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Labor Digests || 2nd Semester SY 2012-2013 C.

WORKERS PREFERENCE IN CASE OF BANKRUPTCY


REPUBLIC vs. PERALTA 20 May 1987 Feliciano, J. FACTS: 1. Quality Tobacco Corporation (Quality) filed for voluntary insolvency. 2. The following claims of creditors were filed: a.) P 2.8M by the USTC Association of Employees (USTC) as separation pay for their members. b.) P 54,000 by the FOITAF as separation pay for their members c.) P 1.1 M by the Bureau of Internal Revenue (BIR) for tobacco inspection fees d.) P 276,000 by the Bureau of Customs (BoC) for customs duties and taxes payable on the importations made by Quality. 3. RTC ruling: The claims of USTC and FOITAF were to be preferred over the claims of the BIR and the BoC because of Article 110 of the Labor Code. 4. The Solicitor General argued that Article 110 is not applicable since it speaks of wages and not separation pay. ISSUES: How should the order of preference be among the claims stated? Sol Gens contention on scope of Article 110 The Sol. Gen. was incorrect. For the specific purposes of Article 110 and in the context of insolvency, termination or separation pay reasonably forms part of the remuneration or other benefits accruing to employees or workers by reason of their having previously rendered services to the employer. Thus, these fall within the scope of Article 110. Civil Code provisions on concurrence and preference of credit Credits against a particular insolvent is grouped into 3 categories: a. special preferred credits in arts. 2241 and 2242 - these are credits which constitute liens or encumbrances on the specific movable or immovable property to which they relate. Thus, duties, taxes, and fees due on the specific movable property and land or building stand first in preference in respect to the particular movable or immovable property to which the tax liens have attached. Such taxes, duties and fees create the first tier order of preference. All other special preferred credits make-up the second tier. Credits which are specially preferred must be discharged first before ordinary preferred credits may lay claim to such credits. b. ordinary preferred credits in article 2244 - Art 2244 creates no liens on determinate property which follow such property. It only creates rights in favor of certain creditors to have the cash and other assets of the insolvent applied in a certain sequence or priority. c. common credits under Art 2245 Order of Preferrence As to the claim of the BoC, the Tariff and Customs Code states that such taxes shall constitute a lien upon the articles imported. Thus, such customs duties and taxes enjoy the status of a specially preferred credit under Article 2241 (1) in respect of the articles imported which resulted in the assessment of unpaid taxes and duties and are still subject to the control of the BoC. As to the claim of the BIR, such taxes also give rise to a tax lien upon all properties and assets, movable and immovable of the insolvent. This must be given preference over all the other claims.

Labor Digests || 2nd Semester SY 2012-2013


As to the claim of the unions, Article 110 does not create a lien in favor of workers for unpaid wages. They are not specially preferred claims under arts 2241 and 2242, except to the extent that such claims for unpaid wages are already covered by Article 2241 (6) or by Article 2242 (3). All other unpaid wages not falling within the two articles enumerated are merely ordinary preferred credits. The claims for separation pay constitute liens as attaching to the processed leaf tobacco and cigars produced or manufactured by Quality and falls under Art 2241 (6). Impact of Article 110 to the order of preference of credits It modifies the order of preference found in Article 2244 but does not override the preference found in Arts. 2241 and 2242. Article 110 of the LC removed the one year limitation found in Art. 2244 and moved up claims for unpaid wages from second to first priority in the order established in Art, 2244. MODIFIED.
RUBBERWORLD VS. NLRC, FACTS: 1. Rubberworld was forced to prematurely shutdown its operations. 2. Respondents were employees of Rubberworld. They filed with the NLRC a complaint for illegal dismissal and non-payment of separation pay. 3. Rubberworld filed with the SEC a petition for declaration of suspension of payments with a proposed rehabilitation plan. 4. SEC suspended all claims against Rubberworld. 5. Rubberworld submitted to the Labor Arbiter a motion to suspend the proceedings, in accordance with the SEC order. 6. The LA did not act on Rubberworlds motion and instead decided in favor of the respondents. 7. The NLRC affirmed the LA. ISSUE: WoN the DOLE, LA and NLRC may legally act on the claims of the respondents despite the said SEC ruling? NO. RATIO: PD 902-A says that all claims against entities under management or receivership pending before any court, tribunal or body shall be suspended accordingly. There is no exception in favor of labor claims. The labor case would defeat the purpose of an automatic stay since any judicial or extra-judicial interference may prevent the rescue of a debtor company. The companys resources must be directed towards its rehabilitation and must not be diverted in defending itself against such claims. Further, such a ruling from the NLRC could not be enforced as long as Rubberworld is under a management committee. Thus, in proceeding with the case, the NLRC acted in excess of jurisdiction. DEVELOPMENT BANK OF THE PHILIPPINES VS. THE HON. SECRETARY OF LABOR, CRESENCIA DIFONTORUM, ET. AL. FACTS: 1. Riverside Mills Corporation (RMC) ceased business operations without filing for bankruptcy or judicial liquidation. Respondents, who are employees and workers of RMC, filed for illegal dismissal, etc. In 1985, DOLE rendered a decision ordering RMC to pay over a million pesos to respondents and, in case of failure to collect, to execute a writ by selling goods of RMC not exempt from execution. 2. It appears that RMC had unpaid loans with petitioner DBP. As early as 1983, DBP had instituted extra-judicial foreclosure proceedings on RMCs properties. As a result, the writ (stemming from the 1985 decision) was returned unsatisfied because premises of RMC had been padlocked and foreclosed by DBP. 3. Respondent workers filed with the DOLE a Motion for Delivery of Properties in the Possession of DBP arguing that Article 110 of the Labor Code gave them first preference over the mortgaged properties of RMC for the satisfaction of the 1985 decision. DOLE granted the motion since the latter believed that they enjoyed a preferential lien for the payment of backwages and separation benefits. 4. DBP argued that Article 110 should not apply in this case since properties in contention no longer belong to RMC because it had been sold in the foreclosure proceedings and there was no bankruptcy or insolvency proceedings undertaken. ISSUE: WoN respondents have the right of first preference under Article 110 of the Labor Code in this case? NO.

Labor Digests || 2nd Semester SY 2012-2013


RATIO: The preferential right accorded to employees and workers under Article 110 may be invoked only during bankruptcy or judicial liquidation proceedings against the employer. Art. 110 must be construed together with provisions of the Civil Code on concurrence and preference of credits. There should first be a formal declaration of bankruptcy or a judicial liquidation order. The preferential right of credit attains significance only after the properties have been inventoried and liquidated, and all the claims have been established. (In this case, nothing of this sort has happened because of the absence of the liquidation proceedings). Also, no lien was created by the said Article. Article 110 only gives workers a preferential right over the properties of the debtor. Further, the DOLE cannot order DBP to deliver RMCs properties to them because RMC had ceased to become the absolute owner of the properties. The power of a court or tribunal in the execution of its judgment extends only over properties unquestionably belonging to the judgment debtor. GRANTED.

C. VISITORIAL AND ENFORCEMENT POWERS; SIMPLE MONEY CLAIMS


V.L. ENTERPRISES VS. CA Facts: On 10 March 1998, the DOLE conducted an inspection of the establishment of petitioner company V.L. Enterprises. On 5 May 1999, then Regional Director Maximo Lim issued an Order, ordering V.L. Enterprises and/or Faustino Visitacion to pay Camilo Francisco (and 22 other workers similarly situated) the total amount of P822,978.00, corresponding to their claims. Failure to do so would cause a Writ of Execution to be issued. Petitioners V.L. Enterprises and Faustino Visitacion appealed the aforequoted Order of the Regional Director. On 23 June 1999, DOLE Undersecretary Jose M. Espaol, Jr. rendered an Order directing petitioners V.L. Enterprises and/or Faustino J. Visitacion, to post cash or surety bond in the amount equivalent to the monetary award; otherwise, the appeal will be dismissed for not having been perfected. On 29 July 1999, petitioners filed an Urgent Motion for Reconsideration, invoking therein that in a similar case pending with the National Labor Relations Commission (NLRC NCR Case No. 00-10-0762-27) involving the same parties and issues, petitioners had already posted a supersedeas bond. On 14 February 2000, Undersecretary Jose M. Espaol, Jr. rendered a Resolution denying the Urgent Motion for Reconsideration and ordering the petitioners to pay the requisite bond within 10 days. On 31 July 2002, DOLE Secretary Patricia A. Sto. Tomas affirmed the 14 February 2000 Order and deemed the appealed order to have become final and executory. On 11 August 2004, Acting NCR Regional Director Ciriaco A. Lagunzad issued an Alias Writ of Execution, directing petitioners to pay respondent Camilo Francisco and several similarly situated employees the sum of P422,978.00. On the basis of said Alias Writ of Execution, Sheriff Wilfredo A. Gabito issued a Notice of Sale on Execution of Real Properties on 11 October 2004. Petitioners filed a Petition for Certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 87230, seeking the nullification of the following Issuances: 1. Order dated 5 May 1999 of DOLE Regional Director Maximo Lim; 2. Alias Writ of Execution dated 11 August 2004 issued by DOLE Acting NCR Regional Director Ciriaco A. Lagunzad III; and 3. Notice of Sale on Execution of Real Properties dated 11 October 2004 issued by Sheriff Willy Gabito. Petitioners ground for annulment of the three Issuances is the alleged lack of jurisdiction on the part of the DOLE Regional Director in awarding amounts which exceeded P5,000.00. Petitioners cite the 1991 Minute Resolution in 5Ds Liners v. Department of Labor and Employment, which in turn cited Servandos Incorporated v. Secretary of Labor and Employment , thus: The Secretary of Labor should be held as possessed of his plenary visitorial powers to order the inspection of all establishments where labor is employed, to look into all possible violations of labor laws and regulations but the power to hear and decide employees' claims exceeding P5,000.00 for each employee should be left to the Labor Arbiter as the exclusive repository of the power to hear and decide such claims. In other words, the inspection conducted by the Secretary of Labor, through labor regulation officers or industrial safety engineers, may yield findings of violations of labor standards under labor laws; the Secretary of Labor may order compliance with said labor standards, if necessary, through appropriate writs of execution but when the findings disclose an employee claim of over P5,000.00, the matter should be referred to the Labor Arbiter in recognition of his exclusive jurisdiction over such claims.

Labor Digests || 2nd Semester SY 2012-2013


and the 1993 Decision Halili Inn, Incorporated v. Trajano, which reads [T]he original and exclusive jurisdiction to hear and decide employees money claims arising from employer-employee relations exceeding the aggregate amount of P5,000.00 for each employee is vested in the Labor Arbiter (Art. 217 (a) (b), Labor Code as amended) and this is confirmed by the provisions of Art. 129 of the same Code, which excludes from jurisdiction of the Regional Director or any hearing officer of the Department of Labor and Employment (DOLE) the power to hear and decide claims of employees arising from employer-employee relations exceeding the amount of P5,000.00 for each employee. On 9 November 2004, the Court of Appeals dismissed the Petition for lack of merit , as well as the petitioners subsequent MR. Petitioners received a copy of the latter Resolution on 3 February 2005. Instead of appealing said Court of Appeals Resolution via a Petition for Review on Certiorari, however, petitioner filed on 11 April 2005 the instant Petition for Annulment of Judgment, Writ of Execution and Notice of Sale on Execution with Prayer for Temporary Restraining Order. Issue: WON the DOLE Regional Director has jurisdiction to award amounts which exceed P5,000. Held/Ratio: YES. The petition must fail. A principle almost repeated to satiety is that "an action for annulment of judgment cannot and is not a substitute for the lost remedy of appeal." A party must have first availed of an appeal, a motion for new trial or a petition for relief before an action for annulment can prosper. Its obvious rationale is to prevent the party from benefiting from his inaction or negligence. Therefore, the petition cannot prosper insofar as it prayed for the annulment of the Court of Appeals Resolution as petitioners did not file a Petition for Review on Certiorari within the reglementary period. On the other hand, the prayer for the annulment of the three other Issuances, namely the 5 May 1999 DOLE Order, the 11 August 2004 Alias Writ of Execution, and the 11 October 2004 Notice of Sale on Execution of Real Properties, should also be denied in view of the final and executory judgment of the Court of Appeals. Be that as it may, the petition would still fail even if we decide the same on the merits. Petitioners must have been unmindful of the fact that one year from the issuance of the Halili Decision, or on 2 June 1994, Republic Act No. 7730 amended Article 128(b) to its present wording so as to free it from the jurisdictional limitations found in Articles 129 and 217. Thus, as it is now worded, the authority under Article 128 may be exercised by DOLE regardless of the monetary value involved, unlike in Article 129 where the authority is only for claims not exceeding P5,000.00 per claimant. Thus, we held in Allied Investigation Bureau Inc. v. Secretary of Labor and Employment : We dismiss the petition. Pursuant to Section 1 of Republic Act 7730 [Approved on June 2, 1994] which amended Article 128 (b) of the Labor Code, the Secretary of Labor and Employment or his duly authorized representative, in the exercise of their visitorial and enforcement powers, are now authorized to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection, sans any restriction with respect to the jurisdictional amount of P5,000.00 provided under Article 129 and Article 217 of the Code. This was further affirmed by our ruling in Guico v. Quisumbing, which stated categorically the abandonment of the Servando ruling: We sustain the jurisdiction of the respondent Secretary. As the respondent correctly pointed out, this Court's ruling in Servando that the visitorial power of the Secretary of Labor to order and enforce compliance with labor standard laws cannot be exercised where the individual claim exceeds P5,000.00, can no longer be applied in view of the enactment of R.A. No. 7730 amending Article 128 (b) of the Labor Code, viz: Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of the Code and other labor legislation based on the findings of the labor employment and enforcement officers or industrial safety engineers made in the course of inspection. The Secretary or his duly authorized representatives shall issue writs of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection. An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order appealed from.

Labor Digests || 2nd Semester SY 2012-2013

F. WORKING CONDITIONS FOR SPECIAL GROUP OF WORKERS A. WOMEN PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND GRACE DE GUZMAN, RESPONDENTS. Facts: PT&T (Philippine Telegraph & Telephone Company) initially hired Grace de Guzman specifically as Supernumerary Project Worker, for a fixed period from November 21, 1990 until April 20, 1991 as reliever for C.F. Tenorio who went on mate rnity leave. She was again invited for employment as replacement of Erlina F. Dizon who went on leave on 2 periods, from June 10, 1991 to July 1, 1991 and July 19, 1991 to August 8, 1991. On September 2, 1991, de Guzman was again asked to join PT&T as a probationary employee where probationary period will cover 150 days. She indicated in the portion of the job application form under civil status that she was single although she had contracted marriage a few months earlier. When petitioner learned later about the marriage, its branch supervisor, Delia M. Oficial, sent de Guzman a memorandum requiring her to explain the discrepancy. Included in the memorandum, was a reminder about the companys policy of not accepting married women for employment. PT&T claims that she concealed her marital status and her admission of misappropriation of company funds, this being an additional ground to dismiss her. In her reply she said that she was not aware of PT&T's policy regarding married women and that she had not deliberately hidden her true civil status. PT&T, unconvinced by her explanations, dismissed her from the company. Grace contested by a complaint for illegal dismissal, with claims for non-payment of cost of living allowances (COLA), before the Regional Arbitration Branch of the National Labor Relations Commission in Baguio City. On November 23, 1993, Labor Arbiter declared that Grace was illegally dismissed. The labor arbiter considers the misappropriation of fund as a mere addition to strengthen its case for dismissal; there was no showing that she deliberately misappropriated such. Her reinstatement, plus payment of the corresponding back wages and COLA, was ordered. He believed that the ground relied for dismissal was insufficient, and that she had been discriminated for contracting marriage in violation of company rules. PT&T appealed to NLRC. They believed that there was unjust and unlawful discrimination by PT&T and that they ordered for her reinstatement but she should be suspended for three months for her dishonest acts which should not be condoned was given by NLRC. PT&T filed a motion for reconsideration filed but was denied. ON SC: PT&T asserts that it dismissed Grace on account of her dishonesty. They added that they had nothing against marriage; but the concealment of that fact, protrudes dishonesty on the part of Grace which resulted in the loss of confidence and justified her termination. Issue: WON PT & T can validly enforce a policy against married women. Held: NO. Nowhere has that prejudice against womankind been as pervasive as in the field of labor, especially on the matter of equal employment opportunities and standards. In the Philippine setting, women have traditionally been considered as falling within the vulnerable groups or types of workers who must be safeguarded with preventive and remedial social legislation against discriminatory and exploitative practices in hiring, training, benefits, promotion and retention. Section 14, Article II 8 on the Declaration of Principles and State Policies, expressly recognizes the role of women in nationbuilding and commands the State to ensure, at all times, the fundamental equality before the law of women and men. Section 3 of Article XIII 9 requires the State to afford full protection to labor and to promote full employment and equality of employment opportunities for all, including an assurance of entitlement to security of all workers. Section 14 of Article XIII 10 mandates that the State shall protect working women through provisions for opportunities that would enable them to reach their full potential.

Labor Digests || 2nd Semester SY 2012-2013


Article 136 of the Labor Code, one of the protective laws for women, explicitly prohibits discrimination merely by reason of marriage of a female employee. It is recognized that company is free to regulate manpower and employment from hiring to firing, according to their discretion and best business judgment, except in those cases of unlawful discrimination or those provided by law. The government abhors any stipulation or policy in the nature adopted by PT&T. As stated in the Labor Code: ART. 136. Stipulation against marriage. It shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman shall not get married, or to stipulate expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of marriage. 1 The policy of PT&T is in derogation of the provisions stated in Art.136 of the Labor Code on the right of a woman to be free from any kind of stipulation against marriage in connection with her employment and it likewise is contrary to good morals and public policy, depriving a woman of her freedom to choose her status, a privilege that is inherent in an individual as an intangible and inalienable right. The kind of policy followed by PT&T strikes at the very essence, ideals and purpose of marriage as an inviolable social institution and ultimately, family as the foundation of the nation. Such policy must be prohibited in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the land not only for order but also imperatively required. PT&Ts policy of not accepting or disqualifying from work any woman worker who contracts marriage is afoul of the right against discrimination provided to all women workers by our labor laws and by our Constitution. The record discloses clearly that de Guzmans ties with PT&T were dissolved principally because of the companys policy that married women are not qualified for employment in the company, and not merely because of her supposed acts of dishonesty. That it was so can easily be seen from the memorandum sent to private respondent by Delia M. Oficial, the branch supervisor of the company, with the reminder, in the words of the latter, that "you're fully aware that the company is not accepting married women employee (sic), as it was verbally instructed to you." Again, in the termination notice sent to her by the same branch supervisor, private respondent was made to understand that her severance from the service was not only by reason of her concealment of her married status but, over and on top of that, was her violation of the company's policy against marriage ("and even told you that married women employees are not applicable [sic] or accepted in our company."). Parenthetically, this seems to be the curious reason why it was made to appear in the initiatory pleadings that petitioner was represented in this case only by its said supervisor and not by its highest ranking officers who would otherwise be solidarily liable with the corporation. Verily, private respondent's act of concealing the true nature of her status from PT & T could not be properly characterized as willful or in bad faith as she was moved to act the way she did mainly because she wanted to retain a permanent job in a stable company. In other words, she was practically forced by that very same illegal company policy into misrepresenting her civil status for fear of being disqualified from work. While loss of confidence is a just cause for termination of employment, it should not be simulated. It must rest on an actual breach of duty committed by the employee and not on the employer's caprices. Furthermore, it should never be used as a subterfuge for causes which are improper, illegal, or unjustified.

This provision had a studied history for its origin can be traced to Section 8 of Presidential Decree No. 148, 31 better known as the "Women and Child Labor Law," which amended paragraph (c), Section 12 of Republic Act No. 679, 32 entitled "An Act to Regulate the Employment of Women and Children, to Provide Penalties for Violations Thereof, and for Other Purposes." The forerunner to Republic Act No. 679, on the other hand, was Act No. 3071 which became law on March 16, 1923 and which regulated the employment of women and children in shops, factories, industrial, agricultural, and mercantile establishments and other places of labor in the then Philippine Islands.
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In Zialcita, et al. vs. Philippine Air Lines, a policy of Philippine Air Lines requiring that prospective flight attendants must be single and that they will be automatically separated from the service once they marry was declared void, it being violative of the clear mandate in Article 136 of the Labor Code with regard to discrimination against married women. The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial Corporation considered as void a policy of the same nature. In said case, respondent, in dismissing from the service the complainant, invoked a policy of the firm to consider female employees in the project it was undertaking as separated the moment they get married due to lack of facilities for married women. Respondent further claimed that complainant was employed in the project with an oral understanding that her services would be terminated when she gets married. Branding the policy of the employer as an example of "discriminatory chauvinism" tantamount to denying equal employment opportunities to women simply on account of their sex, the appellate court struck down said employer policy as unlawful in view of its repugnance to the Civil Code, Presidential Decree No. 148 and the Constitution.

Labor Digests || 2nd Semester SY 2012-2013


V. STIPULATION AGAINST MARRIAGE

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO VS. GLAXO WELLCOME PHILIPPINES, INC. FACTS: Petitioner. Tecson was hired by respondent Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training and orientation. Tecson signed a contract of employment which stipulates, that he will disclose to management any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies and should management find that such relationship poses a possible conflict of interest, to resign from the company. The Employee Code of Conduct also provides if management perceives a conflict of interest or a potential conflict between such relationship and the employees employment Glaxo, the management and the e mployee will explore the possibility of a "transfer to another department in a non-counterchecking position" or preparation for employment outside the company after six months. Tecson was initially assigned to market Glaxos products in the Camarines Sur -Camarines Norte sales area. He entered into a romantic relationship with Bettsy, Astra Pharmaceuticals Branch Coordinator in Albay, and a competitor of Glaxo. Bettsy supervised the district managers and medical representatives of her company and prepared marketing strategies for Astra in that area. Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of interest which his relationship with Bettsy might engender. Still, love prevailed, and Tecson ma rried Bettsy in September 1998. Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict of interest. Tecsons superiors reminded him that he and Bettsy should decide which one of them would resign from their jobs, although they told him that they wanted to retain him as much as possible because he was performing his job well. Tecson requested for time to comply with the company policy against entering into a relationship with an employee of a competitor company. He explained Bettsy was planning resign from Astra, hence the potential conflict of interest would be eliminated. But he was transferred instead to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos Grievance Committee. Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for voluntary arbitration. This failed, hence, the National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxos policy on relationships between its employees and persons employed with competitor companies, and affirming Glaxos right to transfer Tecson to another sales territory. Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision.The CA denied the petition holding that the NCMB did not err in rendering its Decision. The appellate court held that Glaxos policy prohibiting its employees from having personal relationships with employees of competitor companies is a valid exercise of its management prerogatives. MR was denied. Hence a Petition for Review On Certiorari was filed at the SC. Issue: Whether the Court of Appeals erred in ruling that Glaxos policy against its employees marrying employees from competitor companies is valid, and in not holding that said policy violates the equal protection clause of the Constitution? NO. RATIO: The Employee Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest. Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors, especially so that it and Astra are rival companies in the highly competitive pharmaceutical industry. The prohibition against personal or marital relationships with employees of competitor companies upon Glaxos employees is reasonable under the circumstances because relationships of that nature might compromise the interests of the company. In laying down the assailed company policy, Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures. That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns on investments and to expansion and growth.20 Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play.21 The challenged company policy does not violate the equal protection clause of the Constitution as petitioners erroneously suggest. The equal protection clause erects no shield against merely private conduct, however, discriminatory or wrongful. Significantly, the company actually enforced the policy after repeated requests to the employee to comply with the policy. Indeed, the application of the policy was made in an impartial and even-handed manner, with due regard for the lot of the employee. In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that Glaxo does not impose an absolute prohibition against relationships between its employees and those of competitorcompanies. Its employees are free to cultivate relationships with and marry persons of their own choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the company that may arise out of such relationships. The Court of Appeals also correctly noted that the assailed company policy which forms part of respondents Employee Code of Conduct and of its contracts with its employees, such as that signed by Tescon, was made known to him prior to his employment. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo, the stipulations therein

Labor Digests || 2nd Semester SY 2012-2013


have the force of law between them and, thus, should be complied with in good faith." 29 He is therefore estopped from questioning said policy. STAR PAPER CORPORATION, , VS. RONALDO D. SIMBOL Doctrine: The bona fide occupational qualification exception Unless the employer can prove that the reasonable demands of the business require a distinction based on marital status and there is no better available or acceptable policy which would better accomplish the business purpose, an employer may not discrimina te against an employee based on the identity of the employees spouse. Facts: Petitioner Star Paper Corporation (the company) is a corporation engaged in trading principally of paper products. The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the company. According to Star Paper Corp., Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an employee of the company, whom he married on June 27, 1998. Prior to the marriage, Star Paper Corp. (through pet. Ongsitco) advised the couple that should they decide to get married, one of them should resign pursuant to a company policy promulgated in 1995: (1) New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the] 3rd degree of relationship, already employed by the company. (2) In case of two of our employees (both single, one male and another female) developed a friendly relationship during the course of their employment and then decided to get married, one of them should resign to preserve the policy stated above. Simbol resigned on June 20, 1998 pursuant to the company policy. Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee, whom she married. Ongsitco likewise reminded them that pursuant to company policy, one must resign should they decide to get married. Comia resigned on June 30, 2000. Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker. Petitioners stated that Zuiga, a married man, got Estrella pregnant. The company allegedly could have terminated her services due to immorality but she opted to resign on December 21, 1999. According to Star Paper Corp., the respondents each signed a Release and Confirmation Agreement. They stated therein that they have no money and property accountabilities in the company and that they release the latter of any claim or demand of whatever nature. Respondents, however, offer a different version of their dismissal. Simbol and Comia allege that they did not resign voluntarily; they were compelled to resign in view of an illegal company policy. As to respondent Estrella, she alleges that she had a relationship with co-worker Zuiga who misrepresented himself as a married but separated man. After he got her pregnant, she discovered that he was not separated. Thus, she severed her relationship with him to avoid dismissal due to the company policy. On November 30, 1999, she met an accident and was advised by the doctor at the Orthopedic Hospital to recuperate for twenty-one (21) days. She returned to work on December 21, 1999 but she found out that her name was on-hold at the gate. She was denied entry. She was directed to proceed to the personnel office where one of the staff handed her a memorandum, stating that she was being dismissed for immoral conduct. She refused to sign the memorandum because she was on leave for twenty-one (21) days and has not been given a chance to explain. The management asked her to write an explanation, which was nonetheless dismissed by the company later on. Due to her urgent need for money, she later submitted a letter of resignation in exchange for her 13th month pay. Respondents thus filed a complaint for unfair labor practice, constructive dismissal, separation pay and attorneys fees. They averred that the aforementioned company policy is illegal and contravenes Article 136 of the Labor Code. They also contended that they were dismissed due to their union membership. Labor Arbiter: DISMISSED complaint for lack of merit, and considered such company policy as an exercise of management prerogative. The LA likewise declared that an ER is free to regulate, according to his own discretion and judgment, all aspects of employment. NLRC: AFFIRMED ruling of LA. Simbol, Comia and Estrella appealed to the CA via Petition for Certiorari. CA: REVERSED the ruling of the NLRC, declaring that the dismissal of Simbol, Comia and Estrella was illegal, and that Star Paper Corp. should reinstate them to their former positions without loss of seniority rights with full backwages from the time of their dismissal until actual reinstatement. Hence this petition.

Labor Digests || 2nd Semester SY 2012-2013


Issue: WON the 1995 policy of the ER banning spouses from working in the same company violates the rights of the employee under the Constitution and Art. 136 the Labor Code, or is a valid exercise of management prerogative. Held/Ratio: The 1995 policy violates the rights of EE under the Constitution and Art. 136 of the Labor Code. Decision of the CA is therefore AFFIRMED. The 1987 Constitution states our policy towards the protection of labor under the following provisions: o Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare. o Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decisionmaking processes affecting their rights and benefits as may be provided by law. The State shall promote the principle of shared responsibility between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth. The Civil Code likewise protects labor with the following provisions: o Art. 1700. The relation between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects. o Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer. The Labor Code is the most comprehensive piece of legislation protecting labor. The case at bar involves Article 136 of the Labor Code which provides: o Art. 136. It shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman employee shall not get married, or to stipulate expressly or tacitly that upon getting married a woman employee shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of her marriage. It is true that the policy of petitioners prohibiting close relatives from working in the same company takes the nature of an anti-nepotism employment policy. Companies adopt these policies to prevent the hiring of unqualified persons based on their status as a relative, rather than upon their ability. These policies focus upon the potential employment problems arising from the perception of favoritism exhibited towards relatives. With more women entering the workforce, employers are also enacting employment policies specifically prohibiting spouses from working for the same company. Two types of employment policies involve spouses: policies banning only spouses from working in the same company (no-spouse employment policies), and those banning all immediate family members, including spouses, from working in the same company (anti-nepotism employment policies). Unlike in our jurisdiction where there is no express prohibition on marital discrimination, there are twenty state statutes in the United States prohibiting marital discrimination. In challenging the anti-nepotism employment policies in the United States, complainants utilize two theories of employment discrimination: the disparate treatment and the disparate impact: (1) Under the disparate treatment analysis, the plaintiff must prove that an employment policy is discriminatory on its face. No-spouse employment policies requiring an employee of a particular sex to either quit, transfer, or be fired are facially discriminatory. For example, an employment policy prohibiting the employer from hiring wives of male employees, but not husbands of female employees, is discriminatory on its face. (2) On the other hand, to establish disparate impact, the complainants must prove that a facially neutral policy has a disproportionate effect on a particular class. For example, although most employment policies do not expressly indicate which spouse will be required to transfer or leave the company, the policy often disproportionately affects one sex. The state courts rulings on the issue depend on their interpretation of the scope of marital status discrimination within th e meaning of their respective civil rights acts. Though they agree that the term "marital status" encompasses discrimination based on a person's status as either married, single, divorced, or widowed, they are divided on whether the term has a broader meaning. Thus, their decisions vary. The courts narrowly interpreting marital status to refer only to a person's status as married, single, divorced, or widowed reason that if the legislature intended a broader definition it would have either chosen different language or specified its intent. They hold that the relevant inquiry is if one is married rather than to whom one is married. They construe marital status discrimination to include only whether a person is single, married, divorced, or widowed and not the "identity, occupation, and place of employment of one's spouse."

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The courts that have broadly construed the term "marital status" rule that it encompassed the identity, occupation and employment of one's spouse. They strike down the no-spouse employment policies based on the broad legislative intent of the state statute. They reason that the no-spouse employment policy violates the marital status provision because it arbitrarily discriminates against all spouses of present employees without regard to the actual effect on the individual's qualifications or work performance. These courts also find the no-spouse employment policy invalid for failure of the employer to present any evidence of business necessity other than the general perception that spouses in the same workplace might adversely affect the business. They hold that the absence of such a bona fide occupational qualification invalidates a rule denying employment to one spouse due to the current employment of the other spouse in the same office. Thus, they rule that unless the employer can prove that the reasonable demands of the business require a distinction based on marital status and there is no better available or acceptable policy which would better accomplish the business purpose, an employer may not discriminate against an employee based on the identity of the employees spouse . This is known as the bona fide occupational qualification exception. Since the finding of a bona fide occupational qualification justifies an employers no -spouse rule, the exception is interpreted strictly and narrowly by these state courts. There must be a compelling business necessity for which no alternative exists other than the discriminatory practice. To justify a bona fide occupational qualification, the employer must prove two factors: (1) that the employment qualification is reasonably related to the essential operation of the job involved; and, (2) that there is a factual basis for believing that all or substantially all persons meeting the qualification would be unable to properly perform the duties of the job. The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We employ the standard of reasonableness of the company policy which is parallel to the bona fide occupational qualification requirement. o In the recent case of Duncan Association of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc., we passed on the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company. We held that Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors. We considered the prohibition against personal or marital relationships with employees of competitor companies upon Glaxos employees reasonable under the circumstances because relationships of that nature might compromise the interests of Glaxo. In laying down the assailed company policy, we recognized that Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures. o The requirement that a company policy must be reasonable under the circumstances to qualify as a valid exercise of management prerogative was also at issue in the 1997 case of Philippine Telegraph and Telephone Company v. NLRC . In said case, the employee was dismissed in violation of petitioners policy of disqualifying from work any woman worker who contracts marriage. The cases of Duncan and PT&T instruct us that the requirement of reasonableness must be clearly established to uphold the questioned employment policy. The employer has the burden to prove the existence of a reasonable business necessity. The burden was successfully discharged in Duncan but not in PT&T. We do not find a reasonable business necessity in the case at bar. Petitioners sole contention that "the company did not just want to have two (2) or more of its employees related between the third degree by affinity and/or consanguinity" is lame. That the second paragraph was meant to give teeth to the first paragraph of the questioned rule39 is evidently not the valid reasonable business necessity required by the law. It is significant to note that in the case at bar, respondents were hired after they were found fit for the job, but were asked to resign when they married a co-employee. Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its business operations. Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia, then a Production Helper in the Selecting Department, who married Howard Comia, then a helper in the cutter-machine. The policy is premised on the mere fear that employees married to each other will be less efficient. If we uphold the questioned rule without valid justification, the employer can create policies based on an unproven presumption of a perceived danger at the expense of an employees right to security of tenure. Petitioners contend that their policy will apply only when one employee marries a co-employee, but they are free to marry persons other than co-employees. The questioned policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a legitimate business concern in imposing the questioned policy cannot prejudice the employees right to be free from arbitrary discrimination based upon stereotypes of married persons working together in one company. Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast and extensive that we cannot prudently draw inferences from the legislatures silence41 that married persons are not protected under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for failure of petitioners to present undisputed proof of a reasonable business necessity, we

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rule that the questioned policy is an invalid exercise of management prerogative. Corollarily, the issue as to whether respondents Simbol and Comia resigned voluntarily has become moot and academic. The contention of petitioners that respondent Estrella was pressured to resign because she got impregnated by a married man and she could not stand being looked upon or talked about as immoral is incredulous. If she really wanted to avoid embarrassment and humiliation, she would not have gone back to work at all. Nor would she have filed a suit for illegal dismissal and pleaded for reinstatement.

C. HOUSEHELPERS; II. NON HOUSEHOLD WORK APEX MINING COMPANY, INC., VS. NATIONAL LABOR RELATIONS COMMISSION AND Facts: Private respondent Sinclita Candida was employed by petitioner Apex Mining Company, Inc. on May 18, 1973 to perform laundry services at its staff house located at Masara, Maco, Davao del Norte. In the beginning, she was paid on a piece rate basis. However, on January 17, 1982, she was paid on a monthly basis at P250.00 a month which was ultimately increased to P575.00 a month. On December 18, 1987, while she was attending to her assigned task and she was hanging her laundry, she accidentally slipped and hit her back on a stone. She reported the accident to her immediate supervisor Mila de la Rosa and to the personnel officer, Florendo D. Asirit. As a result of the accident she was not able to continue with her work. She was permitted to go on leave for medication. De la Rosa offered her the amount of P 2,000.00 which was eventually increased to P5,000.00 to persuade her to quit her job, but she refused the offer and preferred to return to work. Petitioner did not allow her to return to work and dismissed her on February 4, 1988. On March 11, 1988, private respondent filed a request for assistance with the DOLE. After the parties submitted their position papers as required by the labor arbiter assigned to the case on August 24, 1988 the latter rendered a decision ordering Apex Mining Company to pay the complainant salary differentials, emergency living allowance, 13th month pay, and separation pay. Apex Mining Co. appealed to the public respondent NLRC, which dismissed the appeal and the subsequent MR. Hence, the herein petition for review by certiorari, which appropriately should be a special civil action for certiorari, and which in the interest of justice, is hereby treated as such. The main thrust of the petition is that private respondent should be treated as a mere househelper or domestic servant and not as a regular employee of petitioner. Issue: Is the househelper in the staff houses of an industrial company a domestic helper or a regular employee of the said firm? Held/Ratio: Regular EE. The petition is devoid of merit. Under Rule XIII, Section l(b), Book 3 of the Labor Code, as amended, the terms "househelper" or "domestic servant" are defined as follows: The term "househelper" as used herein is synonymous to the term "domestic servant" and shall refer to any person, whether male or female, who renders services in and about the employer's home and which services are usually necessary or desirable for the maintenance and enjoyment thereof, and ministers exclusively to the personal comfort and enjoyment of the employer's family. The foregoing definition clearly contemplates such househelper or domestic servant who is employed in the employer's home to minister exclusively to the personal comfort and enjoyment of the employer's family. Such definition covers family drivers, domestic servants, laundry women, yayas, gardeners, houseboys and other similar househelps. The definition cannot be interpreted to include househelp or laundrywomen working in staffhouses of a company, like petitioner who attends to the needs of the company's guest and other persons availing of said facilities. By the same token, it cannot be considered to extend to then driver, houseboy, or gardener exclusively working in the company, the staffhouses and its premises. They may not be considered as within the meaning of a "househelper" or "domestic servant" as above-defined by law. The criteria is the personal comfort and enjoyment of the family of the employer in the home of said employer. While it may be true that the nature of the work of a househelper, domestic servant or laundrywoman in a home or in a company staffhouse may be similar in nature, the difference in their circumstances is that in the former instance they are actually serving the family while in the latter case, whether it is a corporation or a single proprietorship engaged in business or industry or any other agricultural or similar pursuit, service is being rendered in the staffhouses or within the premises of the business of the employer. In such instance, they are employees of the company or employer in the business concerned entitled to the privileges of a regular employee. Petitioner contends that it is only when the househelper or domestic servant is assigned to certain aspects of the business of the employer that such househelper or domestic servant may be considered as such as employee. The Court finds no merit in making any such distinction. The mere fact that the househelper or domestic servant is working within the premises of the business of the employer and in relation to or in connection with its business, as in its staffhouses for its guest or even for its officers and employees, warrants the conclusion that such househelper or domestic servant is and should be considered as a regular employee of the employer and not as a mere family househelper or domestic servant as contemplated in Rule XIII, Section l(b), Book 3 of the Labor Code, as amended.

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Petitioner denies having illegally dismissed private respondent and maintains that respondent abandoned her work. This argument notwithstanding, there is enough evidence to show that because of an accident which took place while private respondent was performing her laundry services, she was not able to work and was ultimately separated from the service. She is, therefore, entitled to appropriate relief as a regular employee of petitioner. Inasmuch as private respondent appears not to be interested in returning to her work for valid reasons, the payment of separation pay to her is in order. E. ANTI SEXUAL HARASSMENT; I. POLICY INFLUENCE MERITOR SAVINGS BANK V. VINSON In 1974, Respondent Mechelle Vinson joined the Capital City Federal Savings and Loan Association in Washington D.C. The banks Vice President, Sidney Taylor hired and supervised her. Between 1974 and 1978, Vinson progressed from teller trainee, to teller, to head teller, then to assistant branch manager, all under Taylor's supervision. Vinson's promotions had been based exclusively on merit, according to court records. In September 1978, Vinson took an indefinite sick leave. The next month, the bank fired her for her "excessive use of that leave." In 1980, Vinson brought an action against the bank and her supervisor at the bank, claiming that, during her employment at the bank, she had been subjected to sexual harassment by the supervisor in violation of Title VII of the Civil Rights Act of 1964, and seeking injunctive relief and damages. During the trial, Vinson testified that Taylor behaved in a fatherly manner until her teller-trainee and probationary period ended. When Vinson became a teller, Taylor asked her to dinner. During the meal, he asked her to join him for sex at a motel. After numerous occasions and as many refusals and because she was afraid of being fired if she didn't comply she complied with Taylor's request. She testified that she had intercourse with Taylor 40 or 50 times. Additionally she testified that Taylor had touched her in public, exposed himself to her, and forcibly raped her multiple times.She argued such harassment created a hostile working environment and a form of unlawful discrimination under Title VII of the Civil Rights Act of 1964. The bank contended that the prohibition of Title VII covered only "'tangible loss' of 'an economic character,' [and] not 'purely psychological aspects of the workplace environment'." The parties presented conflicting testimony about the existence of a sexual relationship between respondent and the supervisor. The District Court denied relief without resolving the conflicting testimony, holding that, if respondent and the supervisor did have a sexual relationship, it was voluntary, and had nothing to do with her continued employment at the bank, and that therefore respondent was not the victim of sexual harassment. The court then went on to hold that, since the bank was without notice, it could not be held liable for the supervisor's alleged sexual harassment. The Court of Appeals reversed and remanded. Noting that a violation of Title VII may be predicated on either of two types of sexual harassment -- (1) harassment that involves the conditioning of employment benefits on sexual favors, and (2) harassment that, while not affecting economic benefits, creates a hostile or offensive working environment -- the Court of Appeals held that, since the grievance here was of the second type, and the District Court had not considered whether a violation of this type had occurred, a remand was necessary. The court further held that the need for a remand was not obviated by the fact that the District Court had found that any sexual relationship between respondent and the supervisor was a voluntary one, a finding that might have been based on testimony about respondent's "dress and personal fantasies" that "had no place in the litigation." As to the bank's liability, the Court of Appeals held that an employer is absolutely liable for sexual harassment by supervisory personnel, whether or not the employer knew or should have known about it. Issue: : "Is a hostile work environment a form of unlawful discrimination under the Civil Rights Act of 1964[1], or is the Act limited to "tangible economic discrimination" in the workplace?": Held: Yes, hostile work environment is a form of unlawful sex discrimination. Ratio A claim of "hostile environment" sexual harassment is a form of sex discrimination that is actionable under Title VII. The Court noted that quid pro quo harassment was not the issue in this case. The guidelines classified offensive behavior as sexual harassment "whether or not it is directly linked to the grant or denial of an economic quid pro quo," if the behavior affects an employee's work performance or makes the environment unworkable. In short, sexual harassment may indeed create a hostile or abusive work environment, and as such is a form of sex discrimination. The language of Title VII is not limited to "economic" or "tangible" discrimination. Equal Employment Opportunity Commission Guidelines fully support the view that sexual harassment leading to non-economic [p58] injury can violate Title VII. Here, respondent's allegations were sufficient to state a claim for "hostile environment" sexual harassment. The District Court's findings were insufficient to dispose of respondent's "hostile environment" claim. The District Court apparently erroneously believed that a sexual harassment claim will not lie absent an economic effect on the complainant's employment, and erroneously focused on the "voluntariness" of respondent's participation in the claimed sexual episodes. The correct inquiry is whether respondent by her conduct indicated that the alleged sexual advances were unwelcome, not whether her participation in them was voluntary.

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The District Court did not err in admitting evidence of respondent's sexually provocative speech and dress. While "voluntariness" in the sense of consent is no defense to a sexual harassment claim, it does not follow that such evidence is irrelevant as a matter of law in determining whether the complainant found particular sexual advances unwelcome. The Court of Appeals erred in concluding that employers are always automatically liable for sexual harassment by their supervisors. While common law agency principles may not be transferable in all their particulars to Title VII, Congress' decision to define "employer" to include any "agent" of an employer evinces an intent to place some limits on the acts of employees for which employers under Title VII are to be held responsible. In this case, however, the mere existence of a grievance procedure in the bank and the bank's policy against discrimination, coupled with respondent's failure to invoke that procedure, do not necessarily insulate the bank from liability. FARAGHER V. CITY OF BOCA RATON Facts Between 1985 and 1990 Petitioner Beth Ann Faragher worked part time and during the summers as an ocean lifeguard for the Marine Safety Section of the Parks and Recreation Department of the City of Boca Raton, Florida. During this time, Faragher's immediate supervisors were Bill Terry, David Silverman, and Robert Gordan. The city had adopted a sexual harassment policy during plaintiff's employ, but it was never disseminated to the lifeguards or their immediate supervisors. After resigning as a lifeguard with respondent City of Boca Raton (City), Beth Ann Faragher brought an action against the City, Terry and Silverman, for nominal damages and other relief, alleging, among other things, that the supervisors had created a "sexually hostile atmosphere" at work by repeatedly subjecting Faragher and other female lifeguards to "uninvited and offensive touching," by making lewd remarks, and by speaking of women in offensive terms, and that this conduct constituted discrimination in the "terms, conditions, and privileges" of her employment in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e-2(a)(1). Plaintiff never reported the supervisors' conduct to managers above the supervisors in the city government's chain of command. Following a bench trial, the District Court concluded that the supervisors' conduct was discriminatory harassment sufficiently serious to alter the conditions of Faragher's employment and constitute an abusive working environment. The District Court then held that the City could be held liable for the harassment of its supervisory employees because the harassment was pervasive enough to support an inference that the City had "knowledge, or constructive knowledge" of it; under traditional agency principles Terry and Silverman were acting as the City's agents when they committed the harassing acts; and a third supervisor had knowledge of the harassment and failed to report it to City officials. The Eleventh Circuit, sitting en banc, reversed. Relying on Meritor Savings Bank, FSB v. Vinson and on the Restatement (Second) of Agency 219 (1957) , the CA held that Terry and Silverman were not acting within the scope of their employment when they engaged in the harassing conduct, that their agency relationship with the City did not facilitate the harassment, that constructive knowledge of it could not be imputed to the City because of its pervasiveness or the supervisor's knowledge, and that the City could not be held liable for negligence in failing to prevent it. Issue: W/N an employer is for vicariously liable for actionable discrimination caused by a supervisor? Held: Yes. An employer is vicariously liable for actionable discrimination caused by a supervisor, but subject to an affirmative defense looking to the reasonableness of the employer's conduct as well as that of the plaintiff victim. In Meritor v Vinson, the Court held that traditional agency principles were relevant for determining employer liability. Restatement 219(1) provides that "a master is subject to liability for the torts of his servants committed while acting in the scope of their employment." Although Title VII cases in the Court of Appeals have typically held, or assumed, that supervisory sexual harassment falls outside the scope of employment because it is motivated solely by individual desires and serves no purpose of the employer, these cases appear to be in tension with others defining the scope of the employment broadly to hold employers vicariously liable for employees' intentional torts, including sexual assaults, that were not done to serve the employer, but were deemed to be characteristic of its activities or a foreseeable consequence of its business. It makes sense to hold an employer vicariously liable under Title VII for some tortious conduct of a supervisor made possible by use of his supervisory authority, and the aided-by-agency-relation principle of 219(2)(d) provides an appropriate starting point for determining liability for the kind of harassment presented here. In a sense a supervisor is always assisted in his misconduct by the supervisory relationship; however, the imposition of liability based on the misuse of supervisory authority must be squared with Meritor 's holding that an employer is not "automatically" liable for harassment by a supervisor who creates who creates the requisite degree of discrimination. The Supreme Court observed that courts have consistently held employers liable for harassment by supervisors when the harassment culminates in a tangible employment action, like hiring, firing, promotion, or compensation. Where the harassment does not result in a tangible employment action, stated the Court, the traditional principles of the law of agency were relevant in assigning employer liability. The Court stated in sum that there are good reasons for imposing liability on employers for misuse of supervisory authority, but expressed the necessity to square that rationale with Meritor's holding that an employer is not"automatically" liable.

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To counter the risk of automatic liability under these standards, the Court set forth two alternatives for an employee alleging supervisory liability. The first is to require proof that a harassing supervisor affirmatively or actively invoked the employer's authority. However, the Court noted the difficulty in identifying such affirmative uses of power, observing that supervisors do not make speeches threatening sanctions when they are making legitimate exercises of managerial authority, yet every subordinate knows the sanctions exist. After discussing the difficulty in drawing a line between affirmative and explicit uses of power, the Court stated that the parties would be poorly served by this "active-use rule." As a second alternative, the Court instead recognized an affirmative defense to liability, even where a supervisor did create the actionable environment. The employer should prevent and eliminate harassment and by requiring employees to take advantage of the preventive or remedial apparatus of their employers. The affirmative defense requires a showing 1) that the employer exercised reasonable care to avoid harassment and to eliminate it when it might occur, and 2) that the complaining employee failed to act with "reasonable care" to take advantage of the employer's safeguards and otherwise to prevent harm that could have been avoided. While proof that an employer had promulgated an antiharassment policy with complaint procedure is not necessary in every instance as a matter of law, the need for a stated policy suitable to the employment circumstances may appropriately be addressed in any case when litigating the first element of the defense. And while proof that an employee failed to fulfill the corresponding obligation of reasonable care to avoid harm is not limited to showing an unreasonable failure to use any complaint procedure provided by the employer, a demonstration of such failure will normally suffice to satisfy the employer's burden under the second element of the defense. No affirmative defense is available, however, when the supervisor's harassment culminates in a tangible employment action, such as discharge, demotion, or undesirable reassignment. Under this standard, the Eleventh Circuit's judgment must be reversed. The District Court found that the degree of hostility in the work environment rose to the actionable level and was attributable to Silverman and Terry, and it is clear that these supervisors were granted virtually unchecked authority over their subordinates and that Faragher and her colleagues were completely isolated from the City's higher management. In this case, the Court decided that any avenue to such a defense by the city was closed, noting the city's failure to disseminate its policy against sexual harassment, the city's failure to keep track of supervisors' conduct, and the fact that the city's policy did not include any assurance that a harassing supervisor could be bypassed in registering complaints. The Supreme Court reversed the judgment of the circuit court, and reinstated the judgment of discrimination found by the district court. E. ANTI SEXUAL HARASSMENT; II. APPLICATIONS IN THE PHILIPPINE CONTEXT PHILIPPINE AEOLEUS AUTOMOTIVE UNITED CORP V NLRC Facts Petitioner Philippine Aeolus Automotive United Corporation (PAAUC) is a corporation with petitioner Francis Chua as is its President, while private respondent Rosalinda C. Cortez was a company nurse thereat until her termination on 7 November 1994. Respondent was issued a memorandum requiring her to explain within forty-eight hours why no disciplinary action should be taken against her for, inter alia, throwing a stapler at Plant Manager William Chua, her superior, and uttering invectives against him. Another memorandum was issued to private respondent, this time informing her of her termination from the service effective 7 November 1994 on grounds of gross and habitual neglect of duties, serious misconduct and fraud or willful breach of trust. Among the grounds listed was that she committed acts constituting gross disrespect to her superior Mr. William Chua, the Plant Manager. Respondent Cortez claims that as early as her first year of employment, Chua already manifested a special liking for her, and would oftentimes invite her for a date, which she would as often refuse. On many occasions, he would make sexual advances touching her hands, putting his arms around her shoulders, running his fingers on her arms and telling her she looked beautiful. The special treatment and sexual advances continued during her employment for four years but she never reciprocated his flirtations, until finally, she noticed that his attitude towards her changed. He made her understand that if she would not give in to his sexual advances he would cause her termination from the service; and he made good his threat when he started harassing her. She just found out one day that her table which was equipped with telephone and intercom units and containing her personal belongings was transferred without her knowledge to a place with neither telephone nor intercom, for which reason, an argument ensued when she confronted William Chua resulting in her being charged with gross disrespect. Aggrieved, private respondent filed with the Labor Arbiter a complaint for illegal dismissal, non-payment of annual service incentive leave pay, 13th month pay and damages against PAAUC and its president Francis Chua. The Labor Arbiter rendered a decision holding the termination of Cortez as valid and legal, at the same time dismissing her claim for damages for lack of merit. On appeal to the NLRC, public respondent reversed the decision of the Labor Arbiter and found petitioner corporation guilty of illegal dismissal of private respondent Cortez. The NLRC ordered petitioner PAAUC to reinstate respondent Cortez to her former position with back wages computed from the time of dismissal up to her actual reinstatement.

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Issue: W/N there was a valid dismissal based on serious misconduct? NO. W/N the supervisor is guilty of sexual harassment? YES. Held: For serious misconduct warranting dismissal of an employee, the rule is that (a) it must be serious; and (b) must relate to the performance of the employee's duties; and, (c) must show that the employee has become unfit to continue working for the employer. The act of private respondent in throwing a stapler and uttering abusive language upon the person of the plant manager, in order to consider it a serious misconduct that would justify dismissal under the law, must have been done in relation to the performance of her duties as would show her to be unfit to continue working for her employer. The acts complained of, under the circumstances they were done, did not in any way pertain to her duties as a nurse. Her employment identification card discloses the nature of her employment as a nurse and no other. Public respondent questions why it took private respondent more than four (4) years to expose William Chua's alleged sexual harassment. It reasons out that it would have been more prepared to support her position if her act of throwing the stapler and uttering invectives on William Chua were her immediate reaction to his amorous overtures. The gravamen of the offense in sexual harassment is not the violation of the employee's sexuality but the abuse of power by the employer. Any employee, male or female, may rightfully cry "foul" provided the claim is well substantiated. Strictly speaking, there is no time period within which he or she is expected to complain through the proper channels. The time to do so may vary depending upon the needs, circumstances, and more importantly, the emotional threshold of the employee. Private respondent admittedly allowed four years to pass before finally coming out with her employer's sexual impositions. Not many women, especially in this country, are made of the stuff that can endure the agony and trauma of a public, even corporate, scandal. Moreover, few persons are privileged indeed to transfer from one employer to another. The dearth of quality employment has become a daily "monster" roaming the streets that one may not be expected to give up one's employment easily but to hang on to it, so to speak, by all tolerable means. Perhaps, to private respondent's mind, for as long as she could outwit her employer's ploys she would continue on her job and consider them as mere occupational hazards. Sexual harassment is an imposition of misplaced "superiority" which is enough to dampen an employee's spirit in her capacity for advancement. It affects her sense of judgment; it changes her life. If for this alone private respondent should be adequately compensated. Thus, for the anxiety, the seen and unseen hurt that she suffered, petitioners should also be made to pay her moral damages, plus exemplary damages. LIBRES V NLRC Facts: -Petitioner Carlos G. Libres, an electrical engineer, was holding a managerial position with National Steel Corporation (NSC) as Assistant Manager. He was then asked to comment regarding the charge of sexual harrassment filed against him by the VP's secretary Capiral. - On 14 August 1993 petitioner submitted his written explanation denying the accusation against him and offering to submit himself for clarificatory interrogation. - The Management Evaluation Committee said that "touching a female subordinate's hand and shoulder, caressing her nape and telling other people that Capiral was the one who hugged and kissed or that she responded to the sexual advances are unauthorized acts that damaged her honor." They suspended Libres for 30 days without pay. - He filed charges against the corporation in the Labor Arbiter, but the latter held that the company acted with due process and that his punishment was only mild. --He claimed that he wasn't guaranteed due process because he wasn't given the right be heard. This was due to his demand for personal confrontation not being recognized by the MEC. - Before the SC, petitioner assailed the failure of the NLRC to strictly apply RA No. 7877 -- Petitioner primarily disputes the failure of the NLRC to apply RA No. 7877, An Act Declaring Sexual Harassment Unlawful in the Employment, Education or Training Environment and for Other Purposes, in determining whether he actually committed sexual harassment. He asserts that his acts did not fall within the definition and criteria of sexual harassment as laid down in Sec. 3 of the law. Specifically, he cites public respondents failure to show that his acts of fondling the hand and massaging the shoulders of Capiral discriminated against her continued employment, impaired her rights and privileges under the Labor Code, or created a hostile, intimidating or offensive environment. - Moreover, petitioner also contends that public respondents reliance on Villarama v. NLRC and Golden Donuts was misplaced. He draws attention to victim Divina Gonzagas immediate filing of her letter of resignation in the Villarama case as opposed to the one year delay of Capiral in filing her complaint against him. Issues: 1. WON RA 7877 is applicable in this case? No.

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2. Was Libres accorded due process when the MEC denied his request for personal confrontation? [Yes] Ratio: 1. We note however, that petitioner never raised the applicability of the law in his appeal to the NLRC nor in his motion for reconsideration. Issues or arguments must chiefly be raised before the court or agency concerned so as to allow it to pass upon and correct its mistakes without the intervention of a higher court. Having failed to indicate his effort along this line, petitioner cannot now belatedly raise its application in this petition. Rep Act No. 7877 was not yet in effect at the time of the occurrence of the act complained of. It was still being deliberated upon in Congress when petitioners case was decided by the Labor Arbiter. As a rule, laws shall have no retroactive effect unless otherwise provided, or except in a criminal case when their application will favor the accused. Hence, the Labor Arbiter have to rely on the MEC report and the common connotation of sexual harassment as it is generally understood by the public. Faced with the same predicament, the NLRC had to agree with the Labor Arbiter. In so doing, the NLRC did not commit any abuse of discretion in affirming the decision of the Labor Arbiter. Re: Villarama case- it was both fitting and appropriate since it singularly addressed the issue of a managerial employee committing sexual harassment on a subordinate. The disparity in the periods of filing the complaints in the two (2) cases didnot in any way reduce this case into insignificance. On the contrary, it even invited the attention of the Court to focus on sexual harassment as a just and valid cause for termination. Whereas petitioner Libres was only meted a 30-day suspension by the NLRC, Villarama, in the other case was penalized with termination. As a managerial employee, petitioner is bound by more exacting work ethics. He failed to live up to his higher standard of responsibility when he succumbed to his moral perversity. And when such moral perversity is perpetrated against his subordinate, he provides a justifiable ground for his dismissal for lack of trust and confidence. It is the the duty of every employer to protect his employees from oversexed superiors. Public respondent therefore is correct in its observation that the Labor Arbiter was in fact lenient in his application of the law and jurisprudence for which petitioner must be grateful for. As pointed out by the Solicitor General, it could be expected since Libres was Ca pirals immediate superior. Fear of retaliation and backlash, not to forget the social humiliation and embarrassment that victims of this human frailty usually suffer, are all realities that Capiral had to contend with. Moreover, the delay did not detract from the truth derived from the facts. Petitioner Libres never questioned the veracity of Capirals allegations. In fact his narration even corroborated the latters assertion in several material points. He only raised issue on the complaints protracted filing. 2. Requirements were sufficiently complied with. Due process as a constitutional precept does not always and in all situations require a trial type proceeding. Due process is satisfied when a person is notified of the charge against him and given an opportunity to explain or defend himself. The essence of due process is simply to be heard, or as applied to administrative proceedings, an opportunity to explain ones side, or an opportunity to seek a reconsideration of the action or ruling compla ined of. It is undeniable that petitioner was given a Notice of Investigation informing him of the charge of sexual harassment as well as advising him to submit a written explanation regarding the matter; that he submitted his written explanation to his superior. The VP further allowed him to air his grievance in a private session He was given more than adequate opportunity to explain his side and air his grievances. Personal confrontation was not necessary. Homeowners v NLRC provides that litigants may be heard through pleadings, written explanations, position papers, memoranda or oral arguments. DOMINGO V. RAYALA, GR 155831 AND RAYALA V. OFFICE OF THE PRESIDENT, GR 155840 Facts: - Rayala was the Chairman of NLRC. - On November 16, 1998, Ma. Lourdes T. Domingo (Domingo), then Stenographic Reporter III at the NLRC, filed a Complaint for sexual harassment against Rayala before Secretary Bienvenido Laguesma of DOLE. - The committee constituted found Rayala guilty of the offense charged. Secretary Laguesma submitted a copy of the Committee Report and Recommendation to the OP, but with the recommendation that the penalty should be suspension for six (6) months and one (1) day, in accordance with AO 250. - However, on May 8, 2000, the OP issued AO 119, disagreeing with the recommendation of suspension. It was ordered that Rayala be dismissed from service for being found guilty of grave offense of disgraceful and immoral conduct. - CA: found Rayala guilty and imposed the penalty of suspension of service for the maximum period of one (1) year. - On June 28, 2004, the Court directed the consolidation of the three (3) petitions: G.R. No. 155831 Domingo Petition -

G.R. No. 155840 Rayala Petition, and G.R. No. 158700 Republic petition. - In G.R. No. 155831, Domingo assails the CAs resolution modifying the penalty imposed by the Office of the President. The

Court of Appeals erred in modifying the penalty for the respondent from dismissal to suspension from service for the maximum

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period of one year. She argues that the power to remove Rayala, a presidential appointee, is lodged with the President who has control of the entire Executive Department, its bureaus and offices. - In G.R. No. 155840, -- Invoking Aquino v. Acosta, Rayala argues that the case is the definitive ruling on what constitutes sexual harassment. Thus, he posits that for sexual harassment to exist under RA 7877, there must be: (a) demand, request, or requirement of a sexual favor; (b) the same is made a pre-condition to hiring, re-employment, or continued employment; or (c) the denial thereof results in discrimination against the employee. Rayala asserts that Domingo has failed to allege and establish any sexual favor, demand, or request from petitioner in exchange for her continued employment or for her promotion. --Rayala assails the OPs interpretation, as upheld by the CA, that RA 7877 is malum prohibitum such that the defense of absence of malice is unavailing. He argues that sexual harassment is considered an offense against a particular person, not against society as a whole. Thus, he claims that intent is an essential element of the offense because the law requires as a conditio sine qua non that a sexual favor be first sought by the offender in order to achieve certain specific results. -- AO 250 expands the acts proscribed in RA 7877. In particular, he assails the definition of the forms of sexual harassment2.He posits that these acts alone without corresponding demand, request, or requirement do not constitute sexual harassment as contemplated by the law. He alleges that the rule-making power granted to the employer in Section 4(a) of RA 7877 is limited only to procedural matters. Issue: 1. Did Rayala commit sexual harassment? [Yes] 2. If he did, what is the applicable penalty? [Suspension] Ratio: 1. A. Basic in the law of public officers is the three-fold liability rule, which states that the wrongful acts or omissions of a public officer may give rise to civil, criminal and administrative liability. This rule applies with full force to sexual harassment. The law penalizing sexual harassment in our jurisdiction is RA 7877. 3 Section 3, in relation to Section 7 on penalties, defines the criminal aspect of the unlawful act of sexual harassment. The same section, in relation to Section 6, authorizes the institution of an independent civil action for damages and other affirmative relief. Section 4, also in relation to Section 3, governs the procedure for administrative cases, and the duty of the employer to create a committee on decorum and its power to investigate cases on sexual harassment. IN CAB, the CA, thus, correctly ruled that Rayalas culpability is not to be determined solely on the basi s of Section 3, RA 7877, because he is charged with the administrative offense, not the criminal infraction, of sexual harassment. It should be enough that the CA, along with the Investigating Committee and the Office of the President, found substantial evidence to support the administrative charge. Yet, even if we were to test Rayalas acts strictly by the standards set in Section 3, RA 7877, he would still be administratively liable. It is true that this provision calls for a demand, request or requirement of a sexual favor. But it is not necessary that the demand, request or requirement of a sexual favor be articulated in a categorical oral or written statement. It may be discerned, with equal certitude, from the acts of the offender. IN CAB, Holding and squeezing Domingos shoulders, running his fingers across her neck and tickling her ear, having inappropriate conversations with her, giving her money allegedly for school expenses with a promise of future privileges, and making statements with unmistakable sexual overtones all these acts of Rayala resound with deafening clarity the unspoken request for a sexual favor. Likewise, contrary to Rayalas claim , it is not essential that the demand, request or requirement be made as a condition for continued employment or for promotion to a higher position. It is enough that the respondents acts result in creating an intimidating, hostile or offensive environment for the employee. That the acts of Rayala generated an intimidating and hostile environment for Domingo is clearly shown by the

Rule IV FORMS OF SEXUAL HARASSMENT Section 1. Forms of Sexual Harassment. Sexual harassment may be committed in any of the following forms: a) Overt sexual advances; b) Unwelcome or improper gestures of affection; c) Request or demand for sexual favors including but not limited to going out on dates, outings or the like for the same purpose; d) Any other act or conduct of a sexual nature or for purposes of sexual gratification which is generally annoying, disgusting or offensive to the victim. 3 Section 3 thereof defines work-related sexual harassment in this wise: Sec. 3. Work, Education or Training-related Sexual Harassment Defined. Work, education or training-related sexual harassment is committed by an employer, manager, supervisor, agent of the employer, teacher, instructor, professor, coach, trainor, or any other person who, having authority, influence or moral ascendancy over another in a work or training or education environment, demands, requests or otherwise requires any sexual favor from the other, regardless of whether the demand, request or requirement for submission is accepted by the object of said Act. (a) In a work-related or employment environment, sexual harassment is committed when: (1) The sexual favor is made as a condition in the hiring or in the employment, re-employment or continued employment of said individual, or in granting said individual favorable compensation, terms, conditions, promotions, or privileges; or the refusal to grant the sexual favor results in limiting, segregating or classifying the employee which in a way would discriminate, deprive or diminish employment opportunities or otherwise adversely affect said employee; (2) The above acts would impair the employees rights or privileges under existing labor laws; or (3) The above acts would result in an intimidating, hostile, or offensive environment for the employee.
2

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common factual finding of the Investigating Committee, the OP and the CA that Domingo reported the matter to an officemate and, after the last incident, filed for a leave of absence and requested transfer to another unit. B. Rayalas invocation of Aquino v. Acosta is misplaced, because the factual setting in that case is different from that in the case at bench. In Aquino, the Court interpreted the acts (of Judge Acosta) as casual gestures of friendship and camaraderie, done during festive or special occasions and with other people present. More importantly, and a circumstance absent in Aquino, Rayalas acts, as already adverted to above, produced a hostile work environment for Domingo, as shown by her having reported the matter to an officemate and, after the last incident, filing for a leave of absence and requesting transfer to another unit. C. We reiterate that what is before us is an administrative case for sexual harassment. Thus, whether the crime of sexual harassment is malum in se or malum prohibitum is immaterial. Re: AO 250, the question of whether or not AO 250 covers Rayala is of no real consequence. The events of this case unmistakably show that the administrative charges against Rayala were for violation of RA 7877; AO 250 had never really been applied to Rayala. If it was used at all, it was to serve merely as an auxiliary procedural guide to aid the Committee in the orderly conduct of the investigation. 2. Under AO 250, the penalty for the first offense is suspension for six (6) months and one (1) day to one (1) year. On the other hand, Section 22(o), Rule XVI of the Omnibus Rules Implementing Book V of the Administrative Code of 1987 and Section 52 A(15) of the Revised Uniform Rules on Administrative Cases in the Civil Service both provide that the first offense of disgraceful and immoral conduct is punishable by suspension of six (6) months and one (1) day to one (1) year. Under the Labor Code, the Chairman of the NLRC shall hold office during good behavior until he or she reaches the age of sixty-five, unless sooner removed for cause as provided by law or becomes incapacitated to discharge the duties of the office. In this case, it is the President, as the proper disciplining authority, who would determine whether there is a valid cause for the removal of Rayala as NLRC Chairman. This power, however, is qualified by the phrase for cause as provided by law. Thus, when the President found that Rayala was indeed guilty of disgraceful and immoral conduct, the Chief Executive did not have unfettered discretion to impose a penalty other than the penalty provided by law for such offense. Accordingly, it was error for the Office of the President to impose upon Rayala the penalty of dismissal from the service, a penalty which can only be imposed upon commission of a second offense. Even if the OP properly considered the fact that Rayala took advantage of his high government position, it still could not validly dismiss him from the service. Under the Revised Uniform Rules on Administrative Cases in the Civil Service, taking undue advantage of a subordinate may be considered as an aggravating circumstance and where only aggravating and no mitigating circumstances are present, the maximum penalty shall be imposed. Hence, the maximum penalty that can be imposed on Rayala is suspension for one (1) year.