreement in this

case contains a union security clause-a closed-shop
agreement.
A closed-shop agreement is an agreement

whereby an employer binds himself to hire only
members of the contracting union who must continue
to remain members in good standing to keep their
jobs. It is the most prized achievement of
unionism. It adds membership and compulsory
dues. By holding out to loyal members a promise of
employment in the closed-shop, it welds group
solidarity. (National Labor Union v. Aguinaldo's
Echague Inc., 97 Phil. 184). It is a very effective form
of union security agreement.
This Court has held that a closed-shop is a

valid form of union security, and such a provision in a
collective bargaining agreement is not a restriction of
the right of freedom of association guaranteed by the
Constitution. (Lirag Textile Mills, Inc. v. Blanco, 109
SCRA 87; Manalang v. Artex Development Company,
Inc., 21 SCRA 561.)[33]
Hence, the present petition.

Essentially, the Labor Code of the Philippines has several provisions under
which an employee may be validly terminated, namely: (1) just causes under
Article 282;[34] (2) authorized causes under Article 283;[35] (3) termination due
to disease under Article 284;[36] and (4) termination by the employee or
resignation under Article 285.[37] While the said provisions did not mention as
ground the enforcement of the Union Security Clause in the CBA, the dismissal
from employment based on the same is recognized and accepted in our
jurisdiction.[38]
Union security is a generic term, which is applied to and comprehends closed

shop, union shop, maintenance of membership or any other form of agreement
which imposes upon employees the obligation to acquire or retain union
membership as a condition affecting employment.[39] There is union shop when
all new regular employees are required to join the union within a certain period
as a condition for their continued employment. There is maintenance of
membership shop when employees, who are union members as of the effective
date of the agreement, or who thereafter become members, must maintain
union membership as a condition for continued employment until they are
promoted or transferred out of the bargaining unit or the agreement is
terminated.[40] A closed-shop, on the other hand, may be defined as an
enterprise in which, by agreement between the employer and his employees or
their representatives, no person may be employed in any or certain agreed
departments of the enterprise unless he or she is, becomes, and, for the
duration of the agreement, remains a member in good standing of a union
entirely comprised of or of which the employees in interest are a part.[41]
In their Petition, Bergante and Inguillo assail the legality of their termination
based on the Union Security Clause in the CBA between FPSI and
FPSILU. Article II[42] of the CBA pertains to Union Security and Representatives,
which provides:
The Company hereby agrees to a UNION SECURITY [CLAUSE] with

the following terms:
1. All bonafide union

members as of the effective date of this agreement
and all those employees within the bargaining unit
who shall subsequently become members of the
UNION during the period of this agreement shall, as
a condition to their continued
employment, maintain their membership with
the UNION under the FIRST PHIL. SCALES
INDUSTRIES LABOR UNION Constitution and By-laws
and this Agreement;
2. Within thirty (30) days from the

signing of this Agreement, all workers eligible for
membership who are not union members shall
become and to remain members in good standing as
bonafide union members therein as a condition of
continued employment;
3. New workers hired shall likewise

become members of the UNION from date they
become regular and permanent workers and shall
remain members in good standing as bonafide union
members therein as a condition of continued
employment;
4. In case a worker refused to join

the Union, the Union will undertake to notify workers
to join and become union members. If said worker or
workers still refuses, he or they shall be notified by
the Company of his/her dismissal as a consequence
thereof and thereafter terminated after 30 days
notice according to the Labor Code.
5. Any employee/union member
who fails to retain union membership in good
standing may be recommended for suspension
or dismissal by the Union Directorate and/or
FPSILU Executive Council for any of the
following causes:
a) Acts of Disloyalty;
b) Voluntary Resignation or
Abandonment from the UNION;
c) Organization of or joining another labor
union or any labor group that would
work against the UNION;
d) Participation in any unfair labor practice or
violation of the Agreement, or activity
derogatory to the UNION decision;
e) Disauthorization of, or Non-payment of,
monthly membership dues, fees, fines
and other financial assessments to
the Union;
f) Any criminal violation or violent conduct or
activity against any UNION member
without justification and affecting UNION
rights or obligations under the said
Agreement.
Verily, the aforesaid provision requires all members to maintain their
membership with FPSILU during the lifetime of the CBA. Failing so, and for any
of the causes enumerated therein, the Union Directorate and/or FPSILU
Executive Council may recommend to FPSI an employee/union member's
suspension or dismissal. Records show that Bergante and Inguillo were former
members of FPSILU based on their signatures in the document which ratified
the CBA. It can also be inferred that they disaffiliated from FPSILU when the
CBA was still in force and subsisting, as can be gleaned from the documents
relative to the intra-union dispute between FPSILU and NLM-KATIPUNAN. In
view of their disaffiliation, as well as other acts allegedly detrimental to the
interest of both FPSILU and FPSI, a Petisyon was submitted to Policarpio,
asking for the termination of the services of employees who failed to maintain
their Union membership.
The Court is now tasked to determine whether the enforcement of the aforesaid
Union Security Clause justified herein petitioners' dismissal from the service.
In terminating the employment of an employee by enforcing the Union Security
Clause, the employer needs only to determine and prove that: (1) the union
security clause is applicable; (2) the union is requesting for the enforcement of
the union security provision in the CBA; and (3) there is sufficient evidence to
support the union's decision to expel the employee from the union or
company.[43]
We hold that all the requisites have been sufficiently met and FPSI was justified
in enforcing the Union Security Clause, for the following reasons:
First. FPSI was justified in applying the Union Security Clause, as it was a valid
provision in the CBA, the existence and validity of which was not questioned by
either party. Moreover, petitioners were among the 93 employees who affixed
their signatures to the document that ratified the CBA. They cannot now turn
their back and deny knowledge of such provision.
Second. FPSILU acted on its prerogative to recommend to FPSI the dismissal of

the members who failed to maintain their membership with the Union. Aside
from joining another rival union, FPSILU cited other grounds committed by
petitioners and the other employees which tend to prejudice FPSIs
interests, i.e., dereliction of duty - by failing to call periodic membership
meetings and to give financial reports; depositing union funds in the names of
Grutas and former Vice-President Yolanda Tapang, instead of in the name of
FPSILU care of the President; causing damage to FPSI by deliberately slowing
down production, preventing the Union from even attempting to ask for an
increase in benefits from the former; and poisoning the minds of the rest of the
members of the Union so that they would be enticed to join the rival union.
Third. FPSILU's decision to ask for the termination of the employees in the
Petisyon was justified and supported by the evidence on record. Bergante and
Inguillo were undisputably former members of FPSILU. In fact, Inguillo was the
Secretary of Finance, the underlying reason why his salary was garnished to
satisfy the judgment of the Med-Arbiter who ordered NLM-KATIPUNAN to return
the Union dues it erroneously collected from the employees. Their then
affiliation with FPSILU was also clearly shown by their signatures in the
document which ratified the CBA. Without a doubt, they committed acts of
disloyalty to the Unionwhen they failed not only to maintain their membership
but also disaffiliated from it. They abandoned FPSILU and even joined another
union which works against the former's interests. This is evident from the intra-
union dispute filed by NLM-KATIPUNAN against FPSILU. Once affiliated with
NLM-KATIPUNAN, Bergante and Inguillo proceeded to recruit other employees
to disaffiliate from FPSILU and even collected Union dues from them.
In Del Monte Philippines,[44] the stipulations in the CBA authorizing the

dismissal of employees are of equal import as the statutory provisions on
dismissal under the Labor Code, since a CBA is the law between the company
and the Union, and compliance therewith is mandated by the express policy to
give protection to labor. In Caltex Refinery Employees Association (CREA) v.
Brillantes,[45] the Court expounded on the effectiveness of union security clause
when it held that it is one intended to strengthen the contracting union and to
protect it from the fickleness or perfidy of its own members. For without such
safeguards, group solidarity becomes uncertain; the union becomes gradually
weakened and increasingly vulnerable to company machinations. In this
security clause lies the strength of the union during the enforcement of the
collective bargaining agreement. It is this clause that provides labor with
substantial power in collective bargaining.
Nonetheless, while We uphold dismissal pursuant to a union security clause, the
same is not without a condition or restriction. For to allow its untrammeled
enforcement would encourage arbitrary dismissal and abuse by the employer,
to the detriment of the employees. Thus, to safeguard the rights of the
employees, We have said time and again that dismissals pursuant to union
security clauses are valid and legal, subject only to the requirement of due
process, that is, notice and hearing prior to dismissal.[46] In like manner, We
emphasized that the enforcement of union security clauses is authorized by
law, provided such enforcement is not characterized by arbitrariness, and
always with due process.[47]
There are two (2) aspects which characterize the concept of due process under
the Labor Code: one is substantivewhether the termination of employment was
based on the provisions of the Labor Code or in accordance with the prevailing
jurisprudence; the other is procedural - the manner in which the dismissal was
effected.
The second aspect of due process was clarified by the Court in King of Kings
Transport v. Mamac,[48] stating, thus:
(1) The first written notice to be served on the employees

should contain the specific causes or grounds for
termination against them, and a directive that the employees are
given the opportunity to submit their written explanation within a
reasonable period. x x x
(2) After serving the first notice, the employers should
schedule and conduct a hearing or conference wherein
the employees will be given the opportunity to: (1) explain and
clarify their defenses to the charge against them; (2) present
evidence in support of their defenses; and (3) rebut the
evidence presented against them by the management. During the
hearing or conference, the employees are given the chance to
defend themselves personally, with the assistance of a
representative or counsel of their choice. Moreover, this
conference or hearing could be used by the parties as an
opportunity to come to an amicable settlement.
(3) After determining that termination of employment is

justified, the employers shall serve the employees a written
notice of termination indicating that: (1) all circumstances
involving the charge against the employees have been considered;
and (2) grounds have been established to justify the severance of
their employment.
Corollarily, procedural due process in the dismissal of employees requires

notice and hearing. The employer must furnish the employee two written
notices before termination may be effected. The first notice apprises the
employee of the particular acts or omissions for which his dismissal is sought,
while the second notice informs the employee of the employers decision to
dismiss him.[49] The requirement of a hearing, on the other hand, is complied
with as long as there was an opportunity to be heard, and not necessarily that
an actual hearing was conducted.[50]
In the present case, the required two notices that must be given to herein
petitioners Bergante and Inguillo were lacking. The records are bereft of any
notice that would have given a semblance of substantial compliance on the part
of herein respondents. Respondents, however, aver that they had furnished the
employees concerned, including petitioners, with a copy of FPSILU's
Petisyon. We cannot consider that as compliance with the requirement of either
the first notice or the second notice. While the Petisyon enumerated the several
grounds that would justify the termination of the employees mentioned therein,
yet such document is only a recommendation by the Union upon which the
employer may base its decision. It cannot be considered a notice of
termination. For as agreed upon by FPSI and FPSILU in their CBA, the latter
may only recommend to the former a Union member's suspension or
dismissal. Nowhere in the controverted Union Security Clause was there a
mention that once the union gives a recommendation, the employer is bound
outright to proceed with the termination.
Even assuming that the Petisyon amounts to a first notice, the employer
cannot be deemed to have substantially complied with the procedural
requirements. True, FPSILU enumerated the grounds in said Petisyon. But a
perusal of each of them leads Us to conclude that what was stated were
general descriptions, which in no way would enable the employees to
intelligently prepare their explanation and defenses. In addition, the Petisyon
did not provide a directive that the employees are given opportunity to submit
their written explanation within a reasonable period. Finally, even if We are to
assume that the Petisyon is a second notice, still, the requirement of due
process is wanting. For as We have said, the second notice, which is aimed to
inform the employee that his service is already terminated, must state that the
employer has considered all the circumstances which involve the charge and
the grounds in the first notice have been established to justify the severance of
employment. After the claimed dialogue between Policarpio and the employees
mentioned in the Petisyon, the latter were simply told not to report for work
anymore.
These defects are bolstered by Bergante and Inguillo who remain steadfast in
denying that they were notified of the specific charges against them nor were
they given any memorandum to that effect. They averred that had they been
informed that their dismissal was due to FPSILU's demand/petition, they could
have impleaded the FPSILU together with the respondents. The Court has
always underscored the significance of the two-notice rule in dismissing an
employee and has ruled in a number of cases that non-compliance therewith is
tantamount to deprivation of the employees right to due process.[51]
As for the requirement of a hearing or conference, We hold that respondents

also failed to substantially comply with the same. Policarpio alleged that she
had a dialogue with the concerned employees; that she explained to them the
demand of FPSILU for their termination as well as the consequences of the
Petisyon; and that she had no choice but to act accordingly. She further
averred that Grutas even asked her to pay all the involved employees one (1)-
month salary for every year of service, plus their accrued legal holiday pay, but
which she denied. She informed them that it has been FPSI's practice to give
employees, on a case-to-case basis, only one-half () month salary for every
year of service and after they have tendered their voluntary resignation. The
employees refused her offer and told her that they will just file their claims with
the DOLE.[52]
Policarpio's allegations are self-serving. Except for her claim as stated in the
respondent's Position Paper, nowhere from the records can We find that
Bergante and Inguillo were accorded the opportunity to present evidence in
support of their defenses. Policarpio relied heavily on the Petisyon
of FPSILU. She failed to convince Us that during the dialogue, she was able to
ascertain the validity of the charges mentioned in the Petisyon. In her futile
attempt to prove compliance with the procedural requirement, she reiterated
that the objective of the dialogue was to provide the employees the opportunity
to receive the act of grace of FPSI by giving them an amount equivalent to one-
half () month of their salary for every year of service. We are not
convinced. We cannot even consider the demand and counter-offer for the
payment of the employees as an amicable settlement between the parties
because what took place was merely a discussion only of the amount which the
employees are willing to accept and the amount which the respondents are
willing to give. Such non-compliance is also corroborated by Bergante and
Inguillo in their pleadings denouncing their unjustified dismissal. In fine, We
hold that the dialogue is not tantamount to the hearing or conference
prescribed by law.
We reiterate, FPSI was justified in enforcing the Union Security Clause in the
CBA. However, We cannot countenance respondents' failure to accord herein
petitioners the due process they deserve after the former dismissed them
outright in order to avoid a serious labor dispute among the officers and
members of the bargaining agent.[53] In enforcing the Union Security Clause in
the CBA, We are upholding the sanctity and inviolability of contracts. But in
doing so, We cannot override an employees right to due process.[54] In Carino
v. National Labor Relations Commission,[55] We took a firm stand in holding
that:
The power to dismiss is a normal prerogative of the

employer. However, this is not without limitation. The employer
is bound to exercise caution in terminating the services of
his employees especially so when it is made upon the
request of a labor union pursuant to the Collective
Bargaining Agreement x x x. Dismissals must not be arbitrary
and capricious. Due process must be observed in dismissing

an employee because it affects not only his position but
also his means of livelihood. Employers should respect and
protect the rights of their employees, which include the right to
labor."
Thus, as held in that case, "the right of an employee to be informed of the

charges against him and to reasonable opportunity to present his side in a
controversy with either the company or his own Union is not wiped away by a
Union Security Clause or a Union Shop Clause in a collective bargaining
agreement. An employee is entitled to be protected not only from a company
which disregards his rights but also from his own Union, the leadership of which
could yield to the temptation of swift and arbitrary expulsion from membership
and mere dismissal from his job."[56]
In fine, We hold that while Bergante and Inguillo's dismissals were valid
pursuant to the enforcement of Union Security Clause, respondents however
did not comply with the requisite procedural due process. As in the case
of Agabon v. National Labor Relations Commission,[57] where the dismissal is
for a cause recognized by the prevailing jurisprudence, the absence of the
statutory due process should not nullify the dismissal or render it illegal, or
ineffectual.Accordingly, for violating Bergante and Inguillo's statutory rights,
respondents should indemnify them the amount of P30,000.00 each as nominal
damages.
In view of the foregoing, We see no reason to discuss the other matters

raised by petitioners.
WHEREFORE, premises considered, the instant Petition is DENIED. The Court

of Appeals Decision dated March 11, 2004 and Resolution dated September 17,
2004, in CA-G.R. SP No. 73992, are hereby AFFIRMED WITH
MODIFICATION in that while there was a valid ground for dismissal, the
procedural requirements for termination, as mandated by law and
jurisprudence, were not observed. Respondents First Philippine Scales, Inc.
and/or Amparo Policarpio are hereby ORDERED to PAY petitioners Zenaida
Bergante and Herminigildo Inguillo the amount of P30,000.00 each as nominal
damages. No pronouncement as to costs.
SO ORDERED.

Herminigildo Inguillo and Zenaida Bergante vs. First Philippine Scales,
Inc. (FPSI) and/or Amparo Policarpio, manager
G.R. No. 165407 (June 5, 2009)
In 1991, FPSI and First Philippine Scales Industries Labor Union (FPSILU)
entered into a Collective Bargaining Agreement (CBA) for a period of five (5)
years in a document entitled RATIPIKASYON NG KASUNDUAN. Bergante and
Inguillo, who were members of FPSILU, signed the said document.
Bergante, Inguillo and several FPSI employees joined another union, the
Nagkakaisang Lakas ng Manggagawa (NLM). [The latter] filed with the
Department of Labor and Employment (DOLE) an intra-union dispute against
FPSILU and FPSI. Meanwhile, on March 29, 1996, the executive board and
members of the FPSILU addressed a document dated March 18, 1996
denominated as “Petisyon” to FPSI's general manager, Amparo Policarpio
(Policarpio), seeking the termination of the services of [several employees,
including herein petitioners. This was granted upon by FPSI, which terminated,
among others, herein petitioners.]
In their Petition, Bergante and Inguillo assail the legality of their termination
based on the Union Security Clause in the CBA between FPSI and FPSILU.
[(1) Was there a valid ground for termination?

(2) Was there compliance with the procedural due process to the termination?]
(1) Yes. The Labor Code of the Philippines has several provisions under which
an employee may be validly terminated, namely: (1) just causes under Article
282; (2) authorized causes under Article 283; (3) termination due to disease
under Article 284; and (4) termination by the employee or resignation under
Article 285. While the said provisions did not mention as ground the
enforcement of the Union Security Clause in the CBA, the dismissal from
employment based on the same is recognized and accepted in our jurisdiction.
“Union security” is a generic term, which is applied to and comprehends “closed

shop,” “union shop,” “maintenance of membership” or any other form of
agreement which imposes upon employees the obligation to acquire or retain
union membership as a condition affecting employment. There is union shop
when all new regular employees are required to join the union within a certain
period as a condition for their continued employment. There is maintenance of
membership shop when employees, who are union members as of the effective
date of the agreement, or who thereafter become members, must maintain
union membership as a condition for continued employment until they are
promoted or transferred out of the bargaining unit or the agreement is
terminated.[40] A closed-shop, on the other hand, may be defined as an
enterprise in which, by agreement between the employer and his employees or
their representatives, no person may be employed in any or certain agreed
departments of the enterprise unless he or she is, becomes, and, for the
duration of the agreement, remains a member in good standing of a union
entirely comprised of or of which the employees in interest are a part.[
Bergante and Inguillo assail the legality of their termination based on the Union
Security Clause in the CBA between FPSI and FPSILU. Article II[42] of the CBA
pertains to Union Security and Representatives, which provides:
“The Company hereby agrees to a UNION SECURITY [CLAUSE] with the

following terms:
1. All bonafide union members x x x x shall, as a condition to

their continued employment, maintain their membership with the
UNION;
xxx
5. Any employee/union member who fails to retain union
membership in good standing may be recommended for suspension or
dismissal by the Union Directorate and/or FPSILU Executive Council x x
x”
Verily, the aforesaid provision requires all members to maintain their

membership with FPSILU during the lifetime of the CBA. Failing so, and for
any of the causes enumerated therein, the Union Directorate and/or FPSILU
Executive Council may recommend to FPSI an employee/union member's
suspension or dismissal. Records show that Bergante and Inguillo were former
members of FPSILU based on their signatures in the document which ratified
the CBA. It can also be inferred that they disaffiliated from FPSILU when the
CBA was still in force and subsisting, as can be gleaned from the documents
relative to the intra-union dispute between FPSILU and NLM-KATIPUNAN. In
view of their disaffiliation, as well as other acts allegedly detrimental to the
interest of both FPSILU and FPSI, a “Petisyon” was submitted to Policarpio,
asking for the termination of the services of employees who failed to maintain
their Union membership.
In terminating the employment of an employee by enforcing the Union Security

Clause, the employer needs only to determine and prove that: (1) the union
security clause is applicable; (2) the union is requesting for the enforcement of
the union security provision in the CBA; and (3) there is sufficient evidence to
support the union's decision to expel the employee from the union or company.
All the requisites have been sufficiently met and FPSI was justified in enforcing
the Union Security Clause.
The stipulations in the CBA authorizing the dismissal of employees are of equal
import as the statutory provisions on dismissal under the Labor Code, since a
CBA is the law between the company and the Union, and compliance therewith
is mandated by the express policy to give protection to labor. In Caltex Refinery
Employees Association (CREA) v. Brillantes, the Court expounded on the
effectiveness of union security clause when it held that it is one intended to
strengthen the contracting union and to protect it from the fickleness or perfidy
of its own members. For without such safeguards, group solidarity becomes
uncertain; the union becomes gradually weakened and increasingly vulnerable
to company machinations. In this security clause lies the strength of the union
during the enforcement of the collective bargaining agreement. It is this
clause that provides labor with substantial power in collective bargaining.
(2) No. Nonetheless, while We uphold dismissal pursuant to a union security

clause, the same is not without a condition or restriction. The enforcement of
union security clauses is authorized by law, provided such enforcement is not
characterized by arbitrariness, and always with due process. There are two (2)
aspects which characterize the concept of due process under the Labor Code:
one is substantive––whether the termination of employment was based on the
provisions of the Labor Code or in accordance with the prevailing jurisprudence;
the other is procedural - the manner in which the dismissal was effected.
Procedural due process in the dismissal of employees requires notice and

hearing. The employer must furnish the employee two written notices before
termination may be effected. The first notice apprises the employee of the
particular acts or omissions for which his dismissal is sought, while the second
notice informs the employee of the employer’s decision to dismiss him. The
requirement of a hearing, on the other hand, is complied with as long as there
was an opportunity to be heard, and not necessarily that an actual hearing was
conducted.
In the present case, the required two notices that must be given to herein
petitioners Bergante and Inguillo were lacking. Respondents, however, aver
that they had furnished the employees concerned, including petitioners, with a
copy of FPSILU's “Petisyon.” While the “Petisyon” enumerated the several
grounds that would justify the termination of the employees mentioned therein,
yet such document is only a recommendation by the Union upon which the
employer may base its decision. It cannot be considered a notice of
termination. A perusal of each of [the grounds stated therein] leads Us to
conclude that what was stated were general descriptions, which in no way
would enable the employees to intelligently prepare their explanation and
defenses.
Policarpio's allegations are self-serving. Except for her claim as stated in the
respondent's Position Paper, nowhere from the records can We find that
Bergante and Inguillo were accorded the opportunity to present evidence in
support of their defenses. Policarpio relied heavily on the “Petisyon” of
FPSILU. She failed to convince Us that during the dialogue, she was able to
ascertain the validity of the charges mentioned in the “Petisyon.” In her futile
attempt to prove compliance with the procedural requirement, she reiterated
that the objective of the dialogue was to provide the employees “the
opportunity to receive the act of grace of FPSI by giving them an amount
equivalent to one-half (½) month of their salary for every year of service.” We
are not convinced. We cannot even consider the demand and counter-offer for
the payment of the employees as an amicable settlement between the parties
because what took place was merely a discussion only of the amount which the
employees are willing to accept and the amount which the respondents are
willing to give. Such non-compliance is also corroborated by Bergante and
Inguillo in their pleadings denouncing their unjustified dismissal. In fine, We
hold that the dialogue is not tantamount to the hearing or conference
prescribed by law.

G.R. No. 168081 October 17, 2008
ARMANDO G. YRASUEGUI,
Petitioner,
- versus -
PHILIPPINE AIRLINES, INC.,
Respondent.
REYES, R.T., J.:
THIS case portrays the peculiar story of an international flight steward

who was dismissed because of his failure to adhere to the weight standards of
the airline company.
He is now before this Court via a petition for review on certiorari claiming
that he was illegally dismissed. To buttress his stance, he argues that (1) his
dismissal does not fall under 282(e) of the Labor Code; (2) continuing
adherence to the weight standards of the company is not a bona fide
occupational qualification; and (3) he was discriminated against
because other overweight employees were promoted instead of being
disciplined.
After a meticulous consideration of all arguments pro and con, We uphold the
legality of dismissal. Separation pay, however, should be awarded in favor of
the employee as an act of social justice or based on equity. This is so because
his dismissal is not for serious misconduct. Neither is it reflective of his moral
character.
The Facts
Petitioner Armando G. Yrasuegui was a former international flight

steward of Philippine Airlines, Inc. (PAL). He stands five feet and eight inches
(58) with a large body frame. The proper weight for a man of his height and
body structure is from 147 to 166 pounds, the ideal weight being 166 pounds,
as mandated by the Cabin and Crew Administration Manual[1] of PAL.
The weight problem of petitioner dates back to 1984. Back

then, PAL advised him to go on an extended vacation leave from December 29,
1984 to March 4, 1985 to address his weight concerns. Apparently, petitioner
failed to meet the companys weight
standards, prompting another leave without pay from March 5, 1985 to
November 1985.
After meeting the required weight, petitioner was allowed to return to

work. But petitioners weight problem recurred. He again went on leave without
pay from October 17, 1988 to February 1989.
On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his
ideal weight. In line with company policy, he was removed from flight duty
effective May 6, 1989 to July 3, 1989. He was formally requested to trim down
to his ideal weight and report for weight checks on several
dates. He was also told that he may avail of the services of the company
physician should he wish to do so. He was advised that his case will be
evaluated on July 3, 1989.[2]
On February 25, 1989, petitioner underwent weight check. It was

discovered that he gained, instead of losing, weight. He was overweight at 215
pounds, which is 49 pounds beyond the limit. Consequently, his off-duty status
was retained.
On October 17, 1989, PAL Line Administrator Gloria Dizon personally

visited petitioner at his residence to check on the progress of his effort to lose
weight. Petitioner weighed 217 pounds, gaining 2 pounds from his previous
weight. After the visit, petitioner made a commitment[3] to reduce weight in a
letter addressed to Cabin Crew Group Manager Augusto Barrios. The letter, in
full, reads:
Dear Sir:
I would like to guaranty my commitment towards a weight

loss from 217 pounds to 200 pounds from today until 31 Dec.
1989.
From thereon, I promise to continue reducing at a

reasonable percentage until such time that my ideal weight is
achieved.
Likewise, I promise to personally report to your office at the

designated time schedule you will set for my weight check.

Respectfully Yours,
F/S Armando Yrasuegui[4]
Despite the lapse of a ninety-day period given him to reach his ideal
weight, petitioner remained overweight. On January 3, 1990, he was informed
of the PAL decision for him to remain grounded until such time that he
satisfactorily complies with the weight standards. Again, he was directed to
report every two weeks for weight checks.
Petitioner failed to report for weight checks. Despite that, he was given
one more month to comply with the weight requirement. As usual, he was
asked to report for weight check on different dates. He was reminded that his
grounding would continue pending satisfactory compliance with the weight
standards.[5]
Again, petitioner failed to report for weight checks, although he was seen
submitting his passport for processing at the PAL Staff Service Division.
On April 17, 1990, petitioner was formally warned that a repeated refusal
to report for weight check would be dealt with accordingly. He was given
another set of weight check dates.[6] Again, petitioner ignored the directive and
did not report for weight checks. On June 26, 1990, petitioner was required to
explain his refusal to undergo weight checks.[7]
When petitioner tipped the scale on July 30, 1990, he weighed at 212
pounds. Clearly, he was still way over his ideal weight of 166 pounds.
From then on, nothing was heard from petitioner until he followed up his
case requesting for leniency on the latter part of 1992. He weighed at 219
poundson August 20, 1992 and 205 pounds on November 5, 1992.
On November 13, 1992, PAL finally served petitioner a Notice of

Administrative Charge for violation of company standards on weight
requirements. He was given ten (10) days from receipt of the charge within
which to file his answer and submit controverting evidence.[8]
On December 7, 1992, petitioner submitted his Answer.[9] Notably, he

did not deny being overweight. What he claimed, instead, is that his
violation, ifany, had already been condoned by PAL since no action has been
taken by the company regarding his case since 1988. He also claimed
that PAL discriminated against him because the company has not been fair in
treating the cabin crew members who are similarly situated.
On December 8, 1992, a clarificatory hearing was held where petitioner

manifested that he was undergoing a weight reduction program to lose at least
two (2) pounds per week so as to attain his ideal weight.[10]
On June 15, 1993, petitioner was formally informed by PAL that due to
his inability to attain his ideal weight, and considering the utmost leniency
extended to him which spanned a period covering a total of almost five (5)
years, his services were considered terminated effective immediately.[11]
His motion for reconsideration having been denied,[12] petitioner filed a

complaint for illegal dismissal against PAL.
Labor Arbiter, NLRC and CA Dispositions
On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled[13] that

petitioner was illegally dismissed. The dispositive part of the Arbiter ruling runs
as follows:
WHEREFORE, in view of the foregoing, judgment is hereby

rendered, declaring the complainants dismissal illegal, and
ordering the respondent to reinstate him to his former position or
substantially equivalent one, and to pay him:
a. Backwages of Php10,500.00 per month from his dismissal

on June 15, 1993 until reinstated, which for purposes of appeal is
hereby set from June 15, 1993 up to August 15,
1998 at P651,000.00;
b. Attorneys fees of five percent (5%) of the total award.
SO ORDERED.[14]
The Labor Arbiter held that the weight standards of PAL are reasonable in
view of the nature of the job of petitioner.[15] However, the weight standards
need not be complied with under pain of dismissal since his weight did not
hamper the performance of his duties.[16] Assuming that it did, petitioner could
be transferred to other positions where his weight would not be a negative
factor.[17] Notably, other overweight employees, i.e., Mr. Palacios, Mr. Cui, and
Mr. Barrios, were promoted instead of being disciplined.[18]
Both parties appealed to the National Labor Relations Commission

(NLRC).[19]
On October 8, 1999, the Labor Arbiter issued a writ of execution

directing the reinstatement of petitioner without loss of seniority rights and
other benefits.[20]
On February 1, 2000, the Labor Arbiter denied[21] the Motion to Quash

Writ of Execution[22] of PAL.
On March 6, 2000, PAL appealed the denial of its motion to quash to the
NLRC. [23]
On June 23, 2000, the NLRC rendered judgment[24] in the following

tenor:
WHEREFORE, premises considered[,] the Decision of the

Arbiter dated 18 November 1998 as modified by our findings
herein, is hereby AFFIRMED and that part of the dispositive
portion of said decision concerning complainants entitlement
to backwages shall be deemed to refer to complainants
entitlement to his full backwages, inclusive of allowances and to
his other benefits or their monetary equivalent instead of
simply backwages, from date of dismissal until his actual
reinstatement or finality hereof. Respondent is enjoined to
manifests (sic) its choice of the form of the reinstatement of
complainant, whether physical or through payroll within ten (10)
days from notice failing which, the same shall be deemed as
complainants reinstatement through payroll and execution in case
of non-payment shall accordingly be issued by the Arbiter. Both
appeals of respondent thus, are DISMISSED for utter lack of
merit.[25]
According to the NLRC, obesity, or the tendency to gain weight

uncontrollably regardless of the amount of food intake, is a disease in
itself.[26] As a consequence, there can be no intentional defiance or serious
misconduct by petitioner to the lawful order of PAL for him to lose weight.[27]
Like the Labor Arbiter, the NLRC found the weight standards of PAL to be
reasonable. However, it found as unnecessary the Labor Arbiter holding that
petitioner was not remiss in the performance of his duties as flight steward
despite being overweight. According to the NLRC, the Labor Arbiter should have
limited himself to the issue of whether the failure of petitioner to attain his ideal
weight constituted willful defiance of the weight standards of PAL.[28]
PAL moved for reconsideration to no avail.[29] Thus, PAL elevated the

matter to the Court of Appeals (CA) via a petition for certiorari under Rule 65 of
the 1997 Rules of Civil Procedure.[30]
By Decision dated August 31, 2004, the CA reversed[31] the NLRC:
WHEREFORE, premises considered, we hereby GRANT the

petition. The assailed NLRC decision is declared NULL and VOID
and is hereby SET ASIDE. The private respondents complaint is
hereby DISMISSED. No costs.
SO ORDERED.[32]
The CA opined that there was grave abuse of discretion on the part of
the NLRC because it looked at wrong and irrelevant considerations[33] in
evaluating the evidence of the parties. Contrary to the NLRC ruling, the weight
standards of PAL are meant to be a continuing qualification for an employees
position.[34]The failure to adhere to the weight standards is an analogous
cause for the dismissal of an employee under Article 282(e) of the Labor Code
in relation to Article 282(a). It is not willful disobedience as the NLRC seemed
to suggest.[35] Said the CA, the element of willfulness that the NLRC decision
cites is an irrelevant consideration in arriving at a conclusion on whether the
dismissal is legally proper.[36] In other words, the relevant question to ask is
not one of willfulness but one of reasonableness of the standard and whether or
not the employee qualifies or continues to qualify under this standard.[37]
Just like the Labor Arbiter and the NLRC, the CA held that the weight standards
of PAL are reasonable.[38] Thus, petitioner was legally dismissed because he
repeatedly failed to meet the prescribed weight standards.[39] It is obvious that
the issue of discrimination was only invoked by petitioner for purposes of
escaping the result of his dismissal for being overweight.[40]
On May 10, 2005, the CA denied petitioners motion for
reconsideration. [41]
Elaborating on its earlier ruling, the CA held that the weight
standards of PALare a bona fide occupational qualification which, in case of
violation, justifies an employees separation from the service.[42]
Issues
In this Rule 45 petition for review, the following issues are posed for resolution:
I.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY
ERRED IN HOLDING THAT PETITIONERS OBESITY CAN BE A
GROUND FOR DISMISSAL UNDER PARAGRAPH (e) OF ARTICLE
282 OF THE LABOR CODE OF THE PHILIPPINES;
II.
ERRED IN HOLDING THAT PETITIONERS DISMISSAL FOR OBESITY
CAN BE PREDICATED ON THE BONA FIDE OCCUPATIONAL
QUALIFICATION (BFOQ) DEFENSE;
III.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN
HOLDING THAT PETITIONER WAS NOT UNDULY DISCRIMINATED
AGAINST WHEN HE WAS DISMISSED WHILE OTHER OVERWEIGHT
CABIN ATTENDANTS WERE EITHER GIVEN FLYING DUTIES OR
PROMOTED;
IV.
ERRED WHEN IT BRUSHED ASIDE PETITIONERS CLAIMS FOR
REINSTATEMENT [AND] WAGES ALLEGEDLY FOR BEING
MOOT AND ACADEMIC.[43] (Underscoring supplied)
Our Ruling
I. The obesity of petitioner is a ground for dismissal under Article

282(e) [44] of the Labor Code.

A reading of the weight standards of PAL would lead to no other conclusion
than that they constitute a continuing qualification of an employee in order to
keep the job. Tersely put, an employee may be dismissed the moment he is
unable to comply with his ideal weight as prescribed by the weight
standards. The dismissal of the employee would thus fall under Article 282(e)
of the Labor Code. As explained by the CA:
x x x [T]he standards violated in this case were not mere orders of

the employer; they were the prescribed weights that a cabin crew
must maintain in order to qualify for and keep his or her
position in the company. In other words, they were standards
that establish continuing qualifications for an employees
position. In this sense, the failure to maintain these standards
does not fall under Article 282(a) whose express terms require the
element of willfulness in order to be a ground for dismissal. The
failure to meet the employers qualifying standards is in fact a
ground that does not squarely fall under grounds (a) to (d) and is
therefore one that falls under Article 282(e) the other causes
analogous to the foregoing.
By its nature, these qualifying standards are norms that

apply prior to and after an employee is hired. They apply prior
to employment because these are the standards a job applicant
must initially meet in order to be hired. They apply after
hiring because an employee must continue to meet these
standards while on the job in order to keep his job. Under this
perspective, a violation is not one of the faults for which an
employee can be dismissed pursuant to pars. (a) to (d) of Article
282; the employee can be dismissed simply because he no longer
qualifies for his job irrespective of whether or not the failure to
qualify was willful or intentional. x x x[45]
Petitioner, though, advances a very interesting argument. He claims that

obesity is a physical abnormality and/or illness.[46] Relying
on Nadura v. BenguetConsolidated, Inc.,[47] he says his dismissal is illegal:
Conscious of the fact that Naduras case cannot be made to

fall squarely within the specific causes enumerated in
subparagraphs 1(a) to (e), Benguet invokes the provisions of
subparagraph 1(f) and says that Naduras illness occasional attacks
of asthma is a cause analogous to them.
Even a cursory reading of the legal provision under consideration
is sufficient to convince anyone that, as the trial court
said, illness cannot be included as an analogous cause by any
stretch of imagination.
It is clear that, except the just cause mentioned in sub-paragraph

1(a), all the others expressly enumerated in the law are due to the
voluntary and/or willful act of the employee. How Naduras illness
could be considered as analogous to any of them is beyond our
understanding, there being no claim or pretense that the same
was contracted through his own voluntary act.[48]
The reliance on Nadura is off-tangent. The factual milieu in Nadura is

substantially different from the case at bar. First, Nadura was not decided
under the Labor Code. The law applied in that case was Republic Act (RA) No.
1787. Second, the issue of flight safety is absent in Nadura, thus, the rationale
there cannot apply here. Third, in Nadura, the employee who was a miner, was
laid off from work because of illness, i.e., asthma. Here, petitioner was
dismissed for his failure to meet the weight standards of PAL. He was not
dismissed due to illness. Fourth, the issue in Nadura is whether
or not the dismissed employee is entitled to separation pay and damages. Here,
the issue centers on the propriety of the dismissal of petitioner for his failure to
meet the weight standards of PAL. Fifth, in Nadura, the employee was not
accorded due process. Here, petitioner was accorded utmost leniency. He was
given more than four (4) years to comply with the weight standards of PAL.
In the case at bar, the evidence on record militates against petitioners

claims that obesity is a disease. That he was able to reduce his weight from
1984 to 1992 clearly shows that it is possible for him to lose weight given the
proper attitude, determination, and self-discipline. Indeed, during
the clarificatory hearing on December 8, 1992, petitioner himself claimed that
[t]he issue is could I bring my weight down to ideal weight which is 172, then
the answer is yes. I can do it now.[49]
True, petitioner claims that reducing weight is costing him a lot of

expenses.[50] However, petitioner has only himself to blame. He could have
easily availed the assistance of the company physician, per the advice
of PAL.[51] He chose to ignore the suggestion. In fact, he repeatedly failed to
report when required to undergo weight checks, without offering a valid
explanation. Thus, his fluctuating weight indicates absence of willpower rather
than an illness.
Petitioner cites Bonnie Cook v. State of Rhode Island, Department of

Mental Health, Retardation and Hospitals,[52] decided by the United States Court
of Appeals (First Circuit). In that case, Cook worked from 1978 to 1980 and
from 1981 to 1986 as an institutional attendant for the mentally retarded at the
Ladd Center that was being operated by respondent. She twice resigned
voluntarily with an unblemished record. Even respondent admitted that her
performance met the Centers legitimate expectations. In 1988, Cook re-applied
for a similar position. At that time, she stood 52 tall and weighed over 320
pounds. Respondent claimed that the morbid obesity of plaintiff compromised
her ability to evacuate patients in case of emergency and it also put her at
greater risk of serious diseases.
Cook contended that the action of respondent amounted to

discrimination on the basis of a handicap. This was in direct violation of Section
504(a) of the Rehabilitation Act of 1973,[53] which incorporates the remedies
contained in Title VI of the Civil Rights Act of 1964. Respondent claimed,
however, that morbid obesity could never constitute a handicap within the
purview of the Rehabilitation Act. Among others, obesity is a mutable condition,
thus plaintiff could simply lose weight and rid herself of concomitant disability.
The appellate Court disagreed and held that morbid obesity is a disability
under the Rehabilitation Act and that respondent discriminated against Cook
based on perceived disability. The evidence included expert testimony that
morbid obesity is a physiological disorder. It involves a dysfunction of both the
metabolic system and the neurological appetite suppressing signal system,
which is capable of causing adverse effects within the musculoskeletal,
respiratory, and cardiovascular systems. Notably, the Court stated that
mutability is relevant only in determining the substantiality of the limitation
flowing from a given impairment, thus mutability only precludes those
conditions that an individual can easily and quickly reverse by behavioral
alteration.
Unlike Cook, however, petitioner is not morbidly obese. In the words of

the District Court for the District of Rhode Island, Cook was sometime before
1978 at least one hundred pounds more than what is considered appropriate of
her height. According to the Circuit Judge, Cook weighed over 320 pounds in

1988. Clearly, that is not the case here. At his heaviest, petitioner was only less
than 50 pounds over his ideal weight.
In fine, We hold that the obesity of petitioner, when placed in the context
of his work as flight attendant, becomes an analogous cause under Article
282(e) of the Labor Code that justifies his dismissal from the service. His
obesity may not be unintended, but is nonetheless voluntary. As the CA
correctly puts it, [v]oluntariness basically means that the just cause is solely
attributable to the employee without any external force influencing or
controlling his actions. This element runs through all just causes under Article
282, whether they be in the nature of a wrongful action or omission. Gross and
habitual neglect, a recognized just cause, is considered voluntary although it
lacks the element of intent found in Article 282(a), (c), and (d).[54]
II. The dismissal of petitioner can be predicated on the bona fide

occupational qualification defense.
Employment in particular jobs may not be limited to persons of a particular sex,

religion, or national origin unless the employer can show that sex, religion, or
national origin is an actual qualification for performing the job. The qualification
is called a bona fide occupational qualification (BFOQ).[55] In the United States,
there are a few federal and many state job discrimination laws that contain an
exception allowing an employer to engage in an otherwise unlawful form of
prohibited discrimination when the action is based on a BFOQ necessary to the
normal operation of a business or enterprise.[56]
Petitioner contends that BFOQ is a statutory defense. It does not exist if
there is no statute providing for it.[57] Further, there is no existing BFOQ statute
that could justify his dismissal.[58]
Both arguments must fail.
First, the Constitution,[59] the Labor Code,[60] and RA No. 7277[61] or the
Magna Carta for Disabled Persons[62] contain provisions similar to BFOQ.
Second, in British Columbia Public Service Employee Commission (BSPSERC)

v. The British Columbia Government and Service Employees Union
(BCGSEU),[63] the Supreme Court of Canada adopted the so-called Meiorin Test
in determining whether an employment policy is justified. Under this test, (1)
the employer must show that it adopted the standard for a purpose rationally
connected to the performance of the job;[64] (2) the employer must establish
that the standard is reasonably necessary[65] to the accomplishment of that
work-related purpose; and (3) the employer must establish that the standard is
reasonably necessary in order to accomplish the legitimate work-related
purpose. Similarly, in Star Paper Corporation v. Simbol,[66] this Court held that
in order to justify a BFOQ, the employer must prove that (1) the employment
qualification is reasonably related to the essential operation of the job involved;
and (2) that there is factual basis for believing that all or substantially all
persons meeting the qualification would be unable to properly perform the
duties of the job.[67]
In short, the test of reasonableness of the company policy is used

because it is parallel to BFOQ.[68] BFOQ is valid provided it reflects an inherent
quality reasonably necessary for satisfactory job performance.[69]
In Duncan Association of Detailman-PTGWTO

v. Glaxo Wellcome Philippines, Inc.,[70] the Court did not hesitate to pass upon
the validity of a company policy which prohibits its employees from marrying
employees of a rival company. It was held that the company policy is
reasonable considering that its purpose is the protection of the interests of the
company against possible competitor infiltration on its trade secrets and
procedures.
Verily, there is no merit to the argument that BFOQ cannot be applied if

it has no supporting statute. Too, the Labor Arbiter,[71] NLRC,[72] and CA[73]are
one in holding that the weight standards of PAL are reasonable. A common
carrier, from the nature of its business and for reasons of public policy, is
bound to observe extraordinary diligence for the safety of the passengers it
transports.[74] It is bound to carry its passengers safely as far as
human care and foresight can provide, using the utmost diligence of very
cautious persons, with due regard for all the circumstances.[75]
The law leaves no room for mistake or oversight on the part of a

common carrier. Thus, it is only logical to hold that the weight standards
of PAL show its effort to comply with the exacting obligations imposed upon it
by law by virtue of being a common carrier.
The business of PAL is air transportation. As such, it has committed itself
to safely transport its passengers. In order to achieve this, it must necessarily
rely on its employees, most particularly the cabin flight deck crew who are on
board the aircraft. The weight standards of PAL should be viewed as imposing
strict norms of discipline upon its employees.

In other words, the primary objective of PAL in the imposition of the
weight standards for cabin crew is flight safety. It cannot be gainsaid that cabin
attendants must maintain agility at all times in order to inspire passenger
confidence on their ability to care for the passengers when something goes
wrong. It is not farfetched to say that airline companies, just like all common
carriers, thrive due to public confidence on their safety records. People,
especially the riding public, expect no less than that airline companies transport
their passengers to their respective destinations safely and soundly. A lesser
performance is unacceptable.
The task of a cabin crew or flight attendant is not limited to serving

meals or attending to the whims and caprices of the passengers. The most
important activity of the cabin crew is to care for the safety of passengers and
the evacuation of the aircraft when an emergency occurs. Passenger safety
goes to the core of the job of a cabin attendant. Truly, airlines need cabin
attendants who have the necessary strength to open emergency doors, the
agility to attend to passengers in cramped working conditions, and the stamina
to withstand grueling flight schedules.
On board an aircraft, the body weight and size of a cabin attendant are
important factors to consider in case of emergency. Aircrafts have constricted
cabin space, and narrow aisles and exit doors. Thus, the arguments of
respondent that [w]hether the airlines flight attendants are overweight or not
has no direct relation to its mission of transporting passengers to their
destination; and that the weight standards has nothing to do with airworthiness
of respondents airlines, must fail.
The rationale in Western Air Lines v. Criswell[76] relied upon by petitioner

cannot apply to his case. What was involved there were two (2) airline pilots
who were denied reassignment as flight engineers upon reaching the age of 60,
and a flight engineer who was forced to retire at age 60. They sued the airline
company, alleging that the age-60 retirement for flight engineers violated the
Age Discrimination in Employment Act of 1967. Age-based BFOQ and being
overweight are not the same. The case of overweight cabin attendants is
another matter. Given the cramped cabin space and narrow aisles and
emergency exit doors of the airplane, any overweight cabin attendant would
certainly have difficulty navigating the cramped cabin area.
In short, there is no need to individually evaluate their ability to perform

their task. That an obese cabin attendant occupies more space than a slim one
is an unquestionable fact which courts can judicially recognize without
introduction of evidence.[77] It would also be absurd to require airline companies
to reconfigure the aircraft in order to widen the aisles and exit doors just to
accommodate overweight cabin attendants like petitioner.
The biggest problem with an overweight cabin attendant is the possibility

of impeding passengers from evacuating the aircraft, should the occasion call
for it. The job of a cabin attendant during emergencies is to speedily get the
passengers out of the aircraft safely. Being overweight necessarily impedes
mobility. Indeed, in an emergency situation, seconds are what cabin attendants
are dealing with, not minutes. Three lost seconds can translate into three lost
lives. Evacuation might slow down just because a wide-bodied cabin attendant
is blocking the narrow aisles. These possibilities are not remote.
Petitioner is also in estoppel. He does not dispute that the weight

standards of PAL were made known to him prior to his employment. He is
presumed to know the weight limit that he must maintain at all times.[78] In
fact, never did he question the authority of PAL when he was repeatedly asked
to trim down his weight. Bona fides exigit ut quod convenit fiat. Good faith
demands that what is agreed upon shall be
done. Kung ang tao ay tapat kanyang tutuparin angnapagkasunduan.
Too, the weight standards of PAL provide for separate weight limitations
based on height and body frame for both male and female cabin attendants. A
progressive discipline is imposed to allow non-compliant cabin attendants
sufficient opportunity to meet the weight standards. Thus, the clear-cut rules
obviate any possibility for the commission of abuse or arbitrary action on the
part of PAL.
III. Petitioner failed to substantiate his claim that he was

discriminated against by PAL.
Petitioner next claims that PAL is using passenger safety as a convenient

excuse to discriminate against him.[79] We are constrained, however, to hold
otherwise. We agree with the CA that [t]he element of
discrimination came into play in this case as a secondary position for the
private respondent in order to escape the consequence of dismissal that being
overweight entailed. It is a confession-and-avoidance position that impliedly
admitted the cause of dismissal, including the reasonableness of the applicable

standard and the private respondents failure to comply.[80] It is a basic rule in
evidence that each party must prove his affirmative allegation.[81]
Since the burden of evidence lies with the party who asserts an
affirmative allegation, petitioner has to prove his allegation with
particularity. There is nothing on the records which could support the finding of
discriminatory treatment. Petitioner cannot establish discrimination by simply
naming the supposed cabin attendants who are allegedly similarly situated with
him. Substantial proof must be shown as to how and why they are similarly
situated and the differential treatment petitioner got from PAL despite the
similarity of his situation with other employees.
Indeed, except for pointing out the names of the supposed overweight cabin
attendants, petitioner miserably failed to indicate their respective ideal weights;
weights over their ideal weights; the periods they were allowed to fly despite
their being overweight; the particular flights assigned to them; the
discriminating treatment they got from PAL; and other relevant data that could
have adequately established a case of discriminatory treatment by PAL. In the
words of the CA, PAL really had no substantial case of discrimination to
meet.[82]
We are not unmindful that findings of facts of administrative agencies,

like the Labor Arbiter and the NLRC, are accorded respect, even finality.[83] The
reason is simple: administrative agencies are experts in matters within their
specific and specialized jurisdiction.[84] But the principle is not a hard and fast
rule. It only applies if the findings of facts are duly supported by substantial
evidence. If it can be shown that administrative bodies
grossly misappreciated evidence of such nature so as to compel a conclusion to
the contrary, their findings of facts must necessarily be reversed. Factual
findings of administrative agencies do not have infallibility and must be set
aside when they fail the test of arbitrariness.[85]
Here, the Labor Arbiter and the NLRC

inexplicably misappreciated evidence. We thus annul their findings.
To make his claim more believable, petitioner invokes the equal

protection clause guaranty[86] of the Constitution. However, in the absence of
governmental interference, the liberties guaranteed by the Constitution cannot
be invoked.[87] Put differently, the Bill of Rights is not meant to be invoked
against acts of private individuals.[88] Indeed, the United States Supreme
Court, in interpreting the Fourteenth Amendment,[89] which is the source of our
equal protection guarantee, is consistent in saying that
the equal protection erects no shield against private conduct, however
discriminatory or wrongful.[90] Private actions, no matter how egregious, cannot
violate the equal protection guarantee.[91]
IV. The claims of petitioner for reinstatement and wages are

moot.
As his last contention, petitioner avers that his claims for reinstatement and
wages have not been mooted. He is entitled to reinstatement and his
full backwages, from the time he was illegally dismissed up to the time that the
NLRC was reversed by the CA.[92]
At this point, Article 223 of the Labor Code finds relevance:
In any event, the decision of the Labor Arbiter reinstating a

dismissed or separated employee, insofar as the reinstatement
aspect is concerned, shall immediately be executory, even pending
appeal. The employee shall either be admitted back to work under
the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in
the payroll. The posting of a bond by the employer shall not stay
the execution for reinstatement provided herein.
The law is very clear. Although an award or order of reinstatement is

self-executory and does not require a writ of execution,[93] the option to
exercise actual reinstatement or payroll reinstatement belongs to the
employer. It does not belong to the employee, to the labor tribunals, or even to
the courts.
Contrary to the allegation of petitioner that PAL did everything under the
sun to frustrate his immediate return to his previous position,[94] there is
evidence that PAL opted to physically reinstate him to a substantially equivalent
position in accordance with the order of the Labor
Arbiter.[95] In fact, petitioner duly received the return to work notice
on February 23, 2001, as shown by his signature.[96]
Petitioner cannot take refuge in the pronouncements of the Court in a

case[97]
that [t]he unjustified refusal of the employer to reinstate the dismissed
employee entitles him to payment of his salaries effective from the time the
employer failed to reinstate him despite the issuance of a writ of
execution[98] and even if the order of reinstatement of the Labor Arbiter is
reversed on appeal, it is obligatory on the part of the employer to reinstate and
pay the wages of the employee during the period of appeal until reversal by the
higher court.[99] He failed to prove that he complied with the return to work
order of PAL. Neither does it appear on record that he actually rendered
services for PAL from the moment he was dismissed, in order to insist on the
payment of his full backwages.
In insisting that he be reinstated to his actual position despite being

overweight, petitioner in effect wants to render the issues in the present case
moot. He asks PAL to comply with the impossible. Time and again, the Court
ruled that the law does not exact compliance with the impossible.[100]
V. Petitioner is entitled to separation pay.
Be that as it may, all is not lost for petitioner.
Normally, a legally dismissed employee is not entitled to separation

pay. This may be deduced from the language of Article 279 of the Labor Code
that [a]n employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his
full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement. Luckily for petitioner, this
is not an ironclad rule.
Exceptionally, separation pay is granted to a legally dismissed employee

as an act social justice,[101] or based on equity.[102] In both instances, it is
required that the dismissal (1) was not for serious misconduct; and (2) does
not reflect on the moral character of the employee.[103]
Here, We grant petitioner separation pay equivalent to one-half (1/2)

months pay for every year of service.[104] It should include regular allowances
which he might have been receiving.[105] We are not blind to the fact that he
was not dismissed for any serious misconduct or to any act which would reflect
on his moral character. We also recognize that his employment with PAL lasted
for more or less a decade.
WHEREFORE, the appealed Decision of the Court of Appeals

is AFFIRMED but MODIFIED in that petitioner Armando G. Yrasuegui is
entitled to separation pay in an amount equivalent to one-half (1/2) months
pay for every year of service, which should include his regular allowances.
ARMANDO G. YRASUEGUI, petitioners, vs.
PHILIPPINE AIRLINES, INC., respondents.
G.R. No. 168081, October 17, 2008 (569 SCRA 467)
VERSION 1:
FACTS: THIS case portrays the peculiar story of an international flight steward
who was dismissed because of his failure to adhere to the weight standards of
the airline company.
The proper weight for a man of his height and body structure is from 147 to
166 pounds, the ideal weight being 166 pounds, as mandated by the Cabin and
Crew Administration Manual of PAL.
In 1984, the weight problem started, which prompted PAL to send him to an
extended vacation until November 1985. He was allowed to return to work once
he lost all the excess weight. But the problem recurred. He again went on leave
without pay from October 17, 1988 to February 1989.
Despite the lapse of a ninety-day period given him to reach his ideal weight,
petitioner remained overweight. On January 3, 1990, he was informed of the
PAL decision for him to remain grounded until such time that he satisfactorily
complies with the weight standards. Again, he was directed to report every two
weeks for weight checks, which he failed to comply with.
On April 17, 1990, petitioner was formally warned that a repeated refusal to
report for weight check would be dealt with accordingly. He was given another
set of weight check dates, which he did not report to.
On November 13, 1992, PAL finally served petitioner a Notice of Administrative
Charge for violation of company standards on weight requirements. Petitioner
insists that he is being discriminated as those similarly situated were not
treated the same.
On June 15, 1993, petitioner was formally informed by PAL that due to his
inability to attain his ideal weight, “and considering the utmost leniency”
extended to him “which spanned a period covering a total of almost five (5)
years,” his services were considered terminated “effective immediately.”
LABOR ARBITER: held that the weight standards of PAL are reasonable in view
of the nature of the job of petitioner. However, the weight standards need not
be complied with under pain of dismissal since his weight did not hamper the
performance of his duties.
NLRC affirmed.

CA: the weight standards of PAL are reasonable. Thus, petitioner was legally
dismissed because he repeatedly failed to meet the prescribed weight
standards. It is obvious that the issue of discrimination was only invoked by
petitioner for purposes of escaping the result of his dismissal for being
overweight.
ISSUE: WON he was validly dismissed.
HELD: YES
A reading of the weight standards of PAL would lead to no other conclusion
than that they constitute a continuing qualification of an employee in order to
keep the job. The dismissal of the employee would thus fall under Article
282(e) of the Labor Code.
In the case at bar, the evidence on record militates against petitioner’s claims
that obesity is a disease. That he was able to reduce his weight from 1984 to
1992 clearly shows that it is possible for him to lose weight given the proper
attitude, determination, and self-discipline. Indeed, during the clarificatory
hearing on December 8, 1992, petitioner himself claimed that “[t]he issue is
could I bring my weight down to ideal weight which is 172, then the answer is
yes. I can do it now.”
Petitioner has only himself to blame. He could have easily availed the
assistance of the company physician, per the advice of PAL.
In fine, We hold that the obesity of petitioner, when placed in the context of his
work as flight attendant, becomes an analogous cause under Article 282(e) of
the Labor Code that justifies his dismissal from the service. His obesity may not
be unintended, but is nonetheless voluntary. As the CA correctly puts it,
“[v]oluntariness basically means that the just cause is solely attributable to the
employee without any external force influencing or controlling his actions. This
element runs through all just causes under Article 282, whether they be in the
nature of a wrongful action or omission. Gross and habitual neglect, a
recognized just cause, is considered voluntary although it lacks the element of
intent found in Article 282(a), (c), and (d).”
NOTES:
The dismissal of petitioner can be predicated on the bona fide occupational
qualification defense. Employment in particular jobs may not be limited to
persons of a particular sex, religion, or national origin unless the employer can
show that sex, religion, or national origin is an actual qualification for
performing the job. The qualification is called a bona fide occupational
qualification (BFOQ). In short, the test of reasonableness of the company policy

is used because it is parallel to BFOQ. BFOQ is valid “provided it reflects an
inherent quality reasonably necessary for satisfactory job performance.”
The business of PAL is air transportation. As such, it has committed itself to
safely transport its passengers. In order to achieve this, it must necessarily rely
on its employees, most particularly the cabin flight deck crew who are on board
the aircraft. The weight standards of PAL should be viewed as imposing strict
norms of discipline upon its employees.
The primary objective of PAL in the imposition of the weight standards for cabin
crew is flight safety.
Separation pay, however, should be awarded in favor of the employee as an act
of social justice or based on equity. This is so because his dismissal is not for
serious misconduct. Neither is it reflective of his moral character.
VERSION 2:
Facts: Complainant was an international flight steward who was dismissed
because of his failure to adhere to the weight standards of the company.
Issue: Was the dismissal valid?
Held: SC upheld the legality of dismissal. Separation pay, however, should be
awarded in favor of the employee as an act of social justice or based on equity.
This is so because his dismissal is not for serious misconduct. Neither is it
reflective of his moral character.
The obesity of petitioner, when placed in the context of his work as flight
attendant, becomes an analogous cause under Article 282(e) of the Labor
Code. His obesity may not be unintended, but is nonetheless voluntary.
“[V]oluntariness basically means that the just cause is solely attributable to the
employee without any external force influencing or controlling his actions. This
element runs through all just causes under Article 282, whether they be in the
nature of a wrongful action or omission. Gross and habitual neglect, a
recognized just cause, is considered voluntary although it lacks the element of
intent found in Article 282(a), (c), and (d).”
Employment in particular jobs may not be limited to persons of a particular sex,
religion, or national origin unless the employer can show that sex, religion, or
national origin is an actual qualification for performing the job.
Bona fide occupational qualification (BFOQ)

The Constitution, the Labor Code, and RA No. 7277 or the Magna Carta for
Disabled Persons contain provisions similar to BFOQ.
Argument that BFOQ is a statutory defense must fail
Meiorin Test (US jurisprudence) in determining whether an employment policy
is justified:
(1) the employer must show that it adopted the standard for a purpose
rationally connected to the performance of the job;
2) the employer must establish that the standard is reasonably necessary to
the accomplishment of that work-related purpose; and
(3) the employer must establish that the standard is reasonably necessary in
order to accomplish the legitimate work-related purpose.
In Star Paper Corporation v. Simbol, this Court held that in order to justify a
BFOQ, the employer must prove:
(1) the employment qualification is reasonably related to the essential
operation of the job involved; and
(2) that there is factual basis for believing that all or substantially all persons
meeting the qualification would be unable to properly perform the duties of the
job.
In short, the test of reasonableness of the company policy is used because it is
parallel to BFOQ. BFOQ is valid “provided it reflects an inherent quality
reasonably necessary for satisfactory job performance.”
The weight standards of PAL are reasonable. A common carrier, from the
nature of its business and for reasons of public policy, is bound to observe
extraordinary diligence for the safety of the passengers it transports.
The primary objective of PAL in the imposition of the weight standards for cabin
crew is flight safety. It cannot be gainsaid that cabin attendants must maintain
agility at all times in order to inspire passenger confidence on their ability to
care for the passengers when something goes wrong.
Exceptionally, separation pay is granted to a legally dismissed employee as an
act “social justice,” or based on “equity.” Provided the dismissal:
Entitled to separation pay, even if terminated for just cause
(1) was not for serious misconduct; and
(2) does not reflect on the moral character of the employee.
Thus, he was granted separation pay equivalent to one-half (1/2) month’s pay
for every year of service.
© 2010 www.pinoylegal.com
G.R. No. 197384 January 30, 2013
SAMPAGUITA AUTO TRANSPORT CORPORATION, Petitioner, vs.

NATIONAL LABOR RELATIONS COMMMISSION and EFREN I.
SAGAD, Respondents.
BRION, J.:
Before the Court is the petition for review on certiorari1 in caption, assailing the
decision2 dated March 4, 2011 and the resolution3 dated June 13, 2011 of the
Court of Appeals (CA) in CA-G.R. SP No. 112760.
The Antecedents
In a complaint4 dated August 10, 2007, respondent Efren I. Sagad charged the
petitioner Sampaguita Auto Transport Corporation (company); Andy Adagio,
President and General Manager; Monina Ariola Adagio, Vice-President and
Finance Manager; Virgilio Olunan (referred to as Olonan by Sagad), Operations
Manager; and Gerry Dimate, HRO Officer, with illegal dismissal and damages
plus attorney's fees.
Sagad alleged that on May 14, 2006, the company hired him as a regular bus
driver, not as a probationary employee as the company claimed. He disowned
his purported signature on the contract of probationary Employment5 submitted
in evidence by the company. He maintained that his signature was forged. He
further alleged that on November 5, 2006, he was dismissed by the company
for allegedly conniving with conductor Vitola in issuing tickets outside their
assigned route.
The company countered that it employed Sagad as a probationary bus driver

(evidenced by a probationary employment contract6) from May 14, 2006 to
October 14, 2006; he was duly informed of his corresponding duties and
responsibilities.7 He was further informed that during the probationary period,
his attendance, performance and work attitude shall be evaluated to determine
whether he would qualify for regular employment. For this purpose and as a
matter of company policy, an evaluator was deployed on a company bus (in the
guise of a passenger) to observe the driver’s work performance and attitude.
Allegedly, on September 21, 2006, an evaluator boarded Sagad’s bus. The

evaluator described Sagad’s manner of driving as "reckless driver,

nakikipaggitgitan, nakikipaghabulan, nagsasakay sa gitna ng kalsada,
sumusubsob ang pasahero."8 Sagad disputed the evaluator’s observations. In
an explanation (rendered in Filipino),9 he claimed that he could not have been
driving as reported because his wife (who was pregnant) and one of his
children were with him on the bus. He admitted though that at one time, he
chased an "Everlasting" bus to serve warning on its driver not to block his bus
when he was overtaking. He also admitted that once in a while, he sped up to
make up for lost time in making trips.
The company further alleged that on October 13, 2006, it conducted a thorough
evaluation of Sagad’s performance. It requested conductors who had worked
with Sagad to comment on his work. Conductors A. Hemoroz and Israel Lucero
revealed that Sagad proposed that they cheat on the company by way of an
unreported early bus trip.10Dispatcher E. Castillo likewise submitted a negative
report and even recommended the termination of Sagad’s employment.11 The
company also cited Sagad’s involvement in a hit-and-run accident on
September 9, 2006 along Commonwealth Avenue in Quezon City while on a trip
(bus with Plate No. NYK-216 and Body No. 3094).12Allegedly, Sagad did not
report the accident to the company.
On October 15, 2006, upon conclusion of the evaluation, the company

terminated Sagad’s employment for his failure to qualify as a regular
employee.13
The Compulsory Arbitration Rulings
In her decision dated May 8, 2008,14 Labor Arbiter Marita V. Padolina dismissed
the complaint for lack of merit. She ruled that the company successfully proved
that Sagad failed to qualify as a regular employee. Labor Arbiter Padolina
stressed that on October 15, 2006, the company ordered Sagad not to work
anymore as his probationary employment had expired. While Sagad claimed
that he worked until November 5, 2006, she pointed out that "there is no
record to show that he worked beyond October 14, 2006."15
Sagad appealed the Labor Arbiter’s ruling. On July 10, 2009, the National Labor
Relations Commission (NLRC) rendered a decision16 declaring that Sagad had
been illegally dismissed. It held that Sagad was not a probationary employee as
the company failed to prove by substantial evidence the due execution of
Sagad’s supposed probationary employment contract. It found credible Sagad’s
submission that his signature on the purported contract was a forgery. It

opined that his signature on the contract was "extremely different" from his
signatures in his pleadings and in other documents on record. Further, the
NLRC brushed aside the company memorandum dated October 15,
200617 supposedly terminating Sagad’s probationary employment as there was
no showing that the memorandum had been served on him.
The NLRC disregarded Sagad’s alleged infractions that served as grounds for
the termination of his employment, holding that his dismissal was not based on
these infractions but on his alleged connivance with a conductor in defrauding
the company. The NLRC awarded Sagad backwages of ₱559,050.00 and
separation pay of ₱45,000.00 in lieu of reinstatement, in view of the strained
relations between the parties resulting from the filing of the complaint.
Both parties moved for reconsideration of the NLRC decision, to no avail. The
company then elevated the case to the CA through a petition for certiorari
under Rule 65 of the Rules of Court.
The CA Decision
The CA, in its currently assailed decision,18 affirmed the NLRC rulings in toto,
finding no grave abuse of discretion in the labor tribunal’s reversal of the labor
arbiter’s dismissal of the complaint. It found the "genuineness of respondent’s
signature on the employment contract is tainted with doubt."19 It agreed with
the NLRC that Sagad had been illegally dismissed considering, as it noted, that
the grounds the company relied upon for the termination of Sagad’s
employment were not among the causes for a valid dismissal enumerated
under Article 282 of the Labor Code. It added that even if it had been
otherwise, the company failed to comply with the twin-notice requirement in
employee dismissals.
The Petition
The company seeks the reversal of the appellate court’s decision through the
present appeal,20 and raises the following issues:
1. Whether it dismissed Sagad illegally; and
2. Whether Sagad is entitled to backwages and separation pay, totaling

₱604,050.00, after working with the company for barely five months.

The company insists that Sagad entered into a contract of probationary
employment with it. It was thus surprised with Sagad’s allegation that his
signature appearing in the contract was a forgery. It explained that his
signature on the contract is the same as his signatures on his employment
papers (which include the probationary employment contract). In any event, it
faults the NLRC for not considering other pieces of evidence indicating Sagad’s
actual employment status.
The company points out that one such piece of competent and compelling
evidence is Sagad’s admission of the nature of his employment expressed in his
letter dated October 16, 2006, addressed to Adagio and Olunan.21 In this letter,
he asked for another chance to work with the company.
The company posits that with the letter, Sagad acknowledged that his
probationary employment had expired.22
The company maintains that it terminated Sagad’s employment in good faith.

They are not expected to follow the procedure for dismissing a regular
employee, as the NLRC opined, considering that Sagad was merely on
probation. Lastly, it contends that the award of backwages and separation pay
to Sagad amounting to ₱604,050.00 is unwarranted and confiscatory since he
worked for only five months. It laments that the award would put a premium
on reckless driving and would encourage other drivers to follow Sagad’s
example.
The company disputes the NLRC‘s basis for the award — Sagad’s purported
average daily commission of ₱1,000.00 — as non-existent. They contend in this
respect that the payslips Sagad submitted to the NLRC rarely showed his daily
commission to reach ₱1,000.00. It explains that Sagad presented only one (1)
payslip for November 2006, five (5) for October 2006, one (1) each for July,
August and September 2006. It posits that the company payrolls from June 29,
2006 to October 8, 2006 showed that his daily commissions were below
₱1,000.00.
The Case for Sagad
Through his Comment (on the Petition),23 Sagad asks that the petition be
denied due course. He presents the following arguments:

1. He was not a probationary employee. The signature on the alleged
probationary employment contract attributed to him was not his; it was a
forgery, as confirmed by the NLRC and the CA. The same thing is true
with the supposed letter (dated October 16, 2006)24 in which he
allegedly appealed to be given another chance to work for the company.
Not only was the letter not in his handwriting (it allegedly belonged to
Vitara, a bus conductor of the company), the signature on the letter
attributed to him was also falsified.
2. On the assumption that he was a probationary employee, it is not

correct to say that he failed to qualify for regular employment. The
written statements of bus conductors Hemoroz and Lucero25 regarding
his alleged attempt to cheat on the company are without probative
value. The statements were not under oath and the irregular acts he
allegedly proposed could only be done by the conductors.
The company’s claim that he figured in a "hit-and-run" accident on September

9, 2006, which he allegedly did not report to management, is not also correct.
It was not his bus that was involved in the accident that he duly reported to the
management. Further, the company’s contention that he drove recklessly on
September 16, 2006 cannot be used to support his dismissal as he had already
been penalized for the incident with a five-day suspension.26
Also, the company grounds in Castillo’s evaluation report27 (that the company
relied upon to justify the non-renewal of his contract) are not just causes for
the termination of his employment as the CA correctly ruled.
3. He was a regular employee. He continued to work as driver until

November 4, 2006. The company’s notice of termination of his
Employment28 was not served on him because no such letter existed. If
his probationary employment was to expire on October 14, 2006, he
asks: why was he evaluated only on October 13 and 14, 2006 and why
did the company serve him the termination notice only on October 15,
2006, when he was supposed to have been separated the previous day,
October 14, 2006? He adds: when was the notice served on him that
would have prompted him to write the company a letter on October 16,
2006 to ask for a second chance? All these nagging questions, he
stresses, demonstrate the incredibility of the company’s claim that he
was a probationary employee.

4. He does not have to prove his denial that the signatures on the above-
mentioned documents were not really his. He posits that evidence need
not be given in support of a negative allegation and this is particularly
true in dismissal cases where the burden of proof is on the employer.
5. The petition suffers from a procedural defect as it raises only

questions of fact and not of law, in violation of Rule 45 of the Rules of
Court.
The Court’s Ruling
The procedural issue
This Court, as a rule, only reviews questions of law in a Rule 45 petition for
review. In labor cases, the factual findings of the labor arbiter and of the NLRC
are generally respected and, if supported by substantial evidence, accorded
finality. This rule, however, is not absolute. When the factual findings of the CA
conflict with those of the labor authorities, the Court is forced to review the
evidence on record.29
In this case, the labor arbiter’s factual conclusions, on the one hand, and those
of the NLRC and the CA, on the other hand, differ. The labor arbiter found that
Sagad was a probationary employee and was validly dismissed for his failure to
qualify for regular employment, whereas the NLRC and the CA concluded that
he was a regular employee and was illegally dismissed. We thus find the need
to review the facts in the present labor dispute.
The merits of the case
After a review of the records, we are convinced that Sagad was dismissed, not
as a probationary employee, but as one who had attained regular status. The
company’s evidence on Sagad’s purported hiring as a probationary employee is
inconclusive. To start with, Sagad denied that he entered into a probationary
employment contract with the company, arguing that the signature on the
supposed contract was not his.30 He also denied receiving the alleged
notice31 terminating his probationary employment. The same thing is true with
his purported letter32 asking that he be given another chance to work for the
company. He asserts that not only is the letter not in his handwriting, the
signature on the letter was also not his.

The submissions of the parties on the issue created a doubt on whether Sagad
really entered into a probationary employment contract with the company. The
NLRC resolved the doubt in Sagad’s favor, ruling that Sagad’s signature on the
contract was not his, because it was a forgery. It declared that his signature on
the contract "is extremely different from those in his pleadings and from the
other documents on record,"33 without explaining how and why the two sets of
signatures were vastly different. Lending further support to the NLRC
conclusion, which the CA upheld, is its finding that the company failed to refute
Sagad’s denial of his signature in the contract, which the labor tribunal
considered as an admission of the veracity of Sagad’s statement, pursuant to
the Rules of Court.34
Independently of the above discussion and even if we were to consider that

Sagad went through a probationary period, the records indicate that he was
retained even beyond the expiration of his supposed probationary employment
on October 14, 2006. As the NLRC noted, Sagad claimed that he was dismissed
by the company on November 5, 2006, after he was accused of conniving with
conductor Vitola in issuing tickets outside their assigned route.
The company never refuted this particular assertion of Sagad and its silence
can only mean that Sagad remained in employment until November 4, 2006,
thereby attaining regular status as of that date. Under the law, "an employee
who is allowed to work after a probationary period shall be considered a regular
employee."35
Further, when the company questioned the payslips submitted by Sagad to

substantiate his claim that he earned on the average a daily commission of
₱1,000.00, it pointed out that Sagad presented only one (1) payslip for the
whole month of November 2006, five (5) payslips for the month of October
2006, and one (1) payslip each for the months of July, August and September
2006.36 This seemingly harmless allegation is significant in that it revealed that
Sagad continued working until the first week of November 2006 and was paid
his salary for at least one payroll period. Sagad, therefore, had become a
regular employee when he was dismissed on November 5, 2006.
Is Sagad’s dismissal illegal?
The NLRC and the CA ruled in the affirmative. The labor tribunal opined that the
infractions which Sagad allegedly committed and which disqualified him from
attaining regular status are "unavailing" with respect to his dismissal because

the dismissal was not based on those infractions but on his alleged connivance
with conductor Vitola to cheat on the company.
The CA concurred with the NLRC but for a different reason. It declared that the
"grounds upon which petitioners based respondent’s termination from
employment, viz: ‘hindi lahat ng schedule nailalabas,’ ‘mababa ang revenue ng
bus, laging kasama ang asawa sa byahe’ and ‘maraming naririnig na kwento
tungkol sa kanya, nag-uutos ng conductor para kumita sa hindi magandang
paraan,’ xxx are not among those enumerated under Article 282 of the Labor
Code as just causes for termination of employment."37 The CA added that on
the assumption that the cited grounds can be considered just causes, the
company nonetheless failed to comply with the twin-notice requirement for the
termination of Sagad’s employment.
We disagree with the finding that Sagad’s dismissal had no basis.
First. It is not disputed that the company called Sagad’s attention to his
negative actuations as a bus driver, which were reported by a company
evaluator38 who boarded his bus on September 21, 2006. The evaluator
reported that he was driving recklessly, racing and jostling for position on the
road, thereby jarring the passengers on their seats, and picking up passengers
on the middle of the road. He disputed the evaluator’s observations,39 claiming
that he could not have been driving as reported because his pregnant wife and
one of his children were with him on the bus at the time. He admitted,
however, that on one occasion, he chased an "Everlasting" bus to warn its
driver not to block him. He also admitted that once in a while, he sped up to
compensate for lost time in his trips.
Sagad’s explanation reveals more than what it stated. During his brief
employment with the company, he exhibited the tendency to speed up when he
finds the need for it, very obviously in violation of traffic rules, regulations and
company policy. Instead of negating the evaluator’s observations, his
admissions make them credible.
Second. He was also asked to react to the comments of conductors who had
worked with him (Hemoroz and Lucero) to the effect that he proposed to them
that they cheat on the company by making early (but not to be reported) bus
trips.40 Further, there was Castillo’s evaluation dated

October 13, 2006,41 rating Sagad’s work performance as poor on account of:
(1) the low revenue of Sagad’s bus; (2) his inability to make all his scheduled
trips; and (3) his habit of bringing his wife with him on his trips. Castillo also
heard of talks of Sagad’s orders to the conductors to earn money in a
questionable way.
During the arbitration, Sagad disputed the conductors’ comments, maintaining

that they were not under oath and that the fraudulent proposal they mentioned
could only be committed by conductors. With respect to Castillo’s evaluation,
Sagad invoked the CA’s pronouncement that the infractions mentioned in the
report are not just causes for the termination of his employment.
Sagad’s position fails to convince us. We find no evidence that Hemoroz and
Lucero had an ax to grind against Sagad so that they would lie about their
impression of him as a bus driver. Significantly, their statements validate
Castillo’s own observation that he heard talks of Sagad’s orders to the
conductors for them to cheat on the company. The scheme, contrary to Sagad’s
explanation, can only be committed with the cooperation, or even at the
behest, of the driver, as the proposed scheme is for the bus to make
unscheduled, but unreported, early trips.
Lastly, the company cites Sagad’s involvement in a hit-and-run incident on

September 9, 2006 while driving his assigned bus (with Plate No. NYK-216 and
Body No. 3094).42 Once more, he denies the charge, claiming that it was not
his bus, but two other vehicles, a Honda City and an Elf truck, which figured in
the incident.43 To prove his point, he submitted the "SALAYSAY"44 of his
replacement driver, Carlito Laude, for September 10, 2006, saying that there
was no dents or scratches on the bus.
Again, Sagad’s stance fails to persuade us. Sagad’s statements vis-à-vis the
incident, as well as those of Laude, are belied by the Traffic Accident
Investigation Report45 which mentioned the "Unidentified driver of Public Utility
Bus with plate No. NYK-216 and Body No. 3094." The report was corroborated
by the sworn statements of Ronald Apura, driver of the Elf truck, UFF-597, the
second party in the incident,46 and Bibiana Fuentes, driver of the White Honda
City, WDV-422 (owned by Purefoods Hormel Co.), the first party in the
vehicular accident. There was also the letter to the company of Standard
Insurance Co., Inc. dated February 14, 200747 demanding the reimbursement
of ₱24,667.54 it paid to Purefoods Hormel Co. by way of damages sustained by
the Honda City.

Third. The CA misappreciated the law when it declared that the grounds relied
upon by the company in terminating Sagad’s employment are not among those
enumerated under Article 282 of the Labor Code as just causes for employee
dismissals.1âwphi1 Article 282 of the Code provides:
Art. 282. Termination by employer. – An employer may terminate an

employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the

lawful orders of his employer or representative in connection with his
work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by
his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the

person of his employer or any immediate member of his family or his
duly authorized representative; and
(e) Other causes analogous to the foregoing. [emphasis supplied]
The irregularities or infractions committed by Sagad in connection with his work

as a bus driver constitute a serious misconduct or, at the very least, conduct
analogous to serious misconduct, under the above-cited Article 282 of the
Labor Code. To be sure, his tendency to speed up during his trips, his reckless
driving, his picking up passengers in the middle of the road, his racing with
other buses and his jostling for vantage positions do not speak well of him as a
bus driver. While he denies being informed, when he was hired, of the duties
and responsibilities of a driver — contained in a document submitted in
evidence by the company48 — the requirement "3. to obey traffic rules and
regulations as well as the company policies. 4. to ensure the safety of the
riding public as well as the other vehicles and motorist (sic)"49 is so
fundamental and so universal that any bus driver is expected to satisfy the
requirement whether or not he has been so informed.
Sagad tries to minimize the adverse effect of the evaluator’s report of

September 21, 2006 about his conduct as a driver with the argument that he
had already been penalized with a five-day suspension for chasing an

"Everlasting" bus at one time. The suspension is of no moment. He was
penalized for one reckless driving incident, but it does not erase all the other
infractions he committed. The conductors’ comments and the dispatcher’s
evaluation, together with the earlier on-board evaluation, all paint a picture of a
reckless driver who endangers the safety of his passengers, other motorists
and the general public. With this record, it is not surprising that he figured in a
hit-and-run accident on September 9, 2006.
Under the circumstances, Sagad has become a liability rather than an asset to
his employer, more so when we consider that he attempted to cheat on the
company or could have, in fact, defrauded the company during his brief tenure
as a bus driver. This calls to mind Castillo’s report on the low revenue of
Sagad’s bus, an observation which is validated by the company’s Daily
Operation Reports from June to October 2006.50
All told, we find substantial evidence supporting Sagad’s removal as a bus

driver. Through his reckless driving and his schemes to defraud the company,
Sagad committed serious misconduct and breach of the trust and confidence of
his employer, which, without doubt, are just causes for his separation from the
service. It is well to stress, at this point, an earlier pronouncement of the Court
"that justice is in every case for the deserving, to be dispensed in the light of
the established facts and applicable law and doctrine."51
The twin-notice requirement
Even as we find a just cause for Sagad’s dismissal, we agree with the CA that
the company failed to comply with the two-notice rule. It failed to serve notice
of: (1) the particular acts for which Sagad was being dismissed on November 5,
2006 and (2) his actual dismissal. Consistent with our ruling in Agabon v.
NLRC, 52 we hold that the violation of Sagad's right to procedural due process
entitles him to an indemnity in the form of nominal damages. Considering the
circumstances in the present case, we deem it appropriate to award Sagad
₱30,000.00.
WHEREFORE, premises considered, the appeal is granted. The assailed decision

and resolution of the Court of Appeals are SET ASIDE. The complaint is
DISMISSED for lack of merit. Efren I. Sagad is awarded nominal damages of
₱30,000.00 for violation of his right to procedural due process.
SO ORDERED.

SAMPAGUITA AUTO TRANSPORT CORPORATION
NLRC and EFREN I. SAGAD G.R. No. 197384, 30 January 2013
FACTS:
Sagad alleged that on May 14, 2006, the company hired him as a regular bus d
river, not as a probationary employee as the company claimed. He disowned hi
s purported signature on the contract of probationary Employment submitted in
evidence by the company. He maintained that his signature was forged. He fur
ther alleged that on November 5, 2006, he was dismissed by the company for a
llegedly conniving with conductor Vitola in issuing tickets outside their assigned
route.
ISSUE:
Whether or not a probationary employee attains regular status considering he:s

not terminated upon the expiration of his contract.
RULING:
Yes. After a review of the records, Sagad was dismissed, not as a probationary
employee, but as one who had attained regular status.
Independently of the discussions of the LA, NLRC, and CA about the alleged for
egery of Sagad’s signature in the contract and even if the Court were to conside
r that Sagad went through a probationary period, the records indicate that he w
as retained even beyond the expiration of his supposed probationary employme
nt on October 14, 2006. As the NLRC noted, Sagad claimed that he was dismiss
ed by the company on November 5, 2006, after he was accused of conniving wi
th conductor Vitola in issuing tickets outside their assigned route. The company
never refuted this particular assertion of Sagad and its silence can only mean t
hat Sagad remained in employment until November 4, 2006, thereby attaining
regular status as of that date. Under the law, “an employee who is allowed to w
ork after a probationary period shall be considered a regular employee.”

G.R. No. 49549 August 30, 1990
EVELYN CHUA-QUA, petitioner, vs. HON. JACOBO C. CLAVE, in his

capacity as Presidential Executive Assistant, and TAY TUNG HIGH
SCHOOL, INC., respondents.
REGALADO, J.:
This would have been just another illegal dismissal case were it not for the
controversial and unique situation that the marriage of herein petitioner, then a
classroom teacher, to her student who was fourteen (14) years her junior, was
considered by the school authorities as sufficient basis for terminating her
services.
Private respondent Tay Tung High School, Inc. is an educational institution in

Bacolod City. Petitioner had been employed therein as a teacher since 1963
and, in 1976 when this dispute arose, was the class adviser in the sixth grade
where one Bobby Qua was enrolled. Since it was the policy of the school to
extend remedial instructions to its students, Bobby Qua was imparted such
instructions in school by petitioner. 1 In the course thereof, the couple fell in
love and on December 24, 1975, they got married in a civil ceremony
solemnized in Iloilo City by Hon. Cornelio G. Lazaro, City Judge of
Iloilo.2 Petitioner was then thirty (30) years of age but Bobby Qua being sixteen
(16) years old, consent and advice to the marriage was given by his mother,
Mrs. Concepcion Ong.3 Their marriage was ratified in accordance with the rites
of their religion in a church wedding solemnized by Fr. Nick Melicor at Bacolod
City on January 10, 1976. 4
On February 4, 1976, private respondent filed with the sub-regional office of

the Department of Labor at Bacolod City an application for clearance to
terminate the employment of petitioner on the following ground: "For abusive
and unethical conduct unbecoming of a dignified school teacher and that her
continued employment is inimical to the best interest, and would downgrade
the high moral values, of the school." 5
Petitioner was placed under suspension without pay on March 12,

1976. 6 Executive Labor Arbiter Jose Y. Aguirre, Jr. of the National Labor
Relations Commission, Bacolod City, to whom the case was certified for
resolution, required the parties to submit their position papers and supporting
evidence. Affidavits 7 were submitted by private respondent to bolster its

contention that petitioner, "defying all standards of decency, recklessly took
advantage of her position as school teacher, lured a Grade VI boy under her
advisory section and 15 years her junior into an amorous relation." 8 More
specifically, private respondent raised issues on the fact that petitioner stayed
alone with Bobby Qua in the classroom after school hours when everybody had
gone home, with one door allegedly locked and the other slightly open.
On September 17, 1976, Executive Labor Arbiter Jose Y. Aguirre, Jr., without
conducting any formal hearing, rendered an "Award" in NLRC Case No. 956 in
favor of private respondent granting the clearance to terminate the
employment of petitioner. It was held therein that —
The affidavits . . . although self-serving but were never disputed

by the respondent pointed out that before the marriage of
respondent to Bobby Qua, fourteen (14) years her junior and
during her employment with petitioner, an amorous relationship
existed between them. In the absence of evidence to the contrary,
the undisputed written testimonies of several witnesses
convincingly picture the circumstances under which such amorous
relationship was manifested within the premises of the school,
inside the classroom, and within the sight of some employees.
While no direct evidences have been introduced to show that
immoral acts were committed during these times, it is however
enough for a sane and credible mind to imagine and conclude what
transpired and took place during these times. . . . 9
Petitioner, however, denied having received any copy of the affidavits referred
to. 10
On October 7, 1976, petitioner appealed to the National Labor Relations

Commission claiming denial of due process for not having been furnished copies
of the aforesaid affidavits relied on by the labor arbiter. She further contended
that there was nothing immoral, nor was it abusive and unethical conduct
unbecoming of a dignified school teacher, for a teacher to enter into lawful
wedlock with her student.11
On December 27, 1976, the National Labor Relations Commission unanimously

reversed the Labor Arbiter's decision and ordered petitioner's reinstatement
with backwages, with the following specific findings:

Affiant Maselliones deposed and said that he saw appellant and
Qua sitting on the student desk inside a classroom after classes.
The depositions of affiants Despi and Chin are of the same tenor.
No statements whatever were sworn by them that they were
eyewitnesses to immoral or scandalous acts.
xxx xxx xxx
Even if we have to strain our sense of moral values to

accommodate the conclusion of the Arbiter, we could not deduce
anything immoral or scandalous about a girl and a boy talking
inside a room after classes with lights on and with the door open.
xxx xxx xxx
Petitioner-appellee naively insisted that the clearance application

was precipitated by immoral acts which did not lend dignity to the
position of appellant. Aside from such gratuitous assertions of
immoral acts or conduct by herein appellant, no evidence to
support such claims was introduced by petitioner-appellee. We
reviewed the the sequence of events from the beginning of the
relationship between appellant Evelyn Chua and Bobby Qua up to
the date of the filing of the present application for clearance in
search of evidence that could have proved detrimental to the
image and dignity of the school but none has come to our
attention. . . . 12
The case was elevated by private respondent to the Minister of Labor who, on
March 30, 1977, reversed the decision of the National Labor Relations
Commission. The petitioner was, however, awarded six (6) months salary as
financial assistance. 13
On May 20, 1977, petitioner appealed the said decision to the Office of the
President of the Philippines. 14 After the corresponding exchanges, on
September 1, 1978 said office, through Presidential Executive Assistant Jacobo
C. Clave, rendered its decision reversing the appealed decision. Private
respondent was ordered to reinstate petitioner to her former position without
loss of seniority rights and other privileges and with full back wages from the
time she was not allowed to work until the date of her actual reinstatement. 15

Having run the gamut of three prior adjudications of the case with alternating
reversals, one would think that this decision of public respondent wrote finis to
petitioner's calvary. However, in a resolution dated December 6, 1978, public
respondent, acting on a motion for reconsideration 16 of herein private
respondent and despite opposition thereto, 17 reconsidered and modified the
aforesaid decision, this time giving due course to the application of Tay Tung
High School, Inc. to terminate the services of petitioner as classroom teacher
but giving her separation pay equivalent to her six (6) months salary. 18
In thus reconsidering his earlier decision, public respondent reasoned out in his
manifestation/comment filed on August 14, 1979 in this Court in the present
case:
That this Office did not limit itself to the legal issues involved in
the case, but went further to view the matter from the standpoint
of policy which involves the delicate task of rearing and educating
of children whose interest must be held paramount in the school
community, and on this basis, this Office deemed it wise to uphold
the judgment and action of the school authorities in terminating
the services of a teacher whose actuations and behavior, in the
belief of the school authorities, had spawned ugly rumors that had
cast serious doubts on her integrity, a situation which was
considered by them as not healthy for a school campus, believing
that a school teacher should at all times act with utmost
circumspection and conduct herself beyond reproach and above
suspicion; 19
In this petition for certiorari, petitioner relies on the following grounds for the
reversal of the aforesaid resolution of public respondent, viz.:
1. The dismissal or termination of petitioner's employment, despite

Tay Tung's claim to the contrary, was actually based on her
marriage with her pupil and is, therefore, illegal.
2. Petitioner's right to due process under the Constitution was

violated when the hearsay affidavits of Laddy Maselliones,
Eleuterio Despi, Pina D. Chiu, and Ong Lee Bing, were admitted
and considered in evidence without presenting the affiants as
witnesses and affording the petitioner the right to confront and
cross-examine them.

3. No sufficient proofs were adduced to show that petitioner
committed serious misconduct or breached the trust reposed on
her by her employer or committed any of the other grounds
enumerated in Article 283 (Now Article 282) of the Labor Code
which will justify the termination of her employment. 20
We first dispose of petitioner's claim that her right to due process was violated.
We do not agree. There is no denial of due process where a party was afforded
an opportunity to present his side. Also, the procedure by which issues are
resolved based on position papers, affidavits and other documentary evidence
is recognized as not violative of such right. Moreover, petitioner could have
insisted on a hearing to confront and cross-examine the affiants but she did not
do so, obviously because she was convinced that the case involves a question
of law. Besides, said affidavits were also cited and discussed by her in the
proceedings before the Ministry of Labor.
Now, on the merits. Citing its upright intention to preserve the respect of the
community toward the teachers and to strengthen the educational system,
private respondent submits that petitioner's actuations as a teacher constitute
serious misconduct, if not an immoral act, a breach of trust and confidence
reposed upon her and, thus, a valid and just ground to terminate her services.
It argues that as a school teacher who exercises substitute parental authority
over her pupils inside the school campus, petitioner had moral ascendancy over
Bobby Qua and, therefore, she must not abuse such authority and respect
extended to her. Furthermore, it charged petitioner with having allegedly
violated the Code of Ethics for teachers the pertinent provision of which states
that a "school official or teacher should never take advantage of his/her
position to court a pupil or student." 21
On the other hand, petitioner maintains that there was no ground to terminate
her services as there is nothing wrong with a teacher falling in love with her
pupil and, subsequently, contracting a lawful marriage with him. She argued
that she was dismissed because of her marriage with Bobby Qua This
contention was sustained in the aforesaid decision of the National Labor
Relations Commission thus:
. . . One thing, however, has not escaped our observation: That

the application for clearance was filed only after more than one
month elapsed from the date of appellant's marriage to Bobby Qua
Certainly, such belated application for clearance weakens instead

of strengthening the cause of petitioner-appellee. The alleged
immoral acts transpired before the marriage and if it is these
alleged undignified conduct that triggered the intended separation,
then why was the present application for clearance not filed at that
time when the alleged demoralizing effect was still fresh and
abrasive?22
After a painstaking perusal of the records, we are of the considered view that
the determination of the legality of the dismissal hinges on the issue of whether
or not there is substantial evidence to prove that the antecedent facts which
culminated in the marriage between petitioner and her student constitute
immorality and/or grave misconduct. To constitute immorality, the
circumstances of each particular case must be holistically considered and
evaluated in the light of prevailing norms of conduct and the applicable law.
Contrary to what petitioner had insisted on from the very start, what is before
us is a factual question, the resolution of which is better left to the trier of
facts.
Considering that there was no formal hearing conducted, we are constrained to

review the factual conclusions arrived at by public respondent, and to nullify his
decision through the extraordinary writ of certiorari if the same is tainted by
absence or excess of jurisdiction or grave abuse of discretion. The findings of
fact must be supported by substantial evidence; otherwise, this Court is not
bound thereby.23
We rule that public respondent acted with grave abuse of discretion. As vividly
and forcefully observed by him in his original decision:
Indeed, the records relied upon by the Acting Secretary of Labor

(actually the records referred to are the affidavits attached as
Annexes "A" to "D" of the position paper dated August 10, 1976
filed by appellee at the arbitration proceedings) in arriving at his
decision are unbelievable and unworthy of credit, leaving many
question unanswered by a rational mind. For one thing, the
affidavits refer to certain times of the day during off school hours
when appellant and her student were found together in one of the
classrooms of the school. But the records of the case present a
ready answer: appellant was giving remedial instruction to her
student and the school was the most convenient place to serve the
purpose. What is glaring in the affidavits is the complete absence

of specific immoral acts allegedly committed by appellant and her
student. For another, and very important at that, the alleged acts
complained of invariably happened from September to December,
1975, but the disciplinenary action imposed by appellee was
sought only in February, 1976, and what is more, the affidavits
were executed only in August, 1976 and from all indications, were
prepared by appellee or its counsel. The affidavits heavily relied
upon by appellee are clearly the product of after-thought. . . . The
action pursued by appellee in dismissing appellant over one month
after her marriage, allegedly based on immoral acts committed
even much earlier, is open to basis of the action sought seriously
doubted; on the question. The basis of the action sought is
seriously doubted; on the contrary, we are more inclined to
believe that appellee had certain selfish, ulterior and undisclosed
motives known only to itself. 24
As earlier stated, from the outset even the labor arbiter conceded that there
was no direct evidence to show that immoral acts were committed.
Nonetheless, indulging in a patently unfair conjecture, he concluded that "it is
however enough for a sane and credible mind to imagine and conclude what
transpired during those times." 25 In reversing his decision, the National Labor
Relations Commission observed that the assertions of immoral acts or conducts
are gratuitous and that there is no direct evidence to support such claim, 26 a
finding which herein public respondent himself shared.
We are, therefore, at a loss as to how public respondent could adopt the volte-
face in the questioned resolution, which we hereby reject, despite his prior
trenchant observations hereinbefore quoted. What is revealing however, is that
the reversal of his original decision is inexplicably based on unsubstantiated
surmises and non sequiturs which he incorporated in his assailed resolution in
this wise:
. . . While admittedly, no one directly saw Evelyn Chua and Bobby

Qua doing immoral acts inside the classroom it seems obvious and
this Office is convinced that such a happening indeed transpired
within the solitude of the classrom after regular class hours. The
marriage between Evelyn Chua and Bobby Qua is the best proof
which confirms the suspicion that the two indulged in amorous
relations in that place during those times of the day. . . . 27

With the finding that there is no substantial evidence of the imputed immoral
acts, it follows that the alleged violation of the Code of Ethics governing school
teachers would have no basis. Private respondent utterly failed to show that
petitioner took advantage of her position to court her student. If the two
eventually fell in love, despite the disparity in their ages and academic levels,
this only lends substance to the truism that the heart has reasons of its own
which reason does not know. But, definitely, yielding to this gentle and
universal emotion is not to be so casually equated with immorality. The
deviation of the circumstances of their marriage from the usual societal pattern
cannot be considered as a defiance of contemporary social mores.
It would seem quite obvious that the avowed policy of the school in rearing and
educating children is being unnecessarily bannered to justify the dismissal of
petitioner. This policy, however, is not at odds with and should not be
capitalized on to defeat the security of tenure granted by the Constitution to
labor. In termination cases, the burden of proving just and valid cause for
dismissing an employee rests on the employer and his failure to do so would
result in a finding that the dismissal is unjustified.
The charge against petitioner not having been substantiated, we declare her
dismissal as unwarranted and illegal. It being apparent, however, that the
relationship between petitioner and private respondent has been inevitably and
severely strained, we believe that it would neither be to the interest of the
parties nor would any prudent purpose be served by ordering her
reinstatement.
WHEREFORE, the petition for certiorari is GRANTED and the resolution of public
respondent, dated December 6, 1978 is ANNULLED and SET ASIDE. Private
respondent Tay Tung High School, Inc. is hereby ORDERED to pay petitioner
backwages equivalent to three (3) years, without any deduction or
qualification, and separation pay in the amount of one (1) month for every year
of service.
SO ORDERED.

Landmark Case: CHUA – QUA vs. CLAVE G.R. No. L-49549 August 30,
1990 (Case Digest)
A truly remarkable case wherein the Supreme Court ruled in favor of

“love”. The setting of the case was in when marriage between minors was still
legal, way before the Family Code. In this case, a 30 year old teacher had
married her student which prompted the school to terminate her. And against
all odds the Supreme Court Ruled in favor of her, hence, creating this
Landmark Case. “truism that the heart has reasons of its own which
reason does not know.”
CHUA – QUA vs. CLAVE G.R. No. L-49549 August 30, 1990
Digested Case
A Landmark Case
FACTS:
This would have been just another illegal dismissal case were it not for the
controversial and unique situation that the marriage of herein petitioner, then a
classroom teacher, to her student who was fourteen (14) years her junior, was
considered by the school authorities as sufficient basis for terminating her
services.
The case was about an affair and marriage of 30 years old teacher Evelyn Chua
in Tay Tung High School in Bacolod City to her 16 years old student. The
petitioner teacher was suspended without pay and was terminated of his
employment “for Abusive and Unethical Conduct Unbecoming of a Dignified
School Teacher” which was filed by a public respondent as a clearance for
termination.
ISSUE:
Was her dismissal valid?

Whether or not there is substantial evidence to prove that the antecedent facts
which culminated in the marriage between petitioner and her student constitute
immorality and or grave misconduct?
RULING:
The Supreme Court declared the dismissal illegal saying:
“Private respondent [the school] utterly failed to show that petitioner [30-year
old lady teacher] took advantage of her position to court her student [16-year
old]. If the two eventually fell in love, despite the disparity in their ages
and academic levels, this only lends substance to the truism that the
heart has reasons of its own which reason does not know. But,
definitely, yielding to this gentle and universal emotion is not to be so casually
equated with immorality. The deviation of the circumstances of their marriage
from the usual societal pattern cannot be considered as a defiance of
contemporary social mores.”
Finding that there is no substantial evidence of the imputed immoral acts, it

follows that the alleged violation of Code of Ethics governing school teachers
would have no basis. Private respondent utterly failed to show that petitioner
took advantage of her position to court her student. The deviation of the
circumstances of their marriage from the usual societal pattern cannot be
considered as a defiance of contemporary social mores.

PREMIERE DEVELOPMENT G.R. No. 167716
BANK,Petitioner,
- versus -
ELSIE ESCUDERO MANTAL,Respondent.
March 23, 2006
This petition for review on certiorari under Rule 45 of the Rules of Court seeks
to annul and set aside the Decision of the Court of Appeals in CA-G.R. SP No.
80975 dated January 17, 2005[1] and its Resolution dated April 7,
2005[2] holding the petitioner Premiere Development Bank liable for illegal
suspension and illegal dismissal, ordering it to reinstate respondent Elsie
Escudero Mantal to her former position and to pay her full backwages from date
of suspension and dismissal until actual reinstatement, half month salary and
half month 13th month pay, as well as attorneys fees.
Respondent is a regular employee of petitioners Cubao branch, serving as

accounting clerk since July 17, 1996.[3] On November 24, 2000, the branch
manager, Rosario Detalla, instructed respondent with the following words in the
vernacular, Elsie, baka may mag-confirm sa Bank Guarantee ng GIA Fuel,
sabihin mo OKAY NA, may kulang pa lang dokumento.[4]
Later that day, Emmie Crisostomo of Filpride Energy Corporation inquired

whether GIA Fuel and Lubricant Dealer has a credit line or maintains an account
with petitioner Bank which respondent confirmed after checking the files on the
computer. Crisostomo also inquired if the bank guarantee signed by Detalla is
in order, and likewise respondent replied in the affirmative. However, upon
verification from petitioners head office, Crisostomo was informed that the bank
guarantee was spurious.
On the same day, respondent was summoned to the head office and was
required to write down what she knew about the subject bank
guarantee. Respondent also received a memorandum placing her under
preventive suspension effective immediately for a period of 30 days. During the
investigation, Detalla admitted issuing the falsified bank guarantee.
On December 21, 2000, Detalla tendered her irrevocable letter of

resignation.[5] Respondent was asked to execute a resignation letter on

December 22, 2000, but she declined.[6] The following day, respondent received
a Notice of Termination dated December 22, 2000.[7]
Respondent filed a complaint for illegal suspension, illegal dismissal, unpaid

salary and 13th month pay, moral and exemplary damages.
On September 4, 2002, the Labor Arbiter[8] rendered a decision[9] holding

petitioner liable for illegal suspension and illegal dismissal and ordering the
reinstatement of respondent to her former position, with full backwages, half
month salary and half month 13th month pay, and attorneys fees.[10]
The National Labor Relations Commission (NLRC) reversed the labor arbiters
decision, and dismissed the complaint for lack of merit.[11] The motion for
reconsideration having been denied,[12] respondent appealed to the Court of
Appeals which found that petitioner failed to prove that respondent conspired
with Detalla in issuing the falsified bank guarantee;[13] that the alleged
infraction of respondent was not related to her functions as encoder and
accounts clerk, hence her dismissal could not be based on loss of trust and
confidence, the breach of which must be related to the performance of the
employees functions;[14] that respondent was not negligent in the performance
of her functions inasmuch as she verified from the computer before answering
the queries by Crisostomo;[15]that the alleged negligence was not gross or
habitual;[16] that respondent merely conveyed the instructions of her immediate
superior which appeared to be lawful and regular.[17]
The dispositive portion of the decision reads:
IN LIGHT OF THE FOREGOING, the petition is hereby GRANTED. The Decision

dated 30 May 2003 of the public respondent NLRC reversing the Decision of the
Labor Arbiter and its Resolution dated 30 September 2003 denying petitioners
motion for reconsideration are REVERSED and SET ASIDE. The Decision dated 4
September 2002 of Labor Arbiter Ariel Cadiente Santos is REINSTATED.
SO ORDERED.[18]
The sole issue in the instant petition is whether respondent was validly
suspended and dismissed from her position as accounting clerk.
Petitioner contends that respondent was validly dismissed because she was
grossly negligent in the performance of her functions which caused petitioner to
lose trust and confidence in her. It argues that respondent is guilty of
misconduct for her failure to report the irregularity to the management.

The petition lacks merit.
Gross negligence means an absence of that diligence that a reasonably

prudent man would use in his own affairs. To constitute a just cause for
termination of employment, the neglect of duties must not only be gross but
habitual as well. The single or isolated act of negligence does not constitute a
just cause for the dismissal of the employee.
In JGB and Associates, Inc. v. National Labor Relations

Commission,[19] we held that gross negligence connotes want of care in the
performance of ones duties. Habitual neglect implies repeated failure to
perform ones duties for a period of time, depending upon the circumstances.
Fraud and willful neglect of duties imply bad faith of the employee in failing to
perform his job to the detriment of the employer and the latters business.[20]
On the other hand, misconduct is improper or wrongful conduct. It is the

transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not
mere error in judgment. Under Article 282 of the Labor Code, the misconduct,
to be a just cause for termination, must be of such grave and aggravated
character, not merely of a trivial or unimportant nature. For serious misconduct
to warrant the dismissal of an employee, it (1) must be serious; (2) must relate
to the performance of the employees duty; and (3) must show that the
employee has become unfit to continue working for the employer.[21]
In the case at bar, respondent cannot be held liable for serious misconduct or
gross negligence. No independent evidence was presented to prove her willful
conspiracy with Detalla. Petitioner even admitted that there is no direct
evidence that respondent benefited from the falsified bank guarantee. Liability
for the incident lay solely with Detalla, who patently breached the trust and
confidence of petitioner. Respondent merely followed the orders of the bank
manager which appeared to be regular. Furthermore, the nature of respondents
job does not include processing of bank loans and guarantees. Her work as
accounting clerk refers only to the opening of deposits and processing of
withdrawals. The alleged infraction was not within the scope of her job
function. Petitioner did not contest this fact.
Respondent also verified from the bank computer whether GIA Fuel and
Lubricant Dealer had an account with petitioner, as can be gleaned from her
statements in the Question and Answer[22] conducted by the bank, to wit:

Tanong 1. Noong Nov. 24, 2000 nga bandang 2: o 2:30 na hapon. Nasaan ka
noon.
Sagot 1. Nasa Cubao branch po at ginagawa ang aking trabaho

bilang encoder. Nagring po ang telepono at aking
sinagot ng ganito Hello, Premiere Bank may I help
you? at nagpakilala ang nasa kabilang linya na siya
daw si Ms. Emmie Crisostomo from Philpride at sabi
ay I ve-verify ko lang kung may account dyan si GIA
fuel. Ang sagot ko ay meron.
Tanong 2. Paano mo nasabi na meron?
Sagot 2. Pumunta po ako sa computer at nag search ako sa

file at nakita ko na may GIA fuel account at
bumalik ako at (sic) telepono at sinabi ko sa
kanya na meron.
Tanong 3. Mga ilang minuto mo ibinaba ang telepono para

tingnan sa computer ang GIA fuel account?
Sagot 3. Mga 1 minuto dahil madali lang naman ang mag

search sa computer.
Elsie Mantal: Sabi ni Ms. Crisostomo na may ini-issue na Bank

guarantee na pinirmahan ni Ms. Rosario Detalla, okey
ba ito? Naalala ko ang ipinagbilin sa akin ng Boss ko,
na si Ms. Rosario Detalla sabi nya Na baka may
magverify kay GIA fuel sabihin mo na okay yan. Pero
may kulang pang dokumento.
Tanong 4. Ano ba ang Bank guarantee na sabi mo ay okay?
Sagot 4. Hindi ko alam kung anong nilalaman nyan.

Tanong 5. Pero bakit ka nag okay, e wala ka palang alam
dyan.
Sagot 5. E kasi nga sabi ng Boss ko na si Ms. Detalla na okay

yan, kaya ng may magverify ang sabi ko ay
okay. Hindi ko na man matanong ang Boss ko,
dahil nakaalis na siya.
x x x x. (Emphasis supplied)
Respondent did what was expected of her as an employee of the bank. Before
answering the telephone inquiry, respondent verified the existence of the GIA
Fuel and Lubricant Dealer account through the bank computer. If ever she was
negligent, it would only constitute a single or isolated act which is not a just
cause for the dismissal of the respondent from her employment.
In addition, although respondents position as accounting clerk involves a high

degree of responsibility requiring trust and confidence, carrying 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,[23] the charge against her is
not reasonably connected to her job of opening of savings, current and/or time
deposits and the payment of withdrawals. The duty and ultimately, the
responsibility of approving transactions relating to bank guarantees lie with the
branch manager and the management personnel of the petitioners head
office. Thus, in Metropolitan Bank and Trust Company v. Barrientos,[24] the
Court held that respondent therein was not liable of misconduct for allowing the
opening of fictitious accounts, because he was merely a cashier and had no
authority to approve new accounts and had no way of knowing the anomalous
transactions.
An employer may terminate an employee for fraud or willful breach by the

employee of the trust reposed in him by his employer or duly authorized
representative. However, the right of an employer to terminate an employee
based on loss of confidence must not be exercised arbitrarily and without just
cause.To be a valid reason for dismissal, loss of confidence must be
genuine. Uncorroborated assertions and accusations by the employer will not
suffice, otherwise it will jeopardize the constitutional guarantee of security of
tenure of the employee.[25]

Under Article 279 of the Labor Code, an employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and
other privileges, inclusive of allowances, and other benefits or their monetary
equivalent from the time the compensation was withheld up to the time of
actual reinstatement. In addition, recovery of attorneys fees is reasonable
under the circumstances. It is settled that in actions for recovery of wages or
where an employee was forced to litigate and incur expenses to protect his
rights and interest, he is entitled to an award of attorneys fees.[26]
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in

CA-G.R. SP No. 80975 dated January 17, 2005 finding petitioner guilty of illegal
dismissal and ordering the reinstatement of respondent to her former position,
with full backwages, inclusive of allowances and to the other benefits or their
monetary equivalent from the time her compensation was withheld up to her
actual reinstatement, plus attorneys fees, and the Resolution dated April 7,
2005 denying the motion for reconsideration, are AFFIRMED. SO ORDERED.

[G.R. No. 129413. July 27, 1998]
ROLIA VILLANUEVA, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION (Third Division), ATLAS LITHOGRAPHIC SERVICES, INC.,
ALEJANDRO A. MARAMAG, TERESA ALVINA and FELIX DE
JESUS, respondents.
ROMERO, J.:
Petitioner Rolia Villanueva assails the resolution of the National Labor

Relations Commission (NLRC) dated January 17, 1997[1] declaring her validly
dismissed from her employment as well as its accompanying resolution dated
February 7, 1997 denying her motion for reconsideration.[2]
In 1970, petitioner was hired as clerk by the private respondent Atlas
Lithographic Services. Subsequently, on September 1, 1978, she was promoted
to her present position as Accounting Manager.
On July 10, 1995, petitioner received a show cause letter[3] from the private
respondent asking her to submit her written explanation regarding a letter
complaint filed by a certain Adelina Oguis.[4] In her complaint, Oguis alleged
that petitioner would demand two thousand pesos for every work order she
would obtain from private respondent for her. Private respondent viewed this
act by the petitioner as an act of dishonesty prejudicial to its interest.
In denying any wrong-doing, petitioner sent a letter claiming that the
money she received from Oguis was in consideration of past favors or services
she rendered to the latter. In other words, the money was given on a purely
voluntary basis as an expression of gratitude.[5] Apparently, private respondent
was not impressed with petitioners written explanation, hence, on July 14,
1995 an investigation was conducted wherein petitioner, Oguis and a
representative of the private respondent were present.[6]
However, despite the investigation private respondent did not find any
merit in petitioners contention, resulting in the termination of the latters
employment effective August 2, 1995.[7]
Petitioner then filed a complaint for illegal dismissal and damages before
the arbitration branch of the NLRC. After due proceedings, Labor Arbiter
Potenciano S. Canizares, Jr. on May 13, 1996 ruled in favor of the petitioner
holding that her dismissal was illegal for failure by the private respondent to
prove its allegation, viz.:[8]

Here the respondents failed to prove that Oguis expression of gratitude to the
complainant, for the aforecited help extended to Oguis so ruined the company
that it had to protect its interest by dismissing the complainant. There was no
evidence of damage in any form or manner presented by the respondents.
xxxxxxxxx
WHEREFORE, the respondents are hereby ordered to reinstate the complainant

with full backwages from the time her salaries were withheld from her until her
actual reinstatement.
Unfazed by the setback, private respondent appealed the Labor Arbiters

decision to the NLRC. To the dismay of the petitioner, the NLRC reversed the
decision of the labor arbiter[9] and declared that she was validly dismissed from
her employment taking into account the following points:
Admittedly, complainant, an accounting manager, was a managerial employee

who should have the complete trust and confidence of
respondent. Complainants admitted acceptance of certain amounts from
respondents contractor Ms. Oguis for alleged services rendered was improper
and anomalous.
xxxxxxxxx
PREMISES CONSIDERED, the Decision of May 13, 1996 is hereby VACATED and
a new one is adjudged DISMISSING instant complaint for lack of merit.
Petitioner moved for reconsideration but was unsuccessful.[10]

Hence this petition for review on certiorari wherein the sole issue to be
resolved is whether the petitioner was validly dismissed by the private
respondent.
To begin with, there is no denying that loss of trust and confidence is a
valid ground for termination of employment.[11] Thus, the basic requisite for
dismissal on the ground of loss of confidence is that the employee concerned
holds a position of trust and confidence[12] or is routinely charged with the care
and custody of the employers money or property.[13] Moreover, the breach
must be related to the performance of the employees function.[14] Also, it must
be shown that the employee is a managerial employee, since the term trust

and confidence is restricted to said class of employees.[15] In reviewing this
petition, we have fully taken into account the foregoing considerations.
There is no dispute that petitioner was a managerial employee; as such any
transgression on her part gives the employer a wider latitude of discretion in
terminating her services.[16] Likewise, it is without doubt that petitioner
accepted money on at least four different instances from Oguis, one of private
respondents contractors.However, she attempts to legitimize the propriety of
her acceptance by claiming that the money was given to her as an expression
of gratitude by Oguis.
Be that as it may, we cannot condone petitioners conduct. Her dismissal
must be upheld.
Petitioner, as account manager, had the duty to deal with all of the private
respondents contractors. Consequently, the marketability, goodwill and
sustainability of private respondents service or products would greatly depend
on the objectiveness and unbiased demeanor of the petitioner. Any deviation
from these standards would inevitably affect the private respondents business
and reputation among its other contractors.
As aptly observed by the Solicitor General:
Natural human desire to continue such an advantageous arrangement could

not, but have undermined petitioners ability to make recommendations and
decisions concerning said account on the sole basis of what should have been
good for the company. And, having shown such weakness in one account,
petitioner was obviously not invulnerable to similar temptations regarding other
accounts. In other words, private respondents could no longer safely assume
that petitioner was looking after the companys welfare only whenever she
would recommend a particular account for payment, or a particular contract for
approval, or whenever she would act in any other way on any other matter
concerning a company account or contract.[17]
It must be emphasized that private respondents reliance on petitioners

evaluation and assessment concerning its respective contractors was based
primarily on trust and confidence. Thus, when petitioner accepted considerable
amounts of money from one of the private respondents contractors, the trust
and confidence reposed on her have been seriously shaken.
In fine, whether petitioner demanded the money from Oguis or it was
voluntarily given is immaterial. The fact that she accepted money from one of
the private respondents contractors has cast doubt on her integrity. After all,
we cannot discount the possibility that as a quid pro quo to her acceptance,
some future favors might be asked by Oguis, which may somehow be
detrimental to private respondents business interests. The fact that private
respondent did not suffer losses from the dishonesty of the petitioner because
of their timely discovery does not excuse the latter from any
culpability. Indeed, the law, in protecting the rights of workers, authorizes
neither oppression nor self-destruction of the employer.[18] In this regard, a
company has the right to dismiss its employees as a measure of self-
protection.[19]
Petitioner likewise contends that assuming she was at fault, being a first-
time offender and considering her twenty-five (25) years of employment with
the private respondent, the penalty of dismissal is too harsh.[20] In support of
her contention, petitioner cites the following cases, to wit: PAL v.
PALEA,[21] Gelmart Industries Phil. v. NLRC,[22] Mary Johnston v.
NLRC, [23]
Manila Electric Company v. NLRC,[24]
and Dolores v. NLRC.[25]
We are not unmindful of the foregoing doctrine, but after a careful scrutiny
of the above cases, we are not convinced of its application to the instant
petition.
First, in all of the cases cited, it should be borne in mind that the
employees involved were all rank-and-file or ordinary workers. However, as
earlier pointed out, petitioner was not included in such category but was the
account manager of private respondent, clearly, a managerial position. Metro
Drug Corporation v. NLRC,[26] states:
Managerial personnel and other employees occupying positions of trust and

confidence are entitled to security of tenure, fair standards of employment, and
the protection of labor laws. However, the rules on termination of employment,
penalties for infractions, and resort to concerted action are not necessarily the
same as those for ordinary employees.
Moreover, it pointed out the differences in the imposition of sanctions

concerning erring employees, thus:
When an employee accepts a promotion to a managerial position or to an office

requiring full trust and confidence, she gives up some of the rigid guaranties
available to ordinary workers. Infractions which if committed by others would
be overlooked or condoned or penalties mitigated may be visited with more
severe disciplinary action. A companys resort to acts of self-defense would be
more easily justified.
In addition, in the above-cited cases, the employees transgressions could
not be considered as inimical to the interest of their respective employers. In
fact, in the PALcase, it only involved a theft of a lead pipe while
the Gelmart case was concerned with the pilfering of one (1) used oil plastic
container. The Mary Johnston case relates to a heated argument between two
co-employees. The Dolores case pertains to an employee who failed to obtain
prior leave before pursuing her studies abroad. While the MERALCO case
involved an employee facilitating an illegal installation of power line, which is
clearly prejudicial to the economic activity of his employer (MERALCO), there
was a finding that these losses were not due to the fault of the employee but to
the Power Sales Division of MERALCO.[27]
Finally, there is another aspect which strongly militates against petitioners
plea. Certainly, this was not the petitioners first infraction. She admitted that
she received money from Oguis on four (4) different occasions, a fact shown in
the cash deposit slips.[28] To our mind, each incident constitutes a separate
offense. The fact that this was the first time that her misdeeds were discovered
does not diminish her accountability in whatever way.
In the final analysis, petitioner, as a managerial employee, is expected to
conduct her duties above reproach and to avoid, not only impropriety, but
likewise, the appearance of impropriety. Unfortunately, her propensity of
accepting money from Oguis, one of her employers contractors, has severely
compromised her impartiality. Her excuse that the money was given voluntarily
in recognition of past favors does not convince. In fact, it is deplorable to note
that she did not have the courage to say no when these amounts were first
offered to her, considering that it was coming from one of her employers
business contractors. Ordinary reason and prudence should have prompted the
petitioner to desist from accepting the money, however, well-meaning the
offer. Oguis, being one of her employers contractors and her being the account
manager of the latter should have cautioned petitioner to act in a more
circumspect manner.
In sum, we hold that the dismissal of the petitioner as account manager
was for a just and valid cause and that private respondent faithfully observed
procedural due process in effecting her dismissal.
WHEREFORE, in view of the foregoing, the petition is hereby
DISMISSED. The questioned resolution dated January 17, 1997 and its
accompanying resolution dated February 7, 1997 of the National Labor
Relations Commission are accordingly AFFIRMED.
SO ORDERED.
G.R. No. 114952 January 29, 1996
MAGNOLIA DAIRY PRODUCTS CORPORATION, petitioner, vs.

NATIONAL LABOR RELATIONS COMMISSION and JENNY A.
CALIBO, respondents.
FRANCISCO, J.:
Petitioner, a division of San Miguel Corporation (SMC), entered into a contract

of service with Skillpower, Inc., a duly organized corporation engaged in the
business of offering and providing manpower services to the public. On June
11, 1983, Skillpower, Inc., assigned private respondent Jenny A. Calibo to
petitioner's Tetra Paster Division with these functions: "(i) to remove "bulgings"
(damaged goods) from dilapidated cartons; (ii) to replace damaged goods and
re-paste the carton thereof; (iii) to dispose the damaged goods or returned
goods from Magnolia's warehouse to avoid bad odors; and (iv) to clean
leftovers of leaking tetra pack by mopping or washing the contaminated
premises."1
In September 1986, Skillpower, Inc., pulled-out private respondent from

petitioner's Tetra Paster Division, but assigned her back on May 2, 1987 with
the same functions. When petitioner's contract with Skillpower, Inc., expired,
private respondent applied with Lippercon Services, Inc., also a corporation
engaged in providing manpower services. In July 1987, Lippercon Services,
Inc., assigned her to petitioner's Tetra Paster Division as a cleaning aide. In
December 1987, she was terminated from service due to petitioner's
installation of automated machines. On July 11, 1989, private respondent
instituted a complaint for illegal dismissal against petitioner. In answer thereto,
petitioner averred that it has no employer-employee relationship with private
respondent and that the dismissal was prompted by the installation of labor
saving devices — an authorized cause for dismissal under the Labor Code, as
amended.
The Labor Arbiter ruled that petitioner is the private respondent's employer
because Skillpower, Inc., and Lippercon Services, Inc., were mere "labor-only"
contractors falling under Section 9, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code. The installation of labor saving devices was also
ruled a valid ground for the termination of private respondent's employment,
but the Labor Arbiter emphasized that this did not exculpate petitioner from the
charge of illegal dismissal for its failure to observe the due process of law in

terminating from service its employee. Accordingly, petitioner was ordered "to
pay [private respondent] her backwages in the amount of P23,296.00 [and]
[i]n lieu of reinstatement, . . . to pay [private respondent] separation pay in
the amount of P11,648.00."2 On appeal, the NLRC modified the decision by
directing private respondent's reinstatement and payment of backwages not
exceeding three (3) years.3 Thus, this petition.
The forefront question is whether or not an employer-employee relationship

exists between petitioner and private respondent.
Petitioner insists that it has no employer-employee relationship with private

respondent since Skillpower, Inc., and Lippercon Services, Inc., were solely
responsible for private respondent's employment. More than that, petitioner
points out that private respondent is assigned to a janitorial work which is
neither related to nor connected with its business of producing or
manufacturing fruit juices. Petitioner argues that Skillpower, Inc., and
Lippercon Services, Inc., cannot be deemed to be engaged in "labor-only"
contracting since both have sufficient investment in the form of tools,
equipments, machineries and work materials. Belatedly, in its petition and reply
to public respondent's comment, petitioner additionally contends that both
manpower corporations have sufficient capitalization with subscribed capital
stocks amounting to P600,000.00 and P100,000.00 respectively.4
A perusal of petitioner's contracts of service with Skillpower, Inc., and

Lippercon Services, Inc. reveals that the workers supplied by the two
manpower corporations perform usual, regular and necessary services for
petitioner's production of goods.5 In this connection, the Labor Arbiter
observed:
. . . The undertaking given by respondents Skillpower and/or Lippercon

in favor of respondent Magnolia was not the performance of a specific
job. In the instant case, the undertaking of respondents Skillpower
and/or Lippercon was to provide respondent Magnolia with a certain
number of persons able to carry out the works in the production line.
These workers supplied by Skillpower and/or Lippercon in performing
their works utilized the premises, tools, equipments and machineries of
respondent Magnolia and not those of the former. The work being
performed by complainant, such as, to remove "bulgings" (damaged
goods) from dilapidated cartoons, (sic) to replace damaged goods and
re-paste the cartoon (sic) thereof, to dispose the damaged goods or

returned goods from Magnolia's warehouse to avoid bad odors, to clean
leftovers of leaking tetra-pak by mopping or washing the contaminated
premises, and others, are of course directly related to the day to day
operations of respondent Magnolia. Respondent Magnolia failed to negate
this evidence that the undertaking assigned to the complainant is not
related or necessary to its business operations. Necessarily, if the
undertaking assigned to the complainant is not related nor necessary to
the business operations, she cannot be considered as employee of
respondent Magnolia. But the contrary holds true.6
In full agreement with the Labor Arbiter's finding, public respondent NLRC
categorically stated the following, which we quote with approval:
As borne by the evidence on record, respondents Skillpower and Lipercon

were merely agents of the respondent Magnolia and that the latter was
the real employer. Consequently, the respondent Magnolia was
responsible to the employee of the labor-only contract as if such
employee had been directly employed by the employer. Thus, where
"labor only" contracting exists, as in the case at bar, the status itself
implies or establishes an employer-employee relationship between the
employer and the employees of the "labor-only" contractor. The law in
effect holds both the employer and the "labor only" contractor
responsible to the latter's employees for the more effective safeguarding
of the employees' rights under the Labor Code. (PBCom vs. NLRC, 146
SCRA 347 [1986]).7
We note that petitioner also exercises the power to discipline and suspend
private respondent — a factor that further militates against its claim. In fact,
the latter was meted a suspension by Mr. Antonio Cinco, a supervisor of SMC.8
The existence of an employer-employee relationship is factual in nature9 and we

give due deference to the NLRC's findings in the absence of a clear showing of
arbitrariness in its appreciation of the evidence. Its findings in this case are
fully supported by substantial evidence on record. Findings of fact of
administrative agencies and quasi-judicial bodies which have acquired expertise
because their jurisdiction is confined to specific matters, like the NLRC, are
generally accorded not only respect but even finality and are binding upon the
Court.10

Thus, petitioner's contention that both Skillpower, Inc., and Lippercon Services,
Inc., should be considered the employer of private respondent because they
have sufficient investments in the form of tools, equipments, and machineries
deserves scant consideration in view of the findings of the Labor Arbiter and the
NLRC. In addition, petitioner's contention that both corporations have sufficient
capitalization merits no significance. This issue was belatedly raised in this
appeal. Issues and arguments not adequately and seriously brought below
cannot be raised for the first time on appeal. The resolution of this issue
requires the admission and calibration of evidence and the Labor Arbiter and
the NLRC did not pass upon it in their assailed decisions. Our review of labor
cases are confined to questions of jurisdiction or grave abuse of discretion and
the Supreme Court is not a trier of facts. We thus find that the NLRC neither
exceeded its jurisdiction, nor abused its discretion, in ascertaining the existence
of an employer-employee relationship between petitioner and private
respondent.
Petitioner next asseverates that private respondent was not illegally dismissed
since the termination of her employment was due to a cause expressly
authorized by the Labor Code and the absence of notice therefor did not make
it so. Petitioner cites Wenphil Corp. v. NLRC, et al. (170 SCRA 69 [1989]) in
support of its claim that private respondent is only entitled to an indemnity of
P1,000.00, but not backwages or separation pay. The NLRC, on the other hand,
insists that termination without the benefit of any investigation or notice makes
an employee's dismissal from service illegal.
Article 283 of the Labor Code provides in part:
Art. 283. Closure of establishment and reduction of personnel. — The

employer may also terminate the employment of any employee due to
the installation of labor saving devices, . . ., by serving a written notice
on the workers and the Ministry of Labor and Employment at least one
(1) month before the intended date thereof. In case of termination due
to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. . . A fraction of at least six (6)
months shall be considered one (1) whole year.
The law authorizes an employer, like the herein petitioner, to terminate the
employment of any employee due to the installation of labor saving devices.

The installation of these devices is a management prerogative, and the courts
will not interfere with its exercise in the absence of abuse of discretion,
arbitrariness, or maliciousness on the part of management, as in this case.
Nonetheless, this did not excuse petitioner from complying with the required
written notice to the employee and to the Department of Labor and
Employment (DOLE) at least one month before the intended date of
termination. This procedure enables an employee to contest the reality or good
faith character of the asserted ground for the termination of his services before
the DOLE.11
The failure of petitioner to serve the written notice to private respondent and to
the DOLE, however, does not ipso facto make private respondent's termination
from service illegal so as to entitle her to reinstatement and payment of
backwages.12 If at all, her termination from service is merely defective because
it was not tainted with bad faith or arbitrariness and was due to a valid cause.
The well settled rule is that the employer shall be sanctioned for non-
compliance with the requirements of, or for failure to observe due process in
terminating from service its employee. In Wenphil Corp. v. NLRC,13 we
sanctioned the employer for this failure by ordering it to indemnify the
employee the amount of P1,000.00. Similarly, we imposed the same amount as
indemnification in Rubberworld (Phils.), Inc. v. NLRC,14 and, in Aurelio
v. NLRC. The
15
indemnity was raised to P10,000.00 in Reta
v. NLRC16 and Alhambra Industries, Inc. v. NLRC.17 Subsequently, the sum of
P5,000.00 was awarded to an employee in Worldwide Papermills,
Inc. v. NLRC,18 and P2,000.00 in Sebuguero, et al. v. NLRC, et al.19 Recently,
the sum of P5,000.00 was again imposed as indemnity against the
employer.20 We see no valid and cogent reason why petitioner should not be
likewise sanctioned for its failure to serve the mandatory written notice. Under
the attendant facts, we find the amount of P5,000.00, to be just and
reasonable.
Lastly, the NLRC's grant of backwages and order of reinstatement are

untenable. These awards are proper for illegally dismissed employees which
obviously is not the situation in this case. The appropriate award is separation
pay pursuant to the ruling of this Court in Philippine Long Distance Telephone
Co., Inc. v. NLRC:21
We hold that henceforth separation pay shall be allowed as a measure of social

justice only in those instances where the employee is validly dismissed for

causes other than serious misconduct or those reflecting on his moral
character. Where the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or illicit sexual
relations with a fellow worker, the employer may not be required to give the
dismissed employee separation pay, or financial assistance, or whatever other
name it is called, on the ground of social justice.
and Article 283 of the Labor Code which explicitly provides that an employee
removed from service due to the installation of labor saving devices is entitled
to separation pay.
WHEREFORE, the decision appealed from is MODIFIED by setting aside the

award of reinstatement and backwages. In lieu thereof, petitioner is ordered to
pay separation pay equivalent to one (1) month pay for every year of service.
In addition, petitioner is ordered to pay the sum of P5,000.00 as
indemnification for its failure to serve the required notice mandated by law.
SO ORDERED.

NIPPON HOUSING PHIL. INC., G.R. No. 177816
and/or TADASHI OTA, HOROSHI August 3, 2011
TAKADA, YUSUHIRO KAWATA,
MR. NOBOYUSHI and JOEL
REYES, Petitioners,
- versus -
MAIAH ANGELA LEYNES,

Respondent.
PEREZ, J.:
Assailed in this petition for review on certiorari[1] filed pursuant to Rule 45 of

the 1997 Rules of Civil Procedure is the 23 November 2006 Decision rendered
by the Sixteenth Division of the Court of Appeals (CA) in CA-G.R. SP No.
84781,[2] the decretal portion of which states:
WHEREFORE, the foregoing considered, the petition

is GRANTED and the assailed Decision and Resolution
are REVERSED and SET ASIDE. Accordingly, the Decision of the
Labor Arbiter is REINSTATED.
SO ORDERED.[3]
The Facts
From its original business of providing building maintenance, it appears that

petitioner Nippon Housing Philippines, Inc. (NHPI) ventured into building
management, providing such services as handling of the lease of condominium
units, collection of dues and compliance with government regulatory

requirements. Having gained the Bay Gardens Condominium Project (the
Project) of the Bay Gardens Condominium Corporation (BGCC) as its first and
only building maintenance client, NHPI hired respondent Maiah Angela Leynes
(Leynes) on 26 March 2001 for the position of Property Manager, with a salary
of P40,000.00 per month. Tasked with surveying the requirements of the
government and the client for said project, the formulation of house rules and
regulations and the preparation of the annual operating and capital expenditure
budget, Leynes was also responsible for the hiring and deployment of
manpower, salary and position determination as well as the assignment of the
schedules and responsibilities of employees.[4]
On 6 February 2002, Leynes had a misunderstanding with Engr. Honesto

Cantuba (Cantuba), the Building Engineer assigned at the Project, regarding
the extension of the latters working hours. Aside from instructing the security
guards to bar Engr. Cantuba from entry into the Project and to tell him to
report to the NHPIs main office in Makati, Leynes also sent a letter dated 8
February 2002 by telefax to Joel Reyes (Reyes), NHPIs Human Resources
Department (HRD) Head, apprising the latter of said Building Engineers
supposed insubordination and disrespectful conduct.[5] With Engr. Cantubas
submission of a reply in turn accusing Leynes of pride, conceit and poor
managerial skills,[6] Hiroshi Takada (Takada), NHPIs Vice President, went on to
issue the 12 February 2002 memorandum, attributing the incident to simple
personal differences and directing Leynes to allow Engr. Cantuba to report back
for work.[7]
Disappointed with the foregoing management decision, Leynes submitted to

Tadashi Ota, NHPIs President, a letter dated 12 February 2002, asking for an
emergency leave of absence for the supposed purpose of coordinating with her
lawyer regarding her resignation letter.[8] While NHPI offered the Property
Manager position to Engr. Carlos Jose on 13 February 2002[9] as a consequence
Leynes signification of her intention to resign, it also appears that Leynes sent
another letter to Reyes by telefax on the same day, expressing her intention to
return to work on 15 February 2002 and to call off her planned resignation
upon the advice of her lawyer.[10] Having subsequently reported back for work
and resumed performance of her assigned functions, Leynes was constrained to
send out a 20 February 2002 written protest regarding the verbal information

she supposedly received from Reyes that a substitute has already been hired
for her position.[11] On 22 February 2002, Leynes was further served by
petitioner Yasuhiro Kawata and Noboyushi Hisada, NHPIs Senior Manager and
Janitorial Manager,[12]with a letter and memorandum from Reyes, relieving her
from her position and directing her to report to NHPIs main office while she was
on floating status.[13]
Aggrieved, Leynes lost no time in filing against NHPI and its above-named
officers the 22 February 2002 complaint for illegal dismissal, unpaid salaries,
benefits, damages and attorneys fees docketed before the arbitral level of the
National Labor Relations Commission (NLRC) as NLRC-NCR South Sector Case
No. 30-02-01119-02.[14] Against Leynes claim that her being relieved from her
position without just cause and replacement by one Carlos Jose amounted to an
illegal dismissal from employment,[15] NHPI and its officers asserted that the
managements exercise of the prerogative to put an employee on floating status
for a period not exceeding six months was justified in view of her threatened
resignation from her position and BGCCs request for her replacement.[16] During
the pendency of the case, however, Reyes eventually served the Department of
Labor and Employment (DOLE)[17] and Leynes with the 8 August 2002 notice
terminating her services effective 22 August 2002, on the ground of
redundancy or lack of a posting commensurate to her position at the
Project.[18] Leynes was offered by NHPI the sum of P28,188.16 representing her
unpaid wages, proportionate 13th month pay, tax refund and service incentive
leave pay (SILP).
On 14 January 2003, Labor Arbiter Manuel Manansala rendered a decision,

finding that NHPIs act of putting Leynes on floating status was equivalent to
termination from employment without just cause and compliance with the twin
requirements of notice and hearing. Likewise finding that NHPIs officers acted
with bad faith in effecting Leynes termination,[19] the Labor Arbiter disposed of
the case in the following wise:
WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring respondent Nippon Housing Philippines, Inc. (NHPI)
guilty of illegal dismissal for the reasons above-
discussed. Consequently, the aforenamed respondent is hereby
directed to reinstate complainant Maiah Angela Leynes to her
former position as Property Manager without loss of seniority
rights and with full backwages from the time of her unjust
dismissal up to the time of her actual reinstatement. The
backwages due to complainant Leynes is initially computed
at P471,844.87 x x x subject to the finality of this Decision.
Be that as it may, on account of strained relationship between the

parties brought about by the institution of the instant
case/complaint plus the fact that complainant Leynes occupied
a managerial position, it is better for the parties to be
separated. Thus, in lieu of reinstatement, respondent NHPI is
hereby directed to pay complainant Leynes the sum of P80,000.00
representing the latters initial separation pay subject to the finality
of this Decision x x x.
2. Declaring respondent NHPI and individual respondents Tadashi

Ota (President), Hirochi Takada (Vice President for Finance),
Yasuhiro Kawata (Senior Manager), Noboyushi [Hisada] (Janitorial
Manager), and Joel Reyes (HRD Manager) guilty of evident bad
faith in effecting the dismissal of complainant Leynes from the
service.Consequently, the aforenamed respondents are hereby
directed to pay, jointly and severally, complainant Leynes the sum
of P20,000.00 for moral damages and the sum of P20,000.00 for
exemplary damages;
3. Directing respondent NHPI to pay complainant Leynes the total

sum of P56,888.44 representing her unpaid salary, proportionate
13th month pay, and proportionate service incentive leave pay x x
x
4. Directing the aforenamed respondent NHPI to pay complainant

Leynes ten (10%) percent attorneys fees based on the total
monetary award for having been forced to prosecute and/or
litigate the instant case/complaint by hiring the services of legal
counsel.

5. Dismissing the other mon[e]y claims and/or charges of
complainant Leynes for lack of merit.
SO ORDERED.[20]
On appeal, the foregoing decision was reversed and set aside in the 30
September 2003 decision rendered by the NLRC in NLRC NCR CA No.
035229. In ordering the dismissal of the complaint for lack of merit, the NLRC
ruled that NHPIs placement of Leynes on floating status was necessitated by
the clients contractually guaranteed right to request for her relief.[21] With
Leynes elevation of the case to the CA on a Rule 65 petition
for certiorari,[22] the NLRCs decision was, however, reversed and set aside in
the herein assailed 23 November 2006 decision, upon the following findings and
conclusions: (a) absent showing that there was a bona fide suspension of
NHPIs business operations, Leynes relief from her position even though
requested by the client was tantamount to a constructive dismissal; (b) the bad
faith of NHPI and its officers is evident from the hiring of Engr. Jose as Leynes
replacement on 13 February 2002 or prior to her being relieved from her
position on 22 February 2002; and, (c) the failure of NHPI and its officers to
prove a just cause for Leynes termination, the redundancy of her services and
their compliance with the requirements of due process renders them liable for
illegal dismissal.[23]
The motion for reconsideration of the foregoing decision filed by NHPI and its
officers[24] was denied for lack of merit in the CAs 8 May 2007 resolution,
hence, this petition.[25]
The Issues
Petitioners NHPI and Kawata urge the grant of their petition on the following
grounds, to wit:

I. THE HONORABLE COURT OF APPEALS RULING THAT
PETITIONERS DECISION TO PLACE RESPONDENT ON
FLOATING STATUS IS TANTAMOUNT TO
CONSTRUCTIVE DISMISSAL IS CONTRARY TO LAW
AND SETTLED JURISPRUDENCE.
II. THE HONORABLE COURT OF APPEALS DECLARATION

THAT NHPIS DECISION TO REDUNDATE RESPONDENT
IS UNJUSTIFIED, IS CONTRARY TO LAW AND SETTLED
JURISPRUDENCE.[26]
The Courts Ruling
We find the petition impressed with merit.
Petitioners argue that the CA erred in finding that Leynes was

constructively dismissed when she was placed on floating status prior to her
termination from employment on the ground of redundancy. Maintaining that
the employees right to security of tenure does not give him a vested right
thereto as would deprive the employer of its prerogative to change his
assignment or transfer him to where he will be most useful, petitioners call our
attention to the supposed fact that Leynes was unacceptable to BGCC which
had a contractually guaranteed right to ask for her relief. Rather than outrightly
terminating Leynes employment as a consequence of her threats to resign from
her position, moreover, petitioners claim that she was validly placed on floating
status pursuant to Article 286 of the Labor Code of the Philippines which
provides as follows:
Art. 286. When employment not deemed terminated. The bona

fide suspension of the operation of a business undertaking for a
period not exceeding six (6) months, or the fulfillment by the
employee of a civic duty shall not terminate employment. In all

such cases the employer shall reinstate the employee to his
former position without loss of seniority rights if he indicates his
desire to resume his work not later than one (1) month from the
resumption of operations of his employer or from his relief from
the military or civic duty.
Although the CA correctly found that the record is bereft of any showing
that Leynes was unacceptable to BGCC, the evidence the parties adduced a
quoclearly indicates that petitioners were not in bad faith when they placed the
former under floating status. Disgruntled by NHPIs countermanding of her
decision to bar Engr. Cantuba from the Project, Leynes twice signified her
intention to resign from her position to Ota on 12 February 2002. Upon
receiving the copy of the memorandum issued for Engr. Cantubas return to
work, Leynes inscribed thereon the following handwritten note addressed to
Ota, Good Morning! Im sorry but I would like to report to you my plan of
resigning as your Prop. Manager. Thank You.[27] In her application letter for an
immediate emergency leave,[28] Leynes also distinctly expressed her
dissatisfaction over NHPIs resolution of her dispute with Engr. Cantuba and
announced her plan of coordinating with her lawyer regarding her resignation
letter, to wit:
This is in line with the Management decision re: Return to work

order of Mr. Honesto Cantuba at Bay Gardens. I would like to
express my deepest disappointed (sic) for having received this
kind of decision from Nippon Housing Philippines, Inc.
Mr. Ota, I have been working with NHPI, as your Building Property
Manager, for almost a year now. I had exerted all my effort to set-
up the Property Management, experienced each and every pain
and sacrifice[d] everything before we were able to get
the Bay Gardens project. Mr. Hiro Matsumoto, Hiroshi Takada and
Yasuhiro Kawata had witnessed these things.

Given your decision, I am respecting this. The most painful thing
for me is that the management did not value my effort for what I
have done to the Company.
I am therefore submitting my letter for emergency leave of

absence starting today, while I am still coordinating with my
Lawyer re: my resignation letter.
Thank you for your support.[29]
In view of the sensitive nature of Leynes position and the critical stage of
the Projects business development, NHPI was constrained to relay the situation
to BGCC which, in turn, requested the immediate adoption of remedial
measures from Takada, including the appointment of a new Property Manager
for the Project. Upon BGCCs recommendation,[30] NHPI consequently hired
Engr. Jose on 13 February 2002 as Leynes replacement.[31] Far from being the
indication of bad faith the CA construed the same to be, these factual
antecedents suggest that NHPIs immediate hiring of Engr. Jose as the new
Property Manager for the Project was brought about by Leynes own rash
announcement of her intention to resign from her position. Although she
subsequently changed her mind and sent Reyes a letter by telefax on 13
February 2002 announcing the reconsideration of her planned resignation and
her intention to return to work on 15 February 2002,[32] Leynes evidently had
only herself to blame for precipitately setting in motion the events which led to
NHPIs hiring of her own replacement.
Acting on Leynes 20 February 2002 letter protesting against the hiring of

her replacement and reiterating her lack of intention to resign from her
position,[33] the record, moreover, shows that NHPI simply placed her on
floating status until such time that another project could be secured for
her.[34] Traditionally invoked by security agencies when guards are temporarily
sidelined from duty while waiting to be transferred or assigned to a new post or

client,[35] Article 286 of the Labor Code has been applied to other industries
when, as a consequence of the bona fide suspension of the operation of a
business or undertaking, an employer is constrained to put employees on
floating status for a period not exceeding six months.[36] In brushing aside
respondents reliance on said provision to justify the act of putting Leynes on
floating status, the CA ruled that no evidence was adduced to show that there
was a bona fide suspension of NHPIs business.What said court clearly
overlooked, however, is the fact that NHPI had belatedly ventured into building
management and, with BGCC as its only client in said undertaking, had no
other Property Manager position available to Leynes.
Considering that even labor laws discourage intrusion in the employers

judgment concerning the conduct of their business, courts often decline to
interfere in their legitimate business decisions,[37] absent showing of illegality,
bad faith or arbitrariness. Indeed, the right of employees to security of tenure
does not give them vested rights to their positions to the extent of depriving
management of its prerogative to change their assignments or to transfer
them.[38] The record shows that Leynes filed the complaint for actual illegal
dismissal from which the case originated on 22 February 2002 or immediately
upon being placed on floating status as a consequence of NHPIs hiring of a new
Property Manager for the Project. The rule is settled, however, that "off-
detailing" is not equivalent to dismissal, so long as such status does not
continue beyond a reasonable time and that it is only when such a "floating
status" lasts for more than six months that the employee may be considered to
have been constructively dismissed.[39] A complaint for illegal dismissal filed
prior to the lapse of said six-month and/or the actual dismissal of the employee
is generally considered as prematurely filed.[40]
Viewed in the light of the foregoing factual antecedents, we find that the
CA reversibly erred in holding petitioners liable for constructively dismissing
Leynes from her employment. There is said to be constructive dismissal when
an act of clear discrimination, insensitivity or disdain on the part of the
employer has become so unbearable as to leave an employee with no choice
but to forego continued employment.[41] Constructive dismissal exists where
there is cessation of work because continued employment is rendered
impossible, unreasonable or unlikely, as an offer involving a demotion in rank

and a diminution in pay.[42] Stated otherwise, it is a dismissal in disguise or an
act amounting to dismissal but made to appear as if it were not.[43] In
constructive dismissal cases, the employer is, concededly, charged with the
burden of proving that its conduct and action or the transfer of an employee
are for valid and legitimate grounds such as genuine business necessity.[44] To
our mind, respondents have more than amply discharged this burden with proof
of the circumstances surrounding Engr. Carlos employment as Property
Manager for the Project and the consequent unavailability of a similar position
for Leynes.
With no other client aside from BGCC for the building management side
of its business, we find that NHPI was acting well within its prerogatives when it
eventually terminated Leynes services on the ground of redundancy. One of the
recognized authorized causes for the termination of employment, redundancy
exists when the service capability of the workforce is in excess of what is
reasonably needed to meet the demands of the business enterprise.[45] A
redundant position is one rendered superfluous by any number of factors, such
as overhiring of workers, decreased volume of business, dropping of a
particular product line previously manufactured by the company or phasing out
of service activity priorly undertaken by the business.[46] It has been held that
the exercise of business judgment to characterize an employees service as no
longer necessary or sustainable is not subject to discretionary review where, as
here, it is exercised there is no showing of violation of the law or arbitrariness
or malice on the part of the employer.[47] An employer has no legal obligation to
keep more employees than are necessary for the operation of its business.[48]
Considering that Leynes was terminated from service upon an authorized

cause, we find that the CA likewise erred in faulting NHPI for supposedly failing
to notify said employee of the particular act or omission leveled against her and
the ground/s for which she was dismissed from employment. Where dismissal,
however, is for an authorized cause like redundancy, the employer is, instead,
required to serve a written notice of termination on the worker concerned and
the DOLE, at least one month from the intended date thereof.[49] Here, NHPI
specifically made Leynes termination from service effective 22 August 2002,
but only informed said employee of the same on 8 August 2002[50] and filed
with the DOLE the required Establishment Termination Report only on 16

August 2002.[51]For its failure to comply strictly with the 30-day minimum
requirement for said notice and effectively violating Leynes right to due
process, NHPI should be held liable to pay nominal damages in the sum
of P50,000.00. The penalty should understandably be stiffer because the
dismissal process was initiated by the employer's exercise of its management
prerogative.[52]
Having been validly terminated on the ground of redundancy, Leynes is

entitled to separation pay equivalent to one month salary for every year of
service but not to the backwages adjudicated in her favor by the Labor
Arbiter.[53] Hired by NHPI on 26 March 2001 and terminated effective 22 August
2002, Leynes is entitled to a separation pay in the sum of P40,000.00, in
addition to her last pay which, taking into consideration her proportionate
13th month pay, tax refund and SILP, was computed by NHPI
at P28,188.16.[54] For lack of showing of bad faith, malice or arbitrariness on
the part of NHPI, there is, however, no justifiable ground for an award of moral
and exemplary damages.[55] For lack of factual or legal bases, we find no cause
to award attorneys fees in favor of Leynes. In the absence of the same showing
insofar as NHPIs corporate officers are concerned, neither is there cause to hold
them jointly and severally liable for the above-discussed monetary awards.
WHEREFORE, premises considered, the petition is GRANTED and the

assailed 23 November 2006 Decision is, accordingly, REVERSED and SET
ASIDE. In lieu thereof, another is entered ordering NHPI to pay Leynes the
following sums: (a) P40,000.00 as separation pay; (b) P28,188.16 representing
her unpaid wages, proportionate 13th month pay, tax refund and SILP; and
(c) P50,000.00 by way of nominal damages.
SO ORDERED.

Nippon Housing Philippines, et al. v. Leynes
G.R. No. 177816 : August 3, 2011
NIPPON HOUSING PHIL. INC., and/or TADASHI OTA, HOROSHI

TAKADA, YUSUHIRO KAWATA, MR. NOBOYUSHI and JOEL
REYES,Petitioners, v. MAIAH ANGELA LEYNES, Respondent.
PEREZ, J.:
FACTS:
Nippon Housing Philippines, Inc. (NPHI) hired respondent Maiah Angela

Leyneson 26 March 2001 for the position of Property Manager.
On 6 February 2002, Leynes had a misunderstanding with Engr. Honesto

Cantuba, the Building Engineer assigned at Bay Gardens Condominium Project
(the Project), regarding the extension of the latter working hours. Aside from
instructing the security guards to bar Engr. Cantuba from entry into the Project
and to tell him to report to the NHPI main office in Makati, Leynes also sent a
letter dated 8 February 2002 by telefax to Joel Reyes, NHPI HR Head, apprising
the latter of Cantuba supposed insubordination and disrespectful conduct. With
Engr. Cantuba submission of a reply in turn accusing Leynes of pride, conceit
and poor managerial skills, Hiroshi Takada, NHPI VP, went on to issue the 12
February 2002 memorandum, attributing the incident to "simple personal
differences" and directing Leynes to allow Engr. Cantuba to report back for
work.
Disappointed with the foregoing management decision, Leynes submitted to a

letter asking for an emergency leave of absence for the supposed purpose of
coordinating with her lawyer regarding her resignation letter. While NHPI
offered the Property Manager position to Engr. Carlos Jose on 13 February 2002
as a consequence Leynessignification of her intention to resign, it also appears
that Leynes sent another letter to Reyes by telefax on the same day,
expressing her intention to return to work on 15 February 2002 and to call off
her planned resignation upon the advice of her lawyer. On 22 February 2002,
Leynes was further served with a letter and memorandum relieving her from
her position and directing her to report to NHPI main office while she was on
floating status.
Aggrieved, Leynes lost no time in filing against NHPI and its above-named

officers a complaint for illegal dismissal, unpaid salaries, benefits, damages and
attorney fees before the NLRC. NHPI and its officers asserted that the
management exercise of the prerogative to put an employee on floating status
for a period not exceeding six months was justified in view of her threatened
resignation from her position and BGCC request for her replacement.During the
pendency of the case, however, Reyes eventually served the DOLE and Leynes
with a notice terminating her services effective 22 August 2002, on the ground
of redundancy or lack of a posting commensurate to her position at the
Project.Leynes was offered by NHPI the sum ofP28,188.16 representing her
unpaid wages, proportionate 13th month pay, tax refund and service incentive
leave pay (SILP).
The LA found that NHPI act of putting Leynes on floating status was equivalent
to termination from employment without just cause and compliance with the
twin requirements of notice and hearing.
On appeal, the NLRC reversed the LA decision. Leynes elevated the case to the
CA on a Rule 65 petition for certiorari and the CA reversed the NLRC decision.
ISSUE:
Whether or not the CA erred in finding that Leynes was constructively

dismissed when she was placed on floating status prior to her termination from
employment on the ground of redundancy?
HELD:
Although the CA correctly found that the record is bereft of any showing that
Leynes was unacceptable to BGCC, the evidence the parties adduced a quo
clearly indicates that petitioners were not in bad faith when they placed the
former under floating status. Disgruntled by NHPI countermanding of her
decision to bar Engr. Cantuba from the Project, Leynes twice signified her
intention to resign from her position. In her application letter for an immediate
emergency leave, Leynes also distinctly expressed her dissatisfaction over NHPI
resolution of her dispute with Engr. Cantuba and announced her plan of
coordinating with her lawyer regarding her resignation letter.
In view of the sensitive nature of Leynes position and the critical stage of the
Project business development, NHPI was constrained to relay the situation to
BGCC which, in turn, requested the immediate adoption of remedial measures
from Takada, including the appointment of a new Property Manager for the
Project. Upon BGCC recommendation, NHPI consequently hired Engr. Jose on
13 February 2002 as Leynes replacement. Far from being the indication of bad
faith the CA construed the same to be, these factual antecedents suggest that
NHPI immediate hiring of Engr. Jose as the new Property Manager for the
Project was brought about by Leynesown rash announcement of her intention
to resign from her position. Although she subsequently changed her mind and
sent Reyes a letter by telefax on 13 February 2002 announcing the
reconsideration of her planned resignation and her intention to return to work
on 15 February 2002, Leynes evidently had only herself to blame for
precipitately setting in motion the events which led to NHPI hiring of her own
replacement.
The record, moreover, shows that NHPI simply placed her on floating status
"until such time that another project could be secured" for her. Traditionally
invoked by security agencies when guards are temporarily sidelined from duty
while waiting to be transferred or assigned to a new post or client, Article 286
of the Labor Code has been applied to other industries when, as a consequence
of the bona fide suspension of the operation of a business or undertaking, an
employer is constrained to put employees on floating status for a period not
exceeding six months.
Considering that even labor laws discourage intrusion in the employer's

judgment concerning the conduct of their business, courts often decline to
interfere in their legitimate business decisions,absent showing of illegality, bad
faith or arbitrariness. Indeed, the right of employees to security of tenure does
not give them vested rights to their positions to the extent of depriving
management of its prerogative to change their assignments or to transfer
them.The record shows that Leynes filed the complaint for actual illegal
dismissal from which the case originated on 22 February 2002 or immediately
upon being placed on floating status as a consequence of NHPI hiring of a new
Property Manager for the Project. The rule is settled, however, that "off-
detailing" is not equivalent to dismissal, so long as such status does not
continue beyond a reasonable time and that it is only when such a "floating
status" lasts for more than six months that the employee may be considered to
have been constructively dismissed. A complaint for illegal dismissal filed prior
to the lapse of said six-month and/or the actual dismissal of the employee is
generally considered as prematurely filed.
Viewed in the light of the foregoing factual antecedents, the Court finds that
the CA reversibly erred in holding petitioners liable for constructively dismissing
Leynes from her employment. There is said to be constructive dismissal when

an act of clear discrimination, insensitivity or disdain on the part of the
employer has become so unbearable as to leave an employee with no choice
but to forego continued employment. Constructive dismissal exists where there
is cessation of work because continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and a
diminution in pay. Stated otherwise, it is a dismissal in disguise or an act
amounting to dismissal but made to appear as if it were not.
With no other client aside from BGCC for the building management side of its
business, the Court finds that NHPI was acting well within its prerogatives when
it eventually terminated Leynesservices on the ground of redundancy. One of
the recognized authorized causes for the termination of employment,
redundancy exists when the service capability of the workforce is in excess of
what is reasonably needed to meet the demands of the business enterprise. A
redundant position is one rendered superfluous by any number of factors, such
as overhiring of workers, decreased volume of business, dropping of a
particular product line previously manufactured by the company or phasing out
of service activity priorly undertaken by the business.It has been held that the
exercise of business judgment to characterize an employee service as no longer
necessary or sustainable is not subject to discretionary review where, as here,
it is exercised there is no showing of violation of the law or arbitrariness or
malice on the part of the employer.
Having been validly terminated on the ground of redundancy, Leynes is entitled

to separation pay equivalent to one-month salary for every year of service but
not to the backwages adjudicated in her favor by the Labor Arbiter.
GRANTED

G.R. No. 86657 October 23, 1989
PRECISION ELECTRONICS CORPORATION, petitioner, vs. NATIONAL

LABOR RELATIONS COMMISSION & DOMINADOR C. CABRERA,
JR., respondents.
GRIÑO-AQUINO, J.:
When an employer, on the pretext of retrenching, lays off an employee with a

promise to re-hire him when its economic condition improves, is the employer
bound by that promise? That is the issue presented by this case.
Respondent Dominador C. Cabrera, Jr. was employed by petitioner as

Accountant II-Specialist 3 on September 17, 1979. On June 15,1984, he was
notified that he would be laid off effective July 16, 1984 due to the economic
situation of the company but was assured of being re-hired when its operations
returned to normal. The notice to him reads:
We regret to inform you that effective July 16, 1984, you are
hereby permanently laid-off in view of non-availability of imported
raw materials brought about by the current economic conditions in
the country.
Much as we would like to retain you and continue operations,

economic constraints prevent us from continuing further our
operations. Should in the future, the economic condition in our
country improves (sic) and our operation would return to normal,
you may rest assure (sic) that you will be considered a top priority
in re-hiring. (p. 58, Rollo.)
Three years later, the petitioner announced in the newspapers that it was hiring
additional personnel because its production and sales had increased. Cabrera
applied for reemployment on May 8, 1987, but he was turned down.
On December 7, 1987, he filed a complaint against the petitioner for illegal

dismissal.
On February 29, 1988, the Labor Arbiter dismissed his complaint on the ground
that the "alleged violation of the assurance (that he would be re-
hired)** cannot be a legal basis for the filing therein of a complaint."

Upon appeal by Cabrera to the National Labor Relations Commission, the latter,
on September 30, 1988, reversed the Labor Arbiter and ordered the
reinstatement of the respondent employee with backwages. The NLRC held:
We do find that the Labor Arbiter committed an abuse of discretion

or a serious error in dismissing complainant's case for illegal
dismissal.
It should be pointed out here that respondent spoke of

'retrenchment' as its ground for terminating the services of
complainant and many other of its employees. As we all know,
retrenchment is one of the economic grounds to dismiss
employees, which is resorted to by an employer primarily to avoid
or minimize business losses. The law recognizes this under Article
283 of the Labor Code. However, the employer bears the burden
to prove his allegation of economic or business reverses with clear
and satisfactory evidence it being in the nature of an affirmative
defense (Manila Hotel Corp. vs. NLRC, 141 SCRA 169). Otherwise,
if the employer fails to prove it, it necessarily means that the
dismissal of an employee was not justified (Egypt Air, et al. vs.
NLRC, G.R. No. 63185, February 27,1987).
In the instant case, not even a shred of evidence was presented

by respondent to prove that it suffered from economic or business
reverses so as to justify its claim of retrenchment when it
terminated the services of the complainant on July 16, 1984. No
financial statement of any kind for the year 1983 or immediately
prior thereto was submitted by respondent or any document of
probative value to prove its alleged economic difficulties. No
nothing, so to speak. Thus, the obvious conclusion that the mass
lay-off or dismissal of respondent's employees, including the
complainant, on an unproven claim or non-existing ground of
retrenchment was utterly unjustified, and in violation of the
constitutional and statutory right of the dismissed employees to
security of tenure.
xxx xxx xxx
Wherefore, the judgment appealed from is hereby reversed and

set aside and a new one entered ordering respondent:

1. To reinstate complainant without loss of seniority rights with
backwages from the time he was illegally dismissed from service
up to the time of his reinstatement subject to the deduction
mentioned above;
2. Or to pay complainant separation pay equivalent to one month

salary for every year of service in addition to backwages, if the
reinstatement of complainant is no longer feasible for one reason
or another as may be determined by the Labor Arbiter concerned
during the execution of this decision; and
3. To pay the costs of the suit. (pp. 59-60, Rollo.)
In its petition for certiorari, the petitioner alleges that the NLRC gravely abused
its discretion in allowing Cabrera's appeal although it was not under oath, as
required under Section 13, Rule VII-A of the Implementing Rules of the
Commission. No notice of appeal was sent to the petitioner and some exhibits
were presented for the first time on appeal.
It will be seen that the petition is based on purely technical grounds. The
petitioner did not rebut the finding of the NLRC that the dismissal of Cabrera
was "utterly unjustified," hence, illegal, for the petitioner failed to present
"even a shred of evidence" to prove that it suffered economic or business
reverses justifying its claim that it needed to retrench. The ground for the
dismissal of Cabrera was unproven and non-existent.
Regarding the grounds of the petition, the public respondent pointed out in its
comment that the lack of verification or oath in the appeal (the employee
prosecuted his appeal by himself) was not fatal (Del Navarro & Sons Logging
Enterprises, Inc. vs. NLRC, 136 SCRA 669). Indeed, we have ruled in the past
that a pleading which is required by the Rules of Court to be verified, may be
given due course even without a verification if the circumstances warrant the
suspension of the rules in the interest of justice (Oshita vs. Republic, 19 SCRA
700; Villasanta vs. Bautista, 36 SCRA 160; Quimpo vs. De la Victoria, 46 SCRA
139).
Neither was Cabrera's failure to furnish the petitioner with a copy of his appeal
a sufficient cause for dismissing it. He could simply have been ordered to
furnish the appellee with a copy of his appeal.

The submission of additional evidence in support of Cabrera's appeal did not
prejudice his employer for the latter could have submitted counter-evidence.
After all, the rules of evidence prevailing in courts of law or equity are not
controlling in proceedings before the Commission (Article 221, Labor Code).
WHEREFORE, finding that the NLRC committed no grave abuse of discretion in

rendering its assailed decision in NLRC-NCR Case No. 00-12-04289-87, the
petition for certiorari is dismissed for lack of merit. Costs against the petitioner.
SO ORDERED.

G.R. No. 158693 November 17, 2004
JENNY M. AGABON and VIRGILIO C. AGABON, Petitioners,
- versus -
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME

IMPROVEMENTS, INC. and VICENTE ANGELES,Respondents.
This petition for review seeks to reverse the decision[1] of the Court of Appeals
dated January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of
National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 023442-
00.
Private respondent Riviera Home Improvements, Inc. is engaged in the

business of selling and installing ornamental and construction materials. It
employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board and
cornice installers on January 2, 1992[2] until February 23, 1999 when they were
dismissed for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of

money claims[3] and on December 28, 1999, the Labor Arbiter rendered a
decision declaring the dismissals illegal and ordered private respondent to pay
the monetary claims. The dispositive portion of the decision states:
WHEREFORE, premises considered, We find the termination of the

complainants illegal. Accordingly, respondent is hereby ordered to
pay them their backwages up to November 29, 1999 in the sum
of:
1. Jenny M. Agabon - P56, 231.93

2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay of

one (1) month for every year of service from date of hiring up to
November 29, 1999.
Respondent is further ordered to pay the complainants their
holiday pay and service incentive leave pay for the years 1996,
1997 and 1998 as well as their premium pay for holidays and rest
days and Virgilio Agabons 13th month pay differential amounting to
TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the
aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX
HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for
Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND
EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos
for Virgilio Agabon, as per attached computation of Julieta C.
Nicolas, OIC, Research and Computation Unit, NCR.
SO ORDERED.[4]
On appeal, the NLRC reversed the Labor Arbiter because it found that the
petitioners had abandoned their work, and were not entitled to backwages and
separation pay. The other money claims awarded by the Labor Arbiter were
also denied for lack of evidence.[5]
Upon denial of their motion for reconsideration, petitioners filed a petition for
certiorari with the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners was not
illegal because they had abandoned their employment but ordered the payment
of money claims. The dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations
Commission is REVERSED only insofar as it dismissed petitioners
money claims. Private respondents are ordered to pay petitioners
holiday pay for four (4) regular holidays in 1996, 1997, and 1998,
as well as their service incentive leave pay for said years, and to
pay the balance of petitioner Virgilio Agabons 13th month pay for
1998 in the amount of P2,150.00.
SO ORDERED.[6]
Hence, this petition for review on the sole issue of whether petitioners were
illegally dismissed.[7]
Petitioners assert that they were dismissed because the private

respondent refused to give them assignments unless they agreed to work on
a pakyaw basis when they reported for duty on February 23, 1999. They did
not agree on this arrangement because it would mean losing benefits as Social
Security System (SSS) members. Petitioners also claim that private respondent
did not comply with the twin requirements of notice and hearing.[8]
Private respondent, on the other hand, maintained that petitioners were not
dismissed but had abandoned their work.[9] In fact, private respondent sent two
letters to the last known addresses of the petitioners advising them to report
for work. Private respondents manager even talked to petitioner Virgilio Agabon
by telephone sometime in June 1999 to tell him about the new assignment at
Pacific Plaza Towers involving 40,000 square meters of cornice installation
work. However, petitioners did not report for work because they had
subcontracted to perform installation work for another company. Petitioners
also demanded for an increase in their wage to P280.00 per day. When this was
not granted, petitioners stopped reporting for work and filed the illegal
dismissal case.[10]
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are
accorded not only respect but even finality if the findings are supported by
substantial evidence. This is especially so when such findings were affirmed by
the Court of Appeals.[11] However, if the factual findings of the NLRC and the
Labor Arbiter are conflicting, as in this case, the reviewing court may delve into
the records and examine for itself the questioned findings.[12]
Accordingly, the Court of Appeals, after a careful review of the facts,

ruled that petitioners dismissal was for a just cause. They had abandoned their
employment and were already working for another employer.
To dismiss an employee, the law requires not only the existence of a just and
valid cause but also enjoins the employer to give the employee the opportunity
to be heard and to defend himself.[13] Article 282 of the Labor Code enumerates
the just causes for termination by the employer: (a) serious misconduct or
willful disobedience by the employee of the lawful orders of his employer or the
latters representative in connection with the employees work; (b) gross and
habitual neglect by the employee of his duties; (c) fraud or willful breach by the
employee of the trust reposed in him by his employer or his duly authorized
representative; (d) commission of a crime or offense by the employee against
the person of his employer or any immediate member of his family or his duly
authorized representative; and (e) other causes analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to
resume his employment.[14] It is a form of neglect of duty, hence, a just cause
for termination of employment by the employer.[15] For a valid finding of
abandonment, these two factors should be present: (1) the failure to report for
work or absence without valid or justifiable reason; and (2) a clear intention to
sever employer-employee relationship, with the second as the more
determinative factor which is manifested by overt acts from which it may be
deduced that the employees has no more intention to work. The intent to
discontinue the employment must be shown by clear proof that it was
deliberate and unjustified.[16]
In February 1999, petitioners were frequently absent having subcontracted for
an installation work for another company. Subcontracting for another company
clearly showed the intention to sever the employer-employee relationship with
private respondent. This was not the first time they did this. In January 1996,
they did not report for work because they were working for another company.
Private respondent at that time warned petitioners that they would be
dismissed if this happened again. Petitioners disregarded the warning and
exhibited a clear intention to sever their employer-employee relationship. The
record of an employee is a relevant consideration in determining the penalty
that should be meted out to him.[17]
In Sandoval Shipyard v. Clave,[18] we held that an employee who deliberately

absented from work without leave or permission from his employer, for the
purpose of looking for a job elsewhere, is considered to have abandoned his
job. We should apply that rule with more reason here where petitioners were
absent because they were already working in another company.
The law imposes many obligations on the employer such as providing just
compensation to workers, observance of the procedural requirements of notice
and hearing in the termination of employment. On the other hand, the law also
recognizes the right of the employer to expect from its workers not only good
performance, adequate work and diligence, but also good conduct[19] and
loyalty. The employer may not be compelled to continue to employ such
persons whose continuance in the service will patently be inimical to his
interests.[20]
After establishing that the terminations were for a just and valid cause, we now
determine if the procedures for dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I,

Section 2(d) of the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. In all

cases of termination of employment, the following standards of
due process shall be substantially observed:

I. For termination of employment based on just causes as
defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the

ground or grounds for termination, and giving to said employee
reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee

concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him; and
(c) A written notice of termination served on the employee

indicating that upon due consideration of all the circumstances,
grounds have been established to justify his termination.
In case of termination, the foregoing notices shall be served on

the employees last known address.
Dismissals based on just causes contemplate acts or omissions

attributable to the employee while dismissals based on authorized causes
involve grounds under the Labor Code which allow the employer to terminate
employees. A termination for an authorized cause requires payment of
separation pay. When the termination of employment is declared illegal,
reinstatement and full backwages are mandated under Article 279. If
reinstatement is no longer possible where the dismissal was unjust, separation
pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article

282, the employer must give the employee two written notices and a hearing or
opportunity to be heard if requested by the employee before terminating the
employment: a notice specifying the grounds for which dismissal is sought a
hearing or an opportunity to be heard and after hearing or opportunity to be
heard, a notice of the decision to dismiss; and (2) if the dismissal is based on
authorized causes under Articles 283 and 284, the employer must give the
employee and the Department of Labor and Employment written notices 30
days prior to the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the
dismissal is for a just cause under Article 282 of the Labor Code, for an
authorized cause under Article 283, or for health reasons under Article 284, and
due process was observed; (2) the dismissal is without just or authorized cause
but due process was observed; (3) the dismissal is without just or authorized
cause and there was no due process; and (4) the dismissal is for just or
authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will
not suffer any liability.
In the second and third situations where the dismissals are illegal, Article
279 mandates that the employee is entitled to reinstatement without loss of
seniority rights and other privileges and full backwages, inclusive of allowances,
and other benefits or their monetary equivalent computed from the time the
compensation was not paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural
infirmity cannot be cured, it should not invalidate the dismissal. However, the
employer should be held liable for non-compliance with the procedural
requirements of due process.
The present case squarely falls under the fourth situation. The dismissal should
be upheld because it was established that the petitioners abandoned their jobs
to work for another company. Private respondent, however, did not follow the
notice requirements and instead argued that sending notices to the last known
addresses would have been useless because they did not reside there anymore.
Unfortunately for the private respondent, this is not a valid excuse because the
law mandates the twin notice requirements to the employees last known
address.[21] Thus, it should be held liable for non-compliance with the
procedural requirements of due process.
A review and re-examination of the relevant legal principles is appropriate and

timely to clarify the various rulings on employment termination in the light
ofSerrano v. National Labor Relations Commission.[22]
Prior to 1989, the rule was that a dismissal or termination is illegal if the
employee was not given any notice. In the 1989 case of Wenphil Corp. v.
National Labor Relations Commission,[23] we reversed this long-standing rule
and held that the dismissed employee, although not given any notice and
hearing, was not entitled to reinstatement and backwages because the
dismissal was for grave misconduct and insubordination, a just ground for
termination under Article 282. The employee had a violent temper and caused
trouble during office hours, defying superiors who tried to pacify him. We
concluded that reinstating the employee and awarding backwages may
encourage him to do even worse and will render a mockery of the rules of
discipline that employees are required to observe.[24] We further held that:
Under the circumstances, the dismissal of the private respondent

for just cause should be maintained. He has no right to return to
his former employment.
However, the petitioner must nevertheless be held to

account for failure to extend to private respondent his right to an
investigation before causing his dismissal. The rule is explicit as
above discussed. The dismissal of an employee must be for just or
authorized cause and after due process. Petitioner committed an
infraction of the second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case petitioner
must indemnify the private respondent the amount of P1,000.00.
The measure of this award depends on the facts of each case and
the gravity of the omission committed by the employer.[25]
The rule thus evolved: where the employer had a valid reason to dismiss
an employee but did not follow the due process requirement, the dismissal may
be upheld but the employer will be penalized to pay an indemnity to the
employee. This became known as the Wenphil or Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction
was changed. We held that the violation by the employer of the notice
requirement in termination for just or authorized causes was not a denial of due
process that will nullify the termination. However, the dismissal is ineffectual
and the employer must pay full backwages from the time of termination until it
is judicially declared that the dismissal was for a just or authorized cause.
The rationale for the re-examination of the Wenphil doctrine

in Serrano was the significant number of cases involving dismissals without
requisite notices. We concluded that the imposition of penalty by way of
damages for violation of the notice requirement was not serving as a deterrent.

Hence, we now required payment of full backwages from the time of dismissal
until the time the Court finds the dismissal was for a just or authorized cause.
Serrano was confronting the practice of employers to dismiss now and

pay later by imposing full backwages.
We believe, however, that the ruling in Serrano did not consider the full
meaning of Article 279 of the Labor Code which states:
ART. 279. Security of Tenure. In cases of regular employment, the

employer shall not terminate the services of an employee except
for a just cause or when authorized by this Title. An employee who
is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.
This means that the termination is illegal only if it is not for any of the
justified or authorized causes provided by law. Payment of backwages and
other benefits, including reinstatement, is justified only if the employee was
unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which
elicited strong dissent has prompted us to revisit the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of the Constitution
embodies a system of rights based on moral principles so deeply imbedded in
the traditions and feelings of our people as to be deemed fundamental to a
civilized society as conceived by our entire history. Due process is that which
comports with the deepest notions of what is fair and right and just.[26] It is a

constitutional restraint on the legislative as well as on the executive and judicial
powers of the government provided by the Bill of Rights.
Due process under the Labor Code, like Constitutional due process, has
two aspects: substantive, i.e., the valid and authorized causes of employment
termination under the Labor Code; and procedural, i.e., the manner of
dismissal. Procedural due process requirements for dismissal are found in the
Implementing Rules of P.D. 442, as amended, otherwise known as the Labor
Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department
Order Nos. 9 and 10.[27] Breaches of these due process requirements violate the
Labor Code. Therefore statutory due process should be differentiated from
failure to comply with constitutional due process.
Constitutional due process protects the individual from the government

and assures him of his rights in criminal, civil or administrative proceedings;
while statutory due process found in the Labor Code and Implementing Rules
protects employees from being unjustly terminated without just cause after
notice and hearing.
In Sebuguero v. National Labor Relations Commission,[28] the dismissal

was for a just and valid cause but the employee was not accorded due process.
The dismissal was upheld by the Court but the employer was sanctioned. The
sanction should be in the nature of indemnification or penalty, and depends on
the facts of each case and the gravity of the omission committed by the
employer.
In Nath v. National Labor Relations Commission,[29] it was ruled that

even if the employee was not given due process, the failure did not operate to
eradicate the just causes for dismissal. The dismissal being for just
cause, albeit without due process, did not entitle the employee to
reinstatement, backwages, damages and attorneys fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services,
Inc. v. National Labor Relations Commission,[30] which opinion he reiterated
in Serrano, stated:
C. Where there is just cause for dismissal but due process
has not been properly observed by an employer, it would not be
right to order either the reinstatement of the dismissed employee
or the payment of backwages to him. In failing, however, to
comply with the procedure prescribed by law in terminating the
services of the employee, the employer must be deemed to have
opted or, in any case, should be made liable, for the payment of
separation pay. It might be pointed out that the notice to be given
and the hearing to be conducted generally constitute the two-part
due process requirement of law to be accorded to the employee by
the employer. Nevertheless, peculiar circumstances might obtain
in certain situations where to undertake the above steps would be
no more than a useless formality and where, accordingly, it would
not be imprudent to apply the res ipsa loquitur rule and award, in
lieu of separation pay, nominal damages to the employee. x x
x.[31]
After carefully analyzing the consequences of the divergent doctrines in

the law on employment termination, we believe that in cases involving
dismissals for cause but without observance of the twin requirements of notice
and hearing, the better rule is to abandon the Serrano doctrine and to
follow Wenphil by holding that the dismissal was for just cause but imposing
sanctions on the employer. Such sanctions, however, must be stiffer than that
imposed in Wenphil. By doing so, this Court would be able to achieve a fair
result by dispensing justice not just to employees, but to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for valid or

authorized causes but not complying with statutory due process may have far-
reaching consequences.
This would encourage frivolous suits, where even the most notorious violators
of company policy are rewarded by invoking due process. This also creates
absurd situations where there is a just or authorized cause for dismissal but a
procedural infirmity invalidates the termination. Let us take for example a case

where the employee is caught stealing or threatens the lives of his co-
employees or has become a criminal, who has fled and cannot be found, or
where serious business losses demand that operations be ceased in less than a
month. Invalidating the dismissal would not serve public interest. It could also
discourage investments that can generate employment in the local economy.
The constitutional policy to provide full protection to labor is not meant

to be a sword to oppress employers. The commitment of this Court to the cause
of labor does not prevent us from sustaining the employer when it is in the
right, as in this case.[32] Certainly, an employer should not be compelled to pay
employees for work not actually performed and in fact abandoned.
The employer should not be compelled to continue employing a person who is

admittedly guilty of misfeasance or malfeasance and whose continued
employment is patently inimical to the employer. The law protecting the rights
of the laborer authorizes neither oppression nor self-destruction of the
employer.[33]
It must be stressed that in the present case, the petitioners committed a grave
offense, i.e., abandonment, which, if the requirements of due process were
complied with, would undoubtedly result in a valid dismissal.
An employee who is clearly guilty of conduct violative of Article 282 should not
be protected by the Social Justice Clause of the Constitution. Social justice, as
the term suggests, should be used only to correct an injustice. As the eminent
Justice Jose P. Laurel observed, social justice must be founded on
the recognition of the necessity of interdependence among diverse
units of a society and of the protection that should be equally and
evenly extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and paramount objective of
the state of promoting the health, comfort, and quiet of all persons, and of
bringing about the greatest good to the greatest number.[34]
This is not to say that the Court was wrong when it ruled the way it did
in Wenphil, Serrano and related cases. Social justice is not based on

rigid formulas set in stone. It has to allow for changing times and
circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced

approach to labor-management relations and dispense justice with an even
hand in every case:
We have repeatedly stressed that social justice or any justice for

that matter is for the deserving, whether he be a millionaire in his
mansion or a pauper in his hovel. It is true that, in case of
reasonable doubt, we are to tilt the balance in favor of the poor to
whom the Constitution fittingly extends its sympathy and
compassion. But never is it justified to give preference to the poor
simply because they are poor, or reject the rich simply because
they are rich, for justice must always be served for the poor and
the rich alike, according to the mandate of the law.[35]
Justice in every case should only be for the deserving party. It should not be
presumed that every case of illegal dismissal would automatically be decided in
favor of labor, as management has rights that should be fully respected and
enforced by this Court. As interdependent and indispensable partners in nation-
building, labor and management need each other to foster productivity and
economic growth; hence, the need to weigh and balance the rights and welfare
of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the lack
of statutory due process should not nullify the dismissal, or render it illegal,
or ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights, as ruled in Reta v. National Labor Relations
Commission.[36] The indemnity to be imposed should be stiffer to discourage
the abhorrent practice of dismiss now, pay later, which we sought to deter in
the Serrano ruling. The sanction should be in the nature of indemnification or
penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of
the plaintiff, which has been violated or invaded by the defendant, may be

vindicated or recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered by him.[37]
As enunciated by this Court in Viernes v. National Labor Relations

Commissions,[38] an employer is liable to pay indemnity in the form of nominal
damages to an employee who has been dismissed if, in effecting such
dismissal, the employer fails to comply with the requirements of due process.
The Court, after considering the circumstances therein, fixed the indemnity at
P2,590.50, which was equivalent to the employees one month salary. This
indemnity is intended not to penalize the employer but to vindicate or recognize
the employees right to statutory due process which was violated by the
employer.[39]
The violation of the petitioners right to statutory due process by the private
respondent warrants the payment of indemnity in the form of nominal
damages. The amount of such damages is addressed to the sound discretion of
the court, taking into account the relevant circumstances.[40] Considering the
prevailing circumstances in the case at bar, we deem it proper to fix it
at P30,000.00. We believe this form of damages would serve to deter
employers from future violations of the statutory due process rights of
employees. At the very least, it provides a vindication or recognition of this
fundamental right granted to the latter under the Labor Code and its
Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it
failed to pay petitioners holiday pay, service incentive leave pay and 13th month
pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners money claims.

Private respondent is liable for petitioners holiday pay, service incentive leave
pay and 13th month pay without deductions.

As a general rule, one who pleads payment has the burden of proving it. Even
where the employee must allege non-payment, the general rule is that the
burden rests on the employer to prove payment, rather than on the employee
to prove non-payment. The reason for the rule is that the pertinent personnel
files, payrolls, records, remittances and other similar documents which will
show that overtime, differentials, service incentive leave and other claims of
workers have been paid are not in the possession of the worker but in the
custody and absolute control of the employer.[41]
In the case at bar, if private respondent indeed paid petitioners holiday pay and
service incentive leave pay, it could have easily presented documentary proofs
of such monetary benefits to disprove the claims of the petitioners. But it did
not, except with respect to the 13th month pay wherein it presented cash
vouchers showing payments of the benefit in the years disputed.[42] Allegations
by private respondent that it does not operate during holidays and that it allows
its employees 10 days leave with pay, other than being self-serving, do not
constitute proof of payment. Consequently, it failed to discharge the onus
probandithereby making it liable for such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner
Virgilio Agabons 13th month pay, we find the same to be unauthorized. The
evident intention of Presidential Decree No. 851 is to grant an additional
income in the form of the 13th month pay to employees not already receiving
the same[43] so as to further protect the level of real wages from the ravages of
world-wide inflation.[44] Clearly, as additional income, the 13th month pay is
included in the definition of wage under Article 97(f) of the Labor Code, to wit:
(f) Wage paid to any employee shall mean the remuneration or

earnings, however designated, capable of being expressed in
terms of money whether fixed or ascertained on a time, task,
piece , or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to
be done, or for services rendered or to be rendered and includes
the fair and reasonable value, as determined by the Secretary of

Labor, of board, lodging, or other facilities customarily furnished
by the employer to the employee
from which an employer is prohibited under Article 113[45] of the same Code
from making any deductions without the employees knowledge and consent. In
the instant case, private respondent failed to show that the deduction of the
SSS loan and the value of the shoes from petitioner Virgilio Agabons 13th month
pay was authorized by the latter. The lack of authority to deduct is further
bolstered by the fact that petitioner Virgilio Agabon included the same as one of
his money claims against private respondent.
The Court of Appeals properly reinstated the monetary claims awarded

by the Labor Arbiter ordering the private respondent to pay each of the
petitioners holiday pay for four regular holidays from 1996 to 1998, in the
amount of P6,520.00, service incentive leave pay for the same period in the
amount of P3,255.00 and the balance of Virgilio Agabons thirteenth month pay
for 1998 in the amount of P2,150.00.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of

the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding
that petitioners Jenny and Virgilio Agabon abandoned their work, and ordering
private respondent to pay each of the petitioners holiday pay for four regular
holidays from 1996 to 1998, in the amount of P6,520.00, service incentive
leave pay for the same period in the amount of P3,255.00 and the balance of
Virgilio Agabons thirteenth month pay for 1998 in the amount of P2,150.00
is AFFIRMED with the MODIFICATION that private respondent Riviera Home
Improvements, Inc. is further ORDERED to pay each of the petitioners the
amount of P30,000.00 as nominal damages for non-compliance with statutory
due process. No costs. SO ORDERED.

G.R. No. 158693 November 17, 2004]VIRGILIO AGABON, et al. v. NLRC
FACTS
Virgilio and Jenny Agabon worked for respondent Riviera HomeImprovements, Inc. as
gypsum and cornice installers from January 1992 untilFeb 1999. Their employment
was terminated when they were dismissed forallegedly abandoning their work.
Petitioners Agabon then filed a case of illegal dismissal. /// The LA ruled in favor of
the spouses and ordered Rivierato pay them their money claims. The NLRC reversed
the LA, finding that theAgabons were indeed guilty of abandonment. The CA modified
the LA byruling that there was abandonment but ordering Riviera to pay the Agabons’
money claims.///The arguments of both parties are as follows:
The Agabons claim, among others that Riviera violated the requirements
of notice and hearing when the latter did not send written letters of termination to their
addresses. Riviera admitted to not sending the Agabons letters of termination to
theirlast known addresses because the same would be futile, as the Agabons donot
reside there anymore. However, it also claims that the Agabonsabandoned their work.
More than once, they subcontracted installationworks for other companies. They
already were warned of termination if thesame act was repeated, still, they disregarded
the warning.
ISSUES
Whether the Agabons were illegally dismissed2.
Whether Riviera violated the requirements of notice and hearing3.
Is the violation of the procedural requirements of notice and hearing fortermination of

employees a violation of the Constitutional due process?4.
What are the consequences of violating the procedural requirements of termination?
RULING: Valid dismissal but violation of statutory due process

= payment of nominal damages (P30,000) & balance of 13th month pay,
etc.
1.No. There was just cause for their dismissal, i.e., abandonment. Art. 282specifies the
grounds for just dismissal, to wit:
a.Serious misconduct or willful disobedience of the lawful orders of the employer or his
duly authorized representative in connection
with the employee’s work
b. Gross and habitual neglect of the by the employee of his duties(

includes abandonment)
c. Fraud or willful breach of the trust reposed by the employer or hisduly authorized
representative to the employeed.
Commission of a crime or offense by the employee against theperson of the employer

or any member of his immediate family orhis duly authorized representativee.
Any other causes analogous to the foregoing.To establish abandonment, two elements
must be present:
a.The unjustified failure of the employee to report for work

b.A clear intention to sever e-e relationship, manifested by overt acts
Here, the Agabons were frequently absent from work for havingperformed installation
work for another company, despite prior warninggiven by Riviera. This clearly
establishes an intention to sever the e-erelationship between them, and which
constitutes abandonment.
2.Yes. While the employer has the right to expect good performance,diligence, good
conduct and loyalty from its employees, it also has theduty to provide just
compensation to his employees and to observe theprocedural requirements of
notice and hearing in the termination of his employees.Procedure of
termination (Omnibus Rules Implementing the LaborCode):a.
A written notice to the employee specifying the grounds fortermination and giving the
employee reasonable opportunity tobe heardb.
A hearing where the employee is given the opportunity torespond to the charges
against him and present evidence or rebutthe evidence presented against him (if he so
requests)c.
A written notice of termination indicating that grounds have beenestablished to justify

his termination upon due consideration of allcircumstancesIn this case, Riviera failed to
notify the Agabons of their termination totheir last known addresses. Hence, they
violated the proceduralrequirement laid down by the law in the termination of
employees.

3.No. Constitutional due process is that provided under the Constitution,which
involves the protection of the individual against governmentaloppression and the
assurance of his rights In civil, criminal andadministrative proceedings; statutory
due process is that found in theLabor Code and its Implementing Rules and protects
the individual frombeing unjustly terminated without just or authorized cause after
noticeand hearing.The two are similar in that they both have two aspects:
substantive dueprocess and procedural due process
. However, they differ in that underthe Labor Code, the first one refers to the valid and
authorized causes of employment termination, while the second one refers to the
manner of dismissal. A denial of statutory due process is not the same as a denial
of Constitutional due process for reasons enunciated in Serrano v. NLRC.
4.The dismissal is valid, but Riviera should pay nominal damages to theAgabons in
vindication of the latter for violating their right to notice andhearing. The penalty is in
the nature of a penalty or indemnification, theamount dependent on the facts of each
case, including the nature of gravity of offense of the employer.In this case, the
Serrano doctrine was re-examined.First, in the Serrano case, the dismissal
was upheld, but it was held to beineffectual (without legal effect). Hence, Serrano was
still entitled to thepayment of his backwages from the time of dismissal until
thepromulgation of the court of the existence of an authorized cause.Further, he was
entitled to his separation pay as mandated under Art.283. The ruling is unfair to
employers and has the danger of thefollowing consequences:
a.The encouragement of filing frivolous suits even by notoriousemployees who were

justly dismissed but were deprived of statutory due process; they are rewarded by
invoking due process
b. It would create absurd situations where there is just or authorizedcause but a

procedural infirmity invalidates the termination, ie anemployee who became a criminal
and threatened his co-workers’ lives, who fled and could not be faound
c.It could discourage investments that would generate employmentin the economy
Second, the payment of backwages is unjustified as only illegaltermination gives the

employee the right to be paid full backwages.When the dismissal is valid or upheld, the
employee has no right tobackwages.
ADDITIONAL NOTES:1.
Dismissals based on just causes:

acts or omissions attributable tothe employee; no right to claim backwages or to pay
separationpay (separation pay is subject to exception, ie if termination is notbased on
serious misconduct or a conduct reflecting the moraldepravity of a person, separation
pay may be granted by reasonof social justice)
Dismissals based on authorized causes:
involve grounds providedunder the Labor Code; employee (and DOLE) is entitled
thepayment of separation pay (redundancy and installation of labor-saving devices: 1
month pay or 1 month/yr of service, whicheveris higher; retrenchment and closure or
cessation of business: 1month pay or ½ month per year of service, whichever is
higher)
Illegal termination:
employee is entitled to the payment of fullbackwages as well as reinstatement without
loss of seniorityrights and other privileges, inclusive of allowances and othermonetary
claims from the time compensation was withheld untilreinstatement; if reinstatement is
not possible, separation payshall be given.

[G.R. No. 151378. March 28, 2005]
JAKA FOOD PROCESSING CORPORATION, petitioner, vs. DARWIN

PACOT, ROBERT PAROHINOG, DAVID BISNAR, MARLON DOMINGO,
RHOEL LESCANO and JONATHAN CAGABCAB, respondents.
GARCIA, J.:
Assailed and sought to be set aside in this appeal by way of a petition for
review on certiorari under rule 45 of the Rules of Court are the following
issuances of the Court of Appeals in CA-G.R. SP. No. 59847, to wit:
1. Decision dated 16 November 2001,[1] reversing and setting aside
an earlier decision of the National Labor Relations Commission
(NLRC); and
2. Resolution dated 8 January 2002,[2] denying petitioners motion
for reconsideration.
The material facts may be briefly stated, as follows:
Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon
Domingo, Rhoel Lescano and Jonathan Cagabcab were earlier hired by
petitioner JAKA Foods Processing Corporation (JAKA, for short) until the latter
terminated their employment on August 29, 1997 because the corporation was
in dire financial straits. It is not disputed, however, that the termination was
effected without JAKA complying with the requirement under Article 283 of the
Labor Code regarding the service of a written notice upon the employees and
the Department of Labor and Employment at least one (1) month before the
intended date of termination.
In time, respondents separately filed with the regional Arbitration Branch of
the National Labor Relations Commission (NLRC) complaints for illegal
dismissal, underpayment of wages and nonpayment of service incentive leave
and 13th month pay against JAKA and its HRD Manager, Rosana Castelo.
After due proceedings, the Labor Arbiter rendered a decision[3] declaring the
termination illegal and ordering JAKA and its HRD Manager to reinstate
respondents with full backwages, and separation pay if reinstatement is not
possible. More specifically the decision dispositively reads:
WHEREFORE, judgment is hereby rendered declaring as illegal the termination

of complainants and ordering respondents to reinstate them to their positions

with full backwages which as of July 30, 1998 have already amounted to
P339,768.00. Respondents are also ordered to pay complainants the amount of
P2,775.00 representing the unpaid service incentive leave pay of Parohinog,
Lescano and Cagabcab an the amount of P19,239.96 as payment for 1997
13th month pay as alluded in the above computation.
If complainants could not be reinstated, respondents are ordered to pay them

separation pay equivalent to one month salary for very (sic) year of service.
SO ORDERED.
Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated

August 30, 1999,[4] affirmed in toto that of the Labor Arbiter.
JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out
with another decision dated January 28, 2000,[5] this time modifying its earlier
decision, thus:
WHEREFORE, premises considered, the instant motion for reconsideration is

hereby GRANTED and the challenged decision of this Commission [dated] 30
August 1999 and the decision of the Labor Arbiter xxx are hereby modified by
reversing an setting aside the awards of backwages, service incentive leave
pay. Each of the complainants-appellees shall be entitled to a separation pay
equivalent to one month. In addition, respondents-appellants is (sic) ordered to
pay each of the complainants-appellees the sum of P2,000.00 as
indemnification for its failure to observe due process in effecting the
retrenchment.
SO ORDERED.
Their motion for reconsideration having been denied by the NLRC in its
resolution of April 28, 2000,[6] respondents went to the Court of Appeals via a
petition for certiorari, thereat docketed as CA-G.R. SP No. 59847.
As stated at the outset hereof, the Court of Appeals, in a decision dated
November 16, 2000, applying the doctrine laid down by this Court in Serrano
vs. NLRC,[7]reversed and set aside the NLRCs decision of January 28, 2000,
thus:
WHEREFORE, the decision dated January 28, 2000 of the National Labor
Relations Commission is REVERSED and SET ASIDE and another one entered

ordering respondent JAKA Foods Processing Corporation to pay petitioners
separation pay equivalent to one (1) month salary, the proportionate
13th month pay and, in addition, full backwages from the time their
employment was terminated on August 29, 1997 up to the time the Decision
herein becomes final.
SO ORDERED.
This time, JAKA moved for a reconsideration but its motion was denied by
the appellate court in its resolution of January 8, 2002.
Hence, JAKAs present recourse, submitting, for our consideration, the
following issues:
I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED
FULL BACKWAGES TO RESPONDENTS.
II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED
SEPARATION PAY TO RESPONDENTS.
As we see it, there is only one question that requires resolution, i.e. what
are the legal implications of a situation where an employee is dismissed for
cause but such dismissal was effected without the employers compliance with
the notice requirement under the Labor Code.
This, certainly, is not a case of first impression. In the very recent case
of Agabon vs. NLRC,[8] we had the opportunity to resolve a similar question.
Therein, we found that the employees committed a grave
offense, i.e., abandonment, which is a form of a neglect of duty which, in turn,
is one of the just causes enumerated under Article 282 of the Labor Code. In
said case, we upheld the validity of the dismissal despite non-compliance with
the notice requirement of the Labor Code. However, we required the employer
to pay the dismissed employees the amount of P30,000.00, representing
nominal damages for non-compliance with statutory due process, thus:
Where the dismissal is for a just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights, as ruled in Reta vs. National Labor Relations
Commission. The indemnity to be imposed should be stiffer to discourage the
abhorrent practice of dismiss now, pay later, which we sought to deter in
the Serrano ruling. The sanction should be in the nature of indemnification or

penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer.
xxx xxx xxx
The violation of petitioners right to statutory due process by the private

respondent warrants the payment of indemnity in the form of nominal
damages. The amount of such damages is addressed to the sound discretion of
the court, taking into account the relevant circumstances. Considering the
prevailing circumstances in the case at bar, we deem it proper to fix it
at P30,000.00. We believe this form of damages would serve to deter
employers from future violations of the statutory due process rights of
employees. At the very least, it provides a vindication or recognition of this
fundamental right granted to the latter under the Labor Code and its
Implementing Rules, (Emphasis supplied).
The difference between Agabon and the instant case is that in the former,
the dismissal was based on a just cause under Article 282 of the Labor Code
while in the present case, respondents were dismissed due to retrenchment,
which is one of the authorized causes under Article 283 of the same Code.
At this point, we note that there are divergent implications of a dismissal
for just cause under Article 282, on one hand, and a dismissal for authorized
cause under Article 283, on the other.
A dismissal for just cause under Article 282 implies that the employee
concerned has committed, or is guilty of, some violation against the
employer, i.e. the employee has committed some serious misconduct, is guilty
of some fraud against the employer, or, as in Agabon, he has neglected his
duties. Thus, it can be said that the employee himself initiated the dismissal
process.
On another breath, a dismissal for an authorized cause under Article 283
does not necessarily imply delinquency or culpability on the part of the
employee. Instead, the dismissal process is initiated by the employers exercise
of his management prerogative, i.e. when the employer opts to install labor
saving devices, when he decides to cease business operations or when, as in
this case, he undertakes to implement a retrenchment program.
The clear-cut distinction between a dismissal for just cause under Article
282 and a dismissal for authorized cause under Article 283 is further reinforced

by the fact that in the first, payment of separation pay, as a rule, is not
required, while in the second, the law requires payment of separation pay.[9]
For these reasons, there ought to be a difference in treatment when the
ground for dismissal is one of the just causes under Article 282, and when
based on one of the authorized causes under Article 283.
Accordingly, it is wise to hold that: (1) if the dismissal is based on a just
cause under Article 282 but the employer failed to comply with the notice
requirement, the sanction to be imposed upon him should be tempered because
the dismissal process was, in effect, initiated by an act imputable to the
employee; and (2) if the dismissal is based on an authorized cause under
Article 283 but the employer failed to comply with the notice requirement, the
sanction should be stiffer because the dismissal process was initiated by the
employers exercise of his management prerogative.
The records before us reveal that, indeed, JAKA was suffering from serious
business losses at the time it terminated respondents employment. As aptly
found by the NLRC:
A careful study of the evidence presented by the respondent-appellant

corporation shows that the audited Financial Statement of the corporation for
the periods 1996, 1997 and 1998 were submitted by the respondent-appellant
corporation, The Statement of Income and Deficit found in the Audited Financial
Statement of the respondent-appellant corporation clearly shows the following
in 1996, the deficit of the respondent-appellant corporation was
P188,218,419.00 or 94.11% of the stockholders [sic] equity which amounts to
P200,000,000.00. In 1997 when the retrenchment program of respondent-
appellant corporation was undertaken, the deficit ballooned to P247,222,569.00
or 123.61% of the stockholders equity, thus a capital deficiency or impairment
of equity ensued. In 1998, the deficit grew to P355,794,897.00 or 177% of the
stockholders equity. From 1996 to 1997, the deficit grew by more that (sic)
31% while in 1998 the deficit grew by more than 47%.
The Statement of Income and Deficit of the respondent-appellant corporation to

prove its alleged losses was prepared by an independent auditor, SGV & Co. It
convincingly showed that the respondent-appellant corporation was in dire
financial straits, which the complainants-appellees failed to dispute. The losses
incurred by the respondent-appellant corporation are clearly substantial and
sufficiently proven with clear and satisfactory evidence. Losses incurred were
adequately shown with respondent-appellants audited financial statement.
Having established the loss incurred by the respondent-appellant corporation, it
necessarily necessarily (sic) follows that the ground in support of retrenchment
existed at the time the complainants-appellees were terminated. We cannot
therefore sustain the findings of the Labor Arbiter that the alleged losses of the
respondent-appellant was [sic] not well substantiated by substantial proofs. It
is therefore logical for the corporation to implement a retrenchment program to
prevent further losses.[10]
Noteworthy it is, moreover, to state that herein respondents did not assail
the foregoing finding of the NLRC which, incidentally, was also affirmed by the
Court of Appeals.
It is, therefore, established that there was ground for respondents
dismissal, i.e., retrenchment, which is one of the authorized causes
enumerated under Article 283 of the Labor Code. Likewise, it is established that
JAKA failed to comply with the notice requirement under the same Article.
Considering the factual circumstances in the instant case and the above
ratiocination, we, therefore, deem it proper to fix the indemnity at P50,000.00.
We likewise find the Court of Appeals to have been in error when it ordered
JAKA to pay respondents separation pay equivalent to one (1) month salary for
every year of service. This is because in Reahs Corporation vs. NLRC,[11] we
made the following declaration:
The rule, therefore, is that in all cases of business closure or cessation of

operation or undertaking of the employer, the affected employee is entitled to
separation pay. This is consistent with the state policy of treating labor as a
primary social economic force, affording full protection to its rights as well as its
welfare. The exception is when the closure of business or cessation of
operations is due to serious business losses or financial reverses; duly
proved, in which case, the right of affected employees to separation
pay is lost for obvious reasons. xxx. (Emphasis supplied)
WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed

decision and resolution of the Court of Appeals respectively dated November
16, 2001 and January 8, 2002 are hereby SET ASIDE and a new one entered
upholding the legality of the dismissal but ordering petitioner to pay each of the
respondents the amount of P50,000.00, representing nominal damages for
non-compliance with statutory due process.
SO ORDERED.

JAKA Food Processing vs. Pacot - GR No. 151378 Case Digest
FACTS:
Respondents were hired by JAKA until their termination on August 29, 1997
because the Corporation was “in dire financial straits”. It was not disputed that
they were terminated without complying with the requirement under Art. 283
of the Labor Code regarding the service of notice upon the employees and
DOLE at least one month before the intended date of termination.
ISSUE:
Whether or not full backwages and separation pay be awarded to respondents

when employers effected termination without complying with the twin notice
rule.
RULING:
The dismissal of the respondents was for an authorized cause under Article
283. A dismissal for authorized cause does not necessarily imply delinquency or
culpability on the part of the employee. Instead, the dismissal process is
initiated by the employer’s exercise of his management prerogative, i.e. when
the employer opts to install labor-saving devices, when he decides to cease
business operations or when… he undertakes to implement a retrenchment
program.
Accordingly, it is wise to hold that:
1) if the dismissal is based on a just cause but the employer failed to comply
with the notice requirement, the sanction to be imposed upon him should be
tempered because the dismissal was initiate by an act imputable to the
employee.
2) if the dismissal is based on an authorized cause but the employer fails to

comply with the notice requirement, the sanction should be stiffer because the
dismissal process was initiated by the employer’s exercise of his management
prerogative. Thus, dismissal was upheld but ordered JAKA to pay each of the
respondents the amount of PhP 50,000.00 representing nominal damages for
non-compliance with statutory due process.

G.R. No. 166208 June 29, 2007
KING OF KINGS TRANSPORT,

INC., CLAIRE DELA FUENTE,
and MELISSA LIM,
- versus -
SANTIAGO O. MAMAC, Respondent.
VELASCO, JR., J.:
Is a verbal appraisal of the charges against the employee a breach of the

procedural due process? This is the main issue to be resolved in this plea for
review under Rule 45 of the September 16, 2004 Decision[1] of the Court of
Appeals (CA) in CA-GR SP No. 81961. Said judgment affirmed the dismissal of
bus conductor Santiago O. Mamac from petitioner King of Kings Transport, Inc.
(KKTI), but ordered the bus company to pay full backwages for violation of the
twin-notice requirement and 13th-month pay. Likewise assailed is
the December 2, 2004 CA Resolution[2] rejecting KKTIs Motion for
Reconsideration.
The Facts
Petitioner KKTI is a corporation engaged in public transportation and managed

by Claire Dela Fuente and Melissa Lim.
Respondent Mamac was hired as bus conductor of Don Mariano Transit

Corporation (DMTC) on April 29, 1999. The DMTC employees including
respondent formed the Damayan ng mga Manggagawa, Tsuper at Conductor-
Transport Workers Union and registered it with the Department of Labor and
Employment.Pending the holding of a certification election in DMTC, petitioner
KKTI was incorporated with the Securities and Exchange Commission which
acquired new buses. Many DMTC employees were subsequently transferred to
KKTI and excluded from the election.
The KKTI employees later organized the Kaisahan ng mga Kawani sa King of
Kings (KKKK) which was registered with DOLE. Respondent was elected KKKK
president.
Respondent was required to accomplish a Conductors Trip Report and

submit it to the company after each trip. As a background, this report indicates
the ticket opening and closing for the particular day of duty. After submission,
the company audits the reports. Once an irregularity is discovered, the
company issues an Irregularity Report against the employee, indicating the
nature and details of the irregularity. Thereafter, the concerned employee is
asked to explain the incident by making a written statement or counter-
affidavit at the back of the same Irregularity Report. After considering the
explanation of the employee, the company then makes a determination of
whether to accept the explanation or impose upon the employee a penalty for
committing an infraction. That decision shall be stated on said Irregularity
Report and will be furnished to the employee.
Upon audit of the October 28, 2001 Conductors Report of respondent,

KKTI noted an irregularity. It discovered that respondent declared several sold
tickets as returned tickets causing KKTI to lose an income of eight hundred and
ninety pesos. While no irregularity report was prepared on the October 28,
2001incident, KKTI nevertheless asked respondent to explain the
discrepancy. In his letter,[3] respondent said that the erroneous declaration in
his October 28, 2001 Trip Report was unintentional. He explained that during
that days trip, the windshield of the bus assigned to them was smashed; and
they had to cut short the trip in order to immediately report the matter to the
police. As a result of the incident, he got confused in making the trip report.
On November 26, 2001, respondent received a letter[4] terminating his

employment effective November 29, 2001. The dismissal letter alleged that
the October 28, 2001 irregularity was an act of fraud against the
company. KKTI also cited as basis for respondents dismissal the other offenses
he allegedly committed since 1999.
On December 11, 2001, respondent filed a Complaint for illegal

dismissal, illegal deductions, nonpayment of 13th-month pay, service incentive
leave, and separation pay. He denied committing any infraction and alleged
that his dismissal was intended to bust union activities. Moreover, he claimed
that his dismissal was effected without due process.
In its April 3, 2002 Position Paper,[5] KKTI contended that respondent

was legally dismissed after his commission of a series of misconducts and
misdeeds. It claimed that respondent had violated the trust and confidence
reposed upon him by KKTI. Also, it averred that it had observed due process in
dismissing respondent and maintained that respondent was not entitled to his
money claims such as service incentive leave and 13th-month pay because he
was paid on commission or percentage basis.

On September 16, 2002, Labor Arbiter Ramon Valentin C. Reyes rendered
judgment dismissing respondents Complaint for lack of merit.[6]
Aggrieved, respondent appealed to the National Labor Relations Commission

(NLRC). On August 29, 2003, the NLRC rendered a Decision, the dispositive
portion of which reads:
WHEREFORE, the decision dated 16 September 2002 is

MODIFIED in that respondent King of Kings Transport Inc. is
hereby ordered to indemnify complainant in the amount of ten
thousand pesos (P10,000) for failure to comply with due process
prior to termination.
The other findings are AFFIRMED.
SO ORDERED.[7]
Respondent moved for reconsideration but it was denied through

the November 14, 2003 Resolution[8] of the NLRC.
Thereafter, respondent filed a Petition for Certiorari before the CA urging

the nullification of the NLRC Decision and Resolution.
The Ruling of the Court of Appeals
Affirming the NLRC, the CA held that there was just cause for respondents
dismissal. It ruled that respondents act in declaring sold tickets as returned
tickets x x x constituted fraud or acts of dishonesty justifying his dismissal.[9]
Also, the appellate court sustained the finding that petitioners failed to
comply with the required procedural due process prior to respondents
termination. However, following the doctrine in Serrano v. NLRC,[10] it modified
the award of PhP 10,000 as indemnification by awarding full backwages from
the time respondents employment was terminated until finality of the decision.
Moreover, the CA held that respondent is entitled to the 13th-month pay

benefit.
Hence, we have this petition.

The Issues
Petitioner raises the following assignment of errors for our consideration:
Whether the Honorable Court of Appeals erred in awarding in favor

of the complainant/private respondent, full back wages, despite
the denial of his petition for certiorari.
Whether the Honorable Court of Appeals erred in ruling that KKTI

did not comply with the requirements of procedural due process
before dismissing the services of the complainant/private
respondent.
Whether the Honorable Court of Appeals rendered an incorrect

decision in that [sic] it awarded in favor of the complaint/private
respondent, 13th month pay benefits contrary to PD 851.[11]
The Courts Ruling
The petition is partly meritorious.
The disposition of the first assigned error depends on whether petitioner

KKTI complied with the due process requirements in terminating respondents
employment; thus, it shall be discussed secondly.
Non-compliance with the Due Process Requirements
Due process under the Labor Code involves two aspects: first,
substantivethe valid and authorized causes of termination of employment under
the Labor Code; and second, proceduralthe manner of dismissal.[12] In the
present case, the CA affirmed the findings of the labor arbiter and the NLRC
that the termination of employment of respondent was based on a just cause.
This ruling is not at issue in this case. The question to be determined is
whether the procedural requirements were complied with.
Art. 277 of the Labor Code provides the manner of termination of

employment, thus:
Art. 277. Miscellaneous Provisions.x x x

(b) Subject to the constitutional right of workers to security
of tenure and their right to be protected against dismissal except
for a just and authorized cause without prejudice to the
requirement of notice under Article 283 of this Code, the employer
shall furnish the worker whose employment is sought to be
terminated a written notice containing a statement of the causes
for termination and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules
and regulations promulgated pursuant to guidelines set by the
Department of Labor and Employment. Any decision taken by the
employer shall be without prejudice to the right of the worker to
contest the validity or legality of his dismissal by filing a complaint
with the regional branch of the National Labor Relations
Commission. The burden of proving that the termination was for a
valid or authorized cause shall rest on the employer.
Accordingly, the implementing rule of the aforesaid provision states:
SEC. 2. Standards of due process; requirements of notice.In

all cases of termination of employment, the following standards of
due process shall be substantially observed:
I. For termination of employment based on just causes as

defined in Article 282 of the Code:
(a) A written notice served on the employee

specifying the ground or grounds for termination, and
giving said employee reasonable opportunity within
which to explain his side.
(b) A hearing or conference during which the

employee concerned, with the assistance of counsel if
he so desires is given opportunity to respond to the
charge, present his evidence, or rebut the evidence
presented against him.
(c) A written notice of termination served on the

employee, indicating that upon due consideration of

all the circumstances, grounds have been established
to justify his termination. [13]
In case of termination, the foregoing notices shall be served

on the employees last known address.[14]
To clarify, the following should be considered in terminating the services of

employees:
(1) The first written notice to be served on the employees should contain the
specific causes or grounds for termination against them, and a directive that
the employees are given the opportunity to submit their written explanation
within a reasonable period. Reasonable opportunity under the Omnibus Rules
means every kind of assistance that management must accord to the
employees to enable them to prepare adequately for their defense.[15] This
should be construed as a period of at least five (5) calendar days from receipt
of the notice to give the employees an opportunity to study the accusation
against them, consult a union official or lawyer, gather data and evidence, and
decide on the defenses they will raise against the complaint. Moreover, in order
to enable the employees to intelligently prepare their explanation and defenses,
the notice should contain a detailed narration of the facts and circumstances
that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically
mention which company rules, if any, are violated and/or which among the
grounds under Art. 282 is being charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct
a hearing or conference wherein the employees will be given the opportunity
to: (1) explain and clarify their defenses to the charge against them; (2)
present evidence in support of their defenses; and (3) rebut the evidence
presented against them by the management. During the hearing or conference,
the employees are given the chance to defend themselves personally, with the
assistance of a representative or counsel of their choice. Moreover, this
conference or hearing could be used by the parties as an opportunity to come
to an amicable settlement.
(3) After determining that termination of employment is justified, the

employers shall serve the employees a written notice of
termination indicating that: (1) all circumstances involving the charge against
the employees have been considered; and (2) grounds have been established
to justify the severance of their employment.
In the instant case, KKTI admits that it had failed to provide respondent
with a charge sheet.[16] However, it maintains that it had substantially complied
with the rules, claiming that respondent would not have issued a written
explanation had he not been informed of the charges against him.[17]
We are not convinced.
First, respondent was not issued a written notice charging him of

committing an infraction. The law is clear on the matter. A verbal appraisal of
the charges against an employee does not comply with the first notice
requirement. In Pepsi Cola Bottling Co. v. NLRC,[18] the Court held that
consultations or conferences are not a substitute for the actual observance of
notice and hearing. Also, in Loadstar Shipping Co., Inc. v. Mesano,[19] the
Court, sanctioning the employer for disregarding the due process requirements,
held that the employees written explanation did not excuse the fact that there
was a complete absence of the first notice.
Second, even assuming that petitioner KKTI was able to furnish

respondent an Irregularity Report notifying him of his offense, such would not
comply with the requirements of the law. We observe from the irregularity
reports against respondent for his other offenses that such contained merely a
general description of the charges against him. The reports did not even state a
company rule or policy that the employee had allegedly violated. Likewise,
there is no mention of any of the grounds for termination of employment under
Art. 282 of the Labor Code. Thus, KKTIs standard charge sheet is not sufficient
notice to the employee.
Third, no hearing was conducted. Regardless of respondents written

explanation, a hearing was still necessary in order for him to clarify and present
evidence in support of his defense. Moreover, respondent made the letter
merely to explain the circumstances relating to the irregularity in his October
28, 2001Conductors Trip Report. He was unaware that a dismissal proceeding
was already being effected. Thus, he was surprised to receive the November
26, 2001termination letter indicating as grounds, not only his October 28,
2001 infraction, but also his previous infractions.
Sanction for Non-compliance with Due Process Requirements
As stated earlier, after a finding that petitioners failed to comply with the
due process requirements, the CA awarded full backwages in favor of
respondent in accordance with the doctrine in Serrano v. NLRC.[20] However,
the doctrine in Serrano had already been abandoned in Agabon v. NLRC by
ruling that if the dismissal is done without due process, the employer should
indemnify the employee with nominal damages.[21]
Thus, for non-compliance with the due process requirements in the

termination of respondents employment, petitioner KKTI is sanctioned to pay
respondent the amount of thirty thousand pesos (PhP 30,000) as damages.
Thirteenth (13th)-Month Pay
Section 3 of the Rules Implementing Presidential Decree No. 851[22] provides

the exceptions in the coverage of the payment of the 13th-month benefit. The
provision states:
SEC. 3. Employers covered.The Decree shall apply to all employers

except to:
xxxx
e) Employers of those who are paid on purely commission,

boundary, or task basis, and those who are paid a fixed amount
for performing a specific work, irrespective of the time consumed
in the performance thereof, except where the workers are paid on
piece-rate basis in which case the employer shall be covered by
this issuance insofar as such workers are concerned.
Petitioner KKTI maintains that respondent was paid on purely

commission basis; thus, the latter is not entitled to receive the 13th-month pay
benefit.However, applying the ruling in Philippine Agricultural Commercial and
Industrial Workers Union v. NLRC,[23] the CA held that respondent is entitled to
the said benefit.
It was erroneous for the CA to apply the case of Philippine Agricultural
Commercial and Industrial Workers Union. Notably in the said case, it was
established that the drivers and conductors praying for 13th- month pay were
not paid purely on commission. Instead, they were receiving a commission in
addition to a fixed or guaranteed wage or salary. Thus, the Court held that bus
drivers and conductors who are paid a fixed or guaranteed minimum wage in
case their commission be less than the statutory minimum, and commissions
only in case where they are over and above the statutory minimum, are

entitled to a 13th-month pay equivalent to one-twelfth of their total earnings
during the calendar year.
On the other hand, in his Complaint,[24] respondent admitted that he was paid
on commission only. Moreover, this fact is supported by his pay slips[25] which
indicated the varying amount of commissions he was receiving each trip. Thus,
he was excluded from receiving the 13th-month pay benefit.
WHEREFORE, the petition is PARTLY GRANTED and the September 16, 2004
Decision of the CA is MODIFIED by deleting the award of backwages and 13th-
month pay. Instead, petitioner KKTI is ordered to indemnify respondent the
amount of thirty thousand pesos (PhP 30,000) as nominal damages for failure
to comply with the due process requirements in terminating the employment of
respondent. No costs. SO ORDERED.

G.R. No. 166208 June 29, 2007
KING OF KINGS TRANSPORT INC., CLAIRE DELA FUENTE and MELISSA

LIM, petitioners, vs. SANTIAGO O. MAMAC, respondent.
FACTS: Petitioner KKTI is a corporation engaged in public transportation and

managed by Claire Dela Fuente and Melissa Lim. Respondent was a conductor
for Don Mariano Transit Corporation (DMTC). He was one of the few people who
established Damayan ng mga Manggagawa, Tsuper at Conductor-Transport
Workers Union. Pending the union’s certification election, respondent was
transferred to KKTI. The KKTI employees later organized the Kaisahan ng mga
Kawani sa King of Kings (KKKK) which was registered with DOLE. Respondent
was elected KKKK president.
Upon audit of the October 28, 2001 Conductor’s Report of respondent, KKTI
noted an irregularity. It discovered that respondent declared several sold
tickets as returned tickets causing KKTI to lose an income of eight hundred and
ninety pesos. While no irregularity report was prepared on the October 28,
2001 incident, KKTI nevertheless asked respondent to explain the discrepancy.
In his letter, respondent said that the erroneous declaration in his October 28,
2001 Trip Report was unintentional. He explained that during that day’s trip,
the windshield of the bus assigned to them was smashed; and they had to cut
short the trip in order to immediately report the matter to the police. As a
result of the incident, he got confused in making the trip report.
On November 26, 2001, respondent received a letter terminating his
employment effective November 29, 2001. The dismissal letter alleged that the
October 28, 2001 irregularity was an act of fraud against the company. KKTI
also cited as basis for respondent’s dismissal the other offenses he allegedly
committed since 1999.
After that, he filed an action for illegal dismissal, among other claims. He
denied committing any infraction and alleged that his dismissal was intended to
bust union activities. Moreover, he claimed that his dismissal was effected
without due process.
KKTI averred that it had observed due process in dismissing respondent and
maintained that respondent was not entitled to his money claims such as
service incentive leave and 13th-month pay because he was paid on
commission or percentage basis.
LABOR ARBITER: he was validly dismissed
NLRC: Affirmed. CA held that there was just cause for respondent’s dismissal.
It ruled that respondent’s act in “declaring sold tickets as returned tickets x x x
constituted fraud or acts of dishonesty justifying his dismissal.”

ISSUE: WON respondent was given due process (procedural)
HELD: NO. There was failure to observe the requirements of due process
Due process under the Labor Code involves two aspects: first, substantive––the
valid and authorized causes of termination of employment under the Labor
Code; and second, procedural––the manner of dismissal.
Section 2(d) of Rule I of Book VI of the Omnibus Rules Implementing
the Labor Code provides:
SEC. 2. Standards of due process; requirements of notice.––In all cases
of termination of employment, the following standards of due process shall be
substantially observed:
1. For termination of employment based on just causes as defined in Article 282
of the Code:
(a) A written notice served on the employee specifying the ground or grounds
for termination, and giving said employee reasonable opportunity within which
to explain his side.
(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if he so desires is given opportunity to respond to the
charge, present his evidence, or rebut the evidence presented against him.
(c) A written notice of termination served on the employee, indicating that
upon due consideration of all the circumstances, grounds have been established
to justify his termination.
1. The first written notice to be served on the employees should contain the
specific causes or grounds for termination against them, and a directive that
the employees are given the opportunity to submit their written explanation
within a reasonable period. “Reasonable opportunity” under the Omnibus
Rules means every kind of assistance that management must accord to the
employees to enable them to prepare adequately for their defense.15 This
should be construed as a period of at least five (5) calendar days from
receipt of the notice to give the employees an opportunity to study the
accusation against them, consult a union official or lawyer, gather data and
evidence, and decide on the defenses they will raise against the complaint.
Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against
the employees. A general description of the charge will not suffice. Lastly,
the notice should specifically mention which company rules, if any, are
violated and/or which among the grounds under Art. 282 is being charged
against the employees.
2. After serving the first notice, the employers should schedule and conduct a
hearing or conference wherein the employees will be given the opportunity
to: (1) explain and clarify their defenses to the charge against them; (2)
present evidence in support of their defenses; and (3) rebut the evidence
presented against them by the management. During the hearing or
conference, the employees are given the chance to defend themselves
personally, with the assistance of a representative or counsel of their choice.
Moreover, this conference or hearing could be used by the parties as an
opportunity to come to an amicable settlement.
3. After determining that termination of employment is justified, the employers
shall serve the employees a written notice of termination indicating that: (1)
all circumstances involving the charge against the employees have been
considered; and (2) grounds have been established to justify the severance
of their employment.
Respondent was not issued a written notice charging him of committing an
infraction. A verbal appraisal of the charges against an employee does not
comply with the first notice requirement.
The court observed from the irregularity reports against respondent for his
other offenses that such contained merely a general description of the charges
against him. The reports did not even state a company rule or policy that the
employee had allegedly violated.
No hearing was conducted. Regardless of respondent’s written explanation,
a hearing was still necessary in order for him to clarify and present evidence in
support of his defense. Moreover, respondent made the letter merely to explain
the circumstances relating to the irregularity in his October 28, 2001
Conductor’s Trip Report. He was unaware that a dismissal proceeding was
already being effected. Thus, he was surprised to receive the November 26,
2001 termination letter indicating as grounds, not only his October 28, 2001
infraction, but also his previous infractions.

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[G.R. No. 158255.

1 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

WHEREFORE, premises considered, judgment is hereby rendered, finding that

HERMINIO D. PENA P15,000.00

2 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

THE HONORABLE COURT OF APPEALS IN RENDERING THE ASSAILED DECISION

A. IN GOING BEYOND ITS JURISDICTION AND PROCEEDING TO GIVE

3 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

4 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

Labor-only contracting as defined in Section 5, Department Order No. 18-

5 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

The provisions of written agreement to the contrary notwithstanding and

As such regular employees, private respondents are entitled to security of

7 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

In view of the foregoing, we hold that an employment relationship exists

8 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

9 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

Manila Water Company, Inc. is contracted by the Metropolitan Waterworks and

Lastly, ACGI did not carry on an independent business or undertake the

11 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

PCI AUTOMATION CENTER, INC., petitioner, vs. NATIONAL LABOR

1. Services - PRIME shall provide qualified and adequate personnel services

3. Supervision - The CLIENT shall be responsible in supervising all PRIME

12 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

5. Direct Hiring/Absorption - Since the personnel assigned to the CLIENT are

6. Injury/Damage - PRIME shall not be responsible for any loss or damage

7. Confidentiality - PRIME shall guarantee the confidentiality of CLIENTs nature

8. Mode/Term of Payment - For and in consideration of the abovementioned

13 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

On September 20, 1985, private respondent Hector Santelices was hired by

14 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

CONFORMABLY with the foregoing, judgment is hereby rendered finding

Respondents (sic) companies are further ordered to pay in solidum the

2. P30,000.00 as moral damages;

3. P10,000.00 as exemplary damages; and

4. P5,000.00 as attorneys fees.

All other claims are hereby denied for lack of merit.[10]

Prime and PCI-AC appealed to the NLRC.

The petition must fail.

Article 106. Contractor or subcontractor. -Whenever an employer enters into a

17 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

18 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

(1) The contractor carries on an independent business and undertakes the

Sec. 9. Labor-only contracting. - (a) Any person who undertakes to supply

(b) Labor-only contracting as defined herein is hereby prohibited and the

19 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

xxx xxx xxx

20 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

21 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

22 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

HERMINIGILDO INGUILLO AND

FIRST PHILIPPINE SCALES,

First Philippine Scales, Inc. (FPSI), a domestic corporation engaged in the

In 1991, FPSI and First Philippine Scales Industries Labor Union

Bergante and Inguillo, the remaining complainants, were directed to submit

In their Position Paper,[23] respondents maintained that Bergante and Inguillo's

25 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

1. Declaring respondents First Philippines

2. Directing the afore-named respondents to

3. Dismissing the claim for illegal withholding of

4. Dismissing the other money claims and/or

27 |ANNA L. ILAGAN-MALIPOL, AB,MD LABOR LAW II

WHEREFORE, the resolution of the Commission dated June 8,