G.R. No.

L-48645 January 7, 1987

"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE
PHILIPPINES, ANTONIO CASBADILLO, PROSPERO
TABLADA, ERNESTO BENGSON, PATRICIO SERRANO,
ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO
PARINAS, NORBERTO GALANG, JUANITO NAVARRO,
NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO
L. EGUIA, CARLOS SUMOYAN, LAMBERTO RONQUILLO,
ANGELITO AMANCIO, DANILO B. MATIAR, ET
AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT
FOR LEGAL AFFAIRS, OFFICE OF THE PRESIDENT, HON.
AMADO G. INCIONG, UNDERSECRETARY OF LABOR,
SAN MIGUEL CORPORATION, GENARO OLIVES, ENRIQUE
CAMAHORT, FEDERICO OATE, ERNESTO VILLANUEVA,
ANTONIO BOCALING and GODOFREDO
CUETO, respondents.
GUTIERREZ, JR., J.:
The elemental question in labor law of whether or not an
employer-employee relationship exists between petitionersmembers of the "Brotherhood Labor Unit Movement of the
Philippines" (BLUM) and respondent San Miguel Corporation,
is the main issue in this petition. The disputed decision of
public respondent Ronaldo Zamora, Presidential Assistant for
legal Affairs, contains a brief summary of the facts involved:
1. The records disclose that on July 11, 1969, BLUM filed a
complaint with the now defunct Court of Industrial Relations,
charging San Miguel Corporation, and the following officers:
Enrique Camahort, Federico Ofiate Feliciano Arceo, Melencio
Eugenia Jr., Ernesto Villanueva, Antonio Bocaling and
Godofredo Cueto of unfair labor practice as set forth in
Section 4 (a), sub-sections (1) and (4) of Republic Act No. 875
and of Legal dismissal. It was alleged that respondents

ordered the individual complainants to disaffiliate from the

complainant union; and that management dismissed the
individual complainants when they insisted on their union
membership.
On their part, respondents moved for the dismissal of the
complaint on the grounds that the complainants are not and
have never been employees of respondent company but
employees of the independent contractor; that respondent
company has never had control over the means and methods
followed by the independent contractor who enjoyed full
authority to hire and control said employees; and that the
individual complainants are barred by estoppel from
asserting that they are employees of respondent company.
While pending with the Court of Industrial Relations CIR
pleadings and testimonial and documentary evidences were
duly presented, although the actual hearing was delayed by
several postponements. The dispute was taken over by the
National Labor Relations Commission (NLRC) with the
decreed abolition of the CIR and the hearing of the case
intransferably commenced on September 8, 1975.
On February 9, 1976, Labor Arbiter Nestor C. Lim found for
complainants which was concurred in by the NLRC in a
decision dated June 28, 1976. The amount of backwages
awarded, however, was reduced by NLRC to the equivalent of
one (1) year salary.
On appeal, the Secretary in a decision dated June 1, 1977,
set aside the NLRC ruling, stressing the absence of an
employer-mployee relationship as borne out by the records of
the case. ...
The petitioners strongly argue that there exists an employeremployee relationship between them and the respondent
company and that they were dismissed for unionism, an act

constituting unfair labor practice "for which respondents

must be made to answer."
Unrebutted evidence and testimony on record establish that
the petitioners are workers who have been employed at the
San Miguel Parola Glass Factory since 1961, averaging about
seven (7) years of service at the time of their termination.
They worked as "cargadores" or "pahinante" at the SMC Plant
loading, unloading, piling or palleting empty bottles and
woosen shells to and from company trucks and warehouses.
At times, they accompanied the company trucks on their
delivery routes.
The petitioners first reported for work to Superintendent-inCharge Camahort. They were issued gate passes signed by
Camahort and were provided by the respondent company
with the tools, equipment and paraphernalia used in the
loading, unloading, piling and hauling operation.
Job orders emanated from Camahort. The orders are then
transmitted to an assistant-officer-in-charge. In turn, the
assistant informs the warehousemen and checkers regarding
the same. The latter, thereafter, relays said orders to the
capatazes or group leaders who then give orders to the
workers as to where, when and what to load, unload, pile,
pallet or clean.
Work in the glass factory was neither regular nor continuous,
depending wholly on the volume of bottles manufactured to
be loaded and unloaded, as well as the business activity of
the company. Work did not necessarily mean a full eight (8)
hour day for the petitioners. However, work,at times,
exceeded the eight (8) hour day and necessitated work on
Sundays and holidays. For this, they were neither paid
overtime nor compensation for work on Sundays and
holidays.

Petitioners were paid every ten (10) days on a piece rate

basis, that is, according to the number of cartons and
wooden shells they were able to load, unload, or pile. The
group leader notes down the number or volume of work that
each individual worker has accomplished. This is then made
the basis of a report or statement which is compared with the
notes of the checker and warehousemen as to whether or not
they tally. Final approval of report is by officer-in-charge
Camahort. The pay check is given to the group leaders for
encashment, distribution, and payment to the petitioners in
accordance with payrolls prepared by said leaders. From the
total earnings of the group, the group leader gets a
participation or share of ten (10%) percent plus an additional
amount from the earnings of each individual.
The petitioners worked exclusive at the SMC plant, never
having been assigned to other companies or departments of
SMC plant, even when the volume of work was at its
minimum. When any of the glass furnaces suffered a
breakdown, making a shutdown necessary, the petitioners
work was temporarily suspended. Thereafter, the petitioners
would return to work at the glass plant.
Sometime in January, 1969, the petitioner workers
numbering one hundred and forty (140) organized and
affiliated themselves with the petitioner union and engaged
in union activities. Believing themselves entitled to overtime
and holiday pay, the petitioners pressed management, airing
other grievances such as being paid below the minimum
wage law, inhuman treatment, being forced to borrow at
usurious rates of interest and to buy raffle tickets, coerced by
withholding their salaries, and salary deductions made
without their consent. However, their gripes and grievances
were not heeded by the respondents.
On February 6, 1969, the petitioner union filed a notice of
strike with the Bureau of Labor Relations in connection with

the dismissal of some of its members who were allegedly

castigated for their union membership and warned that
should they persist in continuing with their union activities
they would be dismissed from their jobs. Several conciliation
conferences were scheduled in order to thresh out their
differences, On February 12, 1969, union member Rogelio
Dipad was dismissed from work. At the scheduled conference
on February 19, 1969, the complainant union through its
officers headed by National President Artemio Portugal Sr.,
presented a letter to the respondent company containing
proposals and/or labor demands together with a request for
recognition and collective bargaining.
San Miguel refused to bargain with the petitioner union
alleging that the workers are not their employees.
On February 20, 1969, all the petitioners were dismissed
from their jobs and, thereafter, denied entrance to
respondent company's glass factory despite their regularly
reporting for work. A complaint for illegal dismissal and unfair
labor practice was filed by the petitioners.
The case reaches us now with the same issues to be resolved
as when it had begun.
The question of whether an employer-employee relationship
exists in a certain situation continues to bedevil the courts.
Some businessmen try to avoid the bringing about of an
employer-employee relationship in their enterprises because
that judicial relation spawns obligations connected with
workmen's
compensation,
social
security,
medicare,
minimum wage, termination pay, and unionism. (Mafinco
Trading Corporation v. Ople, 70 SCRA 139).
In determining the existence of an employer-employee
relationship, the elements that are generally considered are
the following: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of

dismissal; and (d) the employer's power to control the

employee with respect to the means and methods by which
the work is to be accomplished. It. is the called "control test"
that is the most important element (Investment Planning
Corp. of the Phils. v. The Social Security System, 21 SCRA
924; Mafinco Trading Corp. v. Ople, supra,and Rosario
Brothers, Inc. v. Ople, 131 SCRA 72).
Applying the above criteria, the evidence strongly indicates
the existence of an employer-employee relationship between
petitioner workers and respondent San Miguel Corporation.
The respondent asserts that the petitioners are employees of
the Guaranteed Labor Contractor, an independent labor
contracting firm.
The facts and evidence on record negate respondent SMC's
claim.
The existence of an independent contractor relationship is
generally established by the following criteria: "whether or
not the contractor is carrying on an independent business;
the nature and extent of the work; the skill required; the term
and duration of the relationship; the right to assign the
performance of a specified piece of work; the control and
supervision of the work to another; the employer's power
with respect to the hiring, firing and payment of the
contractor's workers; the control of the premises; the duty to
supply the premises tools, appliances, materials and labor;
and the mode, manner and terms of payment" (56 CJS
Master and Servant, Sec. 3(2), 46; See also 27 AM. Jur.
Independent Contractor, Sec. 5, 485 and Annex 75 ALR
7260727)
None of the above criteria exists in the case at bar.
Highly unusual and suspect is the absence of a written
contract to specify the performance of a specified piece of
work, the nature and extent of the work and the term and

duration of the relationship. The records fail to show that a

large commercial outfit, such as the San Miguel Corporation,
entered into mere oral agreements of employment or labor
contracting where the same would involve considerable
expenses and dealings with a large number of workers over a
long period of time. Despite respondent company's
allegations not an iota of evidence was offered to prove the
same or its particulars. Such failure makes respondent SMC's
stand subject to serious doubts.
Uncontroverted is the fact that for an average of seven (7)
years, each of the petitioners had worked continuously and
exclusively for the respondent company's shipping and
warehousing department. Considering the length of time that
the petitioners have worked with the respondent company,
there is justification to conclude that they were engaged to
perform activities necessary or desirable in the usual
business or trade of the respondent, and the petitioners are,
therefore regular employees (Phil. Fishing Boat Officers and
Engineers Union v. Court of Industrial Relations, 112 SCRA
159 and RJL Martinez Fishing Corporation v. National Labor
Relations Commission, 127 SCRA 454).
As we have found in RJL Martinez Fishing Corporation v.
National Labor Relations Commission (supra):
... [T]he employer-employee relationship between the parties
herein is not coterminous with each loading and unloading
job. As earlier shown, respondents are engaged in the
business of fishing. For this purpose, they have a fleet of
fishing vessels. Under this situation, respondents' activity of
catching fish is a continuous process and could hardly be
considered as seasonal in nature. So that the activities
performed by herein complainants, i.e. unloading the catch of
tuna fish from respondents' vessels and then loading the
same to refrigerated vans, are necessary or desirable in the
business of respondents. This circumstance makes the

employment of complainants a regular one, in the sense that

it does not depend on any specific project or seasonable
activity. (NLRC Decision, p. 94, Rollo).lwphl@it
so as it with petitioners in the case at bar. In fact, despite
past shutdowns of the glass plant for repairs, the petitioners,
thereafter, promptly returned to their jobs, never having
been replaced, or assigned elsewhere until the present
controversy arose. The term of the petitioners' employment
appears indefinite. The continuity and habituality of
petitioners' work bolsters their claim of employee status visa-vis respondent company,
Even under the assumption that a contract of employment
had indeed been executed between respondent SMC and the
alleged
labor
contractor,
respondent's
case
will,
nevertheless, fail.
Section 8, Rule VIII, Book III of the Implementing Rules of the
Labor Code provides:
Job contracting. There is job contracting permissible under
the Code if the following conditions are met:
(1) The contractor carries on an independent business and
undertakes the contract work on his own account under his
own responsibility according to his own manner and method,
free from the control and direction of his employer or
principal in all matters connected with the performance of
the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in
the form of tools, equipment, machineries, work premises,
and other materials which are necessary in the conduct of his
business.
We find that Guaranteed and Reliable Labor contractors have
neither substantial capital nor investment to qualify as an
independent contractor under the law. The premises, tools,

equipment and paraphernalia used by the petitioners in their

jobs are admittedly all supplied by respondent company. It is
only the manpower or labor force which the alleged
contractors supply, suggesting the existence of a "labor only"
contracting scheme prohibited by law (Article 106, 109 of the
Labor Code; Section 9(b), Rule VIII, Book III, Implementing
Rules and Regulations of the Labor Code). In fact, even the
alleged contractor's office, which consists of a space at
respondent company's warehouse, table, chair, typewriter
and cabinet, are provided for by respondent SMC. It is
therefore clear that the alleged contractors have no capital
outlay involved in the conduct of its business, in the
maintenance thereof or in the payment of its workers'
salaries.
The payment of the workers' wages is a critical factor in
determining the actuality of an employer-employee
relationship whether between respondent company and
petitioners or between the alleged independent contractor
and petitioners. It is important to emphasize that in a truly
independent contractor-contractee relationship, the fees are
paid directly to the manpower agency in lump sum without
indicating or implying that the basis of such lump sum is the
salary per worker multiplied by the number of workers
assigned to the company. This is the rule inSocial Security
System v. Court of Appeals (39 SCRA 629, 635).
The alleged independent contractors in the case at bar were
paid a lump sum representing only the salaries the workers
were entitled to, arrived at by adding the salaries of each
worker which depend on the volume of work they. had
accomplished individually. These are based on payrolls,
reports or statements prepared by the workers' group leader,
warehousemen and checkers, where they note down the
number of cartons, wooden shells and bottles each worker
was able to load, unload, pile or pallet and see whether they
tally. The amount paid by respondent company to the alleged

independent contractor considers no business expenses or

capital outlay of the latter. Nor is the profit or gain of the
alleged contractor in the conduct of its business provided for
as an amount over and above the workers' wages. Instead,
the alleged contractor receives a percentage from the total
earnings of all the workers plus an additional amount
corresponding to a percentage of the earnings of each
individual worker, which, perhaps, accounts for the
petitioners' charge of unauthorized deductions from their
salaries by the respondents.
Anent the argument that the petitioners are not employees
as they worked on piece basis, we merely have to cite our
rulings in Dy Keh Beng v. International Labor and Marine
Union of the Philippines (90 SCRA 161), as follows:
"[C]ircumstances must be construed to determine indeed if
payment by the piece is just a method of compensation and
does not define the essence of the relation. Units of time . . .
and units of work are in establishments like respondent (sic)
just yardsticks whereby to determine rate of compensation,
to be applied whenever agreed upon. We cannot construe
payment by the piece where work is done in such an
establishment so as to put the worker completely at liberty to
turn him out and take in another at pleasure."
Article 106 of the Labor Code provides the legal effect of a
labor only contracting scheme, to wit:
... the person or intermediary shall be considered merely as
an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were
directly employed by him.
Firmly establishing respondent SMC's role as employer is the
control exercised by it over the petitioners that is, control in
the means and methods/manner by which petitioners are to

go about their work, as well as in disciplinary measures

imposed by it.
Because of the nature of the petitioners' work as cargadores
or pahinantes, supervision as to the means and manner of
performing the same is practically nil. For, how many ways
are there to load and unload bottles and wooden shells? The
mere concern of both respondent SMC and the alleged
contractor is that the job of having the bottles and wooden
shells brought to and from the warehouse be done. More
evident and pronounced is respondent company's right to
control in the discipline of petitioners. Documentary evidence
presented by the petitioners establish respondent SMC's right
to impose disciplinary measures for violations or infractions
of its rules and regulations as well as its right to recommend
transfers and dismissals of the piece workers. The inter-office
memoranda submitted in evidence prove the company's
control over the petitioners. That respondent SMC has the
power to recommend penalties or dismissal of the piece
workers, even as to Abner Bungay who is alleged by SMC to
be a representative of the alleged labor contractor, is the
strongest indication of respondent company's right of control
over the petitioners as direct employer. There is no evidence
to show that the alleged labor contractor had such right of
control or much less had been there to supervise or deal with
the petitioners.
The petitioners were dismissed allegedly because of the
shutdown of the glass manufacturing plant. Respondent
company would have us believe that this was a case of
retrenchment due to the closure or cessation of operations of
the establishment or undertaking. But such is not the case
here. The respondent's shutdown was merely temporary, one
of its furnaces needing repair. Operations continued after
such repairs, but the petitioners had already been refused
entry to the premises and dismissed from respondent's
service. New workers manned their positions. It is apparent

that the closure of respondent's warehouse was merely a

ploy to get rid of the petitioners, who were then agitating the
respondent company for benefits, reforms and collective
bargaining as a union. There is no showing that petitioners
had been remiss in their obligations and inefficient in their
jobs to warrant their separation.
As to the charge of unfair labor practice because of SMC's
refusal to bargain with the petitioners, it is clear that the
respondent company had an existing collective bargaining
agreement with the IBM union which is the recognized
collective bargaining representative at the respondent's glass
plant.
There being a recognized bargaining representative of all
employees at the company's glass plant, the petitioners
cannot merely form a union and demand bargaining. The
Labor Code provides the proper procedure for the recognition
of unions as sole bargaining representatives. This must be
followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is
GRANTED. The San Miguel Corporation is hereby ordered to
REINSTATE petitioners, with three (3) years backwages.
However, where reinstatement is no longer possible, the
respondent SMC is ordered to pay the petitioners separation
pay equivalent to one (1) month pay for every year of
service.
SO ORDERED.

G.R. No. 87700 June 13, 1990

SAN MIGUEL CORPORATION EMPLOYEES UNIONPTGWO, DANIEL S.L. BORBON II, HERMINIA REYES,
MARCELA
PURIFICACION,
ET
AL., petitioners,
vs.
HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS
PRESIDING JUDGE OF BRANCH 166, RTC, PASIG, and
SAN MIGUEL CORPORATION, respondents.
Romeo C. Lagman for petitioners.
Jardeleza, Sobrevinas,
respondents.

Diaz,

Mayudini

&

Bodegon

for

MELENCIO-HERRERA, J.:
Respondent Judge of the Regional Trial Court of Pasig, Branch
166, is taken to task by petitioners in this special civil action

for certiorari and Prohibition for having issued the challenged

Writ of Preliminary Injunction on 29 March 1989 in Civil Case
No. 57055 of his Court entitled "San Miguel Corporation vs.
SMCEU-PTGWO, et als."
Petitioners' plea is that said Writ was issued without or in
excess of jurisdiction and with grave abuse of discretion, a
labor dispute being involved. Private respondent San Miguel
Corporation (SanMig. for short), for its part, defends the Writ
on the ground of absence of any employer-employee
relationship between it and the contractual workers
employed by the companies Lipercon Services, Inc.
(Lipercon) and D'Rite Service Enterprises (D'Rite), besides
the fact that the Union is bereft of personality to represent
said workers for purposes of collective bargaining. The
Solicitor General agrees with the position of SanMig.
The antecedents of the controversy reveal that:
Sometime in 1983 and 1984, SanMig entered into contracts
for merchandising services with Lipercon and D'Rite (Annexes
K and I, SanMig's Comment, respectively). These companies
are independent contractors duly licensed by the Department
of Labor and Employment (DOLE). SanMig entered into those
contracts to maintain its competitive position and in keeping
with the imperatives of efficiency, business expansion and
diversity of its operation. In said contracts, it was expressly
understood and agreed that the workers employed by the
contractors were to be paid by the latter and that none of
them were to be deemed employees or agents of SanMig.
There was to be no employer-employee relation between the
contractors and/or its workers, on the one hand, and SanMig
on the other.
Petitioner San Miguel Corporation Employees Union-PTWGO
(the Union, for brevity) is the duly authorized representative
of the monthly paid rank-and-file employees of SanMig with
whom the latter executed a Collective Bargaining Agreement

(CBA) effective 1 July 1986 to 30 June 1989 (Annex A,

SanMig's Comment). Section 1 of their CBA specifically
provides that "temporary, probationary, or contract
employees and workers are excluded from the bargaining
unit and, therefore, outside the scope of this Agreement."
In a letter, dated 20 November 1988 (Annex C, Petition), the
Union advised SanMig that some Lipercon and D'Rite workers
had signed up for union membership and sought the
regularization of their employment with SMC. The Union
alleged that this group of employees, while appearing to be
contractual workers supposedly independent contractors,
have been continuously working for SanMig for a period
ranging from six (6) months to fifteen (15) years and that
their work is neither casual nor seasonal as they are
performing work or activities necessary or desirable in the
usual business or trade of SanMig. Thus, it was contended
that there exists a "labor-only" contracting situation. It was
then demanded that the employment status of these workers
be regularized.
On 12 January 1989 on the ground that it had failed to
receive any favorable response from SanMig, the Union filed
a notice of strike for unfair labor practice, CBA violations, and
union busting (Annex D, Petition).
On 30 January 1989, the Union again filed a second notice of
strike for unfair labor practice (Annex F, Petition).
As in the first notice of strike. Conciliatory meetings were
held on the second notice. Subsequently, the two (2) notices
of strike were consolidated and several conciliation
conferences were held to settle the dispute before the
National Conciliation and Mediation Board (NCMB) of DOLE
(Annex G, Petition).

Beginning 14 February 1989 until 2 March 1989, series of

pickets were staged by Lipercon and D'Rite workers in
various SMC plants and offices.
On 6 March 1989, SMC filed a verified Complaint for
Injunction and Damages before respondent Court to enjoin
the Union from:
a. representing and/or acting for and in behalf of the
employees of LIPERCON and/or D'RITE for the purposes of
collective bargaining;
b. calling for and holding a strike vote, to compel plaintiff to
hire the employees or workers of LIPERCON and D'RITE;
c. inciting, instigating and/or inducing the employees or
workers of LIPERCON and D'RITE to demonstrate and/or
picket at the plants and offices of plaintiff within the
bargaining unit referred to in the CBA,...;
d. staging a strike to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE;
e. using the employees or workers of LIPERCON AND D'RITE
to man the strike area and/or picket lines and/or barricades
which the defendants may set up at the plants and offices of
plaintiff within the bargaining unit referred to in the CBA ...;
f. intimidating, threatening with bodily harm and/or molesting
the other employees and/or contract workers of plaintiff, as
well as those persons lawfully transacting business with
plaintiff at the work places within the bargaining unit referred
to in the CBA, ..., to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE;
g. blocking, preventing, prohibiting, obstructing and/or
impeding the free ingress to, and egress from, the work
places within the bargaining unit referred to in the CBA .., to

compel plaintiff to hire the employees or workers of

LIPERCON and D'RITE;
h. preventing and/or disrupting the peaceful and normal
operation of plaintiff at the work places within the bargaining
unit referred to in the CBA, Annex 'C' hereof, to compel
plaintiff to hire the employees or workers of LIPERCON and
D'RITE. (Annex H, Petition)
Respondent Court found the Complaint sufficient in form and
substance and issued a Temporary Restraining Order for the
purpose of maintaining the status quo, and set the
application for Injunction for hearing.
In the meantime, on 13 March 1989, the Union filed a Motion
to Dismiss SanMig's Complaint on the ground of lack of
jurisdiction over the case/nature of the action, which motion
was opposed by SanMig. That Motion was denied by
respondent Judge in an Order dated 11 April 1989.
After several hearings on SanMig's application for injunctive
relief, where the parties presented both testimonial and
documentary evidence on 25 March 1989, respondent Court
issued the questioned Order (Annex A, Petition) granting the
application and enjoining the Union from Committing the acts
complained of, supra. Accordingly, on 29 March 1989,
respondent Court issued the corresponding Writ of
Preliminary Injunction after SanMig had posted the required
bond of P100,000.00 to answer for whatever damages
petitioners may sustain by reason thereof.
In issuing the Injunction, respondent Court rationalized:
The absence of employer-employee relationship negates the
existence of labor dispute. Verily, this court has jurisdiction to
take cognizance of plaintiff's grievance.
The evidence so far presented indicates that plaintiff has
contracts for services with Lipercon and D'Rite. The

application and contract for employment of the defendants'

witnesses are either with Lipercon or D'Rite. What could be
discerned is that there is no employer-employee relationship
between plaintiff and the contractual workers employed by
Lipercon and D'Rite. This, however, does not mean that a
final determination regarding the question of the existence of
employer-employee relationship has already been made. To
finally resolve this dispute, the court must extensively
consider and delve into the manner of selection and
engagement of the putative employee; the mode of payment
of wages; the presence or absence of a power of dismissal;
and the Presence or absence of a power to control the
putative employee's conduct. This necessitates a full-blown
trial. If the acts complained of are not restrained, plaintiff
would, undoubtedly, suffer irreparable damages. Upon the
other hand, a writ of injunction does not necessarily expose
defendants to irreparable damages.
Evidently, plaintiff has established its right to the relief
demanded. (p. 21, Rollo)
Anchored on grave abuse of discretion, petitioners are now
before us seeking nullification of the challenged Writ. On 24
April 1989, we issued a Temporary Restraining Order
enjoining the implementation of the Injunction issued by
respondent Court. The Union construed this to mean that "we
can now strike," which it superimposed on the Order and
widely circulated to entice the Union membership to go on
strike. Upon being apprised thereof, in a Resolution of 24 May
1989, we required the parties to "RESTORE the status quo
ante declaration of strike" (p. 2,62 Rollo).
In the meantime, however, or on 2 May 1989, the Union went
on strike. Apparently, some of the contractual workers of
Lipercon and D'Rite had been laid off. The strike adversely
affected thirteen (13) of the latter's plants and offices.

On 3 May 1989, the National Conciliation and Mediation

Board (NCMB) called the parties to conciliation. The Union
stated that it would lift the strike if the thirty (30) Lipercon
and D'Rite employees were recalled, and discussion on their
other demands, such as wage distortion and appointment of
coordinators, were made. Effected eventually was a
Memorandum of Agreement between SanMig and the Union
that "without prejudice to the outcome of G.R. No. 87700
(this case) and Civil Case No. 57055 (the case below), the
laid-off individuals ... shall be recalled effective 8 May 1989
to their former jobs or equivalent positions under the same
terms and conditions prior to "lay-off" (Annex 15, SanMig
Comment). In turn, the Union would immediately lift the
pickets and return to work.
After an exchange of pleadings, this Court, on 12 October
1989, gave due course to the Petition and required the
parties to submit their memoranda simultaneously, the last
of which was filed on 9 January 1990.
The focal issue for determination is whether or not
respondent Court correctly assumed jurisdiction over the
present controversy and properly issued the Writ of
Preliminary Injunction to the resolution of that question, is
the matter of whether, or not the case at bar involves, or is in
connection with, or relates to a labor dispute. An affirmative
answer would bring the case within the original and exclusive
jurisdiction of labor tribunals to the exclusion of the regular
Courts.
Petitioners take the position that 'it is beyond dispute that
the controversy in the court a quo involves or arose out of a
labor dispute and is directly connected or interwoven with
the cases pending with the NCMB-DOLE, and is thus beyond
the ambit of the public respondent's jurisdiction. That the
acts complained of (i.e., the mass concerted action of
picketing and the reliefs prayed for by the private

respondent) are within the competence of labor tribunals, is

beyond question" (pp. 6-7, Petitioners' Memo).
On the other hand, SanMig denies the existence of any
employer-employee relationship and consequently of any
labor dispute between itself and the Union. SanMig submits,
in particular, that "respondent Court is vested with
jurisdiction and judicial competence to enjoin the specific
type of strike staged by petitioner union and its officers
herein complained of," for the reasons that:
A. The exclusive bargaining representative of an employer
unit cannot strike to compel the employer to hire and thereby
create an employment relationship with contractual workers,
especially were the contractual workers were recognized by
the union, under the governing collective bargaining
agreement, as excluded from, and therefore strangers to, the
bargaining unit.
B. A strike is a coercive economic weapon granted the
bargaining representative only in the event of a deadlock in a
labor dispute over 'wages, hours of work and all other and of
the employment' of the employees in the unit. The union
leaders cannot instigate a strike to compel the employer,
especially on the eve of certification elections, to hire
strangers or workers outside the unit, in the hope the latter
will help re-elect them.
C. Civil courts have the jurisdiction to enjoin the above
because this specie of strike does not arise out of a labor
dispute, is an abuse of right, and violates the employer's
constitutional liberty to hire or not to hire. (SanMig's
Memorandum, pp. 475-476, Rollo).
We find the Petition of a meritorious character.
A "labor dispute" as defined in Article 212 (1) of the Labor
Code includes "any controversy or matter concerning terms

and conditions of employment or the association or

representation of persons in negotiating, fixing, maintaining,
changing, or arranging the terms and conditions of
employment, regardless of whether the disputants stand in
the proximate relation of employer and employee."
While it is SanMig's submission that no employer-employee
relationship exists between itself, on the one hand, and the
contractual workers of Lipercon and D'Rite on the other, a
labor dispute can nevertheless exist "regardless of whether
the disputants stand in the proximate relationship of
employer and employee" (Article 212 [1], Labor Code, supra)
provided the controversy concerns, among others, the terms
and conditions of employment or a "change" or
"arrangement" thereof (ibid). Put differently, and as defined
by law, the existence of a labor dispute is not negative by the
fact that the plaintiffs and defendants do not stand in the
proximate relation of employer and employee.
That a labor dispute, as defined by the law, does exist herein
is evident. At bottom, what the Union seeks is to regularize
the status of the employees contracted by Lipercon and
D'Rite in effect, that they be absorbed into the working unit
of SanMig. This matter definitely dwells on the working
relationship between said employees vis-a-vis SanMig. Terms,
tenure and conditions of their employment and the
arrangement of those terms are thus involved bringing the
matter within the purview of a labor dispute. Further, the
Union also seeks to represent those workers, who have
signed up for Union membership, for the purpose of
collective bargaining. SanMig, for its part, resists that Union
demand on the ground that there is no employer-employee
relationship between it and those workers and because the
demand violates the terms of their CBA. Obvious then is that
representation and association, for the purpose of
negotiating the conditions of employment are also involved.
In fact, the injunction sought by SanMig was precisely also to

prevent such representation. Again, the matter of

representation falls within the scope of a labor dispute.
Neither can it be denied that the controversy below is directly
connected with the labor dispute already taken cognizance of
by the NCMB-DOLE (NCMB-NCR- NS-01- 021-89; NCMB NCR
NS-01-093-83).
Whether or not the Union demands are valid; whether or not
SanMig's contracts with Lipercon and D'Rite constitute "laboronly" contracting and, therefore, a regular employeremployee relationship may, in fact, be said to exist; whether
or not the Union can lawfully represent the workers of
Lipercon and D'Rite in their demands against SanMig in the
light of the existing CBA; whether or not the notice of strike
was valid and the strike itself legal when it was allegedly
instigated to compel the employer to hire strangers outside
the working unit; those are issues the resolution of which
call for the application of labor laws, and SanMig's cause's of
action in the Court below are inextricably linked with those
issues.
The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30
April 1965, 13 SCRA 738) relied upon by SanMig is not
controlling as in that case there was no controversy over
terms, tenure or conditions, of employment or the
representation of employees that called for the application of
labor laws. In that case, what the petitioning union
demanded was not a change in working terms and
conditions, or the representation of the employees, but that
its members be hired as stevedores in the place of the
members of a rival union, which petitioners wanted
discharged notwithstanding the existing contract of the
arrastre company with the latter union. Hence, the ruling
therein, on the basis of those facts unique to that case, that
such a demand could hardly be considered a labor dispute.

As the case is indisputably linked with a labor dispute,

jurisdiction belongs to the labor tribunals. As explicitly
provided for in Article 217 of the Labor Code, prior to its
amendment by R.A. No. 6715 on 21 March 1989, since the
suit below was instituted on 6 March 1989, Labor Arbiters
have original and exclusive jurisdiction to hear and decide
the following cases involving all workers including "1. unfair
labor practice cases; 2. those that workers may file involving
wages, hours of work and other terms and conditions of
employment; ... and 5. cases arising from any violation of
Article 265 of this Code, including questions involving the
legality of striker and lockouts. ..." Article 217 lays down the
plain command of the law.
The claim of SanMig that the action below is for damages
under Articles 19, 20 and 21 of the Civil Code would not
suffice to keep the case within the jurisdictional boundaries
of regular Courts. That claim for damages is interwoven with
a labor dispute existing between the parties and would have
to be ventilated before the administrative machinery
established for the expeditious settlement of those disputes.
To allow the action filed below to prosper would bring about
"split jurisdiction" which is obnoxious to the orderly
administration of justice (Philippine Communications,
Electronics and Electricity Workers Federation vs. Hon.
Nolasco, L-24984, 29 July 1968, 24 SCRA 321).
We recognize the proprietary right of SanMig to exercise an
inherent management prerogative and its best business
judgment to determine whether it should contract out the
performance of some of its work to independent contractors.
However, 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 (Section 3, Article XIII, 1987
Constitution) equally call for recognition and protection.

Those contending interests must be placed in proper

perspective and equilibrium.
WHEREFORE, the Writ of certiorari is GRANTED and the
Orders of respondent Judge of 25 March 1989 and 29 March
1989 are SET ASIDE. The Writ of Prohibition is GRANTED and
respondent Judge is enjoined from taking any further action
in Civil Case No. 57055 except for the purpose of dismissing
it. The status quo ante declaration of strike ordered by the
Court on 24 May 1989 shall be observed pending the
proceedings in the National Conciliation Mediation BoardDepartment of Labor and Employment, docketed as NCMBNCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No costs.
SO ORDERED.

JOVENCIO L. MAYOR petitioner,

vs.
HON. CATALINO MACARAIG, HON. GUILLERMO
CARAGUE, HON. RIZALINA CAJUCOM, HON. FRANKLIN
DRILON, respondents. LOURDES A. SALES and RICARDO
OLAIREZ, petitioners-intervenors.
G.R. No. 90044 March 5, 1991
PASCUAL V. REYES, petitioner,
vs.
HON. FRANKLIN DRILON, respondent.
G.R. No. 91547 March 5, 1991
CEFERINO E. DULAY, ROSARIO G. ENCARNACION and
DANIEL LUCAS, JR., petitioners,
vs.
HON. CATALINO MACARAIG, JR., as Executive
Secretary, HON. GUILLERMO N. CARAGUE, as Secretary
of Budget and Management, HON. DIONISIO DE LA
SERNA, as Acting Secretary of Labor & Employment,
BARTOLOME CARALE, VICENTE S.E. VELOSO III, ROMEO
B. TUOMO, EDNA BONTO PEREZ, DOMINGO H.
ZAPANTA, RUSTICO L. DIOKNO, LOURDES C. JAVIER,
IRINEO B. BARNALDO, ROGELIO I. RAYALA, ERNESTO G.
LADRINO III, IRENEA E. CENIZA, BERNABE S. BATUHAN,
MUSIB M. BUAT, L.B. GONZAGA, JR. and OSCAR
ABELLA, respondents.
G.R. No. 91730 March 5, 1991
CONRADO B. MAGLAYA, petitioner,
vs.
HON. CATALINO MACARAEG, HON. GUILLERMO
CARAGUE, HON. RIZALINA CAJOCUM, and the
HONORABLE SECRETARY OF LABOR, respondents.

G.R. No. 87211 March 5, 1991

G.R. No. 94518 March 5, 1991

ROLANDO D. GAMBITO, petitioner,

vs.
THE SECRETARY OF LABOR AND EMPLOYMENT and THE
EXECUTIVE SECRETARY, respondents.
NARVASA, J.:p
Five (5) special civil actions are hereby jointly decided
because they involve one common, fundamental issue, the
constitutionality of Republic Act No. 6715, effective March 21,
1989, in so far as it declares vacant "all positions of the
Commissioners, Executive Labor Arbiters and Labor Arbiters
of the National Labor Relations Commission," and operates to
remove the incumbents upon the appointment and
qualification of their successors. The law is entitled, "AN ACT
TO EXTEND PROTECTION TO LABOR, STRENGTHEN THE
CONSTITUTIONAL
RIGHTS
OF
WORKERS
TO
SELFORGANIZATION, COLLECTIVE BARGAINING AND PEACEFUL
CONCERTED ACTIVITIES, FOSTER INDUSTRIAL PEACE AND
HARMONY, PROMOTE THE PREFERENTIAL USE OF VOLUNTARY
MODES OF SETTLING LABOR DISPUTES AND RE-ORGANIZE
THE NATIONAL LABOR RELATIONS COMMISSION, AMENDING
PRESIDENTIAL DECREE NO. 441, AS AMENDED, OTHERWISE
KNOWN AS THE LABOR CODE OF THE PHILIPPINES,
APPROPRIATING FUNDS THEREFOR AND FOR OTHER
PURPOSES." 1 The provision directly dealing with the
reorganization of the National Labor Relations Commission is
Section 35. It reads as follows: 2
Sec. 35. Equity of the Incumbent. Incumbent career
officials and rank-and-file employees of the National labor
Relations Commission not otherwise affected by the Act shall
continue to hold office without need of reappointment.
However, consistent with the need to professionalize the
higher levels of officialdom invested with adjudicatory powers
and functions, and to upgrade their qualifications, ranks, and
salaries or emoluments, all positions of the Commissioners,

Executive Labor Arbiters and Labor Arbiters of the present

National Labor Relations Commission are hereby declared
vacant. However, subject officials shall continue to
temporarily discharge their duties and functions until their
successors shall have been duly appointed and qualified.
The first of these five consolidated cases was filed by Labor
Arbiter Jovencio Ll. Mayor on March 8, 1989. In the year that
followed, eight other officers of the Commission, as initiators
of their own separate actions or as intervenors, joined Mayor
in the attempt to invalidate the reorganization and to be
reinstated to their positions in the Government service.
G.R. No. 87211: Jovencio Mayor; and
A. Sales and Ricardo Olairez

Intervenors

Lourdes

Jovencio Ll. Mayor, a member of the Philippine Bar for fifteen

(15) years, was appointed Labor Arbiter in 1986 after he had,
according to him, met the prescribed qualifications and
passed "a rigid screening process." Fearing that he would be
removed from office on account of the expected
reorganization, he filed in this Court the action now docketed
as G.R. No. 87211. His fears proved groundless, however. He
was in fact reappointed a Labor Arbiter on March 8, 1990.
Hence, as he himself says, the case became moot as to him.
Like Mayor, both intervenors Lourdes A. Sales and Ricardo N.
Olairez were appointed Labor Arbiters in 1986, but unlike
Mayor, were not among the one hundred fifty-one (151)
Labor Arbiters reappointed by the President on March 8,
1990.
G.R. No. 90044; Pascual Y Reyes; and Intervenor Eugenio L
Sagmit, Jr.
At the time of the effectivity of R.A. No. 6715, Pascual Y.
Reyes was holding the office of Executive Director of the
National Labor Relations Commission in virtue of an

appointment extended to him on May 30, 1975. As specified

by Administrative Order No. 10 of the Secretary of Labor,
dated July 14, 1975, the functions of his office were "to take
charge of all administrative matters of the Commission and
to have direct supervision overall units and personnel
assigned to perform administrative tasks;" and Article 213 of
the Labor Code, as amended, declared that the "Executive
Director, assisted by a Deputy Executive Director, shall
exercise the administrative functions of the Commission."
Reyes states that he has been "a public servant for 42
years," and "is about to retire at sixty-five (65)," in 1991.
The petitioner-in-intervention, Eugenio I. Sagmit, Jr., was
Reyes' Deputy Executive Director, appointed as such on
October 27, 1987 after twenty-five (25) years of government
service.
Both Reyes and Sagmit were informed that they had been
separated from employment upon the effectivity of R.A. No.
6715, pursuant to a Memorandum-Order issued by then
Secretary of Labor Franklin Drilon on August 17, 1989 to the
effect that the offices of Executive Director and Deputy
Executive Director had been abolished by Section 35, in
relation to Section 5 of said Act, and "their functions
transferred to the Chairman, aided by the Executive Clerk.
Reyes moved for reconsideration on August 29, 1989, but
when no action was allegedly taken thereon, he instituted the
action at bar, G.R. No. 90044. Sagmit was afterwards granted
leave to intervene in the action.
G.R. No. 91547: Ceferino Dulay, Rosario G. Encarnacion, and
Daniel M. Lucas
Petitioners Rosario G. Encarnacion and Daniel M. Lucas, Jr.
were appointed National Labor Relations Commissioners on
October 20, 1986, after the Commission was reorganized
pursuant to Executive Order No. 47 of President Aquino.

Later, or more precisely on November 19, 1986, Lucas was

designated Presiding Commissioner of the Commission's
Second Division; and Commissioner Ceferino E. Dulay was
appointed Presiding Commissioner of the Third Division.
Executive Order No. 252, issued by the President on July 25,
1987, amended Article 215 of the Labor Code by providing
that "the Commissioners appointed under Executive Order
No. 47 dated September 10, 1986 shall hold office for a term
of six (6) years . . . (but of those thus appointed) three shall
hold office for four (4) years, and three for two (2) years . . .
without prejudice to reappointment." Under Executive Order
No. 252, the terms of Encarnacion and Lucas would expire on
October 23, 1992, and that of Dulay, on December 18, 1992.
On November 18, 1989, R.A. No. 6715 being then already in
effect, the President extended to Encarnacion, Lucas and
Dulay new appointments as Commissioners of the NLRC
despite the fact that, according to them, they had not been
served with notice of the termination of their services as
incumbent commissioners, and no vacancy existed in their
positions. Their new appointments were submitted to
Congress, but since Congress adjourned on December 22,
1989
without
approving
their
appointments,
said
appointments became functus officio.
No other appointments were thereafter extended to
Encarnacion and Dulay. Lucas was however offered the
position of Assistant Regional Director by Secretary Drilon
and then by Acting Secretary Dionisio de la Serna (by letter
dated January 9, 1990 which referred to his appointment as
such Assistant Regional Director supposedly "issued by the
President on November 8, 1989"). Lucas declined the offer,
believing it imported a demotion.
They all pray that their removal be pronounced
unconstitutional
and
void
and
they
be
declared
Commissioners lawfully in office, or, alternatively, that they

be paid all salaries, benefits and emoluments accruing to

them for the unexpired portions of their six-year terms and
allowed to enjoy retirement benefits under applicable laws
(pursuant to R.A. 910 and the Resolution re Judge Mario Ortiz,
G. R. No. 78951, June 28, 1988).
Of the incumbent Commissioners as of the effectivity of R.A.
6715, six (6) were reappointed, namely: (1) Hon. Edna Bonto
Perez (as Presiding Commissioner, Second Division NCR]), (2)
Domingo H. Zapanta (Associate Commissioner, Second
Division), (3) Lourdes C. Javier (Presiding Commissioner, Third
Division [Luzon except NCR]), (4) Ernesto G. Ladrido III
(Presiding Commissioner, Fourth Division [Visayas]), (5)
Musib M. Buat (Presiding Commissioner, Fifth Division
[Mindanao]),
and
(6)
Oscar
N.
Abella
(Associate
Commissioner, Fifth Division). Other members appointed to
the reorganized Commission were Vicente S.E. Veloso III,
Romeo B. Putong, Rustico L. Diokno, Ireneo B. Bernardo,
Rogelio I. Rayala, Irenea E. Ceniza, Bernabe S. Batuhan, and
Leon G. Gonzaga, Jr. Appointed Chairman was Hon.
Bartolome Carale, quondam Dean of the College of Law of
the University of the Philippines.
G.R. No. 91730: Conrado Maglaya
Petitioner Conrado Maglaya alleges that he has been "a
member of the Philippine Bar for thirty-six (36) years of which
31 years . . . (had been) devoted to public service, the last 24
years in the field of labor relations law;" that he was
appointed Labor Arbiter on May 30, 1975 and "was retained
in such position despite the reorganization under the
Freedom Constitution of 1986 . . . (and) later promoted to
and appointed by the President as Commissioner of the . . .
(NLRC) First Division on October 23, 1986." He complains that
he was effectively removed from his position as a result of
the designation of the full complement of Commissioners in
and to all Five Divisions of the NLRC by Administrative Order

No. 161 dated November 18, 1989, issued by Labor Secretary

Drilon.
G.R. No. 94518: Rolando D. Gambito
Rolando Gambito passed the bar examinations in 1971,
joined the Government service in 1974, serving for sixteen
years in the Department of Health, and as Labor Arbiter in
the Department of Labor and Employment from October,
1986. He was not included in the list of newly appointed
Labor Arbiters released on March 8, 1990; and his attempt to
obtain a recosideration of his exclusion therefrom and bring
about his reinstatement as Labor Arbiter was unavailing.
The Basic Issue
A number of issues have been raised and ventilated by the
petitioners in their separate pleadings. They may all be
reduced to one basic question, relating to the
constitutionality of the provisions of Republic Act No. 6715
DECLARING VACANT "all positions of the Commissioners,
Executive Labor Arbiters and Labor Arbiters of the present
National Labor Relations Commission," 3 according to which
the public respondents
1) considered as effectively separated from the service inter
alia, all holders of said positions at the time of the effectivity
of said Republic Act No. 6715, including the positions
of Executive Director and Deputy Executive Director of the
Commission, and
2) consequently, thereafter caused the appointment of other
persons to the new positions specified in said statute: of
Chairman Commissioners, Executive Clerk, Deputy Executive
Clerk, and Labor Arbiters of the reorganized National Labor
Relations Commission. The old positions were declared
vacant because, as the statute states, of "the need to
professionalize the higher levels of officialdom invested with

adjudicatory powers and functions, and to upgrade their

qualifications, ranks, and salaries or emoluments."
As everyone knows, security of tenure is a protected right
under the Constitution. The right is secured to all employees
in privates as well as in public employment. "No officer or
employee in the civil service," the Constitution declares,
"shall be removed or suspended except for cause provided by
law." 4 There can scarcely be any doubt that each of the
petitioners commissioner, administrative officer, or labor
arbiter falls within the concept of an "officer or employee
in the civil service" since the civil service "embraces all
branches, subdivisions, instrumentalities, and agencies of the
Government, including governmentowned or controlled
corporations with original charters." 5 The Commissioners
thus had the right to remain of office until the expiration of
the terms for which they had been appointed, unless sooner
removed "for cause provided by law." So, too, the Executive
Director and Deputy Executive Director, and the Labor
Arbiters had the right to retain their positions until the age of
compulsory retirement, unless sooner removed "for cause
provided by law." None of them could be deemed to be
serving at the pleasure of the President.
Now, a recognized cause for several or termination of
employment of a Government officer or employee is the
abolition by law of his office as a result of reorganization
carried out by reason of economy or to remove redundancy
of functions, or clear and explicit constitutional mandate for
such termination of employment. 6Abolition of an office is
obviously not the same as the declaration that that office is
vacant. While it is undoubtedly a prerogative of the
legislature to abolish certain offices, it can not be conceded
the power to simply pronounce those offices vacant and
thereby effectively remove the occupants or holders thereof
from the civil service. Such an act would constitute, on its
face, an infringement of the constitutional guarantee of

security of tenure, and will have to be struck down on that

account. It can not be justified by the professed "need to
professionalize the higher levels of officialdom invested with
adjudicatory powers and functions, and to upgrade their
qualifications, ranks, and salaries or emoluments."
The Constitution does not, of course, ordain the abolition of
the petitioners' positions of their removal from their offices;
and there is no claim that the petitioners' separation from the
service is due to a cause other than RA 6715. The inquiry
therefore should be whether or not RA 6715 has worked such
an abolition of the petitioners' offices, expressly or impliedly.
This is the only mode by which, under the circumstances, the
petitioners' removal from their positions may be defended
and sustained.
It is immediately apparent that there is no express abolition
in RA 6715 of the petitioners' positions. So, justification must
be sought, if at all, in an implied abolition thereof; i.e., that
resulting from an irreconcilable inconsistency between the
nature, duties and functions of the petitioners' offices under
the old rules and those corresponding thereof under the new
law. An examination of the relevant provisions of RA 6715,
with a view to discovering the changes thereby effected on
the nature, composition, powers, duties and functions of the
Commission and the Commissioners, the Executive Director,
the Deputy Executive Director, and the labor Arbiters under
the prior legislation, fails to disclose such essential
inconsistencies.
1. Amendments as Regards the NLRC and the Commissioners
First, as regards the National Labor Relations Commissioners.
A. Nature and Composition of the Commission, Generally
1. Prior to its amendment by RA 6715, Article 213 of the
Labor Code envisaged the NLRC as being an integral part of

the Department of labor and Employment. "There shall," it

said, "be a National Labor Relations Commissionin the
Department of Labor and Employment . . . ." RA 6715 would
appear to have made the Commission somewhat more
autonomous. Article 213 now declares that, "There shall be a
National labor Relations Commission which shall be attached
to the Department of labor and Employment for program
coordination only . . . ."
2. Tripartite representation was to a certain extent restored in
the Commission. The same Section 213, as amended, now
provides that the Chairman and fourteen (14) members
composing the NLRC shall be chosen from the workers',
employers' and the public sectors, as follows:
Five (5) members each shall be chosen from among the
nominees of the workers and employers organization,
respectively. The Chairman and the four (4) remaining
members shall come from the public sector, with the latter to
be chosen from among the recommendees of the Secretary
of Labor and Employment.
However, once they assume office," the members nominated
by the workers and employers organizations shall divest
themselves of any affiliations with or interest in the
federation or association to which they belong."
B. Allocation of Powers Between NLRC En Banc and its
Divisions
Another amendment was made in respect of the allocation of
powers and functions between the Commission en banc, on
the one hand, and its divisions, on the other. Both under the
old and the amended law, the Commission was vested with
rule-making and administrative authority, as well as
adjudicatory and other powers, functions and duties, and
could sit en banc or in divisions of three (3) members each.
But whereas under the old law, the cases to be decided en

banc and those by a division were determined by rules laid

down by the Commission with the approval of the ex officio,
Chairman (the Secretary of labor) said Commission, in
other
words,
then
exerciseboth administrative
and
adjudicatory powers the law now, as amended by RA 6715,
provides that
1) the Commission "shall sit en banc only for purposes of
promulgating rules and regulations governing the hearing
and disposition of cases before any of its divisions and
regional branches and formulating policies affecting its
administration and operations;" but
2) it "shall exercise its adjudicatory and all other powers,
functions and duties through its divisions."
C. Official Stations, and Appellate Jurisdiction over Fixed
Territory
Other changes related to the official station of the
Commission and its divisions, and the territory over which
the divisions could exercise exclusive appellate jurisdiction.
1. Under the old law, the Commission en banc and its
divisions had their main office in Metropolitan Manila; and
appeals could be taken to them from decisions of Labor
Arbiters regardless of the regional office whence the case
originated.
2. Under the law now, the First and Second Divisions have
their official station in Metropolitan Manila and "handle cases
coming from the National Capital Region;" the Third Division
has its main office also in Metropolitan Manila but would have
appellate jurisdiction over "cases from other parts of Luzon;"
and the Fourth and Fifth Divisions have their main offices in
Cebu and Cagayan de Oro City, and exercise jurisdiction over
cases "from the Visayas and Mindanao," respectively; and the

appellate authority of the divisions is exclusive "within their

respective territorial jurisdiction."
D. Qualifications and Tenure of Commissioners
Revisions were also made by RA 6715 with respect to the
qualifications and tenure of the National Labor Relations
Commissioners.
Prescribed by the old law as qualifications for commissioners
appointed for a term of six (6) years were that they (a)
by members of the Philippine bar, and (b) have at least five
years' experience in handling labor-management relations. 7
RA 6715, on the other hand, requires (a) membership in the
bar, (b) engagement in the practice of law for at least 15
years, (c) at least five years' experience or exposure in the
field of labor-management relations, and (d) preferably,
residence in the region where the commissioner is to hold
office. The commissioners appointed shall hold office during
good behavior until they reach the age of sixty-five (65)
years, unless they are sooner removed for cause as provided
by law or become incapacited to discharge the duties of their
office.
2. Amendments Regarding Executive Labor Arbiters and
Labor Arbiters
A. Qualifications
The old provided for one hundred fifty (150) labor arbiters
assigned to the different regional offices or branches of the
Department of Labor and Employment (including subregional branches or provincial extension units), each
regional branch being headed by an Executive Labor Arbiter.
RA 6715 does not specify any fixed number of labor arbiters,
but simply provides that there shall be as many labor arbiters
as may be necessary for the effective and efficient operation
of the Commission.

The old law declared that Executive Labor Arbiters and Labor
Arbiters should be members of the Bar, with at least two (2)
years experience in the field of labor management relations.
They were appointed by the President upon recommendation
of the Chairman, and were "subject to the Civil Service Law,
rules and regulations."
On the other hand, RA 6715 requires that the "Executive
Labor Arbiters and Labor Arbiters shall likewise be members
of the Philippine Bar," but in addition "must have been in the
practice of law in the Philippines for at least seven (7) years,
with at least three (3) years experience or exposure in the
field of labor-management relations." For "purposes of
reappointment," however, "incumbent Executive Labor
Arbiters and Labor Arbiters who have been engaged in the
practice of law for at least five (5) years may be considered
as already qualified." They are appointed by the President, on
recommendation of the Secretary of Labor and Employment,
and are subject to the Civil Service Law, rules and
regulations.
B. Exclusive Original Jurisdiction
Before the effectivity of RA 6715, the exclusive original
jurisdiction of labor arbiters comprehended the following
cases involving all workers, whether agricultural or nonagricultural:
(1) Unfair labor practice cases;
(2) Those that workers may file involving wages, hours of
work and other terms and conditions of employment;
(3) All money claims of workers, including those based on
non-payment or underpayment of wages, overtime
compensation, separation pay and other benefits provided by
law or appropriate agreement, except claims for employees'

compensation,
benefits;

social

security,

medicare

and

maternity

to decide the case, without extension, except that the

present statute stresses that "even in the absence of
stenographic notes," the period to decide is still thirty days,
without extension.

(5) Cases arising from any violation of Article 265 of this

Code, including questions involving the legality of strikes and
lockouts.

Furthermore, RA 6715 provides that "Cases arising from the

interpretation or implementation of collective bargaining
agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed
of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be
provided in said agreements."

(4) Cases involving household services; and

Some changes were introduced by RA 6715, indicated by

italics in the enumeration which shortly follows. The
exclusive, original jurisdiction of Labor Arbiters now
embraces the following involving all workers, whether
agricultural or non-agricultural:
(1) Unfair labor practice cases;
(2) Termination disputes;
(3) If accompanies with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay,
hours of work and other terms and conditions of
employment;
(4) Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;8
(5) Cases arising from any violation of Article 264 of this
Code, including questions involving the legality of strikes and
lockouts;
(6) Except claims for employees compensation, social
security, medicare and maternity benefits, all other claims
arising from employer-employee relations, including those of
persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00), whether
or not accompanies with a claim for reinstatement.
Now, as before, the Labor Arbiters are given thirty (30)
calendar days after the submission of the case by the parties

3. Amendments as Regards the Executive Director and

Deputy Executive Director
Prior to RA 6715, there was, as earlier stated, an Executive
Director, assisted by a Deputy Executive Director, who was
charged with the "exercise (of) the administrative functions
of the Commission." 9 More particularly, his chief functions
were "to take charge of all administrative matters of the
Commission and to have direct supervision over all units and
personnel
assigned
to
perform
administrative
10
tasks." Although not so stated in the law, in the
performance of their functions, the Executive Director and
the Deputy Executive Director were obviously themselves
subject to the supervision and control of the head of office,
the ex officio Chairman of the National Labor Relations
Commission (the Secretary of Labor), or the Commission
itself.
Under RA 6715, the Secretary of Labor is no longer ex
officio Chairman of the Commission. There has been created
the office of Chairman, who "shall have the administrative
supervision over the Commission and its regional branches
and all its personnel, including the Executive Labor Arbiters
and Labor Arbiters." In this function, the law says, he shall be
"aided by the Executive Clerk of the Commission."

The Executive Clerk appears to be the officer who used to be

known under the old law as the Executive Director. The office
of Executive Director is nowhere mentioned in RA 6715. Said
Executive Clerk is given the additional responsibility of
assisting the Commission en banc and the First Division, in
performing "such similar or equivalent functions and duties
as are discharged by the Clerk of Court . . . of the Court of
Appeals." The position of Deputy Executive Clerks have also
been created whose main role is to assist the other divisions
of the Commission (the second, third, fourth and fifth) "in the
performance of such similar or equivalent functions and
duties as are discharged by the . . . Deputy Clerk(s) of the
Court of Appeals."
Summing up
1. Republic Act No. 6715 did not abolish the NLRC, or change
its essential character as a supervisory and adjudicatory
body. Under said Act, as under the former law, the NLRC
continues
to
act
collegially, whether
it performs
administrative or rule-making functions or exercises
appellate jurisdiction to review decisions and final orders of
the Labor Arbiters. The provisions conferring a somewhat
greater measure of autonomy; requiring that its membership
be drawn from tripartite sectors (workers, employees and the
public sector); changing the official stations of the
Commission's divisions, and even those prescribing higher or
other qualifications for the positions of Commissioner which,
if at all, should operate only prospectively, not to mention the
fact that the petitioners (in G.R. No. 91547) have asserted
without dispute that they possess the new qualifications
none of these can be said to work so essential or radical a
revision of the nature, powers and duties of the NLRC as to
justify a conclusion that the Act in truth did not merely
declare vacant but actually abolished the offices of
commissioners and created others in their place.

2. Similar considerations yield the same conclusion as far as

the positions of Labor Arbiters are concerned, there being no
essential inconsistency on that score between Republic Act
No. 6715 and the old law. The Labor Arbiters continue to
exercise the same basic power and function: the
adjudication, in the first instance, of certain classes of labor
disputes. Their original and exclusive jurisdiction remains
substantially the same under both the old law and the new.
Again, their incumbents' constitutionally guaranteed security
of tenure cannot be defeated by the provision for higher or
other qualifications than were prescribed under the old law;
said provision can only operate prospectively and as to new
appointees to positions regularly vacated; and there is,
besides, also no showing that the petitioning Arbiters do not
qualify under the new law.
3. The position titles of "Executive Clerk" and "Deputy
Executive Clerk(s)" provided for in RA 6715 are obviously not
those of newly-created offices, but new appellations or
designations given to the existing positions of Executive
Director and Deputy Executive Director. There is no essential
change from the prescribed and basically administrative
duties of these positions and, at the same time, no mention
in the Act of the former titles, from which the logical
conclusion is that what was intended was merely a change in
nomenclature, not an express or implied abolition. Neither
does the Act specify the qualifications for Executive Clerk and
Deputy Executive Clerks. There is no reason to suppose that
these could be higher than those for Executive Director and
Deputy Executive Director, or that anything inheres in these
positions that would preclude their incumbents from being
named Executive Clerk and Deputy Executive Clerks.
WHEREFORE, the petitions are, as they must be, GRANTED ,
and the following specific dispositions are hereby RENDERED:

1. In G.R. No. 91547, and G.R. No. 91730, the removal of

petitioners Rosario G. Encarnacion, Daniel M. Lucas, Jr.,
Ceferino E. Dulay, and Conrado Maglaya as Commissioners of
the NLRC is ruled unconstitutional and void; however, to
avoid displacement of any of the incumbent Commissioners
now serving, it not appearing that any of them is unfit or has
given cause for removal, and conformably to the alternative
prayer of the petitioners themselves, it is ORDERED that said
petitioners be paid all salaries, benefits and emoluments
accruing to them for the unexpired portions of their six-year
terms and allowed to enjoy retirement benefits under
applicable laws, pursuant to RA No. 910 and this Court's
Resolution in Ortiz vs. Commission on Elections, G.R. No.
79857, 161 SCRA 812;
This disposition does not involve or apply to respondent Hon.
Bartolome Carale, who replaced the Secretary of Labor as ex
officio Chairman of the NLRC pursuant to RA 6715, none of
the petitioners having been affected or in any manner
prejudiced by his appointment and incumbency as such;
2. In G.R. No. 90044, the removal of petitioner Pascual Y.
Reyes and petitioner-in-intervention Eugenio L. Sagmit, Jr. as
NLRC Executive Director and Deputy Executive Director,
respectively, is likewise declared unconstitutional and void,
and they are ordered reinstated as Executive Clerk and
Deputy Executive Clerk, respectively, unless they opt for
retirement, in either case with full back salaries, emoluments
and benefits from the date of their removal to that of their
reinstatement; and
3. In G.R. Nos. 87211, and 94518, petitioners-intervenors
Lourdes A. Sales and Ricardo Olairez and petitioner Rolando
D. Gambito, having also been illegally removed as Labor
Arbiters, are ordered reinstated to said positions with full
back salaries, emoluments and benefits from the dates of
their removal up to the time they are reinstated.

No pronouncement as to costs.
SO ORDERED.

G.R. No. 91636 April 23, 1992

PETER
JOHN
D.
CALDERON, petitioner,
vs.
BARTOLOME CARALE, in his capacity as Chairman of
the National Labor Relations Commission, EDNA
BONTO PEREZ, LOURDES C. JAVIER, ERNESTO G.
LADRIDO III, MUSIB M. BUAT, DOMINGO H. ZAPANTA,
VICENTE S.E. VELOSO III, IRENEO B. BERNARDO,
IRENEA E. CENIZA, LEON G. GONZAGA, JR., ROMEO B.
PUTONG, ROGELIO I. RAYALA, RUSTICO L. DIOKNO,
BERNABE S. BATUHAN and OSCAR N. ABELLA, in their
capacity as Commissioners of the National Labor
Relations Commission, and GUILLERMO CARAGUE, in
his
capacity
as
Secretary
of
Budget
and
Management, respondents.

PADILLA, J.:
Controversy is focused anew on Sec. 16, Art. VII of the 1987
Constitution which provides:
Sec. 16. The President shall nominate and, with the consent
of the Commission on Appointments, appoint the heads of

the executive departments, ambassadors, other public

ministers and consuls, or officers of the armed forces from
the rank of colonel or naval captain, and other officers whose
appointments are vested in him in this Constitution. He shall
also appoint all other officers of the Government whose
appointments are not otherwise provided for by law, and
those whom he may be authorized by law to appoint. The
Congress may, by law, vest the appointment of other officers
lower in rank in the President alone, in the courts, or in the
heads of departments, agencies, commissions, or boards.
The President shall have the power to make appointments
during the recess of the Congress, whether voluntary or
compulsory, but such appointments shall be effective only
until disapproval by the Commission on Appointments or until
the next adjournment of the Congress. 1
The power of the Commission on Appointments (CA for
brevity) to confirm appointments, contained in the
aforequoted paragraph 1 of Sec. 16, Art. VII, was first
construed in Sarmiento III vs. Mison 2 as follows:
. . . it is evident that the position of Commissioner of the
Bureau of Customs (a bureau head) is not one of those within
the first group of appointments where the consent of the
Commission on Appointments is required. As a matter of fact,
as already pointed out, while the 1935 Constitution includes
"heads
of
bureaus"
among
those
officers
whose
appointments need the consent of the Commission on
Appointments, the 1987 Constitution, on the other hand,
deliberately excluded the position of "heads of bureaus" from
appointments that need the consent (confirmation) of the
Commission on Appointments.
. . . Consequently, we rule that the President of the
Philippines acted within her constitutional authority and
power
in
appointing
respondent
Salvador
Mison,
Commissioner of the Bureau of Customs, without submitting

his nomination to the Commission on Appointments for

confirmation. . . .
. . . In the 1987 Constitution, however, as already pointed
out, the clear and expressed intent of its framers was to
exclude presidential appointments from confirmation by the
Commission on Appointments, except appointments to
offices expressly mentioned in the first sentence of Sec. 16,
Art. VII. Consequently, there was no reason to use in the third
sentence of Sec. 16, Article VII the word "alone" after the
word "President" in providing that Congress may by law vest
the appointment of lower-ranked officers in the President
alone, or in the courts, or in the heads of departments,
because the power to appoint officers whom he (the
president) may be authorized by law to appoint is already
vested in the President, without need of confirmation by the
Commission on Appointments, in the second sentence of the
same Sec. 16, Article VII." (emphasis supplied)
Next came Mary Concepcion Bautista v. Salonga, 3 this time
involving the appointment of the Chairman of the
Commission on Human Rights. Adhering to the doctrine
in Mison, the Court explained:
. . . Since the position of Chairman of the Commission on
Human Rights is not among the positions mentioned in the
first sentence of Sec. 16, Art. VII of the 1987 Constitution,
appointments to which are to be made with the confirmation
of the Commission on Appointments, it follows that the
appointment by the President of the Chairman of the CHR is
to be made without the review or participation of the
Commission on Appointments. To be more precise, the
appointment of the Chairman and Members of the
Commission on Human Rights is not specifically provided for
in the Constitution itself, unlike the Chairmen and Members
of the Civil Service Commission, the Commission on Elections
and the Commission on Audit, whose appointments are

expressly vested by the Constitution in the president with the

consent of the Commission on Appointments. The president
appoints the Chairman and Members of The Commission on
Human Rights pursuant to the second sentence in Section
16, Art. VII, that is, without the confirmation of the
Commission on Appointments because they are among the
officers of government "whom he (the President) may be
authorized by law to appoint." And Section 2(c), Executive
Order No. 163, 5 May 1987, authorizes the President to
appoint the Chairman and Members of the Commission on
Human Rights.
Consistent with its rulings in Mison and Bautista, in Teresita
Quintos Deles, et al. v. The Commission on Constitutional
Commissions, et al., 4 the power of confirmation of the
Commission on Appointments over appointments by the
President of sectoral representatives in Congress was upheld
because:

constitutional
Election).

commissions

of

Audit,

Civil

Service

and

2. Confirmation is not required when the President appoints

other government officers whose appointments are not
otherwise provided for by law or those officers whom he may
be authorized by law to appoint (like the Chairman and
Members of the Commission on Human Rights). Also, as
observed in Mison, when Congress creates inferior offices but
omits to provide for appointment thereto, or provides in an
unconstitutional manner for such appointments, the officers
are considered as among those whose appointments are not
otherwise provided for by law.
Sometime in March 1989, RA 6715 (Herrera-Veloso Law),
amending the Labor Code (PD 442) was approved. It provides
in Section 13 thereof as follows:
xxx xxx xxx

. . . Since the seats reserved for sectoral representatives in

paragraph 2, Section 5, Art. VI may be filled by appointment
by the President by express provision of Section 7, Art. XVIII
of the Constitution, it is indubitable that sectoral
representatives to the House of Representatives are among
the "other officers whose appointments are vested in the
President in this Constitution," referred to in the first
sentence of Section 16, Art. VII whose appointments are
subject to confirmation by the Commission on Appointments.

The Chairman, the Division Presiding Commissioners and

other Commissioners shall all be appointed by the President,
subject to confirmation by the Commission on Appointments.
Appointments to any vacancy shall come from the nominees
of the sector which nominated the predecessor. The
Executive Labor Arbiters and Labor Arbiters shall also be
appointed by the President, upon recommendation of the
Secretary of Labor and Employment, and shall be subject to
the Civil Service Law, rules and regulations. 5

From the three (3) cases above-mentioned, these doctrines

are deducible:

Pursuant to said law (RA 6715), President Aquino appointed

the Chairman and Commissioners of the NLRC representing
the public, workers and employers sectors. The appointments
stated that the appointees may qualify and enter upon the
performance of the duties of the office. After said
appointments, then Labor Secretary Franklin Drilon issued
Administrative Order No. 161, series of 1989, designating the
places of assignment of the newly appointed commissioners.

1. Confirmation by the Commission on Appointments is

required only for presidential appointees mentioned in the
first sentence of Section 16, Article VII, including, those
officers whose appointments are expressly vested by the
Constitution
itself
in
the
president
(like
sectoral
representatives to Congress and members of the

This petition for prohibition questions the constitutionality

and legality of the permanent appointments extended by the
President of the Philippines to the respondents Chairman and
Members of the National Labor Relations Commission (NLRC),
without submitting the same to the Commission on
Appointments for confirmation pursuant to Art. 215 of the
Labor Code as amended by said RA 6715.
Petitioner insists on a mandatory compliance with RA 6715
which has in its favor the presumption of validity. RA 6715 is
not, according to petitioner, an encroachment on the
appointing power of the executive contained in Section 16,
Art. VII, of the Constitution, as Congress may, by law, require
confirmation by the Commission on Appointments of other
officers appointed by the President additional to those
mentioned in the first sentence of Section 16 of Article VII of
the
Constitution.
Petitioner
claims
that
the Mison and Bautista rulings are not decisive of the issue in
this case for in the case at bar, the President issued
permanent appointments to the respondents without
submitting them to the CA for confirmation despite passage
of a law (RA 6715) which requires the confirmation by the
Commission on Appointments of such appointments.
The Solicitor General, on the other hand, contends that RA
6715 which amended the Labor Code transgressesSection
16, Article VII by expanding the confirmation powers of the
Commission
on
Appointments
without
constitutional
basis. Mison and Bautista laid the issue to rest, says the
Solicitor General, with the following exposition:
As interpreted by this Honorable Court in the Mison case,
confirmation by the Commission on Appointments is required
exclusively for the heads of executive departments,
ambassadors, public ministers, consuls, officers of the armed
forces from the rank of colonel or naval captain, and other
officers whose appointments are vested in the President by

the Constitution, such as the members of the various

Constitutional Commissions. With respect to the other
officers whose appointments are not otherwise provided for
by the law and to those whom the President may be
authorized by law to appoint, no confirmation by the
Commission on Appointments is required.
Had it been the intention to allow Congress to expand the list
of officers whose appointments must be confirmed by the
Commission on Appointments, the Constitution would have
said so by adding the phrase "and other officers required by
law" at the end of the first sentence, or the phrase, "with the
consent of the Commission on Appointments" at the end of
the second sentence. Evidently, our Constitution has
significantly omitted to provide for such additions.
The original text of Section 16 of Article VII of the present
Constitution as embodied in Resolution No. 517 of the
Constitutional Commission reads as follows:
"The President shall nominate and, with the consent of the
Commission on Appointments, shall appoint the heads of the
executive departments and bureaus, ambassadors, other
public ministers and consuls, or officers of the armed forces
from the rank of captain or commander, and all other officers
of the Government whose appointments are not herein
otherwise provided for by law, and those whom he may be
authorized by law to appoint. The Congress may by law vest
the appointment of inferior officers in the President alone, in
the courts or in the heads of the department."
Three points should be noted regarding sub-section 3 of
Section 10 of Article VII of the 1935 Constitution and in the
original text of Section 16 of Article VII of the present
Constitution as proposed in Resolution No. 517.

First, in both of them, the appointments of heads of bureaus

were required to be confirmed by the Commission on
Appointments.
Second, in both of them, the appointments of other officers,
"whose appointments are not otherwise provided for by law
to appoint" are expressly made subject to confirmation by
the Commission on Appointments. However, in the final
version of Resolution No. 517, as embodied in Section 16 of
Article VII of the present Constitution, the appointment of the
above mentioned officers (heads of bureaus; other officers
whose appointments are not provided for by law; and those
whom he may be authorized by law to appoint) are excluded
from the list of those officers whose appointments are to be
confirmed by the Commission on Appointments. This
amendment, reflected in Section 16 of Article VII of the
Constitution, clearly shows the intent of the framers to
exclude such appointments from the requirement of
confirmation by the Commission on Appointments.
Third, under the 1935 Constitution the word "nominate"
qualifies the entire Subsection 3 of Section 10 of Article VII
thereof.
Respondent reiterates that if confirmation is required, the
three (3) stage process of nomination, confirmation and
appointment operates. This is only true of the first group
enumerated in Section 16, but the word nominate does not
any more appear in the 2nd and 3rd sentences. Therefore,
the president's appointment pursuant to the 2nd and 3rd
sentences needs no confirmation. 6
The only issue to be resolved by the Court in the present
case is whether or not Congress may, by law, require
confirmation by the Commission on Appointments of
appointments extended by the president to government
officers additional to those expressly mentioned in the first
sentence of Sec. 16, Art. VII of the Constitution whose

appointments require confirmation by the Commission on

Appointments.
To resolve the issue, we go back to Mison where the Court
stated:
. . . there are four (4) groups of officers whom the President
shall appoint. These four (4) groups, to which we will
hereafter refer from time to time, are:
First, the heads of the executive departments, ambassadors,
other public ministers and consuls, officers of the armed
forces from the rank of colonel or naval captain, and other
officers whose appointments are vested in him in this
Constitution;
Second, all other officers of the Government
appointments are not otherwise provided for by law;

whose

Third, those whom the president may be authorized by law to

appoint;
Fourth, officers lower in rank whose appointments the
Congress may by law vest in the President alone. 7
Mison also opined:
In the course of the debates on the text of Section 16, there
were two (2) major changes proposed and approved by the
Commission. These were (1) the exclusion of the
appointments of heads of bureaus from the requirement of
confirmation by the Commission on Appointments; and (2)
the exclusion of appointments made under the second
sentence of the section from the same requirement. . . .
The second sentence of Sec. 16, Art. VII refers to all other
officers of the government whose appointments are not
otherwise provided for by law and those whom the President
may be authorized by law to appoint.

Indubitably, the NLRC Chairman and Commissioners fall

within the second sentence of Section 16, Article VII of the
Constitution, more specifically under the "third groups" of
appointees referred to in Mison, i.e. those whom the
President may be authorized by law to appoint. Undeniably,
the Chairman and Members of the NLRC are not among the
officers mentioned in the first sentence of Section 16, Article
VII whose appointments requires confirmation by the
Commission on Appointments. To the extent that RA 6715
requires confirmation by the Commission on Appointments of
the appointments of respondents Chairman and Members of
the
National
Labor
Relations
Commission,
it
is
unconstitutional because:
1) it amends by legislation, the first sentence of Sec. 16, Art.
VII of the Constitution by adding thereto appointments
requiring confirmation by the Commission on Appointments;
and
2) it amends by legislation the second sentence of Sec. 16,
Art. VII of the Constitution, by imposing the confirmation of
the Commission on Appointments on appointments which are
otherwise entrusted only with the President.
Deciding on what laws to pass is a legislative prerogative.
Determining their constitutionality is a judicial function. The
Court respects the laudable intention of the legislature.
Regretfully, however, the constitutional infirmity of Sec. 13 of
RA 6715 amending Art. 215 of the Labor Code, insofar as it
requires confirmation of the Commission on Appointments
over appointments of the Chairman and Member of the
National Labor Relations Commission (NLRC) is, as we see it,
beyond redemption if we are to render fealty to the mandate
of the Constitution in Sec. 16, Art. VII thereof.
Supreme Court decisions applying or interpreting the
Constitution shall form part of the legal system of the
Philippines. 8 No doctrine or principle of law laid down by the

Court in a decision rendered en banc or in division may be

modified or reversed except by the Court sitting en banc. 9
. . . The interpretation upon a law by this Court constitutes, in
a way, a part of the law as of the date that law was originally
passed, since this Court's construction merely establishes the
contemporaneous legislative intent that the law thus
construed intends to effectuate. The settled rule supported
by numerous authorities is a restatement of the legal maxim
"legis interpretado legis vim obtinent" the interpretation
placed upon the written law by a competent court has the
force of law. 10
The
rulings
in Mison,
Bautista and Quintos-Deles have
interpreted Art. VII, Sec. 16 consistently in one manner. Can
legislation expand a constitutional provision after the
Supreme Court has interpreted it?
In Endencia and Jugo vs. David,

11

the Court held:

By legislative fiat as enunciated in Section 13, Republic Act

No. 590, Congress says that taxing the salary of a judicial
officer is not a decrease of compensation. This is a clear
example of interpretation or ascertainment of the meaning of
the phrase "which shall not be diminished during their
continuance in office," found in Section 9, Article VIII of the
Constitution, referring to the salaries of judicial officers.
xxx xxx xxx
The rule is recognized elsewhere that the legislature cannot
pass any declaratory act, or act declaratory of what the law
was before its passage, so as to give it any binding weight
with the courts. A legislative definition of a word as used in a
statute is not conclusive of its meaning as used elsewhere;
otherwise, the legislature would be usurping a judicial
function in defining a term. (11 Am. Jur., 914, emphasis
supplied).

The legislature cannot, upon passing law which violates a

constitutional provision, validate it so as to prevent an attack
thereon in the courts, by a declaration that it shall be so
construed as not to violate the constitutional inhibition. (11
Am., Jur., 919, emphasis supplied).
We have already said that the Legislature under our form of
government is assigned the task and the power to make and
enact laws, but not to interpret them. This is more true with
regard to the interpretation of the basic law, the Constitution,
which is not within the sphere of the Legislative
department. If the Legislature may declare what a law
means, or what a specific portion of the Constitution means,
especially after the courts have in actual case ascertained its
meaning by interpretation and applied it in a decision, this
would surely cause confusion and instability in judicial
processes and court decisions. Under such a system, a final
court determination of a case based on a judicial
interpretation of the law or of the Constitution may be
undermined or even annulled by a subsequent and different
interpretation of the law or of the Constitution by the
Legislative department that would be neither wise nor
desirable, being clearly violative of the fundamental
principles of our constitutional system of government,
particularly
those
governing
the
separation
of
14
powers. (Emphasis supplied)
Congress, of course, must interpret the Constitution, must
estimate the scope of its constitutional powers when it sets
out to enact legislation and it must take into account the
relevant constitutional prohibitions. 15
. . . The Constitution did not change with public opinion.
It is not only the same words, but the same in meaning . . .
and as long as it it speaks not only in the same words, but
with the same meaning and intent with which it spoke when

it came from the hands of its framers, and was voted and
adopted by the people . . . 16
The function of the Court in passing upon an act of Congress
is to "lay the article of the Constitution which is invoked
beside the statute which is challenged and to decide whether
the latter squares with the former" and to "announce its
considered judgment upon the question." 17
It can not be overlooked that Sec. 16, Art. VII of the 1987
Constitution was deliberately, not unconsciously, intended by
the framers of the 1987 Constitution to be a departure from
the system embodied in the 1935 Constitution where the
Commission on Appointments exercised the power of
confirmation over almost all presidential appointments,
leading to many cases of abuse of such power of
confirmation. Subsection 3, Section 10, Art. VII of the 1935
Constitution provided:
3. The President shall nominate and with the consent of the
Commission on Appointments, shall appoint the heads of the
executive departments and bureaus, officers of the Army
from the rank of colonel, of the Navy and Air Forces from the
rank of captain or commander, and all other officers of the
Government whose appointments are not herein otherwise
provided for, and those whom he may be authorized by law
to appoint; . . .
The deliberate limitation on the power of confirmation of the
Commission
on
Appointments
over
presidential
appointments, embodied in Sec. 16, Art. VII of the 1987
Constitution, has undoubtedly evoked the displeasure and
disapproval of members of Congress. The solution to the
apparent problem, if indeed a problem, is not judicial or
legislative but constitutional. A future constitutional
convention
or
Congress
sitting
as
a
constituent
(constitutional) assembly may then consider either a return
to the 1935 Constitutional provisions or the adoption of a

hybrid system between the 1935 and 1987 constitutional

provisions. Until then, it is the duty of the Court to apply the
1987 Constitution in accordance with what it says and not in
accordance with how the legislature or the executive would
want it interpreted.

v. Salonga (172 SCRA 160 [1989]), I reiterated my dissent

and urged a re-examination of the doctrine stated
in Sarmiento v. Mison.

WHEREFORE, the petition is DISMISSED. Art. 215 of the Labor

Code as amended by RA 6715 insofar as it requires the
confirmation of the Commission on Appointments of
appointments of the Chairman and Members of the National
Labor Relations Commission (NLRC) is hereby declared
unconstitutional and of no legal force and effect.

The issue is again before us. Even as I continue to believe

that
the
majority
was
wrong
in
the Sarmiento andBautista cases, I think it is time to finally
accept the majority opinion as the Court's ruling on the
matter and one which everybody should respect. There will
be no end to litigation if, everytime a high government
official is appointed without confirmation by the Commission
on Appointments, another petition is filed with this Court.

SO ORDERED.

I, therefore, VOTE with the majority to DISMISS the PETITION.

Narvasa, C.J., Melencio-Herrera, Paras, Feliciano, Bidin, GrioAquino, Medialdea, Regalado, Davide, Jr., Romero and Nocon,
JJ., concur.

CRUZ, J., dissenting:

Bellosillo, J., took no part.

I dissent on the basis of my dissent in Sarmiento v. Mison,

which I believe should be re-examined instead of being
automatically re-affirmed simply because of its original
adoption. I do not believe we should persist in error on the
ground merely of adherence to judicial precedent, however
unsound.
Separate Opinion

Separate Opinions

GUTIERREZ, JR., concurring:

When the issues in this petition were first raised in Sarmiento
III v. Mison (156 SCRA 549 [1987]), I joined Justice Cruz in a
dissent because I felt that the interpretation of Section 16,
Article VII by the majority of the Court results in absurd or
irrational consequences. The framers could not have
intended what the majority ruled to be the meaning of the
provision. When the question was again raised in Bautista

GUTIERREZ, JR., J., concurring:

When the issues in this petition were first raised in Sarmiento
III v. Mison (156 SCRA 549 [1987]), I joined Justice Cruz in a
dissent because I felt that the interpretation of Section 16,
Article VII by the majority of the Court results in absurd or
irrational consequences. The framers could not have
intended what the majority ruled to be the meaning of the
provision. When the question was again raised in Bautista
v. Salonga (172 SCRA 160 [1989]), I reiterated my dissent
and urged a re-examination of the doctrine stated
in Sarmiento v. Mison.

The issue is again before us. Even as I continue to believe

that
the
majority
was
wrong
in
the Sarmiento andBautista cases, I think it is time to finally
accept the majority opinion as the Court's ruling on the
matter and one which everybody should respect. There will
be no end to litigation if, everytime a high government
official is appointed without confirmation by the Commission
on Appointments, another petition is filed with this Court.
I, therefore, VOTE with the majority to DISMISS the PETITION.
CRUZ, J., dissenting:
I dissent on the basis of my dissent in Sarmiento v. Mison,
which I believe should be re-examined instead of being
automatically re-affirmed simply because of its original
adoption. I do not believe we should persist in error on the
ground merely of adherence to judicial precedent, however
unsound.

G.R. No. 106231 November 16, 1994

HAWAIIAN-PHILIPPINE
COMPANY, petitioner,
vs.
REYNALDO J. GULMATICO, Labor Arbiter, Regional
Arbitration Branch No. VI, AND NATIONAL FEDERATION
OF SUGAR WORKERS-FOOD AND GENERAL TRADES
representing all the sugar farm workers of the
HAWAIIAN PHILIPPINE MILLING DISTRICT, respondents.
Angara, Abella, Concepcion, Regala & Cruz for petitioner.
Manlapao, Ymballa and Chaves for private respondent.

BIDIN, J.:
This petition for certiorari and prohibition with preliminary
injunction seeks to annul the Order dated June 29, 1992
issued by public respondent Labor Arbiter Reynaldo J.
Gulmatico denying petitioner's motion for "Claims on R.A.
809" in RAB VI Case No. 06-07-10256-89, the dispositive
portion of which reads, in part:
WHEREFORE, premises considered, the motion to dismiss
dated July 31, 1989 and the supplement thereto dated
September 19, 1989 filed by respondent company together
with the motion to dismiss filed by respondent Ramon Jison
dated August 27, 1990 and Francisco Jison dated September
20, 1990, respectively, are hereby DENIED.
xxx xxx xxx

(Rollo, p. 59)
The antecedent facts are as follows:
On July 4, 1989, respondent union, the National Federation of
Sugar Workers-Food and General Trades (NFSW-FGT) filed
RAB VI Case No. 06-07-10256-89 against herein petitioner
Hawaiian-Philippine Company for claims under Republic Act
809 (The Sugar Act of 1952). Respondent union claimed that
the sugar farm workers within petitioner's milling district
have never availed of the benefits due them under the law.
Under Section 9 of R.A 809, otherwise known as the Sugar
Act of 1952, it is provided, to wit:

On October 3,1989, petitioner applied a "Reply to Opposition"

followed by a "Citation of Authorities in Support of Motion to
Dismiss."
On December 20, 1989, respondent union filed an amended
complaint additionally impleading as complainants Efren
Elaco, Bienvenido Gulmatico, Alberto Amacio, Narciso
Vasquez, Mario Casociano and all the other farm workers of
the sugar planters milling with petitioner from 1979 up to the
present, and as respondents, Jose Maria Regalado, Ramon
Jison, Rolly Hernaez, Rodolfo Gamboa, Francisco Jison and all
other sugar planters milling their canes with petitioner from
1979 up to the present.

Sec. 9. In addition to the benefits granted by the Minimum

Wage Law, the proceeds of any increase in participation
granted to planters under this Act and above their present
share shall be divided between the planter and his laborers
in the following proportions;

On August 27, 1990, Ramon Jison, one of the respondents

impleaded in the amended complaint, filed a "Motion to
Dismiss and/or to Include Necessary Parties," praying for the
inclusion as co-respondents of the Asociacion de Hacenderos
de Silan-Saravia, Inc. and the Associate Planters of SilaySaravia, Inc.

Sixty per centum of the increase participation for the laborers

and forty per centum for the planters. The distribution of the
share corresponding to the laborers shall be made under the
supervision of the Department of Labor.

On June 29, 1992, public respondent promulgated the

assailed Order denying petitioner's Motion to Dismiss and
Supplemental Motion to Dismiss.

xxx xxx xxx

Hence, this petition filed by Hawaiian-Philippine Company.

(Emphasis supplied.)

Petitioner reasserts the two lesson earlier raised in its Motion

to Dismiss which public respondent unfavorably resolved in
the assailed Order.

On July 31, 1989, petitioner filed a "Motion to Dismiss,"

followed by a "Supplemental Motion to Dismiss" on
September 19, 1989. Petitioner contended that public
respondent Labor Arbiter has no jurisdiction to entertain and
resolve the case, and that respondent union has no cause of
action against petitioner.
On August 23, 1989, respondent union filed an "Opposition to
Motion to Dismiss."

These two issues are first, whether public respondent Labor

Arbiter has jurisdiction to hear and decide the case against
petitioner; and the second, whether respondent union and/or
the farm workers represented by it have a cause of action
against petitioner.
Petitioner contends that the complaint filed against it cannot
be categorized under any of the cases falling within the

jurisdiction of the Labor Arbiter as enumerated in Article 217

of the Labor Code, as amended, considering that no
employer-employee relationship exists between petitioner
milling company and the farm workers represented by
respondent union. Article 217 of the Labor Code provides:
Art. 217. Jurisdiction of Labor Arbiters and the Commission.
(a) Except as otherwise provided under this Code, the
Labor Arbiters shall have original and exclusive jurisdiction to
hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and
lockouts; and
6. Except claims for employees' compensation, social
security, medicare from maternity benefits, all other claims
arising from employer-employee relations, including those of
persons in domestic or household service, involving an
amount exceeding Five Thousand Pesos (P5,000.00), whether
or not accompanied with a claim for reinstatement.
(Emphasis supplies)

In support of the contention that the Labor Arbiter has no

jurisdiction to hear and decide the case against petitioner,
the latter cites the ruling in San Miguel Corporation
vs. NLRC, 161 SCRA 719 [1988], wherein it was held that a
single unifying element runs through the cases and disputes
falling under the jurisdiction of the Labor Arbiter and that is
that all the enumerated cases and disputes arise out of or
are in connection with an employer-employee relationship, or
some aspect or incident of such relationship. Likewise,
in Federation of Free Farmers vs. Court of Appeals, 107 SCRA
411 [1981], this Court held that:
. . . . From the beginning of the sugar industry, the centrals
have never had any privity with the plantation laborers, since
they had their own laborers to take care of. . . . Nowhere in
Republic Act 809 (the Sugar Act of 1952) can we find
anything that creates any relationship between the laborers
of the planters and the centrals. . . .
. . . Under no principle of law or equity can we impose on the
central . . . any liability to the plantation laborers. . . .
(Emphasis supplied)
On the strength of the aforecited authorities, petitioner
contends that it is not a proper party and has no involvement
in the case filed by respondent union as it is not the
employer of the respondent sugar workers.
Furthermore, to bolster its contention, petitioner cites the
Rules and Regulations Implementing RA 809 issued by the
then Wage Administration Service pursuant to the
Administrative Order of the Labor Secretary dated October 1,
1952. Section 1 thereof states:
Sec. 1. The payment of the proceeds derived from the
sixty per centum of any increase in the participation due the
laborers
shall
be directly
paid
to
the
individual
laborer concerned at the end of each milling season by his

respective planter under the Supervision of the Secretary of

Labor or his duly authorized representative by means of
payrolls prepared by said planter. (Emphasis supplied)
In addition, under Letter of Instruction No. 854 dated May 1,
1979, it is provided:
1. Payment subject to supervision. The workers' share shall
be paid directly by the planter concerned to the workers or
claimants entitled thereto subject to the supervision of the
Minister of Labor or his duly designated representative.
The responsibility for the payment of the sugar workers'
benefits under R.A. 809 was categorically ruled upon in
the Federation of Free Farmers case, supra., to wit:
. . . the matter of paying the plantation laborers of the
respective planters becomes exclusively the concern of the
planters, the laborers and the Department of Labor. Under no
principle of law or equity can we impose on the Central
here VICTORIAS any liability to the respective plantation
laborers, should any of their respective planters-employers
fail to pay their legal share. After all, since under the law it is
the Department of Labor which is the office directly called
upon to supervise such payment, it is but reasonable to
maintain that if any blame is to be fixed for the unfortunate
situation of the unpaid laborers, the same should principally
be laid on the planters and secondarily on the Department of
Labor, but surely never on the central.
Whatever liability there exists between favor of the
plantation laborers should be pinned on the PLANTERS, their
respective employers. (Emphasis supplied)
On the other hand, public respondent and respondent union
maintain the position that privity exists between petitioner
and the sugar workers. Actually, public respondent, in
resolving petitioner's Motion to Dismiss, skirted the issue of

whether an employer-employee relationship indeed exists

between petitioner milling company and the sugar workers.
He did not categorically rule thereon but instead relied on the
observation that when petitioner delivered to its planters the
quedans representing its share, petitioner did not first
ascertain whether the shares of all workers or claimants were
fully paid/covered pursuant to LOI No. 854, and that
petitioner did not have the necessary certification from the
Department of Labor attesting to such fact of delivery. In
view of these observations, public respondent subscribed to
the possibility that petitioner may still have a liability vis-avis the workers' share. Consequently, in order that the
workers would not have to litigate their claim separately,
which would be tantamount to tolerating the splitting of a
cause of action, public respondent held that petitioner should
still be included in this case as an indispensable party
without which a full determination of this case would not be
obtained.
We find for petitioner.
The Solicitor General, in its adverse Comment, correctly
agreed with petitioner's contention that while the jurisdiction
over controversies involving agricultural workers has been
transferred from the Court of Agrarian Relations to the Labor
Arbiters under the Labor Code as amended, the said
transferred jurisdiction is however, not without limitations.
The dispute or controversy must still fall under one of the
cases enumerated under Article 217 of the Labor Code,
which cases, as ruled in San Miguel, supra., arise out of or
are in connection with an employer-employee relationship.
In the case at bar, it is clear that there is no employeremployee relationship between petitioner milling company
and respondent union and/or its members-workers, a fact
which, the Solicitor General notes, public respondent did not
dispute or was silent about. Absent the jurisdictional requisite

of an employer-employee relationship between petitioner and

private respondent, the inevitable conclusion is that public
respondent is without jurisdiction to hear and decide the case
with respect to petitioner.
Anent the issue of whether respondent union and/or its
members-workers have a cause of action against petitioner,
the same must be resolved in the negative. To have a cause
of action, the claimant must show that he has a legal right
and the respondent a correlative duty in respect thereof,
which the latter violated by some wrongful act or omission
(Marquez vs. Varela, 92 Phil. 373 [1952]). In the instant case,
a simple reading of Section 9 of R.A. 809 and Section 1 of LOI
845 as aforequoted, would show that the payment of the
workers' share is a liability of the planters-employers, and not
of the milling company/sugar central. We thus reiterate Our
ruling on this matter, as enunciated in Federation of Free
Farmers, supra., to wit:
. . . . Nowhere in Republic Act No. 809 can we find anything
that creates any relationship between the laborers of the
planters and the centrals. Under the terms of said Act, the
old practice of the centrals issuing the quedans to the
respective PLANTERS for their share of the proceeds of milled
sugar per their milling contracts has not been altered or
modified. In other words, the language of the Act does not in
any manner make the central the insurer on behalf of the
plantation laborers that the latter's respective employersplanters would pay them their share. . . .
. . . . Accordingly, the only obligation of the centrals (under
Section 9 of the Act), like VICTORIAS, is to give to the
respective planters, like PLANTERS herein, the planters' share
in the proportion stipulated in the milling contract which
would necessarily include the portion of 60% pertaining to
the laborers. Once this has been done, the central is already
out of the picture. . . . (Emphasis supplied)

In the case at bar, it is disputed that petitioner milling

company has already distributed to its planters their
respective shares. Consequently, petitioner has fulfilled its
part and has nothing more to do with the subsequent
distribution by the planters of the workers' share.
Public respondent's contention that petitioner is an
indispensable party is not supported by the applicable
provisions of the Rules of Court. Under Section 7, Rule 3
thereof, indispensable parties are "parties in interest" without
whom no final determination of the action can be obtained. In
this case, petitioner cannot be deemed as a party in interest
since there is no privity or legal obligation linking it to
respondent union and/or its members-workers.
In order to further justify petitioner's compulsory joinder as a
party to this case, public respondent relies on petitioners'
lack of certification from the Department of Labor of its
delivery of the planters' shares as evidence of an alleged
"conspicuous display of concerted conspiracy between the
respondent sugar central (petitioner) and its adherent
planters to deprive the workers or claimants of their shares in
the increase in participation of the adherent planters." (Rollo,
p. 56)
The assertion is based on factual conclusions which have yet
to be proved. And even assuming for the sake of argument
that public respondent's conclusions are true, respondent
union's and/or its workers' recourse lies with the Secretary of
Labor, upon whom authority is vested under RA 809 to
supervise the payment of the workers' shares. Any act or
omission involving the legal right of the workers to said
shares may be acted upon by the Labor Secretary
either motu proprio or at the instance of the workers. In this
case however, no such action has been brought by the
subject workers, thereby raising the presumption that no
actionable violation has been committed.

Public respondent is concerned that the respondent planters

may easily put up the defense that the workers' share is with
petitioner milling company, giving rise to multiplicity of suits.
The Solicitor General correctly postulates that the planters
cannot legally set up the said defense since the payment of
the workers' share is a direct obligation of the planters to
their workers that cannot be shifted to the miller/central.
Furthermore, the Solicitor General notes that there is nothing
in RA 809 which suggests directly or indirectly that the
obligation of the planter to pay the workers' share is
dependent upon his receipt from the miller of his own share.
If indeed the planter did not receive his just and due share
from the miller, he is not without legal remedies to enforce
his rights. The proper recourse against a reneging miller or
central is for the planter to implead the former not as an
indispensable party but as a third party defendant under
Section 12, Rule 6 of the Rules of Court. In such case, herein
petitioner milling company would be a proper third party
dependent because it is directly liable to the planters (the
original defendants) for all or part of the workers' claim.
However, the planters involved in this controversy have not
filed any complaint of such a nature against petitioner,
thereby lending credence to the conclusion that petitioner
has fulfilled its part vis-a-vis its obligation under RA 809.
WHEREFORE, premises considered, the petition is GRANTED.
Public respondent Reynaldo J. Gulmatico is hereby ORDERED
to DISMISS RAB VI Case No. 06-07-10256-89 with respect to
herein petitioner Hawaiian-Philippine Company and to
PROCEED WITH DISPATCH in resolving the said case.
SO ORDERED.

G.R. No. 124193 March 6, 1998

WILLIAM DAYAG,
EDUARDO
CORTON, EDGARDO
CORTON, LEOPOLDO NAGMA, ALOY FLORES, ROMEO
PUNAY
and
EDWIN
DAYAG, petitioners,
vs.
HON. POTENCIANO S. CANIZARES, JR., NATIONAL
LABOR
RELATIONS
COMMISSION
and
YOUNG'S
CONSTRUCTION CORPORATION, respondents.

ROMERO, J.:
On March 11, 1993, petitioners William Dayag, Edwin Dayag,
Eduardo Corton, Edgardo Corton, Leopoldo Nagma, Aloy
Flores, and Romeo Punay filed a complaint for illegal
dismissal, non-payment of wages, overtime pay, premium
pay, holiday pay, service incentive leave, 13th month pay,
and actual, moral and exemplary damages against Alfredo
Young, a building contractor doing business under the firm
name Young's Construction. They filed the complaint with the
National Capital Region Arbitration Branch of the NLRC which
docketed the same as NLRC-NCR-Case No. 00-03-01891-93.
The case was subsequently assigned to Labor Arbiter
Potenciano Canizares, Jr.
Petitioners alleged that they were hired in 1990 by Young to
work as tower crane operators at the latter's construction site
at Platinum 2000 in San Juan, Metro Manila. In November
1991, they were transferred to Cebu City to work at the
construction of his Shoemart Cebu project. Petitioners worked
in Cebu until February 1993, except for Punay who stayed up
to September 29, 1992 only and Nagma, until October 21,
1992.

On January 30, 1993, William Dayag asked for permission to

go to Manila to attend to family matters. He was allowed to
do so but was not paid for the period January 23-30, 1993,
allegedly due to his accountability for the loss of certain
construction tools. Eduardo Corton had earlier left on January
16, 1993, purportedly due to harassment by Young. In
February 1993, Edgardo Corton, Aloy Flores and Edwin Dayag
also left Cebu for Manila, allegedly for the same reason.
Thereafter, petitioners banded together and filed the
complaint previously mentioned.
Instead of attending the initial hearings set by the labor
arbiter, Young filed, on July 6, 1993, a motion to transfer the
case to the Regional Arbitration Branch, Region VII of the
NLRC. He claimed that the workplace where petitioners were
regularly assigned was in Cebu City and that, in consonance
with Section 1(a) of Rule IV of the New Rules of Procedure of
the NLRC, 1 the case should have been filed in Cebu City.
Young submitted in evidence a certificate of registration of
business name showing his company's address as "Corner
Sudlon-Espaa Streets, Pari-an, Cebu City"; its business
permit issued by the Office of the Mayor of Cebu City and a
certification by the Philippine National Police-Cebu City Police
Station 2 that petitioners had been booked therein for
qualified theft upon the complaint of Young's Construction.
Petitioners opposed the same, arguing that all of them,
except for Punay, were, by that time, residents of Metro
Manila and that they could not afford trips to Cebu City.
Besides, they claimed that respondent had its main office at
Corinthian Gardens in Quezon City. Young, in reply, declared
that the Corinthian Gardens address was not his principal
place of business, but actually his residence, which he also
used as a correspondent office for his construction firm.
Agreeing that petitioners' workplace when the cause of
action accrued was Cebu City, the labor arbiter, on

September 8, 1993, granted Young's motion and ordered the

transmittal of the case to the regional arbitration branch of
Region VII. Petitioners promptly appealed said order to the
NLRC, which, however, dismissed the same on January 31,
1995, for lack of merit.
Citing Nestle
Philippines,
Inc. vs. NLRC 2 and Cruzvale,
Inc. vs. Laguesma 3 petitioners moved for a reconsideration
of the January 31, 1995 resolution of the Commission. Acting
favorably on said motion, the Commission, on August 25,
1995, annulled and set aside its resolution of January 31,
1995, and remanded the case to the original arbitration
branch of the National Capital Region for further proceedings.
This prompted Young, in turn, to file his own motion for
reconsideration seeking the reversal of the August 25, 1995
resolution of the Commission. Finding the two above-cited
cases to be inapplicable to instant case, the Commission
made a volte-face and reconsidered its August 25, 1995
resolution. It reinstated the resolution of January 31, 1995,
directing the transfer of the case to Cebu City. In addition, it
ruled that no further motion of a similar nature would be
entertained. Hence, the recourse to this Court by petitioners,
who raise the following as errors:
1. THE LABOR ARBITER A QUO ERRED IN ISSUING THE
DISPUTED ORDER DATED SEPTEMBER 8, 1993 WHEN,
OBVIOUSLY, THE SAID MOTION TO TRANSFER VENUE WAS
FILED IN VIOLATION OF SECTIONS 4 AND 5 OF RULE 15 OF
THE REVISED RULES OF COURT.
2. PUBLIC RESPONDENTS ERRED IN ISSUING THE DISPUTED
JUDGMENT WHEN, OBVIOUSLY, THE RESPONDENT, BY FILING
ITS POSITION PAPER, HAS WAIVED ITS RIGHT TO QUESTION
THE VENUE OF THE INSTANT CASE.
3. THE PUBLIC RESPONDENTS ERRED IN CONCLUDING THAT
THE WORKPLACE OF THE COMPLAINANTS IS AT CEBU CITY

AND IN DECLARING THAT THE PROPER VENUE IS AT CEBU

CITY.
Petitioner contends that the labor arbiter acted with grave
abuse of discretion when it entertained Young's motion to
transfer venue since it did not specify the time and date
when it would be heard by the labor arbiter. They raise the
suppletory application of the Rules of Court, specifically
Sections 4 and 5 of Rule 15, 4 in relation to Section 3 of Rule I
of the New Rules of Procedure of the NLRC, in support of their
contention.
We find no merit in petitioners' argument. In a long line of
decisions, 5 this Court has consistently ruled that the
application of technical rules of procedure in labor cases may
be relaxed to serve the demands of substantial justice. As
provided by Article 221 of the Labor Code "rules of evidence
prevailing in courts of law or equity shall not be controlling
and it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall
use every and all reasonable means to ascertain the facts in
each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due
process." Furthermore, while it is true that any motion that
does not comply with the requirements of Rule 15 should not
be accepted for filing and, if filed, is not entitled to judicial
cognizance, this Court has likewise held that where a rigid
application of the rule will result in a manifest failure or
miscarriage of justice, technicalities may be disregarded in
order to resolve the case. Litigations should, as much as
possible, be decided on the merits and not on
technicalities. 6 Lastly, petitioners were able to file an
opposition to the motion to transfer venue which,
undisputedly, was considered by the labor arbiter when he
issued the disputed order of September 8, 1993. There is,
hence, no showing that petitioners have been unduly
prejudiced by the motion's failure to give notice of hearing.

Given the foregoing, it seems improper to nullify Young's

motion on a mere technicality. Petitioners' averments should
be given scant consideration to give way to the more
substantial matter of equitably determining the rights and
obligations of the parties. It need not be emphasized that
rules of procedure must be interpreted in a manner that will
help secure and not defeat justice. 7

Finally, while it is true that objections to venue are deemed

waived if the respondent, through conduct, manifests
satisfaction with the venue until after the trial, or abides by it
until the matter has proceeded to a hearing, 8 no waiver of
the defense of venue on the ground of estoppel by conduct
can be attributed to Young, who consistently and persistently
contested the same even before trial.

Likewise, petitioners harp on Young's so-called "waiver" of his

right to contest the venue of the instant case. They argue
that Young is estopped from questioning the venue herein as
his motion to transfer venue was actually a position paper, a
close scrutiny of the same purportedly showing that he
admitted and denied certain allegations found in petitioners'
complaint.

Similarly, petitioners' reliance on Nestle 9 and Cruzvale 10 is

likewise misplaced. While Nestle ruled that Rule IV of the New
Rules of Procedure of the NLRC does not constitute a
complete rule on venue in cases cognizable by labor arbiters,
Section 2, Rule 4 of the Rules of Court 11 having suppletory
effect, it also held that the foregoing provision of the Rules of
Court applies only where the petitioners are labor unions or
where a single act of an employer gives rise to a cause of
action common to many of its employees working in different
branches or workplaces of the former. It is not denied that
petitioners herein are not represented by a union; nor were
they assigned to different workplaces
by Young.
Likewise, Cruzvale is inapplicable to the case at bar, the issue
involved therein being the propriety of the DOLE Region IV
Office's taking cognizance of a petition for certification
election when the company's place of business was in Cubao,
Quezon City, while the workplace of the petitioning union was
elsewhere. The instant case does not involve any certification
election; nor are the workplace of the employees and place
of business of the employer different.

Petitioners' contention rings hollow. Even if the questioned

motion was at the same time a position paper, Section 1(c) of
Rule IV provides: "(w)hen improper venue is not objected to
before or at the time of the filing of position papers, such
question shall be deemed waived" (Emphasis supplied).
Consequently, there is no waiver of improper venue if a party
questions venue simultaneously with the filing of a position
paper. Moreover, nowhere in the New Rules of Procedure of
the NLRC is there a requirement that a party must
object solely to venue, on penalty of waiving the same. In
fact, Section 1(d) provides that:
The venue of an action may be changed or transferred to a
different Regional Arbitration Branch other than where the
complaint was filed by written agreement of the parties or
when the Commission or Labor Arbiter before whom the case
is pending so orders, upon motion by the proper party in
meritorious cases (Emphasis supplied).
Young's acts are in consonance with this provision, for he
seasonably made representations to transfer the venue of
the action in the proper motion.

Young cannot, however, derive comfort from the foregoing,

this petition having been overtaken by events. In the recent
case of Sulpicio Lines, Inc. vs. NLRC 12 this Court held that the
question of venue essentially pertains to the trial and relates
more to the convenience of the parties rather than upon the
substance and merits of the case. It underscored the fact
that the permissive rules underlying provisions on venue are
intended to assure convenience for the plaintiff and his

witnesses and to promote the ends of justice. With more

reason does the principle find applicability in cases involving
labor and management because of the doctrine wellentrenched in our jurisdiction that the State shall afford full
protection to labor. The Court held that Section 1(a), Rule IV
of the NLRC Rules of Procedure on Venue was merely
permissive. In its words:

action at all. The condition will thus defeat, instead of

enhance, the ends of justice. Upon the other hand, petitioner
had branches or offices in the respective ports of call of the
vessels and could afford to litigate in any of these places.
Hence, the filing of the suit in the CFI of Misamis Oriental, as
was done in the instant case will not cause inconvenience to,
much less prejudice petitioner.

This provision is obviously permissive, for the said section

uses the word "may," allowing a different venue when the
interests of substantial justice demand a different one. In any
case, as stated earlier, the Constitutional protection accorded
to labor is a paramount and compelling factor, provided the
venue chosen is not altogether oppressive to the employer.

In the case at hand, the ruling specifying the National Capital

Region Arbitration Branch as the venue of the present action
cannot be considered oppressive to Young. His residence in
Corinthian Gardens also serves as his correspondent office.
Certainly, the filing of the suit in the National Capital Region
Arbitration Branch in Manila will not cause him as much
inconvenience as it would the petitioners, who are now
residents of Metro Manila, if the same was heard in Cebu.
Hearing the case in Manila would clearly expedite
proceedings and bring about the speedy resolution of instant
case.

The rationale for the rule is obvious. The worker, being the
economically-disadvantaged
partywhether
as
complainant/petitioner or as respondent, as the case may be,
the nearest governmental machinery to settle the dispute
must be placed at his immediate disposal, and the other
party is not to be given the choice of another competent
agency sitting in another place as this will unduly burden the
former. 13 In fact, even in cases where venue has been
stipulated by the parties, this Court has not hesitated to set
aside the same if it would lead to a situation so grossly
inconvenient to one party as to virtually negate his claim.
Again,
in Sulpicio
Lines,
this
Court,
citing Sweet
14
Lines vs. Teves, held that:
An agreement will not be held valid where it practically
negates the action of the claimant, such as the private
respondents herein. The philosophy underlying the provisions
on transfer of venue of actions is the convenience of the
plaintiffs as well as his witnesses and to promote the ends of
justice. Considering the expense and trouble a passenger
residing outside Cebu City would incur to prosecute a claim in
the City of Cebu, he would probably decide not to file the

WHEREFORE, premises considered, the resolution of February

12, 1996, of public respondent NLRC, transferring the instant
case to the Seventh Regional Arbitration Branch, Cebu City, is
SET ASIDE. Instead, its resolution dated August 25, 1995,
remanding the case to the Arbitration Branch of Origin, is
hereby REINSTATED and AFFIRMED.
SO ORDERED.

G.R. No. L-56431 January 19, 1988

NATIONAL UNION OF BANK EMPLOYEES, In Its Own
Right And In Behalf Of CBTC EMPLOYEES Affiliated
With It; CBTC EMPLOYEES UNION, In Its Own Right And
Interest And In Behalf Of All CBTC Rank And File
Employees Including Its Members, BENJAMIN GABAT,
BIENVENIDO MORALEDA, ELICITA GAMBOA, FAUSTINO
TEVES, SALVADOR LISING, and NESTOR DE LOS
SANTOS, petitioners,
vs.
THE HON. JUDGE ALFREDO M. LAZARO, CFI-MANILA
BRANCH XXXV; COMMERCLKL BANK AND TRUST
COMPANY OF THE PHILIPPINES; BANK OF THE
PHILIPPINE ISLANDS; AYALA CORPORATION; MANUEL J.
MARQUEZ; ENRIQUE ZOBEL; ALBERTO VILLA-ABRILLE;
VICENTE A.
PACIS,
JR.; and
DEOGRACIAS
A.
FERNANDO, respondents.

SARMIENTO, J.:
The sole issue in this special civil action for certiorari is
whether or not the courts may take cognizance of claims for
damages arising from a labor controversy.
The antecedent facts are not disputed.
On July 1, 1977, the Commercial Bank and Trust Company, a
Philippine banking institution, entered into a collective
bargaining agreement with the Commercial Bank and Trust
Company Union, representing the rank and file of the bank
with a membership of over one thousand employees, and an
affiliated local of the National Union of Bank Employees, a
national labor organization.

The agreement was effective until June 30, 1980, with an

automatic renewal clause until the parties execute a new
agreement.
On May 20, 1980, the union, together with the National Union
of Bank Employees, submitted to the bank management
proposals for the renegotiation of a new collective bargaining
agreement. The following day, however, the bank suspended
negotiations with the union. The bank had meanwhile
entered into a merger with the Bank of the Philippine Islands,
another Philippine banking institution, which assumed all
assets and liabilities thereof.
As a consequence, the union went to the then Court of First
Instance of Manila, presided over by the respondent Judge,
on a complaint for specific performance, damages, and
preliminary injunction against the private respondents.
Among other things, the complaint charged:
xxx xxx xxx
51. In entering in to such arrangement for the termination of
the CURRENT CBA, and the consequent destruction to
existing rights, interests and benefits thereunder,CBTC is
liable for wilful injury to the contract and property rights
thereunder as provided in Article 2220 of the Civil Code of
the Philippines;
52. By arranging for the termination of the CURRENT CBA in
the manner above described, CBTC committed breach of said
contract in bad faith, in that CBTC had taken undue
advantage of its own employees, by concealing and hiding
the negotiations towards an agreement on the sales and
merger, when it was under a statutory duty to disclose and
bargain on the effects thereof, according to law;
xxx xxx xxx

54. In virtually suppressing the collective bargaining rights of

plaintiffs under the law and as provided in the CURRENT CBA,
through shadow bargaining, calculated delay, suspension of
negotiations, concealment of bargainable issues and highhanded dictation, the CBTC and its defendant officials, as well
as the BANK OF P.I. and its defendant officials, were all
actuated by a dishonest purpose to secure an undue
advantage; on the part of the CBTC it was to avoid fresh and
additional
contractual
commitments,
which
would
substantially lessen and diminish the profitability of the sale;
and on the part of the BANKOF P.I., it was to avoid having to
face higher compensation rates of CBTC employees in the
course of integration and merger which could force the
upgrading of the benefit package for the personnel of the
merged operations, and thereby pushed personnel costs
upwards; substantial outlays and costs thereby entailed were
all deftly avoided and evaded, through the expedient of
deliberate curtailment and suppression of contractual
bargaining rights;
55. All the other defendants have actively cooperated with
and abetted the CBTC and its defendant officers in
negotiating, contriving and effecting the above arrangements
for the attainment of its dishonest purpose, for abuse of its
rights, and for taking undue advantage of its very own
employees, through the secret sale and scheduled merger;
the collective participation therein evinces machination,
deceit, wanton attitude, bad faith, and oppressive intent,
wilfully causing loss or injury to plaintiffs in a manner that is
contrary to law, morals, good customs and public policy, in
violation of Articles 21 and 28 of the Civil Code; 1
xxx xxx xxx
Predictably, the private respondents moved for the dismissal
of the case on the ground, essentially, of lack of jurisdiction
of the court.

On November 26, 1980, the respondent Judge issued an

order, dismissing the case for lack of jurisdiction. According
to the court, the complaint partook of an unfair labor practice
dispute notwithstanding the incidental claim for damages,
jurisdiction over which is vested in the labor arbiter. This
order, as well as a subsequent one denying reconsideration,
is now alleged as having been issued 'in excess of his
jurisdiction amounting to a grave abuse of discretion."
We sustain the dismissal of the case, which is, as correctly
held by the respondent court, an unfair labor practice
controversy within the original and exclusive jurisdiction of
the labor arbiters and the exclusive appellate jurisdiction of
the National Labor Relations Commission. The claim against
the Bank of Philippine Islands the principal respondent
according to the petitioners for allegedly inducing the
Commercial Bank and Trust Company to violate the existing
collective bargaining agreement in the process of renegotiation, consists mainly of the civil aspect of the unfair
labor practice charge referred to under Article 247 2 of the
Labor Code.
Under Article 248
labor practice:

of the Labor Code, it shall be an unfair

(a) To interfere with, restrain or coerce employees in the

exercise of their right to self-organization;
xxx xxx xxx
(g) To violate the duty to bargain collectively as prescribed by
this Code;
xxx xxx xxx
The act complained of is broad enough to embrace either
provision. Since it involves collective bargaining whether
or not it involved an accompanying violation of the Civil Code
it may rightly be categorized as an unfair labor practice.

The civil implications thereof do not defeat its nature as a

fundamental labor offense.
As we stated, the damages (allegedly) suffered by the
petitioners only form part of the civil component of the injury
arising from the unfair labor practice. Under Article 247 of
the Code, "the civil aspects of all cases involving unfair labor
practices, which may include claims for damages and other
affirmative relief, shall be under the jurisdiction of the labor
arbiters. 4
The petitioners' claimed injury as a consequence of the tort
allegedly committed by the private respondents, specifically,
the Bank of the Philippine Islands, under Article 1314 of the
Civil Code, 5 does not necessarily give the courts jurisdiction
to try the damage suit. Jurisdiction is conferred by law 6 and
not necessarily by the nature of the action. Civil
controversies are not the exclusive domain of the courts. In
the case at bar, Presidential Decree No. 442, as amended by
Batas Blg. 70, has vested such a jurisdiction upon the labor
arbiters, a jurisdiction the courts may not assume.
Jurisdiction over unfair labor practice cases, moreover,
belongs generally to the labor department of the
government, never the courts. In Associated Labor Union v.
Gomez, 7 we said:
A rule buttressed upon statute and reason that is frequently
reiterated in jurisprudence is that labor cases involving unfair
practice are within the exclusive jurisdiction of the CIR. By
now, this rule has ripened into dogma. It thus commands
adherence, not breach.
The fact that the Bank of the Philippine Islands is not a party
to the collective bargaining agreement, for which it "cannot
be sued for unfair labor practice at the time of the
action," 8 cannot bestow on the respondent court the

jurisdiction it does not have. In Cebu Portland Cement Co. v.

Cement Workers' Union, 9 we held:
xxx xxx xxx
There is no merit in the allegation. In the first place, it must
be remembered that jurisdiction is conferred by law; it is not
determined by the existence of an action in another tribunal.
In other words, it is not filing of an unfair labor case in the
Industrial Court that divests the court of first instance
jurisdiction over actions properly belonging to the former. It is
the existence of a controversy that properly falls within the
exclusive jurisdiction of the Industrial Court and to which the
civil action is linked or connected that removes said civil case
from the competence of the regular courts. It is for this
reason that civil actions found to be intertwined with or
arising out of, a dispute exclusively cognizable by the Court
of Industrial Relations were dismissed, even if the cases were
commenced ahead of the unfair labor practice proceeding,
and jurisdiction to restrain picketing was decreed to belong
to the Court of Industrial Relations although no unfair labor
practice case has as yet been instituted. For the court of first
instance to lose authority to pass upon a case, therefore, it is
enough that unfair labor practice case is in fact involved in or
attached to the action, such fact of course being established
by sufficient proof. 10
xxx xxx xxx
Furthermore, to hold that the alleged tortious act now
attributed to the Bank of the Philippine Islands may be the
subject of a separate suit is to sanction split jurisdiction long
recognized to be an offense against the orderly
administration of justice. As stated in Nolganza v. Apostol: 11
xxx xxx xxx

As far back as Associated Labor Union vs. Gomez [L-25999,

February 9, 1967, 19 SCRA 304] the exclusive jurisdiction of
the Court of Industrial Relations in disputes of this character
was upheld. "To hold otherwise," as succinctly stated by the
ponente, Justice Sanchez, "is to sanction split jurisdictionwhich is obnoxious to the orderly administration of justice."
Then, in Progressive Labor Association vs. Atlas Consolidated
Mining and Development Corporation [L-27585, May 29,
1970, 33 SCRA 349] decided three years later, Justice J.B.L.
Reyes, speaking for the Court, stressed that to rule that such
demand for damages is to be passed upon by the regular
courts of justice, instead of leaving the matter to the Court of
Industrial Relations, 'would be to sanction split jurisdiction,
which is prejudicial to the orderly administration of justice'.
Thereafter, this Court, in the cases of Leoquinco vs. Canada
Dry Bottling Co. [L-28621, February 22, 1971, 37 SCRA 535]
and Associated Labor Union v. Cruz ([L-28978, September 22,
1971, 41 SCRA 12], with the opinions coming from the same
distinguished jurist, adhered to such a doctrine. The latest
case in point, as noted at the outset, is the Goodrich
Employees Association decision [L-30211, October 5, 1976,
73 SCRA 297].
xxx xxx xxx
The petitioners' reliance upon Calderon v. Court of
Appeals 12 is not well-taken. Calderon has since lost its
persuasive force, beginning with our ruling in PEPSI-COLA
BOTTLING
COMPANY
v.
MARTINEZ, 13 EBON
v.
DE
14
GUZMAN, and AGUSAN DEL NORTE ELECTRIC COOP., INC. v.
SUAREZ, 15 and following the promulgation of Presidential
Decree No. 1691, restoring the jurisdiction to decide money
claims unto the labor arbiters.
Neither does the fact that the Bank of the Philippine Islands
"was not an employer at the time the act was committed'
abate a recourse to the labor arbiter. It should be noted

indeed that the Bank of the Philippine Islands assumed "all

the assets and liabilities" 16 of the Commercial Bank and Trust
Company. Moreover, under the Corporation Code:
xxx xxx xxx
5. The surviving or consolidated corporation shall be
responsible and liable for all the liabilities and obligations of
each of the constituent corporations in the same manner as if
such surviving or consolidated corporation had itself incurred
such liabilities or obligations; and any claim, action or
proceeding pending by or against any of such constituent
corporations may be prosecuted by or against the surviving
or consolidated corporation, as the case may be. Neither the
rights of creditors nor any lien upon the property of any of
such constituent corporations shall be impaired by such
merger or consolidation. 17
xxx xxx xxx
In sum, the public respondent has not acted with grave
abuse of discretion.
WHEREFORE, the petition is DISMISSED. No costs.

G.R. No. L-68544 October 27, 1986

LORENZO C. DY, ZOSIMO DY, SR., WILLIAM IBERO,

RICARDO GARCIA AND RURAL BANK OF AYUNGON,
INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND
EXECUTIVE LABOR ARBITER ALBERTO L. DALMACION,
AND CARLITO H. VAILOCES, respondents.
Marcelino C. Maximo and Ramon Barrameda for petitioners.
Carlito H. Vailoces for private respondent.

NARVASA, J.:
Petitioners assail in this Court the resolution of the National
Labor Relations Commission (NLRC) dismissing their appeal
from the decision of the Executive Labor Arbiter 1 in Cebu
City which found private respondent to have been illegally
dismissed by them.
Said private respondent, Carlito H. Vailoces, was the manager
of the Rural Bank of Ayungon (Negros Oriental), a banking
institution duly organized under Philippine laws. He was also
a director and stockholder of the bank.
On June 4, 1983, a special stockholders' meeting was called
for the purpose of electing the members of the bank's Board
of Directors. Immediately after the election the new Board
proceeded to elect the bank's executive officers.
Pursuant to Article IV of the bank's by-laws, 2 providing for
the election by the entire membership of the Board of the
executive officers of the bank, i.e., the president, vicepresident, secretary, cashier and bank manager, in that
board meeting of June 4, 1983, petitioners Lorenzo Dy,
William Ibero and Ricardo Garcia were elected president,
vice-president and corporate secretary, respectively. Vailoces

was not re-elected as bank manager, 3 Because of this

development, the Board, on July 2, 1983, passed Resolution
No. 5, series of 1983, relieving him as bank manager.
On August 3, 1983, Vailoces filed a complaint for illegal
dismissal and damages with the Ministry of Labor and
Employment against Lorenzo Dy and Zosimo Dy, Sr. The
complaint was amended on September 22, 1983 to include
additional respondents-William Ibero, Ricardo Garcia and the
Rural Bank of Ayungon, and additional causes of action for
underpayment of salary and non-payment of living
allowance.
In his complaint and position paper, Vailoces asserted that
Lorenzo Dy, after obtaining control of the majority stock of
the bank by buying the shares of Marcelino Maximo, called
an illegal stockholders' meeting and elected a Board of
Directors controlled by him; that after its illegal constitution,
said Board convened on July 2, 1983 and passed a resolution
dismissing him as manager, without giving him the
opportunity to be heard first; that his dismissal was
motivated by Lorenzo Dy's desire to take over the
management and control of the bank, not to mention the fact
that he (Dy) harbored ill feelings against Vailoces on account
of the latter's filing of a complaint for violation of the
corporation code against him and another complaint for
compulsory recognition of natural child with damages against
Zosimo Dy, Sr. 4
In their answer, Lorenzo Dy, et al. denied the charge of illegal
dismissal. They pointed out that Vailoces' position was an
elective one, and he was not re-elected as bank manager
because of the Board's loss of confidence in him brought
about by his absenteeism and negligence in the performance
of his duties; and that the Board's action was taken to protect
the interest of the bank and was "designed as an internal

control measure to secure the check and balance of authority

within the organization." 5
The Executive Labor Arbiter found that Vailoces was:
(a) Illegally dismissed, first not because of absenteeism and
negligence, but of the resentment of petitioners against
Vailoces which arose from the latter's filing of the cases for
recognition as natural child against Zosimo Dy, Sr. and for
violation of the corporation code against Lorenzo Dy; and
second, because he was not afforded the due process of law
when he was dismissed during the Board meeting of July 2,
1983 the validity of which is seriously doubted;
(b) Not paid his cost of living allowance; and
(c) Underpaid with only P500 monthly salary,
and consequently ordered the individual petitioners
Lorenzo Dy and Zosimo Dy-but not the Bank itself, to:
(a) Pay Vailoces jointly and severally, the sum of P111,480.60
representing his salary differentials, cost of living allowances,
back wages from date of dismissal up to the date of the
decision (November 29, 1983), moral and exemplary
damages, and attorney's fees; and
(b) Reinstate Vailoces to his position as bank manager, with
additional backwages from December 1, 1983 on the
adjusted salary rate of P620.00 r month until he is actually
reinstated, plus cost-of-living allowance. 6
Lorenzo Dy, et al. appealed to the NLRC, assigning error to
the decision of the Labor Arbiter on various grounds, among
them: that Vailoces was not entitled to notice of the Board
meeting of July 2, 1983 which decreed his relief because he
was no longer a member of the Board on said date; that he
nonetheless had the opportunity to refute the charges
against him and seek a formal investigation because he

received a copy of the minutes of said meeting while he was

still the bank manager (his removal was to take effect only on
August 15, 1983), instead of which he simply abandoned the
work he was supposed to perform up to the effective date of
his relief; and that the matter of his relief was within the
adjudicatory powers of the Securities and Exchange
Commission. 7
The NLRC, however bypassed the issues raised and simply
dismissed the appeal for having been filed late. It ruled that:
The record shows that a copy of the decision sent by
registered mail to respondents' counsel, Atty. Edmund Tubio,
was received on January 11, 1984 by a certain Atty. Ramon
Elesteria, a law office partner of Atty. Tubio. ... This fact is
corroborated by the certification issued by the Postmaster of
Dumaguete City... Moreover, the same is admitted by no less
than Atty. Ramon Elesteria himself in his affidavit. It further
appears in the record that on January 30, 1984 a certain Atty.
Francisco Zerna, a new lawyer engaged by the respondents
for the appeal, received a copy of the decision in this case as
certified by Julia Pepito in an affidavit subscribed before the
Senior Labor Arbitration Specialist. The appeal was filed only
on February 17, 1984.
Considering that it was a law partner of the respondents'
counsel who received on January 11, 1984 the registered
letter, his actual receipt thereof completes the service. ...
And even assuming that such was not a valid service, since
the respondents received another copy of the decision on
January 30, 1984, through their newly engaged counsel, it is
therefore our opinion that the appeal herein was filed out of
time, whether the time is reckoned from the receipt by Atty.
Elesteria or Atty. Zerna, and, for this reason, we can not give
due course to his appeal. 8
In this Court, petitioners assail said ruling as an arbitrary
deprivation of their right to appeal through unreasonable

adherence to procedural technicality. They argue that they

should not be bound by the service of the Labor Arbiter's
decision by Atty. Elesteria on January 11, 1984 or by Atty.
Zerna on January 30, 1984, because neither lawyer was
authorized to accept service for their counsel Atty. Tubio, and
that their 10 day period of appeal should be counted from
February 10, 1984 when they actually received the copy of
the decision from Atty. Zerna. On the merits, they assert that
the Arbiter's finding of illegal dismissal was without
evidentiary basis, that it was error to impose the obligation to
pay damages upon the individual petitioners, instead of the
Rural Bank of Ayungon, which was Vailoces' real employer,
and that the damages awarded are exorbitant and
oppressive.
While the comment of Vailoces traverses the averments of
the petition, that of the Solicitor General on behalf of public
respondents perceives the matter as an intracorporate
controversy of the class described in Section 5, par. (c), of
Presidential Decree No. 902-A, namely:
(c) Controversies in the election or appointments of directors,
trustees, officers or managers of such corporations,
partnerships or associations.
explicitly declared to be within the original and exclusive
jurisdiction of the Securities and Exchange Commission, and
recommends that the questioned resolution of the NLRC as
well as the decision of the Labor Arbiter be set aside as null
and void. 9
In truth, the issue of jurisdiction is decisive and renders
unnecessary consideration of the other questions raised.
There is no dispute that the position from which private
respondent Vailoces claims to have been illegally dismissed
is an elective corporate office. He himself acquired that
position through election by the bank's Board of Directors at

the organizational meeting of November 17, 1979. 10 He lost

that position because the Board that was elected in the
special stockholders' meeting of June 4, 1983 did not re-elect
him. And when Vailoces, in his position paper submitted to
the Labor Arbiter, impugned said stockholders' meeting as
illegally convoked and the Board of Directors thereby elected
as illegally constituted, 11 he made it clear that at the heart
of the matter was the validity of the directors' meeting of
June 4, 1983 which, by not re-electing him to the position of
manager, in effect caused termination of his services.
The case thus falls squarely within the purview of Section 5,
par. (c), No. 902-A just cited. In PSBA vs. Leao, 12 this Court,
confronted with a similar controversy, ruled that the
Securities and Exchange Commission, not the NLRC, has
jurisdiction:
It was at a Board regular monthly meeting held on August 1,
1981, that three directors were elected to fill vacancies. And,
it was at the regular Board meeting of September 5, 1981
that all corporate positions were declared vacant in order to
effect a reorganization, and at the ensuing election of
officers, Tan was not re-elected as Executive Vice-President.
Basically, therefore, the question is whether the election of
directors on August 1, 1981 and the election of officers on
September 5, 1981, which resulted in Tan's failure to be reelected, were validly held. This is the crux of the question
that Tan has raised before the SEC. Even in his position paper
before the NLRC, Tan alleged that the election on August 1,
1981 of the three directors was in contravention of the PSBA
By-Laws providing that any vacancy in the Board shall be
filled by a majority vote of the stockholders at a meeting
specially called for the purpose. Thus, he concludes, the
Board meeting on September 5, 1981 was tainted with
irregularity on account of the presence of illegally elected
directors without whom the results could have been different.

Tan invoked the same allegations in his complaint filed with

the SEC. So much so, that on December 17, 1981, the SEC
(Case No. 2145) rendered a Partial Decision annulling the
election of the three directors and ordered the convening of a
stockholders' meeting for the purpose of electing new
members of the Board. The correctness of d conclusion is not
for us to pass upon in this case. Tan was present at said
meeting and again sought the issuance of injunctive relief
from the SEC.
The foregoing indubitably show that, fundamentally, the
controversy is intra-corporate in nature. It revolves around
the election of directors, officers or managers of the PSBA,
the relation between and among its stockholders, and
between them and the corporation. Private respondent also
contends that his "ouster" was a scheme to intimidate him
into selling his shares and to deprive him of his just and fair
return on his investment as a stockholder received through
his salary and allowances as Executive Vice-President. Vis-avis the NLRC, these matters fall within the jurisdiction of the
SEC. Presidential Decree No. 902-A vests in the Securities
and Exchange Commission:
... Original and exclusive jurisdiction to hear and decide cases
involving:
a) Devices or schemes employed by or any acts, of the board
of directors, business associates, its officers or partners,
amounting to fraud and misrepresentation) which may be
detrimental to the interest of the public and/or of the
stockholders, partners, members of associations or
organizations registered with the Commission.
b) Controversies arising out of intracorporate or partnership
relations, between and among stockholders, members or
associates; between any of all of them and the corporation,
partnership or association of which they are stockholders,
members or associates, respectively; and between such

corporation, partnership or association and the state insofar

as it concerns their individual franchise or right to exist as
such entity;
c) Controversies in the election or appointments of directors,
trustees, officers or managers of such corporations,
partnership or associations.
This is not a case of dismissal. The situation is that of
a corporate office having been declared vacant, and of Tan's
not having been elected thereafter. The matter of whom to
elect is a prerogative that belongs to the Board, and involves
the exercise of deliberate choice and the faculty of
discriminative selection. Generally speaking, the relationship
of a person to corporation, whether as officer or as agent or
employee, is not determined by the nature of the services
performed, but by the incidents of the relationship as they
actually exist.
Respondent Vailoces' invocation of estoppel as against
petitioners with respect to the issue of jurisdiction is
unavailing. In the first place, it is not quite correct to state
that petitioners did not raise the point in the lower tribunal.
Although rather off handedly, in their appeal to the NLRC
they called attention to the Labor Arbiter's lack of jurisdiction
to rule on the validity of the meeting of July 2, 1983, but the
dismissal of the appeal for alleged tardiness effectively
precluded consideration of that or any other question raised
in the appeal. More importantly, estoppel cannot be invoked
to prevent this Court from taking up the question of
jurisdiction, which has been apparent on the face of the
pleadings since the start of litigation before the Labor Arbiter.
It is well settled that the decision of a tribunal not vested
with appropriate jurisdiction is null and void. Thus,
in Calimlim vs. Ramirez, 13 this Court held:
A rule that had been settled by unquestioned acceptance and
upheld in decisions so numerous to cite is that the

jurisdiction of a court over the subject matter of the action is

a matter of law and may not be conferred by consent or
agreement of the parties. The lack of jurisdiction of a court
may be raised at any stage of the proceedings, even on
appeal. This doctrine has been qualified by recent
pronouncements which stemmed principally from the ruling
in the cited case of Sibonghanoy. It is to be regretted,
however, that the holding in said case had been applied to
situations which were obviously not contemplated therein.
The
exceptional
circumstances
involved
in Sibonghanoy which justified the departure from the
accepted concept of non-waivability of objection to
jurisdiction has been ignored and, instead a blanket doctrine
had been repeatedly upheld that rendered the supposed
ruling in Sibonghanoy not as the exception, but rather the
general rule, virtually overthrowing altogether the timehonored principle that the issue of jurisdiction is not lost by
waiver or by estoppel.

at once be deemed sufficient basis of estoppel. It could have

been the result of an honest mistake or of divergent
interpretation of doubtful legal provisions. If any fault is to be
imputed to a party taking such course of action, part of the
blame should be placed on the court which shall entertain
the suit, thereby lulling the parties into believing that they
pursued their remedies in the correct forum. Under the rules,
it is the duty of the court to dismiss an action 'whenever it
appears that court has no jurisdiction over the subject
matter.' (Section 2, Rule 9, Rules of Court) Should the Court
render a judgment without jurisdiction, such judgment may
be impeached or annulled for lack of jurisdiction (Sec. 30,
Rule 132, Ibid), within ten (10) years from the finality of the
same (Art. 1144, par. 3, Civil Code).

xxx xxx xxx

The failure of the appellees to invoke anew the

aforementioned solid ground of want of jurisdiction of the
lower court in this appeal should not prevent this Tribunal to
take up that issue as the lack of jurisdiction of the lower court
is apparent upon the face of the record and it is fundamental
that a court of justice could only validly act upon a cause of
action or subject matter of a case over which it has
jurisdiction and said jurisdiction is one conferred only by law;
and cannot be acquired through, or waived by, any act or
omission of the parties (Lagman vs. CA, 44 SCRA 234
[1972]); hence may be considered by this court motu proprio
(Gov't. vs. American Surety Co., 11 Phil. 203 [1908])... 14

It is neither fair nor legal to bind a party by the result of a

suit or proceeding which was taken cognizance of in a court
which lacks jurisdiction over the same irrespective of the
attendant circumstances. The equitable defense of estoppel
requires knowledge or consciousness of the facts upon which
it is based . The same thing is true with estoppel by conduct
which may be asserted only when it is shown, among others,
that the representation must have been made with
knowledge of the facts and that the party to whom it was
made is ignorant of the truth of the matter (De Castro vs.
Gineta, 27 SCRA 623). The filing of an action or suit in a court
that does not possess jurisdiction to entertain the same may
not be presumed to be deliberate and intended to secure a
ruling which could later be annulled if not favorable to the
party who filed such suit or proceeding in a court that lacks
jurisdiction to take cognizance of the same, such act may not

To be sure, petitioners failed to raise the issue of jurisdiction

in their petition before this Court. But this, too, is no
hindrance to the Court's considering said issue.

These considerations make inevitable the conclusion that the

judgment of the Labor Arbiter and the resolution of the NLRC
are void for lack of cause of jurisdiction, and this Court must
set matters aright in the exercise of its judicial power. It is of
no moment that Vailoces, in his amended complaint, seeks

other relief which would seemingly fan under the jurisdiction

of the Labor Arbiter, because a closer look at theseunderpayment of salary and non-payment of living
allowance-shows that they are actually part of the perquisites
of his elective position, hence, intimately linked with his
relations with the corporation. The question of remuneration,
involving as it does, a person who is not a mere employee
but a stockholder and officer, an integral part, it might be
said, of the corporation, is not a simple labor problem but a
matter that comes within the area of corporate affairs and
management, and is in fact a corporate controversy in
contemplation of the Corporation Code.
WHEREFORE, the questioned decision of the Labor Arbiter
and the Resolution of the NLRC dismissing petitioners' appeal
from said decision are hereby set aside because rendered
without jurisdiction. The amended complaint for illegal
dismissal, etc., basis of said decision and Resolution, is
ordered dismissed, without prejudice to private respondent's
seeking recourse in the appropriate forum.
SO ORDERED.

G.R. No. 79762 January 24, 1991

FORTUNE
CEMENT
CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (First
Division) and ANTONIO M. LAGDAMEO, respondents.
De Leon, Diokno & Associates Law Offices for petitioner.
Romarie G. Villonco and George C. Nograles for private
respondent.

GRIO-AQUINO, J.:p
This is a petition for certiorari with prayer to annul the
resolution dated May 29, 1987 of respondent National Labor
Relations Commission (NLRC) reversing the order dated
December 3, 1985 of the Labor Arbiter which dismissed
private respondent Antonio M. Lagdameo's (Lagdameo for
brevity) complaint for Illegal Dismissal (NLRC NCR Case No.
1-228-85) against petitioner Fortune Cement Corporation
(FCC for brevity) for lack of jurisdiction.
Lagdameo is a registered stockholder of FCC.

On October 14, 1975, at the FCC Board of Directors' regular

monthly meeting, he was elected Executive Vice-President of
FCC effective November 1, 1975 (p. 3, Rollo).
Some eight (8) years later, or on February 10, 1983, during a
regular meeting, the FCC Board resolved that all of its
incumbent corporate officers, including Lagdameo, would be
"deemed" retained in their respective positions without
necessity of yearly reappointments, unless they resigned or
were terminated by the Board (p. 4, Rollo).

We find merit in the petition.

The sole issue to be resolved is whether or not the NLRC has
jurisdiction over a complaint filed by a corporate executive
vice-president for illegal dismissal, resulting from a board
resolution dismissing him as such officer.
Section 5 of Presidential Decree No. 902-A vests in the SEC
original and exclusive jurisdiction over this controversy:

At subsequent regular meetings held on June 14 and 21,

1983, the FCC Board approved and adopted a resolution
dismissing Lagdameo as Executive Vice-President of the
company, effective immediately, for loss of trust and
confidence (p. 4, Rollo).

Sec. 5. In addition to the regulatory and adjudicative

functions of the Securities and Exchange Commission over
corporations, partnerships and other forms of associations
registered with it as expressly granted under existing laws
and decrees, it shall have original and exclusive jurisdiction
to hear and decide cases involving:

On June 21, 1983, Lagdameo filed with the National Labor

Relations Commission (NLRC), National Capital Region, a
complaint for illegal dismissal against FCC (NLRC-NCR Case
No. 1-228-85) alleging that his dismissal was done without a
formal hearing and investigation and, therefore, without due
process (p. 63, Rollo).

a) Devices and schemes employed by or any acts, of the

board of directors, business associates, its officers or
partners, amounting to fraud and misrepresentation which
may be detrimental to the interest of the public and/or
stockholders, partners, members of associations or
organization registered with the Commission;

On August 5, 1985, FCC moved to dismiss Lagdameo's

complaint on the ground that his dismiss as a corporate
officer is a purely intra-corporate controversy over which the
Securities and Exchange Commission (SEC) has original and
exclusive jurisdiction.

b) Controversies arising out of intra-corporate or partnership

relations, between and among stockholders, members, or
associates; between any or all of them and the corporation,
partnership or association of which they are stockholders,
members or associates, respectively; and between such
corporation, partnership or association and the state insofar
as it concerns their individual franchise or right to exist as
such entity;

The Labor Arbiter granted the motion to dismiss (p.

22, Rollo). On appeal, however, the NLRC set aside the Labor
Arbiter's order and remanded the case to the Arbitration
Branch "for appropriate proceedings" (NLRC Resolution dated
April 30, 1987). The NLRC denied FCC's motion for
reconsideration (p. 5, Rollo). Dissatisfied, FCC filed this
petition for certiorari.

c) Controversies in the election or appointments of directors,

trustees, officers or managers of such corporations,
partnership or associations." (Section 5, P.D. 902-A; Emphasis
supplied.)

In reversing the decision of Labor

Villanueva, respondent NLRC held:

Arbiter Porfirio

E.

. . . . It is not disputed that complainant Lagdameo was an

employee of respondent Fortune Cement Corporation, being
then the Executive Vice-President. For having been dismissed
for alleged loss of trust and confidence, complainant
questioned his dismissal on such ground and the manner in
which he was dismissed, claiming that no investigation was
conducted, hence, there was and is denial of due process.
Predicated on the above facts, it is clear to Us that a labor
dispute had arisen between the appellant and the respondent
corporation, a dispute which falls within the original and
exclusive jurisdiction of the NLRC. A labor dispute as defined
in the Labor Code includes any controversy or matter
concerning terms or conditions of employment or the
association or representation of persons in negotiating,
fixing, maintaining, changing or arranging the terms and
conditions of employment regardless of whether or not the
disputants stand in the proximate relations of employers and
employees." (pp. 16-17, Rollo).
The Solicitor General, declining to defend public respondent
in its pleading entitled "Manifestation in Lieu of Comment,"
aptly observed:
The position of "Executive Vice-President," from which private
respondent Lagdameo claims to have been illegally
dismissed, is an elective corporate office. He himself
acquired that position through election by the corporation's
Board of Directors, although he also lost the same as a
consequence of the latter's resolution.
Indeed the election, appointment and/or removal of an
executive vice-president is a prerogative vested upon a
corporate board.

And it must be, not only because it is a practice observed in

petitioner Fortune Cement Corporation, but more so, because
of an express mandate of law. (p. 65, Rollo.)
The Solicitor General pointed out that "a corporate officer's
dismissal is always a corporate act and/or intra-corporate
controversy and that nature is not altered by the reason or
wisdom which the Board of Directors may have in taking such
action." The dispute between petitioner and Lagdameo is of
the class described in Section 5, par. (c) of Presidential
Decree No. 902-A, hence, within the original and exclusive
jurisdiction of the SEC. The Solicitor General recommended
that the petition be granted and NLRC-NCR Case No. 1-22885 be dismissed by respondent NLRC for lack of jurisdiction
(p. 95, Rollo).
In PSBA vs. Leao (127 SCRA 778), this Court, confronted
with a similar controversy, ruled that the SEC, not the NLRC,
has jurisdiction:
This is not a case of dismissal. The situation is that of a
corporate office having been declared vacant, and of Tan's
not having been elected thereafter. The matter of whom to
elect is a prerogative that belongs to the Board, and involves
the exercise of deliberate choice and the faculty of
discriminative selection. Generally speaking, the relationship
of a person to a corporation, whether as officer or as agent or
employee is not determined by the nature of the services
performed, but by the incidents of the relationship as they
actually exist.
Lagdameo claims that his dismissal was wrongful, illegal, and
arbitrary, because the "irregularities" charged against him
were not investigated (p. 85, Rollo); that the case of PSBA
vs. Leao (supra) cited by the Labor Arbiter finds no
application to his case because it is not a matter of corporate
office having been declared vacant but one where a
corporate officer was dismissed without legal and factual

basis and without due process; that the power of dismissal

should not be confused with the manner of exercising the
same; that even a corporate officer enjoys security of tenure
regardless of his rank (p. 97, Rollo); and that the SEC is
without power to grant the reliefs prayed for in his complaint
(p. 106, Rollo).
The issue of the SEC's power or jurisdiction is decisive and
renders unnecessary a consideration of the other questions
raised by Lagdameo. Thus did this Court rule in the case
of Dy vs. National Labor Relations Commission (145 SCRA
211) which involved a similar situation:
It is of no moment that Vailoces, in his amended complaint,
seeks other reliefs which would seemingly fall under the
jurisdiction of the Labor Arbiter, because a closer look at
these underpayment of salary and non-payment of living
allowance shows that they are actually part of the
perquisites of his elective position, hence, intimately linked
with his relations with the corporation. The question of
remuneration, involving as it does, a person who is not a
mere employee but a stockholder and officer, an integral
part, it might be said, of the corporation, is not a simple labor
problem but a matter that comes within the area of
corporate affairs and management, and is in fact a corporate
controversy in contemplation of the Corporation Code.
(Emphasis ours.)
WHEREFORE, the questioned Resolution of the NLRC
reversing the decision of the Labor Arbiter, having been
rendered without jurisdiction, is hereby reversed and set
aside. The decision of the Labor Arbiter dated December 3,
1985 dismissing NLRC-NCR Case No. 1-228-85 is affirmed,
without prejudice to private respondent Antonio M.
Lagdameo's seeking recourse in the appropriate forum. No
costs.
SO ORDERED.

G.R. No. 118088 November 23, 1995

MAINLAND CONSTRUCTION, CO., INC., and/or LUCITA

LU CARABUENA, ROBERT L. CARABUENA, ELLEN LU
CARABUENA,
and
MARTIN
LU, petitioners,
vs.
MILA MOVILLA, ERNESTO MOVILLA, JR., MILA JUDITH C.
MOVILLA, JUDE BRIX C. MOVILLA, JONARD ELLERY C.
MOVILLA, AND MAILA JONAH M. QUIMBO, surviving
heirs of ERNESTO MOVILLA, and THE HONORABLE
COMMISSIONER of the NATIONAL LABOR RELATIONS
COMMISSION-5TH DIVISION,respondents.

HERMOSISIMA, JR., J.:

Petitioners urge this Court to set aside the Decision of the
National Labor Relations Commission (NLRC), dated May 30,
1994,
in
NLRC-CA
No.
M-000949-92 for having been rendered with grave abuse of
discretion amounting to lack of jurisdiction. This reversed the
decision of the Labor Arbiter in case No. RAB-11-10-9988391. Petitioners' motion for reconsideration of the NLRC
decision was denied in a Resolution, dated August 31, 1994.
Mainland Construction Co., Inc. is a domestic corporation,
duly organized and existing under Philippine laws, having
been issued a certificate of registration by the Securities and
Exchange Commission (SEC) on July 26, 1977, under Registry
Number 74691. Its principal line of business is the general
construction of roads and bridges and the operation of a
service shop for the maintenance of equipment. Respondents
on the other hand, are the surviving heirs of complainant,
Ernesto Movilla, who died during the pendency of the action
with the Labor Arbiter.
Records show that Ernesto Movilla, who was a Certified Public
Accountant during his lifetime, was hired as such by Mainland

in 1977. Thereafter, he was promoted to the position of

Administrative Officer with a monthly salary of P4,700.00. 1
Ernesto Movilla, recorded as receiving a fixed salary of
P4,700.00 a month, was registered with the Social Security
System (SSS) as an employee of petitioner Corporation. His
contributions to the SSS, Medicare and Employees
Compensation Commission (ECC) were deducted from his
monthly earnings by his said employer. 2
On April 12, 1987, during petitioner corporation's annual
meeting of stockholders, the following were elected members
of the Board of Directors, viz.: Robert L. Carabuena, Ellen L.
Carabuena, Lucita Lu Carabuena, Martin G. Lu and Ernesto L.
Movilla.
On the same day, an organizational meeting was held and
the Board of Directors elected Ernesto Movilla as
Administrative Manager. 3 He occupied the said position up to
the time of his death.
On April 2, 1991, the Department of Labor and Employment
(DOLE) conducted a routine inspection on petitioner
corporation and found that it committed such irregularities in
the conduct of its business as:
1. Underpayment of wages under R.A. 6727 and RTWPB-XI01;
2. Non-implementation of Wage Order No. RTWPB-XI-02;
3. Unpaid wages for 1989 and 1990;
4. Non-payment of holiday pay and service incentive leave
pay; and
5. Unpaid 13th month pay (remaining balance for 1990). 4
On the basis of this finding, petitioner corporation was
ordered by DOLE to pay to its thirteen employees, which

included Movilla, the total amount of P309,435.89,

representing their salaries, holiday pay, service incentive
leave pay differentials, unpaid wages and 13th month pay.
All the employees listed in the DOLE's order were paid by
petitioner corporation, except Ernesto Movilla.
On October 8, 1991, Ernesto Movilla filed a case against
petitioner corporation and/or Lucita, Robert, and Ellen, all
surnamed Carabuena, for unpaid wages, separation pay and
attorney's fees, with the Department of Labor and
Employment, Regional Arbitration, Branch XI, Davao City.
On February 29, 1992, Ernesto Movilla died while the case
was being tried by the Labor Arbiter and was promptly
substituted by his heirs, private respondents herein, with the
consent of the Labor Arbiter.
The Labor Arbiter rendered judgment on June 26, 1992,
dismissing the complaint on the ground of lack of jurisdiction.
Specifically, the Labor Arbiter made the following
ratiocination:
It is clear that in the case at bar, the controversy presented
by complainant is intra-corporate in nature and is within the
jurisdiction of the Securities and Exchange Commission,
pursuant to P.D. 902-A (Phil. School of Business
Administration, et al. v. Leano, G.R. No. L-58468, February 24,
1984; Dy et al. v. NLRC, et al., G.R. No. L-68544, October 27,
1986). What Movilla is claiming against respondents are his
alleged unpaid salaries and separation pay as Administrative
Manager of the corporation for which position he was
appointed by the Board of Directors. His claims therefore fall
under the jurisdiction of the Securities and Exchange
Commission because this is not a simple labor problem; but a
matter that comes within the area of corporate affairs and
management, and is in fact a corporate controversy in
contemplation of the Corporation Code. (Fortune Cement

Corporation v. NLRC, et al., G.R. No. 79762, January 24,

1991). 5
Aggrieved by this decision, respondents appealed to the
National Labor Relations Commission (NLRC). The NLRC ruled
that the issue in the case was one which involved a labor
dispute between an employee and petitioner corporation
and, thus, the NLRC had jurisdiction to resolve the case. The
dispositive portion of the NLRC decision reads:
WHEREFORE, the assailed decision is Reversed and Set
Aside. Respondents are ordered to pay the heirs of
complainant the following:
1. Unpaid salaries from January 1989 to September 1991 in
the sum of P155,100.00;
2. Separation pay in the sum of P65,800.00;
3. Moral damages in the sum of P10,000.00;
4. Indemnity in the sum of P3,000.00; and,
5. Attorney's fees equivalent to 10% of the total award. 6
The pivotal issue in this case is which of the two agencies of
the government the NLRC or the SEC has jurisdiction
over the controversy.
As we stated earlier, it is of course the contention of
petitioners that the NLRC committed grave abuse of
discretion when it nullified the decision of the Labor Arbiter
which dismissed the complaint of Movilla for unpaid wages,
separation pay and attorney's fees on the ground of lack of
jurisdiction. Petitioners take the position that, since Ernesto
Movilla was a corporate officer, the controversy as to his
compensation is within the jurisdiction of the SEC as
mandated by P.D. 902-A and not with the NLRC.

We find for the respondents, it appearing that petitioners'

contention is bereft of merit.
In order that the SEC can take cognizance of a case, the
controversy must pertain to any of the following
relationships: a) between the corporation, partnership or
association and the public; b) between the corporation,
partnership or association and its stockholders, partners,
members
or
officers;
c) between the corporation, partnership or association and
the State as far as its franchise, permit or license to operate
is concerned; and d) among the stockholders, partners or
associates themselves. 7 The fact that the parties involved in
the controversy are all stockholders or that the parties
involved are the stockholders and the corporation does not
necessarily place the dispute within the ambit of the
jurisdiction of SEC. The better policy to be followed in
determining jurisdiction over a case should be to consider
concurrent factors such as the status or relationship of the
parties or the nature of the question that is the subject of
their controversy. 8 In the absence of any one of these
factors, the SEC will not have jurisdiction. Furthermore, it
does not necessarily follow that every conflict between the
corporation and its stockholders would involve such
corporate matters as only the SEC can resolve in the exercise
of its adjudicatory or quasi-judicial powers. 9
In the case at bench, the claim for unpaid wages and
separation pay filed by the complainant against petitioner
corporation involves a labor dispute. It does not involve an
intra-corporate matter, even when it is between a
stockholder and a corporation. It relates to an employeremployee relationship which is distinct from the corporate
relationship of one with the other. Moreover, there was no
showing of any change in the duties being performed by
complainant as an Administrative Officer and as an
Administrative Manager after his election by the Board of

Directors. What comes to the fore is whether there was a

change in the nature of his functions and not merely the
nomenclature or title given to his job.
Indeed, Ernesto Movilla worked as an administrative officer of
the company for several years and was given a fixed salary
every month. To further sustain this assertion Movilla also
submitted a joint affidavit executed by Juanito S. Malubay
and Delia S. Luciano, Project Engineer and Personnel-InCharge, respectively, of petitioner corporation, attesting that
they personally knew Movilla and that he was employed in
the company. A Premium Certification issued by an
authorized representative of petitioners was also presented
to show his actual monthly earnings as well as his monthly
contributions to the SSS, Medicare and ECC. 10 Movilla's
registration in the SSS by petitioner corporation added
strength to the conclusion that he was petitioner
corporation's employee as coverage by the said law is
predicated on the existence of an employer-employee
relationship. 11 Furthermore, petitioner corporation failed to
present evidence which showed that, after his election as
Administrative Manager, he was excluded from the coverage
of the SSS, Medicare and ECC.
He also presented, appearing to be relevant to the issue, the
result of the investigation conducted by DOLE which found
that petitioner corporation has transgressed several labor
standard laws against its employees.
As correctly ruled by the NLRC:
The claims for unpaid salaries/monetary benefits and
separation pay, are not a corporate conflict as respondents
presented them to be. If complainant is not an employee,
respondent should have contested the DOLE inspection
report, What they did was to exclude complainant from the
order of payment . . . and worse, he was not both given
responsibilities and paid his salaries for the succeeding

months . . . . This is a clear case of constructive dismissal

without due process . . . 12
The existence of an employer-employee relationship is a
factual question and public respondent's findings are
accorded great weight and respect as the same are
supported by substantial evidence. 13 Hence, we uphold the
conclusion of public respondent that Ernesto Movilla was an
employee of petitioner corporation.
It is pertinent to note that petitioner corporation is not
prohibited from hiring its corporate officers to perform
services under a circumstance which will make him an
employee. 14 Moreover, although a director of a corporation is
not, merely by virtue of his position, its employee, said
director may act as an employee or accept duties that make
him also an employee. 15
Since Ernesto Movilla's complaint involves a labor dispute, it
is the NLRC, under Article 217 of the Labor Code of the
Philippines, which has jurisdiction over the case at bench.
WHEREFORE, the petition is DISMISSED for lack of showing of
any grave abuse of discretion on the part of public
respondent NLRC. The assailed decision of public respondent
is thus AFFIRMED.
SO ORDERED.
G.R. No. 121143 January 21, 1997
PURIFICACION
G.
TABANG, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
PAMANA
GOLDEN
CARE
MEDICAL
CENTER
FOUNDATION, INC., respondents.

REGALADO, J.:
This is a petition for certiorari which seeks to annul the
resolution of the National Labor Relations Commission
(NLRC), dated June 26, 1995, affirming in toto the order of
the labor arbiter, dated April 26, 1994, which dismissed
petitioner's complaint for illegal dismissal with money claims
for lack of jurisdiction.
The records show that petitioner Purificacion Tabang was a
founding member, a member of the Board of Trustees, and
the corporate secretary of private respondent Pamana
Golden Care Medical Center Foundation, Inc., a non-stock
corporation engaged in extending medical and surgical
services.
On October 30, 1990, the Board of Trustees issued a
memorandum appointing petitioner as Medical Director and
Hospital Administrator of private respondent's Pamana
Golden Care Medical Center in Calamba, Laguna.
Although the memorandum was silent as to the amount of
remuneration for the position, petitioner claims that she
received a monthly retainer fee of five thousand pesos
(P5,000.00) from private respondent, but the payment
thereof was allegedly stopped in November, 1991.
As medical director and hospital administrator, petitioner was
tasked to run the affairs of the aforesaid medical center and
perform all acts of administration relative to its daily
operations.
On May 1, 1993, petitioner was allegedly informed personally
by Dr. Ernesto Naval that in a special meeting held on April
30, 1993, the Board of Trustees passed a resolution relieving
her of her position as Medical Director and Hospital
Administrator, and appointing the latter and Dr. Benjamin
Donasco as acting Medical Director and acting Hospital

Administrator, respectively. Petitioner averred that

thereafter received a copy of said board resolution.

she

On June 6, 1993, petitioner filled a complaint for illegal

dismissal and non-payment of wages, allowances and 13th
month pay before the labor arbiter.
Respondent corporation moved for the dismissal of the
complaint on the ground of lack of jurisdiction over the
subject matter. It argued that petitioner's position as Medical
Director and Hospital Administrator was interlinked with her
position as member of the Board of Trustees, hence, her
dismissal is an intra-corporate controversy which falls within
the exclusive jurisdiction of the Securities and Exchange
Commission (SEC).
Petitioner opposed the motion to dismiss, contending that
her position as Medical Director and Hospital Administrator
was separate and distinct from her position as member of the
Board of Trustees. She claimed that there is no intracorporate controversy involved since she filed the complaint
in her capacity as Medical Director and Hospital
Administrator, or as an employee of private respondent.
On April 26, 1994, the labor arbiter issued an order
dismissing the complaint for lack of jurisdiction. He ruled that
the case falls within the jurisdiction of the SEC, pursuant to
Section
5
of
Presidential
Decree
No.
902-A. 1
Petitioner's motion for reconsideration was treated as an
appeal by the labor arbiter who consequently ordered the
elevation of the entire records of the case to public
respondent NLRC for appellate review. 2
On appeal, respondent NLRC affirmed the dismissal of the
case on the additional ground that "the position of a Medical
Director and Hospital Administrator is akin to that of an

executive position in a corporate ladder structure." hence,

petitioner's removal from the said position was an intracorporate controversy within the original and exclusive
jurisdiction of the SEC. 3
Aggrieved by the decision, petitioner filed the instant petition
which we find, however, to be without merit.
We agree with the findings of the NLRC that it is the SEC
which has jurisdiction over the case at bar. The charges
against herein private respondent partake of the nature of an
intra-corporate controversy. Similarly, the determination of
the rights of petitioner and the concomitant liability of
private respondent arising from her ouster as a medical
director and/or hospital administrator, which are corporate
offices, is an intra-corporate controversy subject to the
jurisdiction of the SEC.
Contrary to the contention of petitioner, a medical director
and a hospital administrator are considered as corporate
officers under the by-laws of respondent corporation. Section
2(i), Article I thereof states that one of the powers of the
Board of Trustees is "(t)o appoint a Medical Director,
Comptroller/Administrator, Chiefs of Services and such other
officers as it may deem necessary and prescribe their powers
and duties." 4
The president, vice-president, secretary and treasurer are
commonly regarded as the principal or executive officers of a
corporation, and modern corporation statutes usually
designate them as the officers of the corporation. 5 However,
other offices are sometimes created by the charter or by-laws
of a corporation, or the board of directors may be
empowered under the by-laws of a corporation to create
additional offices as may be necessary. 6 It has been held
that an "office'' is created by the charter of the corporation
and the officer is elected by the directors or
stockholders. 7 On the other hand, an "employee" usually

occupies no office and generally is employed not by action of

the directors or stockholders but by the managing officer of
the corporation who also determines the compensation to be
paid to such employee. 8
In the case at bar, considering that herein petitioner, unlike
an ordinary employee, was appointed by respondent
corporation's Board of Trustees in its memorandum of
October 30, 1990, 9 she is deemed an officer of the
corporation. Perforce, Section 5(c) of Presidential Decree No.
902-A, which provides that the SEC exercises exclusive
jurisdiction over controversies in the election appointment of
directors, trustees, officers or managers of corporations,
partnerships or associations, applies in the present dispute.
Accordingly, jurisdiction over the same is vested in the SEC,
and not in the Labor Arbiter or the NLRC.
Moreover, the allegation of petitioner that her being a
member of the Board of Trustees was not one of the
considerations for her appointment is belied by the tenor of
the memorandum itself. It states: "We hope that you will
uphold and promote the mission of our foundation," 10 and
this cannot be construed other than in reference to her
position or capacity as a corporate trustee.
A corporate officer's dismissal is always a corporate act, or
an intra-corporate controversy, and the nature is not altered
by the reason or wisdom with which the Board of Directors
may have in taking such action. 11 Also, an intra-corporate
controversy is one which arises between a stockholder and
the corporation. There is no distinction, qualification, nor any
exemption whatsoever. The provision is broad and covers all
kinds
of
controversies
between
stockholders
and
12
corporations.
With regard to the amount of P5,000,00 formerly received by
herein petitioner every month, the same cannot be
considered as compensation for her services rendered as

Medical
Director
and
Hospital
Administrator.
The
13
vouchers submitted by petitioner show that the said
amount was paid to her by PAMANA, Inc., a stock corporation
which is separate and distinct from herein private
respondent. Although the payments were considered
advances to Pamana Golden Care, Calamba branch, there is
no evidence to show that the Pamana Golden Care stated in
the vouchers refers to herein respondent Pamana Golden
Care Medical Center Foundation, Inc.
Pamana Golden Care is a division of Pamana, Inc., while
respondent Pamana Golden Care Medical Center Foundation,
Inc. is a non-stock, non-profit corporation. It is stated in the
memorandum of petitioner that Pamana, Inc. is a stock and
profit corporation selling pre-need plan for education,
pension and health care. The health care plan is called
Pamana Golden Care Plan and the holders are called Pamana
Golden Care Card Holders or, simply, Pamana Members. 14
It is an admitted fact that herein petitioner is a retained
physician of Pamana, Inc., whose patients are holders of the
Pamana Golden Care Card. In fact, in her complaint 15 filed
before the Regional Trial Court of Calamba, herein petitioner
is asking among others, for professional fees and/or retainer
fees earned for her treatment of Pamana Golden Care card
holders. 16 Thus, at most, said vouchers can only be
considered as proof of payment of retainer fees made by
Pamana, Inc. to herein petitioner as a retained physician of
Pamana Golden Care.
Moreover, even assuming that the monthly payment of
P5,000.00 was a valid claim against respondent corporation,
this would not operate to effectively remove this case from
the jurisdiction of the SEC. In the case ofCagayan de Oro
Coliseum, Inc. vs. Office of the Minister of Labor and
Employment, etc., et al., 17 we ruled that "(a)lthough the
reliefs sought by Chavez appear to fall under the jurisdiction

of the labor arbiter as they are claims for unpaid salaries and
other remunerations for services rendered, a close scrutiny
thereof shows that said claims are actually part of the
perquisites of his position in, and therefore interlinked with,
his relations with the corporation. In Dy, et al., vs. NLRC, et
al., the Court said: "(t)he question of remuneration involving
as it does, a person who is not a mere employee but a
stockholder and officer, an integral part, it might be said, of
the corporation, is not a simple labor problem but a matter
that comes within the area of corporate affairs and
management and is in fact a corporate controversy in
contemplation of the Corporation Code."
WHEREFORE, the questioned resolution of the NLRC is hereby
AFFIRMED, without prejudice to petitioner's taking recourse
to and seeking relief through the appropriate remedy in the
proper forum.
SO ORDERED.

G.R. No. 144767

March 21, 2002

DILY DANY NACPIL, petitioner,

vs.
INTERNATIONAL BROADCASTING
CORPORATION, respondent.
KAPUNAN, J.:
This is a petition for review on certiorari under Rule 45,
assailing the Decision of the Court of Appeals dated
November 23, 1999 in CA-G.R. SP No. 527551 and the
Resolution dated August 31, 2000 denying petitioner Dily
Dany Nacpil's motion for reconsideration. The Court of
Appeals reversed the decisions promulgated by the Labor
Arbiter and the National Labor Relations Commission (NLRC),
which consistently ruled in favor of petitioner.
Petitioner states that he was Assistant General Manager for
Finance/Administration and Comptroller of private respondent
Intercontinental Broadcasting Corporation (IBC) from 1996

until April 1997. According to petitioner, when Emiliano

Templo was appointed to replace IBC President Tomas Gomez
III sometime in March 1997, the former told the Board of
Directors that as soon as he assumes the IBC presidency, he
would terminate the services of petitioner. Apparently,
Templo blamed petitioner, along with a certain Mr. Basilio and
Mr. Gomez, for the prior mismanagement of IBC. Upon his
assumption of the IBC presidency, Templo allegedly harassed,
insulted, humiliated and pressured petitioner into resigning
until the latter was forced to retire. However, Templo refused
to pay him his retirement benefits, allegedly because he had
not yet secured the clearances from the Presidential
Commission on Good Government and the Commission on
Audit. Furthermore, Templo allegedly refused to recognize
petitioner's employment, claiming that petitioner was not the
Assistant General Manager/Comptroller of IBC but merely
usurped the powers of the Comptroller. Hence, in 1997,
petitioner filed with the Labor Arbiter a complaint for illegal
dismissal and non-payment of benefits.1wphi1.nt

1. To reinstate complainant to his former position without

diminution of salary or loss of seniority rights, and with full
backwages computed from the time of his illegal dismissal on
May 16, 1997 up to the time of his actual reinstatement
which is tentatively computed as of the date of this decision
on August 21, 1998 in the amount of P1,231,750.00 (i.e.,
P75,000.00 a month x 15.16 months = P1,137,000.00 plus
13th month pay equivalent to 1/12 of P 1,137,000.00 =
P94,750.00 or the total amount of P 1,231,750.00). Should
complainant be not reinstated within ten (10) days from
receipt of this decision, he shall be entitled to additional
backwages until actually reinstated.

Instead of filing its position paper, IBC filed a motion to

dismiss alleging that the Labor Arbiter had no jurisdiction
over the case. IBC contended that petitioner was a corporate
officer who was duly elected by the Board of Directors of IBC;
hence, the case qualifies as an intra-corporate dispute falling
within the jurisdiction of the Securities and Exchange
Commission (SEC). However, the motion was denied by the
Labor Arbiter in an Order dated April 22, 1998. 2

SO ORDERED.3

On August 21, 1998, the Labor Arbiter rendered a Decision

stating that petitioner had been illegally dismissed. The
dispositive portion thereof reads:
WHEREFORE, in view of all the foregoing, judgment is hereby
rendered in favor of the complainant and against all the
respondents, jointly and severally, ordering the latter:

2. Likewise, to pay complainant the following:

a) P 2 Million as and for moral damages;
b) P500,000.00 as and for exemplary damages; plus and (sic)
c) Ten (10%) percent thereof as and for attorney's fees.

IBC appealed to the NLRC, but the same was dismissed in a

Resolution dated March 2, 1999, for its failure to file the
required appeal bond in accordance with Article 223 of the
Labor Code.4 IBC then filed a motion for reconsideration that
was likewise denied in a Resolution dated April 26, 1999. 5
IBC then filed with the Court of Appeals a petition for
certiorari under Rule 65, which petition was granted by the
appellate court in its Decision dated November 23, 1999. The
dispositive portion of said decision states:
WHEREFORE, premises considered, the petition for Certiorari
is GRANTED. The assailed decisions of the Labor Arbiter and
the NLRC are REVERSED and SET ASIDE and the complaint is
DISMISSED without prejudice.

SO ORDERED.6
Petitioner then filed a motion for reconsideration, which was
denied by the appellate court in a Resolution dated August
31, 2000.
Hence, this petition.
Petitioner Nacpil submits that:
I.
THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER
WAS APPOINTED BY RESPONDENT'S BOARD OF DIRECTORS
AS COMPTROLLER. THIS FINDING IS CONTRARY TO THE
COMMON, CONSISTENT POSITION AND ADMISSION OF BOTH
PARTIES. FURTHER, RESPONDENT'S BY-LAWS DOES NOT
INCLUDE COMPTROLLER AS ONE OF ITS CORPORATE
OFFICERS.
II.
THE COURT OF APPEALS WENT BEYOND THE ISSUE OF THE
CASE WHEN IT SUBSTITUTED THE NATIONAL LABOR
RELATIONS COMMISSION'S DECISION TO APPLY THE APPEAL
BOND REQUIREMENT STRICTLY IN THE INSTANT CASE. THE
ONLY ISSUE FOR ITS DETERMINATION IS WHETHER NLRC
COMMITTED GRAVE ABUSE OF DISCRETION IN DOING THE
SAME.7
The issue to be resolved is whether the Labor Arbiter had
jurisdiction over the case for illegal dismissal and nonpayment of benefits filed by petitioner. The Court finds that
the Labor Arbiter had no jurisdiction over the same.
Under Presidential Decree No. 902-A (the Revised Securities
Act), the law in force when the complaint for illegal dismissal
was instituted by petitioner in 1997, the following cases fall
under the exclusive of the SEC:

a) Devices or schemes employed by or any acts of the board

of directors, business associates, its officers or partners,
amounting to fraud and misrepresentation which may be
detrimental to the interest of the public and/or of the
stockholders, partners, members of associations or
organizations registered with the Commission;
b) Controversies arising out of intra-corporate or partnership
relations, between and among stockholders, members or
associates; between any or all of them and the corporation,
partnership or association of which they are stockholders,
members or associates, respectively; and between such
corporation, partnership or association and the State insofar
as it concerns their individual franchise or right to exist as
such entity;
c) Controversies in the election or appointment of
directors, trustees, officers, or managers of such
corporations, partnerships or associations;
d) Petitions of corporations, partnerships, or associations to
be declared in the state of suspension of payments in cases
where the corporation, partnership or association possesses
property to cover all of its debts but foresees the
impossibility of meeting them when they respectively fall due
or in cases where the corporation, partnership or association
has no sufficient assets to cover its liabilities, but is under the
Management Committee created pursuant to this decree.
(Emphasis supplied.)
The Court has consistently held that there are two elements
to be considered in determining whether the SEC has
jurisdiction over the controversy, to wit: (1) the status or
relationship of the parties; and (2) the nature of the question
that is the subject of their controversy. 8
Petitioner argues that he is not a corporate officer of the IBC
but an employee thereof since he had not been elected nor

appointed as Comptroller and Assistant Manager by the IBC's

Board of Directors. He points out that he had actually been
appointed as such on January 11, 1995 by the IBC's General
Manager, Ceferino Basilio. In support of his argument,
petitioner underscores the fact that the IBC's By-Laws does
not even include the position of comptroller in its roster of
corporate officers.9 He therefore contends that his dismissal
is a controversy falling within the jurisdiction of the labor
courts.10
Petitioner's argument is untenable. Even assuming that he
was in fact appointed by the General Manager, such
appointment was subsequently approved by the Board of
Directors of the IBC.11 That the position of Comptroller is not
expressly mentioned among the officers of the IBC in the ByLaws is of no moment, because the IBC's Board of Directors is
empowered under Section 25 of the Corporation Code 12 and
under the corporation's By-Laws to appoint such other
officers as it may deem necessary. The By-Laws of the IBC
categorically provides:
XII. OFFICERS
The officers of the corporation shall consist of a President, a
Vice-President,
a
Secretary-Treasurer,
a
General
Manager, and such other officers as the Board of
Directors may from time to time does fit to provide for.
Said officers shall be elected by majority vote of the
Board of Directors and shall have such powers and duties
as shall hereinafter provide (Emphasis supplied). 13
The Court has held that in most cases the "by-laws may and
usually do provide for such other officers," 14 and that where a
corporate office is not specifically indicated in the roster of
corporate offices in the by-laws of a corporation, the board of
directors may also be empowered under the by-laws to
create additional officers as may be necessary. 15

An "office" has been defined as a creation of the charter of a

corporation, while an "officer" as a person elected by the
directors or stockholders. On the other hand, an "employee"
occupies no office and is generally employed not by action of
the directors and stockholders but by the managing officer of
the corporation who also determines the compensation to be
paid to such employee.16
As petitioner's appointment as comptroller required the
approval and formal action of the IBC's Board of Directors to
become valid,17 it is clear therefore holds that petitioner is a
corporate officer whose dismissal may be the subject of a
controversy cognizable by the SEC under Section 5(c) of P.D.
902-A which includes controversies involving both election
and appointment of corporate directors, trustees, officers,
and managers.18 Had petitioner been an ordinary employee,
such board action would not have been required.
Thus, the Court of Appeals correctly held that:
Since complainant's appointment was approved unanimously
by the Board of Directors of the corporation, he is therefore
considered a corporate officer and his claim of illegal
dismissal is a controversy that falls under the jurisdiction of
the SEC as contemplated by Section 5 of P.D. 902-A. The rule
is that dismissal or non-appointment of a corporate officer is
clearly an intra-corporate matter and jurisdiction over the
case properly belongs to the SEC, not to the NLRC. 19
As to petitioner's argument that the nature of his functions is
recommendatory thereby making him a mere managerial
officer, the Court has previously held that the relationship of
a person to a corporation, whether as officer or agent or
employee is not determined by the nature of the services
performed, but instead by the incidents of the relationship as
they actually exist.20

It is likewise of no consequence that petitioner's complaint

for illegal dismissal includes money claims, for such claims
are actually part of the perquisites of his position in, and
therefore linked with his relations with, the corporation. The
inclusion of such money claims does not convert the issue
into a simple labor problem. Clearly, the issues raised by
petitioner against the IBC are matters that come within the
area of corporate affairs and management, and constitute a
corporate controversy in contemplation of the Corporation
Code.21
Petitioner further argues that the IBC failed to perfect its
appeal from the Labor Arbiter's Decision for its non-payment
of the appeal bond as required under Article 223 of the Labor
Code, since compliance with the requirement of posting of a
cash or surety bond in an amount equivalent to the monetary
award in the judgment appealed from has been held to be
both mandatory and jurisdictional. 22 Hence, the Decision of
the Labor Arbiter had long become final and executory and
thus, the Court of Appeals acted with grave abuse of
discretion amounting to lack or excess of jurisdiction in giving
due course to the IBC's petition for certiorari, and in deciding
the case on the merits.
The IBC's failure to post an appeal bond within the period
mandated under Article 223 of the Labor Code has been
rendered immaterial by the fact that the Labor Arbiter did not
have jurisdiction over the case since as stated earlier, the
same is in the nature of an intra-corporate controversy. The
Court has consistently held that where there is a finding that
any decision was rendered without jurisdiction, the action
shall be dismissed. Such defense can be interposed at any
time, during appeal or even after final judgment. 23 It is a wellsettled rule that jurisdiction is conferred only by the
Constitution or by law. It cannot be fixed by the will of the
parties; it cannot be acquired through, enlarged or
diminished by, any act or omission of the parties. 24

Considering the foregoing, the Court holds that no error was

committed by the Court of Appeals in dismissing the case
filed before the Labor Arbiter, without prejudice to the filing
of an appropriate action in the proper court. 1wphi1.nt
It must be noted that under Section 5.2 of the Securities
Regulation Code (Republic Act No. 8799) which was signed
into law by then President Joseph Ejercito Estrada on July 19,
2000, the SEC's jurisdiction over all cases enumerated in
Section 5 of P.D. 902-A has been transferred to the Regional
Trial Courts.25
WHEREFORE, the petition is hereby DISMISSED and the
Decision of the Court of Appeals in CA-G.R. SP No. 52755
is AFFIRMED.
SO ORDERED.

collection of foreign bills or checks purchased, including the

signing of transmittal letters covering the same.
After proceedings duly undertaken by the parties, judgment
was rendered by labor Arbiter Cornelio L. Linsangan, the
dispositive portion of which reads:

G.R. No. 141093

February 20, 2001

PRUDENTIAL BANK and TRUST COMPANY, petitioner,

vs.
CLARITA T. REYES, respondent.
GONZAGA-REYES, J.:
Before the Court is a petition for review on certiorari of the
Decision,1 dated October 15, 1999 of the Court of Appeals in
C.A.-G.R. SP No. 30607 and of its Resolution, dated December
6, 1999 denying petitioner's motion for reconsideration of
said decision. The Court of Appeals reversed and set aside
the resolution2 of the National Labor Relations Commission
(NLRC) in NLRC NCR CA No.009364-95, reversing and setting
aside the labor arbiter's decision and dismissing for lack of
merit private respondent's complaint.3
The case stems from NLRC NCR Case No.00-06-03462-92,
which is a complaint for illegal suspension and illegal
dismissal with prayer for moral and exemplary damages,
gratuity, fringe benefits and attorney's fees filed by Clarita
Tan Reyes against Prudential Bank and Trust Company (the
Bank) before the labor arbiter. Prior to her dismissal, private
respondent Reyes held the position of Assistant Vice
President in the foreign department of the Bank, tasked with
the duties, among others, to collect checks drawn against
overseas banks payable in foreign currency and to ensure the

"WHEREFORE, finding the dismissal of complainant to be

without factual and legal basis, judgment is hereby rendered
ordering the respondent bank to pay her back wages for
three (3) years in the amount of P540,000.00 (P15,000.00 x
36 mos.). In lieu of reinstatement, the respondent is also
ordered to pay complainant separation pay equivalent to one
month salary for every year of service, in the amount of
P420,000.00 (P15,000 x 28 mos.). In addition, the respondent
should. also pay complainant profit sharing and unpaid fringe
benefits. Attorney's fees equivalent to ten (10%) percent of
the total award should likewise be paid by respondent.
SO ORDERED."4
Not satisfied, the Bank appealed to the NLRC which, as
mentioned at the outset, reversed the Labor Arbiter's
decision in its Resolution dated 24 March 1997. Private
respondent sought reconsideration which, however, was
denied by the NLRC in its Resolution of 28 July 1998.
Aggrieved, private respondent commenced on October 28,
1998, a petition for certiorari before the Supreme Court. 5 The
subject petition was referred to the Court of Appeals for
appropriate action and disposition per resolution of this Court
dated November 25, 1998, in accordance with the ruling
in St. Marlin Funeral Homes vs. NLRC. 6
In its assailed decision, the Court of Appeals adopted the
following antecedent facts leading to Reyes's dismissal as
summarized by the NLRC:

"The auditors of the Bank discovered that two checks,

No.011728-7232-146, in the amount of US$109,650.00, and
No. 011730-7232-146, in the amount of US$115,000.00,
received by the Bank on April 6, 1989, drawn ,by the Sanford
Trading
against
Hongkong
and
Shanghai
Banking
Corporation, Jurong Branch, Singapore, in favor of Filipinas
Tyrom, were not sent out for collection to Hongkong Shanghai
Banking Corporation on the alleged order of the complainant
until the said checks became stale.
The Bank created a committee to investigate the findings of
the auditors involving the two checks which were not
collected and became stale.
On March 8, 1991, the president of the Bank issued a
memorandum to the complainant informing her of the
findings of the auditors and asked her to give her side. In
reply, complainant requested for an extension of one week to
submit her explanation. In a "subsequent letter, dated March
14, 1991, to the president, complainant stated that in view of
the refusal of the Bank that she be furnished copies of the
pertinent documents she is requesting and the refusal to
grant her a reasonable period to prepare her answer, she was
constrained to make a general denial of any misfeasance or
malfeasance on her part and asked that a formal
investigation be made.
As the complainant failed to attend and participate in the
formal investigation conducted by the Committee on May 24,
1991, despite due notice, the Committee proceeded with its
hearings and heard the testimonies of several witnesses.
The Committee's findings were:
'a) The two (2) HSBC checks were received by the Foreign
Department on 6 April 1989. On the same day, complainant
authorized the crediting of the account of Filipinas Tyrom in
the amount of P4,780,102.70 corresponding to the face value

of the checks, (Exhibits 6, 22 to 22-A and 23 to 23-A). On the

following day, a transmittal letter was prepared by Ms. Cecilia
Joven, a remittance clerk then assigned in the Foreign
Department, for the purpose of sending out the two (2) HSBC
checks for collection. She then requested complainant to sign
the said transmittal letters (Exhibits 1, 7 and 25; TSN, 11
March 1993, pp. 42-52), as it is complainant who gives her
instructions directly concerning the transmittal of foreign bills
purchased. All other transmittal letters are in fact signed by
complainant.
b) After Ms. Joven delivered the transmittal letters and the
checks to the Accounting Section of the Foreign Department,
complainant instructed her to withdraw the same for the
purpose of changing the addressee thereon from American
Express Bank to Bank of Hawaii (ibid.) under a special
collection scheme (Exhibits 4 and 5 to 5-B).
c) After complying with complainant's instruction, Ms. Joven
then returned to complainant for the latter to sign the new
transmittal letters. However, complainant told Ms. Joven to
just hold on to the letters and checks and await further
instructions (ibid.). Thus, the new transmittal letters
remained unsigned. (See Exhibits 5 to 5-B).
d) In June 1989, Ms. Joven was transferred to another
department. Hence, her duties, responsibilities and functions,
including the responsibility over the two (2) HSBC checks,
were turned over to another remittance clerk, Ms. Analisa
Castillo (Exhibit 14; TSN, 4 June 1993, pp. 27-29).
e) When asked by Ms. Castillo about the two (2) HSBC
checks, Ms. Joven relayed to the latter complainant's
instruction (Exhibit 14; TSN, 4 June 1993, p. 42).
f) About fifteen (15) months after the HSBC checks were
received by the Bank, the said checks were discovered in the
course of an audit conducted by the Bank's auditors. Atty.

Pablo Magno, the Bank's legal counsel, advised complainant

to send the checks for collection despite the lapse of fifteen
(15) months.

closed.' To date, the value of said checks have not been paid
by Filipinas Tyrom, which as payee of the checks, had been
credited with their peso equivalent;

g) Complainant, however, deliberately withheld Atty. Magno's

advice from her superior, the Senior Vice-President, Mr.
Renato Santos and falsely informed the latter that Atty .
Magno advised that a demand letter be sent instead, thereby
further delaying the collection of the HSBC checks.

2. You tried to influence the decision of Atty. Pablo P. Magno,

Bank legal counsel, by asking him to do something allegedly
upon instructions of a Senior Vice President of the Bank or
else lose his job when in truth and in fact no such instructions
was given; and

h) On 10 July 1990, the HSBC checks were finally sent for

collection, but were returned on 16 July 1990 for the reason
'account closed' (Exhibits 2-A and 3-A).'

3. You deliberately withheld from Mr. Santos, Senior Vice

President, the advice given by the legal counsel of the Bank
which Mr. Santos had asked you to seek. As a matter of fact,
you even relayed a false advice which delayed further the
sending of the two checks for collection. Likewise, you
refused to heed the advice of the Bank's legal counsel to
send the checks for collection.

After a review of the Committee's findings, the Board of

Directors of the Bank resolved not to re-elect complainant
any longer to the position of assistant president pursuant to
the Bank's By-laws.
On July 19, 1991, complainant was informed of her
termination of employment from the Bank by Senior Vice
President Benedicto L. Santos, in a letter the text of which is
quoted in full:
'Dear Mrs. Reyes:
After a thorough investigation and appreciation of the
charges against you as contained in the Memorandum of the
President dated March 8, 1991, the Fact Finding Committee
which was created to investigate the commission and/or
omission of the acts alluded therein, has found the following:
1. You have deliberately held the clearing of Checks Nos.
11728 and 11730 of Hongkong and Shanghai Banking
Corporation in the total amount of US$224,650.00 by giving
instructions to the collection clerk not to send the checks for
collection. In view thereof, when the said checks were finally
sent to clearing after the lapse of 15 months from receipt of
said checks, they were returned for the reason 'Account

These findings have given rise to the Bank's loss of trust and
confidence in you, the same being acts of serious misconduct
in the performance of your duties resulting in monetary loss
to the Bank. In view thereof, the Board has resolved not to reelect you to the position of Assistant Vice President of the
Bank. Accordingly, your services are terminated effective
immediately. In relation thereto, your monetary and
retirement benefits are forfeited except those that have
vested in you.'
In her position paper, complainant alleged that the real
reason for her dismissal was her filing of the criminal cases
against the bank president, the vice president and the
auditors of the Bank, such filing not being a valid ground for
her dismissal. Furthermore, she alleged that it would be selfserving for the respondent to state that she was found guilty
of gross misconduct in deliberately withholding the clearing
of the two dollar checks. She further alleged that she was not
afforded due process as she was not given the chance to

refute the charges mentioned in the letter of dismissal.

Hence, she was illegally dismissed.
On the other hand, respondent argues that there were
substantial bases for the bank to lose its trust and confidence
on the complainant and, accordingly, had just cause for
terminating her services. Moreover, for filing the clearly
unfounded
suit
against
the
respondent's
officers,
complainant is liable to pay moral and exemplary damages
and attorney's fees."7
The Court of Appeals found that the NLRC committed grave
abuse of discretion in ruling that the dismissal of Reyes is
valid. In effect, the Court of Appeals reinstated the judgment
of the labor arbiter with modification as follows:
"WHEREFORE, in the light of the foregoing, the decision
appealed from is hereby REVERSED and SET ASIDE. In lieu
thereof, judgment is hereby rendered ordering respondent
Bank as follows:
1. To pay petitioner full backwages and other benefits from
July 19, 1991 up to the finality of this judgment;
2. To pay petitioner separation pay equivalent to one (1)
month salary for every year of service in lieu of
reinstatement; and
3. To pay attorney's fee equivalent to ten (10%) percent of
the total award.
SO ORDERED."8
Hence, the Bank's recourse to this Court contending in its
memorandum that:
"IN SETTING ASIDE THE DECISION DATED 24 MARCH 1997
AND THE RESOLUTION DATED 28 JULY 1998 OF THE NLRC
AND REINSTATING WITH MODIFICATION THE DECISION DATED

20 JULY 1995 OF LABOR ARBITER CORNELIO L. LINSANGAN,

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED, IN
VIEW OF THE FOLLOWING:
I.
IT IS THE SEC (NOW THE REGIONAL TRIAL COURT) AND NOT
THE NLRC WHICH HAS ORIGINAL AND EXCLUSIVE
JURISDICTION OVER CASES INVOLVING THE REMOVAL FROM
OFFICE OF CORPORATE OFFICERS.
II.
EVEN ASSUMING ARGUENDO THAT THE NLRC HAS
JURISDICTION, THERE WAS SUBSTANTIAL EVIDENCE OF
RESPONDENT'S MISCONDUCT JUSTIFYING THE BANK'S LOSS
OF TRUST AND CONFIDENCE ON (sic) HER.
III.
EVEN ASSUMING ARGUENDO THAT RESPONDENT WAS
ENTITLED TO BACKWAGES, THE HONORABLE COURT OF
APPEALS ERRED IN AWARDING UNLIMITED AND UNQUALIFIED
BACKWAGES THEREBY GOING FAR BEYOND THE LABOR
ARBITER'S DECISION LIMITING THE SAME TO THREE YEARS,
WHICH DECISION RESPONDENT HERSELF SOUGHT TO
EXECUTE."9
In sum, the resolution of this petition hinges on (1) whether
the NLRC has jurisdiction over the complaint for illegal
dismissal; (2) whether complainant Reyes was illegally
dismissed; and (3) whether the amount of back wages
awarded was proper.
On the first issue, petitioner seeks refuge behind the
argument that the dispute is an intra-corporate controversy
concerning as it does the non-election of private respondent
to the position of Assistant Vice-President of the Bank which
falls under the exclusive and original, jurisdiction of the

Securities and Exchange Commission (now the Regional Trial

Court) under Section 5 of Presidential Decree No. 902-A. More
specifically, petitioner contends that complainant is a
corporate officer, an elective position under the corporate bylaws and her non-election is an intra-corporate controversy
cognizable by the SEC invoking lengthily a number of this
Court's decisions.10
Petitioner Bank can no longer raise the issue of jurisdiction
under the principle of estoppel. The Bank participated in the
proceedings from start to finish. It filed its position paper with
the Labor Arbiter. When the decision of the Labor Arbiter was
adverse to it, the Bank appealed to the NLRC. When the NLRC
decided in its favor, the bank said nothing about jurisdiction.
Even before the Court of Appeals, it never questioned the
proceedings on the ground of lack of jurisdiction. It was only
when the Court of Appeals ruled in favor of private
respondent did it raise the issue of jurisdiction. The Bank
actively participated in the proceedings before the Labor
Arbiter, the NLRC and the Court of Appeals. While it is true
that jurisdiction over the subject matter of a case may be
raised at any time of the proceedings, this rule presupposes
that laches or estoppel has not supervened. In this
regard, Baaga vs. Commission on the Settlement of Land
Problems,11 is most enlightening. The Court therein stated:
"This Court has time and again frowned upon the undesirable
practice of a party submitting his case for decision and then
accepting the judgment, only if favorable, and attacking it for
lack of jurisdiction when adverse. Here, the principle of
estoppel lies. Hence, a party may be estopped or barred from
raising the question of jurisdiction for the first time in a
petition before the Supreme Court when it failed to do so in
the early stages of the proceedings."
Undeterred, the Bank also contends that estoppel cannot lie
considering that "from the beginning, petitioner Bank has

consistently asserted in all its pleadings at all stages of the

proceedings that respondent held the position of Assistant
Vice President, an elective position which she held by virtue
of her having been elected as such by the Board of
Directors." As far as the records before this Court reveal
however, such an assertion was made only in the appeal to
the NLRC and raised again before the Court of Appeals, not
for purposes of questioning jurisdiction but to establish that
private respondent's tenure was subject to the discretion of
the Board of Directors and that her non-reelection was a
mere expiration of her term. The Bank insists that private
respondent was elected Assistant Vice President sometime in
1990 to serve as such for only one year. This argument will
not do either and must be rejected.
It appears that private respondent was appointed Accounting
Clerk by the Bank on July 14, 1963. From that position she
rose to become supervisor. Then in 1982, she was appointed
Assistant Vice-President which she occupied until her illegal
dismissal on July 19, 1991. The bank's contention that she
merely holds an elective position and that in effect she is not
a regular employee is belied by the nature of her work and
her length of service with the Bank. As earlier stated, she
rose from the ranks and has been employed with the Bank
since 1963 until the termination of her employment in 1991.
As Assistant Vice President of the foreign department of the
Bank, she is tasked, among others, to collect checks drawn
against overseas banks payable in foreign currency and to
ensure the collection of foreign bills or checks purchased,
including the signing of transmittal letters covering the same.
It has been stated that "the primary standard of determining
regular employment is the reasonable connection between
the particular activity performed by the employee in relation
to the usual trade or business of the employer. 12 Additionally,
"an employee is regular because of the nature of work and
the length of service, not because of the mode or even the
reason for hiring them."13 As Assistant Vice-President of the

Foreign Department of the Bank she performs tasks integral

to the operations of the bank and her length of service with
the bank totaling 28 years speaks volumes of her status as a
regular employee of the bank. In fine, as a regular employee,
she is entitled to security of tenure; that is, her services may
be terminated only for a just or authorized cause. 14 This
being in truth a case of illegal dismissal, it is no wonder then
that the Bank endeavored to the very end to establish loss of
trust and confidence and serious misconduct on the part of
private respondent but, as will be discussed later, to no avail.
This brings us to the second issue wherein the Bank insists
that it has presented substantial evidence to prove the
breach of trust on the part of private respondent warranting
her dismissal. On this point, the Court of Appeals disagreed
and set aside the findings of the NLRC that Reyes
deliberately withheld the release of the two dollar checks;
that she is guilty of conflict of interest that she waived her
right to due process for not attending the hearing; and that
she was dismissed based on loss of trust and confidence. We
quote pertinent portions of the decision, to wit:
"FIRST: Respondent Bank heavily relied on the testimony and
affidavit of Remittance Clerk Joven' in trying to establish loss
of confidence. However, Joven's allegation that petitioner
instructed her to hold the subject two dollar checks
amounting to $224,650.00 falls short of the requisite proof to
warrant petitioner's dismissal. Except for Joven's bare
assertion to withhold the dollar checks per petitioner's
instruction, respondent Bank failed to adduce convincing
evidence to prove bad faith and malice. It bears emphasizing
that respondent Bank's witnesses merely corroborate Joven's
testimony.
Upon this point, the rule that proof beyond reasonable doubt
is not required to terminate an employee on the charge of
loss of confidence and that it is sufficient that there is some

basis for such loss of confidence, is not absolute. The right of

an employer to dismiss employees on the ground that it has
lost its trust and confidence in him must not be exercised
arbitrarily and without just cause. For loss of trust and
confidence to be valid ground for an employee's dismissal, it
must be substantial and not arbitrary, and must be founded
on clearly established facts sufficient to warrant the
employee's separation from work (Labor vs. NLRC, 248 SCRA
183).
SECOND. Respondent Bank's charge of deliberate withholding
of the two dollar checks finds no support in the testimony of
Atty. Jocson, Chairman of the Investigating Committee. On
cross examination, Atty. Jocson testified that the documents
themselves do not show any direct withholding (pp. 186-187,
Rollo). There being conflict in the statement of witnesses, the
court must adopt the testimony which it believes to be true
(U.S. vs. Losada, 18 Phil. 90).
THIRD. Settled is the rule that when the conclusions of the
Labor Arbiter are sufficiently substantiated by the evidence
on record, the same should be respected by appellate
tribunals since he is in a better position to assess and
evaluate the credibility of the contending parties (Ala Mode
Garments, Inc. vs. NLRC, 268 SCRA 497). In this regard, the
Court quotes with approval the following disquisition of Labor
Arbiter Linsangan, thus:
This Office has repeatedly gone over the records of the case
and painstakingly examined the testimonies of respondent
bank's witnesses. One thing was clearly established: that the
legality of complainant's dismissal based on the first ground
stated in respondent's letter of termination (exh. 25-J, supra)
will rise or fall on the credibility of Miss Joven who
undisputedly is the star witness for the bank. It will be
observed that the testimonies of the bank's other witnesses,
Analiza Castillo, Dante Castor and Antonio Ragasa pertaining

to the non-release of the dollar checks and their

corresponding transmittal letters were all anchored on what
was told them by Ms. Joven, that is: she was instructed by
complainant to hold the release of subject checks. In a
nutshell, therefore, the issue boils down to who between
complainant and Ms. Joven is more credible.

accompanied by driver Celestino Banito, went to her

residence and confronted her regarding the non-release of
the dollar checks. It took Ms. Joven eighteen (18) months
before she explained her side on the controversy. As to what
prompted her to make her letter of explanation was not even
mentioned.

After painstakingly examining the testimonies of Ms. Joven

and respondent's other witnesses' this Office finds the
evidence still wanting in proof of complainant's guilt. This
Office had closely observed the demeanor of Ms. Joven while
testifying on the witness stand and was not impressed by her
assertions. The allegation of Ms. Joven in that her non-release
of the dollar checks was upon the instruction of complainant
Reyes is extremely doubtful. In the first place, the said
instruction constitutes a gross violation of the bank's
standard operating procedure. Moreover, Ms. Joven was fully
aware that the instruction, if carried out, will greatly
prejudice her employer bank. It was incumbent upon Ms.
Joven not only to disobey the instruction but even to report
the matter to management, if same was really given to her
by complainant.

On the other hand, the actions taken by the complainant

were spontaneous. When complainant was informed by Mr.
Castor and Ms. Castillo regarding the non-release of the
checks sometime in November, 1989 she immediately
reported the matter to Vice President Santos, Head of the
Foreign Department. And as earlier mentioned, complainant
went to the residence of Ms. Joven to confront her. In this
regard, Celestino Bonito, complainant's driver, stated in his
affidavit, thus:

Our doubt on the veracity of Ms. Joven's allegation even

deepens as we consider the fact that when the non-release of
the checks was discovered by Ms. Castillo the former
contented herself by continuously not taking any action on
the two dollar checks. Worse, Ms. Joven even impliedly told
by Ms. Castillo (sic) to ignore the two checks and just
withhold their release. In her affidavit Ms. Castillo said:
'4. When I asked Cecille Joven what I was supposed to do with
those checks, she said the same should be held as per
instruction of Mrs. Reyes.' (Exh. "14", supra).
The evidence shows that it was only on 16 May 1990 that Ms.
Joven broke her silence on the matter despite the fact that on
15 November 1989, at about 8:00 p.m. the complainant,

'1. Sometime on November 15, 1989 at about 7:00 o'clock in

the evening, Mrs. Clarita Tan Reyes and I were in the
residence of one Ms. Cecille Joven, then a Processing Clerk in
the Foreign Department of Prudential Bank;
2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan
Reyes were seated in the sala when the latter asked the
former, Ms. Cecille Joven, how it came about that the two
dollar checks which she was then holding with the transmittal
letters, were found in a plastic envelope kept day-to-day by
the former;
3. Hesitatingly, Cecille Joven said: "Eh, Mother (Mrs. Tan
Reyes had been intimately called Mother in the Bank) akala
ko bouncing checks yon mga yon.
4. Mrs. Clarita Tan Reyes, upon hearing those words, was
surprised and she said: "Ano, papaano mong alam na
bouncing na hindi mo pa pinadadala:
5. Mrs. Cecille Joven turned pale and was not able to answer.'

There are other factors that constrain this Office to doubt

even more the legality of complainant's dismissal based on
the first ground stated in the letter of dismissal. The nonrelease of the dollar checks was reported to top management
sometime on 15 November 1989 when complainant,
accompanied by Supervisor Dante Castor and Analiza
Castillo, reported the matter to Vice President Santos. And
yet, it was only on 08 March 1991, after a lapse of sixteen
(16) months from the time the non-release of the checks was
reported to the Vice President, that complainant was issued a
memorandum directing her to submit an explanation. And it
took the bank another four (4) months before it dismissed
complainant.
The delayed action taken by respondent against complainant
lends credence to the assertion of the latter that her
dismissal was a mere retaliation to the criminal complaints
she filed against the bank's top officials.
It clearly appears from the foregoing that the complainant
herein has no knowledge of, much less participation in, the
non-release of the dollar checks under discussion. Ms. Joven
is solely responsible for the same. Incidentally, she was not
even reprimanded by the bank.
FOURTH. Respondent Bank having failed to furnish petitioner
necessary documents imputing loss of confidence, petitioner
was not amply afforded opportunity to prepare an intelligent
answer. The Court finds nothing confidential in the auditor's
report and the affidavit of Transmittal Clerk Joven. Due
process dictates that management accord the employees
every kind of assistance to enable him to prepare adequately
for his defense, including legal representation.
The issue of conflict of interest not having been covered by
the investigation, the Court finds it irrelevant to the
charge."15

We uphold the findings of the Court of Appeals that the

dismissal of private respondent on the ground of loss of trust
and confidence was without basis. The charge was
predicated on the testimony of Ms. Joven and we defer to the
findings of the Labor Arbiter as confirmed and adopted by the
Court of Appeals on the credibility of said witness. This Court
is not a trier of facts and will not weigh anew the evidence
already passed upon by the Court of Appeals. 16
On the third issue, the Bank questions the award of full
backwages and other benefits from July 19, 1991 up to the
finality of this judgment; separation pay equivalent to one (1)
month salary for every year of service in lieu of
reinstatement; and attorney's fees equivalent to ten (10%)
percent of the total award. The Bank argues, in the main,
that private respondent is not entitled to full backwages in
view of the fact that she did not bother to appeal that portion
of the labor arbiter's judgment awarding back wages limited
to three years. It must be stressed that private respondent
filed a special civil action for certiorari to review the decision
of the NLRC17 and not an ordinary appeal. An ordinary appeal
is distinguished from the remedy of certiorari under Rule 65
of the Revised Rules of Court in that in ordinary appeals it is
settled that a party who did not appeal cannot seek
affirmative relief other than the ones granted in the decision
of the court below. 18 On the other hand, resort to a judicial
review of the decisions of the National Labor Relations
Commission in a petition for certiorari under Rule 65 of Rules
of Court is confined to issues of want or excess of jurisdiction
and grave abuse of discretion. 19 In the instant case, the Court
of Appeals found that the NLRC gravely abused its discretion
in finding that the private respondent's dismissal was valid
and so reversed the same. Corollary to the foregoing, the
appellate court awarded backwages in accordance with
current jurisprudence.

Indeed, jurisprudence is clear on the amount of backwages

recoverable in cases of illegal dismissal. Employees illegally
dismissed prior to the effectivity of Republic Act No. 6715 on
March 21, 1989 are entitled to backwages up to three (3)
years without deduction or qualification, while those illegally
dismissed after are granted full backwages inclusive of
allowances and other benefits or their monetary equivalent
from the time their actual compensation was withheld from
them
up
to
the
time
of
their
actual
20
reinstatement. Considering that private respondent was
terminated on July 19, 1991, she is entitled to full backwages
from the time her actual compensation was withheld from
her (which, as a rule, is from the time of her illegal dismissal)
up to the finality of this judgment (instead of reinstatement)
considering that reinstatement is no longer feasible as
correctly pointed out by the Court of Appeals on account of
the strained relations brought about by the litigation in this
case. Since reinstatement is no longer viable, she is also
entitled to separation pay equivalent to one (1) month salary
for every year of service.21 Lastly, since private respondent
was compelled to file an action for illegal dismissal with the
labor arbiter, she is likewise entitled to attorney's fees 22 at
the rate above-mentioned. There is no room to argue, as the
Bank does here, that its liability should be mitigated on
account of its good faith and that private respondent is not
entirely blameless. There is no showing that private
respondent is partly at fault or that the Bank acted in good
faith in terminating an employee of twenty-eight years. In
any event, Article 279 of Republic Act No. 671523 clearly and
plainly provides for "full backwages" to illegally dismissed
employees.1wphi1.nt
WHEREFORE, the instant petition for review on certiorari
is DENIED, and the assailed Decision of the Court of Appeals,
dated October 15, 1999, is AFFIRMED.
SO ORDERED.

G.R. No. L-58877 March 15, 1982

PEPSI-COLA BOTTLING COMPANY, COSME DE ABOITIZ,
and
ALBERTO
M.
DACUYCUY, petitioners,
vs.
HON. JUDGE ANTONIO M. MARTINEZ, in his official
capacity, and ABRAHAM TUMALA, JR., respondents.

ESCOLIN, J.:
This petition for certiorari, prohibition and mandamus raises
anew the legal question often brought to this Court: Which
tribunal has exclusive jurisdiction over an action filed by an
employee against his employer for recovery of unpaid
salaries, separation benefits and damages the court of
general jurisdiction or the Labor Arbiter of the National Labor
Relations Commission [NLRC]?
The facts that gave rise to this petition are as follows:
On September 19, 1980, respondent Abraham Tumala, Jr.
filed a complaint in the Court of First Instance of Davao,
docketed as Civil Case No. 13494, against petitioners PepsiCola Bottling Co., Inc., its president Cosme de Aboitiz and
other company officers. Under the first cause of action, the

complaint averred inter alia that Tumala was a salesman of

the company in Davao City from 1977 up to August 21, 1980;
that in the annual "Sumakwel" contest conducted by the
company in 1979, Tumala was declared winner of the "LapuLapu Award" for his performance as top salesman of the
year, an award which entitled him to a prize of a house and
lot; and that petitioners, despite demands, have unjustly
refused to deliver said prize Under the second cause of
action, it was alleged that on August 21, 1980, petitioners,
"in a manner oppressive to labor" and "without prior
clearance from the Ministry of Labor", "arbitrarily and
ilegally" terminated his employment. He prayed that
petitioners be ordered, jointly and severally, to deliver his
prize of house and lot or its cash equivalent, and to pay his
back salaries and separation benefits, plus moral and
exemplary damages, attorney's fees and litigation expenses.
He did not ask for reinstatement.
Petitioners moved to dismiss the complaint on grounds of
lack of jurisdiction and cause of action. Petitioners further
alleged that Tumala was not entitled to the "Sumakwel" prize
for having misled the company into declaring him top
salesman for 1979 through various deceitful and fraudulent
manipulations and machinations in the performance of his
duties as salesman and depot in-charge of the bottling
company in Davao City, which manipulations consisted of
"unremitted cash collections, fictitious collections of trade
accounts, fictitious loaned empties, fictitious product deals,
uncollected loaned empties, advance sales confirmed as
fictitious, and route shortages which resulted to the damage
and prejudice of the bottling company in the amount of
P381,851.76." The alleged commission of these fraudulent
acts was also advanced by petitioners to justify Tumala's
dismissal.

The court below, sustaining its jurisdiction over the case,

denied the motion for reconsideration. Hence the present
recourse.
We rule that the Labor Arbiter has exclusive jurisdiction over
the case.
Jurisdiction over the subject matter in a judicial proceeding is
conferred by the sovereign authority which organizes the
court; and it is given only by law. 1 Jurisdiction is never
presumed; it must be conferred by law in words that do not
admit of doubt. 2
Since the jurisdiction of courts and judicial tribunals is
derived exclusively from the statutes of the forum, the issue
efore Us should be resolved on the basis of the law or statute
now in force. We find that law in Presidential Decree 1691
which took effect on May 1, 1980, Section 3 of which reads as
follows:
SEC. 3. Article 217, 222 and 262 of Book V of the Labor Code
are hereby amended to read as follows:
Article 217. Jurisdiction of Labor Arbiters and the
Commission. The Labor Arbiters shall have the original and
exclusive jurisdiction to hear and decide the following cases
involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Unresolved issues in collective bargaining, including those
that involve waged hours of work and other terms and
conditions of employment;
3. All money claims of workers, including those based on nonpayment
or
underpayment
of
wages,
overtime
compensation, separation pay and other benefits provided by
law or appropriate agreement, except claims for employees'

compensation,
benefits;

social

security,

medicare

and

maternity

4. Cases involving household services; and

5. All other claims arising from employer-employee relations,
unless expressly excluded by this Code.
Under paragraphs 3 and 5 of the above Presidential Decree,
the case is exclusively cognizable by the Labor Arbiters of the
National Labor Relations Commission.
It is to be noted that P.D. 1691 is an exact reproduction of
Article 217 of the Labor Code (P.D. 442), which took effect on
May 1, 1974. In Garcia vs. Martinez 3, an action filed on
August 2, 1976 in the Court of First Instance of Davao by a
dismissed employee against his employer for actual, moral
and exemplary damages, We held that under Article 217 of
the Labor Code, the law then in force, the case was within
the exclusive jurisdiction of the Labor Arbiters and the
National Labor Relations Commission [NLRC]. This Court, per
Justice Aquino, rational this holding thus:
The provisions of paragraph 3 and 5 of Article 217 are broad
and comprehensive enough to cover Velasco's [employee's]
claim for damages allegedly arising from his unjustified
dismissal by Garcia [employer]. His claim was a consequence
of the termination of their employer-employee relations
[Compare with Ruby Industrial Corporation vs. Court of First
Instance of Manila, L- 38893, August 31, 1977, 78 SCRA 499].
Article 217 of the Labor Code words amended by P.D. 1367,
which was promulgated on May 1, 1978, the full text of which
is quoted as follows:
SECTION 1. Paragraph [a] of Art, 217 of the Labor Code as
amended is hereby further amended to read as follows:

[a] The Labor Arbiters shall have exclusive jurisdiction hear

and decide the following cases involving all workers, whether
agricultural or non-agricultural:
1] Unfair labor practice cases;
2] Unresolved issues in collective bargaining, including those
which involve wages, hours of work, and other terms
conditions of employment; and
3] All other cases arising from employer-employee relations
duly indorsed by the Regional Directors in accordance with
the provisions of this Code.
Provided, that the Regional Directors shall not indorse and
Labor Arbiters shall not entertain claims for moral or other
forms of damages.
It will be noted that paragraphs 3 and 5 of Article 217 were
deleted from the text of the above decree and a new
provision incorporated therein, to wit: "Provided that the
Regional Directors shall not indorse and Labor Arbiters shall
not en certain claims for moral or other forms of damages."
This amendatory act thus divested the Labor Arbiters of their
competence to pass upon claims for damages by employees
against their employers.
However, on May 1, 1980, Article 217, as amended by P.D.
1367, was amended anew by P.D. 1691. This last decree,
which is a verbatim reproduction of the original test of Article
217 of the Labor Code, restored to the Labor Arbiters of the
NLRC exclusive jurisdiction over claims, money or otherwise,
arising from employer-employee relations, except those
expressly excluded therefrom.
In sustaining its jurisdiction over the case at bar, the
respondent court relied on Calderon vs. Court of Appeals 4 ,
where We ruled that an employee's action for unpaid
salaries, alowances and other reimbursable expenses and

damages was beyond the periphery of the jurisdictional

competence of the Labor Arbiters. Our ruling in Calderon,
however, no longer applaies to this case because P.D. 1367,
upon which said decision was based, had already been
superceded by P.D. 1691. As heretofore stated, P.D. 1691
restored to the Labor Arbiters their exlcusive jurisdiction over
said classes of claims.
Respondent Tumala maintains that his action for delivery of
the house and lot, his prize as top salesman of the company
for 1979, is a civil controversy triable exclusively by the court
of the general jurisdiction. We do not share this view. The
claim for said prize unquestionably arose from an employeremployee relation and, therefore, falls within the coverage of
par. 5 of P.D. 1691, which speaks of "all claims arising from
employer-employee relations, unless expressly excluded by
this Code." Indeed, Tumala would not have qualitfied for the
content, much less won the prize, if he was not an employee
of the company at the time of the holding of the contest.
Besides, the cause advanced by petitioners to justify their
refusal to deliver the prizethe alleged fraudulent
manipulations committed by Tumala in connection with his
duties as salesman of the companyinvolves an inquiry into
his actuations as an employee.
Besides, to hold that Tumala's claim for the prize should be
passed upon by the regular court of justice, independently
and separately from his claim for back salaries, retirement
benefits and damages, would be to sanction split juridiction
and multiplicity of suits which are prejudicial to the orderly
administration of justice.
One last point. Petitioners content that Tumala has no cause
of action to as for back salaries and damages because his
dimissal was authorized by the Regional Director of the
MInistry of Labor. This question calls for the presentaiton of
evidence and the same may well be entilated before the

labor Arbiter who has jurisdiction over the case. Besides, the
issue raised is not for Us to determine in this certiorari
proceeding. The extraordinary remedy of certiorari
proceeding. The extraordinary remedy of certiorari offers
only a limited form of review and its principal function is to
keep an inferior tribunal within its jurisdiction. 5
WHEREFORE, the petition is granted, and respondent judge is
hereby directed to dismiss Civil Case No. 13494, without
prejudice to the right of respondent Tumala to refile the same
with the Labor Arbiter. No costs.
SO ORDERED.

G.R. No. 80774 May 31, 1988

SAN
MIGUEL
CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
RUSTICO VEGA, respondents.
Siguion Reyna, Montecillo & Ongsiako Law Offices for
petitioner.
The Solicitor General for public respondent.

FELICIANO, J.:
In line with an Innovation Program sponsored by petitioner
San Miguel Corporation ("Corporation;" "SMC") and under
which management undertook to grant cash awards to "all
SMC employees ... except [ED-HO staff, Division Managers
and higher-ranked personnel" who submit to the Corporation
Ideas and suggestions found to be beneficial to the
Corporation, private respondent Rustico Vega submitted on
23 September 1980 an innovation proposal. Mr. Vega's
proposal was entitled "Modified Grande Pasteurization
Process," and was supposed to eliminate certain alleged
defects in the quality and taste of the product "San Miguel
Beer Grande:"
Title of Proposal
Modified Grande Pasteurization Process
Present Condition or Procedure

At the early stage of beer grande production, several cases of

beer grande full goods were received by MB as returned beer
fulls (RBF). The RBF's were found to have sediments and their
contents were hazy. These effects are usually caused by
underpasteurization time and the pasteurzation units for beer
grande were almost similar to those of the steinie.
Proposed lnnovation (Attach necessary information)
In order to minimize if not elienate underpasteurization of
beer grande, reduce the speed of the beer grande
pasteurizer thereby, increasing the pasteurization time and
the pasteurization acts for grande beer. In this way, the selflife (sic) of beer grande will also be increased. 1
Mr. Vega at that time had been in the employ of petitioner
Corporation for thirteen (1 3) years and was then holding the
position of "mechanic in the Bottling Department of the SMC
Plant Brewery situated in Tipolo, Mandaue City.
Petitioner Corporation, however, did not find the aforequoted
proposal acceptable and consequently refused Mr. Vega's
subsequent demands for a cash award under the Innovation
Program. On 22 February 1983., a Complaint 2 (docketed as
Case No. RAB-VII-0170-83) was filed against petitioner
Corporation with Regional Arbitration Branch No. VII (Cebu
City) of the then.", Ministry of Labor and Employment. Frivate
respondent Vega alleged there that his proposal "[had] been
accepted by the methods analyst and implemented by the
Corporation [in] October 1980," and that the same
"ultimately and finally solved the problem of the Corporation
in the production of Beer Grande." Private respondent thus
claimed entitlement to a cash prize of P60,000.00 (the
maximum award per proposal offered under the Innovation
Program) and attorney's fees.
In
an
Answer
3
Paper, petitioner

With
Counterclaim
Corporation
alleged

and
that

Position
private

respondent had no cause of action. It denied ever having

approved or adopted Mr. Vega's proposal as part of the
Corporation's brewing procedure in the production of San
Miguel Beer Grande. Among other things, petitioner stated
that Mr. Vega's proposal was tumed down by the company
"for lack of originality" and that the same, "even if
implemented [could not] achieve the desired result."
Petitioner further alleged that the Labor Arbiter had no
jurisdiction, Mr. Vega having improperly bypassed the
grievance machinery procedure prescribed under a then
existing
collective
bargaining
agreement
between
management and employees, and available administrative
remedies provided under the rules of the Innovation Program.
A counterclaim for moral and exemplary damages, attorney's
fees, and litigation expenses closed out petitioner's pleading.
In an Order 4 dated 30 April 1986, the Labor Arbiter, noting
that the money claim of complainant Vega in this case is "not
a necessary incident of his employment" and that said claim
is not among those mentioned in Article 217 of the Labor
Code, dismissed the complaint for lack of jurisdiction.
However, in a gesture of "compassion and to show the
government's concern for the workingman," the Labor Arbiter
also directed petitioner to pay Mr. Vega the sum of P2,000.00
as "financial assistance."
The Labor Arbiter's order was subsequently appealed by both
parties, private respondent Vega assailing the dismissal of his
complaint for lack of jurisdiction and petitioner Corporation
questioning the propriety of the award of "financial
assistance" to Mr. Vega. Acting on the appeals, the public
respondent National Labor Relations Commission, on 4
September 1987, rendered a Decision, 5 the dispositive
portion of which reads:

WHEREFORE, the appealed Order is hereby set aside and

another udgment entered, order the respondent to pay the
complainant the amount of P60,000.00 as explained above.

5. Cases arising from any violation of Article 265 of this;

Code, including questions involving the legality of strikes and
lockouts.

SO ORDERED.

(b) The Commission shall have exclusive appellate

jurisdiction over all cases decided by Labor Arbiters.
(Emphasis supplied)

In the present Petition for certiorari filed on 4 December

1987, petitioner Corporation, invoking Article 217 of the
Labor Code, seeks to annul the Decision of public respondent
Commission in Case No. RAB-VII-01 70-83 upon the ground
that the Labor Arbiter and the Commission have no
jurisdiction over the subject matter of the case.
The jurisdiction of Labor Arbiters and the National Labor
Relations Commission is outlined in Article 217 of the Labor
Code, as last amended by Batas Pambansa Blg. 227 which
took effect on 1 June 1982:
ART. 217. Jurisdiction of Labor Arbiters and the commission.
(a) The Labor Arbiters shall have theoriginal and exclusive
jurisdiction to hear and decide within thirty (30) working days
after submission of the case by the parties for decision, the
following cases involving are workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of work
and other terms and conditions of employment;
3. All money claims of workers, including those based on
non-payment or underpayment of wages, overtime
compensation, separation pay and other benefits provided
by law or appropriate agreement, except claims for
employees' compensation, social security, medicare and
maternity benefits;
4. Cases involving household services; and

While paragraph 3 above refers to "all money claims of

workers," it is not necessary to suppose that the entire
universe of money claims that might be asserted by workers
against their employers has been absorbed into the original
and exclusive jurisdiction of Labor Arbiters. In the first place,
paragraph 3 should be read not in isolation from but rather
within the context formed by paragraph 1 related to unfair
labor practices), paragraph 2 (relating to claims concerning
terms and conditions of employment), paragraph 4 (claims
relating to household services, a particular species of
employer-employee relations), and paragraph 5 (relating to
certain
activities
prohibited
to
employees
or
to
employers).<re||an1w> It is evident that there is a
unifying element which runs through paragraphs 1 to 5 and
that is, that they all refer to cases or disputes arising out of
or in connection with an employer-employee relationship.
This is, in other words, a situation where the rule of noscitur a
sociis may be usefully invoked in clarifying the scope of
paragraph 3, and any other paragraph of Article 217 of the
Labor Code, as amended. We reach the above conclusion
from an examination of the terms themselves of Article 217,
as last amended by B.P. Blg. 227, and even though earlier
versions of Article 217 of the Labor Code expressly brought
within the jurisdiction of the Labor Arbiters and the NLRC
"cases arising from employer employee relations," 6 which
clause was not expressly carried over, in printer's ink, in
Article 217 as it exists today. For it cannot be presumed that
money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and

which would therefore fall within the general jurisdiction of

the regular courts of justice, were intended by the legislative
authority to be taken away from the jurisdiction of the courts
and lodged with Labor Arbiters on an exclusive basis. The
Court, therefore, believes and so holds that the money claims
of workers" referred to in paragraph 3 of Article 217
embraces money claims which arise out of or in connection
with the employer-employee relationship, or some aspect or
incident of such relationship. Put a little differently, that
money claims of workers which now fall within the original
and exclusive jurisdiction of Labor Arbiters are those money
claims which have some reasonable causal connection with
the employer-employee relationship.
Applying the foregoing reading to the present case, we note
that petitioner's Innovation Program is an employee incentive
scheme offered and open only to employees of petitioner
Corporation, more specifically to employees below the rank
of manager. Without the existing employer-employee
relationship between the parties here, there would have been
no occasion to consider the petitioner's Innovation Program
or the submission by Mr. Vega of his proposal concerning
beer grande; without that relationship, private respondent
Vega's suit against petitioner Corporation would never have
arisen. The money claim of private respondent Vega in this
case, therefore, arose out of or in connection with his
employment relationship with petitioner.
The next issue that must logically be confronted is whether
the fact that the money claim of private respondent Vega
arose out of or in connection with his employment relation"
with petitioner Corporation, is enough to bring such money
claim within the original and exclusive jurisdiction of Labor
Arbiters.
In Molave Motor Sales, Inc. v. Laron, 7 the petitioner was a
corporation engaged in the sale and repair of motor vehicles,

while private respondent was the sales Manager of petitioner.

Petitioner had sued private respondent for non-payment of
accounts which had arisen from private respondent's own
purchases of vehicles and parts, repair jobs on cars
personally owned by him, and cash advances from the
corporation. At the pre-trial in the lower court, private
respondent raised the question of lack of jurisdiction of the
court, stating that because petitioner's complaint arose out
of the employer-employee relationship, it fell outside the
jurisdiction of the court and consequently should be
dismissed. Respondent Judge did dismiss the case, holding
that the sum of money and damages sued for by the
employer arose from the employer-employee relationship
and, hence, fell within the jurisdiction of the Labor Arbiter
and the NLRC. In reversing the order of dismissal and
requiring respondent Judge to take cognizance of the case
below, this Court, speaking through Mme. Justice MelencioHerrera, said:
Before the enactment of BP Blg. 227 on June 1, 1982, Labor
Arbiters, under paragraph 5 of Article 217 of the Labor Code
had jurisdiction over" all other cases arising from employeremployee relation, unless, expressly excluded by this
Code." Even then, the principle followed by this Court was
that, although a controversy is between an employer and an
employee, the Labor Arbiters have no jurisdiction if the Labor
Code is not involved. In Medina vs. Castro-Bartolome, 11
SCRA 597, 604, in negating jurisdiction of the Labor Arbiter,
although the parties were an employer and two employees,
Mr. Justice Abad Santos stated:
The pivotal question to Our mind is whether or not the Labor
Code has any relevance to the reliefs sought by the plaintiffs.
For if the Labor Code has no relevance, any discussion
concerning the statutes amending it and whether or not they
have retroactive effect is unnecessary.

It is obvious from the complaint that the plaintiffs have not

alleged any unfair labor practice. Theirs is a simple action for
damages for tortious acts allegedly committed by the
defendants. Such being the case, the governing statute is
the Civil Code and not the Labor Code. It results that the
orders under review are based on a wrong premise.
And in Singapore Airlines Limited v. Pao, 122 SCRA 671,
677, the following was said:
Stated differently, petitioner seeks protection under the civil
laws and claims no benefits under the Labor Code. The
primary relief sought is for liquidated damages for breach of
a contractual obligation. The other items demanded are not
labor benefits demanded by workers generally taken
cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed
are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.
In the case below, PLAINTIFF had sued for monies loaned to
DEFENDANT, the cost of repair jobs made on his personal
cars, and for the purchase price of vehicles and parts sold to
him. Those accounts have no relevance to the Labor Code.
The cause of action was one under the civil laws, and it does
not breach any provision of the Labor Code or the contract of
employment of DEFENDANT. Hence the civil courts, not the
Labor Arbiters and the NLRC should have jurisdiction. 8
It seems worth noting that Medina v. Castro-Bartolome,
referred to in the above excerpt, involved a claim for
damages by two (2) employees against the employer
company and the General Manager thereof, arising from the
use of slanderous language on the occasion when the
General Manager fired the two (2) employees (the Plant
General Manager and the Plant Comptroller). The Court
treated the claim for damages as "a simple action for
damages for tortious acts" allegedly committed by private

respondents, clearly if impliedly suggesting that the claim for

damages did not necessarily arise out of or in connection
with the employer-employee relationship.Singapore Airlines
Limited v. Pao, also cited in Molave, involved a claim for
liquidated damages not by a worker but by the employer
company, unlike Medina. The important principle that runs
through these three (3) cases is that where the claim to the
principal relief sought 9 is to be resolved not by reference to
the Labor Code or other labor relations statute or a collective
bargaining agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular courts of
justice and not to the Labor Arbiter and the NLRC. In such
situations, resolution of the dispute requires expertise, not in
labor management relations nor in wage structures and other
terms and conditions of employment, but rather in the
application of the general civil law. Clearly, such claims fall
outside the area of competence or expertise ordinarily
ascribed to Labor Arbiters and the NLRC and the rationale for
granting jurisdiction over such claims to these agencies
disappears.
Applying the foregoing to the instant case, the Court notes
that the SMC Innovation Program was essentially an
invitation from petitioner Corporation to its employees to
submit innovation proposals, and that petitioner Corporation
undertook to grant cash awards to employees who accept
such invitation and whose innovation suggestions, in the
judgment of the Corporation's officials, satisfied the
standards and requirements of the Innovation Program 10 and
which, therefore, could be translated into some substantial
benefit to the Corporation. Such undertaking, though
unilateral in origin, could nonetheless ripen into an
enforceable contractual (facio ut des) 11 obligation on the
part of petitioner Corporation under certain circumstances.
Thus, whether or not an enforceable contract, albeit implied
arid innominate, had arisen between petitioner Corporation
and private respondent Vega in the circumstances of this

case, and if so, whether or not it had been breached, are

preeminently legal questions, questions not to be resolved by
referring to labor legislation and having nothing to do with
wages or other terms and conditions of employment, but
rather having recourse to our law on contracts.
WEREFORE, the Petition for certiorari is GRANTED. The
decision dated 4 September 1987 of public respondent
National Labor Relations Commission is SET ASIDE and the
complaint in Case No. RAB-VII-0170-83 is hereby DISMISSED,
without prejudice to the right of private respondent Vega to
file a suit before the proper court, if he so desires. No
pronouncement as to costs. SO ORDERED.
G.R. No. L-50459 August 25, 1989
LEONARDO
D.
SUARIO, petitioner,
vs.
BANK OF THE PHILIPPINE ISLANDS, Davao Branch or
The
Manager/Cashier
and
NATIONAL
LABOR
RELATIONS COMMISSION, respondents.
Leonardo D. Suario for and in his own behalf.
Canete Tolentino,
respondent BPI.

Buyo,

Caballero

and

Fuentes

for

GUTIERREZ, JR., J.:

The petitioner, with himself as his own counsel, filed this
petition for review of the decision of the National Labor
Relations Commission (NLRC) which denied his claim for
damages arising from an alleged illegal dismissal. In addition
to the separation pay already awarded to him, the petitioner
asks for P9,995.00 actual damages, P300,000.00 moral
damages, P200,000.00 exemplary damages, and attorney's
fees to be determined by the Court.

On August 4,1977, petitioner Leonardo D. Suario filed a

complaint for separation pay, damages and attorney's fees
against the Bank of the Philippine Islands, Davao Branch/ or
the Manager and Assistant Manager/Cashier alleging:
xxx xxx xxx
2. That complainant has been a loyal employee of the
respondent bank since March, 1969, first assigned as a
saving clerk, then rose to become the head of the loan
section in 1976 with an official designation as Credit
Investigator Appraiser-Credit Analyst;
3. That during the time of the complainant's employment
with the respondent bank, he pursued his studies of law
without criticism or adverse comments from the respondent
bank but instead praises were showered and incentives and
considerations were bestowed in view of the complainant's
determination for intellectual advancement;
4. That sometime in March, 1976, the complainant verbally
requested the then Asst. Vice-President and Branch Manager,
Mr. Armando N. Guilatco, for a 6-month leave of absence
without pay purposely to take the 1976 pre-bar review in
Manila and that the said Mr. Guilatco informed the
complainant that there would be no problem as regards the
requested leave of absence;
5. That sometime in May, 1976, the complainant received a
verbal notice from the new Branch Manager, Mr. Vicente
Casino, that the respondent's Head Office approved only a
30-day leave of absence without pay but that Mr. Guilatco,
then assigned in Head Office as Vice President, advised him
(Casino) to inform the complainant to just avail of the 30-day
leave of absence first and then proceed to Manila for the
review since the request would be ultimately granted;

6. That complainant never suspected that his application

would be disapproved, much less any bad faith on the part of
the respondent bank to discriminate union member (sic),
since it has been the policy of the respondent bank to grant
request of this nature as shown in the case of four (4) former
employees who were all granted leave of absence without
pay. Copies of the affidavits of Judge Juan Montejo and Atty.
Bienvenido Banez and xerox copies of the payroll of Jose
Ledesma and Antonio Tan are hereto attached as ANNEXES
'A', 'B', 'C', and 'D' and made an integral part hereof;
7. That on May 10, 1976, the complainant wrote a formal
letter to the President of the respondent bank, Mr. Alberto
Villa Abrille, asking for a formal reconsideration and caused
the same to be received by Mr. Vicente Casino but the latter
advised instead the complainant to address to him (Casino) a
letter of mild tenor since any reconsideration should be
coursed through the proper channel; and that Mr. Casino
advised the complainant to just file his 30-day leave of
absence without pay as approved and then proceed to Manila
since the request would ultimately be granted. A Xerox copy
of the said letter is hereto attached as ANNEX 'E' to be made
an integral part hereof;
8. That acting on the said advice of Vicente Casino, the
complainant, with utmost good faith, wrote a letter
addressed to Mr. Casino aid at the same time, filed a 30-day
leave of absence. Copies of the letter and Application for
Leave of Absence are hereto attached as ANNEXES 'F' and 'G'
to be made an integral part hereof,
9. That on May 17, 1976, the complainant proceeded to
Manila for the pre-bar review and even went to the extent of
going to the respondent's Head Office to seek an audience
with the Personnel Manager with an alternative of working
with any of the Metro Manila Branches of the respondent
bank if and when the request would not be granted and that

the Personnel Manager promised to take up the matter with

Mr. Alberto Villa Abrille;
10. That during the first week of August, 1976, the
complainant
received
a
letter
from
the
Asst.
Manager/Cashier, Mr. Douglas E. Aurelio, ordering the
complainant to report back for work since the complainant's
request was allegedly disapproved and that failure to report
back for work would be a conclusive proof that the
complainant is no longer interested to continue working and
therefore considered resigned. ...
11. That upon receipt of the letter, complainant's review was
unduly interrupted since sleepless nights were spent in order
to arrive at the proper decision and that the complainant has
decided not to report back because of the considerable
expenses already incurred in Manila after he has been led to
believe that the request would ultimately be granted;
12. That during the last week of August, 1976, the
complainant received another letter from Douglas E. Aurelio,
attaching a xerox copy of the application for a Clearance to
terminate on the ground of resignation/ or abandonment. ...
13. That the complainant failed to file his opposition since as
above averred to, he was already in Manila taking up the
review and was then very busy since the bar examination
was only two months shy;
14. That sometime during the first week of December, 1976,
the complainant went to the respondent bank but was
verbally informed that he was already dismissed;
15. That on December 13, 1976, the complainant formally
wrote a letter to the respondent bank requesting for a written
and formal advise as to his real status and that on December
14, 1976, the respondent bank replied that the matter was
still referred to the Personnel Department at Head Office

leading again the complainant to believe that his case was

not yet hopeless. ...

The petitioner alleges that the public respondent committed

the following:

16. That on December 21, 1976, the complainant wrote

another letter pressing for a categorical answer and on
December 23, 1976, the lawyers of the respondent bank
replied that as far as the bank is concerned the services of
the complainant was considered terminated effective July 19,
1976 contrary to the respondent bank's manifestation that
his case was still pending before the Personnel
Department. ...

17. That the dismissal of the complainant was clearly illegal

and without just cause, being discriminatory in character he
being an active union member and in fact the Vice President
of the ALU-BPI Chapter until his dismissal in view of the
uneven application of the respondent's policy; ... (Rollo, pp.
15-19)

THAT THE NATIONAL LABOR RELATIONS COMMISSION ERRED

IN
DISMISSING
PETITIONER'S
MOTION
FOR
RECONSIDERATION BASED MAINLY ON PD NOS. 1367 AND
1391 IN ITS DECISION DATED FEBRUARY 9, 1979. (Rollo, p.
139).

The case was set for conciliation but since the parties could
not agree on any settlement, the case was certified to the
Labor Arbiter. Thereafter, the Executive Labor Arbiter
required the parties to submit their position papers. Based on
the position papers submitted, a decision was rendered on
December 7, 1977. The dispositive portion reads as follows:
WHEREFORE, premises considered, respondent is hereby
ordered to pay complainant's claim for separation pay in the
amount of P11,813.36. His claim for moral, actual, and
exemplary damages and attorney's fees are hereby
dismissed for lack of merit. (Rollo, p. 46)
The decision of the Executive Labor Arbiter was affirmed on
appeal to the National Labor Relations Commission on
October 9, 1978. A motion for reconsideration was likewise
denied. Hence, this petition.

THAT THE NATIONAL LABOR RELATIONS COMMISSION IN ITS

DECISION DATED OCTOBER 9, 1978 (ANNEX F OF THE
PETITION) ERRED IN NOT GRANTING THE CLAIM OF DAMAGES
PRAYED FOR BY PETITIONER DESPITE FINDINGS THAT THE
DISMISSAL WAS CLEARLY ILLEGAL; and
II

The main issue in this case is whether or not the NLRC

committed grave abuse of discretion in denying the
petitioner's claim for actual, moral and exemplary damages
plus attorney's fees in addition to his separation pay.
On the matter of NLRC jurisdiction over claims for damages,
it clearly appears that the complaint was filed on August 4,
1977 and decided by the Labor Arbiter on December 7, 1977;
hence, the applicable law is Article 217 of the Labor Code
which took effect on October 1, 1974, and which provides:
xxx xxx xxx
ART. 217. Jurisdiction of Labor Arbiters and the Commission.
(a) The Labor Arbiters shall have exclusive jurisdiction to
hear and decide the following cases involving all workers,
whether agricultural or non-agricultural:
(1) Unfair labor practice cases;

(2) Unresolved issues in collective bargaining including those

which involve wages, hours of work, and other terms and
conditions of employment duly indorsed by the Bureau in
accordance with the provisions of this Code;
(3) All money claims of workers involving non-payment or
underpayment
of
wages,
overtime
or
premium
compensation, maternity or service incentive leave,
separation pay and other money claims arising from
employer-employee relation, except claims for employee's
compensation, social security and medicare benefits and as
otherwise provided in Article 128 of this Code;
(4) Cases involving household services; and
(5) All other cases arising from employer-employee
relationship unless expressly excluded by this Code.
(b) The Commission shall have exclusive appellate
jurisdiction over all cases decided by Labor Arbiters,
compulsory arbitrators, and voluntary arbitrators in
appropriate casino provided in Article 263 of this Code. ...
The contention of private respondent that the NLRC is not
clothed with authority to entertain claims for moral and other
forms of damages is based on PD 1367 which took effect on
May 1, 1979 and which amended Article 217 by specifically
providing that "Regional Directors shall not indorse and Labor
Arbiters shall not entertain claims for moral or other forms of
damages."
This limitation on jurisdiction did not last long. This Court in
the case of Ebon v. De Guzman, (113 SCRA 52 [1982])
explained:
Evidently, the lawmaking authority had second thoughts
about depriving the Labor Arbiters and the NLRC of the
jurisdiction to award damages in labor cases because that set
up would mean duplicity of suits, splitting the cause of action

and possible conflicting findings and conclusions by two

tribunals on one and the same claim.
So, on May 1, 1980, Presidential Decree No. 1691 (which
substantially reenacted Article 217 in its original form)
nullified Presidential Decree No. 1367 and restored to the
Labor Arbiters and the NLRC their jurisdiction to award all
kinds of damages in cases arising from employer-employee
relations (Pepsi-Cola Bottling Company of the Philippines v.
Martinez, G.R. No. 58877).
It is now well settled that money claims of workers provided
by law over which the labor arbiter has original and exclusive
jurisdiction are comprehensive enough to include claims for
moral damages of a dismissed employee against his
employer. (Vargas v. Akai Phil. Inc., 156 SCRA 531 [1987]).
On the issue whether or not the petitioner is entitled to his
claim for moral damages, we are constrained to decide in the
negative. The case of Primero v. Intermediate Appellate
Court, (156 SCRA 435 [1987]) expounded on this matter, to
wit:
xxx xxx xxx
The legislative intent appears clear to allow recovery in
proceedings before Labor Arbiters of moral and other forms
of damages, in all cases or matters arising from employeremployee relations. This would no doubt include, particularly,
instances where an employee has been unlawfully dismissed.
In such a case the Labor Arbiter has jurisdiction to award to
the dismissed employee not only the reliefs specifically
provided by labor laws, but also moral and the forms of
damages governed by the Civil Code. Moral damages would
be recoverable, for example, where the dismissal of the
employee was not only effected without authorized cause
and/or due process for which relief is granted by the Labor
Code but was attended by bad faith or fraud, or

constituted an act oppressive to labor, or was done in a

manner contrary to morals, good customs or public policy-for
which the obtainable relief is determined by 'the Civil
Code (not the Labor Code).lwph1.t Stated otherwise, if
the evidence adduced by the employee before the Labor
Arbiter should establish that the employer did indeed
terminate the employee's services without just cause or
without according him due process, the Labor Arbiter's
judgment shall be for the employer to reinstate the
employee and pay him his back wages, or exceptionally, for
the employee simply to receive separation pay. These are
reliefs explicitly prescribed by the Labor Code. But any award
of moral damages by the Labor Arbiter obviously cannot be
based on the Labor Code but should be grounded on the Civil
Code. Such an award cannot be justified solely upon the
premise (otherwise sufficient for redress under the Labor
Code) that the employer fired his employee without just
cause or due process. Additional facts must be pleaded and
proven to warrant the grant of moral damages under the
Civil Code, these being, to repeat, that the act of dismissal
was attended by bad faith or fraud, or was oppressive to
labor, or done in a manner contrary to morals, good customs,
or public policy; and, of course, that social humiliation,
wounded
feelings,
grave
anxiety,
etc.,
resulted
therefrom. (pp. 443-444, emphasis supplied)
The case of Primero v. IAC states the distinction between the
two seemingly disparate causes of action, to wit:
It is clear that the question of the legality of the act of
dismissal is intimately related to the issue of the legality of
the manner by which that act of dismissal was performed.
But while the Labor Code treats of the nature of, and the
remedy available as regards the first the employee's
separation from employment it does not at all deal with the
second the manner of that separation which is governed
exclusively by the Civil Code. In addressing the first issue,

the Labor Arbiter applies the Labor Code; in addressing the

second, the Civil Code. And this appears to be the plain and
patent intendment of the law. For apart from the reliefs
expressly set out in the Labor Code flowing from illegal
dismiss from employment, no other damages may be
awarded to an illegally dismiss employee other than those
specified by the Civil Code. Hence, the fact that the issue of
whether or not moral or other damages were suffered by an
employee and in the affirmative, the amount that should
properly be awarded to him in the circumstances is
determined under the provisions of the Civil Code and not the
Labor Code. ... (P. 445)
In the case of Guita v. Court of Appeals (139 SCRA 576
[1985]), we stated that:
Moral damages may be awarded to compensate one for
diverse injuries such as mental anguish, besmirched
reputation, wounded feelings and social humiliation. It is
however not enough that such injuries have arisen; it is
essential that they have sprung from a wrongful act or
omission of the defendant which was the proximate cause
thereof.
Moral damages include physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury.
Though incapable of pecuniary computation, moral damages
may be recovered if they are the proximate result of the
defendant's wrongful act or omission. (Civil Code, Article
2217).
In a long line of cases, we have consistently ruled that in the
absence of a wrongful act or omission or of fraud or bad
faith, moral damages cannot be awarded. . . (R & B Surety
and Insurance Co., Inc. v. IAC, 129 SCRA 736, 743.) (p. 580)

We do not find any bad faith or fraud on the part of the bank
officials who denied the petitioner's request for a six months'
leave of absence without pay. If the petitioner was made to
believe that his request would be granted, we can not fault
the branch manager or his subsequent replacement for
giving their assurances. They were merely personal
assurances which could be reconsidered on the basis of later
developments or upon consultation with higher authorities
and which are not binding. Certainly, the bank officials who
gave their verbal assurances had only the petitioner's
paramount welfare in their minds. There is no evidence to
show that they meant to deceive the petitioner. They
themselves thought that such a request would be granted.
Unfortunately, company policy had to be followed. The fact
that the petitioner's request for six months' leave of absence
was denied does not ipso facto entitle him to damages.

however, did not oppose such application nor did he do

anything to preserve his right.

As held in the case of Rubio v. Court of Appeals (141 SCRA

488 [1986]):

In the light of the foregoing, we sustain the Labor Arbiter's

finding that the petitioner's claim for damages must be
dismissed for lack of sufficient basis.

xxx xxx xxx

More pertinent is the fact that the petitioner knew as early as

May 6, 1976 that he was granted only a one month study
leave (rollo, p. 98). He may have asked for a reconsideration
but notwithstanding its denial, the petitioner proceeded with
his review. Whether or not his request for six months' leave
without pay would be granted, the petitioner was set on
continuing with his review.
Neither can we consider the private respondents' response to
the petitioner's query regarding his status as having given
him false hopes. The referral to the personnel department
was merely a part of the formal procedure undertaken by the
bank. Such referral does not show that the bank acted in a
wanton or willful manner.

In a long line of cases, we have consistently ruled that in the

absence of a wrongful act or omission or of fraud or bad faith,
moral damages cannot be awarded and that the adverse
result of an action does not per se make the action wrongful
and subject the actor to have payment of damages, for the
law could not have meant to impose a penalty on the right to
litigate. ... (p. 516)

WHEREFORE, the petition is hereby DISMISSED for lack of

merit.

It is incumbent upon the petitioner to prove that there was

malice or bad faith on the part of the private respondents in
terminating him On the contrary, the records of this petition
show that the private respondent acted in accordance with
law before effecting the dismissal. The records also show that
there was a prior application with the Ministry of Labor to
terminate the petitioner's employment. A copy of said
application was furnished to the petitioner. The petitioner,

PHILIPPINE
NATIONAL
vs.
FLORENCE O. CABANSAG, respondent.

SO ORDERED.

G.R. No. 157010

DECISION
PANGANIBAN, J.:

June 21, 2005

BANK, petitioner,

The Court reiterates the basic policy that all Filipino workers,
whether employed locally or overseas, enjoy the protective
mantle of Philippine labor and social legislations. Our labor
statutes may not be rendered ineffective by laws or
judgments promulgated, or stipulations agreed upon, in a
foreign country.

employment as Branch Credit Officer, at a total monthly

package of $SG4,500.00, effective upon assumption of duties
after approval. Ruben C. Tobias found her eminently qualified
and wrote on October 26, 1998, a letter to the President of
the Bank in Manila, recommending the appointment of
Florence O. Cabansag, for the position.

The Case

xxxxxxxxx

Before us is a Petition for Review on Certiorari1 under Rule 45

of the Rules of Court, seeking to reverse and set aside the
July 16, 2002 Decision2 and the January 29, 2003
Resolution3 of the Court of Appeals (CA) in CA-GR SP No.
68403. The assailed Decision dismissed the CA Petition (filed
by herein petitioner), which had sought to reverse the
National Labor Relations Commission (NLRC)s June 29, 2001
Resolution,4 affirming Labor Arbiter Joel S. Lustrias January
18, 2000 Decision.5

"The President of the Bank was impressed with the

credentials of Florence O. Cabansag that he approved the
recommendation of Ruben C. Tobias. She then filed an
Application, with the Ministry of Manpower of the
Government of Singapore, for the issuance of an
Employment Pass as an employee of the Singapore PNB
Branch. Her application was approved for a period of two (2)
years.

The assailed CA Resolution denied herein petitioners Motion

for Reconsideration.
The Facts
The facts are narrated by the Court of Appeals as follows:
"In late 1998, [herein Respondent Florence Cabansag] arrived
in Singapore as a tourist. She applied for employment, with
the Singapore Branch of the Philippine National Bank, a
private banking corporation organized and existing under the
laws of the Philippines, with principal offices at the PNB
Financial Center, Roxas Boulevard, Manila. At the time, the
Singapore PNB Branch was under the helm of Ruben C.
Tobias, a lawyer, as General Manager, with the rank of VicePresident of the Bank. At the time, too, the Branch Office had
two (2) types of employees: (a) expatriates or the regular
employees, hired in Manila and assigned abroad including
Singapore, and (b) locally (direct) hired. She applied for

"On December 7, 1998, Ruben C. Tobias wrote a letter to

Florence O. Cabansag offering her a temporary appointment,
as Credit Officer, at a basic salary of Singapore Dollars
4,500.00, a month and, upon her successful completion of
her probation to be determined solely, by the Bank, she may
be extended at the discretion of the Bank, a permanent
appointment and that her temporary appointment was
subject to the following terms and conditions:
1. You will be on probation for a period of three (3)
consecutive months from the date of your assumption of
duty.
2. You will observe the Banks rules and regulations and
those that may be adopted from time to time.
3. You will keep in strictest confidence all matters related to
transactions between the Bank and its clients.
4. You will devote your full time during business hours in
promoting the business and interest of the Bank.

5. You will not, without prior written consent of the Bank, be

employed in anyway for any purpose whatsoever outside
business hours by any person, firm or company.
6. Termination of your employment with the Bank may be
made by either party after notice of one (1) day in writing
during probation, one month notice upon confirmation or the
equivalent of one (1) days or months salary in lieu of
notice.
"Florence O. Cabansag accepted the position and assumed
office. In the meantime, the Philippine Embassy in Singapore
processed the employment contract of Florence O. Cabansag
and, on March 8, 1999, she was issued by the Philippine
Overseas
Employment
Administration,
an
Overseas
Employment Certificate, certifying that she was a bona fide
contract worker for Singapore.
xxxxxxxxx
"Barely three (3) months in office, Florence O. Cabansag
submitted to Ruben C. Tobias, on March 9, 1999, her initial
Performance Report. Ruben C. Tobias was so impressed with
the Report that he made a notation and, on said Report:
GOOD WORK. However, in the evening of April 14, 1999,
while Florence O. Cabansag was in the flat, which she and
Cecilia Aquino, the Assistant Vice-President and Deputy
General Manager of the Branch and Rosanna Sarmiento, the
Chief Dealer of the said Branch, rented, she was told by the
two (2) that Ruben C. Tobias has asked them to tell Florence
O. Cabansag to resign from her job. Florence O. Cabansag
was perplexed at the sudden turn of events and the runabout
way Ruben C. Tobias procured her resignation from the Bank.
The next day, Florence O. Cabansag talked to Ruben C. Tobias
and inquired if what Cecilia Aquino and Rosanna Sarmiento
had told her was true. Ruben C. Tobias confirmed the veracity
of the information, with the explanation that her resignation
was imperative as a cost-cutting measure of the Bank.

Ruben C. Tobias, likewise, told Florence O. Cabansag that the

PNB Singapore Branch will be sold or transformed into a
remittance office and that, in either way, Florence O.
Cabansag had to resign from her employment. The more
Florence O. Cabansag was perplexed. She then asked Ruben
C. Tobias that she be furnished with a Formal Advice from
the PNB Head Office in Manila. However, Ruben C. Tobias
flatly refused. Florence O. Cabansag did not submit any letter
of resignation.
"On April 16, 1999, Ruben C. Tobias again summoned
Florence O. Cabansag to his office and demanded that she
submit her letter of resignation, with the pretext that he
needed a Chinese-speaking Credit Officer to penetrate the
local market, with the information that a Chinese-speaking
Credit Officer had already been hired and will be reporting for
work soon. She was warned that, unless she submitted her
letter of resignation, her employment record will be
blemished with the notation DISMISSED spread thereon.
Without giving any definitive answer, Florence O. Cabansag
asked Ruben C. Tobias that she be given sufficient time to
look for another job. Ruben C. Tobias told her that she should
be out of her employment by May 15, 1999.
"However, on April 19, 1999, Ruben C. Tobias again
summoned Florence O. Cabansag and adamantly ordered her
to submit her letter of resignation. She refused. On April 20,
1999, she received a letter from Ruben C. Tobias terminating
her employment with the Bank.
xxxxxxxxx
"On January 18, 2000, the Labor Arbiter rendered judgment
in favor of the Complainant and against the Respondents, the
decretal portion of which reads as follows:

WHEREFORE, considering the foregoing premises, judgment

is hereby rendered finding respondents guilty of Illegal
dismissal and devoid of due process, and are hereby ordered:

Currency at the time of payment, and moral damages in the

amount of PhP 200,000.00, exemplary damages in the
amount of PhP 100,000.00;

1. To reinstate complainant to her former or substantially

equivalent position without loss of seniority rights, benefits
and privileges;

4. To pay complainant the amount of SGD 5,039.81 or its

equivalent in Philippine Currency at the time of payment,
representing attorneys fees.

2. Solidarily liable to pay complainant as follows:

SO ORDERED."

a) To pay complainant her backwages from 16 April 1999 up

to her actual reinstatement. Her backwages as of the date of
the promulgation of this decision amounted to SGD
40,500.00 or its equivalent in Philippine Currency at the time
of payment;

PNB appealed the labor arbiters Decision to the NLRC. In a

Resolution dated June 29, 2001, the Commission affirmed
that Decision, but reduced the moral damages to P100,000
and the exemplary damages to P50,000. In a subsequent
Resolution,
the
NLRC
denied
PNBs
Motion
for
Reconsideration.

b) Mid-year bonus in the amount of SGD 2,250.00 or its

equivalent in Philippine Currency at the time of payment;
c) Allowance for Sunday banking in the amount of SGD
120.00 or its equivalent in Philippine Currency at the time of
payment;
d) Monetary equivalent of leave credits earned on Sunday
banking in the amount of SGD 1,557.67 or its equivalent in
Philippine Currency at the time of payment;
e) Monetary equivalent of unused sick leave benefits in the
amount of SGD 1,150.60 or its equivalent in Philippine
Currency at the time of payment.
f) Monetary equivalent of unused vacation leave benefits in
the amount of SGD 319.85 or its equivalent in Philippine
Currency at the time of payment.
g) 13th month pay in the amount of SGD 4,500.00 or its
equivalent in Philippine Currency at the time of payment;
3. Solidarily to pay complainant actual damages in the
amount of SGD 1,978.00 or its equivalent in Philippine

[Emphasis in the original.]

Ruling of the Court of Appeals

In disposing of the Petition for Certiorari, the CA noted that
petitioner bank had failed to adduce in evidence the
Singaporean law supposedly governing the latters
employment Contract with respondent. The appellate court
found that the Contract had actually been processed by the
Philippine Embassy in Singapore and approved by the
Philippine Overseas Employment Administration (POEA),
which then used that Contract as a basis for issuing an
Overseas Employment Certificate in favor of respondent.
According to the CA, even though respondent secured an
employment pass from the Singapore Ministry of
Employment, she did not thereby waive Philippine labor laws,
or the jurisdiction of the labor arbiter or the NLRC over her
Complaint for illegal dismissal. In so doing, neither did she
submit herself solely to the Ministry of Manpower of
Singapores jurisdiction over disputes arising from her
employment. The appellate court further noted that a cursory

reading of the Ministrys letter will readily show that no such

waiver or submission is stated or implied.
Finally, the CA held that petitioner had failed to establish a
just cause for the dismissal of respondent. The bank had also
failed to give her sufficient notice and an opportunity to be
heard and to defend herself. The CA ruled that she was
consequently entitled to reinstatement and back wages,
computed from the time of her dismissal up to the time of
her reinstatement.
Hence, this Petition.

Issues
Petitioner submits the following issues for our consideration:
"1. Whether or not the arbitration branch of the NLRC in the
National Capital Region has jurisdiction over the instant
controversy;
"2. Whether or not the arbitration of the NLRC in the National
Capital Region is the most convenient venue or forum to hear
and decide the instant controversy; and
"3. Whether or not the respondent was illegally dismissed,
and therefore, entitled to recover moral and exemplary
damages and attorneys fees."8

for certiorari. Thus, in observance of the doctrine on the

hierarchy of courts, these petitions should be initially filed
with the CA.11
Rightly, the bank elevated the NLRC Resolution to the CA by
way of a Petition for Certiorari. In seeking a review by this
Court of the CA Decision -- on questions of jurisdiction, venue
and validity of employment termination -- petitioner is
likewise correct in invoking Rule 45.12
It is true, however, that in a petition for review on certiorari,
the scope of the Supreme Courts judicial review of decisions
of the Court of Appeals is generally confined only to errors of
law. It does not extend to questions of fact. This doctrine
applies with greater force in labor cases. Factual questions
are for the labor tribunals to resolve. 13In the present case,
the labor arbiter and the NLRC have already determined the
factual issues. Their findings, which are supported by
substantial evidence, were affirmed by the CA. Thus, they are
entitled to great respect and are rendered conclusive upon
this Court, absent a clear showing of palpable error or
arbitrary disregard of evidence.14
The Courts Ruling
The Petition has no merit.
First Issue:

In addition, respondent assails, in her Comment, the

propriety of Rule 45 as the procedural mode for seeking a
review of the CA Decision affirming the NLRC Resolution.
Such issue deserves scant consideration. Respondent
miscomprehends the Courts discourse in St. Martin Funeral
Home v. NLRC,10 which has indeed affirmed that the proper
mode of review of NLRC decisions, resolutions or orders is by
a special civil action for certiorari under Rule 65 of the Rules
of Court. The Supreme Court and the Court of Appeals
have concurrent original jurisdiction over such petitions

Jurisdiction
The jurisdiction of labor arbiters and the NLRC is specified in
Article 217 of the Labor Code as follows:
"ART. 217. Jurisdiction of Labor Arbiters and the Commission.
(a) Except as otherwise provided under this Code the Labor
Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without

extension, even in the absence of stenographic notes, the

following cases involving all workers, whether agricultural or
non-agricultural:

virtue of any law or contract involving Filipino workers for

overseas deployment including claims for actual, moral,
exemplary and other forms of damages.

1. Unfair labor practice cases;

x x x x x x x x x"

2. Termination disputes;

Based on the foregoing provisions, labor arbiters clearly

have original and exclusive jurisdiction over claims arising
from employer-employee relations, including termination
disputes involving all workers, among whom are overseas
Filipino workers (OFW).15

3. If accompanied with a claim for reinstatement, those cases

that workers may file involving wage, rates of pay, hours of
work and other terms and conditions of employment
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and
lockouts; and
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service, involving an
amount of exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for
reinstatement.
(b) The commission shall have exclusive appellate jurisdiction
over all cases decided by Labor Arbiters.
x x x x x x x x x."
More specifically, Section 10 of RA 8042 reads in part:
"SECTION 10. Money Claims. Notwithstanding any
provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within
ninety (90) calendar days after the filing of the complaint, the
claims arising out of an employer-employee relationship or by

We are not unmindful of the fact that respondent was directly

hired, while on a tourist status in Singapore, by the PNB
branch in that city state. Prior to employing respondent,
petitioner had to obtain an employment pass for her from the
Singapore Ministry of Manpower. Securing the pass was a
regulatory requirement pursuant to the immigration
regulations of that country.16
Similarly, the Philippine government requires non-Filipinos
working in the country to first obtain a local work permit in
order to be legally employed here. That permit, however,
does not automatically mean that the non-citizen is thereby
bound by local laws only, as averred by petitioner. It does not
at all imply a waiver of ones national laws on labor. Absent
any clear and convincing evidence to the contrary, such
permit simply means that its holder has a legal status as a
worker in the issuing country.1avvphil.zw+
Noteworthy is the fact that respondent likewise applied for
and secured an Overseas Employment Certificate from the
POEA through the Philippine Embassy in Singapore. The
Certificate, issued on March 8, 1999, declared her a bona fide
contract worker for Singapore. Under Philippine law, this
document authorized her working status in a foreign country
and entitled her to all benefits and processes under our
statutes. Thus, even assuming arguendothat she was

considered at the start of her employment as a "direct hire"

governed by and subject to the laws, common practices and
customs prevailing in Singapore 17 she subsequently became
a contract worker or an OFW who was covered by Philippine
labor laws and policies upon certification by the POEA. At the
time her employment was illegally terminated, she already
possessed the POEA employment Certificate.
Moreover, petitioner admits that it is a Philippine corporation
doing
business
through
a
branch
office
in
18
Singapore. Significantly, respondents employment by the
Singapore branch office had to be approved by Benjamin P.
Palma Gil,19 the president of the bank whose principal offices
were in Manila. This circumstance militates against
petitioners contention that respondent was "locally hired";
and totally "governed by and subject to the laws, common
practices and customs" of Singapore, not of the Philippines.
Instead, with more reason does this fact reinforce the
presumption that respondent falls under the legal definition
of migrant worker, in this case one deployed in Singapore.
Hence, petitioner cannot escape the application of Philippine
laws or the jurisdiction of the NLRC and the labor arbiter.
In any event, we recall the following policy pronouncement of
the Court in Royal Crown Internationale v. NLRC:20
"x x x. Whether employed locally or overseas, all Filipino
workers enjoy the protective mantle of Philippine labor and
social legislation, contract stipulations to the contrary
notwithstanding. This pronouncement is in keeping with the
basic public policy of the State to afford protection to labor,
promote full employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the relations
between workers and employers.1awphi1.net For the State
assures the basic rights of all workers to self-organization,
collective bargaining, security of tenure, and just and
humane conditions of work [Article 3 of the Labor Code of the

Philippines; See also Section 18, Article II and Section 3,

Article XIII, 1987 Constitution]. This ruling is likewise
rendered imperative by Article 17 of the Civil Code which
states that laws which have for their object public order,
public policy and good customs shall not be rendered
ineffective by laws or judgments promulgated, or by
determination or conventions agreed upon in a foreign
country."
Second Issue:
Proper Venue
Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:
"Section 1. Venue (a) All cases which Labor Arbiters have
authority to hear and decide may be filed in the Regional
Arbitration Branch having jurisdiction over the workplace of
the complainant/petitioner; Provided, however that cases of
Overseas Filipino Worker (OFW) shall be filed before the
Regional Arbitration Branch where the complainant resides or
where the principal office of the respondent/employer is
situated, at the option of the complainant.
"For purposes of venue, workplace shall be understood as the
place or locality where the employee is regularly assigned
when the cause of action arose. It shall include the place
where the employee is supposed to report back after a
temporary detail, assignment or travel. In the case of field
employees, as well as ambulant or itinerant workers, their
workplace is where they are regularly assigned, or where
they are supposed to regularly receive their salaries/wages or
work instructions from, and report the results of their
assignment to their employers."
Under the "Migrant Workers and Overseas Filipinos Act of
1995" (RA 8042), a migrant worker "refers to a person who is
to be engaged, is engaged or has been engaged in a

remunerated activity in a state of which he or she is not a

legal resident; to be used interchangeably with overseas
Filipino worker."21 Undeniably, respondent was employed by
petitioner in its branch office in Singapore. Admittedly, she is
a Filipino and not a legal resident of that state. She thus falls
within the category of "migrant worker" or "overseas Filipino
worker."
As such, it is her option to choose the venue of her Complaint
against petitioner for illegal dismissal. The law gives her two
choices: (1) at the Regional Arbitration Branch (RAB) where
she resides or (2) at the RAB where the principal office of her
employer is situated. Since her dismissal by petitioner,
respondent has returned to the Philippines -- specifically to
her residence at Filinvest II, Quezon City. Thus, in filing her
Complaint before the RAB office in Quezon City, she has
made a valid choice of proper venue.
Third Issue:
Illegal Dismissal
The appellate court was correct in holding that respondent
was already a regular employee at the time of her dismissal,
because her three-month probationary period of employment
had already ended. This ruling is in accordance with Article
281 of the Labor Code: "An employee who is allowed to work
after a probationary period shall be considered a regular
employee." Indeed, petitioner recognized respondent as such
at the time it dismissed her, by giving her one months salary
in lieu of a one-month notice, consistent with provision No. 6
of her employment Contract.

without due process of law. The twin requirements of notice

and hearing constitute the essential elements of procedural
due process, and neither of these elements can be
eliminated without running afoul of the constitutional
guarantee.22
In dismissing employees, the employer must furnish them
two written notices: 1) one to apprise them of the particular
acts or omissions for which their dismissal is sought; and 2)
the other to inform them of the decision to dismiss them. As
to the requirement of a hearing, its essence lies simply in the
opportunity to be heard.23
The evidence in this case is crystal-clear. Respondent was not
notified of the specific act or omission for which her dismissal
was being sought. Neither was she given any chance to be
heard, as required by law. At any rate, even if she were given
the opportunity to be heard, she could not have defended
herself effectively, for she knew no cause to answer to.
All that petitioner tendered to respondent was a notice of her
employment termination effective the very same day,
together with the equivalent of a one-month pay. This Court
has already held that nothing in the law gives an employer
the option to substitute the required prior notice and
opportunity to be heard with the mere payment of 30 days
salary.24
Well-settled is the rule that the employer shall be sanctioned
for noncompliance with the requirements of, or for failure to
observe, due process that must be observed in dismissing an
employee.25

Notice and Hearing Not Complied With

No Valid Cause for Dismissal

As a regular employee, respondent was entitled to all rights,

benefits and privileges provided under our labor laws. One of
her fundamental rights is that she may not be dismissed

Moreover, Articles 282,26 28327 and 28428 of the Labor Code

provide the valid grounds or causes for an employees
dismissal. The employer has the burden of proving that it was

done for any of those just or authorized causes. The failure to

discharge this burden means that the dismissal was not
justified, and that the employee is entitled to reinstatement
and back wages.29
Notably, petitioner has not asserted any of the grounds
provided by law as a valid reason for terminating the
employment of respondent. It merely insists that her
dismissal was validly effected pursuant to the provisions of
her employment Contract, which she had voluntarily agreed
to be bound to.
Truly, the contracting parties may establish such stipulations,
clauses, terms and conditions as they want, and their
agreement would have the force of law between them.
However, petitioner overlooks the qualification that those
terms and conditions agreed upon must not be contrary to
law, morals, customs, public policy or public order. 30 As
explained earlier, the employment Contract between
petitioner and respondent is governed by Philippine labor
laws. Hence, the stipulations, clauses, and terms and
conditions of the Contract must not contravene our labor law
provisions.
Moreover, a contract of employment is imbued with public
interest. The Court has time and time again reminded parties
that they "are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations
by simply contracting with each other." 31 Also, while a
contract is the law between the parties, the provisions of
positive law that regulate such contracts are deemed
included and shall limit and govern the relations between the
parties.32
Basic in our jurisprudence is the principle that when there is
no showing of any clear, valid, and legal cause for the
termination of employment, the law considers the matter a
case of illegal dismissal.33

Awards for Damages Justified

Finally, moral damages are recoverable when the dismissal of
an employee is attended by bad faith or constitutes an act
oppressive to labor or is done in a manner contrary to
morals, good customs or public policy. 34 Awards for moral and
exemplary damages would be proper if the employee was
harassed and arbitrarily dismissed by the employer. 35
In affirming the awards of moral and exemplary damages, we
quote with approval the following ratiocination of the labor
arbiter:
"The records also show that [respondents] dismissal was
effected by [petitioners] capricious and high-handed
manner, anti-social and oppressive, fraudulent and in bad
faith, and contrary to morals, good customs and public policy.
Bad faith and fraud are shown in the acts committed by
[petitioners] before, during and after [respondents] dismissal
in addition to the manner by which she was dismissed. First,
[respondent] was pressured to resign for two different and
contradictory reasons, namely, cost-cutting and the need for
a Chinese[-]speaking credit officer, for which no written
advice was given despite complainants request. Such
wavering stance or vacillating position indicates bad faith
and a dishonest purpose. Second, she was employed on
account of her qualifications, experience and readiness for
the position of credit officer and pressured to resign a month
after she was commended for her good work. Third, the
demand for [respondents] instant resignation on 19 April
1999 to give way to her replacement who was allegedly
reporting soonest, is whimsical, fraudulent and in bad faith,
because on 16 April 1999 she was given a period of [sic] until
15 May 1999 within which to leave. Fourth, the pressures
made on her to resign were highly oppressive, anti-social and
caused her absolute torture, as [petitioners] disregarded her
situation as an overseas worker away from home and family,

with no prospect for another job. She was not even provided
with a return trip fare. Fifth, the notice of termination is an
utter manifestation of bad faith and whim as it totally
disregards [respondents] right to security of tenure and due
process. Such notice together with the demands for
[respondents] resignation contravenes the fundamental
guarantee and public policy of the Philippine government on
security of tenure.

SO ORDERED.

"[Respondent] likewise established that as a proximate result

of her dismissal and prior demands for resignation, she
suffered and continues to suffer mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings,
moral shock and social humiliation. Her standing in the social
and business community as well as prospects for
employment with other entities have been adversely affected
by her dismissal. [Petitioners] are thus liable for moral
damages under Article 2217 of the Civil Code.
xxxxxxxxx
"[Petitioners] likewise acted in a wanton, oppressive or
malevolent
manner
in
terminating
[respondents]
employment and are therefore liable for exemplary damages.
This should served [sic] as protection to other employees of
[petitioner] company, and by way of example or correction
for the public good so that persons similarly minded as
[petitioners] would be deterred from committing the same
acts."36
The Court also affirms the award of attorneys fees. It is
settled that when an action is instituted for the recovery of
wages, or when employees are forced to litigate and
consequently incur expenses to protect their rights and
interests, the grant of attorneys fees is legally justifiable. 37
WHEREFORE, the Petition is DENIED and the assailed
Decision and Resolution AFFIRMED. Costs against petitioner.

G.R. Nos. L-53364-65 March 16, 1987

DOMICIANO
vs.
MERCANTILE

SOCO, petitioner,
CORPORATION

OF

DAVAO

AND

THE

HONORABLE AMADO G. INCIONG, DEPUTY MINISTER,

MINISTRY OF LABOR, respondents.
Antonio Ladlao for petitioner.
Rodolfo A. Ta-asan for private respondent.

ALAMPAY, J.:
Petition for certiorari to annul the order dated October 25,
1979 of the former Deputy Minister of Labor in Case No.
ROXI-C-209-79 and Case No. LR-30-79, which affirmed the
order dated May 31, 1979 of the Regional Director, granting
the application of private respondent Mercantile Corporation
of Davao (MERCO), for clearance to terminate petitioner
Domiciano Soco and dismissing the latter's complaint for
unfair labor practice.
Private respondent is engaged in the sale and distribution of
ice cream in Davao City. Petitioner who was employed as
driver of MERCO's delivery van, was the President of the
MERCO Employees Labor Union (MELU), an affiliate of the
Federation of Free Workers (FFW). In the last week of January,
1979, the personnel officer of private respondent conducted
an investigation due to reports that petitioner was carrying
on his union MELU activities during his working hours for the
purpose of transferring his Union's affiliation from the FFW to
the Southern Philippines Federation of Labor (SPFL) and for
this purpose he was even utilizing the company vehicle of
MERCO, in violation of the Company's Rule No. 19(a) which
prescribes a penalty of suspension of 15 days for the first
offense and dismissal for succeeding offenses.
It appears that on January 25, 1979, petitioner was ordered
to deliver ice cream to the Imperial Hotel and Maguindanao
Hotel at CM Recto Avenue and to Your Goody Mart at Anda
Street, all in Davao City, but he deviated from the usual route

and went to Kiosk No. 4 on San Pedro Street to talk to

Bartolome Calago, a co-employee, but who was then off-duty.
The personnel officer of MERCO advised petitioner to report
to his office to explain his unauthorized deviation in
connection with said incident but petitioner did not comply.
On January 30, 1979, MERCO wrote the FFW to which MELU
was affiliated and wherein petitioner Domiciano Soco was the
President asking for a grievance conference to be scheduled
not later than February 13, 1979. When petitioner manifested
his unwillingness to attend the grievance conference in his
belief that such is not necessary, FFW relayed this
information to MERCO. Due to the refusal of petitioner to
submit himself to a formal conference, MERCO, in a
memorandum dated February 13, 1979 suspended petitioner
for five (5) days, effective February 15, 1979, for violation of
Company Rule No. 19(a). Then a report of this action taken
was filed with the Ministry of Labor.
On February 13, 1979, at 10:30 A.M., petitioner was
instructed to deliver ice cream to the New City Commercial
Corporation at R. Magsaysay Avenue and Gempesaw Store at
Gempesaw Street, Davao City. After making these deliveries,
petitioner then proceeded to the Office of SPFL Union at the
Puericulture Center building located on Alvarez Street. John
Ferrazzini, Manager of MERCO saw the company vehicle
parked along the street, After verifying that petitioner was
the driver of the MERCO Ford Fiera van, he then called for
Rogelio Galagar, Secretary of the MELU and another
employee and in their presence, the MERCO manager took
out the rotor of the van. Later that morning, when petitioner
came out of the building he was unable to start the engine of
the vehicle and he called for company assistance. An officer
of MERCO advised petitioner to report to his office because of
the said incident in order to explain his unauthorized
deviation but petitioner did not do so. On February 14, 1979,
respondent MERCO wrote the FFW to which MELU was
affiliated and the petitioner herein was the President, for a

grievance conference on February 15, 1979, but this was

reset to February 21, 1979 to afford FFW sufficient time to
notify petitioner Domiciano Soco. On February 20, 1979, FFW
informed MERCO that the requested grievance conference
would not be held because petitioner Domiciano Soco finds it
unnecessary to do so.
On his part, petitioner filed on February 14, 1979 a complaint
for unfair labor practice against MERCO, docketed by the
Regional Office of the Ministry of Labor, Davao City, as LRD
Case No. LR-30-79. Petitioner alleged therein that the five (5)
days suspension imposed on him by respondent Company,
was on account of his union activities.
On February 21, 1979, petitioner was placed on preventive
suspension pending the approval of MERCO's application for
clearance to terminate the services of the former. This
application was filed with the Ministry of Labor on February
22, 1979 and docketed therein as LRD Case No. ROXI-C-20979. MERCO's application for clearance to terminate was
opposed by petitioner even as MERCO filed its Answer to the
complaint against it for unfair labor practice, on March 7,
1979.
The two cases were consolidated and tried jointly as agreed
to by the contending parties. In an order dated May 21, 1979,
the Regional Director granted private respondent's
application to terminate the employment of petitioner. He
upheld the preventive suspension imposed by MERCO on
herein petitioner and dismissed the latter's complaint for
unfair labor practice. Said order was then appealed by herein
petitioner but the Deputy Minister of Labor, on October 25,
1979, affirmed the appealed order. The dismissal of
petitioner's appeal led to the filing of the instant petition for
certiorari.
Petitioner assails the action taken by the respondent Deputy
Minister of Labor as done with grave abuse of discretion

amounting to lack of or in excess of jurisdiction. Petitioner

contends that Policy Instruction No. 6 of the Ministry of Labor
and Employment (MOLE) indicates that the Regional Director
has no jurisdiction to hear and decide unfair labor practice
cases because the exclusive original jurisdiction over such
labor cases belongs to the Conciliation Section of the
Regional Office of the MOLE. Petitioner avers, that such
cases, therefore, should be first resolved by the Labor Arbiter
and not the Regional Director.
This contention is undeserving of the Court's favor.
The fact appears that at the initial hearing conducted on
March 7, 1979 by the Regional Director, it was agreed upon
by the parties to consolidate the two cases being litigated
considering that both cases concern the same parties and
the issues involved are interrelated (Decision of the Regional
Director, p. 20, Rollo). Petitioner obviously accepted the
jurisdiction of the Regional Director by presenting his
evidence. By having asked for affirmative relief, without
challenging the Regional Director's power to hear and try his
complaint for unfair labor practice, he cannot rightfully now
challenge the resolution made in said cases by the same
Director, based on the latter's alleged lack of jurisdiction.
In the case of Tijam vs. Sibonghanoy, 23 SCRA 29, it has
been stated that "after voluntarily submitting a cause and
encountering an adverse decision on the merits, it is too late
for the loser to question the jurisdiction or power of the
court." Therein, We stated that the Court "frowns upon the
undesirable practice of a party submitting his case for
decision and then accepting the judgment, only if favorable,
and attacking it for lack of jurisdiction when adverse."
In Ching vs. Ramolete, 51 SCRA 14, this view was reiterated,
and We quote:
xxx xxx xxx

Having invoked the jurisdiction of the trial court to secure an

affirmative relief against his opponents, petitioner may not
now be allowed to repudiate or question the same jurisdiction
after failing to obtain such relief. While jurisdiction of a
tribunal may be challenged at any time, sound public policy
bars petitioner from doing so after having procured that
jurisdiction himself, speculating on the fortunes of litigation.
Petitioner avers that respondent Minister of Labor erred in
affirming the findings of the Regional Director that he
violated Company Rules No. 19(a) twice and his dismissal
was, therefore, unwarranted. This issue raised by petitioner
relates to questions of fact. It has been held, however, in
numerous cases, that as a general rule, the findings of fact of
the trial court or quasi-judicial bodies are binding on this
Court. This principle should be applied in the instant cases,
considering that the findings of respondent Deputy Minister
of Labor are supported by the evidence he appreciated. As a
matter of fact, the petitioner was caught for the second time
by no less than the Manager of respondent's company, in
actual violation of the rule prohibiting the use of the
company vehicle for private purposes.
Lastly, petitioner asserts that in affirming his dismissal, the
Deputy Minister of Labor violated the constitutional provision
of the security of tenure of employees and that assuming
that he indeed violated the company rule, the fact remains
that the damage caused by him, if any, to the company, is
only very minimal which should not warrant the imposition of
a penalty of dismissal. Petitioner submits that he has been
employed in the company for eighteen (18) years. Petitioner
avers that the damage inflicted on MERCO by his activities
due to his misuse of the company vehicle during working
hours did not hamper the smooth business operations of
MERCO.

However, what should not be overlooked is the prerogative of

an employer company to prescribe reasonable rules and
regulations necessary or proper for the conduct of its
business and to provide certain disciplinary measures in
order to implement said rules and to assure that the same
would be complied with. A rule prohibiting employees from
using company vehicles for private purpose without authority
from management is, from our viewpoint, a reasonable one.
This regulation cannot be faulted by petitioner because this
is proper and necessary even if only for an orderly conduct of
MERCO's business. From the evidence presented, petitioner
twice used the company vehicle in pursuing his own personal
interests, on company time and deviating from his authorized
route, all without permission. To cap off his infractions,
petitioners stubbornly declined even to satisfy MERCO's
request for an explanation or to attend a grievance
conference to discuss violations. Certainly, to condone
petitioner's own conduct will erode the discipline that an
employer should uniformly apply so that it can expect
compliance to the same rules and regulations by its other
employees. Otherwise, the rules necessary and proper for the
operation of its business, would be gradually rendered
ineffectual, ignored, and eventually become meaningless.
The Court agrees fully with the comment made by the
respondent Deputy Minister of Labor, represented by the
office of the Solicitor General, thatxxx xxx xxx
The filing by petitioner of the complaint for Unfair Labor
Practice case on February 14, 1979 was brought about by the
fact that he was caught for the second time on February 13,
1979 violating Company Rule 19(a). It was more of an
anticipatory move on the part of petitioner. (Rollo, pp. 82-83).
The Court is not unmindful of the fact that petitioner has, as
he says, been employed with petitioner Company for

eighteen (18) years. On this singular consideration, the Court

deems it proper to afford some equitable relief to petitioner
due to the past services rendered by him to MERCO. Thus, it
is but appropriate that petitioner should be given by
respondent MERCO, separation pay, equivalent to one month
salary for every year of his service to said Company.
WHEREFORE, the petition is hereby DISMISSED but
respondent Mercantile Corporation of Davao (MERCO) is,
nevertheless, ordered to grant the petitioner herein
separation pay, equivalent to one (1) month salary for every
year of his service.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 104269 November 11, 1993

DEPARTMENT
OF
AGRICULTURE, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, et
al., respondents.
Roy Lago Salcedo for private respondents.

VITUG, J.:

For consideration are the incidents that flow from the familiar
doctrine of non-suability of the state.
In this petition for certiorari, the Department of Agriculture
seeks to nullify the Resolution, 1 dated 27 November 1991, of
the National Labor Relations Commission (NLRC), Fifth
Division, Cagayan de Oro City, denying the petition for
injunction, prohibition and mandamus that prays to enjoin
permanently the NLRC's Regional Arbitration Branch X and
Cagayan de Oro City Sheriff from enforcing the decision 2 of
31 May 1991 of the Executive Labor Arbiter and from
attaching and executing on petitioner's property.
The Department of Agriculture (herein petitioner) and Sultan
Security Agency entered into a contract 3 on 01 April 1989 for
security services to be provided by the latter to the said
governmental entity. Save for the increase in the monthly
rate of the guards, the same terms and conditions were also
made to apply to another contract, dated 01 May 1990,
between the same parties. Pursuant to their arrangements,
guards were deployed by Sultan Agency in the various
premises of the petitioner.
On 13 September 1990, several guards of the Sultan Security
Agency filed a complaint for underpayment of wages, nonpayment of 13th month pay, uniform allowances, night shift
differential pay, holiday pay and overtime pay, as well as for
damages, 4 before the Regional Arbitration Branch X of
Cagayan de Oro City, docketed as NLRC Case No. 10-0900455-90 (or 10-10-00519-90, its original docket number),
against the Department of Agriculture and Sultan Security
Agency.
The Executive Labor Arbiter rendered a decision on 31 May
finding herein petitioner and jointly and severallyliable with
Sultan Security Agency for the payment of money claims,
aggregating P266,483.91, of the complainant security
guards. The petitioner and Sultan Security Agency did not

appeal the decision of the Labor Arbiter. Thus, the decision

became final and executory.

petitioner to source and raise funds to satisfy the judgment

awards against it;

On 18 July 1991, the Labor Arbiter issued a writ of

execution. 5 commanding the City Sheriff to enforce and
execute the judgment against the property of the two
respondents. Forthwith, or on 19 July 1991, the City Sheriff
levied on execution the motor vehicles of the petitioner, i.e.
one (1) unit Toyota Hi-Ace, one (1) unit Toyota Mini Cruiser,
and one (1) unit Toyota Crown. 6 These units were put under
the custody of Zacharias Roa, the property custodian of the
petitioner, pending their sale at public auction or the final
settlement of the case, whichever would come first.

2. Meantime, petitioner is ordered and directed to source for

funds within the period above-stated and to deposit the sums
of money equivalent to the aggregate amount. it has been
adjudged to pay jointly and severally with respondent Sultan
Security Agency with the Regional Arbitration Branch X,
Cagayan de Oro City within the same period for proper
dispositions;

A petition for injunction, prohibition and mandamus, with

prayer for preliminary writ of injunction was filed by the
petitioner with the National Labor Relations Commission
(NLRC), Cagayan de Oro, alleging, inter alia, that the writ
issued was effected without the Labor Arbiter having duly
acquired jurisdiction over the petitioner, and that, therefore,
the decision of the Labor Arbiter was null and void and all
actions pursuant thereto should be deemed equally invalid
and of no legal, effect. The petitioner also pointed out that
the attachment or seizure of its property would hamper and
jeopardize petitioner's governmental functions to the
prejudice of the public good.

3. In order to ensure compliance with this order, petitioner is

likewise
directed
to
put
up
and
post
sufficient surety and supersedeas bond equivalent to at least
to fifty (50%) percent of the total monetary award issued by
a reputable bonding company duly accredited by the
Supreme Court or by the Regional Trial Court of Misamis
Oriental to answer for the satisfaction of the money claims in
case of failure or default on the part of petitioner to satisfy
the money claims;

WHEREFORE, premises considered, the following orders are

issued:

4. The City Sheriff is ordered to immediately release the

properties of petitioner levied on execution within ten (10)
days from notice of the posting of sufficient surety or
supersedeas bond as specified above. In the meanwhile,
petitioner is assessed to pay the costs and/or expenses
incurred by the City Sheriff, if any, in connection with the
execution of the judgments in the above-stated cases upon
presentation of the appropriate claims or vouchers and
receipts by the city Sheriff, subject to the conditions specified
in the NLRC Sheriff, subject to the conditions specified in the
NLRC Manual of Instructions for Sheriffs;

1. The enforcement and execution of the judgments against

petitioner in NLRC RABX Cases Nos. 10-10-00455-90; 10-100481-90 and 10-10-00519-90 are temporarily suspended for
a period of two (2) months, more or less, but not extending
beyond the last quarter of calendar year 1991 to enable

5. The right of any of the judgment debtors to claim

reimbursement against each other for any payments made in
connection with the satisfaction of the judgments herein is
hereby recognized pursuant to the ruling in the Eagle
Security case, (supra). In case of dispute between the

On 27 November 1991, the NLRC promulgated its assailed

resolution; viz:

judgment debtors, the Executive Labor Arbiter of the Branch

of origin may upon proper petition by any of the parties
conduct arbitration proceedings for the purpose and thereby
render his decision after due notice and hearings;
7. Finally, the petition for injunction is Dismissed for lack of
basis. The writ of preliminary injunction previously issued
is Lifted and Set Aside and in lieu thereof, a Temporary Stay
of Execution is issued for a period of two (2) months but not
extending beyond the last quarter of calendar year 1991,
conditioned upon the posting of a surety or supersedeas
bond by petitioner within ten (10) days from notice pursuant
to paragraph 3 of this disposition. The motion to admit the
complaint in intervention isDenied for lack of merit while the
motion to dismiss the petition filed by Duty Sheriff is Noted
SO ORDERED.
In this petition for certiorari, the petitioner charges the NLRC
with grave abuse of discretion for refusing to quash the writ
of execution. The petitioner faults the NLRC for assuming
jurisdiction over a money claim against the Department,
which, it claims, falls under the exclusive jurisdiction of the
Commission on Audit. More importantly, the petitioner
asserts, the NLRC has disregarded the cardinal rule on the
non-suability of the State.
The private respondents, on the other hand, argue that the
petitioner has impliedly waived its immunity from suit by
concluding a service contract with Sultan Security Agency.
The basic postulate enshrined in the constitution that "(t)he
State may not be sued without its consent," 7 reflects nothing
less than a recognition of the sovereign character of the
State and an express affirmation of the unwritten rule
effectively insulating it from the jurisdiction of courts. 8 It is
based on the very essence of sovereignty. As has been aptly
observed, by Justice Holmes, a sovereign is exempt from suit,

not because of any formal conception or obsolete theory, but

on the logical and practical ground that there can be no legal
right as against the authority that makes the law on which
the right depends. 9 True, the doctrine, not too infrequently,
is derisively called "the royal prerogative of dishonesty"
because it grants the state the prerogative to defeat any
legitimate claim against it by simply invoking its nonsuability. 10 We have had occasion, to explain in its defense,
however, that a continued adherence to the doctrine of nonsuability cannot be deplored, for the loss of governmental
efficiency and the obstacle to the performance of its
multifarious functions would be far greater in severity than
the inconvenience that may be caused private parties, if such
fundamental principle is to be abandoned and the availability
of judicial remedy is not to be accordingly restricted. 11
The rule, in any case, is not really absolute for it does not say
that the state may not be sued under any circumstances. On
the contrary, as correctly phrased, the doctrine only conveys,
"the state may not be sued without its consent;" its clear
import then is that the State may at times be sued. 12 The
States' consent may be given expressly or impliedly. Express
consent may be made through a general law 13 or a special
law. 14 In this jurisdiction, the general law waiving the
immunity of the state from suit is found in Act No. 3083,
where the Philippine government "consents and submits to
be sued upon any money claims involving liability arising
from contract, express or implied, which could serve as a
basis of civil action between private parties." 15 Implied
consent, on the other hand, is conceded when the State itself
commences
litigation,
thus
opening
itself
to
a
16
17
counterclaim or when it enters into a contract.
In this
situation, the government is deemed to have descended to
the level of the other contracting party and to have divested
itself of its sovereign immunity. This rule, relied upon by the
NLRC and the private respondents, is not, however, without
qualification. Not all contracts entered into by the

government operate as a waiver of its non-suability;

distinction must still be made between one which is executed
in the exercise of its sovereign function and another which is
done in its proprietary capacity. 18
In the Unites States of America vs. Ruiz, 19 where the
questioned transaction dealt with improvements on the
wharves in the naval installation at Subic Bay, we held:
The traditional rule of immunity exempts a State from being
sued in the courts of another State without its consent or
waiver. This rule is a necessary consequence of the principles
of independence and equality of States. However, the rules
of International Law are not petrified; they are constantly
developing and evolving. And because the activities of states
have multiplied, it has been necessary to distinguish them
between sovereign and governmental acts ( jure imperii) and
private, commercial and proprietary act ( jure gestionisis).
The result is that State immunity now extends only to
acts jure imperii. The restrictive application of State
immunity is now the rule in the United States, the United
Kingdom and other states in Western Europe.
xxx xxx xxx
The restrictive application of State immunity is proper only
when the proceedings arise out of commercial transactions of
the foreign sovereign, its commercial activities or economic
affairs. Stated differently, a state may be said to have
descended to the level of an individual and can this be
deemed to have actually given its consent to be sued only
when it enters into business contracts. It does not apply
where the contracts relates to the exercise of its sovereign
functions. In this case the projects are an integral part of the
naval base which is devoted to the defense of both the
United States and the Philippines, indisputably a function of
the government of the highest order; they are not utilized for
not dedicated to commercial or business purposes.

In the instant case, the Department of Agriculture has not

pretended to have assumed a capacity apart from its being a
governmental entity when it entered into the questioned
contract; nor that it could have, in fact, performed any act
proprietary in character.
But, be that as it may, the claims of private respondents, i.e.
for underpayment of wages, holiday pay, overtime pay and
similar other items, arising from the Contract for Service,
clearly constitute money claims. Act No. 3083, aforecited,
gives the consent of the State to be "sued upon any
moneyed claim involving liability arising from contract,
express or implied, . . . Pursuant, however, to Commonwealth
Act ("C.A.") No. 327, as amended by Presidential Decree
("P.D.") No. 1145, the money claim first be brought to the
Commission on Audit. Thus, inCarabao, Inc., vs. Agricultural
Productivity Commission, 20 we ruled:
(C)laimants have to prosecute their money claims against the
Government under Commonwealth Act 327, stating that Act
3083 stands now merely as the general law waiving the
State's immunity from suit, subject to the general limitation
expressed in Section 7 thereof that "no execution shall issue
upon any judgment rendered by any Court against the
Government of the (Philippines), and that the conditions
provided in Commonwealth Act 327 for filing money claims
against the Government must be strictly observed."
We fail to see any substantial conflict or inconsistency
between the provisions of C.A. No. 327 and the Labor Code
with respect to money claims against the State. The Labor
code, in relation to Act No. 3083, provides the legal basis for
the State liability but the prosecution, enforcement or
satisfaction thereof must still be pursued in accordance with
the rules and procedures laid down in C.A. No. 327, as
amended by P.D. 1445.

When the state gives its consent to be sued, it does thereby

necessarily consent to unrestrained execution against it.
tersely put, when the State waives its immunity, all it does, in
effect, is to give the other party an opportunity to prove, if it
can, that the State has a liability. 21 In Republic vs.
Villasor 22 this Court, in nullifying the issuance of an alias writ
of execution directed against the funds of the Armed Forces
of the Philippines to satisfy a final and executory judgment,
has explained, thus
The universal rule that where the State gives its consent to
be sued by private parties either by general or special law, it
may limit the claimant's action "only up to the completion of
proceedings anterior to the stage of execution" and that the
power of the Courts ends when the judgment is rendered,
since government funds and properties may not be seized
under writs or execution or garnishment to satisfy such
judgments, is based on obvious considerations of public
policy. Disbursements of public funds must be covered by the
correspondent appropriation as required by law. The
functions and public services rendered by the State cannot
be allowed to be paralyzed or disrupted by the diversion of
public funds from their legitimate and specific objects, as
appropriated by law. 23
WHEREFORE, the petition is GRANTED. The resolution, dated
27 November 1991, is hereby REVERSED and SET ASIDE. The
writ of execution directed against the property of the
Department of Agriculture is nullified, and the public
respondents are hereby enjoined permanently from doing,
issuing and implementing any and all writs of execution
issued pursuant to the decision rendered by the Labor Arbiter
against said petitioner.

G.R. No. 116347 October 3, 1996

NATIVIDAD
vs.
NATIONAL LABOR RELATIONS
Division,
Cagayan
de
Oro
PONDOC,respondents.

SO ORDERED.
DAVIDE, JR., J.:p

PONDOC, petitioner,
COMMISSION (Fifth
City)
and
EMILIO

The novel issue that confronts us in this case is whether the

Fifth Division of the National Labor Relations Commission
(NLRC) can validly defeat a final judgment of the Labor
Arbiter in favor of the complainant in a labor case by: (a)
entertaining a petition for injunction and damages, and an
appeal from the Labor Arbiter's denial of a claim for set-off
based on an alleged indebtedness of the laborer and order of
execution of the final judgment; and, (b) thereafter, by
receiving evidence and adjudging recovery on such
indebtedness and authorizing it to offset the Labor Arbiter's
final award.
The petitioner takes the negative view. In its Manifestation
and Motion in Lieu of Comment, 1 the Office of the Solicitor
General joins her in her plea, hence we required the NLRC to
file its own comment.
We resolved to give due course to the petition after the filing
by the NLRC and the private respondent of their separate
comments.
Petitioner Natividad Pondoc was the legitimate wife of Andres
Pondoc. Atter her death on 5 December 1994, she was
substituted by Hipolito Pondoc, her only legitimate son. 2
The Office of the Solicitor General summarized the factual
antecedents of this case in its Manifestation and Motion in
Lieu of Comment:
Private respondent Eulalio Pondoc is the owner-proprietor of
Melleonor General Merchandise and Hardware Supply located
at Poblacion, Sindangan, Zamboanga del Norte. Respondent
is engaged, among others, in the business of buying and
selling copra, rice, corn, "binangkol," junk iron and empty
bottles. He has in his employ more than twenty (20) regular
workers (Records, pp. 9-11)

Records disclose that Andres Pondoc was employed by

Eulalio Pondoc as a laborer from October 1990 up to
December 1991, receiving a wage rate of P20.00 per day. He
was required to work twelve (12) hours a day from 7:00 AM
to 8:00 PM, Monday to Sunday. Despite working on his rest
days and holidays, he was not paid his premium pay as
required by law (Ibid).
Consequently, on May 14, 1992, Natividad Pondoc, on behalf
of her husband, filed a complaint for salary differential,
overtime pay, 13th month pay, holiday pay and other money
claims before the Sub-Regional Arbitration Branch No. 9 of
the NLRC, docketed as Sub-RAB Case No. 09-05-10102-92
(Records, p.1).
In his position paper, private respondent questioned, among
others, the existence of [an] employer-employee relationship
between them. He further averred that Melleonor General
Merchandise and Hardware Supply is a fictitious
establishment (Records, pp. 64-68).
On June 17, 1993, Labor Arbiter Esteban Abecia rendered a
Decision finding the existence of [an] employer-employee
relationship between the parties. The dispositive portion of
the Decision reads:
WHEREFORE, judgment is hereby rendered: (a) ordering
respondent Eulalio Pondoc to pay complainant the following
claims:
(1)
reason

Salary
of

(2)
premium

Regular
pay
for

differential
underpayment
holiday
holiday
services

for
P35,776.00;
and
902.00;

(3)
Premium
services

(4)

13th

pay

for

month

rest

pay

day
3,840.00;

Accordingly, respondent Eulalio Pondoc is hereby directed to

pay complainant Natividad Pondoc the amount of P3,066.65.

3,600.00

The Temporary restraining order issued herein is hereby

made permanent.

or the total amount of FORTY-FOUR [sic] THOUSAND AND

ONE HUNDRED EIGHTEEN PESOS (P44,118.00).
Other claims are denied for lack of merit.
SO ORDERED (Records, pp. 323-324).
On his last day to perfect an appeal, private respondent filed
a Manifestation before the Labor Arbiter praying that his
liabilities be set-off against petitioner's alleged indebtedness
to him (Records, pp. 325-327). The Labor Arbiter denied,
however, the compensation, and, instead, issued a writ of
execution as prayed for by petitioner (Records, p. 328).
Before the execution order could be implemented, however,
private respondent was able to obtain a restraining order
from the NLRC, where he filed a Petition for "Injunction and
Damages," docketed as NLRC Case No. ICM-000065.
On February 28, 1994, public respondent NLRC allowed
compensation between petitioner's monetary award and her
alleged indebtedness to private respondent. It disposed:
WHEREFORE, the appealed order is hereby vacated and set
aside. A new one is entered declaring the setting-off of
complainant's indebtedness which allegedly amounted to
P41,051.35 against the complainant's monetary award in the
amount of P44,118.00. The additional amount of P5,000.00
which complainant allegedly got from respondent on 10 July
1993 could not be credited in view of appellant's failure to
submit evidence to prove that complainant was really paid
P5,000.00.

SO ORDERED (Annex "D" of Petition).

Her motion for reconsideration of the judgment having been

denied by the NLRC, the petitioner instituted this special civil
action for certiorari under Rule 65 of the Rules of Court
wherein she prays this Court annul the challenged decision of
the NLRC, Fifth Division (Cagayan de Oro City), in NLRC Case
No. IC No. M-000065, and direct the enforcement of the writ
of execution in NLRC Case No. SRAB-09-05-10102-92, on the
ground that the NLRC, Fifth Division, acted without or in
excess of jurisdiction or with grave abuse of discretion when
it proceeded to determine the alleged indebtedness of the
petitioner and set-off the same against the liabilities of the
private respondent. The petitioner asserts that the decision
of the Labor Arbiter in NLRC Case No. SRAB-09-05-10102-92
was already final and executory when the private respondent
tried to defeat the judgment by asserting an alleged
indebtedness of Andres Pondoc as a set-off, a claim not
pleaded before the Labor Arbiter at any time before
judgment,
hence
deemed
waived.
Moreover
the
indebtedness "did not evolve out [sic] employer-employee
relationship, hence, purely civil in aspect."
The Office of the Solicitor General agreed with the petitioner
and stressed further that the asserted indebtedness was
never proven to have arisen out of or in connection with the
employer-employee relationship between the private
respondent and the late Andres Pondoc, or to have any
causal connection thereto. Accordingly, both the Labor
Arbiter and the NLRC did not have jurisdiction over the
private respondent's claim.

As expected, the private respondent and the NLRC prayed for

the dismissal of this case.

pendency of the case, but excluding labor disputes involving

strike or lockout. (emphasis supplied).

We rule for the petitioner.

Hence, a petition or motion for preliminary injunction should

have been filed in the appeal interposed by the private
respondent, i.e., in NLRC Case No. SRAB-09-05-10102-92.
This matter, however, became academic when the NLRC
consolidated the two cases as shown by the captions in its
challenged decision of 28 February 1994 and resolution of 6
May 1994.

The proceedings before the NLRC were fatally flawed.

In the first place, the NLRC should not have entertained the
private respondent's separate or independent petition for
"Injunction and Damages" (NLRC IC No. M-000065). It was
obvious that the petition was a scheme to defeat or obstruct
the enforcement of the judgment in NLRC Case No. SRAB-0905-10102-92 where, in fact, a writ of execution had been
issued. Article 218(e) of the Labor Code does not provide
blanket authority to the NLRC or any of its divisions to issue
writs of injunction, while Rule XI of the New Rules of
Procedure of the NLRC makes injunction only an ancillary
remedy in ordinary labor disputes such as the one brought by
the petitioner in NLRC Case No. SRAB-09-05-10102-92. This is
clear from Section 1 of the said Rule which pertinently
provides as follows:
Sec. 1. Injunction in Ordinary Labor Disputed. A
preliminary injunction or a restraining order may be granted
by the Commission through its divisions pursuant to the
provisions of paragraph (e) of Article 218 of the Labor Code,
as amended, when it is established on the bases of the sworn
allegations in the petition that the acts complained
of, involving or arising from any labor dispute before the
Commission, which, if not restrained or performed forthwith,
may cause grave or irreparable damage to any party or
render ineffectual any decision in favor of such party.
xxx xxx xxx
The foregoing ancillary power may be exercised by the Labor
Arbiters only as an incident to the cases pending before them
in order to preserve the rights of the parties during the

Secondly, the appeal of the private respondent in NLRC Case

No. SRAB-09-05-10102-92 was not from the decision therein,
but from the order of the Labor Arbiter denying the set-off
insisted upon by the private respondent and directing the
execution of the judgment. Therefore, the private respondent
admitted the final and executory character of the judgment.
The Labor Arbiter, in denying the set-off, reasoned "[i]t could
have been considered if it was presented before the decision
of this case." 4 While this is correct, there are stronger
reasons why the set-off should, indeed, be denied. As
correctly contended by the Office of the Solicitor General,
there is a complete want of evidence that the indebtedness
asserted by the private respondent against Andres Pondoc
arose out of or was incurred in connection with the employeremployee relationship between them. The Labor Arbiter did
not then have jurisdiction over the claim as under paragraph
(a) of Article 217 of the Labor Code, Labor Arbiters have
exclusive and original jurisdiction only in the following cases:
1.
Unfair
labor
practice
cases;
2.
Termination
disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
4. Claim for actual, moral, exemplary and other forms of
damages
arising
from
employer-employee
relations;

5. Cases arising from any violation of Article 264 of this Code,

including questions involving the legality of strikes and
lockouts;
and
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those
of persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanies with a claim for
reinstatement.
On the other hand, under paragraph (b) thereof, the NLRC
has exclusive appellate jurisdiction over all cases decided by
the Labor Arbiters. This simply means that the NLRC does not
have original jurisdiction over the cases enumerated in
paragraph (a) and that if a claim does not fall within the
exclusive original jurisdiction of the Labor Arbiter, the NLRC
cannot have appellate jurisdiction thereon.
The conclusion then is inevitable that the NLRC was without
jurisdiction, either original or appellate, to receive evidence
on the alleged indebtedness, render judgment thereon, and
direct that its award be set-off against the final judgment of
the Labor Arbiter.
Finally, even assuming arguendo that the claim for the
alleged indebtedness fell within the exclusive original
jurisdiction of the Labor Arbiter, it was deemed waived for
not having been pleaded as an affirmative defense or barred
for not having been set up as a counterclaim before the
Labor Arbiter at any appropriate time prior to the rendition of
the decision in NLRC Case No. SRAB-09-05-10102-92. Under
the Rules of Court, which is applicable in a suppletory
character in labor cases before the Labor Arbiters or the
NLRC pursuant to Section 3, Rule I of the New Rules of
Procedure of the NLRC, defenses which are not raised either
in a motion to dismiss or in the answer are deemed

waived 5 and counterclaims not set up in the answer are

barred. 6 Set-off or compensation is one of the modes of
extinguishing
obligations 7 and
extinguishment
is
an
8
affirmative defense and a ground for a motion to dismiss.
We do not then hesitate to rule that the NLRC acted without
jurisdiction or with grave abuse of discretion in entertaining
an independent action for injunction and damages (NLRC IC
No. M-000065), in receiving evidence and rendering
judgment on the alleged indebtedness of Andres Pondoc, and
in ordering such judgment to offset the final award of the
Labor Arbiter in NLRC Case No. SRAB-09-05-10102-92.
WHEREFORE, the instant petition is GRANTED and the
challenged decision of 28 February 1994 and resolution of 6
May 1994 of the National Labor Relations Commission in
NLRC Case No. IC No. M-000065 and NLRC Case No. SRAB-0905-10102-92 are ANNULLED and SET ASIDE. The judgment of
the Labor Arbiter in NLRC Case No. SRAB-09-05-10102-92
should forthwith be enforced without any further delay, the
award therein bearing interest at the rate of twelve per
centum (12%) per annum from the finality of such judgment
until it shall have been fully paid.
Costs against the private respondent.
SO ORDERED.

petitioner to reinstate the private respondents to their

previous positions?
This is the pivotal issue presented before us in this petition
for certiorari under Rule 65 of the Revised Rules of Court
which seeks the nullification of the injunctive writ dated April
3, 1995 issued by the NLRC and the Order denying
petitioner's motion for reconsideration on the ground that the
said Orders were issued in excess of jurisdiction.
Private respondents are flight stewards of the petitioner. Both
were dismissed from the service for their alleged
involvement in the April 3, 1993 currency smuggling in Hong
Kong.
Aggrieved by said dismissal, private respondents filed with
the NLRC a petition 1 for injunction praying that:

G.R. No. 120567 March 20, 1998

PHILIPPINE
AIRLINES,
vs.
NATIONAL
LABOR
RELATIONS
FERDINAND
PINEDA
and
CABLING, respondents.

INC., petitioner,
COMMISSION,
GOGFREDO

MARTINEZ, J.:
Can the National Labor Relations Commission (NLRC), even
without a complaint for illegal dismissal tiled before the labor
arbiter, entertain an action for injunction and issue such writ
enjoining petitioner Philippine Airlines, inc. from enforcing its
Orders of dismissal against private respondents, and ordering

I. Upon filing of this Petition, a temporary restraining order be

issued, prohibiting respondents (petitioner herein) from
effecting or enforcing the Decision dated Feb. 22, 1995, or to
reinstate petitioners temporarily while a hearing on the
propriety of the issuance of a writ of preliminary injunction is
being undertaken;
II. After hearing, a writ of preliminary mandatory injunction
be issued ordering respondent to reinstate petitioners to their
former positions pending the hearing of this case, or,
prohibiting respondent from enforcing its Decision dated
February 22, 1995 while this case is pending adjudication;
III. After hearing, that the writ of preliminary injunction as to
the reliefs sought for be made permanent, that petitioners be
awarded full backwages, moral damages of PHP 500,000.00
each and exemplary damages of PHP 500,000.00 each,
attorney's fees equivalent to ten percent of whatever amount
is awarded, and the costs of suit.

On April 3, 1995, the NLRC issued a temporary mandatory

injunction 2 enjoining petitioner to cease and desist from
enforcing its February 22, 1995 Memorandum of dismissal. In
granting the writ, the NLRC considered the following facts, to
wit:
. . . that almost two (2) years ago, i.e. on April 15, 1993, the
petitioners were instructed to attend an investigation by
respondent's
"Security
and
Fraud
Prevention
SubDepartment" regarding an April 3, 1993 incident in Hongkong
at which Joseph Abaca, respondent's Avionics Mechanic in
Hongkong "was intercepted by the Hongkong Airport Police at
Gate 05 . . . the ramp area of the Kai Tak International Airport
while . . . about to exit said gate carrying a . . . bag said to
contain some 2.5 million pesos in Philippine Currencies. That
at the Police Station. Mr. Abaca claimed that he just found
said plastic bag at the Skybed Section of the arrival flight
PR300/03 April 93," where petitioners served as flight
stewards of said flight PR300; . . the petitioners sought "a
more detailed account of what this HKG incident is all about";
but instead, the petitioners were administratively charged, "a
hearing"
on
which
"did
not push through" until almost two (2) years after, i.e, "on
January 20, 1995 . . . where a confrontation between Mr.
Abaca and petitioners herein was compulsorily arranged by
the respondent's disciplinary board" at which hearing, Abaca
was made to identify petitioners as co-conspirators; that
despite the fact that the procedure of identification adopted
by respondent's Disciplinary Board was anomalous "as there
was no one else in the line-up (which could not be called one)
but petitioners . . . Joseph Abaca still had difficulty in
identifying petitioner Pineda as his co-conspirator, and as to
petitioner Cabling, he was implicated and pointed by Abaca
only after respondent's Atty. Cabatuando pressed the former
to identify petitioner Cabling as co-conspirator"; that with the
hearing reset to January 25, 1995, "Mr. Joseph Abaca finally
gave exculpating statements to the board in that he cleared

petitioners from any participation or from being the owners

of the currencies, and at which hearing Mr. Joseph Abaca
volunteered the information that the real owner of said
money was one who frequented his headquarters in
Hongkong to which information, the Disciplinary Board
Chairman, Mr. Ismael Khan," opined "for the need for another
hearing to go to the bottom of the incident"; that from said
statement, it appeared "that Mr. Joseph Abaca was the
courier, and had another mechanic in Manila who hid the
currency at the plane's skybed for Abaca to retrieve in
Hongkong, which findings of how the money was found was
previously confirmed by Mr. Joseph Abaca himself when he
was first investigated by the Hongkong authorities"; that just
as petitioners "thought that they were already fully cleared of
the
charges,
as
they
no
longer
received
any
summons/notices on the intended "additional hearings"
mandated by the Disciplinary Board," they were surprised to
receive "on February 23, 1995. . . a Memorandum dated
February 22, 1995" terminating their services for alleged
violation of respondent's Code of Discipline "effective
immediately"; that sometime . . . first week of March, 1995,
petitioner Pineda received another Memorandum from
respondent Mr. Juan Paraiso, advising him of his termination
effective February 3, 1995, likewise for violation of
respondent's Code of Discipline; . . .
In support of the issuance of the writ of temporary injunction,
the NLRC adapted the view that: (1) private respondents
cannot be validly dismissed on the strength of petitioner's
Code of Discipline which was declared illegal by this Court in
the ease at PAL, Inc. vs. NLRC, (G.R. No. 85985), promulgated
August 13, 1993, for the reason that it was formulated by the
petitioner without the participation of its employees as
required in R.A. 6715, amending Article 211 of the Labor
Code; (2) the whimsical, baseless and premature dismissals
of private respondents which "caused them grave and
irreparable injury" is enjoinable as private respondents are

left "with no speedy and adequate remedy at law" except the

issuance of a temporary mandatory injunction; (3) the NLRC
is empowered under Article 218 (e) of the Labor Code not
only to restrain any actual or threatened commission of any
or all prohibited or unlawful acts but also to require the
performance of a particular act in any labor dispute, which, if
not restrained or performed forthwith, may cause grave or
irreparable damage to any party; and (4) the temporary
power of the NLRC was recognized by this Court in the case
of Chemo-Technische Mfg., Inc.Employees Union, DFA,
et. al. vs. Chemo-Technische Mfg., Inc. [G.R. No. 107031,
January 25, 1993].
On
May
4,
1995,
petitioner
moved
reconsideration 3 arguing that the NLRC erred:

for

1. . . . in granting a temporary injunction order when it has no

jurisdiction to issue an injunction or restraining order since
this may be issued only under Article 218 of the Labor Code if
the case involves or arises from labor disputes;
2. . . . in granting a temporary injunction order when the
termination of private respondents have long been carried
out;
3. . . . in ordering the reinstatement of private respondents
on the basis of their mere allegations, in violation of PAL's
right to due process:
4. . . . in arrogating unto itself management prerogative to
discipline its employees and divesting the labor arbiter of its
original and exclusive jurisdiction over illegal dismissal cases;
5. . . . in suspending the effects of termination when such
action is exclusively within the jurisdiction of the Secretary of
Labor;

6. . . . in issuing the temporary injunction in the absence of

any irreparable or substantial injury to both private
respondents.
On May 31, 1995, the NLRC denied petitioner's motion for
reconsideration, ruling:
"The respondent (now petitioner), for one, cannot validly
claim that we cannot exercise our injunctive power under
Article 218 (e) of the Labor Code on the pretext that what we
have here is not a labor dispute as long as it concedes that
as defined by law, a" (l) "Labor Dispute" includes any
controversy or matter concerning terms or conditions of
employment." If security of tenure, which has been breached
by respondent and which, precisely, is sought to be protected
by our temporary mandatory injunction (the core of
controversy in this case) is not a "term or condition of
employment", what then is?
xxx xxx xxx
Anent respondent's second argument . . . . Article 218 (e) of
the Labor Code . . . empowered the Commission not only to
issue a prohibitory injunction, but a mandatory ("to require
the performance") one as well. Besides, as earlier discussed,
we already exercised (on August 23, 1991) this temporary
mandatory injunctive power in the case of "ChemoTechnische Mfg., Inc. Employees Union-DFA et. al. vs. ChemoTechnische Mfg., Inc., et. al." (supra) and effectively enjoined
one (1) month old dismissals by Chemo-Technische and that
our aforesaid mandatory exercise of injunctive power, when
questioned through a petition for certiorari, was sustained by
the Third Division of the Supreme court per its Resolution
dated January 25, 1993.
xxx xxx xxx

Respondent's fourth argument that petitioner's remedy for

their dismissals is "to file an illegal dismissal case against PAL
which cases are within the original and exclusive jurisdiction
of the Labor Arbiter' is ignorant. In requiring as a condition
for the issuance of a "temporary or permanent injunction"
"(4) That complainant has no adequate remedy at law;"
Article
218
(e)
of
the
Labor
Code
clearly
envisioned adequacy, and not plain availability of a remedy
at law as an alternative bar to the issuance of an injunction.
An illegal dismissal suit (which takes, on its expeditious side,
three (3) years before it can be disposed of) while available
as a remedy under Article 217 (a) of the Labor Code, is
certainly not an "adequate; remedy at law, Ergo, it cannot as
an alternative remedy, bar our exercise of that injunctive
power given us by Article 218 (e) of the Code.
xxx xxx xxx
Thus, Article 218 (e), as earlier discussed [which empowers
this Commission "to require the performance of a particular
act" (such as our requiring respondent "to cease and desist
from enforcing" its whimsical memoranda of dismissals and
"instead to reinstate petitioners to their respective position
held prior to their subject dismissals") in "any labor dispute
which, if not . . . performed forthwith, may cause grave and
irreparable damage to any party"] stands as the sole
"adequate remedy at law" for petitioners here.
Finally, the respondent, in its sixth argument claims that
even if its acts of dismissing petitioners "may be great, still
the same is capable of compensation", and that
consequently, "injunction need not be issued where adequate
compensation at law could be obtained". Actually,
what respondent PAL argues here is that we need not
interfere in its whimsical dismissals of petitioners as, after all,
it can pay the latter its backwages. . . .

But just the same, we have to stress that Article 279 does not
speak alone of backwages as an obtainable relief for illegal
dismissal; that reinstatement as well is the concern of said
law, enforceable when necessary, through Article 218 (e) of
the Labor Code (without need of an illegal dismissal suit
under Article 217 (a) of the Code) if such whimsical and
capricious act of illegal dismissal will "cause grave or
irreparable injury to a party". . . . . 4
Hence, the present recourse.
Generally, injunction is a preservative remedy for the
protection of one's substantive rights or interest. It is not a
cause of action in itself but merely a provisional remedy, an
adjunct to a main suit. It is resorted to only when there is a
pressing necessity to avoid injurious consequences which
cannot be remedied under any standard of compensation.
The application of the injunctive writ rests upon the existence
of an emergency or of a special reason before the main case
be regularly heard. The essential conditions for granting such
temporary injunctive relief are that the complaint alleges
facts which appear to be sufficient to constitute a proper
basis for injunction and that on the entire showing from the
contending parties, the injunction is reasonably necessary to
protect the legal rights of the plaintiff pending the
litigation. 5 Injunction is also a special equitable relief granted
only in cases where there is no plain, adequate and complete
remedy at law. 6
In labor cases, Article 218 of the Labor Code empowers the
NLRC
(e) To enjoin or restrain any actual or threatened commission
of any or all prohibited or unlawful acts or to require the
performance of a particular act in any labor dispute which, if
not restrained or performed forthwith, may cause grave or
irreparable damage to any party or render ineffectual any
decision in favor of such party; . . ." (Emphasis Ours)

Complementing the above-quoted provision, Sec. 1, Rule XI

of the New Rules of Procedure of the NLRC, pertinently
provides as follows:
Sec. 1. Injunction in Ordinary Labor Dispute. A preliminary
injunction or a restraining order may be granted by the
Commission through its divisions pursuant to the provisions
of paragraph (e) of Article 218 of the Labor Code, as
amended, when it is established on the bases of the sworn
allegations in the petition that the acts complained
of, involving or arising from any labor dispute before the
Commission, which, if not restrained or performed forthwith,
may cause grave or irreparable damage to any party or
render ineffectual any decision in favor of such party.
xxx xxx xxx
The foregoing ancillary power may be exercised by the Labor
Arbiters only as an incident to the cases pending before them
in order to preserve the rights of the parties during the
pendency of the case, but excluding labor disputes involving
strikes or lockout. 7 (Emphasis Ours)
From the foregoing provisions of law, the power of the NLRC
to issue an injunctive writ originates from "any labor dispute"
upon application by a party thereof, which application if not
granted "may cause grave or irreparable damage to any
party or render ineffectual any decision in favor of such
party."
The term "labor dispute" is defined as "any controversy or
matter concerning terms and conditions of employment or
the association or representation of persons in negotiating,
fixing. maintaining, changing, or arranging the terms and
conditions of employment regardless of whether or not the
disputants stand in the proximate relation of employers and
employees." 8

The term "controversy" is likewise defined as "a litigated

question; adversary proceeding in a court of law; a civil
action or suit, either at law or in equity; a justiciable
dispute." 9
A "justiciable controversy" is "one involving an active
antagonistic assertion of a legal right on one side and a
denial thereof on the other concerning a real, and not a mere
theoretical question or issue." 10
Taking into account the foregoing definitions, it is an essential
requirement that there must first be a labor dispute between
the contending parties before the labor arbiter. In the present
case, there is no labor dispute between the petitioner and
private respondents as there has yet been no complaint for
illegal dismissal filed with the labor arbiter by the private
respondents against the petitioner.
The petition for injunction directly filed before the NLRC is in
reality an action for illegal dismissal. This is clear from the
allegations in the petition which prays for; reinstatement of
private respondents; award of full backwages, moral and
exemplary damages; and attorney's fees. As such, the
petition should have been filed with the labor arbiter who has
the original and exclusive jurisdiction to hear and decide the
following cases involving all workers, whether agricultural or
non-agricultural:
(1) Unfair labor practice;
(2) Termination disputes;
(3) If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay,
hours of work and other terms and conditions of
employment;
(4) Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;

(5) Cases arising from any violation of Article 264 of this

Code, including questions involving the legality of strikes and
lockouts; and
(6) Except claims for employees compensation, social
security, medicare and maternity benefits, all other claims
arising from employer- employee relations, including those of
persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00), whether
or not accompanied with a claim for reinstatement. 11
The jurisdiction conferred by the foregoing legal provision to
the labor arbiter is both original and exclusive, meaning, no
other officer or tribunal can take cognizance of, hear and
decide any of the cases therein enumerated. The only
exceptions are where the Secretary of Labor and
Employment or the NLRC exercises the power of compulsory
arbitration, or the parties agree to submit the matter to
voluntary arbitration pursuant to Article 263 (g) of the Labor
Code, the pertinent portions of which reads:
(g) When, in his opinion, there exists a labor dispute causing
or likely to cause a strike or lockout in an industry
indispensable to the national interest, the Secretary of Labor
and Employment may assume jurisdiction over the dispute
and decide it or certify the same to the Commission for
compulsory arbitration. Such assumption or certification shall
have the effect of automatically enjoining the intended or
impending strike or lockout as specified in the assumption or
certification order. If one has already taken place at the time
of assumption or certification, all striking or locked out
employees shall immediately resume operations and readmit
all workers under the same terms and conditions prevailing
before the strike or lockout. The Secretary of Labor and
Employment or the Commission may seek the assistance of
law enforcement agencies to ensure compliance with this

provision as well as with such orders as he may issue to

enforce the same.
On
the
other
hand,
the
NLRC
shall
have
exclusive appellate jurisdiction over all cases decided by
labor arbiters as provided in Article 217(b) of the Labor Code.
In short, the jurisdiction of the NLRC in illegal dismissal cases
is appellate in nature and, therefore, it cannot entertain the
private respondents' petition for injunction which challenges
the dismissal orders of petitioner. Article 218(e) of the Labor
Code does not provide blanket authority to the NLRC or any
of its divisions to issue writs of injunction, considering that
Section 1 of Rule XI of the New Rules of Procedure of the
NLRC makes injunction only an ancillary remedy in ordinary
labor disputes." 12
Thus, the NLRC exceeded its jurisdiction when it issued the
assailed Order granting private respondents' petition for
injunction and ordering the petitioner to reinstate private
respondents.
The argument of the NLRC in its assailed Order that to file an
illegal dismissal suit with the labor arbiter is not an
"adequate" remedy since it takes three (3) years before it
can be disposed of, is patently erroneous. An "adequate"
remedy at law has been defined as one "that affords relief
with reference to the matter in controversy, and which is
appropriate to the particular circumstances of the case." 13 It
is a remedy which is equally, beneficial, speedy and sufficient
which will promptly relieve the petitioner from the injurious
effects of the acts complained of.14
Under the Labor Code, the ordinary and proper recourse of
an illegally dismissed employee is to file a complaint for
illegal dismissal with the labor arbiter. 15 In the case at bar,
private respondents disregarded this rule and directly went to
the NLRC through a petition for injunction praying that
petitioner be enjoined from enforcing its dismissal orders.

In Lamb vs. Phipps, 16 we ruled that if the remedy is

specifically provided by law, it is presumed to be adequate.
Moreover, the preliminary mandatory injunction prayed for
by the private respondents in their petition before the NLRC
can also be entertained by the labor arbiter who, as shown
earlier, has the ancillary power to issue preliminary
injunctions or restraining orders as an incident in the cases
pending before him in order to preserve the rights of the
parties during the pendency of the case. 17
Furthermore, an examination of private respondents' petition
for injunction reveals that it has no basis since there is no
showing of any urgency or irreparable injury which the
private respondents might suffer. An injury is considered
irreparable if it is of such constant and frequent recurrence
that no fair and reasonable redress can be had therefor in a
court of law, 18 or where there is no standard by which their
amount can be measured with reasonable accuracy, that is, it
is not susceptible of mathematical computation. It is
considered irreparable injury when it cannot be adequately
compensated in damages due to the nature of the injury
itself or the nature of the right or property injured or when
there exists no certain pecuniary standard for the
measurement of damages. 19
In the case at bar, the alleged injury which private
respondents stand to suffer by reason of their alleged illegal
dismissal can be adequately compensated and therefore,
there exists no "irreparable injury," as defined above which
would necessitate the issuance of the injunction sought for.
Article 279 of the Labor Code provides that an employee who
is unjustly dismissed from employment shall be entitled to
reinstatement, without loss of seniority rights and other
privileges, and to the payment of full backwages, inclusive of
allowances, and to other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.

The ruling of the NLRC that the Supreme Court upheld its
power to issue temporary mandatory injunction orders in the
case of Chemo-Technische Mfg., Inc. Employees Union-DFA,
et. al. vs. Chemo-Technische Mfg., Inc. et. al., docketed as
G.R. No. 107031, is misleading. As correctly argued by the
petitioner, no such pronouncement was made by this Court in
said case. On January 25, 1993, we issued a Minute
Resolution in the subject case stating as follows:
Considering the allegations contained, the issues raised and
the arguments adduced in the petition for certiorari, as well
as the comments of both public and private respondents
thereon, and the reply of the petitioners to private
respondent's motion to dismiss the petition, the Court
Resolved to DENY the same for being premature.
It is clear from the above resolution that we did not in
anyway sustain the action of the NLRC in issuing such
temporary mandatory injunction but rather we dismissed the
petition as the NLRC had yet to rule upon the motion for
reconsideration filed by petitioner. Thus, the minute
resolution denying the petition for being prematurely filed.
Finally, an injunction, as an extraordinary remedy, is not
favored in labor law considering that it generally has not
proved to be an effective means of settling labor
disputes. 20 It has been the policy of the State to encourage
the parties to use the non-judicial process of negotiation and
compromise, mediation and arbitration. 21 Thus, injunctions
may be issued only in cases of extreme necessity based on
legal grounds clearly established, after due consultations or
hearing and when all efforts at conciliation are exhausted
which factors, however, are clearly absent in the present
case.
WHEREFORE, the petition is hereby GRANTED. The assailed
Orders dated April 3, 1995 and May 31, 1995, issued by the

National Labor Relations Commission (First Division), in NLRC

NCR IC No. 000563-95, are hereby REVERSED and SET ASIDE.
SO ORDERED.

determinada, termina o bien por voluntad de cualquiera de

las partes o cada vez que ilega el plazo fijado para el pago de
los salarios segun costumbre en la localidad o cunado se
termine la obra;
2. Que los obreros de una empresa fabril, que han celebrado
contrato, ya individual ya colectivamente, con ell, sin tiempo
fijo, y que se han visto obligados a cesar en sus tarbajos por
haberse declarando paro forzoso en la fabrica en la cual
tarbajan, dejan de ser empleados u obreros de la misma;

G.R. No. L-46496

February 27, 1940

ANG TIBAY, represented by TORIBIO TEODORO,

manager
and
propietor,
and
NATIONAL
WORKERS
BROTHERHOOD, petitioners,
vs.
THE COURT OF INDUSTRIAL RELATIONS and NATIONAL
LABOR UNION, INC., respondents.
Office of the Solicitor-General Ozaeta and Assistant Attorney
Barcelona
for
the
Court
of
Industrial
Relations.
Antonio
D.
Paguia
for
National
Labor
Unon.
Claro
M.
Recto
for
petitioner
"Ang
Tibay".
Jose M. Casal for National Workers' Brotherhood.
LAUREL, J.:
The Solicitor-General in behalf of the respondent Court of
Industrial Relations in the above-entitled case has filed a
motion for reconsideration and moves that, for the reasons
stated in his motion, we reconsider the following legal
conclusions of the majority opinion of this Court:
1. Que un contrato de trabajo, asi individual como colectivo,
sin termino fijo de duracion o que no sea para una

3. Que un patrono o sociedad que ha celebrado un contrato

colectivo de trabajo con sus osbreros sin tiempo fijo de
duracion y sin ser para una obra determiminada y que se
niega a readmitir a dichos obreros que cesaron como
consecuencia de un paro forzoso, no es culpable de practica
injusta in incurre en la sancion penal del articulo 5 de la Ley
No. 213 del Commonwealth, aunque su negativa a readmitir
se deba a que dichos obreros pertenecen a un determinado
organismo obrero, puesto que tales ya han dejado deser
empleados suyos por terminacion del contrato en virtud del
paro.
The respondent National Labor Union, Inc., on the other
hand, prays for the vacation of the judgement rendered by
the majority of this Court and the remanding of the case to
the Court of Industrial Relations for a new trial, and avers:
1. That Toribio Teodoro's claim that on September 26, 1938,
there was shortage of leather soles in ANG TIBAY making it
necessary for him to temporarily lay off the members of the
National Labor Union Inc., is entirely false and unsupported
by the records of the Bureau of Customs and the Books of
Accounts of native dealers in leather.
2. That the supposed lack of leather materials claimed by
Toribio Teodoro was but a scheme to systematically prevent

the forfeiture of this bond despite the breach of his

CONTRACT with the Philippine Army.

necessarily mean the modification and reversal of the

judgment rendered herein.

3. That Toribio Teodoro's letter to the Philippine Army dated

September 29, 1938, (re supposed delay of leather soles
from the States) was but a scheme to systematically prevent
the forfeiture of this bond despite the breach of his
CONTRACT with the Philippine Army.

The petitioner, Ang Tibay, has filed an opposition both to the

motion for reconsideration of the respondent National Labor
Union, Inc.

4. That the National Worker's Brotherhood of ANG TIBAY is a

company or employer union dominated by Toribio Teodoro,
the existence and functions of which are illegal. (281 U.S.,
548, petitioner's printed memorandum, p. 25.)
5. That in the exercise by the laborers of their rights to
collective
bargaining,
majority
rule
and
elective
representation are highly essential and indispensable.
(Sections 2 and 5, Commonwealth Act No. 213.)
6. That the century provisions of the Civil Code which had
been (the) principal source of dissensions and continuous
civil war in Spain cannot and should not be made applicable
in interpreting and applying the salutary provisions of a
modern labor legislation of American origin where the
industrial peace has always been the rule.
7. That the employer Toribio Teodoro was guilty of unfair
labor practice for discriminating against the National Labor
Union, Inc., and unjustly favoring the National Workers'
Brotherhood.
8. That the exhibits hereto attached are so inaccessible to
the respondents that even with the exercise of due diligence
they could not be expected to have obtained them and
offered as evidence in the Court of Industrial Relations.
9. That the attached documents and exhibits are of such farreaching importance and effect that their admission would

In view of the conclusion reached by us and to be herein after

stead with reference to the motion for a new trial of the
respondent National Labor Union, Inc., we are of the opinion
that it is not necessary to pass upon the motion for
reconsideration of the Solicitor-General. We shall proceed to
dispose of the motion for new trial of the respondent labor
union. Before doing this, however, we deem it necessary, in
the interest of orderly procedure in cases of this nature, in
interest of orderly procedure in cases of this nature, to make
several observations regarding the nature of the powers of
the Court of Industrial Relations and emphasize certain
guiding principles which should be observed in the trial of
cases brought before it. We have re-examined the entire
record of the proceedings had before the Court of Industrial
Relations in this case, and we have found no substantial
evidence that the exclusion of the 89 laborers here was due
to their union affiliation or activity. The whole transcript taken
contains what transpired during the hearing and is more of a
record of contradictory and conflicting statements of
opposing counsel, with sporadic conclusion drawn to suit
their own views. It is evident that these statements and
expressions of views of counsel have no evidentiary value.
The Court of Industrial Relations is a special court whose
functions are specifically stated in the law of its creation
(Commonwealth Act No. 103). It is more an administrative
than a part of the integrated judicial system of the nation. It
is not intended to be a mere receptive organ of the
Government. Unlike a court of justice which is essentially
passive, acting only when its jurisdiction is invoked and

deciding only cases that are presented to it by the parties

litigant, the function of the Court of Industrial Relations, as
will appear from perusal of its organic law, is more active,
affirmative and dynamic. It not only exercises judicial or
quasi-judicial functions in the determination of disputes
between employers and employees but its functions in the
determination of disputes between employers and employees
but its functions are far more comprehensive and expensive.
It has jurisdiction over the entire Philippines, to consider,
investigate, decide, and settle any question, matter
controversy or dispute arising between, and/or affecting
employers and employees or laborers, and regulate the
relations between them, subject to, and in accordance with,
the provisions of Commonwealth Act No. 103 (section 1). It
shall take cognizance or purposes of prevention, arbitration,
decision and settlement, of any industrial or agricultural
dispute causing or likely to cause a strike or lockout, arising
from differences as regards wages, shares or compensation,
hours of labor or conditions of tenancy or employment,
between landlords and tenants or farm-laborers, provided
that the number of employees, laborers or tenants of farmlaborers involved exceeds thirty, and such industrial or
agricultural dispute is submitted to the Court by the
Secretary of Labor or by any or both of the parties to the
controversy and certified by the Secretary of labor as existing
and proper to be by the Secretary of Labor as existing and
proper to be dealth with by the Court for the sake of public
interest. (Section 4, ibid.) It shall, before hearing the dispute
and in the course of such hearing, endeavor to reconcile the
parties and induce them to settle the dispute by amicable
agreement. (Paragraph 2, section 4, ibid.) When directed by
the President of the Philippines, it shall investigate and study
all industries established in a designated locality, with a view
to determinating the necessity and fairness of fixing and
adopting for such industry or locality a minimum wage or
share of laborers or tenants, or a maximum "canon" or rental

to be paid by the "inquilinos" or tenants or less to

landowners. (Section 5, ibid.) In fine, it may appeal to
voluntary arbitration in the settlement of industrial disputes;
may employ mediation or conciliation for that purpose, or
recur to the more effective system of official investigation
and compulsory arbitration in order to determine specific
controversies between labor and capital industry and in
agriculture. There is in reality here a mingling of executive
and judicial functions, which is a departure from the rigid
doctrine of the separation of governmental powers.
In the case of Goseco vs. Court of Industrial Relations et al.,
G.R. No. 46673, promulgated September 13, 1939, we had
occasion to joint out that the Court of Industrial Relations et
al., G. R. No. 46673, promulgated September 13, 1939, we
had occasion to point out that the Court of Industrial
Relations is not narrowly constrained by technical rules of
procedure, and the Act requires it to "act according to justice
and equity and substantial merits of the case, without regard
to technicalities or legal forms and shall not be bound by any
technicalities or legal forms and shall not be bound by any
technical rules of legal evidence but may inform its mind in
such manner as it may deem just and equitable." (Section
20, Commonwealth Act No. 103.) It shall not be restricted to
the specific relief claimed or demands made by the parties to
the industrial or agricultural dispute, but may include in the
award, order or decision any matter or determination which
may be deemed necessary or expedient for the purpose of
settling the dispute or of preventing further industrial or
agricultural disputes. (section 13, ibid.) And in the light of
this legislative policy, appeals to this Court have been
especially regulated by the rules recently promulgated by the
rules recently promulgated by this Court to carry into the
effect the avowed legislative purpose. The fact, however,
that the Court of Industrial Relations may be said to be free
from the rigidity of certain procedural requirements does not
mean that it can, in justifiable cases before it, entirely ignore

or disregard the fundamental and essential requirements of

due process in trials and investigations of an administrative
character. There are primary rights which must be respected
even in proceedings of this character:
(1) The first of these rights is the right to a hearing, which
includes the right of the party interested or affected to
present his own case and submit evidence in support thereof.
In the language of Chief Hughes, in Morgan v. U.S., 304 U.S.
1, 58 S. Ct. 773, 999, 82 Law. ed. 1129, "the liberty and
property of the citizen shall be protected by the rudimentary
requirements of fair play.
(2) Not only must the party be given an opportunity to
present his case and to adduce evidence tending to establish
the rights which he asserts but the tribunal must consider the
evidence presented. (Chief Justice Hughes in Morgan v. U.S.
298 U.S. 468, 56 S. Ct. 906, 80 law. ed. 1288.) In the
language of this court inEdwards vs. McCoy, 22 Phil., 598,
"the right to adduce evidence, without the corresponding
duty on the part of the board to consider it, is vain. Such
right is conspicuously futile if the person or persons to whom
the evidence is presented can thrust it aside without notice
or consideration."
(3) "While the duty to deliberate does not impose the
obligation to decide right, it does imply a necessity which
cannot be disregarded, namely, that of having something to
support it is a nullity, a place when directly attached."
(Edwards vs. McCoy, supra.) This principle emanates from the
more fundamental is contrary to the vesting of unlimited
power anywhere. Law is both a grant and a limitation upon
power.
(4) Not only must there be some evidence to support a
finding or conclusion (City of Manila vs. Agustin, G.R. No.
45844, promulgated November 29, 1937, XXXVI O. G. 1335),
but the evidence must be "substantial." (Washington, Virginia

and Maryland Coach Co. v. national labor Relations Board,

301 U.S. 142, 147, 57 S. Ct. 648, 650, 81 Law. ed. 965.) It
means such relevant evidence as a reasonable mind accept
as adequate to support a conclusion." (Appalachian Electric
Power v. National Labor Relations Board, 4 Cir., 93 F. 2d 985,
989; National Labor Relations Board v. Thompson Products, 6
Cir., 97 F. 2d 13, 15; Ballston-Stillwater Knitting Co. v.
National Labor Relations Board, 2 Cir., 98 F. 2d 758, 760.) . . .
The statute provides that "the rules of evidence prevailing in
courts of law and equity shall not be controlling.' The obvious
purpose of this and similar provisions is to free administrative
boards from the compulsion of technical rules so that the
mere admission of matter which would be deemed
incompetent inn judicial proceedings would not invalidate the
administrative order. (Interstate Commerce Commission v.
Baird, 194 U.S. 25, 44, 24 S. Ct. 563, 568, 48 Law. ed. 860;
Interstate Commerce Commission v. Louisville and Nashville
R. Co., 227 U.S. 88, 93 33 S. Ct. 185, 187, 57 Law. ed. 431;
United States v. Abilene and Southern Ry. Co. S. Ct. 220, 225,
74 Law. ed. 624.) But this assurance of a desirable flexibility
in administrative procedure does not go far as to justify
orders without a basis in evidence having rational probative
force. Mere uncorroborated hearsay or rumor does not
constitute substantial evidence. (Consolidated Edison Co. v.
National Labor Relations Board, 59 S. Ct. 206, 83 Law. ed. No.
4, Adv. Op., p. 131.)"
(5) The decision must be rendered on the evidence presented
at the hearing, or at least contained in the record and
disclosed to the parties affected. (Interstate Commence
Commission vs. L. & N. R. Co., 227 U.S. 88, 33 S. Ct. 185, 57
Law. ed. 431.) Only by confining the administrative tribunal
to the evidence disclosed to the parties, can the latter be
protected in their right to know and meet the case against
them. It should not, however, detract from their duty actively
to see that the law is enforced, and for that purpose, to use
the authorized legal methods of securing evidence and

informing itself of facts material and relevant to the

controversy. Boards of inquiry may be appointed for the
purpose of investigating and determining the facts in any
given case, but their report and decision are only advisory.
(Section 9, Commonwealth Act No. 103.) The Court of
Industrial Relations may refer any industrial or agricultural
dispute or any matter under its consideration or advisement
to a local board of inquiry, a provincial fiscal. a justice of the
peace or any public official in any part of the Philippines for
investigation, report and recommendation, and may delegate
to such board or public official such powers and functions as
the said Court of Industrial Relations may deem necessary,
but such delegation shall not affect the exercise of the Court
itself of any of its powers. (Section 10, ibid.)
(6) The Court of Industrial Relations or any of its judges,
therefore, must act on its or his own independent
consideration of the law and facts of the controversy, and not
simply accept the views of a subordinate in arriving at a
decision. It may be that the volume of work is such that it is
literally Relations personally to decide all controversies
coming before them. In the United States the difficulty is
solved with the enactment of statutory authority authorizing
examiners or other subordinates to render final decision, with
the right to appeal to board or commission, but in our case
there is no such statutory authority.
(7) The Court of Industrial Relations should, in all
controversial questions, render its decision in such a manner
that the parties to the proceeding can know the various
issues involved, and the reasons for the decision rendered.
The performance of this duty is inseparable from the
authority conferred upon it.
In the right of the foregoing fundamental principles, it is
sufficient to observe here that, except as to the alleged
agreement between the Ang Tibay and the National Worker's

Brotherhood (appendix A), the record is barren and does not

satisfy the thirst for a factual basis upon which to predicate,
in a national way, a conclusion of law.
This result, however, does not now preclude the concession
of a new trial prayed for the by respondent National Labor
Union, Inc., it is alleged that "the supposed lack of material
claimed by Toribio Teodoro was but a scheme adopted to
systematically discharged all the members of the National
Labor Union Inc., from work" and this avernment is desired to
be proved by the petitioner with the "records of the Bureau of
Customs and the Books of Accounts of native dealers in
leather"; that "the National Workers Brotherhood Union of
Ang Tibay is a company or employer union dominated by
Toribio Teodoro, the existence and functions of which are
illegal." Petitioner further alleges under oath that the exhibits
attached to the petition to prove his substantial avernments"
are so inaccessible to the respondents that even within the
exercise of due diligence they could not be expected to have
obtained them and offered as evidence in the Court of
Industrial Relations", and that the documents attached to the
petition "are of such far reaching importance and effect that
their admission would necessarily mean the modification and
reversal of the judgment rendered herein." We have
considered the reply of Ang Tibay and its arguments against
the petition. By and large, after considerable discussions, we
have come to the conclusion that the interest of justice would
be better served if the movant is given opportunity to
present at the hearing the documents referred to in his
motion and such other evidence as may be relevant to the
main issue involved. The legislation which created the Court
of Industrial Relations and under which it acts is new. The
failure to grasp the fundamental issue involved is not entirely
attributable to the parties adversely affected by the result.
Accordingly, the motion for a new trial should be and the
same is hereby granted, and the entire record of this case
shall be remanded to the Court of Industrial Relations, with

instruction that it reopen the case, receive all such evidence

as may be relevant and otherwise proceed in accordance
with the requirements set forth hereinabove. So ordered.

G.R. No. 157634

May 16, 2005

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

JOSEFA
PO
LAM, petitioners,
vs.
ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE,
EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO
TORREFRANCA,
LOURDES
CAMIGLA,
TEODORO
LAURENARIA, WENEFREDO LOVERES, LUIS GUADES,
AMADO MACANDOG, PATERNO LLARENA, GREGORIO
NICERIO, JOSE ATRACTIVO, MIGUEL TORREFRANCA,
and SANTOS BROOLA, respondents.
DECISION
PUNO, J.:

This is a petition for certiorari to reverse and set aside the

Decision issued by the Court of Appeals (CA) 1 in CA-G.R. SP
No. 68642, entitled "Rolando Adana, Wenefredo Loveres, et.
al. vs. National Labor Relations Commission (NLRC), Mayon
Hotel & Restaurant/Pacita O. Po, et al.," and the
Resolution2 denying petitioners' motion for reconsideration.
The assailed CA decision reversed the NLRC Decision which
had dismissed all of respondents' complaints, 3 and reinstated
the Joint Decision of the Labor Arbiter 4 which ruled that
respondents were illegally dismissed and entitled to their
money claims.
The facts, culled from the records, are as follows: 5
Petitioner Mayon Hotel & Restaurant is a single proprietor
business registered in the name of petitioner Pacita O.
Po,6 whose mother, petitioner Josefa Po Lam, manages the
establishment.7 The hotel and restaurant employed about
sixteen (16) employees.
Records show that on various dates starting in 1981,
petitioner hotel and restaurant hired the following people, all
respondents in this case, with the following jobs: 8
1. Wenefredo Loveres

Accountant
charge

and

Officer-in-

2. Paterno Llarena

Front Desk Clerk

3. Gregorio Nicerio

Supervisory Waiter

4. Amado Macandog

Roomboy

5. Luis Guades

Utility/Maintenance Worker

6. Santos Broola

Roomboy

7. Teodoro Laurenaria

Waiter

8. Eduardo Alamares

Roomboy/Waiter

9. Lourdes Camigla

Cashier

10. Chona Bumalay

Cashier

11. Jose Atractivo

Technician

12. Amado Alamares

Dishwasher
Helper

13. Roger Burce

Cook

14. Rolando Adana

Waiter

15. Miguel Torrefranca

Cook

and

Kitchen

16. Edgardo Torrefranca Cook

Due to the expiration and non-renewal of the lease contract
for the rented space occupied by the said hotel and
restaurant at Rizal Street, the hotel operations of the
business were suspended on March 31, 1997. 9 The operation
of the restaurant was continued in its new location at
Elizondo Street, Legazpi City, while waiting for the
construction of a new Mayon Hotel & Restaurant at
Pearanda Street, Legazpi City. 10 Only nine (9) of the sixteen
(16) employees continued working in the Mayon Restaurant
at its new site.11
On various dates of April and May 1997, the 16 employees
filed complaints for underpayment of wages and other
money claims against petitioners, as follows:12
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose
Atractivo for illegal dismissal, underpayment of wages,
nonpayment of holiday and rest day pay; service incentive
leave pay (SILP) and claims for separation pay plus damages;

Paterno Llarena and Gregorio Nicerio for illegal dismissal with

claims for underpayment of wages; nonpayment of cost of
living allowance (COLA) and overtime pay; premium pay for
holiday and rest day; SILP; nightshift differential pay and
separation pay plus damages;
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for
underpayment of wages; nonpayment of holiday and rest day
pay and SILP;
Rolando Adana, Roger Burce and Amado Alamares for
underpayment of wages; nonpayment of COLA, overtime,
holiday, rest day, SILP and nightshift differential pay;
Eduardo Alamares for underpayment of wages, nonpayment
of holiday, rest day and SILP and night shift differential pay;
Santos Broola for illegal dismissal, underpayment of wages,
overtime pay, rest day pay, holiday pay, SILP, and
damages;13 and
Teodoro Laurenaria for underpayment of wages; nonpayment
of COLA and overtime pay; premium pay for holiday and rest
day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr.
rendered a Joint Decision in favor of the employees. The
Labor Arbiter awarded substantially all of respondents'
money claims, and held that respondents Loveres, Macandog
and Llarena were entitled to separation pay, while
respondents Guades, Nicerio and Alamares were entitled to
their retirement pay. The Labor Arbiter also held that based
on the evidence presented, Josefa Po Lam is the
owner/proprietor of Mayon Hotel & Restaurant and the proper
respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was
reversed, and all the complaints were dismissed.

Respondents filed a motion for reconsideration with the NLRC

and when this was denied, they filed a petition
forcertiorari with the CA which rendered the now assailed
decision.
After their motion for reconsideration was denied, petitioners
now come to this Court, seeking the reversal of the CA
decision on the following grounds:
I. The Honorable Court of Appeals erred in reversing the
decision of the National Labor Relations Commission (Second
Division) by holding that the findings of fact of the NLRC were
not supported by substantial evidence despite ample and
sufficient evidence showing that the NLRC decision is indeed
supported by substantial evidence;
II. The Honorable Court of Appeals erred in upholding the
joint decision of the labor arbiter which ruled that private
respondents were illegally dismissed from their employment,
despite the fact that the reason why private respondents
were out of work was not due to the fault of petitioners but to
causes beyond the control of petitioners.
III. The Honorable Court of Appeals erred in upholding the
award of monetary benefits by the labor arbiter in his joint
decision in favor of the private respondentS, including the
award of damages to six (6) of the private respondents,
despite the fact that the private respondents have not proven
by substantial evidence their entitlement thereto and
especially the fact that they were not illegally dismissed by
the petitioners.
IV. The Honorable Court of Appeals erred in holding that
Pacita Ong Po is the owner of the business establishment,
petitioner Mayon Hotel and Restaurant, thus disregarding the
certificate of registration of the business establishment
ISSUED by the local government, which is a public document,

and the unqualified admissions of complainants-private

respondents.14
In essence, the petition calls for a review of the following
issues:
1. Was it correct for petitioner Josefa Po Lam to be held liable
as the owner of petitioner Mayon Hotel & Restaurant, and the
proper respondent in this case?
2. Were respondents Loveres, Guades, Macandog, Atractivo,
Llarena and Nicerio illegally dismissed?
3. Are respondents entitled to their money claims due to
underpayment of wages, and nonpayment of holiday pay,
rest day premium, SILP, COLA, overtime pay, and night shift
differential pay?
It is petitioners' contention that the above issues have
already been threshed out sufficiently and definitively by the
NLRC. They therefore assail the CA's reversal of the NLRC
decision, claiming that based on the ruling in Castillo v.
NLRC,15 it is non sequitur that the CA should re-examine the
factual findings of both the NLRC and the Labor Arbiter,
especially as in this case the NLRC's findings are allegedly
supported by substantial evidence.
We do not agree.
There is no denying that it is within the NLRC's competence,
as an appellate agency reviewing decisions of Labor Arbiters,
to disagree with and set aside the latter's findings. 16 But it
stands to reason that the NLRC should state an acceptable
cause therefore, otherwise it would be a whimsical,
capricious, oppressive, illogical, unreasonable exercise of
quasi-judicial prerogative, subject to invalidation by the
extraordinary writ of certiorari.17 And when the factual
findings of the Labor Arbiter and the NLRC are diametrically
opposed and this disparity of findings is called into question,

there is, necessarily, a re-examination of the factual findings

to ascertain which opinion should be sustained.18 As ruled
in Asuncion v. NLRC,19
Although, it is a legal tenet that factual findings of
administrative bodies are entitled to great weight and
respect, we are constrained to take a second look at the facts
before us because of the diversity in the opinions of the
Labor Arbiter and the NLRC. A disharmony between the
factual findings of the Labor Arbiter and those of the NLRC
opens the door to a review thereof by this Court. 20
The CA, therefore, did not err in reviewing the records to
determine which opinion was supported by substantial
evidence.
Moreover, it is explicit in Castillo v. NLRC21 that factual
findings of administrative bodies like the NLRC are
affirmed only if they are supported by substantial
evidence that is manifest in the decision and on the
records. As stated in Castillo:
[A]buse of discretion does not necessarily follow from a
reversal by the NLRC of a decision of a Labor Arbiter. Mere
variance in evidentiary assessment between the NLRC and
the Labor Arbiter does not automatically call for a full review
of the facts by this Court. The NLRC's decision, so long as it is
not bereft of substantial support from the records, deserves
respect from this Court. As a rule, the original and exclusive
jurisdiction to review a decision or resolution of respondent
NLRC in a petition for certiorari under Rule 65 of the Rules of
Court does not include a correction of its evaluation of the
evidence but is confined to issues of jurisdiction or grave
abuse of discretion. Thus, the NLRC's factual findings, if
supported by substantial evidence, are entitled to great
respect and even finality, unless petitioner is able to show
that it simply and arbitrarily disregarded the evidence before
it or had misappreciated the evidence to such an extent as to

compel a contrary conclusion if such evidence had been

properly appreciated. (citations omitted)22

that the evidence[,] if produced, would operate to his

prejudice, and support the case of his adversary.

After careful review, we find that the reversal of the NLRC's

decision was in order precisely because it was not supported
by substantial evidence.

Furthermore, in ruling that Josefa Po Lam is the real owner of

the hotel and restaurant, the labor arbiter relied also on the
testimonies of the witnesses, during the hearing of the
instant case. When the conclusions of the labor arbiter are
sufficiently corroborated by evidence on record, the same
should be respected by appellate tribunals, since he is in a
better position to assess and evaluate the credibility of the
contending parties.23 (citations omitted)

1. Ownership by Josefa Po Lam

The Labor Arbiter ruled that as regards the claims of the
employees, petitioner Josefa Po Lam is, in fact, the owner of
Mayon Hotel & Restaurant. Although the NLRC reversed this
decision, the CA, on review, agreed with the Labor Arbiter
that notwithstanding the certificate of registration in the
name of Pacita Po, it is Josefa Po Lam who is the
owner/proprietor of Mayon Hotel & Restaurant, and the
proper respondent in the complaints filed by the employees.
The CA decision states in part:
[Despite] the existence of the Certificate of Registration in
the name of Pacita Po, we cannot fault the labor arbiter in
ruling that Josefa Po Lam is the owner of the subject hotel
and restaurant. There were conflicting documents submitted
by Josefa herself. She was ordered to submit additional
documents to clearly establish ownership of the hotel and
restaurant, considering the testimonies given by the
[respondents] and the non-appearance and failure to submit
her own position paper by Pacita Po. But Josefa did not
comply with the directive of the Labor Arbiter. The ruling of
the Supreme Court in Metropolitan Bank and Trust Company
v. Court of Appeals applies to Josefa Po Lam which is stated in
this wise:
When the evidence tends to prove a material fact which
imposes a liability on a party, and he has it in his power to
produce evidence which from its very nature must overthrow
the case made against him if it is not founded on fact, and he
refuses to produce such evidence, the presumption arises

Petitioners insist that it was error for the Labor Arbiter and
the CA to have ruled that petitioner Josefa Po Lam is the
owner of Mayon Hotel & Restaurant. They allege that the
documents they submitted to the Labor Arbiter sufficiently
and clearly establish the fact of ownership by petitioner
Pacita Po, and not her mother, petitioner Josefa Po Lam. They
contend that petitioner Josefa Po Lam's participation was
limited to merely (a) being the overseer; (b) receiving the
month-to-month and/or year-to-year financial reports
prepared and submitted by respondent Loveres; and (c)
visitation of the premises.24 They also put emphasis on the
admission of the respondents in their position paper
submitted to the Labor Arbiter, identifying petitioner Josefa
Po Lam as the manager, and Pacita Po as the owner. 25 This,
they claim, is a judicial admission and is binding on
respondents. They protest the reliance the Labor Arbiter and
the CA placed on their failure to submit additional documents
to clearly establish ownership of the hotel and restaurant,
claiming that there was no need for petitioner Josefa Po Lam
to submit additional documents considering that the
Certificate of Registration is the best and primary evidence of
ownership.

We disagree with petitioners. We have scrutinized the records

and find the claim that petitioner Josefa Po Lam is merely the
overseer is not borne out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the
proceedings with the Labor Arbiter. Despite receipt of the
Labor Arbiter's notice and summons, other notices and
Orders, petitioner Pacita Po failed to appear in any of the
proceedings with the Labor Arbiter in these cases, nor file her
position paper.26 It was only on appeal with the NLRC that
Pacita Po signed the pleadings.27 The apathy shown by
petitioner Pacita Po is contrary to human experience as one
would think that the owner of an establishment would
naturally be concerned when all her employees file
complaints against her.
Second. The records of the case belie petitioner Josefa Po
Lam's claim that she is merely an overseer. The findings of
the Labor Arbiter on this question were based on credible,
competent and substantial evidence. We again quote the
Joint Decision on this matter:
Mayon Hotel and Restaurant is a [business name] of an
enterprise. While [petitioner] Josefa Po Lam claims that it is
her daughter, Pacita Po, who owns the hotel and restaurant
when the latter purchased the same from one Palanos in
1981, Josefa failed to submit the document of sale from said
Palanos to Pacita as allegedly the sale was only verbal
although the license to operate said hotel and restaurant is in
the name of Pacita which, despite our Order to Josefa to
present the same, she failed to comply (p. 38, tsn. August 13,
1998). While several documentary evidences were submitted
by Josefa wherein Pacita was named therein as owner of the
hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,]
there were documentary evidences also that were submitted
by Josefa showing her ownership of said enterprise (pp. 468
to 469; vol. II, rollo). While Josefa explained her participation

and interest in the business as merely to help and assist her

daughter as the hotel and restaurant was near the former's
store, the testimonies of [respondents] and Josefa as well as
her demeanor during the trial in these cases proves (sic) that
Josefa Po Lam owns Mayon Hotel and Restaurant.
[Respondents] testified that it was Josefa who exercises all
the acts and manifestation of ownership of the hotel and
restaurant like transferring employees from the Greatwall
Palace Restaurant which she and her husband Roy Po Lam
previously owned; it is Josefa to whom the employees
submits (sic) reports, draws money for payment of payables
and for marketing, attending (sic) to Labor Inspectors during
ocular inspections. Except for documents whereby Pacita Po
appears as the owner of Mayon Hotel and Restaurant,
nothing in the record shows any circumstance or
manifestation that Pacita Po is the owner of Mayon Hotel and
Restaurant. The least that can be said is that it is absurd for a
person to purchase a hotel and restaurant in the very heart
of the City of Legazpi verbally. Assuming this to be true,
when [petitioners], particularly Josefa, was directed to submit
evidence as to the ownership of Pacita of the hotel and
restaurant, considering the testimonies of [respondents], the
former should [have] submitted the lease contract between
the owner of the building where Mayon Hotel and Restaurant
was located at Rizal St., Legazpi City and Pacita Po to clearly
establish ownership by the latter of said enterprise. Josefa
failed. We are not surprised why some employers employ
schemes to mislead Us in order to evade liabilities. We
therefore consider and hold Josefa Po Lam as the
owner/proprietor of Mayon Hotel and Restaurant and the
proper respondent in these cases. 28
Petitioners' reliance on the rules of evidence, i.e., the
certificate of registration being the best proof of ownership,
is misplaced. Notwithstanding the certificate of registration,
doubts were cast as to the true nature of petitioner Josefa Po
Lam's involvement in the enterprise, and the Labor Arbiter

had the authority to resolve this issue. It was therefore within

his jurisdiction to require the additional documents to
ascertain who was the real owner of petitioner Mayon Hotel &
Restaurant.
Article 221 of the Labor Code is clear: technical rules are not
binding, and the application of technical rules of procedure
may be relaxed in labor cases to serve the demand of
substantial justice.29 The rule of evidence prevailing in court
of law or equity shall not be controlling in labor cases and it
is the spirit and intention of the Labor Code that the Labor
Arbiter shall use every and all reasonable means to ascertain
the facts in each case speedily and objectively and without
regard to technicalities of law or procedure, all in the interest
of due process.30 Labor laws mandate the speedy
administration of justice, with least attention to technicalities
but without sacrificing the fundamental requisites of due
process.31
Similarly, the fact that the respondents' complaints contained
no allegation that petitioner Josefa Po Lam is the owner is of
no moment. To apply the concept of judicial admissions to
respondents who are but lowly employees - would be to
exact compliance with technicalities of law that is contrary to
the demands of substantial justice. Moreover, the issue of
ownership was an issue that arose only during the course of
the proceedings with the Labor Arbiter, as an incident of
determining respondents' claims, and was well within his
jurisdiction.32
Petitioners were also not denied due process, as they were
given sufficient opportunity to be heard on the issue of
ownership.33 The essence of due process in administrative
proceedings is simply an opportunity to explain one's side or
an opportunity to seek reconsideration of the action or ruling
complained of.34 And there is nothing in the records which
would suggest that petitioners had absolute lack of

opportunity to be heard. 35 Obviously, the choice not to

present evidence was made by petitioners themselves. 36
But more significantly, we sustain the Labor Arbiter and the
CA because even when the case was on appeal with the
NLRC, nothing was submitted to negate the Labor Arbiter's
finding that Pacita Po is not the real owner of the subject
hotel and restaurant. Indeed, no such evidence was
submitted in the proceedings with the CA nor with this Court.
Considering that petitioners vehemently deny ownership by
petitioner Josefa Po Lam, it is most telling that they continue
to withhold evidence which would shed more light on this
issue. We therefore agree with the CA that the failure to
submit could only mean that if produced, it would have been
adverse to petitioners' case.37
Thus, we find that there is substantial evidence to rule that
petitioner Josefa Po Lam is the owner of petitioner Mayon
Hotel & Restaurant.
2. Illegal Dismissal: claim for separation pay
Of the sixteen employees, only the following filed a case for
illegal dismissal: respondents Loveres, Llarena, Nicerio,
Macandog, Guades, Atractivo and Broola. 38
The Labor Arbiter found that there was illegal dismissal, and
granted separation pay to respondents Loveres, Macandog
and Llarena. As respondents Guades, Nicerio and Alamares
were already 79, 66 and 65 years old respectively at the time
of the dismissal, the Labor Arbiter granted retirement
benefits pursuant to Article 287 of the Labor Code as
amended.39 The Labor Arbiter ruled that respondent Atractivo
was not entitled to separation pay because he had been
transferred to work in the restaurant operations in Elizondo
Street, but awarded him damages. Respondents Loveres,
Llarena, Nicerio, Macandog and Guades were also awarded
damages.40

The NLRC reversed the Labor Arbiter, finding that "no clear
act of termination is attendant in the case at bar" and that
respondents "did not submit any evidence to that effect, but
the finding and conclusion of the Labor Arbiter [are] merely
based on his own surmises and conjectures." 41 In turn, the
NLRC was reversed by the CA.
It is petitioners contention that the CA should have sustained
the NLRC finding that none of the above-named respondents
were illegally dismissed, or entitled to separation or
retirement pay. According to petitioners, even the Labor
Arbiter and the CA admit that when the illegal dismissal case
was filed by respondents on April 1997, they had as yet no
cause of action. Petitioners therefore conclude that the filing
by respondents of the illegal dismissal case was premature
and should have been dismissed outright by the Labor
Arbiter.42 Petitioners also claim that since the validity of
respondents' dismissal is a factual question, it is not for the
reviewing court to weigh the conflicting evidence. 43
We do not agree. Whether respondents are still working for
petitioners is a factual question. And the records are
unequivocal that since April 1997, when petitioner Mayon
Hotel & Restaurant suspended its hotel operations and
transferred its restaurant operations in Elizondo Street,
respondents Loveres, Macandog, Llarena, Guades and Nicerio
have not been permitted to work for petitioners. Respondent
Alamares, on the other hand, was also laid-off when the
Elizondo Street operations closed, as were all the other
respondents. Since then, respondents have not been
permitted to work nor recalled, even after the construction of
the new premises at Pearanda Street and the reopening of
the hotel operations with the restaurant in this new site. As
stated by the Joint Decision of the Labor Arbiter on July 2000,
or more than three (3) years after the complaint was filed: 44

[F]rom the records, more than six months had lapsed without
[petitioner] having resumed operation of the hotel. After
more than one year from the temporary closure of Mayon
Hotel and the temporary transfer to another site of Mayon
Restaurant, the building which [petitioner] Josefa allege[d]
w[h]ere the hotel and restaurant will be transferred has been
finally constructed and the same is operated as a hotel with
bar and restaurant nevertheless, none of [respondents]
herein who were employed at Mayon Hotel and Restaurant
which was also closed on April 30, 1998 was/were recalled by
[petitioner] to continue their services...
Parenthetically, the Labor Arbiter did not grant separation
pay to the other respondents as they had not filed an
amended complaint to question the cessation of their
employment after the closure of Mayon Hotel & Restaurant
on March 31, 1997.45
The above factual finding of the Labor Arbiter was never
refuted by petitioners in their appeal with the NLRC. It
confounds us, therefore, how the NLRC could have so
cavalierly treated this uncontroverted factual finding by
ruling that respondents have not introduced any evidence to
show that they were illegally dismissed, and that the Labor
Arbiter's finding was based on conjecture. 46 It was a serious
error that the NLRC did not inquire as to thelegality of the
cessation of employment. Article 286 of the Labor Code is
clear there is termination of employment when an
otherwise bona fide suspension of work exceeds six (6)
months.47 The cessation of employment for more than six
months was patent and the employer has the burden of
proving that the termination was for a just or authorized
cause.48
Moreover, we are not impressed by any of petitioners'
attempts to exculpate themselves from the charges. First, in
the proceedings with the Labor Arbiter, they claimed that it

could not be illegal dismissal because the lay-off was merely

temporary (and due to the expiration of the lease contract
over the old premises of the hotel). Theyspecifically invoked
Article 286 of the Labor Code to argue that the claim for
separation pay was premature and without legal and factual
basis.49 Then, because the Labor Arbiter had ruled that there
was already illegal dismissal when the lay-off had exceeded
the six-month period provided for in Article 286, petitioners
raise this novel argument, to wit:
It is the firm but respectful submission of petitioners that
reliance on Article 286 of the Labor Code is misplaced,
considering that the reason why private respondents were
out of work was not due to the fault of petitioners. The failure
of petitioners to reinstate the private respondents to their
former positions should not likewise be attributable to said
petitioners as the private respondents did not submit any
evidence to prove their alleged illegal dismissal. The
petitioners cannot discern why they should be made liable to
the private respondents for their failure to be reinstated
considering that the fact that they were out of work was not
due to the fault of petitioners but due to circumstances
beyond the control of petitioners, which are the termination
and non-renewal of the lease contract over the subject
premises. Private respondents, however, argue in their
Comment that petitioners themselves sought the application
of Article 286 of the Labor Code in their case in their Position
Paper filed before the Labor Arbiter. In refutation, petitioners
humbly submit that even if they invoke Article 286 of the
Labor Code, still the fact remains, and this bears stress and
emphasis, that the temporary suspension of the operations of
the establishment arising from the non-renewal of the lease
contract did not result in the termination of employment of
private respondents and, therefore, the petitioners cannot be
faulted if said private respondents were out of work, and
consequently, they are not entitled to their money claims
against the petitioners.50

It is confounding how petitioners have fashioned their

arguments. After having admitted, in effect, that respondents
have been laid-off since April 1997, they would have this
Court excuse their refusal to reinstate respondents or grant
them separation pay because these same respondents
purportedly have not proven the illegality of their dismissal.
Petitioners' arguments reflect their lack of candor and the
blatant attempt to use technicalities to muddle the issues
and defeat the lawful claims of their employees. First,
petitioners admit that since April 1997, when hotel
operations were suspended due to the termination of the
lease of the old premises, respondents Loveres, Macandog,
Llarena, Nicerio and Guades have not been permitted to
work. Second, even after six monthsof what should have
been just a temporary lay-off, the same respondents
were still not recalled to work. As a matter of fact, the
Labor Arbiter even found that as of the time when he
rendered his Joint Decision on July 2000 or more than three
(3) years after the supposed "temporary lay-off," the
employment of all of the respondents with petitioners
had ceased, notwithstanding that the new premises had
been completed and the same operated as a hotel with bar
and restaurant. This is clearly dismissal or the permanent
severance or complete separation of the worker from the
service on the initiative of the employer regardless of the
reasons therefor.51
On this point, we note that the Labor Arbiter and the CA are
in accord that at the time of the filing of the complaint,
respondents had no cause of action to file the case for illegal
dismissal. According to the CA and the Labor Arbiter, the layoff of the respondents was merely temporary, pending
construction of the new building at Pearanda Street. 52
While the closure of the hotel operations in April of 1997
may have been temporary, we hold that the evidence on

record belie any claim of petitioners that the lay-of of

respondents on that same date was merely temporary. On
the contrary, we find substantial evidence that petitioners
intended
the
termination
to
be
permanent. First,
respondents Loveres, Macandog, Llarena, Guades, Nicerio
and
Alamares
filed
the
complaint
for
illegal
dismissalimmediately after the closure of the hotel
operations in Rizal Street, notwithstanding the alleged
temporary nature of the closure of the hotel operations, and
petitioners' allegations that the employees assigned to the
hotel operations knew about this beforehand. Second, in
their position paper submitted to the Labor Arbiter,
petitioners invoked Article 286 of the Labor Code to assert
that the employer-employee relationship was merely
suspended, and therefore the claim for separation pay was
premature and without legal or factual basis.53 But they
made no mention of any intent to recall these
respondents to work upon completion of the new
premises. Third,the various pleadings on record show that
petitioners held respondents, particularly Loveres, as
responsible for mismanagement of the establishment and for
abuse of trust and confidence. Petitioner Josefa Po Lam's
affidavit on July 21, 1998, for example, squarely blamed
respondents, specifically Loveres, Bumalay and Camigla, for
abusing her leniency and causing petitioner Mayon Hotel &
Restaurant to sustain "continuous losses until it is closed."
She then asserts that respondents "are not entitled to
separation pay for they were not terminated and if ever the
business
ceased
to
operate
it was
because
of
54
losses." Again, petitioners make the same allegation in their
memorandum on appeal with the NLRC, where they alleged
that three (3) years prior to the expiration of the lease in
1997, the operation of the Hotel had been sustaining
consistent losses, and these were solely attributed to
respondents, but most especially due to Loveres's
mismanagement and abuse of petitioners' trust and

confidence.55 Even the petition filed in this court made

reference to the separation of the respondents due to
"severe financial losses and reverses," again imputing it to
respondents'
mismanagement.56 The
vehemence
of
petitioners'
accusation
of
mismanagement
against
respondents, especially against Loveres, is inconsistent with
the desire to recall them to work. Fourth, petitioners'
memorandum on appeal also averred that the case was filed
"not because of the business being operated by them or that
they were supposedly not receiving benefits from the Labor
Code which is true, but because of the fact that the source
of their livelihood, whether legal or immoral, was
stopped on March 31, 1997, when the owner of the
building terminated the Lease Contract." 57Fifth, petitioners
had inconsistencies in their pleadings (with the NLRC, CA and
with this Court) in referring to the closure, 58 i.e., in the
petition filed with this court, they assert that there is no
illegal dismissal because there was "only a temporary
cessation or suspension of operations of the hotel and
restaurant due to circumstances beyond the control of
petitioners, and that is, the non-renewal of the lease
contract..."59 And yet, in the same petition, they also assert
that: (a) the separation of respondents was due to severe
financial losses and reverses leading to the closure of the
business; and (b) petitioner Pacita Po had to close
shop and was bankrupt and has no liquidity to put up her
own building to house Mayon Hotel & Restaurant. 60 Sixth,
and finally, the uncontroverted finding of the Labor Arbiter
that petitioners terminated all the other respondents, by not
employing them when the Hotel and Restaurant transferred
to its new site on Pearanda Street. 61 Indeed, in this same
memorandum, petitioners referred to all respondents as
"former employees of Mayon Hotel & Restaurant." 62
These factors may be inconclusive individually, but when
taken together, they lead us to conclude that petitioners
really intended to dismiss all respondents and merely used

the termination of the lease (on Rizal Street premises) as a

means by which they could terminate their employees.
Moreover, even assuming arguendo that the cessation of
employment on April 1997 was merely temporary,
itbecame dismissal by operation of law when petitioners
failed to reinstate respondents after the lapse of six (6)
months, pursuant to Article 286 of the Labor Code.
We are not impressed by petitioners' claim that severe
business losses justified their failure to reinstate
respondents. The evidence to prove this fact is inconclusive.
But more important, serious business losses do not excuse
the employer from complying with the clearance or report
required under Article 283 of the Labor Code and its
implementing rules before terminating the employment of its
workers.63 In the absence of justifying circumstances, the
failure of petitioners to observe the procedural requirements
set out under Article 284, taints their actuations with bad
faith, especially since they claimed that they have been
experiencing losses in the three years before 1997. To say
the least, if it were true that the lay-off was temporary but
then serious business losses prevented the reinstatement of
respondents, then petitioners should have complied with the
requirements of written notice. The requirement of law
mandating the giving of notices was intended not only to
enable the employees to look for another employment and
therefore ease the impact of the loss of their jobs and the
corresponding income, but more importantly, to give the
Department of Labor and Employment (DOLE) the
opportunity to ascertain the verity of the alleged authorized
cause of termination.64
And even assuming that the closure was due to a reason
beyond the control of the employer, it still has to accord its
employees some relief in the form of severance pay. 65

While we recognize the right of the employer to terminate

the services of an employee for a just or authorized cause,
the dismissal of employees must be made within the
parameters of law and pursuant to the tenets of fair
play.66 And in termination disputes, the burden of proof is
always on the employer to prove that the dismissal was for a
just or authorized cause. 67 Where there is no showing of a
clear, valid and legal cause for termination of employment,
the law considers the case a matter of illegal dismissal. 68
Under these circumstances, the award of damages was
proper. As a rule, moral damages are recoverable where the
dismissal of the employee was attended by bad faith or fraud
or constituted an act oppressive to labor, or was done in a
manner contrary to morals, good customs or public
policy.69 We believe that the dismissal of the respondents was
attended with bad faith and meant to evade the lawful
obligations imposed upon an employer.
To rule otherwise would lead to the anomaly of respondents
being terminated from employment in 1997 as a matter of
fact, but without legal redress. This runs counter to notions of
fair play, substantial justice and the constitutional mandate
that labor rights should be respected. If doubts exist between
the evidence presented by the employer and the employee,
the scales of justice must be tilted in favor of the latter the
employer must affirmatively show rationally adequate
evidence that the dismissal was for a justifiable cause. 70 It is
a time-honored rule that in controversies between a laborer
and his master, doubts reasonably arising from the evidence,
or in the interpretation of agreements and writing should be
resolved in the former's favor. 71 The policy is to extend the
doctrine to a greater number of employees who can avail of
the benefits under the law, which is in consonance with the
avowed policy of the State to give maximum aid and
protection of labor.72

We therefore reinstate the Labor Arbiter's decision with the

following modifications:
(a) Separation pay for the illegal dismissal of respondents
Loveres, Macandog and Llarena; (Santos Broola cannot be
granted separation pay as he made no such claim);
(b) Retirement pay for respondents Guades, Nicerio, and
Alamares, who at the time of dismissal were entitled to their
retirement benefits pursuant to Article 287 of the Labor Code
as amended;73 and
(c) Damages for respondents Loveres, Macandog, Llarena,
Guades, Nicerio, Atractivo, and Broola.
3. Money claims
The CA held that contrary to the NLRC's ruling, petitioners
had not discharged the burden of proving that the monetary
claims of the respondents have been paid. 74 The CA thus
reinstated the Labor Arbiter's grant of respondents' monetary
claims, including damages.
Petitioners assail this ruling by repeating their long and
convoluted argument that as there was no illegal dismissal,
then respondents are not entitled to their monetary claims or
separation pay and damages. Petitioners' arguments are not
only tiring, repetitive and unconvincing, but confusing and
confused entitlement to labor standard benefits is a
separate and distinct concept from payment of separation
pay arising from illegal dismissal, and are governed by
different provisions of the Labor Code.
We agree with the CA and the Labor Arbiter. Respondents
have set out with particularity in their complaint, position
paper, affidavits and other documents the labor standard
benefits they are entitled to, and which they alleged that
petitioners have failed to pay them. It was therefore
petitioners' burden to prove that they have paid these money

claims. One who pleads payment has the burden of proving

it, and even where the employees must allege nonpayment,
the general rule is that the burden rests on the defendant to
prove nonpayment, rather than on the plaintiff to prove non
payment.75 This petitioners failed to do.
We also agree with the Labor Arbiter and the CA that the
documents petitioners submitted, i.e., affidavits executed by
some of respondents during an ocular inspection conducted
by an inspector of the DOLE; notices of inspection result and
Facility Evaluation Orders issued by DOLE, are not sufficient
to prove payment.76 Despite repeated orders from the Labor
Arbiter,77 petitioners failed to submit the pertinent employee
files, payrolls, records, remittances and other similar
documents which would show that respondents rendered
work entitling them to payment for overtime work, night shift
differential, premium pay for work on holidays and rest day,
and payment of these as well as the COLA and the SILP
documents which are not in respondents' possession but in
the custody and absolute control of petitioners. 78 By choosing
not to fully and completely disclose information and present
the necessary documents to prove payment of labor standard
benefits due to respondents, petitioners failed to discharge
the burden of proof. 79 Indeed, petitioners' failure to submit
the necessary documents which as employers are in their
possession, inspite of orders to do so, gives rise to the
presumption that their presentation is prejudicial to its
cause.80 As aptly quoted by the CA:
[W]hen the evidence tends to prove a material fact which
imposes a liability on a party, and he has it in his power to
produce evidence which from its very nature must overthrow
the case made against him if it is not founded on fact, and he
refuses to produce such evidence, the presumption arises
that the evidence, if produced, would operate to his
prejudice, and support the case of his adversary. 81

Petitioners next claim that the cost of the food and snacks
provided to respondents as facilities should have been
included in reckoning the payment of respondents' wages.
They state that although on the surface respondents
appeared to receive minimal wages, petitioners had granted
respondents other benefits which are considered part and
parcel of their wages and are allowed under existing
laws.82 They claim that these benefits make up for whatever
inadequacies there may be in compensation. 83 Specifically,
they invoked Sections 5 and 6, Rule VII-A, which allow the
deduction of facilities provided by the employer through an
appropriate Facility Evaluation Order issued by the Regional
Director of the DOLE.84 Petitioners also aver that they give
five (5) percent of the gross income each month as
incentives. As proof of compliance of payment of minimum
wages, petitioners submitted the Notice of Inspection Results
issued in 1995 and 1997 by the DOLE Regional Office. 85
The cost of meals and snacks purportedly provided to
respondents cannot be deducted as part of respondents'
minimum wage. As stated in the Labor Arbiter's decision: 86
While [petitioners] submitted Facility Evaluation Orders (pp.
468, 469; vol. II, rollo) issued by the DOLE Regional Office
whereby the cost of meals given by [petitioners] to
[respondents] were specified for purposes of considering the
same as part of their wages, We cannot consider the cost of
meals in the Orders as applicable to [respondents].
[Respondents] were not interviewed by the DOLE as to the
quality and quantity of food appearing in the applications of
[petitioners] for facility evaluation prior to its approval to
determine whether or not [respondents] were indeed given
such kind and quantity of food. Also, there was no evidence
that the quality and quantity of food in the Orders were
voluntarily accepted by [respondents]. On the contrary; while
some [of the respondents] admitted that they were given
meals and merienda, the quality of food serve[d] to them

were not what were provided for in the Orders and that it was
only when they filed these cases that they came to know
about said Facility Evaluation Orders (pp. 100; 379[,] vol.
II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa
herself, who applied for evaluation of the facility (food) given
to [respondents], testified that she did not inform
[respondents] concerning said Facility Evaluation Orders (p.
34, tsn[,] August 13, 1998).
Even granting that meals and snacks were provided and
indeed constituted facilities, such facilities could not be
deducted
without
compliance
with
certain
legal
87
requirements. As stated in Mabeza v. NLRC, the employer
simply cannot deduct the value from the employee's wages
without satisfying the following: (a) proof that such facilities
are customarily furnished by the trade; (b) the provision of
deductible facilities is voluntarily accepted in writing by the
employee; and (c) the facilities are charged at fair and
reasonable value. The records are clear that petitioners failed
to comply with these requirements. There was no proof of
respondents' written authorization. Indeed, the Labor Arbiter
found that while the respondents admitted that they were
given meals and merienda, the quality of food served to
them was not what was provided for in the Facility Evaluation
Orders and it was only when they filed the cases that they
came to know of this supposed Facility Evaluation
Orders.88 Petitioner Josefa Po Lam herself admitted that she
did not inform the respondents of the facilities she had
applied for.89
Considering the failure to comply with the above-mentioned
legal requirements, the Labor Arbiter therefore erred when he
ruled that the cost of the meals actually provided to
respondents should be deducted as part of their salaries, on
the ground that respondents have availed themselves of the
food given by petitioners.90 The law is clear that mere

availment is not
employees' wages.

sufficient

to

allow

deductions

from

More important, we note the uncontroverted testimony of

respondents on record that they were required to eat in the
hotel and restaurant so that they will not go home and there
is no interruption in the services of Mayon Hotel &
Restaurant. As ruled in Mabeza, food or snacks or other
convenience provided by the employers are deemed as
supplements if they are granted for the convenience of the
employer. The criterion in making a distinction between a
supplement and a facility does not so much lie in the kind
(food, lodging) but the purpose. 91 Considering, therefore, that
hotel workers are required to work different shifts and are
expected to be available at various odd hours, their ready
availability is a necessary matter in the operations of a small
hotel, such as petitioners' business. 92 The deduction of the
cost of meals from respondents' wages, therefore, should be
removed.
We also do not agree with petitioners that the five (5) percent
of the gross income of the establishment can be considered
as part of the respondents' wages. We quote with approval
the Labor Arbiter on this matter, to wit:
While complainants, who were employed in the hotel,
receive[d] various amounts as profit share, the same cannot
be considered as part of their wages in determining their
claims for violation of labor standard benefits. Although
called profit share[,] such is in the nature of share from
service charges charged by the hotel. This is more explained
by [respondents] when they testified that what they received
are not fixed amounts and the same are paid not on a
monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo). Also,
[petitioners] failed to submit evidence that the amounts
received by [respondents] as profit share are to be
considered part of their wages and had been agreed by them

prior to their employment. Further, how can the amounts

receive[d] by [respondents] be considered as profit share
when the same [are] based on the gross receipt of the
hotel[?] No profit can as yet be determined out of the gross
receipt of an enterprise. Profits are realized after expenses
are deducted from the gross income.
On the issue of the proper minimum wage applicable to
respondents, we sustain the Labor Arbiter. We note that
petitioners themselves have admitted that the establishment
employs "more or less sixteen (16) employees,"93therefore
they are estopped from claiming that the applicable
minimum wage should be for service establishments
employing 15 employees or less.
As for petitioners repeated invocation of serious business
losses, suffice to say that this is not a defense to payment of
labor standard benefits. The employer cannot exempt himself
from liability to pay minimum wages because of poor
financial condition of the company. The payment of minimum
wages is not dependent on the employer's ability to pay. 94
Thus, we reinstate the award of monetary claims granted by
the Labor Arbiter.
4. Conclusion
There is no denying that the actuations of petitioners in this
case have been reprehensible. They have terminated the
respondents' employment in an underhanded manner, and
have used and abused the quasi-judicial and judicial
processes to resist payment of their employees' rightful
claims, thereby protracting this case and causing the
unnecessary clogging of dockets of the Court. They have also
forced respondents to unnecessary hardship and financial
expense. Indeed, the circumstances of this case would have
called for exemplary damages, as the dismissal was effected
in a wanton, oppressive or malevolent manner, 95 and public

policy requires that these acts must be suppressed and

discouraged.96

(2) Granting retirement pay for respondents Guades, Nicerio,

and Alamares;

Nevertheless, we cannot agree with the Labor Arbiter in

granting exemplary damages of P10,000.00 each to all
respondents. While it is true that other forms of damages
under the Civil Code may be awarded to illegally dismissed
employees,97 any award of moral damages by the Labor
Arbiter cannot be based on the Labor Code but should be
grounded on the Civil Code.98 And the law is clear that
exemplary damages can only be awarded if plaintiff shows
proof that he is entitled to moral, temperate or compensatory
damages.99

(3) Removing the deductions for food facility from the

amounts due to all respondents;

As only respondents Loveres, Guades, Macandog, Llarena,

Nicerio, Atractivo and Broola specifically claimed damages
from petitioners, then only they are entitled to exemplary
damages.sjgs1
Finally, we rule that attorney's fees in the amount
to P10,000.00 should be granted to each respondent. It is
settled that in actions for recovery of wages or where an
employee was forced to litigate and incur expenses to
protect his rights and interest, he is entitled to an award of
attorney's fees.100 This case undoubtedly falls within this rule.
IN VIEW WHEREOF, the petition is hereby DENIED. The
Decision of January 17, 2003 of the Court of Appeals in CAG.R. SP No. 68642 upholding the Joint Decision of July 14,
2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97
and 04-00080-97 is AFFIRMED, with the following
MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every
year of service to respondents Loveres, Macandog and
Llarena;

(4) Awarding moral damages of P20,000.00 each for

respondents Loveres, Macandog, Llarena, Guades, Nicerio,
Atractivo, and Broola;
(5) Deleting the award of exemplary damages of P10,000.00
from all respondents except Loveres, Macandog, Llarena,
Guades, Nicerio, Atractivo, and Broola; and
(6) Granting attorney's fees of P10,000.00 each to all
respondents.
The case is REMANDED to the Labor Arbiter for the
RECOMPUTATION of the total monetary benefits awarded and
due to the employees concerned in accordance with the
decision. The Labor Arbiter is ORDERED to submit his
compliance thereon within thirty (30) days from notice of this
decision, with copies furnished to the parties.
SO ORDERED.

G.R. No. 76988 January 31, 1989

GENERAL
RUBBER
AND
FOOTWEAR
CORPORATION, petitioner,
vs.
THE HON. FRANKLIN DRILON IN HIS CAPACITY AS THE
MINISTER OF LABOR & EMPLOYMENT and THE
GENERAL
RUBBER
WORKERS'
UNIONNATU, respondents.
Paez & Pascual Law Office for petitioners.
The Solicitor General for public respondent.
Marcelino Lontok, Jr. for private respondent.
RESOLUTION

FELICIANO, J.:
The present petition involves the question of whether or not
union members who did not ratify a waiver of accrued wage

differentials are bound by the ratification made by a majority

of the union members.

1985 arising out of the non-compliance of said wage order

during the said period. 3 (Emphasis supplied)

On 26 December 1984, Wage Order No. 6 was issued,

increasing the statutory minimum wage rate (by P2.00) and
the mandatory cost of living allowance (by P3.00 for nonagricultural workers) in the private sector, to take effect on 1
November 1984, Petitioner General Rubber and Footwear
Corporation applied to the National Wages Council ("Council")
for exemption from the provisions of Wage Order No. 6. The
Council, in an Order dated 4 March 1985, denied petitioner's
application, stating in part that:

This agreement was subsequently ratified on 30 July 1985 in

a
document
entitled "Sama-samang
Kapasyahan
sa
Pagpapatibay ng Return-to-Work Agreement" 4 by some two
hundred and sixty-eight (268) members of respondent union,
each member signing individually the instrument of
ratification.

[Y]ou are hereby ordered to pay your covered employees the

daily increase in statutory minimum wage rate of P 2.00 and
living allowance of P3.00 effective November 1, 1984. ...
This decision is final.

(Emphasis supplied)

Petitioner filed a Motion for Reconsideration of this Order on

27 May 1985.
On 25 May 1985, some members of respondent General
Rubber Workers' Union-NATU, led by one Leopoldo Sto.
Domingo, declared a strike against petitioner. 2 Three (3)
days later, on 28 May 1985, petitioner and Sto. Domingo, the
latter purporting to represent the striking workers, entered
into a Return-to-Work Agreement ("Agreement"), Article 4 of
which provided:
4. The COMPANY agrees to implement in full Wage Order No.
6 effective May 30, 1985, and agrees to withdraw the Motion
for Reconsideration which it filed with the National Wages
Council in connection with the Application for Exemption. In
consideration, the UNION, its officers and members, agrees
not to demand or ask from the COMPANY the corresponding
differential pay from November 1, 1984 to May 29

Before the ratification of the Agreement, petitioner filed, on 5

June 1985, a Motion with the Council withdrawing its pending
Motion for Reconsideration of the Council's Order of 4 March
1985. By a letter dated 13 June 1985, the Council allowed the
withdrawal of petitioner's Motion for Reconsideration, which
letter in part stated:
In view of your compliance with Wage Order No. 6 effective
May 30, 1985 pursuant to the Return to Work Agreement ... ,
this Council interposes no objection to your Motion to
Withdraw ... 5 (Emphasis supplied)
Meanwhile, there were some one hundred (100) members of
the union who were unhappy over the Agreement, who took
the view that the Council's Order of 4 March 1985 bad
become final and executory upon the withdrawal of
petitioner's Motion for Reconsideration and who would not
sign the instrument ratifying the Agreement. On 10 July
1985, these minority union members with respondent union
acting on their behalf, applied for a writ of execution of the
Council's Order. 6
Petitioner opposed the Motion for a writ of execution,
contending that the Council's approval of its deferred
compliance with the implementation of the Wage
Order, 7 together with the majority ratification of the
Agreement by the individual workers, 8 bound the nonratifying union members represented by respondent union.

Respondent union countered that the Agreement despite

the majority ratification was not binding on the union
members who had not consented thereto, upon the ground
that ratification or non-ratification of the Agreement,
involving as it did money claims, was a personal right under
the doctrine of "Kaisahan ng Manggagawa sa La Campana v.
Honorable Judge Ulpiano Sarmiento and La Campana." 9
Finding for the Union members represented by respondent
union, the then Ministry (now Department) of Labor and
Employment, in an order dated 20 September 1985 issued by
National Capital Region Director Severo M. Pucan, directed
the issuance of a writ of execution and required petitioner to
pay the minority members of respondent union their claims
for differential pay under Wage Order No. 6, which totalled
P90,090.00. 10
Petitioner then moved to quash the writ of execution upon
the ground that the Council's order could not be the subject
of a writ of execution, having been superseded by the
Agreement. 11 In another Order dated 15 January 1986.
Director Pucan, reversed his previous order and sustained
petitioner's contention that the minority union members
represented by respondent union were bound by the majority
ratification, holding that the Council's 20 September 1985
Order sought to be enforced by writ of execution should not
have been issued. 12
Respondent union filed a Motion for Reconsideration, which
was treated as an appeal to the Minister of Labor. In a
decision dated 19 December 1986, the Minister of Labor set
aside the appealed Order of Director Pucan. The Minister's
decision held that:
It is undisputed that the 100 numbers did not sign and ratify
the Return-to-Work Agreement and therefore they cannot be
bound by the waiver of benefits therein. This, in essence, is
the ruling of the High Tribunal in the La Campana case.

Accordingly, the benefits under Wage Order No. 6 due them

by virtue of the final and executory Order of the National
Wages Council dated March 4, 1985 subsists in their favor
and can be subject for execution.
xxx xxx xxx
The writ of execution dated September 20, 1985 ... was
clearly based on the final Order of the National Wages
Council sought to be enforced in a Motion for Execution filed
by the union. While the Return-to-Work Agreement was
mentioned in the writ, the respondent allegedly failing 'to
comply with the above-stated Agreement which had become
final and executory,' we find the Agreement indeed not the
basis for the issuance of the writ.
WHEREFORE, the Order of the Director dated January 15,
1986 is hereby set aside. Let a writ of execution be issued
immediately to enforce the payment of the differential pay
under Wage Order No. 6 from November 1, 1984 to May 29,
1985 of the 100 workers who did not sign any waiver, in
compliance with the final Order of the National Wages
Council. The entire record is hereby remanded to the
Regional Director, National Capital Region for this purpose.
SO ORDERED .

13

(Emphasis supplied)

Not pleased with the adverse decision of the Minister,

petitioner filed the instant Petition for Certiorari.
Petitioner argues once again that the National Wages
Council's Order of 4 March 1985 did not become final and
executory because it had been superseded by the Return-toWork Agreement signed by petitioner corporation and the
union. At the same time, petitioner also argues that the
Return-to-Work Agreement could not be enforced by a writ of
execution, because it was a contractual document and not
the final and executory award of a public official or agency.

Petitioner's contention is more clever than substantial. The

core issue is whether or not Article 4 of the Return-to-Work
Agreement quoted above, could be deemed as binding upon
all members of the union, without regard to whether such
members had or had not in fact individually signed and
ratified such Agreement. Article 4 of that Agreement
provided for, apparently, a quid pro quo arrangement:
petitioner agreed to implement in full Wage Order No.
6 starting 30 May 1985 (and not 1 November 1984, as
provided by the terms of Wage Order No. 6) and to withdraw
its previously filed Motion for Reconsideration with the
National Wages Council; in turn, the union and its members
would refrain from requiring the company to pay the
differential pay (increase in pay) due under Wage Order No. 6
corresponding to the preceding seven-month period from 1
November 1984 to 29 May 1985.
Thus, Kaisahan ng Mangagawa sa La Campana v. Sarmiento,
(supra) is practically on all fours with the instant case. In La
Campana, what was at stake was the validity of a
compromise agreement entered into between the union and
the company. In that compromise agreement, the union
undertook to dismiss and withdraw the case it had filed with
the then Court of Industrial Relations, and waived its right to
execute any final judgment rendered in that case. The CIR
had in that case, rendered a judgment directing
reinstatement of dismissed workers and payment of ten (10)
years backwages. The Secretary of Labor held that that
compromise agreement was void for lack of ratification by
the individual members of the union. The Supreme Court
upheld the decision of the Secretary of Labor, stating among
other things that:
Generally, a judgment on a compromise agreement puts an
end to a litigation and is immediately executory. However,
the Rules [of Court] require a special authority before an
attorney can compromise the litigation of [his] clients. The

authority to compromise cannot lightly be presumed and

should be duly established by evidence. (Esso Philippine, Inc.
v. MME, 75 SCRA 91).
As aptly held by the Secretary of Labor, the records are
bereft of showing that the individual members consented to
the said agreement. Now were the members informed of the
filing of the civil case before the Court of First Instance. If the
parties to said agreement acted in good faith, why did they
not furnish the Office of the president with a copy of the
agreement when they knew all the while that the labor case
was then pending appeal therein? Undoubtedly, the
compromise agreement was executed to the prejudice of the
complainants who never consented thereto, hence, it is null
and void. The judgment based on such agreement does not
bind the individual members or complainants who are not
parties thereto nor signatories therein.
Money claims due to laborers cannot be the object of
settlement or compromise effected by a union or counsel
without the specific individual consent of each laborer
concerned. The beneficiaries are the individual complainants
themselves. The union to which they belong can only assist
them but cannot decide for them.Awards in favor of laborers
after long years of litigation must be attended to with mutual
openness and in the best of faith. (Danao Development Corp.
v. NLRC, 81 SCRA 487-505). Only thus can we really give
meaning to the constitutional mandate of giving laborers
maximum protection and security. It is about time that the
judgment in Case No. 584-V(7) be fully implemented
considering the unreasonable delay in the satisfaction
thereof. This unfortunate incident may only weaken the
workingmen's faith in the judiciary's capacity to give them
justice when due. 14
xxx xxx xxx
(Emphasis supplied)

In the instant case, there is no dispute that private

respondents had not ratified the Return-to-Work Agreement.
It follows, and we so hold, that private respondents cannot be
held bound by the Return-to-Work Agreement. The waiver of
money claims, which in this case were accrued money
claims, by workers and employees must be regarded as a
personal right, that is, a right that must be personally
exercised. For a waiver thereof to be legally effective, the
individual consent or ratification of the workers or employees
involved must be shown. Neither the officers nor the majority
of the union had any authority to waive the accrued rights
pertaining to the dissenting minority members, even under a
collective bargaining agreement which provided for a "union
shop." The same considerations of public policy which
impelled the Court to reach the conclusion it did in La
Campana, are equally compelling in the present case. The
members of the union need the protective shield of this
doctrine not only vis-a-vis their employer but also, at
times, vis-a-vis the management of their own union, and at
other times even against their own imprudence or
impecuniousness.
It should perhaps be made clear that the Court is not here
saying that accrued money claims can never be effectively
waived by workers and employees. What the Court is saying
is that, in the present case, the private respondents never
purported to waive their claims to accrued differential pay.
Assuming that private respondents had actually and
individually purported to waive such claims, a second
question would then have arisen: whether such waiver could
be given legal effect or whether, on the contrary, it was
violative of public policy. 15 Fortunately, we do not have to
address this second question here.
Since Article 4 of the Return-to-Work Agreement was not
enforceable against the non-consenting union members, the
Order of the National Wages Council dated 4 March 1985

requiring petitioner to comply with Wage Order No. 6 from 1

November 1984 onward must be regarded as having become
final and executory insofar as the non-consenting union
members were concerned. Enforcement by writ of execution
of that Order was, therefore, proper. It follows further that the
decision of 19 December 1986 of the respondent Minister of
Labor, far from constituting a grave abuse of discretion or an
act without or in excess of jurisdiction, was fully in
accordance with law as laid down in La Campana and here
reiterated.
WHEREFORE, the Court Resolved to DISMISS the Petition
for certiorari for lack of merit. Costs against petitioner.

Aquilino Magsalin, Pedro Manibo, Ricardo Borja, Benjamin

Camitan, Alicia M. San Pedro, and Felomena Tolin were
employed as dispatcher, warehouseman, issue monitor,
foreman, jacks cementer and outer sole attacher,
respectively.
On August 26, 1994, Rubberworld filed with the Department
of Labor and Employment a notice of temporary shutdown of
operations to take effect on September 26, 1994. Before the
effectivity date, however, Rubberworld was forced to
prematurely shutdown its operations.

G.R. No. 128003

July 26, 2000

RUBBERWORLD [PHILS.], INC., and JULIE YAO

ONG, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, AQUINO
MAGSALIN, PEDRO MAIBO, RICARDO BORJA, ALICIA
M. SAN PEDRO AND FELOMENA B. TOLIN, respondents.
DECISION
PARDO, J.:
What is before the Court for resolution is a petition to annul
the resolution of the National Labor Relations Commission
(NLRC),1 affirming the labor-arbiter's award but deleting the
moral and exemplary damages.
The facts are as follows:
Petitioner
Rubberworld
(Phils.),
Inc.
[hereinafter
Rubberworld], a corporation established in 1965, was
engaged in manufacturing footwear, bags and garments.

On November 11, 1994, private respondents filed with the

National Labor Relations Commission a complaint 2against
petitioner for illegal dismissal and non-payment of separation
pay.
On November 22, 1994, Rubberworld filed with the Securities
and Exchange Commission (SEC) a petition for declaration of
suspension of payments with a proposed rehabilitation plan. 3
On December 28, 1994, SEC issued the following order:
"Accordingly, with the creation of the Management
Committee, all actions for claims against Rubberworld
Philippines, Inc. pending before any court, tribunal, office,
board, body, Commission or sheriff are hereby deemed
SUSPENDED.
"Consequently, all pending incidents for preliminary
injunctions, writ or attachments, foreclosures and the like are
hereby rendered moot and academic.
"SO ORDERED."4
On January 24, 1995, petitioners submitted to the labor
arbiter a motion to suspend the proceedings invoking the
SEC order dated December 28, 1994. The labor arbiter did

not act on the motion and ordered the parties to submit their
respective position papers.
On December 10, 1995, the labor arbiter rendered a decision,
which provides:
"In the light of the foregoing, respondents are hereby
declared guilty of ILLEGAL SHUTDOWN and that respondents
are ordered to pay complainants their separation pay
equivalent to one (1) month pay for every year of service.
Considering the malicious act of closing the business
precipitately without due regard to the rights of
complainants, moral damages and exemplary damage in the
sum of P 50,000.00 and P 30,000.00 respectively is hereby
awarded for each of the complainants.
Finally 10 % of all sums owing to complainants is hereby
adjudged as attorney's fees.
SO ORDERED."5
On February 5, 1996, petitioners appealed to the National
Labor Relations Commission (NLRC) alleging abuse of
discretion and serious errors in the findings of facts of the
labor arbiter.
On August 30, 1996, NLRC issued a resolution, the dispositive
portion of which reads:
"PREMISES CONSIDERED, the decision appealed from is
hereby, AFFIRMED with MODIFICATION in that the award of
moral and exemplary damages is hereby, DELETED.
SO ORDERED."6
On November 20, 1996, NLRC denied petitioners' motion for
reconsideration.
Hence, this petition.7

The issue is whether or not the Department of Labor and

Employment, the Labor Arbiter and the National Labor
Relations Commission may legally act on the claims of
respondents despite the order of the Securities and Exchange
Commission suspending all actions against a company under
rehabilitation by a management committee created by the
Securities and Exchange Commission.
Presidential Decree No. 902-A is clear that "all actions for
claims against corporations, partnerships or associations
under management or receivership pending before any court,
tribunal, board or body shall be suspended accordingly." The
law did not make any exception in favor of labor claims. 8
"The justification for the automatic stay of all pending actions
for claims is to enable the management committee or the
rehabilitation receiver to effectively exercise its/his powers
free from any judicial or extra judicial interference that might
unduly hinder or prevent the 'rescue' of the debtor company.
To allow such other actions to continue would only add to the
burden of the management committee or rehabilitation
receiver, whose time, effort and resources would be wasted
in defending claims against the corporation instead of being
directed toward its restructuring and rehabilitation." 9
Thus, the labor case would defeat the purpose of an
automatic stay.1wphi1 To rule otherwise would open the
floodgates to numerous claims and would defeat the rescue
efforts of the management committee.
Besides, even if an award is given to private respondents, the
ruling could not be enforced as long as petitioner is under
management committee.10
This finds ratiocination in that the power to hear and decide
labor disputes is deemed suspended when the Securities and
Exchange
Commission
puts
the
corporation
under
rehabilitation.

Thus, when NLRC proceeded to decide the case despite the

SEC suspension order, the NLRC acted without or in excess of
its jurisdiction to hear and decide cases. As a consequence,
any resolution, decision or order that it rendered or issued
without jurisdiction is a nullity.
WHEREFORE, the petition is hereby GRANTED. The decision
of the labor arbiter dated December 10, 1995 and the NLRC
resolution dated August 30, 1996, are SET ASIDE.
No costs.
SO ORDERED.

G.R. No. 126625 September 18, 1997

KANLAON
CONSTRUCTION
ENTERPRISES
CO.,
INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, 5TH
DIVISION, and BENJAMIN RELUYA, JR., EDGARDO
GENAYAS, ERNESTO CANETE, PROTACIO ROSALES,
NESTOR BENOYA, RODOLFO GONGOB, DARIO BINOYA,
BENJAMIN
BASMAYOR,
ABELARDO
SACURA,
FLORENCIO SACURA, ISABELO MIRA, NEMESIO LACAR,
JOSEPH
CABIGKIS,
RODRIGO
CILLON,
VIRGILIO
QUIZON, GUARINO EVANGELISTA, ALEJANDRO GATA,
BENEDICTO CALAGO, NILO GATA, DIONISIO PERMACIO,
JUANITO SALUD, ADOR RIMPO, FELIPE ORAEZ, JULIETO
TEJADA, TEOTIMO LACIO, ONOFRE QUIZON, RUDY

ALVAREZ, CRESENCIO FLORES, ALFREDO PERMACIO,

CRESENCIO ALVIAR, HERNANI SURILLA, DIOSDADO
SOLON, CENON ALBURO, ZACARIAS ORTIZ, EUSEBIO
BUSTILLO, GREGORIO BAGO, JERRY VARGAS, EDUARDO
BUENO, PASCUAL HUDAYA, ROGELIO NIETES, and
REYNALDO NIETES, respondents.

PUNO, J.:
In this petition for certiorari, petitioner Kanlaon Construction
Enterprises Co., Inc. seeks to annul the decision of
respondent National Labor Relations Commission, Fifth
Division and remand the cases to the Arbitration Branch for a
retrial on the merits.
Petitioner is a domestic corporation engaged in the
construction business nationwide with principal office at No.
11 Yakan St., La Vista Subdivision, Quezon City. In 1988,
petitioner was contracted by the National Steel Corporation
to construct residential houses for its plant employees in
Steeltown, Sta. Elena, Iligan City. Private respondents were
hired by petitioner as laborers in the project and worked
under the supervision of Engineers Paulino Estacio and Mario
Dulatre. In 1989, the project neared its completion and
petitioner started terminating the services of private
respondents and its other employees.
In 1990, private respondents filed separate complaints
against petitioner before Sub-Regional Arbitration Branch XII,
Iligan City. Numbering forty-one (41) in all, they claimed that
petitioner paid them wages below the minimum and sought
payment of their salary differentials and thirteenth-month
pay. Engineers Estacio and Dulatre were named corespondents.

Some of the cases were assigned to Labor Arbiter Guardson

A. Siao while the others were assigned to Labor Arbiter
Nicodemus G. Palangan. Summonses and notices of
preliminary conference were issued and served on the two
engineers and petitioner through Engineer Estacio. The
preliminary conferences before the labor arbiters were
attended by Engineers Estacio and Dulatre and private
respondents. At the conference of June 11, 1990 before
Arbiter Siao, Engineer Estacio admitted petitioner's liability to
private respondents and agreed to pay their wage
differentials and thirteenth-month pay on June 19, 1990. As a
result of this agreement, Engineer Estacio allegedly waived
petitioner's right to file its position paper. 1 Private
respondents declared that they, too, were dispensing with
their position papers and were adopting their complaints as
their position paper. 2
On June 19, 1990, Engineer Estacio appeared but requested
for another week to settle the claims. Labor Arbiter Siao
denied this request. On June 21, 1990, Arbiter Siao issued an
order granting the complaint and directing petitioner to pay
private respondents' claims. Arbiter Siao held:
xxx xxx xxx
Considering the length of time that has elapsed since these
cases were filed, and what the complainants might think as
to how this branch operates and/or conducts its proceedings
as they are now restless, this Arbiter has no other alternative
or recourse but to order the respondent to pay the claims of
the complainants, subject of course to the computation of the
Fiscal Examiner II of this Branch pursuant to the oral
manifestation of respondent. The Supreme Court ruled:
"Contracts though orally made are binding on the parties."
(Lao Sok v. Sabaysabay, 138 SCRA 134).
Similarly, this Branch would present in passing that "a court
cannot decide a case without facts either admitted or agreed

upon by the parties or proved by evidence." (Yu Chin Piao v.

Lim Tuaco, 33 Phil. 92; Benedicto v. Yulo, 26 Phil. 160)
WHEREFORE, premises considered, the respondent is hereby
ordered to pay the individual claims of the above-named
complainants representing their wage differentials within ten
(10) days from receipt of this order.
The Fiscal Examiner II of this Branch is likewise hereby
ordered to compute the individual claims of the herein
complainants.
SO ORDERED. 3
On June 29, 1990, Arbiter Palangan issued a similar order,
thus:
When the above-entitled cases were called for hearing on
June 19, 1990 at 10:00 a.m. respondent thru their
representative manifested that they were willing to pay the
claims of the complainants and promised to pay the same on
June 28, 1990 at 10:30 a.m.
However, when these cases were called purposely to
materialize the promise of the respondent, the latter failed to
appear without any valid reason.
Considering therefore that the respondent has already
admitted the claims of the complainants, we believe that the
issues raised herein have become moot and academic.
WHEREFORE premises considered, the above-entitled cases
are hereby ordered Closed and Terminated, however, the
respondent is hereby ordered to pay the complainants their
differential pay and 13th-month pay within a period of ten
(10) days from receipt hereof based on the employment
record on file with the respondent.
SO ORDERED. 4

Petitioner appealed to respondent National Labor Relations

Commission. It alleged that it was denied due process and
that Engineers Estacio and Dulatre had no authority to
represent and bind petitioner. Petitioner's appeal was filed by
one Atty. Arthur Abundiente.
In a decision dated April 27, 1992, respondent Commission
affirmed the orders of the Arbiters.
Petitioner interposed this petition alleging that the decision of
respondent Commission was rendered without jurisdiction
and in grave abuse of discretion. Petitioner claims that:
I
THE QUESTIONED DECISION RENDERED BY THE HONORABLE
COMMISSION IS A NULLITY, IT HAVING BEEN ISSUED
WITHOUT JURISDICTION;
II
PUBLIC
RESPONDENT
NATIONAL
LABOR
RELATIONS
COMMISSION GRAVELY ABUSED ITS DISCRETION IN
ARBITRARILY, CAPRICIOUSLY AND WHIMSICALLY MAKING THE
FOLLOWING CONCLUSIONS BASED NOT ON FACTS AND BUT
ON SPECULATION, SURMISE AND EVIDENCE CONJECTURE:
A. Petitioner was deprived of the constitutional right to due
process of law when it was adjudged by the NLRC liable
without trial on the merits and without its knowledge;
B. The NLRC erroneously, patently and unreasonably
interpreted the principle that the NLRC and its Arbitration
Branch are not strictly bound by the rules of evidence;
C. There is no legal nor actual basis in the NLRC's ruling that
petitioner is already in estoppel to disclaim the authority of
its alleged representatives.

D. The NLRC committed manifest error in relying merely on

private, respondents' unsubstantiated complaints to hold
petitioner liable for damages. 5
In brief, petitioner alleges that the decisions of the labor
arbiters and respondent Commission are void for the
following reasons: (1) there was no valid service of summons;
(2) Engineers Estacio and Dulatre and Atty. Abundiente had
no authority to appear and represent petitioner at the
hearings before the arbiters and on appeal to respondent
Commission; (3) the decisions of the arbiters and respondent
Commission are based on unsubstantiated and self-serving
evidence and were rendered in violation of petitioner's right
to due process.
Service of summons in cases filed before the labor arbiters is
governed by Sections 4 and 5 of Rule IV of the New Rules of
Procedure of the NLRC. They provide:
Sec. 4. Service of Notices and Resolutions. (a) Notices or
summons and copies of orders, resolutions or decisions shall
be served on the parties to the case personally by the bailiff
or duly authorized public officer within three (3) days from
receipt thereof or by registered mail; Provided that where a
party is represented by counsel or authorized representative,
service shall be made on such counsel or authorized
representative; provided further that in cases of decision and
final awards, copies thereof shall be served on both the
parties and their counsel; provided finally, that in case where
the parties are so numerous, service shall be made on
counsel and upon such number of complainants as may be
practicable, which shall be considered substantial compliance
with Article 224 (a) of the Labor Code, as amended.
xxx xxx xxx
Sec. 5. Proof and completeness of service. The return
is prima facie proof of the facts indicated therein.Service by

registered mail is complete upon receipt by the addressee or

his agent. . . .

of petitioner. Summons for petitioner was therefore validly

served on him.

Under the NLRC Rules of Procedure, summons on the

respondent shall be served personally or by registered mail
on the party himself. If the party is represented by counsel or
any other authorized representative or agent, summons shall
be served on such person.

Engineer Estacio's appearance before the labor arbiters and

his promise to settle the claims of private respondents is
another matter.

It has been established that petitioner is a private domestic

corporation with principal address in Quezon City. The
complaints against petitioner were filed in Iligan City and
summonses therefor served on Engineer Estacio in Iligan City.
The question now is whether Engineer Estacio was an agent
and authorized representative of petitioner.
To determine the scope or meaning of the term "authorized
representative" or "agent" of parties on whom summons may
be served, the provisions of the Revised Rules of Court may
be resorted to. 6
Under the Revised Rules of Court, 7 service upon a private
domestic corporation or partnership must be made upon its
officers, such as the president, manager, secretary, cashier,
agent, or any of its directors. These persons are deemed so
integrated with the corporation that they know their
responsibilities and immediately discern what to do with any
legal papers served on them. 8
In the case at bar, Engineer Estacio, assisted by Engineer
Dulatre, managed and supervised the construction
project. 9 According to the Solicitor General and private
respondents, Engineer Estacio attended to the project in
Iligan City and supervised the work of the employees thereat.
As manager, he had sufficient responsibility and discretion to
realize the importance of the legal papers served on him and
to relay the same to the president or other responsible officer

The general rule is that only lawyers are allowed to appear

before the labor arbiter and respondent Commission in cases
before them. The Labor Code and the New Rules of Procedure
of the NLRC, nonetheless, lists three (3) exceptions to the
rule, viz:
Sec. 6. Appearances. . . . .
A non-lawyer may appear before the Commission or any
Labor Arbiter only if:
(a) he represents himself as party to the case;
(b) he represents the organization or its members, provided
that he shall be made to present written proof that he is
properly authorized; or
(c) he is a duly-accredited member of any legal aid office
duly recognized by the Department of Justice or the
Integrated Bar of the Philippines in cases referred thereto by
the latter. . . . 10
A non-lawyer may appear before the labor arbiters and the
NLRC only if: (a) he represents himself as a party to the case;
(b) he represents an organization or its members, with
written authorization from them: or (c) he is a duly-accredited
member of any legal aid office duly recognized by the
Department of Justice or the Integrated Bar of the Philippines
in cases referred to by the latter. 11
Engineers Estacio and Dulatre were not lawyers. Neither were
they duly-accredited members of a legal aid office. Their

appearance before the labor arbiters in their capacity as

parties to the cases was authorized under the first exception
to the rule. However, their appearance on behalf of petitioner
required written proof of authorization. It was incumbent
upon the arbiters to ascertain this authority especially since
both engineers were named co-respondents in the cases
before the arbiters. Absent this authority, whatever
statements and declarations Engineer Estacio made before
the arbiters could not bind petitioner.
The appearance of Atty. Arthur Abundiente in the cases
appealed to respondent Commission did not cure Engineer
Estacio's representation. Atty. Abundiente, in the first place,
had no authority to appear before the respondent
Commission. The appellants' brief he filed was verified by
him, not by petitioner. 12 Moreover, respondent Commission
did not delve into the merits of Atty. Abundiente's appeal and
determine whether Engineer Estacio was duly authorized to
make such promise. It dismissed the appeal on the ground
that notices were served on petitioner and that the latter was
estopped from denying its promise to pay.
Nevertheless, even assuming that Engineer Estacio and Atty.
Abundiente were authorized to appear as representatives of
petitioner, they could bind the latter only in procedural
matters before the arbiters and respondent Commission.
Petitioner's liability arose from Engineer Estacio's alleged
promise to pay. A promise to pay amounts to an offer to
compromise and requires a special power of attorney or the
express consent of petitioner. The authority to compromise
cannot be lightly presumed and should be duly established
by evidence.13 This is explicit from Section 7 of Rule III of the
NLRC Rules of Procedure, viz:
Sec. 7. Authority to bind party. Attorneys and other
representatives of parties shall have authority to bind their
clients in all matters of procedure; but they cannot, without a

special power of attorney or express consent, enter into a

compromise agreement with the opposing party in full or
partial discharge of a client's claim.
The promise to pay allegedly made by Engineer Estacio was
made at the preliminary conference and constituted an offer
to settle the case amicably. The promise to pay could not be
presumed to be a single unilateral act, contrary to the claim
of the Solicitor General. 14 A defendant's promise to pay and
settle the plaintiff's claims ordinarily requires a reciprocal
obligation from the plaintiff to withdraw the complaint and
discharge the defendant from liability. 15 In effect, the offer to
pay was an offer to compromise the cases.
In civil cases, an offer to compromise is not an admission of
any liability, and is not admissible in evidence against the
offeror. 16 If this rule were otherwise, no attempt to settle
litigation could safely be made. 17 Settlement of disputes by
way of compromise is an accepted and desirable practice in
courts of law and administrative tribunals.18 In fact, the Labor
Code mandates the labor arbiter to exert all efforts to enable
the parties to arrive at an amicable settlement of the dispute
within his jurisdiction on or before the first hearing. 19
Clearly, respondent Commission gravely abused its discretion
in affirming the decisions of the labor arbiters which were not
only based on unauthorized representations, but were also
made in violation of petitioner's right to due process.
Section 3 of Rule V of the NLRC Rules of Procedure provides:
Sec. 3. Submission of Position Papers/Memorandum.
Should the parties fail to agree upon an amicable settlement,
in whole or in part, during the conferences, the Labor Arbiter
shall issue an order stating therein the matters taken up and
agreed upon during the conferences and directing the parties
to simultaneously file their respective verified position papers

xxx xxx xxx

After petitioner's alleged representative failed to pay the
workers' claims as promised, Labor Arbiters Siao and
Palangan did not order the parties to file their respective
position papers. The arbiters forthwith rendered a decision on
the merits without at least requiring private respondents to
substantiate their complaints. The parties may have earlier
waived their right to file position papers but petitioner's
waiver was made by Engineer Estacio on the premise that
petitioner shall have paid and settled the claims of private
respondents at the scheduled conference. Since petitioner
reneged on its "promise," there was a failure to settle the
case amicably. This should have prompted the arbiters to
order the parties to file their position papers.

Division, is annulled and set aside and the case is remanded

to the Regional Arbitration Branch, Iligan City for further
proceedings.
SO ORDERED.

Article 221 of the Labor Code mandates that in cases before

labor arbiters and respondent Commission, they "shall use
every and all reasonable means to ascertain the facts in each
case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due
process." The rule that respondent Commission and the
Labor Arbiters are not bound by technical rules of evidence
and procedure should not be interpreted so as to dispense
with the fundamental and essential right of due
process. 20 And this right is satisfied, at the very least, 'when
the parties are given the opportunity to submit position
papers. 21 Labor Arbiters Siao and Palangan erred in
dispensing with this requirement.
Indeed, the labor arbiters and the NLRC must not, at the
expense of due process, be the first to arbitrarily disregard
specific provisions of the Rules which are precisely intended
to assist the parties in obtaining the just, expeditious and
inexpensive settlement of labor disputes. 22
IN VIEW WHEREOF, the petition for certiorari is granted. The
decision of the National Labor Relations Commission, Fifth

G.R. No. 116568. September 3, 1999]

DELFIN GARCIA, doing business under the name
NAPCO-LUZMART, Inc., petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION and CARLITO
LACSON, respondents.

DECISION
GONZAGA-REYES, J.:
Before us is a Petition for Certiorari under Rule 65 of the
Rules of Court to annul and set aside the decision of the
National Labor Relations Commission[1] in NLRC CA No. L001268 dated April 12, 1994 which affirmed the decision of
the Sub-Regional Arbitration Branch No. I in Dagupan City
finding that the private respondent Carlito Lacson was
constructively dismissed by the petitioner Delfin Garcia doing
business under the name NAPCO-LUZMART, Inc. and
awarding respondent backwages and separation pay.
The following facts as adopted by the National Labor
Relations Commission (NLRC) are uncontroverted:
Complainant Carlito Lacson was employed on March 5, 1987
as boiler operator technician by Northwest Agro-Marine
Products Corporation (NAPCO). On December 12, 1990
respondent Luzmart, Inc., acquired NAPCO in a foreclosure
sale. Both companies were managed by respondent Delfin
Garcia.
On January 28, 1993, there was a mauling incident which
involved the complainant and Julius Z. Viray, his immediate
supervisor and allegedly a friend and compadre of
respondent Garcia. As complainant suffered injuries as a
result thereof he reported the matter to police authorities
and he sought treatment at the Teofilo Sison Memorial
Provincial Hospital. Both the complainant and Viray were
asked to explain their sides. After the submission of the
written explanations, Delfin Garcia suspended both of them
from work for a period of one month effective April 15,
1993. In the same suspension order, complainant was
further directed to explain in writing why he should not be
dealt with disciplinary action or terminated for his continued
absences from February 15, 1993 up to the date of the

memorandum order. Complainant filed a complaint for illegal

dismissal and other monetary claims but the same was
dismissed without prejudice. On September 1, 1993, the
complainant refiled this case.[2]
The Labor Arbiter[3] ruled in favor of the respondent Carlito
Lacson (LACSON). Petitioner NAPCO-Luzmart (LUZMART)
appealed to the NLRC which affirmed the decision of the
Labor Arbiter after finding that the Labor Arbiter did not
commit any reversible error. The NLRC however deleted the
award of attorneys fees in favor of LACSON. Its decision,
which adopted the conclusions of the Labor Arbiter, reads:
In finding for the complainant, the Labor Arbiter ruled:
The issues to be resolved in this case are: (1) whether or
not the complainant was dismissed from his employment; (2)
whether or not he is entitled to his claim for overtime
services, separation pay, 13th month pay, premium pay for
working on holidays and rest days, separation pay,
13th month pay and service incentive leave pay; and, (3)
whether or not the complainant is considered an employee of
the respondents since March 1987.
The first issue: Respondent Delfin Garcia insists that he did
not dismiss the complainant and that he can return to his
work after his one month suspension, (affidavit of respondent
Garcia, marked as Annex H of his position paper). On the
other hand, complainant Lacson maintains that he reported
for work several times but respondent Garcia refused to take
him back and that the former told him to look for another job.
Let us scrutinize the evidence. The incident involving the
complainant and Julius Viray, also an employee of the
respondents,
wherein
Viray
allegedly
mauled
the
complainant, happened on January 28, 1993. On February
1993, the complainant submitted his handwritten explanation
blaming Viray as the aggressor. According to the

complainant, Viray was drunk at the time of the incident and

although he avoided Viray, the latter armed with a lead pipe,
followed him and wanted to kill him (Annex C
complainant). Viray
also
submitted
his
handwritten
explanation on February 2, 1993 (see Annex E-1 of
respondents position paper). Viray only stated that a
heated argument transpired. On March 31, 1993,
respondent Garcia issued a Memorandum suspending both
the complainant and Viray for one (1) month effective April
15, 1993 and at the same time required the complainant to
explain why he should not be terminated for being absent
from Feb. 15, 1993, (Annex F, respondents). The question
is, why did it take respondent Delfin Garcia one (1) month or
more to decide and issue an order suspending the
complainant and Viray? Why did he not suspend the two
immediately after the incident? This leads credence to the
complainants allegation that he reported for work after
submitting his explanation but respondent Garcia refused to
admit him back and told him to take a vacation or to look for
another work, hence he decided to file a complaint against
him on Feb. 4, 1993, which was later dismissed without
prejudice, the reason for the dismissal of which was not
explained to us by the complainant. Moreover, it is true that
the complainant failed to report for work since Feb. 15, 1993,
why did respondent Garcia not issue an order or
memorandum after the complainant failed to report for a
number of days and directing the complainant to report
immediately
otherwise
his
employment
will
be
terminated? We also agree with the complainants argument
that the respondents should not have asked him to explain
his alleged failure to report for work since Feb. 15, 1993,
because he has already filed a complaint against Garcia
earlier.
The second issue; Annexes G, G-1 to G-14 of the
respondents, which are samples of respondents payroll, show
that whenever the complainant rendered overtime services,

he was paid accordingly. Is he entitled to his claim for

13th monthpay, service incentive leave pay, vacation in sick
leave pay and separation pay? Respondents maintain that
since the complainant was employed by them only on
February 1, 1991, he has no right to claim benefits that arose
before his employment with them. That since he was not
dismissed from his employment, he is not also entitled to his
claim for separation pay. (The resolution of this issue will
also resolve the second issue)
Respondents argue that the services of the complainant with
NAPCO since March 1987, cannot be credited or counted to
his length of service with LUZMART because his subsequent
employment with LUZMART is a new employment as shown in
his employment contract (Annex D respondents) with
LUZMART.
In the case of MDII Supervisors and Confidential Employees
Association (FFW) vs. Presidential Assistant on Legal Affairs,
79 SCRA 40 (1977), the Supreme Court ruled that:
xxx And there is no law which requires the purchaser to
absorb the employees of the selling corporation.
As there is no such law, the most that the purchasing
company may do, for purposes of public policy and social
justice, is to give preference to the qualified separated
employees of the selling company, who in their judgment are
necessary in the continued operation of the business
establishment. This
RCAM
did. It
required
private
respondents to reapply as new employees as a condition for
rehiring subject to the usual probationary status, the latters
past services with the petitioners, transferors not recognized
(San Felipe Neri School of Mandaluyong, Inc., et. Al. Vs. NLRC,
Roman Catholic Archbishop of Manila (RCAM), et. al., G.R. No.
78350, Sept. 11, 1991.).

Except for his bare allegation that LUZMART was only

organized by the controlling stockholders of NAPCO to
acquire or gain control of the latter, the complainant did not
present sufficient evidence to prove his allegation, LUZMART
is an entirely new corporation or entity with a distinct
personality from NAPCO, and is not an alter ego of
NAPCO. Therefore, LUZMART is not under obligation to
absorb the workers of NAPCO or to absorb the length of
service earned by its employees.
The respondents are therefore correct in their assertion that
they should not be answerable for the complainants claim
for benefits that may be due him before January 1, 1991.
As we have discussed earlier, the complainant herein was
constructively dismissed from his employment by respondent
Delfin Garcia because of the latters refusal to admit him
back to work inspite of the complainants insistence to
resume his work after he has given his explanation.
On appeal, respondent contends that the Labor Arbiter erred
in awarding backwages to the complainant from February 1,
1993 up to the date of the promulgation of the decision, and
in awarding separation pay of one month pay for every year
of service.
We are in full accord with the Labor Arbiters conclusion that
the complainant was constructively dismissed by the
respondent Delfin Garcia when he refused to admit the
complainant despite his insistence to go back to work.
However, we delete the award of attorneys fees as this is not
a case of unlawful withholding of wages.
WHEREFORE, premises considered, the appealed decision is
modified by deleting the award of attorneys fees. In all
other respect, the same is affirmed.
SO ORDERED.[4]

LUZMARTs motion for reconsideration [5] was denied hence,

this petition wherein LUZMART claims that the NLRC
committed grave abuse of discretion in holding that LACSON
was illegally dismissed.
In support of its petition, LUZMART claims that LACSON was
not dismissed but was merely suspended as shown by the
March 31, 1993 memorandum.[6] His suspension was a
consequence of the imposition of disciplinary measures on
him as fighting within the company premises constitutes
serious misconduct and disorderly behavior. The fact that
LUZMART did not immediately suspend him after the fighting
incident does not establish that he was dismissed from his
employment as there is no law which requires an employer to
immediately rule on any infraction under investigation after
the filing of the explanation of the person under
investigation. Neither is LACSON entitled to backwages nor
separation pay as these are only granted to employees who
have been illegally dismissed from work and not to
employees like LACSON who abandoned his employment as
he failed to report to work from February 15, 1993 to March
31, 1993.[7]
We resolve to affirm the judgment of the NLRC.
LUZMARTs claim that LACSON was merely suspended and
was still employed by LUZMART does not convince us that
LACSON was not dismissed from his employment. Said claim
was a mere afterthought to preempt or thwart the impending
illegal dismissal case filed by LACSON against LUZMART. As
found by the labor arbiter, LACSONs failure to report to work
was due to LUZMARTs refusal to admit him back. In fact,
LUZMART told him to go on vacation or to look for other work.
[8]

LACSONs dismissal is clearly established by the following

chronology of events: The mauling incident occurred on
January 28, 1993. LACSON submitted his written explanation

of the event on February 1, 1993. On February 4, 1993,

LACSON attempted to report for work but LUZMART refused
to admit him. On February 11, 1993, LACSON filed an action
for illegal dismissal with the NLRC. [9] On April 13, 1993,
LUZMART sent LACSON the memorandum ordering LACSONs
suspension dated on March 31, 1993. By this time, LUZMART
already knew of the pending illegal dismissal case against it
as it was already directed by the NLRC to submit its position
paper on April 5, 1993. LUZMARTs reliance on the March 31,
1993 memorandum[10] and the February 1-15, 1993
payroll[11] to prove that LACSON was merely suspended is
therefore unavailing. The March 31, 1993 memorandum is at
most self-serving; a ploy to cover up the dismissal of LACSON
since this was issued after LUZMART had knowledge of the
illegal dismissal case filed against it by LACSON on February
11, 1993. Likewise, the veracity of the February 1-15, 1993
payroll that purportedly shows that LACSON was included in
LUZMARTs payroll is of doubtful probative value. First of all,
it does not contain a certification by Charito Fernandez at its
back page, unlike the other payrolls [12] attached as annexes
to LUZMARTs petition. Secondly, said payroll does not
contain the signatures of the other employees as proof that
they received their salaries for the said period. Given these
circumstances, both documents appear to have been
prepared in contemplation of the pending illegal dismissal
case filed against LUZMART.
The contention that LACSON abandoned his employment is
also without merit. Mere absence or failure to report for
work, after notice to return, is not enough to amount to such
abandonment.[13] For a valid finding of abandonment, two
factors must be present, viz; (1) the failure to report for work
or absence without valid or justifiable reason; and (2) a clear
intention to sever the employer-employee relationship,
[14]
with the second element as the more determinative factor
being manifested by some overt acts. [15] There must be
a concurrence of the intention to abandon and some overt

acts from which an employee may be deduced as having no

more intention to work.[16] Such intent to discontinue the
employment must be shown by clear proof that it was
deliberate and unjustified.[17]
LACSONs absence from work was not without a valid
reason. It was petitioner who did not allow him to work and
in fact told him to go on vacation or to look for other
work. This is tantamount to a constructive dismissal which is
defined as a quitting because continued employment is
rendered impossible, unreasonable or unlikely; as an offer
involving a demotion in rank and diminution in pay [18] Since
LACSON was denied entry into his workplace, it was
impossible for him to return to work. It would be unjust to
allow herein petitioners to claim as a ground for
abandonment a situation which they themselves had brought
about.[19] Moreover, LACSONs filing of the complaint for
illegal dismissal on February 11, 1993, or seven days after his
alleged abandonment, negates said charge. It is highly
illogical for an employee to abandon his employment and
thereafter file a complaint for illegal dismissal. [20]
We also do not agree with LUZMART that LACSON gave just
cause for the imposition of disciplinary measures upon
him. Although fighting within company premises may
constitute serious misconduct under Article 282 [21] of the
Labor Code and may be a just cause to terminate ones
employment[22], every fight within company premises in
which an employee is involved would not warrant his
dismissal. This is especially true when the employee
concerned did not instigate the fight and was in fact the
victim who was constrained to defend himself. In the present
case, it appears that LACSON was assaulted by Julius Viray
(VIRAY), a co-employee, after they were questioned about
missing diesel fuel. LACSON attempted to avoid the conflict
since VIRAY was intoxicated but VIRAY followed him and after
an exchange of words, VIRAY punched him while saying

Papatayin Kita (I will kill you). After being punched a

second time, LACSON punched back. He thereafter ran
towards the dressing plant after his companion, a certain
DANNY, told him to run. VIRAY was persistent and followed
LACSON and continued delivering punches at him. LACSON
ran away for a second time but VIRAY still pursued him and
even armed himself with a lead pipe. LACSON sustained
wounds on his head and forehead due to VIRAYs use of the
lead pipe. The Medico-Legal Certificate[23] issued by the Gov.
Teofilo Sison Memorial Hospital corroborates LACSONs
injuries. Given the above circumstances, it is not difficult to
understand why LACSON had to defend himself.
Even assuming that there was just cause to dismiss LACSON,
strict compliance by the employer with the demands of both
procedural and substantive due process is a condition sine
qua non for the termination to be declared valid. The law
requires that the employer must furnish the worker sought to
be dismissed with two written notices before termination of
employment can be legally effected:
1. notice which apprises the employee of the particular acts
or omissions for which his dismissal is sought; and
2. the subsequent notice which informs the employee of the
employers decision to dismiss him.[24]
It is unclear whether LUZMART complied with the first
required written notice; apparently, LACSON was able to give
his account of the fight. However, even assuming that
LUZMART complied with the first written notice i.e. the charge
against LACSON with fighting within company premises, the
evidence fails to show compliance with the second notice
requirement; to inform LACSON of the decision to dismiss
him. Such failure to comply with said requirements taints
LACSONs dismissal with illegality.

An illegally dismissed employee is entitled to 1) either

reinstatement or separation pay if reinstatement is no longer
viable, and 2) backwages.[25] In the present case, LACSON is
entitled to be reinstated, as there is no evidence to show that
reinstatement is no longer possible considering LUZMARTs
position in this appeal is that LACSON was never dismissed
but merely suspended. He is also entitled to backwages
computed from the time of illegal dismissal, in this case on
February 4, 1993[26] (not February 1, 1993 as found by the
NLRC) up to the time of actual reinstatement, without
qualification or deduction[27]
WHEREFORE, the assailed decision of the NLRC is
AFFIRMED and the instant petition is hereby DISMISSED with
the MODIFICATION that LUZMART reinstate LACSON to his
former position and pay him backwages computed from the
date of illegal dismissal on February 4, 1993 up to the time of
actual reinstatement.
No pronouncement as to costs.
SO ORDERED.

ALFREDO VELOSO and EDITO LIGUATON petitioners,

vs.
DEPARTMENT OF LABOR AND EMPLOYMENT, NOAH'S
ARK SUGAR CARRIERS AND WILSON T. GO,respondents.
CRUZ, J.:p
The law looks with disfavor upon quitclaims and releases by
employees who are inveigled or pressured into signing them
by unscrupulous employers seeking to evade their legal
responsibilities. On the other hand, there are legitimate
waivers that represent a voluntary settlement of laborer's
claims that should be respected by the courts as the law
between the parties.
In the case at bar, the petitioners claim that they were forced
to sign their respective releases in favor of their employer,
the herein private respondent, by reason of their dire
necessity. The latter, for its part, insists that the petitioner
entered into the compromise agreement freely and with open
eyes and should not now be permitted to reject their solemn
commitments.
The controversy began when the petitioners, along with
several co-employees, filed a complaint against the private
respondent for unfair labor practices, underpayment, and
non-payment of overtime, holiday, and other benefits. This
was decided in favor of the complainants on October 6,1987.
The motion for reconsideration, which was treated as an
appeal, was dismissed in a resolution dated February 17,
1988, the dispositive portion of which read as follows:

G.R. No. 87297 August 5, 1991

WHEREFORE, the instant appeal is hereby DISMISSED and the

questioned Order affirmed with the modification that the
monetary awards to Jeric Dequito, Custodio Ganuhay
Conrado Mori and Rogelio Veloso are hereby deleted for
being settled. Let execution push through with respect to the
awards to Alfredo Veloso and Edito Liguaton.

On February 23, 1988, the private respondent filed a motion

for reconsideration and recomputation of the amount
awarded to the petitioners. On April 15, 1988, while the
motion was pending, petitioner Alfredo Veloso, through his
wife Connie, signed a Quitclaim and Release for and in
consideration of P25,000.00, 1 and on the same day his
counsel, Atty. Gaga Mauna, manifested "Satisfaction of
Judgment" by receipt of the said sum by Veloso. 2 For his
part, petitioner Liguaton filed a motion to dismiss dated July
16, 1988, based on a Release and Quitclaim dated July
19,1988 , 3 for and in consideration of the sum of P20,000.00
he acknowledged to have received from the private
respondent. 4
These releases were later impugned by the petitioners on
September 20, 1988, on the ground that they were
constrained to sign the documents because of their "extreme
necessity." In an Order dated December 16, 1988, the
Undersecretary of Labor rejected their contention and ruled:
IN VIEW THEREOF, complainants Motion to Declare Quitclaim
Null and Void is hereby denied for lack of merit and the
compromise agreements/settlements dated April 15, 1988
and July 19, 1988 are hereby approved. Respondents' motion
for reconsideration is hereby denied for being moot and
academic.
Reconsideration of the order having been denied on March 7,
1989, the petitioners have come to this Court oncertiorari.
They ask that the quitclaims they have signed be annulled
and that writs of execution be issued for the sum of
P21,267.92 in favor of Veloso and the sum of P26,267.92 in
favor of Liguaton in settlement of their claims.
Their petition is based primarily on Pampanga Sugar
Development Co., Inc. v. Court of Industrial Relations, 5where
it was held:

... while rights may be waived, the same must not be

contrary to law, public order, public policy, morals or good
customs or prejudicial to a third person with a right
recognized by law. (Art. 6, New Civil Code) ...
... The above-quoted provision renders the quitclaim
agreements void ab initio in their entirety since they
obligated the workers concerned to forego their benefits,
while at the same time, exempted the petitioner from any
liability that it may choose to reject. This runs counter to Art.
22 of the new Civil Code which provides that no one shall be
unjustly enriched at the expense of another.
The Court had deliberated on the issues and the arguments
of the parties and finds that the petition must fail. The
exception and not the rule shall be applied in this case.
The case cited is not apropos because the quitclaims therein
invoked were secured by the employer after it had already
lost in the lower court and were subsequently rejected by this
Court when the employer invoked it in a petition
for certiorari. By contrast, the quitclaims in the case before
us were signed by the petitioners while the motion for
reconsideration was still pending in the DOLE, which finally
deemed it on March 7, 1989. Furthermore, the quitclaims in
the cited case were entered into without leave of the lower
court whereas in the case at bar the quitclaims were made
with the knowledge and approval of the DOLE, which
declared in its order of December 16, 1988, that "the
compromise agreement/settlements dated April 15, 1988 and
July 19, 1988 are hereby approved."
It is also noteworthy that the quitclaims were voluntarily and
knowingly made by both petitioners even if they may now
deny this. In the case of Veloso, the quitclaim he had signed
carried the notation that the sum stated therein had been
paid to him in the presence of Atty. Gaga Mauna, his counsel,
and the document was attested by Atty. Ferdinand Magabilin,

Chief of the Industrial Relations Division of the National

Capitol Region of the DOLE. In the case of Liguaton, his
quitclaim was made with the assistance of his counsel, Atty.
Leopoldo Balguma, who also notarized it and later confirmed
it with the filing of the motion to dismiss Liguaton's
complaint.
The same Atty. Balguma is the petitioners' counsel in this
proceeding. Curiously, he is now challenging the very same
quitclaim of Liguaton that he himself notarized and invoked
as the basis of Liguaton's motion to dismiss, but this time for
a different reason. whereas he had earlier argued for
Liguaton that the latter's signature was a forgery, he has
abandoned that contention and now claims that the quitclaim
had been executed because of the petitioners' dire necessity.
"Dire necessity" is not an acceptable ground for annulling the
releases, especially since it has not been shown that the
employees had been forced to execute them. It has not even
been proven that the considerations for the quitclaims were
unconscionably low and that the petitioners had been tricked
into accepting them. While it is true that the writ of execution
dated November 24, 1987, called for the collection of the
amount of P46,267.92 each for the petitioners, that amount
was still subject to recomputation and modification as the
private respondent's motion for reconsideration was still
pending before the DOLE. The fact that the petitioners
accepted the lower amounts would suggest that the original
award was exorbitant and they were apprehensive that it
would be adjusted and reduced. In any event, no deception
has been established on the part of the Private respondent
that would justify the annulment of the Petitioners'
quitclaims.
The applicable law is Article 227 of the Labor Code providing
clearly as follows:

Art. 227. Compromise agreements. Any compromise

settlement, including those involving labor standard laws,
voluntarily agreed upon by the parties with the assistance of
the Bureau or the regional office of the Department of Labor,
shall be final and binding upon the parties. The National
Labor Relations Commission or any court shall not assume
jurisdiction over issues involved therein except in case of
non-compliance thereof or if there is prima facie evidence
that the settlement was obtained through fraud,
misrepresentation or coercion.
The petitioners cannot renege on their agreement simply
because they may now feel they made a mistake in not
awaiting the resolution of the private respondent's motion for
reconsideration and recomputation. The possibility that the
original award might have been affirmed does not justify the
invalidation of the perfectly valid compromise agreements
they had entered into in good faith and with full
voluntariness. In General Rubber and Footwear Corp. vs.
Drilon, 6 we "made clear that the Court is not saying that
accrued money claims can never be effectively waived by
workers and employees." As we later declared in Periquet v.
NLRC: 7
Not all waivers and quitclaims are invalid as against public
policy. If the agreement was voluntarily entered into and
represents a reasonable settlement, it is binding on the
parties and may not later be disowned simply because of a
change of mind. It is only where there is clear proof that the
waiver was wangled from an unsuspecting or gullible person,
or the terms of settlement are unconscionable on its face,
that the law will step in to annul the questionable
transaction. But where it is shown that the person making the
waiver did so voluntarily, with full understanding of what he
was doing, and the consideration for the quitclaim is credible
and reasonable, the transaction must be recognized as a
valid and binding undertaking. As in this case.

We find that the questioned quitclaims were voluntarily and

knowingly executed and that the petitioners should not be
relieved of their waivers on the ground that they now feel
they were improvident in agreeing to the compromise. What
they call their "dire necessity" then is no warrant to nullify
their solemn undertaking, which cannot be any less binding
on them simply because they are laborers and deserve the
protection of the Constitution. The Constitution protects the
just, and it is not the petitioners in this case.
WHEREFORE, the petition is DISMISSED, with costs against
the petitioners. It is so ordered.

G.R. No. 105710 February 23, 1995

JAG
&
HAGGAR
JEANS
AND
SPORTSWEAR
CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LAKAS
MANGGA-GAWA SA JAG, DOMINGO NAMIA, RIZALDE
FLORES, JULIETA ADRIANO, ROBERTO ALAMO, JOSE
BALDELOBAR, LILIBETH BIDES, NARCISO GARBIN,
AMELITA LEBRIAS, MARIBEL MADRID, VERONICA
MAGPILI,
IMELDA
NEPOMUCENO,
AND
DAN
VILLAMOR,respondents.

QUIASON, J.:
This is a petition for certiorari to set aside the Decision dated
February 26, 1992 of the National Labor Relations
Commission (NLRC) in NCR Case No. 00-09-04050-88 and its
Resolution dated April 22, 1992, denying petitioner's motion
for reconsideration. The decision held that the members of
the Union who did not ratify or avail of the benefits under the
Compromise Agreement entered into between petitioner and
the Union were not bound thereby (Rollo, pp. 32-41). In our
Resolution dated June 29, 1992, we issued a temporary
restraining order.
I
In September 1988, the Lakas Manggagawa sa Jag (Union)
composed of the rank-and-file employees of Jag & Haggar
Jeans and Sportswear Corporation, petitioner herein, staged a
strike. Petitioner filed a petition to declare the strike illegal.
On November 29, 1988, Labor Arbiter Eduardo Madriaga
rendered a decision, declaring the strike illegal and ordering
the dismissal of the officers, as well as the members of the
Union who took part in the illegal strike. The dispositive
portion of said decision reads as follows:
WHEREFORE, premises considered, the strike conducted by
respondent union and individual respondents on September
22, 1988 and subsisting to date, is hereby declared to be
illegal for failure to observe the cooling-off period as agreed
upon by the parties and the conduct of the strike vote as
required by law, as well as for commission of illegal acts in
the staging of the said strike as averred in the affidavits of
witnesses for petitioner.
Accordingly, the officers of the union, to wit:
xxx xxx xxx

are hereby declared to have legally lost their employment

status.
Likewise, for commission of illegal acts as averred in the
affidavits of witnesses for petitioner which were not
controverted by respondents, the following rank-and-file
employees, to wit:
xxx xxx xxx
are hereby declared to have legally lost their employment
status.
The rest of the striking workers are hereby ordered to
immediately dismantle their pickets and barricades and
return to work within seventy-two (72) hours from receipt of
copy of this Decision.
Finally, both parties are hereby enjoined to maintain
the status quo prior to the strike staged by respondents
(Rollo, pp. 12-14).
The affected officers and members of the Union appealed the
decision to NLRC. On August 31, 1989, NLRC rendered its
decision setting aside the Labor Arbiter's decision and
ordering the reinstatement of the affected employees (Rollo,
pp. 14-15).
Acting on the motion for reconsideration filed by petitioner,
NLRC, on May 31, 1990 modified its earlier decision as
follows:
WHEREFORE, premises considered, the Commission's
Decision dated 31 August 1989, is hereby modified as
follows:
1. The following officers of the Union Norma Jocson-President
Narciso
Sinag-Vice
President;
Gloria
Gavis-Treasurer;

Luzviminda Guspid-Secretary; and Apolinario Sta. Ana-PRO

are hereby declared to have lost their employment;
2. The Union Board Members and Shop Stewards may be
dismissed by respondent-appellee subject to the payment of
separation pay equivalent to one-half month for every year of
service; and
3. The mere union members are directed to report for work
within ten (10) days from receipt of this Decision and
management is ordered to accept them to their former or
equivalent position. (Rollo, p. 15)
Again, the aggrieved officers and members of the Union filed
a motion for reconsideration while petitioner filed a
Manifestation/Motion for Clarification (Rollo, p. 15).
Pending resolution of the two motions by NLRC, both parties
agreed to negotiate a settlement and to defer the
enforcement of the decision.
On July 30, 1990, the two motions were dismissed by the
NLRC (Rollo, p. 15).
On October 23, 1990, a compromise agreement was
executed and signed by petitioner and the Union represented
by its officers (Rollo, pp. 16-18). The parties agreed that:
1. The Company shall pay to the officers and members of the
Union named in the aforesaid decision separation pay
equivalent to one-half (1/2) month basic pay for every year of
service.
2. Additionally, the Company shall pay to the officers of the
Union mentioned in item No. 2 of the Decision, namely the
Union Board members, and Shop Stewards financial
assistance in the amount of One Thousand (P1,000.00)
Pesos.

3. The Company shall also pay to the members of the Union

mentioned in item No. 3 of the Decision, namely those who
should be allowed to work, financial assistance in the amount
of Two Thousand (P2,000.00) Pesos.
xxx xxx xxx
Out of a total of 114 affected employees, 90 of them availed
of the benefits provided for under the Compromise
Agreement (Rollo, pp. 16-19).
On May 15, 1991, 24 of the affected employees moved for
the execution of the May 31, 1990 Decision of NLRC (Rollo, p.
19).
Petitioner filed an opposition, citing the Compromise
Agreement, which had been availed of by 90 of the affected
employees (Rollo, p. 19)
On September 12, 1991, Labor Arbiter Salimathar Nambi
issued an order, denying the motion for execution (Rollo, p.
19). In the meantime, 12 of the 24 affected employees also
availed of the benefits under the Compromise Agreement.
The remaining 12 employees appealed to NLRC from the
denial of their motion for execution. On February 26, 1992,
NLRC set aside the order of Labor Arbiter Nambi and directed
petitioner to accept the union members to their former or
equivalent position with back wages from July 30, 1990 until
they were reinstated (Rollo, p. 40).
A motion for reconsideration was filed by petitioner but this
was denied on April 22, 1992 (Rollo, p. 42).
On May 19, 1992, petitioner filed with this Court a petition
for certiorari with prayer for issuance of a restraining order
and/or writ of preliminary injunction docketed as G.R. No.
105184. However, the petition was dismissed by the First
Division in a resolution dated May 27, 1992 for failure to

comply with the Revised Rules of Court and Circular Nos. 188 and 28-91 (G.R. No. 105184, Rollo, p. 35).
On June 19, 1992, petitioner filed a motion for leave to refile
its petition for certiorari (G.R. No. 105710). In a resolution
dated June 29, 1992, the Third Division of this Court granted
the petition and resolved to issue a temporary restraining
order (Rollo, p. 44). The case was reassigned to the First
Division.
II
The main issue to be resolved is whether or not the
Compromise Agreement entered into by petitioner and the
Union is binding upon private respondents.
Petitioner contends that the Compromise Agreement was
deemed ratified by the union members considering that 102
out of the 114 affected employees already availed of and
received the benefits under the said agreement and that
private respondents were represented in all stages of the
proceedings without them questioning the authority of their
union officers and their counsel. It cites the case of Betting
Ushers Union (PLUM) v. Jai-alai, 101 Phil. 822 (1957) wherein
we ruled that the "will of the majority should prevail over the
minority" and which ruling was reiterated in Dionela v. Court
of Industrial Relations, 8 SCRA 832 (1963) and Chua
v. National Labor Relations Commison, 190 SCRA 558 (1990).
On the other hand, private respondents allege that for a
compromise agreement to be binding upon them, a special
power of attorney or their express consent was necessary for
what was being waived or surrendered under the agreement
was their right to an employment. Such right is protected
under the security of tenure provision of the Labor Code of
the Philippines and cannot be lost without due process of law
(Rollo, p. 62).

"Settlement of disputes by way of compromise whereby the

parties, by making reciprocal concessions, avoid a litigation
or put an end to one already commenced, is an accepted,
nay desirable practice encouraged by the courts of law and
administrative tribunals" (Santiago v. De Guzman, 177 SCRA
344 [1989]).
The authority of attorneys to bind their clients is governed by
Section 7, Rule IV of the New Rules of Procedure of the
National Labor Relations Commission, which provides:
Authority to bind party. Attorneys and other
representatives of parties shall have authority to bind their
clients in all matters of procedure; but they cannot, without a
special power of attorney or express consent, enter into a
compromise agreement with the opposing party in full or
partial discharge of a client's claim (Emphasis supplied).
It will be noted that the Compromise Agreement provides in
paragraphs 2 and 3 thereof that:
2. The union Board Members and Shop Stewards may be
dismissed by respondent-appellee subject to the payment of
separation pay equivalent to one-half month for every year of
service; and
3. The mere union members are directed to report for work
within 10 days from receipt of this Decision and management
is ordered to accept them to their former or equivalent
position (Rollo, pp. 16-17).
The Decision dated May 8, 1990 ordered the reinstatement of
the union members to their former or equivalent position
while in the case of the Union board members and shop
stewards, petitioner was given the option to dismiss them
subject to the payment of separation pay. However, in the
Compromise Agreement, not only the union officers, board
members and shop stewards were considered dismissed from

the service but also the union members subject to the

payment of separation pay and financial assistance.
The waiver of reinstatement, like waivers of money claims,
must be regarded as a personal right which must be
exercised personally by the workers themselves. "For a
waiver thereof to be legally effective, the individual consent
or ratification of the workers or employees involved must be
shown. Neither the officers nor the majority of the union had
any authority to waive the accrued rights pertaining to the
dissenting minority members, . . . . The members of the
union need the protective shield of this doctrine not only visa-vis their employer but also, at times,vis-a-vis the
management of their own union, and at other times even
against their own imprudence or impecuniousaess" (General
Rubber and Footwear Corporation v. Drilon, 169 SCRA 808
[1989]).
We have ruled that ". . . when it comes to individual benefits
accruing to members of a union from a favorable final
judgment of any court, the members themselves become the
real parties in interest and it is for them, rather than for the
union, to accept or reject individually the fruits of litigation"
(Esso Philippines, Inc. v. Malayang Manggagawa sa Esso
(MME), 75 SCRA 73 [1977]).
The authority to compromise cannot lightly be presumed and
should be duly established by evidence (General Rubber and
Footwear Corporation v. Drilon, supra; Kaisahan ng mga
Manggagawa sa La Campana v. Sarmiento, 133 SCRA 220,
[1984]).
We also find no reason for the union members to enter into a
compromise when the decision of NLRC ordering their
reinstatement is more advantageous to them than their
being dismissed from their jobs under said Compromise
Agreement.

The Compromise Agreement does not apply to private

respondents who did not sign the Compromise Agreement,
nor avail of its benefits.
However, while respondents Domingo Namia and Rizalde
Flores are not bound by the terms of the Compromise
Agreement, they are bound by the amended decision of NLRC
rendered on May 3, 1990 which provides that members of
the board of directors of the union may be dismissed by
petitioner subject to the payment of separation pay. The two
respondents did not appeal the amended decision after the
denial by NLRC of their motion for reconsideration thereof.
WHEREFORE, the Decision dated February 26, 1992 of the
NLRC is AFFIRMED with the modification stated above with
respect to respondents Domingo Namia and Rizalde Flores.
The temporary restraining order is lifted except with respect
to aforementioned respondents.
SO ORDERED.

G.R. No. 123938 May 21, 1998

LABOR CONGRESS OF THE PHILIPPINES (LCP) for and
in behalf of its members, ANA MARIE OCAMPO, MARY
INTAL, ANNABEL CARESO, MARLENE MELQIADES,
IRENE JACINTO, NANCY GARCIA, IMELDA SARMIENTO,
LENITA VIRAY, GINA JACINTO, ROSEMARIE DEL
ROSARIO, CATHERINE ASPURNA, WINNIE PENA, VIVIAN
BAA, EMILY LAGMAN, LILIAN MARFIL, NANCY DERACO,
JANET DERACO, MELODY JACINTO, CAROLYN DIZON,
IMELDA MANALOTO, NORY VIRAY, ELIZA SALAZAR, GIGI
MANALOTO, JOSEFINA BASILIO, MARY ANN MAYATI,
ZENAIDA
GARCIA,
MERLY
CANLAS,
ERLINDA

MANALANG, ANGELINA QUIAMBAO, LANIE GARCIA,

ELVIRA PIEDRA, LOURDES PANLILIO, LUISA PANLILIO,
LERIZA PANLILIO, ALMA CASTRO, ALDA DAVID, MYRA T.
OLALIA, MARIFE PINLAC, NENITA DE GUZMAN, JULIE
GACAD, EVELYN MANALO, NORA PATIO, JANETH
CARREON, ROWENA MENDOZA, ROWENA MANALO,
LENY GARCIA, FELISISIMA PATIO, SUSANA SALOMON,
JOYDEE LANSANGAN, REMEDIOS AGUAS, JEANIE
LANSANGAN,
ELIZABETH
MERCADO,
JOSELYN
MANALESE, BERNADETH RALAR, LOLITA ESPIRITU,
AGNES SALAS, VIRGINIA MENDIOLA, GLENDA SALITA,
JANETH RALAR, ERLINDA BASILIO, CORA PATIO,
ANTONIA CALMA, AGNES CARESO, GEMMA BONUS,
MARITESS OCAMPO, LIBERTY GELISANGA, JANETH
MANARANG, AMALIA DELA CRUZ, EVA CUEVAS, TERESA
MANIAGO, ARCELY PEREZ, LOIDA BIE, ROSITA CANLAS,
ANALIZA ESGUERRA, LAILA MANIAGO, JOSIE MANABAT,
ROSARIO
DIMATULAC,
NYMPA
TUAZON,
DAIZY
TUASON, ERLINDA NAVARRO, EMILY MANARANG,
EMELITA CAYANAN, MERCY CAYANAN, LUZVIMINDA
CAYANAN, ANABEL MANALO, SONIA DIZON, ERNA
CANLAS, MARIAN BENEDICTA, DOLORES DOLETIN,
JULIE DAVID, GRACE VILLANUEVA, VIRGINIA MAGBAG,
CORAZON RILLION, PRECY MANALILI, ELENA RONOZ,
IMELDA MENDOZA, EDNA CANLAS and ANGELA
CANLAS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, EMPIRE
FOOD PRODUCTS, its Proprietor/President & Manager,
MR.
GONZALO
KEHYENG
and
MRS.
EVELYN
KEHYENG, respondents.

DAVIDE, JR., J.:

In this special civil action for certiorari under Rule 65,

petitioners seek to reverse the 29 March 1995 resolution 1of
the National Labor Relations Commission (NLRC) in NLRC RAB
III Case No. 01-1964-91 which affirmed the Decision 2 of
Labor Arbiter Ariel C. Santos dismissing their complaint for
utter lack of merit.
The antecedents of this case, as summarized by the Office of
the Solicitor General in its Manifestation and Motion in Lieu of
Comment, 3 are as follows:
The 99 persons named as petitioners in this proceeding were
rank-and-file employees of respondent Empire Food Products,
which hired them on various dates (Paragraph 1, Annex "A"
of Petition, Annex "B;" Page 2, Annex "F" of Petition).
Petitioners filed against private respondents a complaint for
payment of money claim[s] and for violation of labor
standard[s] laws (NLRC Case No. RAB-111-10-1817-90). They
also filed a petition for direct certification of petitioner Labor
Congress of the Philippines as their bargaining representative
(Case No. R0300-9010-RU-005).
On October 23, 1990, petitioners represented by LCP
President Benigno B. Navarro, Sr. and private respondents
Gonzalo Kehyeng and Evelyn Kehyeng in behalf of Empire
Food Products, Inc. entered into a Memorandum of
Agreement which provided, among others, the following:
1. That in connection with the pending Petition for Direct
Certification filed by the Labor Congress with the DOLE,
Management of the Empire Food Products has no objection
[to] the direct certification of the LCP Labor Congress and is
now recognizing the Labor Congress of the Philippines (LCP)
and its Local Chapter as the SOLE and EXCLUSIVE Bargaining
Agent and Representative for all rank and file employees of
the Empire Food Products regarding "WAGES, HOURS Of

WORK, AND OTHER

EMPLOYMENT;"

TERMS

AND

CONDITIONS

OF

2. That with regards [sic] to NLRC CASE NO. RAB-III-10-181790 pending with the NLRC parties jointly and mutually agreed
that the issues thereof, shall be discussed by the parties and
resolve[d] during the negotiation of the Collective Bargaining
Agreement;
3. That Management of the Empire Food Products shall make
the proper adjustment of the Employees Wages within fifteen
(15) days from the signing of this Agreement and further
agreed to register all the employees with the SSS;
4. That Employer, Empire Food Products thru its Management
agreed to deduct thru payroll deduction UNION DUES and
other Assessment[s] upon submission by the LCP Labor
Congress individual Check-Off Authorization[s] signed by the
Union Members indicating the amount to be deducted and
further agreed all deduction[s] made representing Union
Dues and Assessment[s] shall be remitted immediately to the
LCP Labor Congress Treasurer or authorized representative
within three (3) or five (5) days upon deductions [sic], Union
dues not deducted during the period due, shall be refunded
or
reimbursed
by
the
Employer/Management.
Employer/Management further agreed to deduct Union dues
from non-union members the same amount deducted from
union members without need of individual Check-Off
Authorizations [for] Agency Fee;
5. That in consideration [of] the foregoing covenant, parties
jointly and mutually agreed that NLRC CASE NO. RAB-III-101817-90 shall be considered provisionally withdrawn from the
Calendar of the National Labor Relations Commission (NLRC),
while the Petition for direct certification of the LCP Labor
Congress parties jointly move for the direct certification of
the LCP Labor Congress;

6. That parties jointly and mutually agreed that upon signing

of this Agreement, no Harassments [sic], Threats,
Interferences [sic] of their respective rights under the law, no
Vengeance or Revenge by each partner nor any act of ULP
which might disrupt the operations of the business;
7. Parties jointly and mutually agreed that pending
negotiations or formalization of the propose[d] CBA, this
Memorandum of Agreement shall govern the parties in the
exercise of their respective rights involving the Management
of the business and the terms and condition[s] of
employment, and whatever problems and grievances may
arise by and between the parties shall be resolved by them,
thru the most cordial and good harmonious relationship by
communicating the other party in writing indicating said
grievances before taking any action to another forum or
government agencies;
8. That parties [to] this Memorandum of Agreement jointly
and mutually agreed to respect, abide and comply with all
the terms and conditions hereof. Further agreed that violation
by the parties of any provision herein shall constitute an act
of ULP. (Annex "A" of Petition).
In an Order dated October 24, 1990, Mediator Arbiter Antonio
Cortez approved the memorandum of agreement and
certified LCP "as the sole and exclusive bargaining agent
among the rank-and-file employee of Empire Food Products
for purposes of collective bargaining with respect to wages,
hours of work and other terms and conditions of
employment" (Annex "B" of Petition).
On November 9, 1990, petitioners through LCP President
Navarro submitted to private respondents a proposal for
collective bargaining (Annex "C" of Petition).

On January 23, 1991, petitioners filed a complaint docketed

as NLRC Case No. RAB-III-01-1964-91 against private
respondents for:
a. Unfair Labor Practice by way of Illegal Lockout and/or
Dismissal;
b. Union busting thru Harassments [sic], threats, and
interfering with the rights of employees to self-organization;
c. Violation of the Memorandum of Agreement dated October
23, 1990;
d. Underpayment of Wages in violation of R.A. No. 6640 and
R.A. No. 6727, such as Wages promulgated by the Regional
Wage Board;
e. Actual, Moral and Exemplary Damages. (Annex "D" of
Petition)
After the submission by the parties of their respective
position papers and presentation of testimonial evidence,
Labor Arbiter Ariel C. Santos absolved private respondents of
the charges of unfair labor practice, union busting, violation
of the memorandum of agreement, underpayment of wages
and denied petitioners' prayer for actual, moral and
exemplary damages. Labor Arbiter Santos, however, directed
the reinstatement of the individual complainants:
The undersigned Labor Arbiter is not oblivious to the fact that
respondents have violated a cardinal rule in every
establishment that a payroll and other papers evidencing
hours of work, payments, etc. shall always be maintained
and subjected to inspection and visitation by personnel of the
Department of Labor and Employment. As such penalty,
respondents should not escape liability for this technicality,
hence, it is proper that all individual complainants except
those who resigned and executed quitclaim[s] and releases
prior to the filing of this complaint should be reinstated to

their former position[s] with the admonition to respondents

that any harassment, intimidation, coercion or any form of
threat as a result of this immediately executory
reinstatement shall be dealt with accordingly.
SO ORDERED. (Annex "G" of petition)
On appeal, the National Labor Relations Commission vacated
the Decision dated April 14, 1972 [sic] and remanded the
case to the Labor Arbiter for further proceedings for the
following reasons:
The Labor Arbiter, through his decision, noted that ". . .
complainant did not present any single witness while
respondent presented four (4) witnesses in the persons of
Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira
Bulagan . . ." (p. 183, Records), that ". . . complainant before
the National Labor Relations Commission must prove with
definiteness and clarity the offense charged. . . ." (Record, p.
183); that ". . . complainant failed to specify under what
provision of the Labor Code particularly Art. 248 did
respondents violate so as to constitute unfair labor
practice . . ." (Record, p. 183); that "complainants failed to
present any witness who may describe in what manner
respondents have committed unfair labor practice . . ."
(Record, p. 185); that ". . . complainant LCP failed to present
anyone of the so-called 99 complainants in order to testify
who committed the threats and intimidation . . ." (Record, p.
185).
Upon review of the minutes of the proceedings on record,
however, it appears that complainant presented witnesses,
namely, BENIGNO NAVARRO, JR. (28 February 1991, RECORD,
p. 91; 8 March 1991, RECORD, p. 92, who adopted its
POSITION PAPER AND CONSOLIDATED AFFIDAVIT, as Exhibit
"A" and the annexes thereto as Exhibit "B", "B-1" to "B-9",
inclusive. Minutes of the proceedings on record show that
complainant
further
presented
other
witnesses,

namely: ERLINDA BASILIO (13 March 1991, RECORD,

p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENIE GARCIA (16
April 1991, Record, p. 96, see back portion thereof ; 2 May
1991, Record, p. 102; 16 May 1991, Record, p. 103, 11 June
1991, Record, p. 105). Formal offer of Documentary and
Testimonial Evidence was made by complainant on June 24,
1991 (Record, p. 106-109)
The Labor Arbiter must have overlooked the testimonies of
some of the individual complainants which are now on
record. Other individual complainants should have been
summoned with the end in view of receiving their
testimonies. The complainants should be afforded the time
and opportunity to fully substantiate their claims against the
respondents. Judgment should be rendered only based on the
conflicting positions of the parties. The Labor Arbiter is called
upon to consider and pass upon the issues of fact and law
raised by the parties.
Toward this end, therefore, it is Our considered view [that]
the case should be remanded to the Labor Arbiter of origin
for further proceedings. (Annex "H" of Petition)
In a Decision dated July 27, 1994, Labor Arbiter Santos made
the following determination:
Complainants failed to present with definiteness and clarity
the particular act or acts constitutive of unfair labor practice.
It is to be borne in mind that a declaration of unfair labor
practice connotes a finding of prima facieevidence of
probability that a criminal offense may have been committed
so as to warrant the filing of a criminal information before the
regular court. Hence, evidence which is more than a scintilla
is required in order to declare respondents/employers guilty
of unfair labor practice. Failing in this regard is fatal to the
cause of complainants. Besides, even the charge of illegal
lockout has no leg to stand on because of the testimony of

respondents through their guard Orlando Cairo (TSN, July 31,

1991 hearing; p. 5-35) that on January 21, 1991,
complainants refused and failed to report for work, hence
guilty of abandoning their post without permission from
respondents. As a result of complainants['] failure to report
for work, the cheese curls ready for repacking were all
spoiled to the prejudice of respondents. Under crossexamination, complainants failed to rebut the authenticity of
respondents' witness testimony.
As regards the issue of harassments [sic], threats and
interference with the rights of employees to self-organization
which is actually an ingredient of unfair labor practice,
complainants failed to specify what type of threats or
intimidation was committed and who committed the same.
What are the acts or utterances constitutive of harassments
[sic] being complained of? These are the specifics which
should have been proven with definiteness and clarity by
complainants who chose to rely heavily on its position paper
through generalizations to prove their case.
Insofar as violation of [the] Memorandum of Agreement
dated October 23, 1990 is concerned, both parties agreed
that:
2 That with regards [sic] to the NLRC Case No. RAB III-101817-90 pending with the NLRC, parties jointly and mutually
agreed that the issues thereof shall be discussed by the
parties and resolve[d] during the negotiation of the CBA.
The aforequoted provision does not speak of [an] obligation
on the part of respondents but on a resolutory condition that
may occur or may not happen. This cannot be made the
basis of an imposition of an obligation over which the
National Labor Relations Commission has exclusive
jurisdiction thereof.

Anent the charge that there was underpayment of wages, the

evidence points to the contrary. The enumeration of
complainants' wages in their consolidated Affidavits of merit
and position paper which implies underpayment has no leg to
stand on in the light of the fact that complainants' admission
that they are piece workers or paid on a pakiao [basis] i.e. a
certain amount for every thousand pieces of cheese curls or
other products repacked. The only limitation for piece
workers or pakiao workers is that they should receive
compensation no less than the minimum wage for an eight
(8) hour work [sic]. And compliance therewith was
satisfactorily explained by respondent Gonzalo Kehyeng in
his testimony (TSN, p. 12-30) during the July 31, 1991
hearing. On cross-examination, complainants failed to rebut
or deny Gonzalo Kehyeng's testimony that complainants
have been even receiving more than the minimum wage for
an average workers [sic]. Certainly, a lazy worker earns less
than the minimum wage but the same cannot be attributable
to respondents but to the lazy workers.
Finally, the claim for moral and exemplary damages has no
leg to stand on when no malice, bad faith or fraud was ever
proven to have been perpetuated by respondents.
WHEREFORE, premises considered, the complaint is hereby
DISMISSED for utter lack of merit. (Annex "I" of Petition). 4
On appeal, the NLRC, in its Resolution dated 29 March
1995, 5 affirmed in toto the decision of Labor Arbiter Santos.
In so doing, the NLRC sustained the Labor Arbiter's findings
that: (a) there was a dearth of evidence to prove the
existence of unfair labor practice and union busting on the
part of private respondents; (b) the agreement of 23 October
1990 could not be made the basis of an obligation within the
ambit of the NLRC's jurisdiction, as the provisions thereof,
particularly Section 2, spoke of a resolutory condition which
could or could not happen; (c) the claims for underpayment

of wages were without basis as complainants were

admittedly"pakiao" workers and paid on the basis of their
output subject to the lone limitation that the payment
conformed to the minimum wage rate for an eight-hour
workday; and (d) petitioners were not underpaid.
Their motion for reconsideration having been denied by the
NLRC in its Resolution of 31 October 1995, 6petitioners filed
the instant special civil action for certiorari raising the
following issues:
I
WHETHER OR NOT THE PUBLIC RESPONDENT NATIONAL
LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS
DISCRETION WHEN IT DISREGARDED OR IGNORED NOT ONLY
THE EVIDENCE FAVORABLE TO HEREIN PETITIONERS,
APPLICABLE JURISPRUDENCE BUT ALSO ITS OWN DECISIONS
AND THAT OF THIS HONORABLE HIGHEST TRIBUNAL WHICH
[WAS] TANTAMOUNT NOT ONLY TO THE DEPRIVATION OF
PETITIONERS' RIGHT TO DUE PROCESS BUT WOULD RESULT
[IN] MANIFEST INJUSTICE.
II
WHETHER OR NOT THE PUBLIC RESPONDENT GRAVELY
ABUSED ITS DISCRETION WHEN IT DEPRIVED THE
PETITIONERS OF THEIR CONSTITUTIONAL RIGHT TO SELFORGANIZATION, SECURITY OF TENURE, PROTECTION TO
LABOR, JUST AND HUMANE CONDITIONS OF WORK AND DUE
PROCESS.
III
WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY EASED
OUT [OF] OR CONSTRUCTIVELY DISMISSED FROM THEIR ONLY
MEANS OF LIVELIHOOD.
IV

WHETHER OR NOT PETITIONERS SHOULD BE REINSTATED

FROM THE DATE OF THEIR DISMISSAL UP TO THE TIME OF
THEIR REINSTATEMENT, WITH BACKWAGES, STATUTORY
BENEFITS, DAMAGES AND ATTORNEY'S FEES. 7
We required respondents to file their respective Comments.
In their Manifestation and Comment, private respondents
asserted that the petition was filed out of time. As petitioners
admitted in their Notice to File Petition for Review
on Certiorari that they received a copy of the resolution
(denying their motion for reconsideration) on 13 December
1995, they had only until 29 December 1995 to file the
petition. Having failed to do so, the NLRC thus already
entered judgment in private respondents' favor.
In their Reply, petitioners averred that Mr. Navarro, a nonlawyer who filed the notice to file a petition for review on
their behalf, mistook which reglementary period to apply.
Instead
of
using
the
"reasonable
time"
criterion
forcertiorari under Rule 65, he used the 15-day period for
petitions for review on certiorari under Rule 45. They
hastened to add that such was a mere technicality which
should not bar their petition from being decided on the
merits in furtherance of substantial justice, especially
considering that respondents neither denied nor contradicted
the facts and issues raised in the petition.
In its Manifestation and Motion in Lieu of Comment, the
Office of the Solicitor General (OSG) sided with petitioners. It
pointed out that the Labor Arbiter, in finding that petitioners
abandoned their jobs, relied solely on the testimony of
Security Guard Rolando Cairo that petitioners refused to work
on 21 January 1991, resulting in the spoilage of cheese curls
ready for repacking. However, the OSG argued, this refusal to
report for work for a single day did not constitute
abandonment, which pertains to a clear, deliberate and
unjustified refusal to resume employment, and not mere

absence. In fact, the OSG stressed, two days after allegedly

abandoning their work, petitioners filed a complaint for, inter
alia, illegal lockout or illegal dismissal. Finally, the OSG
questioned the lack of explanation on the part of Labor
Arbiter Santos as to why he abandoned his original decision
to reinstate petitioners.
In view of the stand of the OSG, we resolved to require the
NLRC to file its own Comment.
In its Comment, the NLRC invokes the general rule that
factual findings of an administrative agency bind a reviewing
court and asserts that this case does not fall under the
exceptions. The NLRC further argues that grave abuse of
discretion may not be imputed to it, as it affirmed the factual
findings and legal conclusions of the Labor Arbiter only after
carefully reviewing, weighing and evaluating the evidence in
support thereof, as well as the pertinent provisions of law and
jurisprudence.
In their Reply, petitioners claim that the decisions of the
NLRC and the Labor Arbiter were not supported by
substantial evidence; that abandonment was not proved; and
that much credit was given to self-serving statements of
Gonzalo Kehyeng, owner of Empire Foods, as to payment of
just wages.
On 7 July 1997, we gave due course to the petition and
required the parties to file their respective memoranda.
However, only petitioners and private respondents filed their
memoranda, with the NLRC merely adopting its Comment as
its Memorandum.
We find for petitioners.
Invocation of the general rule that factual findings of the
NLRC bind this Court is unavailing under the circumstances.
Initially, we are unable to discern any compelling reason

justifying the Labor Arbiter's volte facefrom his 14 April 1992

decision reinstating petitioners to his diametrically opposed
27 July 1994 decision, when in both instances, he had before
him substantially the same evidence. Neither do we find the
29 March 1995 NLRC resolution to have sufficiently discussed
the facts so as to comply with the standard of substantial
evidence. For one thing, the NLRC confessed its reluctance to
inquire into the veracity of the Labor Arbiter's factual
findings, staunchly declaring that it was "not about to
substitute [its] judgment on matters that are within the
province of the trier of facts." Yet, in the 21 July 1992 NLRC
resolution, 8 it chastised the Labor Arbiter for his errors both
in judgment and procedure; for which reason it remanded the
records of the case to the Labor Arbiter for compliance with
the pronouncements therein.
What cannot escape from our attention is that the Labor
Arbiter did not heed the observations and pronouncements of
the NLRC in its resolution of 21 July 1992, neither did he
understand the purpose of the remand of the records to him.
In said resolution, the NLRC summarized the grounds for the
appeal to be:
1. that there is a prima facie evidence of abuse of discretion
and acts of gross incompetence committed by the Labor
Arbiter in rendering the decision.
2. that the Labor Arbiter in rendering the decision committed
serious errors in the findings of facts.
After which, the NLRC observed and found:
Complainant alleged that the Labor Arbiter disregarded the
testimonies of the 99 complainants who submitted their
Consolidated Affidavit of Merit and Position Paper which was
adopted as direct testimonies during the hearing and crossexamined by respondents' counsel.

The Labor Arbiter, through his decision, noted that ". . .

complainant did not present any single witness while
respondent presented four (4) witnesses in the persons of
Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira
Bulagan . . ." (Records, p. 183), that ". . . complainant before
the National Labor Relations Commission must prove with
definiteness and clarity the offense charged. . . ." (Record, p.
183; that ". . . complainant failed to specify under what
provision of the Labor Code particularly Art. 248 did
respondents violate so as to constitute unfair labor
practice . . ." (Record, p. 183); that "complainants failed to
present any witness who may describe in what manner
respondents have committed unfair labor practice . . ."
(Record, p. 185); that ". . . complainant a [sic] LCP failed to
present anyone of the so called 99 complainants in order to
testify who committed the threats and intimidation . . ."
(Record, p.185).
Upon review of the minutes of the proceedings on record,
however, it appears that complainant presented witnesses,
namely BENIGNO NAVARRO, JR. (28 February 1991, RECORD,
p. 91; 8 March 1991, RECORD, p. 92), who adopted its
POSITION PAPER AND CONSOLIDATED AFFIDAVIT as Exhibit A
and the annexes thereto as Exhibit B, B-1 to B-9, inclusive.
Minutes of the proceedings on record show that complainant
further presented other witnesses, namely: ERLINDA BASILIO
(13 March 1991, RECORD, p. 93; LOURDES PANTILLO, MARIFE
PINLAC, LENI GARCIA (16 April 1991, Record, p. 96, see back
portion thereof; 2 May 1991, Record, p. 102; 16 May 1991,
Record, p. 103; 11 June 1991, Record, p. 105). Formal offer of
Documentary and Testimonial Evidence was made by the
complainant on June 24, 1991 (Record, p.106-109).
The Labor Arbiter must have overlooked the testimonies of
some of the individual complainants which are now on
record. Other individual complainants should have been
summoned with the end in view of receiving their

testimonies. The complainants should [have been] afforded

the time and opportunity to fully substantiate their claims
against the respondents. Judgment should [have been]
rendered only based on the conflicting positions of the
parties. The Labor Arbiter is called upon to consider and pass
upon the issues of fact and law raised by the parties.
Toward this end, therefore, it is Our considered view the case
should be remanded to the Labor Arbiter of origin for further
proceedings.
Further, We take note that the decision does not contain a
dispositive portion or fallo. Such being the case, it may be
well said that the decision does not resolve the issues at
hand. On another plane, there is no portion of the decision
which could be carried out by way of execution.
It may be argued that the last paragraph of the decision may
be categorized as the dispositive portion thereof:
xxx xxx xxx
The undersigned Labor Arbiter is not oblivious [to] the fact
that respondents have violated a cardinal rule in every
establishment that a payroll and other papers evidencing
hour[s] of work, payment, etc. shall always be maintained
and subjected to inspection and visitation by personnel of the
Department of Labor and Employment. As such penalty,
respondents should not escape liability for this technicality,
hence, it is proper that all the individual complainants except
those who resigned and executed quitclaim[s] and release[s]
prior to the filing of this complaint should be reinstated to
their former position with the admonition to respondents that
any harassment, intimidation, coercion or any form of threat
as a result of this immediately executory reinstatement shall
be dealt with accordingly.
SO ORDERED.

It is Our considered view that even assuming arguendo that

the respondents failed to maintain their payroll and other
papers evidencing hours of work, payment etc., such
circumstance, standing alone, does not warrant the directive
to reinstate complainants to their former positions. It is [a]
well settled rule that there must be a finding of illegal
dismissal before reinstatement be mandated.
In this regard, the LABOR ARBITER is hereby directed to
include in his clarificatory decision, after receiving evidence,
considering and resolving the same, the requisite dispositive
portion. 9
Apparently, the Labor Arbiter perceived that if not for
petitioners, he would not have fallen victim to this stinging
rebuke at the hands of the NLRC. Thus does it appear to us
that the Labor Arbiter, in concluding in his 27 July 1994
Decision that petitioners abandoned their work, was moved
by, at worst, spite, or at best, lackadaisically glossed over
petitioner's evidence. On this score, we find the following
observations of the OSG most persuasive:
In finding that petitioner employees abandoned their work,
the Labor Arbiter and the NLRC relied on the testimony of
Security Guard Rolando Cairo that on January 21, 1991,
petitioners refused to work. As a result of their failure to
work, the cheese curls ready for repacking on said date were
spoiled.
The failure to work for one day, which resulted in the spoilage
of cheese curls does not amount to abandonment of work. In
fact two (2) days after the reported abandonment of work or
on January 23, 1991, petitioners filed a complaint for, among
others, unfair labor practice, illegal lockout and/or illegal
dismissal. In several cases, this Honorable Court held that
"one could not possibly abandon his work and shortly
thereafter vigorously pursue his complaint for illegal
dismissal (De Ysasi III v. NLRC, 231 SCRA 173; Ranara v.

NLRC, 212 SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA
328; Atlas Consolidated Mining and Development Corp. v.
NLRC, 190 SCRA 505; Hua Bee Shirt Factory v. NLRC, 186
SCRA 586; Mabaylan v. NLRC, 203 SCRA 570 and Flexo
Manufacturing
v.
NLRC,
135 SCRA
145). In
Atlas
Consolidated, supra, this Honorable Court explicitly stated:
It would be illogical for Caballo, to abandon his work and then
immediately file an action seeking for his reinstatement. We
can not believe that Caballo, who had worked for Atlas for
two years and ten months, would simply walk away from his
job unmindful of the consequence of his act. i.e. the
forfeiture of his accrued employment benefits. In opting to
finally to [sic] contest the legality of his dismissal instead of
just claiming his separation pay and other benefits, which he
actually did but which proved to be futile after all, ably
supports his sincere intention to return to work, thus
negating Atlas' stand that he had abandoned his job.
In De Ysasi III v. NLRC (supra), this Honorable Court stressed
that it is the clear, deliberate and unjustified refusal to
resume employment and not mere absence that constitutes
abandonment. The absence of petitioner employees for one
day on January 21, 1991 as testified [to] by Security Guard
Orlando Cairo did not constitute abandonment.
In his first decision, Labor Arbiter Santos expressly directed
the reinstatement of the petitioner employees and
admonished the private respondents that "any harassment,
intimidation, coercion or any form of threat as a result of this
immediately executory reinstatement shall be dealt with
accordingly.
In his second decision, Labor Arbiter Santos did not state why
he was abandoning his previous decision directing the
reinstatement of petitioner employees.

By directing in his first decision the reinstatement of

petitioner employees, the Labor Arbiter impliedly held that
they did not abandon their work but were not allowed to work
without just cause.
That petitioner employees are "pakyao" or piece workers
does not imply that they are not regular employees entitled
to reinstatement. Private respondent Empire Food Products,
Inc. is a food and fruit processing company. In Tabas
v. California Manufacturing Co., Inc. (169 SCRA 497), this
Honorable Court held that the work of merchandisers of
processed food, who coordinate with grocery stores and
other outlets for the sale of the processed food is necessary
in the day-to-day operation[s] of the company. With more
reason, the work of processed food repackers is necessary in
the day-to-day operation[s] of respondent Empire Food
Products. 10
It may likewise be stressed that the burden of proving the
existence of just cause for dismissing an employee, such as
abandonment, rests on the employer, 11 a burden private
respondents failed to discharge.
Private respondents, moreover, in considering petitioners'
employment to have been terminated by abandonment,
violated their rights to security of tenure and constitutional
right to due process in not even serving them with a written
notice of such termination. 12 Section 2, Rule XIV, Book V of
the Omnibus Rules Implementing the Labor Code provides:
Sec. 2. Notice of Dismissal Any employer who seeks to
dismiss a worker shall furnish him a written notice stating the
particular acts or omission constituting the grounds for his
dismissal. In cases of abandonment of work, the notice shall
be served at the worker's last known address.
Petitioners are therefore entitled to reinstatement with full
back wages pursuant to Article 279 of the Labor Code, as

amended by R.A. No. 6715. Nevertheless, the records

disclose that taking into account the number of employees
involved, the length of time that has lapsed since their
dismissal, and the perceptible resentment and enmity
between petitioners and private respondents which
necessarily strained their relationship, reinstatement would
be impractical and hardly promotive of the best interests of
the parties. In lieu of reinstatement then, separation pay at
the rate of one month for every year of service, with
a fraction of at least six (6) months of service considered as
one (1) year, is in order. 13
That being said, the amount of back wages to which each
petitioner is entitled, however, cannot be fully settled at this
time. Petitioners, as piece-rate workers having been paid by
the piece, 14 there is need to determine the varying degrees
of production and days worked by each worker. Clearly, this
issue is best left to the National Labor Relations Commission.
As to the other benefits, namely, holiday pay, premium pay,
13th month pay and service incentive leave which the labor
arbiter failed to rule on but which petitioners prayed for in
their complaint, 15 we hold that petitioners are so entitled to
these benefits. Three (3) factors lead us to conclude that
petitioners, although piece-rate workers, were regular
employees of private respondents. First, as to the nature of
petitioners' tasks, their job of repacking snack food was
necessary or desirable in the usual business of private
respondents, who were engaged in the manufacture and
selling of such food products; second, petitioners worked for
private respondents throughout the year, their employment
not having been dependent on a specific project or season;
and third, the length of time 16that petitioners worked for
private respondents. Thus, while petitioners' mode of
compensation was on a "per piece basis," the status and
nature of their employment was that of regular employees.

The Rules Implementing the Labor Code exclude certain

employees from receiving benefits such as nighttime pay,
holiday pay, service incentive leave 17 and 13th month
pay, 18 inter alia, "field personnel and other employees whose
time and performance is unsupervised by the employer,
including those who are engaged on task or contract basis,
purely commission basis, or those who are paid a fixed
amount for performing work irrespective of the time
consumed in the performance thereof." Plainly, petitioners as
piece-rate workers do not fall within this group. As mentioned
earlier, not only did petitioners labor under the control of
private respondents as their employer, likewise did
petitioners toil throughout the year with the fulfillment of
their quota as supposed basis for compensation. Further, in
Section 8 (b), Rule IV, Book III which we quote hereunder,
piece workers are specifically mentioned as being entitled to
holiday pay.
Sec. 8. Holiday pay of certain employees.
(b) Where a covered employee is paid by results or output,
such as payment on piece work, his holiday pay shall not be
less than his average daily earnings for the last seven (7)
actual working days preceding the regular holiday: Provided,
however, that in no case shall the holiday pay be less than
the applicable statutory minimum wage rate.
In addition, the Revised Guidelines on the Implementation of
the 13th Month Pay Law, in view of the modifications to P.D.
No. 851 19 by Memorandum Order No. 28, clearly exclude the
employer of piece rate workers from those exempted from
paying 13th month pay, to wit:
2. EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:

d. Employers of those who are paid on purely commission,

boundary or task basis, and those who are paid a fixed
amount for performing specific work, irrespective of the time
consumed in the performance thereof, except where the
workers are paid on piece-rate basis in which case the
employer shall grant the required 13th month pay to such
workers. (emphasis supplied)
The Revised Guidelines as well as the Rules and Regulations
identify those workers who fall under the piece-rate category
as those who are paid a standard amount for every piece or
unit of work produced that is more or less regularly
replicated, without regard to the time spent in producing the
same. 20
As to overtime pay, the rules, however, are different.
According to Sec. 2(e), Rule I, Book III of the Implementing
Rules, workers who are paid by results including those who
are paid on piece-work, takay, pakiao, or task basis, if their
output rates are in accordance with the standards prescribed
under Sec. 8, Rule VII, Book III, of these regulations, or where
such rates have been fixed by the Secretary of Labor in
accordance with the aforesaid section, are not entitled to
receive overtime pay. Here, private respondents did not
allege adherence to the standards set forth in Sec. 8 nor with
the rates prescribed by the Secretary of Labor. As such,
petitioners are beyond the ambit of exempted persons and
are therefore entitled to overtime pay. Once more, the
National Labor Relations Commission would be in a better
position to determine the exact amounts owed petitioners, if
any.
As to the claim that private respondents violated petitioners'
right to self-organization, the evidence on record does not
support this claim. Petitioners relied almost entirely on
documentary evidence which, per se, did not prove any
wrongdoing on private respondents' part. For example,

petitioners presented their complaint 21 to prove the violation

of labor laws committed by private respondents. The
complaint, however, is merely "the pleading alleging the
plaintiff's cause or causes of action." 22 Its contents are
merely allegations, the verity of which shall have to be
proved during the trial. They likewise offered their
Consolidated Affidavit of Merit and Position Paper 23which,
like the offer of their Complaint, was a tautological exercise,
and did not help nor prove their cause. In like manner, the
petition for certification election 24 and the subsequent order
of certification 25 merely proved that petitioners sought and
acquired the status of bargaining agent for all rank-and-file
employees. Finally, the existence of the memorandum of
agreement 26 offered to substantiate private respondents'
non-compliance therewith, did not prove either compliance or
non-compliance, absent evidence of concrete, overt acts in
contravention of the provisions of the memorandum.

receipt of a copy of this decision and of the records of the

case and to submit to this Court a report of its compliance
hereof within ten (10) days from the rendition of its
resolution.
Costs against private respondents.
SO ORDERED.

IN VIEW WHEREOF, the instant petition is hereby GRANTED.

The Resolution of the National Labor Relations Commission of
29 March 1995 and the Decision of the Labor Arbiter of 27
July 1994 in NLRC Case No. RAB-III-01-1964-91 are hereby
SET ASIDE, and another is hereby rendered:
1. DECLARING petitioners to have been illegally dismissed by
private respondents, thus entitled to full back wages and
other privileges, and separation pay in lieu of reinstatement
at the rate of one month's salary for every year of service
with a fraction of six months of service considered as one
year;
2. REMANDING the records of this case to the National Labor
Relations Commission for its determination of the back wages
and other benefits and separation pay, taking into account
the foregoing observations; and
3. DIRECTING the National Labor Relations Commission to
resolve the referred issues within sixty (60) days from its

G.R. No. 85393 September 5, 1991

ALBA PATIO DE MAKATI, ANASTACIO ALBA and
CLAUDIO
OLABARRIETA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ALBA
PATIO
DE
MAKATI
EMPLOYEES
ASSOCIATION,
HERMOGENES CAGANO, LUCIO CAGANO, RUPERTO
CRUZ and BONIFACIO ACIADO respondents.
Justo & Magpale Law Offices for petitioners.
Felipe P. Fuentes, Jr. for private respondents.

PADILLA, J.:p
This is a petition for certiorari with prayer for the issuance of
a writ of preliminary injunction, seeking to set aside or
modify the Order of the respondent National Labor Relations
Commission (NLRC), dated 6 September 1988, which set
aside the order of the Labor Arbiter dated 31 October 1984. 1
On 5 December 1988, a temporary restraining order was
issued by this Court enjoining the respondents from enforcing
the questioned NLRC Order until further orders from the
Court. 2
The antecedent facts of the case are as follows:
On 30 April 1973, the Court of Industrial Relations (CIR)
rendered a decision in Case No. 5478-ULP, entitled "Alba
Patio de Makati Employees Association, et al, complainants,
vs. Alba Patio de Makati, et al., respondents," the dispositive
part of which reads as follows:
WHEREFORE, respondents are hereby declared guilty of
unfair labor practices as charged and are ordered to cease
and desist from further committing said acts, to reinstate the
herein four (4) individual complainants with full back wages
and to pay them their respective shares in the service
charges for May 1 to 15, 1970 and for the rest of that month
until their forced resignation.
A motion for reconsideration of the said decision filed by
respondents (herein petitioners) was denied on 6 November
1973.
Petitioners then sought a review by this Court of the CIR's
decision and resolution. The case was docketed as "Alba
Patio de Makati, Anastacio Alba and Claudio Olabarrieta,
petitioners, vs. Alba Patio de Makati Employees Association,

Hermogenes Cagano, Ruperto Cruz, Lucio Cagano, and

Bonifacio Aclado, respondents, G.R. No. L-37922." 3
On 16 March 1984, this Court rendered a decision in the
above-mentioned case, dismissing the petition for review and
affirming the decision and resolution of the CIR.
Thereafter, the National Labor Relations Commission (which
had succeeded the Court of Industrial Relations), through
Labor Arbiter Antonio Tria Tirona directed the Chief of the
Research and Information Division of the NLRC to have the
award due the complainants computed. The pertinent part of
the "Report of Examiner" submitted stated that the total
money value of the backwages and service charges due
herein private respondents amounts to P196,270.84, and that
the herein petitioners had not as of the date of the report
reinstated the private respondents.
With the submission of the Report of Examiner, private
respondents moved for the issuance of a writ of execution.
Petitioners opposed the motion, contending, among other
things, that the computation of back wages should be limited
to three (3) years without qualification or deduction, in
accordance with the rulings of this Court on the matter, and
that if complainants would insist on payment based on the
"Report of Examiner", they should then render an accounting
of their income realized elsewhere from 1 May 1970 up to 15
August 1984.
The Report and the petitioners' opposition to the motions
were set for hearing on 29 October 1984. At the said hearing,
Lucio Cagano, for himself and as the alleged attorney-in-fact
of the other complainants, filed a document entitled
"Satisfaction of Judgment, Release and Quit-claim" which
declares inter alia that complainants have received the sum
of P54,000.00 from the Alba Patio de Makati, which amount
corresponds to three (3) years back wages, including
attorney's fees, in full and complete satisfaction of the

judgment and releasing the petitioners from any further

liability
in
connection
with
their
claims
against
petitioners. 4 Filed with the above-said document were the
respective special powers of attorney purportedly executed
by Bonifacio Aclado, Ruperto Cruz, and Esteban Cagano,
father of deceased Hermogenes Cagano, appointing Lucio
Cagano as their attorney-in-fact. 5Said documents were
notarized by Atty. Eugenio Tumulak, counsel for Lucio
Cagano.
Acting on the foregoing documents, Labor Arbiter Tirona
issued the order of 31 October 1984. the dispositive part of
which reads:
Finding said "Satisfaction of Judgment, Release and Quitclaim" to be in order and it appearing thereon that
complainants have already received P54,000.00 for and in
consideration thereof, the instant case is hereby considered
CLOSED and TERMINATED. 6
On 10 December 1985, private co-respondent Bonifacio
Aclado wrote his counsel Atty. Felipe P. Fuentes, Jr., informing
the latter that as of said date, he had not been reinstated
and paid his back wages by the petitioners. The following
day, or on 11 December 1985, Atty. Fuentes filed before the
NLRC a motion for the immediate execution of the CIR
decision. Petitioners opposed the motion, alleging that the
case was already considered closed and terminated as per
order of 31 October 1.984 and that the said order was issued
pursuant to the "Satisfaction of Judgment, Release and Quitclaim" which had been executed by Lucio Cagano as the
attorney-in-fact of complainant (private co-respondent)
Bonifacio Aclado.
Thereafter, on 3 March 1986, other private co-respondent
Ruperto Cruz filed a similar motion for execution and to annul
and set aside the order dated 31 October 1984, alleging that
he had not executed any specific power of attorney naming

Lucio Cagano as his attorney-in-fact. 7 Petitioners filed an

Omnibus Motion 8 alleging, among other things, that the
Labor Arbiter/ NLRC had already lost jurisdiction over the
case by reason of the satisfaction of the judgment and that
any question as to the validity of the "Satisfaction of
Judgment, Release and Quit-claim" which is in the nature of a
compromise agreement must be brought before the regular
courts.
On 6 September 1988, the NLRC promulgated the questioned
Order, annulling and setting aside the order of Labor Arbiter
Antonio Tria Tirona dated 31 October 1984 and directing the
immediate enforcement of the decision of the Court of
Industrial Relations dated 30 April 1973 as affirmed by this
Court. It held:
Resolving this issue, we rule that the special power of
attorney executed by Esteban Cagano in behalf of his
deceased son, Hermogenes Cagano, one of the complainants
in this case, who have (sic) children but still minors and the
mother of said children (alleged common law wife of the
deceased), and in favor of Lucio Cagano as attorney-in-fact is
patently null and void since Esteban Cagano had no legal
authority to execute a special power of attorney in behalf of a
deceased person or represent the minor children of the
deceased complainant. If an agency is extinguished by death
of the principal, with more reason that an agency cannot be
constituted for and in behalf of a deceased person or the
latter's minor children unless duly authorized by the Court. A
cursory reading of these (sic) special power of attorney
shows that the attorney-in-fact was practically granted
blanket authority to negotiate with respondent any amount of
back wages due the complainants. However, such back
wages awarded to them and which the attorney-in-fact is
allowed to negotiate or receive in their behalf under the
special power of attorney is an 'amount (shall) be due in
accordance with law.'A fortiori, We should carefully scrutinize

and determine in what manner and to what extent was this

express authority exercised and whether or not the
settlement arrived at by the complainants through their
attorney-in-fact and respondents is in accordance with the
terms of the special power of attorney and that the same is
not contrary to law, morals, good customs, public order, or
public policy.
To Us, the settlement of the computed award of P196,270.84
for only a minuscule sum of P54,000.00 is grossly
disproportionate, unconscionable and inequitable. We cannot
therefore give imprimatur to such settlement, release and
quitclaim for being clearly contrary to the authority granted
to the attorney-in-fact and also violative of law and public
policy. We cannot allow this miscarriage of justice.
Accordingly, the approval of the settlement constitutes a
reversible error. Labor justice may not be thwarted or
frustrated by strait-jacketed technicalities by denying this
Commission its jurisdiction to pass upon these issues. For Us
to refer this matter to another forum would necessarily make
the complainants who are affected thereby to undergo their
calvary twice after so many long years of litigation.
Hence, the present petition for certiorari filed by petitioners
with prayer for the issuance of a writ of preliminary
injunction.
The only issue to be resolved in this case is whether or not
the NLRC still had jurisdiction to issue the resolution or order
of 6 September 1988, setting aside the Labor Arbiter's order
of 31 October 1984.
Petitioners claim that the jurisdiction of the National Labor
Relations Commission over the case had already been lost by
virtue of the order dated 31 October 1984, wherein the Labor
Arbiter declared the case closed and terminated in view of
the document filed by the private respondents entitled
"Satisfaction of Judgment, Release and Quit-claim"; that the

aforesaid document, petitioners allege, is in the nature of a

compromise agreement which has, upon the parties, the
effect of res judicata; that the allegations in the private
respondents' subsequent motions set forth a cause of action
that does not involve a question arising out of employer
employee relations but the validity and enforceability of a
compromise agreement between petitioners and private
respondents, for which reason, the matter should properly be
raised before the regular courts.
On the other hand, the Solicitor General maintains that
petitioners, having submitted themselves to the jurisdiction
of the NLRC, should not be snowed, for reasons of public
policy, to repudiate the very same jurisdiction they had
invoked to seek affirmative relief, citing in support of his
submission the case of Tijam vs. Sibonghanoy, 23 SCRA 29.
In addition, private respondents insist that they had not
executed any special power of attorney in favor of their cocomplainant Lucio Cagano; that they have not received their
backwages and have not been reinstated to their former
respective positions by petitioners pursuant to the CIR
decision as affirmed by this Court.
The petition is bereft of merit.
Time and again, this Court has set aside technicalities in the
interest of substantial justice. In the present case, the
judgment of the Court of Industrial Relations had long
become final and executory. A final and executory judgment
can no longer be altered. As we held in a recent case, 9 "(t)he
judgment may no longer be modified in any respect, even if
the modification is meant to correct what is perceived to be
an erroneous conclusion of fact or law, and regardless of
whether the modification is attempted to be made by the
court rendering it or by the highest court of the land."
Moreover, a final and executory judgment cannot be
negotiated, hence, any act to subvert it is contemptuous. 10

The NLRC was correct in setting aside the order of the Labor
Arbiter dated 31 October 1984, as the same was void. It
rendered the very decision of this Court meaningless, and
showed disrespect for the administration of justice. 11 This
should not be sanctioned.
It was incumbent upon the counsel for the complainant (now
respondent) Lucio Cagano to have seen to it that the interest
of an complainants (now private respondents) was protected.
The quitclaim and release in the preparation of which he
assisted clearly worked to the grave disadvantage of the
complainants (private respondents). As we have stated
earlier, to render the decision of this Court meaningless by
paying the backwages of the affected employees in a much
lesser amount clearly manifested a disregard of the authority
of this Court as the final arbiter of cases brought to it. 12
As for the Labor Arbiter, he should have consciensciously
examined the veracity and reliability of the quitclaim
purportedly executed by the other complainants (now
respondents) through Lucio Cagano, especially so when the
counsel of record of private respondents Cruz and Aclado,
Atty. Felipe Fuentes, Jr., was not present when the document
was filed. Moreover, he should have been aware of this
Court's standing rulings that quit-claims and releases signed
by employees are normally frowned upon as contrary to
public policy. His precipitate approval of the release and
quitclaim resulted in the reduction of the backwages to a
much lesser amount due the private respondents and in
releasing petitioners from their obligation to reinstate the
complainants under a final judgment of this Court. This is
indeed lamentable.
Finally, we agree with the Solicitor General, that having
submitted themselves to the jurisdiction of the NLRC,
petitioners should not be allowed to repudiate that same

jurisdiction simply because they have failed to obtain a

favorable decision.
This case has been pending for almost eighteen (18) years
since the order of the CIR was rendered on 30 April 1973. The
private respondents have already suffered for a long time. To
further prolong the proceedings in this case would be
tantamount to a denial of justice to private respondents. It is
about time that the decision of the Court of Industrial
Relations of 30 April 1973, as affirmed by this Court, be fully
and finally implemented.
WHEREFORE, the petition is DISMISSED, and the temporary
restraining order LIFTED. Costs against petitioners.
SO ORDERED.

Region) in behalf of the rank and file employees of the

Progressive Development Corporation (Pizza Hut) docketed
as NCR Case No. NCR-OD-M-9307-020. 1

G.R. No. 115077 April 18, 1997

PROGRESSIVE DEVELOPMENT CORPORATION-PIZZA
HUT, petitioner,
vs.
HON. BIENVENIDO LAGUESMA, in his capacity as
Undersecretary of Labor, and NAGKAKAISANG LAKAS
NG MANGGAGAWA (NLM)-KATIPUNAN, respondents.
KAPUNAN, J.:
On July 9, 1993, Nagkakaisang Lakas ng Manggagawa (NLM)Katipunan (respondent Union) filed a petition for certification
election with the Department of Labor (National Capital

Petitioner filed on August 20, 1993, a verified Motion to

Dismiss the petition alleging fraud, falsification and
misrepresentation in the respondent. Union's registration
making it void and invalid. The motion specifically alleged
that: a) respondent Union's registration was tainted with
false, forged, double or multiple signatures of those who
allegedly took part in the ratification of the respondent
Union's constitution and by-laws and in the election of its
officers that there were two sets of supposed attendees to
the alleged organizational meeting that was alleged to have
taken place on June 26, 1993; that the alleged chapter is
claimed to have been supported by 318 members when in
fact the persons who actually signed their names were much
less; and b) while the application for registration of the
charter was supposed to have been approved in the
organizational meeting held on June 27, 1993, the charter
certification issued by the federation KATIPUNAN was
dated June 26, 1993 or one (1) day prior to the formation of
the chapter, thus, there were serious falsities in the dates of
the issuance of the charter certification and the organization
meeting of the alleged chapter.
Citing other instances of misrepresentation and fraud,
petitioner, on August 29, 1993, filed a Supplement to its
Motion to Dismiss, 2 claiming that:
1) Respondent Union alleged that the election of its officers
was held on June 27, 1993; however, it appears from the
documents submitted by respondent union to the BIR-DOLE
that the Union's constitution and by-laws were adopted only
on July 7, 1993, hence, there was no bases for the supposed
election of officers on June 27, 1993 because as of this date,

there existed no positions to which the officers could be

validly elected;
2) Voting was not conducted by secret ballot in violation of
Article 241, section (c) of the Labor Code;
3) The Constitution and by Laws submitted in support of its
petition were not properly acknowledged and notarized. 3
On August 30, 1993, petitioner filed a Petition 4 seeking the
cancellation of the Union's registration on the grounds of
fraud and falsification, docketed as BIR Case No. 8-2183. 5 Motion was likewise filed by petitioner with the MedArbiter requesting suspension of proceedings in the
certification election case until after the prejudicial question
of the Union's legal personality is determined in the
proceedings for cancellation of registration.
However, in an Order dated September 29, 1993, 6 MedArbiter Rasidali C. Abdullah directed the holding of a
certification election among petitioner's rank and file
employees. The Order explained:
. . . Sumasaklaw sa Manggagawa ng Pizza Hut is a legitimate
labor organization in contemplation of law and shall remain
as such until its very charter certificate is canceled or
otherwise revoked by competent authority. The alleged
misrepresentation, fraud and false statement in connection
with the issuance of the charter certificate are collateral
issues which could be properly ventilated in the cancellation
proceedings. 7
On appeal to the office of the Secretary of Labor, Labor
Undersecretary Bienvenido E. Laguesma in a Resolution
dated December 29, 1993 8 denied the same.
A motion for reconsideration of the public respondent's
resolution was denied in his Order 9 dated January 27, 1994,
hence, this special civil action for certiorari under Rule 65 of

the Revised Rules of Court where the principal issue raised is

whether or not the public respondent committed grave abuse
of discretion in affirming the Med-Arbiter's order to conduct a
certification election among petitioner's rank and file
employees, considering that: (1) respondent Union's legal
personality was squarely put in issue; (2) allegations of fraud
and falsification, supported by documentary evidence were
made; and (3) a petition to cancel respondent Union's
registration is pending with the regional office of the
Department of Labor and Employment. 10
We grant the petition.
In the public respondent's assailed Resolution dated
December 29, 1993, the suggestion is made that once a
labor organization has filed the necessary documents and
papers and the same have been certified under oath and
attested to, said organization necessarily becomes clothed
with the character of a legitimate labor organization. The
resolution declares:
Records show that at the time of the filing of the subject
petition on 9 July 1993 by the petitioner NLM-KATIPUNAN, for
and in behalf of its local affiliate Sumasaklaw sa
Manggagawa ng Pizza Hut, the latter has been clothed with
the status and/or character of a legitimate labor organization.
This is so, because on 8 July 1993, petitioner submitted to
the Bureau of Labor Relations (BLR), this Department, the
following documents: Charter Certificate, Minutes of the
Organizational Meeting, List of Officers, and their respective
addresses, financial statement, Constitution and By-Laws
(CBL, and the minutes of the ratification of the CBL). Said
documents (except the charter certificate) are certified under
oath and attested to by the local union's Secretary/Treasurer
and President, respectively.
As to the contention that the certification election
proceedings should be suspended in view of the pending

case for the cancellation of the petitioner's certificate of

registration, let it be stressed that the pendency of a
cancellation case is not a ground for the dismissal or
suspension of a representation proceedings considering that
a registered labor organization continues to be a legitimate
one entitled to all the rights appurtenant thereto until a final
valid order is issued canceling such registration. 11
In essence, therefore, the real controversy in this case
centers on the question of whether or not, after the
necessary papers and documents have been filed by a labor
organization, recognition by the Bureau of Labor Relations
merely becomes a ministerial function.
We do not agree.
In the first place, the public respondent's views as expressed
in his December 29, 1993 Resolution miss the entire point
behind the nature and purpose of proceedings leading to the
recognition of unions as legitimate labor organizations.
Article 234 of the Labor Code provides:
Art. 234. Requirements of registration. Any applicant labor
organization, association or group of unions or workers shall
acquire legal personality and shall be entitled to the rights
and privileges granted by law to legitimate labor
organizations upon issuance of the certificate of registration
based on the following requirements:
(a) Fifty pesos (P50.00) registration fee;
(b) The names of its officers, their addresses, the principal
address of the labor organization, the minutes of the
organizational meetings and the list of the workers who
participated in such meetings;
(c) The names of all its members comprising at least twenty
percent (20%) of all the employees in the bargaining unit
where it seeks to operate;

(d) If the applicant union has been in existence for one or

more years, copies of its annual financial reports; and
(e) Four (4) copies of the constitution and by-laws of the
applicant union, minutes of its adoption or ratification, and
the list of the members who participated in it.
A more than cursory reading of the aforecited provisions
clearly indicates that the requirements embodied therein are
intended as preventive measures against the commission of
fraud. After a labor organization has filed the necessary
papers and documents for registration, it becomes
mandatory for the Bureau of Labor Relations to check if the
requirements under Article 234 have been sedulously
complied with. If its application for registration is vitiated by
falsification and serious irregularities, especially those
appearing on the face of the application and the supporting
documents, a labor organization should be denied
recognition as a legitimate labor organization. And if a
certificate of recognition has been issued, the propriety of
the labor organization's registration could be assailed directly
through cancellation of registration proceedings in
accordance with Articles 238 and 239 of the Labor Code, or
indirectly, by challenging its petition for the issuance of an
order for certification election.
These measures are necessary and may be undertaken
simultaneously if the spirit behind the Labor Code's
requirements for registration are to be given flesh and blood.
Registration requirements specifically afford a measure of
protection to unsuspecting employees who may be lured into
joining unscrupulous or fly-by-night unions whose sole
purpose is to control union funds or use the labor
organization for illegitimate ends. 12 Such requirements are a
valid exercise of the police power, because the activities in
which labor organizations, associations and unions of workers

are engaged directly affect the public interest and should be

protected. 13
Thus, in Progressive Development Corporation vs. Secretary
of Labor and Employment, 14 we held:
The controversy in this case centers on the requirements
before a local or chapter of a federation may file a petition
for certification election and be certified as the sole and
exclusive bargaining agent of the petitioner's employees.
xxx xxx xxx
But while Article 257 cited by the Solicitor General directs the
automatic conduct of a certification election in an
unorganized establishment, it also requires that the petition
for certification election must be filed by a legitimate labor
organization . . .
xxx xxx xxx
. . . The employer naturally needs assurance that the union it
is dealing with is a bona-fide organization, one which has not
submitted false statements or misrepresentations to the
Bureau. The inclusion of the certification and attestation
requirements will in a marked degree allay these
apprehensions of management. Not only is the issuance of
any false statement and misrepresentation or ground for
cancellation of registration (see Article 239 (a), (c) and (d)); it
is also a ground for a criminal charge of perjury.
The certification and attestation requirements are preventive
measures against the commission of fraud. They likewise
afford a measure of protection to unsuspecting employees
who may be lured into joining unscrupulous or fly-by-night
unions whose sole purpose is to control union funds or to use
the union for dubious ends.
xxx xxx xxx

. . . It is not this Court's function to augment the

requirements prescribed by law in order to make them wiser
or to allow greater protection to the workers and even their
employer. Our only recourse is, as earlier discussed, to exact
strict compliance with what the law provides as requisites for
local or chapter formation.
xxx xxx xxx
The Court's conclusion should not be misconstrued as
impairing the local union's right to be certified as the
employees'
bargaining
agent
in
the
petitioner's
establishment. We are merely saying that the local union
must first comply with the statutory requirements in order to
exercise this right. Big federations and national unions of
workers should take the lead in requiring their locals and
chapters to faithfully comply with the law and the rules
instead of merely snapping union after union into their folds
in a furious bid with rival federations to get the most number
of members
Furthermore, the Labor Code itself grants the Bureau of Labor
Relations a period of thirty (30) days within which to review
all applications for registration. Article 235 provides:
Art. 235. Action on application. The Bureau shall act on all
applications for registration within thirty (30) days from filing.
All requisite documents and papers shall be certified under
oath by the secretary or the treasurer of the organization, as
the case may be, and attested to by its president.
The thirty-day period in the aforecited provision ensures that
any action taken by the Bureau of Labor Relations is made in
consonance with the mandate of the Labor Code, which, it
bears emphasis, specifically requires that the basis for the
issuance of a certificate of registration should be compliance
with the requirements for recognition under Article 234.

Since, obviously, recognition of a labor union or labor

organization is not merely a ministerial function, the question
now arises as to whether or not the public respondent
committed grave abuse of discretion in affirming the MedArbiter's order in spite of the fact that the question of the
Union's legitimacy was squarely put in issue and that the
allegations of fraud and falsification were adequately
supported by documentary evidence.
The Labor Code requires that in organized and
unorganized 15 establishments, a petition for certification
electionmust be filed by a legitimate labor organization. The
acquisition of rights by any union or labor organization,
particularly the right to file a petition for certification
election, first and foremost, depends on whether or not the
labor organization has attained the status of a legitimate
labor organization.
In the case before us, the Med-Arbiter summarily disregarded
the petitioner's prayer that the former look into the
legitimacy of the respondent. Union by a sweeping
declaration that the union was in the possession of a charter
certificate so that "for all intents and purposes, Sumasaklaw
sa Manggagawa sa Pizza Hut (was) a legitimate labor
organization." 16 Glossing over the transcendental issue of
fraud and misrepresentation raised by herein petitioner, MedArbiter Rasidali Abdullah held that:
The alleged misrepresentation, fraud and false statement in
connection with the issuance of the charter certificate are
collateral issues which could be ventilated in the cancellation
proceedings. 17
It cannot be denied that the grounds invoked by petitioner for
the cancellation of respondent Union's registration fall under
paragraph (a) and (c) of Article 239 of the Labor Code, to wit:

(a) Misrepresentation, false statement or fraud in connection

with the adoption or ratification of the constitution and bylaws or amendments thereto, the minutes of ratification, the
list of members who took part in the ratification of the
constitution and by-laws or amendments thereto, the
minutes of ratification, the list of members who took part in
the ratification;
xxx xxx xxx
(c) Misrepresentation, false statements or fraud in connection
with the election of officers, minutes of the election of
officers, the list of voters, or failure to submit these
documents together with the list of the newly electedappointed officers and their postal addresses within thirty
(30) days from election.
xxx xxx xxx
The grounds ventilated in cancellation proceedings in
accordance with Article 239 of the Labor Code constitute a
grave challenge to the right of respondent Union to ask for
certification election. The Med-Arbiter should have looked
into the merits of the petition for cancellation before issuing
an order calling for certification election. Registration based
on false and fraudulent statements and documents confer no
legitimacy upon a labor organization irregularly recognized,
which, at best, holds on to a mere scrap of paper. Under such
circumstances, the labor organization, not being a legitimate
labor organization, acquires no rights, particularly the right to
ask for certification election in a bargaining unit.
As we laid emphasis in Progressive Development Corporation
Labor, 18 "[t]he employer needs the assurance that the union
it is dealing with is a bona fide organization, one which has
not submitted false statements or misrepresentations to the
Bureau." Clearly, fraud, falsification and misrepresentation in
obtaining recognition as a legitimate labor organization are

contrary to the Med-Arbiter's conclusion not merely collateral

issues. The invalidity of respondent Union's registration
would negate its legal personality to participate in
certification election.
Once a labor organization attains the status of a legitimate
labor organization it begins to possess all of the rights and
privileges granted by law to such organizations. As such
rights and privileges ultimately affect areas which are
constitutionally protected, the activities in which labor
organizations, associations and unions are engaged directly
affect the public interest and should be zealously protected.
A strict enforcement of the Labor Code's requirements for the
acquisition of the status of a legitimate labor organization is
in order.
Inasmuch as the legal personality of respondent Union had
been seriously challenged, it would have been more prudent
for the Med-Arbiter and public respondent to have granted
petitioner's request for the suspension of proceedings in the
certification election case, until the issue of the legality of the
Union's registration shall have been resolved. Failure of the
Med-Arbiter and public respondent to heed the request
constituted a grave abuse of discretion.
WHEREFORE, PREMISES CONSIDERED, the instant petition is
GRANTED and the Resolution and Order of the public
respondent dated December 29, 1993 and January 24, 1994,
respectively, are hereby SET ASIDE.
The case is REMANDED to the Med-Arbiter to resolve with
reasonable dispatch petitioner's petition for cancellation of
respondent Union's registration.
SO ORDERED.

G.R. No. 76427 February 21, 1989

JOHNSON AND JOHNSON LABOR UNION-FFW, DANTE
JOHNSON MORANTE, MYRNA OLOVEJA AND ITS OTHER
INDIVIDUAL
UNION
MEMBERS, petitioners
vs.

DIRECTOR OF LABOR
PILI, respondents.

RELATIONS,

AND

OSCAR

Rogelio R. Udarbe for petitioners.

The Solicitor General for public respondent.
Manuel V. Nepomuceno for private respondent.

GUTIERREZ, JR., J.:

The sole issue in this petition for review on certiorari is
whether or not the public respondent committed grave abuse
of discretion in ruling that the private respondent is entitled
to the financial aid from the compulsory contributions of the
petitioner-union afforded to its members who have been
suspended or terminated from work without reasonable
cause.
The provision for the grant of financial aid in favor of a union
member is embodied in the petitioner-union's Constitution
and By-laws, Article XIII, Section 5, of which reads:
A member who have (sic) been suspended or terminated
without reasonable cause shall be extended a financial aid
from the compulsory contributions in the amount of SEVENTY
FIVE CENTAVOS (P0. 75) from each member weekly. (p. 18,
Rollo)
On May 6, 1985, the private respondent, a member of the
petitioner-union was dismissed from his employment by
employer Johnson & Johnson (Phil.) Inc., for non-disclosure in
his job application form of the fact that he had a relative in
the company in violation of company policies.
On July 1985, a complaint was filed by the private respondent
against the officers of the petitioner-union docketed as NRCLRD-M-7-271-85 alleging, among others, that the union

officers had refused to provide the private respondent the

financial aid as provided in the union constitution despite
demands for payment thereof The petitioner-union and its
officers counter-alleged, in their answer, that the said
financial aid was to be given only in cases of termination or
suspension without any reasonable cause; that the union's
executive board had the prerogative to determine whether
the suspension or termination was for a reasonable cause or
not; and that the union, in a general membership meeting,
had resolved not to extend financial aid to the private
respondent.
While the grievance procedure as contained in the union's
collective bargaining agreement was being undertaken, the
private respondent, on August 26, 1985, filed a case for
unfair labor practice and illegal dismissal against his
employer docketed as NLRC-NCR Case No. 6-1912-85.
On September 27, 1985, Med-Arbiter Anastacio L. Bactin
issued an order dismissing for lack of merit the complaint of
the private respondent against the petitioners for alleged
violation of the union constitution and by-laws.
On appeal, the then public respondent Director Cresenciano
B. Trajano, on April 17, 1986, rendered the decision assailed
in this petition. The dispositive portion of the said decision
reads:
WHEREFORE,
premises
considered,
the
appeal
of
complainant Oscar Pili is hereby granted and the Order
appealed from is hereby set aside. Appellees, therefore, are
hereby ordered to pay the complainant the sum of
P0.75/week per union member to be computed from the time
of the complainant's termination from employment to the
time he acquired another employment should his complaint
for illegal dismissal against the company be resolved in his
favor; provided, that if his complaint against the company be

dismissed, appellees are absolved

complainant anything. (p. 115, Records)

from

paying

the

Both parties moved for reconsideration. The petitioners

reiterated that since the private respondent's termination
was for a reasonable cause, it would be unjust and unfair if
financial aid were to be given in the event that the latter's
case for illegal dismissal is decided against him. The private
respondent, on the other hand, prayed for the amendment of
the dispositive portion in order that the grant of financial aid
be made without any qualifications.
On June 16, 1986, a Manifestation and/or Opposition to the
Motion for Reconsideration filed by the petitioners was filed
by the private respondent stating that he was being
discriminated against considering that one Jerwin Taguba,
another union member, was terminated for dishonesty and
loss of confidence but was granted financial aid by the
petitioners while Taguba's complaint against the company
was still pending with the National Labor Relation
Commission.
The public respondent separately resolved the above
motions. On June 26, 1986, an order was issued denying the
petitioners' motion for reconsideration. On August 19, 1986,
the public respondent modified its decision dated April 17,
1986 and its aforestated order as follows:
Considering that complainant Pili is similarly situated as
Jerwin Taguba coupled with the need to obviate any
discriminating treatment to the former, it is only just and
appropriate that our Decision dated 17 April 1986 be
modified in such a manner that respondents immediately pay
the complainant the sum of P0.75/ week per union member
to be computed from the time of his dismissal from the
company, without prejudice to refund of the amount that
shall be paid to Pili in the event the pending case is finally
resolved against him.

WHEREFORE, and as above qualified, this Bureau's Decision

dated 17 April 1986 and the Order dated 26 June 1986 are
hereby modified to the extent that the respondents are
directed to immediately pay complainant the sum of
P0.75/week per union member to be computed from the time
of his termination from his employment until his case against
the employer company shall have been finally resolved
and/or disposed. (p. 53, Rollo)
Meanwhile, on July 25, 1986, a motion for issuance of a writ
of execution was filed by the private respondent in order to
collect from the petitioners the amount of financial aid to
which the former was entitled.
On September 1, 1986, the petitioners moved for a
reconsideration of the public respondent's resolution dated
August 19, 1986 on the grounds that Taguba's affidavit
cannot support the private respondent's claim that he is also
entitled to the financial aid provided in the union's
constitution and that the union cannot be compelled to grant
the said aid in the absence of a special fund for the purpose.
On October 28, 1986, the public respondent through Director
Pura Ferrer-Calleja denied the petitioners' motion for
reconsideration stating that Article XIII, Section 5 of the
union's constitution and by-laws does not require a special
fund so that all union members similarly situated as the
private respondent must be entitled to the same right and
privilege regarding the grant of financial aid as therein
provided.
On December 18, 1986, a writ of execution was issued by the
public respondent in the following tenor:
NOW THEREFORE, you are hereby directed to proceed to the
premises of Johnson and Johnson (FFW) located at Edison
Road, Bo. Ibayo, Paranaque, Metro Manila to collect from the
said union through its Treasurer, Myrna Oloveja or to any

responsible officer of the union the amount of Twenty

Thousand Five Hundred Twenty Pesos (P20,520.00), more or
less representing financial assistance to complainant under
the union's constitution and by-laws. In case you fail to
collect said amount in cash, you are to cause the satisfaction
of the same on the union's movable or immovable properties
not exempt from execution. You are to return this writ within
fifteen (15) days from your compliance hereby together with
your report thereon. You may collect your legal fees from the
respondent union. (p. 55, Rollo)
On December 24, 1986, the instant petition was filed with
prayer for a preliminary injunction. The temporary restraining
order issued by the Chief Justice on December 24, 1986 was
confirmed in our resolution dated January 7, 1987.
The grounds relied upon by the petitioners are as follows:
A. THAT THE DECISION/ORDER IN QUESTION IS CONTRARY TO
LAW.
B. THAT RESPONDENT OFFICIAL ACTED WITH GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF JURISDICTION.
C. THAT WITH RESPECT TO PETITIONING MEMBERS, THEY
HAVE BEEN DEPRIVED OF THEIR CONSTITUTIONAL RIGHT TO
DUE PROCESS OF LAW. (P. 13, Rollo)
We find unmeritorious the contention of the petitioners that
the questioned decision and order are contrary to law for
being tantamount to compelling the union to disburse it
funds without the authority of the general membership and
to collect from its members without the benefit of individual
payroll authorization.
Section 5, Article XIII of the petitioner-union's constitution
and by-laws earlier aforequoted is self-executory. The
financial aid extended to any suspended or terminated union
member is realized from the contributions declared to be

compulsory under the said provision in the amount of

seventy-five centavos due weekly from each union member.
The nature of the said contributions being compulsory and
the fact that the purpose as stated is for financial aid clearly
indicate that individual payroll authorizations of the union
members are not necessary. The petitioner-union's
constitution and by-laws govern the relationship between and
among its members. As in the interpretation of contracts, if
the terms are clear and leave no doubt as to the intention of
the parties, the literal meaning of the stipulations shall
control. (See Government Service Insurance System v. Court
of Appeals, 145 SCRA 311 [1986]). Section 5, Article XIII of
the said constitution and by-laws is in line with the petitionerunion's aims and purposes which under Sec. 2, Article II
include
To promote, establish and devise schemes of mutual
assistance among the members in labor disputes.
Thus, there is no doubt that the petitioner-union can be
ordered to release its funds intended for the promotion of
mutual assistance in favor of the private respondent.
We likewise find untenable the argument of the petitioners
that the public respondent, in granting financial aid to the
private respondent, in effect, substituted the decision of the
petitioner-union to do otherwise and that in so doing, the
public respondent gravely abused its discretion amounting to
lack of jurisdiction. The union constitution is a covenant
between the union and its members and among the
members. There is nothing in their constitution which leaves
the legal interpretation of its terms unilaterally to the union
or its officers or even the general membership. It is
noteworthy to quote the ruling made by the public
respondent in this respect, to wit:
The union constitution and by-laws clearly show that any
member who is suspended or terminated from employment

without reasonable cause is entitled to financial assistance

from the union and its members. The problem, however, is
that the constitution does not indicate which body has the
power to determine whether a suspension or dismissal is for
reasonable cause or not. To our mind, the constitution's
silence on this matter is a clear recognition of the labor
arbiter's exclusive jurisdiction over dismissal cases. After all,
the union's constitution and by-laws is valid only insofar as it
is not inconsistent with existing laws. ... . (BLR decision, p. 2;
p. 115, Records)
An aggrieved member has to resort to a government agency
or tribunal. Considering that quasi-judicial agencies like the
public respondent's office have acquired expertise since their
jurisdiction is confined to specific matter, their findings of
fact in connection with their rulings are generally accorded
not only respect but at times even finality if supported by
substantial evidence. (See Manila Mandarin Employees Union
v. National Labor Relations Commission, 154 SCRA 368
[1987]) Riker v. Ople, 155 SCRA 85 [1987]; and Palencia v.
National Labor Relations Commission, 153 SCRA 247 [1987].
We note from the records that the petitioners have conflicting
interpretations of the same disputed provision one in favor of
Jerwin Taguba and another against the private respondent.
On the ancillary issue presented by the petitioners whether
or not the petitioning union members have been deprived of
their right to due process of law because they were never
made parties to the case under consideration, we rule that
the fact that the union officers impleaded since the inception
of the case acted in a representative capacity on behalf of
the entire union's membership substantially meets the
requirements of due process with respect to the said union
members. Moreover, the complaint filed against the union
involves the interpretation of its constitution favoring an
aggrieved member. The members are bound by the terms of
their own constitution. A suit to enforce a union constitution

does not have to be brought against each individual member,

especially where several thousand members form the
membership. If there is any violation of the right to due
process in the case at bar it is as regards the private
respondent since the petitioners-union has dispensed with
due process in deciding not to extend financial aid to the
private respondent in the absence yet of a ruling by the labor
arbiter on whether his dismissal was for a reasonable cause
or not.
The remedy of the petitioners is to strike out or amend the
objectionable features of their constitution. They cannot
expect the public respondent to assist them in its nonenforcement or violation.
WHEREFORE, PREMISES CONSIDERED, the instant petition is
hereby DISMISSED in the absence of a showing of grave
abuse of discretion on the part of the public respondent. The
decision of the public respondent dated April 17, 1986 as
modified in a resolution dated August 17, 1986 is AFFIRMED.
The temporary restraining order issued by the Court on
December 24,1986 is SET ASIDE.
SO ORDERED.

G.R. No. L-43495-99 January 20, 1990

TROPICAL
HUT
EMPLOYEES'
UNION-CGW,
JOSE
ENCINAS, JOSE LUIS TRIBINO, FELIPE DURAN, MANUEL
MANGYAO, MAMERTO CAHUCOM, NEMESIO BARRO,
TEODULFO CAPAGNGAN, VICTORINO ABORRO, VIDAL
MANTOS, DALMACIO DALDE, LUCIO PIASAN, CANUTO
LABADAN, TERESO ROMERDE, CONRADO ENGALAN,
SALVADOR NERVA, BERNARDO ENGALAN, BONIFACIO
CAGATIN, BENEDICTO VALDEZ, EUSEBIO SUPILANAS,
ALFREDO HAMAYAN, ASUERO BONITO, GAVINO DEL

CAMPO, ZACARIAS DAMING, PRUDENCIO LADION,

FULGENCIO BERSALUNA, ALBERTO PERALES, ROMEO
MAGRAMO, GODOFREDO CAMINOS, GILDARDO DUMAS,
JORGE SALDIVAR, GENARO MADRIO, SEGUNDINO
KUIZON, LUIS SANDOVAL, NESTOR JAPAY, ROGELIO
CUIZON, RENATO ANTIPADO, GREGORIO CUEVO,
MARTIN BALAZUELA, CONSTANCIO CHU, CRISPIN
TUBLE, FLORENCIO CHIU, FABIAN CAHUCOM, EMILIANO
VILLAMOR,
RESTITUTO
HANDAYAN,
VICTORINO
ESPEDILLA, NOEL CHUA, ARMANDO ALCORANO,
ELEUTERIO TAGUIK, SAMSON CRUDA, DANILO CASTRO,
CENON VALLENAS, DANILO CAWALING, SIMPLICIO
GALLEROS, PERFECTO CUIZON, PROCESO LAUROS,
ANICETO BAYLON, EDISON ANDRES, REYNALDO
BAGOHIN, IRENEO SUPANGAN, RODRIGO CAGATIN,
TEODORO ORENCIO, ARMANDO LUAYON, JAIME NERVA,
NARCISO CUIZON, ALFREDO DEL ROSARIO, EDUARDO
LORENZO, PEDRO ARANGO, VICENTE SUPANGAN,
JACINTO BANAL AND BONIFACIO PUERTO, petitioners,
vs.
TROPICAL HUT FOOD MARKET, INC., ESTELITA J. QUE,
ARTURO DILAG, MARCELINO LONTOK JR., NATIONAL
ASSOCIATION OF TRADE UNIONS (NATU), NATIONAL
LABOR RELATIONS COMMISSION (NLRC), HON. DIEGO
P. ATIENZA, GERONIMO Q. QUADRA, FEDERICO C.
BORROMEO, AND HON. BLAS F. OPLE,respondents.
Pacifico C. Rosal for petitioners.
Marcelino Lontok, Jr. for private respondents.
Dizon, Vitug & Fajardo Law Office for Tropical Hut Food
Market, Inc. and Que.

MEDIALDEA, J.:

This is a petition for certiorari under Rule 65 seeking to set

aside the decisions of the public respondents Secretary of
Labor and National Labor Relations Commission which
reversed the Arbitrators rulings in favor of petitioners herein.
The following factual background of this case appears from
the record:
On January 2, 1968, the rank and file workers of the Tropical
Hut Food Market Incorporated, referred to herein as
respondent company, organized a local union called the
Tropical Hut Employees Union, known for short as the THEU,
elected their officers, adopted their constitution and by-laws
and immediately sought affiliation with the National
Association of Trade Unions (NATU). On January 3, 1968, the
NATU accepted the THEU application for affiliation. Following
such affiliation with NATU, Registration Certificate No. 5544-IP
was issued by the Department of Labor in the name of the
Tropical Hut Employees Union NATU. It appears, however,
that NATU itself as a labor federation, was not registered with
the Department of Labor.
After several negotiations were conducted between THEUNATU, represented by its local president and the national
officers of the NATU, particularly Ignacio Lacsina, President,
Pacifico Rosal, Executive Vice-President and Marcelino
Lontok, Jr., Vice President, and respondent Tropical Hut Food
Market, Incorporated, thru its President and General
Manager, Cesar Azcona, Sr., a Collective Bargaining
Agreement was concluded between the parties on April 1,
1968, the term of which expired on March 31, 1971. Said
agreement' contained these clear and unequivocal terms:
This Agreement made and entered into this __________ day of
___________, 1968, by and between:
The Tropical Hut Food Market, Inc., a corporation duly
organized and existing under and by virtue of the laws of the

Republic of the Philippines, with principal office at Quezon

City, represented in this Act by its President, Cesar B. Azcona
(hereinafter referred to as the Company)
and
The Tropical Hut Employees Union NATU, a legitimate labor
organization duly organized and existing in accordance with
the laws of the Republic of the Philippines, and affiliated with
the National Association of Trade Unions, with offices at San
Luis Terraces, Ermita, Manila, and represented in this Act by
its undersigned officers (hereinafter referred to as the UNION)
Witnesseth:
xxx xxx xxx
Article I
Coverage and Effectivity
Sec. 1. The COMPANY recognizes the UNION as the sole and
exclusive collective bargaining agent for all its workers and
employees in all matters concerning wages, hours of work,
and other terms and conditions of employment.
xxx xxx xxx
Article III
Union Membership and Union Check-off
Sec. 1 . . . Employees who are already members of the
UNION at the time of the signing of this Agreement or who
become so thereafter shall be required to maintain their
membership therein as a condition of continued employment.
xxx xxx xxx
Sec. 3Any employee who is expelled from the UNION for
joining another federation or forming another union, or who

fails or refuses to maintain his membership therein as

required, . . . shall, upon written request of the UNION be
discharged by the COMPANY. (Rollo, pp. 667-670)
And attached to the Agreement as Appendix "A" is a checkoff Authorization Form, the terms of which are as follows:
We, the undersigned, hereby designate the NATIONAL
Association of Trade Unions, of which the TROPICAL HUT
EMPLOYEES UNION is an affiliate as sole collective bargaining
agent in all matters relating to salary rates, hours of work
and other terms and conditions of employment in the Tropical
Hut Food Market, Inc. and we hereby authorize the said
company to deduct the amount of Four (P 4.00) Pesos each
every month as our monthly dues and to deliver the amount
to the Treasurer of the Union or his duly authorized
representatives. (Rollo, pp. 680-684)
On May 21, 1971, respondent company and THEU-NATU
entered into a new Collective Bargaining Agreement which
ended on March 31, 1974. This new CBA incorporated the
previous union-shop security clause and the attached checkoff authorization form.
Sometime in July, 1973, Arturo Dilag, incumbent President of
THEU-NATU, was appointed by the respondent company as
Assistant Unit Manager. On July 24, 1973, he wrote the
general membership of his union that for reason of his
present position, he was resigning as President of the THEUNATU effective that date. As a consequence thereof, his VicePresident, Jose Encinas, assumed and discharged the duties
of the presidency of the THEU-NATU.
On December 19,1973, NATU received a letter dated
December 15, 1973, jointly signed by the incumbent officers
of the local union informing the NATU that THEU was
disaffiliating from the NATU federation. On December 20,
1973, the Secretary of the THEU, Nemesio Barro, made an

announcement in an open letter to the general membership

of the THEU, concerning the latter's disaffiliation from the
NATU and its affiliation with the Confederation of General
Workers (CGW). The letter was passed around among the
members of the THEU-NATU, to which around one hundred
and thirty-seven (137) signatures appeared as having given
their consent to and acknowledgment of the decision to
disaffiliate the THEU from the NATU.
On January 1, 1974, the general membership of the so-called
THEU-CGW held its annual election of officers, with Jose
Encinas elected as President. On January 3, 1974, Encinas, in
his capacity as THEU-CGW President, informed the
respondent company of the result of the elections. On
January 9, 1974, Pacifico Rosal, President of the
Confederation of General Workers (CGW), wrote a letter in
behalf of complainant THEU-CGW to the respondent company
demanding the remittance of the union dues collected by the
Tropical Hut Food Mart, Incorporated to the THEU-CGW, but
this was refused by the respondent company.
On January 11, 1974, the NATU thru its Vice-President
Marcelino Lontok, Jr., wrote Vidal Mantos, requiring the latter
to assume immediately the position of President of the THEUNATU in place of Jose Encinas, but the position was declined
by Mantos. On the same day, Lontok, Jr., informed Encinas in
a letter, concerning the request made by the NATU federation
to the respondent company to dismiss him (Encinas) in view
of his violation of Section 3 of Article III of the Collective
Bargaining Agreement. Encinas was also advised in the letter
that NATU was returning the letter of disaffiliation on the
ground that:
1. Under the restructuring program NOT of the Bureau of
Labor but of the Philippine National Trade Union Center in
conjunction with the NATU and other established national
labor centers, retail clerks and employees such as our

members in the Tropical Hut pertain to Industry II which by

consensus, has been assigned already to the jurisdiction of
the NATU;
2. The right to disaffiliate belongs to the union membership
who on the basis of verified reports received by have
not even been consulted by you regarding the matter;
3. Assuming that the disaffiliation decision was properly
reached; your letter nevertheless is unacceptable in view of
Article V, Section 1, of the NATU Constitution which provides
that "withdrawal from the organization shall he valid provided
three (3) months notice of intention to withdraw is served
upon the National Executive Council." (p. 281, Rollo)
In view of NATU's request, the respondent company, on the
same day, which was January 11, 1974, suspended Encinas
pending the application for clearance with the Department of
Labor to dismiss him. On January 12, 1974, members of the
THEU-CGW passed a resolution protesting the suspension of
Encinas and reiterated their ratification and approval of their
union's disaffiliation from NATU and their affiliation with the
Confederation of General Workers (CGW). It was Encinas'
suspension that caused the filing of NLRC Case No. LR-2511
on January 11, 1974 against private respondents herein,
charging them of unfair labor practice.
On January 15,1974, upon the request of NATU, respondent
company applied for clearance with the Secretary of Labor to
dismiss the other officers and members of THEU-CGW. The
company also suspended them effective that day. NLRC Case
No. LR-2521 was filed by THEU-CGW and individual
complainants against private respondents for unfair labor
practices.
On January 19, 1974, Lontok, acting as temporary chairman,
presided over the election of officers of the remaining THEUNATU in an emergency meeting pending the holding of a

special election to be called at a later date. In the alleged

election, Arturo Dilag was elected acting THEU-NATU
President together with the other union officers. On February
14, 1974, these temporary officers were considered as
having been elected as regular officers for the year 1974.
On January 30, 1974, petitioner THEU-CGW wrote a letter to
Juan Ponce Enrile, Secretary of National Defense, complaining
of the unfair labor practices committed by respondent
company against its members and requesting assistance on
the matter. The aforementioned letter contained the
signatures of one hundred forty-three (143) members.
On February 24,1974, the secretary of THEU-NATU, notified
the entire rank and file employees of the company that they
will be given forty-eight (48) hours upon receipt of the notice
within which to answer and affirm their membership with
THEU-NATU. When the petitioner employees failed to reply,
Arturo Dilag advised them thru letters dated February 26,
March 2 and 5, 1974, that the THEU-NATU shall enforce the
union security clause set forth in the CBA, and that he had
requested respondent company to dismiss them.
Respondent company, thereafter, wrote the petitioner
employees demanding the latter's comment on Dilag's
charges before action was taken thereon. However, no
comment or reply was received from petitioners. In view of
this, Estelita Que, President/General Manager of respondent
company, upon Dilag's request, suspended twenty four (24)
workers on March 5, 1974, another thirty seven (37) on
March 8, 1974 and two (2) more on March 11, 1974, pending
approval by the Secretary of Labor of the application for their
dismissal.
As a consequence thereof, NLRC Case Nos. LR-2971, LR-3015
and an unnumbered case were filed by petitioners against
Tropical Hut Food Market, Incorporated, Estelita Que,
Hernando Sarmiento and Arturo Dilag.

It is significant to note that the joint letter petition signed by

sixty-seven (67) employees was filed with the Secretary of
Labor, the NLRC Chairman and Director of Labor Relations to
cancel the words NATU after the name of Tropical Hut
Employee Union under Registration Certificate No. 5544 IP.
Another letter signed by one hundred forty-six (146)
members of THEU-CGW was sent to the President of the
Philippines informing him of the unfair labor practices
committed by private respondents against THEU-CGW
members.
After hearing the parties in NLRC Cases Nos. 2511 and 2521
jointly filed with the Labor Arbiter, Arbitrator Daniel Lucas
issued an order dated March 21, 1974, holding that the
issues raised by the parties became moot and academic with
the issuance of NLRC Order dated February 25, 1974 in NLRC
Case No. LR-2670, which directed the holding of a
certification election among the rank and file workers of the
respondent company between the THEU-NATU and THEUCGW. He also ordered: a) the reinstatement of all
complainants; b) for the respondent company to cease and
desist from committing further acts of dismissals without
previous order from the NLRC and for the complainant
Tropical Hut Employees UNION-CGW to file representation
cases on a case to case basis during the freedom period
provided for by the existing CBA between the parties (pp. 9193, Rollo).
With regard to NLRC Case Nos. LR-2971, LR-3015, and the
unnumbered case, Arbitrator Cleto T. Villatuya rendered a
decision dated October 14, 1974, the dispositive portion of
which states:
Premises considered, a DECISION is hereby rendered ordering
respondent company to reinstate immediately the sixty three
(63) complainants to their former positions with back wages
from the time they were illegally suspended up to their actual

reinstatement without loss of seniority and other

employment rights and privileges, and ordering the
respondents to desist from further committing acts of unfair
labor practice. The respondent company's application for
clearance filed with the Secretary of Labor to terminate the
subject complainants' services effective March 20 and 23,
1974, should be denied.
SO ORDERED. (pp. 147-148, Rollo)
From the orders rendered above by Abitrator Daniel Lucas in
NLRC Cases No. LR-2511 and LR-2521 and by Arbitrator Cleto
Villatuya in NLRC Cases Nos. LR-2971, LR-3015, and the
unnumbered case, all parties thereto, namely, petitioners
herein, respondent company, NATU and Dilag appealed to the
National Labor Relations Commission.
In a decision rendered on August 1, 1975, the National Labor
Relations Commission found the private respondents' appeals
meritorious, and stated, inter alia:
WHEREFORE, in view of the foregoing premises, the Order of
Arbitrator Lucas in NLRC CASE NOS. LR-2511, 2521 and the
decision of Arbitrator Villatuya in NLRC CASE NOS. LR-2971,
3015 and the unnumbered Case are hereby REVERSED.
Accordingly, the individual complainants are deemed to have
lost their status as employees of the respondent company.
However, considering that the individual complainants are
not presumed to be familiar with nor to have anticipated the
legal mesh they would find themselves in, after their
"disaffiliation" from National Association of Trade Unions and
the THEU-NATU, much less the legal consequences of the
said action which we presume they have taken in all good
faith; considering, further, that the thrust of the new
orientation in labor relations is not towards the punishment
of acts violative of contractual relations but rather towards
fair adjustments of the resulting complications; and
considering, finally, the consequent economic hardships that

would be visited on the individual complainants, if the law

were to be strictly enforced against them, this Commission is
constrained
to
be
magnanimous
in
this
instant,
notwithstanding its obligation to give full force and effect to
the majesty of the law, and hereby orders the respondent
company, under pain of being cited for contempt for failure
to do so, to give the individual complainants a second chance
by reemploying them upon their voluntary reaffirmation of
membership and loyalty to the Tropical Hut Employees UnionNATU and the National Association of Trade Unions in the
event it hires additional personnel.
SO ORDERED. (pp. 312-313, Rollo)
The petitioner employees appealed the decision of the
respondent National Labor Relations Commission to the
Secretary of Labor. On February 23, 1976, the Secretary of
Labor rendered a decision affirming the findings of the
Commission, which provided inter alia:
We find, after a careful review of the record, no sufficient
justification to alter the decision appealed from except that
portion of the dispositive part which states:
. . . this Commission . . . hereby orders respondent company
under pain of being cited for contempt for failure to do so, to
give the individual complainants a second chance by
reemploying them upon their voluntary reaffirmation of
membership and loyalty to the Tropical Hut Employees
UNION-NATU and the National Association of Trade Union in
the event it hires additional personnel.
Compliance by respondent of the above undertaking is not
immediately feasible considering that the same is based on
an uncertain event, i.e., reemployment of individual
complainants "in the event that management hires additional
personnel," after they shall have reaffirmed their loyalty to
THEU-NATU, which is unlikely.

In lieu of the foregoing, and to give complainants positive

relief pursuant to Section 9, Implementing Instruction No. 1.
dated November 9, 1972, respondent is hereby ordered to
grant to all the individual complainants financial assistance
equivalent to one (1) month salary for every year of service.
WHEREFORE, with the modification as above indicated, the
Decision of the National Labor Relations Commission is
hereby affirmed.
SO ORDERED.(pp. 317-318, Rollo)
From the various pleadings filed and arguments adduced by
petitioners and respondents, the following issues appear to
be those presented for resolution in this petition to wit: 1)
whether or not the petitioners failed to exhaust
administrative remedies when they immediately elevated the
case to this Court without an appeal having been made to
the Office of the President; 2) whether or not the disaffiliation
of the local union from the national federation was valid; and
3) whether or not the dismissal of petitioner employees
resulting from their unions disaffiliation for the mother
federation was illegal and constituted unfair labor practice on
the part of respondent company and federation.
We find the petition highly meritorious.
The applicable law then is the Labor Code, PD 442, as
amended by PD 643 on January 21, 1975, which states:
Art. 222. Appeal . . .
xxx xxx xxx
Decisions of the Secretary of Labor may be appealed to the
President of the Philippines subject to such conditions or
limitations as the President may direct. (Emphasis ours)

The remedy of appeal from the Secretary of Labor to the

Office of the President is not a mandatory requirement before
resort to courts can be had, but an optional relief provided by
law to parties seeking expeditious disposition of their labor
disputes. Failure to avail of such relief shall not in any way
served as an impediment to judicial intervention. And where
the issue is lack of power or arbitrary or improvident exercise
thereof, decisions of the Secretary of Labor may be
questioned in a certiorari proceeding without prior appeal to
the President (Arrastre Security Association TUPAS v. Ople,
No. L-45344, February 20, 1984, 127 SCRA 580). Since the
instant petition raises the same issue of grave abuse of
discretion of the Secretary of Labor amounting to lack of or in
excess of jurisdiction in deciding the controversy, this Court
can properly take cognizance of and resolve the issues raised
herein.
This brings Us to the question of the legality of the dismissal
meted to petitioner employees. In the celebrated case
of Liberty Cotton Mills Workers Union v. Liberty Cotton Mills,
L-33187, September 4, 1975, 66 SCRA 512, We held that the
validity of the dismissals pursuant to the union security
clause in the collective bargaining agreement hinges on the
validity of the disaffiliation of the local union from the
federation.
The right of a local union to disaffiliate from its mother
federation is well-settled. A local union, being a separate and
voluntary association, is free to serve the interest of all its
members including the freedom to disaffiliate when
circumstances warrant. This right is consistent with the
constitutional guarantee of freedom of association (Volkschel
Labor Union v. Bureau of Labor Relations, No. L-45824, June
19, 1985, 137 SCRA 42).
All employees enjoy the right to self organization and to form
and join labor organizations of their own choosing for the

purpose of collective bargaining and to engage in concerted

activities for their mutual aid or protection. This is a
fundamental right of labor that derives its existence from the
Constitution. In interpreting the protection to labor and social
justice provisions of the Constitution and the labor laws or
rules or regulations, We have always adopted the liberal
approach which favors the exercise of labor rights.
Relevant on this point is the basic principle We have
repeatedly in affirmed in many rulings:
. . . The locals are separate and distinct units primarily
designed to secure and maintain an equality of bargaining
power between the employer and their employee-members
in the economic struggle for the fruits of the joint productive
effort of labor and capital; and the association of the locals
into the national union (PAFLU) was in furtherance of the
same end. These associations are consensual entities
capable of entering into such legal relations with their
member. The essential purpose was the affiliation of the local
unions into a common enterprise to increase by collective
action the common bargaining power in respect of the terms
and conditions of labor. Yet the locals remained the basic
units of association, free to serve their own and the common
interest of all, subject to the restraints imposed by the
Constitution and By-Laws of the Association, and free also to
renounce the affiliation for mutual welfare upon the terms
laid down in the agreement which brought it into existence.
(Adamson & Adamson, Inc. v. CIR, No. L-35120, January 31,
1984, 127 SCRA 268; Elisco-Elirol Labor Union (NAFLU) v.
Noriel, No. L-41955, December 29, 1977, 80 SCRA 681;
Liberty Cotton Mills Workers Union v. Liberty Cotton Mills,
Inc., supra).
The inclusion of the word NATU after the name of the local
union THEU in the registration with the Department of Labor
is merely to stress that the THEU is NATU's affiliate at the

time of the registration. It does not mean that the said local
union cannot stand on its own. Neither can it be interpreted
to mean that it cannot pursue its own interests
independently of the federation. A local union owes its
creation and continued existence to the will of its members
and not to the federation to which it belongs.
When the local union withdrew from the old federation to join
a new federation, it was merely exercising its primary right to
labor organization for the effective enhancement and
protection of common interests. In the absence of
enforceable provisions in the federation's constitution
preventing disaffiliation of a local union a local may sever its
relationship with its parent (People's Industrial and
Commercial Employees and Workers Organization (FFW) v.
People's Industrial and Commercial Corporation, No. 37687,
March 15, 1982, 112 SCRA 440).
There is nothing in the constitution of the NATU or in the
constitution of the THEU-NATU that the THEU was expressly
forbidden to disaffiliate from the federation (pp. 62,
281, Rollo), The alleged non-compliance of the local union
with the provision in the NATU Constitution requiring the
service of three months notice of intention to withdraw did
not produce the effect of nullifying the disaffiliation for the
following grounds: firstly, NATU was not even a legitimate
labor organization, it appearing that it was not registered at
that time with the Department of Labor, and therefore did not
possess and acquire, in the first place, the legal personality
to enforce its constitution and laws, much less the right and
privilege under the Labor Code to organize and affiliate
chapters or locals within its group, and secondly, the act of
non-compliance with the procedure on withdrawal is
premised on purely technical grounds which cannot rise
above the fundamental right of self-organization.

Respondent Secretary of Labor, in affirming the decision of

the respondent Commission, concluded that the supposed
decision to disaffiliate was not the subject of a free and open
discussion and decision on the part of the THEU-NATU
general membership (p. 305, Rollo). This, however, is
contradicted by the evidence on record. Moreover, We are
inclined to believe Arbitrator Villatuya's findings to the
contrary, as follows:
. . . . However, the complainants refute this allegation by
submitting the following: a) Letter dated December 20, 1.973
signed by 142 members (Exhs. "B to B-5") resolution dated
January 12, 1974, signed by 140 members (Exhs. "H to H-6")
letter dated February 26, 1974 to the Department of Labor
signed by 165 members (Exhs. "I to I-10"); d) letter dated
January 30, 1974 to the Secretary of the National Defense
signed by 144 members (Exhs. "0 to 0-5") and; e) letter
dated March 6, 1974 signed by 146 members addressed to
the President of the Philippines (Exhs. "HH to HH-5"), to show
that in several instances, the members of the THEU-NATU
have acknowledged their disaffiliation from NATU. The letters
of the complainants also indicate that an overwhelming
majority have freely and voluntarily signed their union's
disaffiliation from NATU, otherwise, if there was really
deception employed in securing their signatures as claimed
by NATU/ Dilag, it could not be possible to get their
signatures in five different documents. (p. 144, Rollo)
We are aware of the time-honored doctrine that the findings
of the NLRC and the Secretary of Labor are binding on this
Court if supported by substantial evidence. However, in the
same way that the findings of facts unsupported by
substantial and credible evidence do not bind this Court,
neither will We uphold erroneous conclusions of the NLRC and
the Secretary of Labor when We find that the latter
committed grave abuse of discretion in reversing the decision
of the labor arbiter (San Miguel Corporation v. NLRC, L-50321,

March 13, 1984, 128 SCRA 180). In the instant case, the
factual findings of the arbitrator were correct against that of
public respondents.
Further, there is no merit in the contention of the
respondents that the act of disaffiliation violated the union
security clause of the CBA and that their dismissal as a
consequence thereof is valid. A perusal of the collective
bargaining agreements shows that the THEU-NATU, and not
the NATU federation, was recognized as the sole and
exclusive collective bargaining agent for all its workers and
employees in all matters concerning wages, hours of work
and other terms and conditions of employment (pp. 667706, Rollo). Although NATU was designated as the sole
bargaining agent in the check-off authorization form attached
to the CBA, this simply means it was acting only for and in
behalf of its affiliate. The NATU possessed the status of an
agent while the local union remained the basic principal
union which entered into contract with the respondent
company. When the THEU disaffiliated from its mother
federation, the former did not lose its legal personality as the
bargaining union under the CBA. Moreover, the union security
clause embodied in the agreements cannot be used to justify
the dismissals meted to petitioners since it is not applicable
to the circumstances obtaining in this case. The CBA imposes
dismissal only in case an employee is expelled from the
union for joining another federation or for forming another
union or who fails or refuses to maintain membership therein.
The case at bar does not involve the withdrawal of merely
some employees from the union but of the whole THEU itself
from its federation. Clearly, since there is no violation of the
union security provision in the CBA, there was no sufficient
ground to terminate the employment of petitioners.
Public respondents considered the existence of Arturo Dilag's
group as the remaining true and valid union. We, however,

are inclined to agree instead with the Arbitrator's findings

when he declared:
. . . . Much more, the so-called THEU-NATU under Dilag's
group which assumes to be the original THEU-NATU has a
very doubtful and questionable existence not to mention that
the alleged president is performing supervisory functions and
not qualified to be a bona fide member of the rank and file
union. (p. 146, Rollo)
Records show that Arturo Dilag had resigned in the past as
President of THEU-NATU because of his promotion to a
managerial or supervisory position as Assistant Unit Manager
of respondent Company. Petitioner Jose Encinas replaced
Dilag as President and continued to hold such position at the
time of the disaffiliation of the union from the federation. It is
therefore improper and contrary to law for Dilag to reassume
the leadership of the remaining group which was alleged to
be the true union since he belonged to the managerial
personnel who could not be expected to work for the
betterment of the rank and file employees. Besides,
managers and supervisors are prohibited from joining a rank
and file union (Binalbagan Isabela Sugar Co., Inc. (BISCOM) v.
Philippine Association of Free Labor Unions (PAFLU), et al., L18782, August 29, 1963, 8 SCRA 700). Correspondingly, if a
manager or supervisor organizes or joins a rank and file
union, he will be required to resign therefrom (Magalit, et al.
v. Court of Industrial Relations, et al., L-20448, May 25,
1965,14 SCRA 72).
Public respondents further submit that several employees
who disaffiliate their union from the NATU subsequently
retracted and reaffirmed their membership with the THEUNATU. In the decision which was affirmed by respondent
Secretary of Labor, the respondent Commission stated that:
. . . out of the alleged one hundred and seventy-one (171)
members of the THEU-CGW whose signatures appeared in

the "Analysis of Various Documents Signed by Majority

Members of the THEU-CGW, (Annex "T", Complainants),
which incidentally was relied upon by Arbitrator Villatuya in
holding that complainant THEU-CGW commanded the
majority of employees in respondent company, ninety-three
(93) of the alleged signatories reaffirmed their membership
with the THEU-NATU and renounced whatever connection
they may have had with other labor unions, (meaning the
complainant THEU-CGW) either through resolution or
membership application forms they have unwittingly signed."
(p. 306, Rollo)
Granting arguendo, that the fact of retraction is true, the
evidence on record shows that the letters of retraction were
executed on various dates beginning January 11, 1974 to
March 8, 1974 (pp. 278-280, Rollo). This shows that the
retractions were made more or less after the suspension
pending dismissal on January 11, 1974 of Jose Encinas,
formerly THEU-NATU President, who became THEU-CGW
President, and the suspension pending their dismissal of the
other elected officers and members of the THEU-CGW on
January 15, 1974. It is also clear that some of the retractions
occurred after the suspension of the first set of workers
numbering about twenty-four (24) on March 5, 1974. There is
no use in saying that the retractions obliterated the act of
disaffiliation as there are doubts that they were freely and
voluntarily done especially during such time when their own
union officers and co-workers were already suspended
pending their dismissal.
Finally, with regard to the process by which the workers were
suspended or dismissed, this Court finds that it was hastily
and summarily done without the necessary due process. The
respondent company sent a letter to petitioners herein,
advising them of NATU/Dilag's recommendation of their
dismissal and at the same time giving them forty-eight (48)
hours within which to comment (p. 637, Rollo). When

petitioners failed to do so, respondent company immediately

suspended them and thereafter effected their dismissal. This
is certainly not in fulfillment of the mandate of due process,
which is to afford the employee to be dismissed an
opportunity to be heard.
The prerogative of the employer to dismiss or lay-off an
employee should be done without abuse of discretion or
arbitrainess, for what is at stake is not only the employee's
name or position but also his means of livelihood. Thus, the
discharge of an employee from his employment is null and
void where the employee was not formally investigated and
given the opportunity to refute the alleged findings made by
the company (De Leon v. NLRC, L-52056, October 30, 1980,
100 SCRA 691). Likewise, an employer can be adjudged
guilty of unfair labor practice for having dismissed its
employees in line with a closed shop provision if they were
not given a proper hearing (Binalbagan-Isabela Sugar Co.,
Inc.,(BISCOM) v. Philippine Association of Free Labor Unions
(PAFLU) et al., L-18782, August 29, 1963, 8 SCRA 700).
In view of the fact that the dispute revolved around the
mother federation and its local, with the company
suspending and dismissing the workers at the instance of the
mother federation then, the company's liability should be
limited to the immediate reinstatement of the workers. And
since their dismissals were effected without previous hearing
and at the instance of NATU, this federation should be held
liable to the petitioners for the payment of their backwages,
as what We have ruled in the Liberty Cotton Mills Case
(supra).
ACCORDINGLY, the petition is hereby GRANTED and the
assailed decision of respondent Secretary of Labor is
REVERSED and SET ASIDE, and the respondent company is
hereby ordered to immediately reinstate all the petitioner
employees within thirty (30) days from notice of this

decision. If reinstatement is no longer feasible, the

respondent company is ordered to pay petitioners separation
pay equivalent to one (1) month pay for every year of
service. The respondent NATU federation is directed to pay
petitioners the amount of three (3) years backwages without
deduction or qualification. This decision shall be immediately
executory upon promulgation and notice to the parties.
SO ORDERED.

G.R. No. 82914 June 20, 1988

KAPATIRAN SA MEAT AND CANNING DIVISION (TUPAS
Local
Chapter
No.
1027), petitioner,
vs.
THE HONORABLE BLR DIRECTOR PURA FERRER
CALLEJA, MEAT AND CANNING DIVISION UNIVERSAL
ROBINA CORPORATION and MEAT AND CANNING
DIVISION NEW EMPLOYEES AND WORKERS UNITED
LABOR ORGANIZATION, respondents.
Alar, Comia, Manalo and Associates for petitioner.
Danilo Bolos for respondent Robina Corporation.
RESOLUTION

GRIO-AQUINO, J.:
The petitioner, Kapatiran sa Meat and Canning Division
TUPAS Local Chapter No. 1027) hereinafter referred to as
"TUPAS," seeks a review of the resolution dated January 27,
1988 (Annex D) of public respondent Pura Ferrer-Calleja,
Director of the Bureau of Labor Relations, dismissing its
appeal from the Order dated November 17, 1987 (Annex C)
of the Med-Arbiter Rasidali C. Abdullah ordering a
certification election to be conducted among the regular daily
paid rank and file employees/workers of Universal Robina
Corporation-Meat and Canning Division to determine which of
the contending unions:

a) Kapatiran sa Meat and Canning Division TUPAS Local

Chapter No. 1027 (or "TUPAS" for brevity);
b) Meat and Canning Division New Employees and Workers
United Labor Organization (or "NEW ULO" for brevity);
c) No union.
shall be the bargaining unit of the daily wage rank and file
employees in the Meat and Canning Division of the company.
From 1984 to 1987 TUPAS was the sole and exclusive
collective bargaining representative of the workers in the
Meat and Canning Division of the Universal Robina
Corporation, with a 3-year collective bargaining agreement
(CBA) which was to expire on November 15, 1987.
Within the freedom period of 60 days prior to the expiration
of its CBA, TUPAS filed an amended notice of strike on
September 28, 1987 as a means of pressuring the company
to extend, renew, or negotiate a new CBA with it.
On October 8, 1987, the NEW ULO, composed mostly of
workers belonging to the IGLESIA NI KRISTO sect, registered
as a labor union.
On October 12, 1987, the TUPAS staged a strike. ROBINA
obtained an injunction against the strike, resulting in an
agreement to return to work and for the parties to negotiate
a new CBA.
The next day, October 13, 1987, NEW ULO, claiming that it
has "the majority of the daily wage rank and file employees
numbering 191," filed a petition for a certification election at
the Bureau of Labor Relations (Annex A).
TUPAS moved to dismiss the petition for being defective in
form and that the members of the NEW ULO were mostly
members of the Iglesia ni Kristo sect which three (3) years

previous refused to affiliate with any labor union. It also

accused the company of using the NEW ULO to defeat TUPAS'
bargaining rights (Annex B).
On November 17, 1987, the Med-Arbiter ordered the holding
of a certification election within 20 days (Annex C).
TUPAS appealed to the Bureau of Labor Relations BLR. In the
meantime, it was able to negotiate a new 3-year CBA with
ROBINA, which was signed on December 3, 1987 and to
expire on November 15, 1990.
On January 27, 1988, respondent BLR Director Calleja
dismissed the appeal (Annex D).
TUPAS' motion for reconsideration (Annex E) was denied on
March 17, 1988 (Annex F). On April 30, 1988, it filed this
petition alleging that the public respondent acted in excess
of her jurisdiction and with grave abuse of discretion in
affirming the Med-Arbiter's order for a certification election.
After deliberating on the petition and the documents annexed
thereto, We find no merit in the Petition. The public
respondent did not err in dismissing the petitioner's appeal in
BLR Case No. A-12-389-87. This Court's decision inVictoriano
vs. Elizalde Rope Workers' Union, 59 SCRA 54, upholding the
right of members of the IGLESIA NI KRISTO sect not to join a
labor union for being contrary to their religious beliefs, does
not bar the members of that sect from forming their own
union. The public respondent correctly observed that the
"recognition of the tenets of the sect ... should not infringe on
the basic right of self-organization granted by the
constitution to workers, regardless of religious affiliation."
The fact that TUPAS was able to negotiate a new CBA with
ROBINA within the 60-day freedom period of the existing
CBA, does not foreclose the right of the rival union, NEW ULO,
to challenge TUPAS' claim to majority status, by filing a

timely petition for certification election on October 13, 1987

before TUPAS' old CBA expired on November 15, 1987 and
before it signed a new CBA with the company on December
3, 1987. As pointed out by Med-Arbiter Abdullah, a
"certification election is the best forum in ascertaining the
majority status of the contending unions wherein the workers
themselves can freely choose their bargaining representative
thru secret ballot." Since it has not been shown that this
order is tainted with unfairness, this Court will not thwart the
holding of a certification election (Associated Trade Unions
[ATU] vs. Noriel, 88 SCRA 96).
WHEREFORE, the petition for certiorari is denied, with costs
against the petitioner.
SO ORDERED.

G.R. No. L-25246 September 12, 1974

BENJAMIN
VICTORIANO, plaintiff-appellee,
vs.
ELIZALDE ROPE WORKERS' UNION and ELIZALDE ROPE
FACTORY, INC., defendants, ELIZALDE ROPE WORKERS'
UNION, defendant-appellant.
Salonga, Ordonez, Yap, Sicat & Associates for plaintiffappellee.
Cipriano Cid & Associates for defendant-appellant.

ZALDIVAR, J.:p
Appeal to this Court on purely questions of law from the
decision of the Court of First Instance of Manila in its Civil
Case No. 58894.
The undisputed facts that spawned the instant case follow:

Benjamin Victoriano (hereinafter referred to as Appellee), a

member of the religious sect known as the "Iglesia ni Cristo",
had been in the employ of the Elizalde Rope Factory, Inc.
(hereinafter referred to as Company) since 1958. As such
employee, he was a member of the Elizalde Rope Workers'
Union (hereinafter referred to as Union) which had with the
Company a collective bargaining agreement containing a
closed shop provision which reads as follows:
Membership in the Union shall be required as a condition of
employment for all permanent employees workers covered
by this Agreement.
The collective bargaining agreement expired on March 3,
1964 but was renewed the following day, March 4, 1964.
Under Section 4(a), paragraph 4, of Republic Act No. 875,
prior to its amendment by Republic Act No. 3350, the
employer was not precluded "from making an agreement
with a labor organization to require as a condition of
employment membership therein, if such labor organization
is the representative of the employees." On June 18, 1961,
however, Republic Act No. 3350 was enacted, introducing an
amendment to paragraph (4) subsection (a) of section 4 of
Republic Act No. 875, as follows: ... "but such agreement
shall not cover members of any religious sects which prohibit
affiliation of their members in any such labor organization".
Being a member of a religious sect that prohibits the
affiliation of its members with any labor organization,
Appellee presented his resignation to appellant Union in
1962, and when no action was taken thereon, he reiterated
his resignation on September 3, 1974. Thereupon, the Union
wrote a formal letter to the Company asking the latter to
separate Appellee from the service in view of the fact that he
was resigning from the Union as a member. The management
of the Company in turn notified Appellee and his counsel that
unless the Appellee could achieve a satisfactory arrangement

with the Union, the Company would be constrained to

dismiss him from the service. This prompted Appellee to file
an action for injunction, docketed as Civil Case No. 58894 in
the Court of First Instance of Manila to enjoin the Company
and the Union from dismissing Appellee. 1 In its answer, the
Union invoked the "union security clause" of the collective
bargaining agreement; assailed the constitutionality of
Republic Act No. 3350; and contended that the Court had no
jurisdiction over the case, pursuant to Republic Act No. 875,
Sections 24 and 9 (d) and (e). 2 Upon the facts agreed upon
by the parties during the pre-trial conference, the Court a
quorendered its decision on August 26, 1965, the dispositive
portion of which reads:
IN VIEW OF THE FOREGOING, judgment is rendered enjoining
the defendant Elizalde Rope Factory, Inc. from dismissing the
plaintiff from his present employment and sentencing the
defendant Elizalde Rope Workers' Union to pay the plaintiff
P500 for attorney's fees and the costs of this action. 3
From this decision, the Union appealed directly to this Court
on purely questions of law, assigning the following errors:
I. That the lower court erred when it did not rule that
Republic Act No. 3350 is unconstitutional.
II. That the lower court erred when it sentenced appellant
herein to pay plaintiff the sum of P500 as attorney's fees and
the cost thereof.
In support of the alleged unconstitutionality of Republic Act
No. 3350, the Union contented, firstly, that the Act infringes
on the fundamental right to form lawful associations; that
"the very phraseology of said Republic Act 3350, that
membership in a labor organization is banned to all those
belonging to such religious sect prohibiting affiliation with
any labor organization" 4 , "prohibits all the members of a
given religious sect from joining any labor union if such sect

prohibits affiliations of their members thereto" 5 ; and,

consequently, deprives said members of their constitutional
right to form or join lawful associations or organizations
guaranteed by the Bill of Rights, and thus becomes
obnoxious to Article III, Section 1 (6) of the 1935
Constitution. 6
Secondly, the Union contended that Republic Act No. 3350 is
unconstitutional for impairing the obligation of contracts in
that, while the Union is obliged to comply with its collective
bargaining agreement containing a "closed shop provision,"
the Act relieves the employer from its reciprocal obligation of
cooperating in the maintenance of union membership as a
condition of employment; and that said Act, furthermore,
impairs the Union's rights as it deprives the union of dues
from members who, under the Act, are relieved from the
obligation to continue as such members. 7
Thirdly, the Union contended that Republic Act No. 3350
discriminatorily favors those religious sects which ban their
members from joining labor unions, in violation of Article Ill,
Section 1 (7) of the 1935 Constitution; and while said Act
unduly protects certain religious sects, it leaves no rights or
protection to labor organizations. 8
Fourthly, Republic Act No. 3350, asserted the Union, violates
the constitutional provision that "no religious test shall be
required for the exercise of a civil right," in that the laborer's
exercise of his civil right to join associations for purposes not
contrary to law has to be determined under the Act by his
affiliation with a religious sect; that conversely, if a worker
has to sever his religious connection with a sect that
prohibits membership in a labor organization in order to be
able to join a labor organization, said Act would violate
religious freedom. 9
Fifthly, the Union contended that Republic Act No. 3350,
violates the "equal protection of laws" clause of the

Constitution, it being a discriminately legislation, inasmuch

as by exempting from the operation of closed shop
agreement the members of the "Iglesia ni Cristo", it has
granted said members undue advantages over their fellow
workers, for while the Act exempts them from union
obligation and liability, it nevertheless entitles them at the
same time to the enjoyment of all concessions, benefits and
other emoluments that the union might secure from the
employer. 10
Sixthly, the Union contended that Republic Act No. 3350
violates the constitutional provision regarding the promotion
of social justice. 11
Appellant Union, furthermore, asserted that a "closed shop
provision" in a collective bargaining agreement cannot be
considered violative of religious freedom, as to call for the
amendment introduced by Republic Act No. 3350; 12and that
unless Republic Act No. 3350 is declared unconstitutional,
trade unionism in this country would be wiped out as
employers would prefer to hire or employ members of the
Iglesia ni Cristo in order to do away with labor
organizations. 13
Appellee, assailing appellant's arguments, contended that
Republic Act No. 3350 does not violate the right to form
lawful associations, for the right to join associations includes
the right not to join or to resign from a labor organization, if
one's conscience does not allow his membership therein, and
the Act has given substance to such right by prohibiting the
compulsion of workers to join labor organizations; 14 that said
Act does not impair the obligation of contracts for said law
formed part of, and was incorporated into, the terms of the
closed shop agreement; 15 that the Act does not violate the
establishment of religion clause or separation of Church and
State, for Congress, in enacting said law, merely
accommodated the religious needs of those workers whose

religion prohibits its members from joining labor unions, and

balanced the collective rights of organized labor with the
constitutional right of an individual to freely exercise his
chosen religion; that the constitutional right to the free
exercise of one's religion has primacy and preference over
union security measures which are merely contractual 16 ;
that said Act does not violate the constitutional provision of
equal protection, for the classification of workers under the
Act depending on their religious tenets is based on
substantial distinction, is germane to the purpose of the law,
and applies to all the members of a given class; 17 that said
Act, finally, does not violate the social justice policy of the
Constitution, for said Act was enacted precisely to equalize
employment opportunities for all citizens in the midst of the
diversities of their religious beliefs." 18
I. Before We proceed to the discussion of the first assigned
error, it is necessary to premise that there are some
thoroughly established principles which must be followed in
all cases where questions of constitutionality as obtains in
the instant case are involved. All presumptions are indulged
in favor of constitutionality; one who attacks a statute,
alleging unconstitutionality must prove its invalidity beyond a
reasonable doubt, that a law may work hardship does not
render it unconstitutional; that if any reasonable basis may
be conceived which supports the statute, it will be upheld,
and the challenger must negate all possible bases; that the
courts are not concerned with the wisdom, justice, policy, or
expediency of a statute; and that a liberal interpretation of
the constitution in favor of the constitutionality of legislation
should be adopted. 19
1. Appellant Union's contention that Republic Act No.
3350 prohibits and bans the members of such religious sects
that forbid affiliation of their members with labor unions from
joining labor unions appears nowhere in the wording of
Republic Act No. 3350; neither can the same be deduced by

necessary implication therefrom. It is not surprising,

therefore, that appellant, having thus misread the Act,
committed the error of contending that said Act is obnoxious
to the constitutional provision on freedom of association.
Both the Constitution and Republic Act No. 875 recognize
freedom of association. Section 1 (6) of Article III of the
Constitution of 1935, as well as Section 7 of Article IV of the
Constitution of 1973, provide that the right to form
associations or societies for purposes not contrary to law
shall not be abridged. Section 3 of Republic Act No. 875
provides that employees shall have the right to selforganization and to form, join of assist labor organizations of
their own choosing for the purpose of collective bargaining
and to engage in concerted activities for the purpose of
collective bargaining and other mutual aid or protection.
What the Constitution and the Industrial Peace Act recognize
and guarantee is the "right" to form or join associations.
Notwithstanding the different theories propounded by the
different schools of jurisprudence regarding the nature and
contents of a "right", it can be safely said that whatever
theory one subscribes to, a right comprehends at least two
broad notions, namely: first, liberty or freedom, i.e., the
absence of legal restraint, whereby an employee may act for
himself without being prevented by law; and second, power,
whereby an employee may, as he pleases, join or refrain
from Joining an association. It is, therefore, the employee
who should decide for himself whether he should join or not
an association; and should he choose to join, he himself
makes up his mind as to which association he would join; and
even after he has joined, he still retains the liberty and the
power to leave and cancel his membership with said
organization at any time. 20 It is clear, therefore, that the
right to join a union includes the right to abstain from joining
any union. 21 Inasmuch as what both the Constitution and the
Industrial Peace Act have recognized, and guaranteed to the
employee, is the "right" to join associations of his choice, it

would be absurd to say that the law also imposes, in the

same breath, upon the employee the duty to join
associations. The law does not enjoin an employee to sign up
with any association.
The right to refrain from joining labor organizations
recognized by Section 3 of the Industrial Peace Act is,
however, limited. The legal protection granted to such right
to refrain from joining is withdrawn by operation of law,
where a labor union and an employer have agreed on a
closed shop, by virtue of which the employer may employ
only member of the collective bargaining union, and the
employees must continue to be members of the union for the
duration of the contract in order to keep their jobs. Thus
Section 4 (a) (4) of the Industrial Peace Act, before its
amendment by Republic Act No. 3350, provides that although
it would be an unfair labor practice for an employer "to
discriminate in regard to hire or tenure of employment or any
term or condition of employment to encourage or discourage
membership in any labor organization" the employer is,
however, not precluded "from making an agreement with a
labor organization to require as a condition of employment
membership therein, if such labor organization is the
representative of the employees". By virtue, therefore, of a
closed shop agreement, before the enactment of Republic Act
No. 3350, if any person, regardless of his religious beliefs,
wishes to be employed or to keep his employment, he must
become a member of the collective bargaining union. Hence,
the right of said employee not to join the labor union is
curtailed and withdrawn.
To that all-embracing coverage of the closed shop
arrangement, Republic Act No. 3350 introduced an exception,
when it added to Section 4 (a) (4) of the Industrial Peace Act
the following proviso: "but such agreement shall not cover
members of any religious sects which prohibit affiliation of
their members in any such labor organization". Republic Act

No. 3350 merely excludes ipso jure from the application and
coverage of the closed shop agreement the employees
belonging to any religious sects which prohibit affiliation of
their members with any labor organization. What the
exception provides, therefore, is that members of said
religious sects cannot be compelled or coerced to join labor
unions even when said unions have closed shop agreements
with the employers; that in spite of any closed shop
agreement, members of said religious sects cannot be
refused employment or dismissed from their jobs on the sole
ground that they are not members of the collective
bargaining union. It is clear, therefore, that the assailed Act,
far from infringing the constitutional provision on freedom of
association, upholds and reinforces it. It does not prohibit the
members of said religious sects from affiliating with labor
unions. It still leaves to said members the liberty and the
power to affiliate, or not to affiliate, with labor unions. If,
notwithstanding their religious beliefs, the members of said
religious sects prefer to sign up with the labor union, they
can do so. If in deference and fealty to their religious faith,
they refuse to sign up, they can do so; the law does not
coerce them to join; neither does the law prohibit them from
joining; and neither may the employer or labor union compel
them to join. Republic Act No. 3350, therefore, does not
violate the constitutional provision on freedom of association.
2. Appellant Union also contends that the Act is
unconstitutional for impairing the obligation of its contract,
specifically, the "union security clause" embodied in its
Collective Bargaining Agreement with the Company, by virtue
of which "membership in the union was required as a
condition for employment for all permanent employees
workers". This agreement was already in existence at the
time Republic Act No. 3350 was enacted on June 18, 1961,
and it cannot, therefore, be deemed to have been
incorporated into the agreement. But by reason of this
amendment, Appellee, as well as others similarly situated,

could no longer be dismissed from his job even if he should

cease to be a member, or disaffiliate from the Union, and the
Company could continue employing him notwithstanding his
disaffiliation from the Union. The Act, therefore, introduced a
change into the express terms of the union security clause;
the Company was partly absolved by law from the
contractual obligation it had with the Union of employing only
Union members in permanent positions, It cannot be denied,
therefore, that there was indeed an impairment of said union
security clause.
According to Black, any statute which introduces a change
into the express terms of the contract, or its legal
construction, or its validity, or its discharge, or the remedy
for its enforcement, impairs the contract. The extent of the
change is not material. It is not a question of degree or
manner or cause, but of encroaching in any respect on its
obligation or dispensing with any part of its force. There is an
impairment of the contract if either party is absolved by law
from its performance. 22 Impairment has also been predicated
on laws which, without destroying contracts, derogate from
substantial contractual rights. 23
It should not be overlooked, however, that the prohibition to
impair the obligation of contracts is not absolute and
unqualified. The prohibition is general, affording a broad
outline and requiring construction to fill in the details. The
prohibition is not to be read with literal exactness like a
mathematical formula, for it prohibits unreasonable
impairment only. 24 In spite of the constitutional prohibition,
the State continues to possess authority to safeguard the
vital interests of its people. Legislation appropriate to
safeguarding said interests may modify or abrogate contracts
already in effect. 25 For not only are existing laws read into
contracts in order to fix the obligations as between the
parties, but the reservation of essential attributes of
sovereign power is also read into contracts as a postulate of

the legal order. All contracts made with reference to any

matter that is subject to regulation under the police power
must be understood as made in reference to the possible
exercise of that power. 26 Otherwise, important and valuable
reforms may be precluded by the simple device of entering
into contracts for the purpose of doing that which otherwise
may be prohibited. The policy of protecting contracts against
impairment presupposes the maintenance of a government
by virtue of which contractual relations are worthwhile a
government which retains adequate authority to secure the
peace and good order of society. The contract clause of the
Constitution must, therefore, be not only in harmony with,
but also in subordination to, in appropriate instances, the
reserved power of the state to safeguard the vital interests of
the people. It follows that not all legislations, which have the
effect of impairing a contract, are obnoxious to the
constitutional prohibition as to impairment, and a statute
passed in the legitimate exercise of police power, although it
incidentally destroys existing contract rights, must be upheld
by the courts. This has special application to contracts
regulating relations between capital and labor which are not
merely contractual, and said labor contracts, for being
impressed with public interest, must yield to the common
good. 27
In several occasions this Court declared that the prohibition
against impairing the obligations of contracts has no
application to statutes relating to public subjects within the
domain of the general legislative powers of the state
involving public welfare. 28 Thus, this Court also held that the
Blue Sunday Law was not an infringement of the obligation of
a contract that required the employer to furnish work on
Sundays to his employees, the law having been enacted to
secure the well-being and happiness of the laboring class,
and being, furthermore, a legitimate exercise of the police
power. 29

In order to determine whether legislation unconstitutionally

impairs contract obligations, no unchanging yardstick,
applicable at all times and under all circumstances, by which
the validity of each statute may be measured or determined,
has been fashioned, but every case must be determined
upon its own circumstances. Legislation impairing the
obligation of contracts can be sustained when it is enacted
for the promotion of the general good of the people, and
when the means adopted to secure that end are reasonable.
Both the end sought and the means adopted must be
legitimate, i.e., within the scope of the reserved power of the
state construed in harmony with the constitutional limitation
of that power. 30
What then was the purpose sought to be achieved by
Republic Act No. 3350? Its purpose was to insure freedom of
belief and religion, and to promote the general welfare by
preventing discrimination against those members of religious
sects which prohibit their members from joining labor unions,
confirming thereby their natural, statutory and constitutional
right to work, the fruits of which work are usually the only
means whereby they can maintain their own life and the life
of their dependents. It cannot be gainsaid that said purpose
is legitimate.
The questioned Act also provides protection to members of
said religious sects against two aggregates of group strength
from which the individual needs protection. The individual
employee, at various times in his working life, is confronted
by two aggregates of power collective labor, directed by a
union, and collective capital, directed by management. The
union, an institution developed to organize labor into a
collective force and thus protect the individual employee
from the power of collective capital, is, paradoxically, both
the champion of employee rights, and a new source of their
frustration. Moreover, when the Union interacts with
management, it produces yet a third aggregate of group

strength from which the individual also needs protection

the collective bargaining relationship. 31
The aforementioned purpose of the amendatory law is clearly
seen in the Explanatory Note to House Bill No. 5859, which
later became Republic Act No. 3350, as follows:
It would be unthinkable indeed to refuse employing a person
who, on account of his religious beliefs and convictions,
cannot accept membership in a labor organization although
he possesses all the qualifications for the job. This is
tantamount to punishing such person for believing in a
doctrine he has a right under the law to believe in. The law
would not allow discrimination to flourish to the detriment of
those whose religion discards membership in any labor
organization. Likewise, the law would not commend the
deprivation of their right to work and pursue a modest means
of livelihood, without in any manner violating their religious
faith and/or belief.32
It cannot be denied, furthermore, that the means adopted by
the Act to achieve that purpose exempting the members
of said religious sects from coverage of union security
agreements is reasonable.
It may not be amiss to point out here that the free exercise of
religious profession or belief is superior to contract rights. In
case of conflict, the latter must, therefore, yield to the
former. The Supreme Court of the United States has also
declared on several occasions that the rights in the First
Amendment, which include freedom of religion, enjoy a
preferred position in the constitutional system. 33 Religious
freedom, although not unlimited, is a fundamental personal
right and liberty, 34 and has a preferred position in the
hierarchy of values. Contractual rights, therefore, must yield
to freedom of religion. It is only where unavoidably necessary
to prevent an immediate and grave danger to the security
and welfare of the community that infringement of religious

freedom may be justified, and only to the smallest extent

necessary to avoid the danger.

unless the state can accomplish its purpose without imposing

such burden. 38

3. In further support of its contention that Republic Act No.

3350 is unconstitutional, appellant Union averred that said
Act discriminates in favor of members of said religious sects
in violation of Section 1 (7) of Article Ill of the 1935
Constitution, and which is now Section 8 of Article IV of the
1973 Constitution, which provides:

In Aglipay v. Ruiz 39 , this Court had occasion to state that the

government should not be precluded from pursuing valid
objectives secular in character even if the incidental result
would be favorable to a religion or sect. It has likewise been
held that the statute, in order to withstand the strictures of
constitutional prohibition, must have a secular legislative
purpose and a primary effect that neither advances nor
inhibits religion. 40 Assessed by these criteria, Republic Act
No. 3350 cannot be said to violate the constitutional
inhibition of the "no-establishment" (of religion) clause of the
Constitution.

No law shall be made respecting an establishment of religion,

or prohibiting the free exercise thereof, and the free exercise
and enjoyment of religious profession and worship, without
discrimination and preference, shall forever be allowed. No
religious test shall be required for the exercise of civil or
political rights.
The constitutional provision into only prohibits legislation for
the support of any religious tenets or the modes of worship of
any sect, thus forestalling compulsion by law of the
acceptance of any creed or the practice of any form of
worship, 35 but also assures the free exercise of one's chosen
form of religion within limits of utmost amplitude. It has been
said that the religion clauses of the Constitution are all
designed to protect the broadest possible liberty of
conscience, to allow each man to believe as his conscience
directs, to profess his beliefs, and to live as he believes he
ought to live, consistent with the liberty of others and with
the common good. 36 Any legislation whose effect or purpose
is to impede the observance of one or all religions, or to
discriminate invidiously between the religions, is invalid,
even though the burden may be characterized as being only
indirect. 37 But if the stage regulates conduct by enacting,
within its power, a general law which has for its purpose and
effect to advance the state's secular goals, the statute is
valid despite its indirect burden on religious observance,

The purpose of Republic Act No. 3350 is secular, worldly, and

temporal, not spiritual or religious or holy and eternal. It was
intended to serve the secular purpose of advancing the
constitutional right to the free exercise of religion, by
averting that certain persons be refused work, or be
dismissed from work, or be dispossessed of their right to
work and of being impeded to pursue a modest means of
livelihood, by reason of union security agreements. To help its
citizens to find gainful employment whereby they can make a
living to support themselves and their families is a valid
objective of the state. In fact, the state is enjoined, in the
1935 Constitution, to afford protection to labor, and regulate
the relations between labor and capital and industry. 41 More
so now in the 1973 Constitution where it is mandated that
"the State shall afford protection to labor, promote full
employment and equality in employment, ensure equal work
opportunities regardless of sex, race or creed and regulate
the relation between workers and employers. 42
The primary effects of the exemption from closed shop
agreements in favor of members of religious sects that
prohibit their members from affiliating with a labor

organization, is the protection of said employees against the

aggregate force of the collective bargaining agreement, and
relieving certain citizens of a burden on their religious beliefs;
and by eliminating to a certain extent economic insecurity
due to unemployment, which is a serious menace to the
health, morals, and welfare of the people of the State, the
Act also promotes the well-being of society. It is our view that
the exemption from the effects of closed shop agreement
does not directly advance, or diminish, the interests of any
particular religion. Although the exemption may benefit those
who are members of religious sects that prohibit their
members from joining labor unions, the benefit upon the
religious sects is merely incidental and indirect. The
"establishment clause" (of religion) does not ban regulation
on conduct whose reason or effect merely happens to
coincide or harmonize with the tenets of some or all
religions. 43 The free exercise clause of the Constitution has
been interpreted to require that religious exercise be
preferentially aided. 44
We believe that in enacting Republic Act No. 3350, Congress
acted consistently with the spirit of the constitutional
provision. It acted merely to relieve the exercise of religion,
by certain persons, of a burden that is imposed by union
security agreements. It was Congress itself that imposed that
burden when it enacted the Industrial Peace Act (Republic Act
875), and, certainly, Congress, if it so deems advisable, could
take away the same burden. It is certain that not every
conscience can be accommodated by all the laws of the land;
but when general laws conflict with scrupples of conscience,
exemptions ought to be granted unless some "compelling
state interest" intervenes.45 In the instant case, We see no
such compelling state interest to withhold exemption.
Appellant bewails that while Republic Act No. 3350 protects
members of certain religious sects, it leaves no right to, and
is silent as to the protection of, labor organizations. The

purpose of Republic Act No. 3350 was not to grant rights to

labor unions. The rights of labor unions are amply provided
for in Republic Act No. 875 and the new Labor Code. As to the
lamented silence of the Act regarding the rights and
protection of labor unions, suffice it to say, first, that the
validity of a statute is determined by its provisions, not by its
silence 46 ; and, second, the fact that the law may work
hardship does not render it unconstitutional. 47
It would not be amiss to state, regarding this matter, that to
compel persons to join and remain members of a union to
keep their jobs in violation of their religious scrupples, would
hurt, rather than help, labor unions, Congress has seen it fit
to exempt religious objectors lest their resistance spread to
other workers, for religious objections have contagious
potentialities more than political and philosophic objections.
Furthermore, let it be noted that coerced unity and loyalty
even to the country, and a fortiori to a labor union
assuming that such unity and loyalty can be attained through
coercion is not a goal that is constitutionally obtainable at
the expense of religious liberty. 48 A desirable end cannot be
promoted by prohibited means.
4. Appellants' fourth contention, that Republic Act No. 3350
violates the constitutional prohibition against requiring a
religious test for the exercise of a civil right or a political
right, is not well taken. The Act does not require as a
qualification, or condition, for joining any lawful association
membership in any particular religion or in any religious sect;
neither does the Act require affiliation with a religious sect
that prohibits its members from joining a labor union as a
condition or qualification for withdrawing from a labor union.
Joining or withdrawing from a labor union requires a positive
act. Republic Act No. 3350 only exempts members with such
religious affiliation from the coverage of closed shop
agreements. So, under this Act, a religious objector is not

required to do a positive act to exercise the right to join or

to resign from the union. He is exempted ipso jure without
need of any positive act on his part. A conscientious religious
objector need not perform a positive act or exercise the right
of resigning from the labor union he is exempted from the
coverage of any closed shop agreement that a labor union
may have entered into. How then can there be a religious
test required for the exercise of a right when no right need be
exercised?
We have said that it was within the police power of the State
to enact Republic Act No. 3350, and that its purpose was
legal and in consonance with the Constitution. It is never an
illegal evasion of a constitutional provision or prohibition to
accomplish a desired result, which is lawful in itself, by
discovering or following a legal way to do it. 49
5. Appellant avers as its fifth ground that Republic Act No.
3350 is a discriminatory legislation, inasmuch as it grants to
the members of certain religious sects undue advantages
over other workers, thus violating Section 1 of Article III of
the 1935 Constitution which forbids the denial to any person
of the equal protection of the laws. 50
The guaranty of equal protection of the laws is not a
guaranty of equality in the application of the laws upon all
citizens of the state. It is not, therefore, a requirement, in
order to avoid the constitutional prohibition against
inequality, that every man, woman and child should be
affected alike by a statute. Equality of operation of statutes
does not mean indiscriminate operation on persons merely
as such, but on persons according to the circumstances
surrounding them. It guarantees equality, not identity of
rights. The Constitution does not require that things which
are different in fact be treated in law as though they were the
same. The equal protection clause does not forbid
discrimination as to things that are different. 51 It does not

prohibit legislation which is limited either in the object to

which it is directed or by the territory within which it is to
operate.
The equal protection of the laws clause of the Constitution
allows classification. Classification in law, as in the other
departments of knowledge or practice, is the grouping of
things in speculation or practice because they agree with one
another in certain particulars. A law is not invalid because of
simple inequality. 52 The very idea of classification is that of
inequality, so that it goes without saying that the mere fact
of inequality in no manner determines the matter of
constitutionality. 53 All that is required of a valid classification
is that it be reasonable, which means that the classification
should be based on substantial distinctions which make for
real differences; that it must be germane to the purpose of
the law; that it must not be limited to existing conditions
only; and that it must apply equally to each member of the
class. 54 This Court has held that the standard is satisfied if
the classification or distinction is based on a reasonable
foundation or rational basis and is not palpably arbitrary. 55
In the exercise of its power to make classifications for the
purpose of enacting laws over matters within its jurisdiction,
the state is recognized as enjoying a wide range of
discretion. 56 It is not necessary that the classification be
based on scientific or marked differences of things or in their
relation. 57 Neither is it necessary that the classification be
made
with
mathematical
nicety. 58 Hence
legislative
classification may in many cases properly rest on narrow
distinctions, 59 for the equal protection guaranty does not
preclude the legislature from recognizing degrees of evil or
harm, and legislation is addressed to evils as they may
appear.
We believe that Republic Act No. 3350 satisfies the
aforementioned requirements. The Act classifies employees

and workers, as to the effect and coverage of union shop

security agreements, into those who by reason of their
religious beliefs and convictions cannot sign up with a labor
union, and those whose religion does not prohibit
membership in labor unions. Tile classification rests on real or
substantial, not merely imaginary or whimsical, distinctions.
There is such real distinction in the beliefs, feelings and
sentiments of employees. Employees do not believe in the
same religious faith and different religions differ in their
dogmas and cannons. Religious beliefs, manifestations and
practices, though they are found in all places, and in all
times, take so many varied forms as to be almost beyond
imagination. There are many views that comprise the broad
spectrum of religious beliefs among the people. There are
diverse manners in which beliefs, equally paramount in the
lives of their possessors, may be articulated. Today the
country is far more heterogenous in religion than before,
differences in religion do exist, and these differences are
important and should not be ignored.
Even from the phychological point of view, the classification
is based on real and important differences. Religious beliefs
are not mere beliefs, mere ideas existing only in the mind, for
they carry with them practical consequences and are the
motives of certain rules. of human conduct and the
justification of certain acts. 60 Religious sentiment makes a
man view things and events in their relation to his God. It
gives to human life its distinctive character, its tone, its
happiness or unhappiness its enjoyment or irksomeness.
Usually, a strong and passionate desire is involved in a
religious belief. To certain persons, no single factor of their
experience is more important to them than their religion, or
their not having any religion. Because of differences in
religious belief and sentiments, a very poor person may
consider himself better than the rich, and the man who even
lacks the necessities of life may be more cheerful than the
one who has all possible luxuries. Due to their religious

beliefs people, like the martyrs, became resigned to the

inevitable and accepted cheerfully even the most painful and
excruciating pains. Because of differences in religious beliefs,
the world has witnessed turmoil, civil strife, persecution,
hatred, bloodshed and war, generated to a large extent by
members of sects who were intolerant of other religious
beliefs. The classification, introduced by Republic Act No.
3350, therefore, rests on substantial distinctions.
The classification introduced by said Act is also germane to
its purpose. The purpose of the law is precisely to avoid
those who cannot, because of their religious belief, join labor
unions, from being deprived of their right to work and from
being dismissed from their work because of union shop
security agreements.
Republic Act No. 3350, furthermore, is not limited in its
application to conditions existing at the time of its
enactment. The law does not provide that it is to be effective
for a certain period of time only. It is intended to apply for all
times as long as the conditions to which the law is applicable
exist. As long as there are closed shop agreements between
an employer and a labor union, and there are employees who
are prohibited by their religion from affiliating with labor
unions, their exemption from the coverage of said
agreements continues.
Finally, the Act applies equally to all members of said
religious sects; this is evident from its provision. The fact that
the law grants a privilege to members of said religious sects
cannot by itself render the Act unconstitutional, for as We
have adverted to, the Act only restores to them their freedom
of association which closed shop agreements have taken
away, and puts them in the same plane as the other workers
who are not prohibited by their religion from joining labor
unions. The circumstance, that the other employees, because
they are differently situated, are not granted the same

privilege, does not render the law unconstitutional, for every

classification allowed by the Constitution by its nature
involves inequality.
The mere fact that the legislative classification may result in
actual inequality is not violative of the right to equal
protection, for every classification of persons or things for
regulation by law produces inequality in some degree, but
the law is not thereby rendered invalid. A classification
otherwise reasonable does not offend the constitution simply
because in practice it results in some inequality. 61 Anent this
matter, it has been said that whenever it is apparent from
the scope of the law that its object is for the benefit of the
public and the means by which the benefit is to be obtained
are of public character, the law will be upheld even though
incidental advantage may occur to individuals beyond those
enjoyed by the general public. 62
6. Appellant's further contention that Republic Act No. 3350
violates the constitutional provision on social justice is also
baseless. Social justice is intended to promote the welfare of
all the people. 63 Republic Act No. 3350 promotes that welfare
insofar as it looks after the welfare of those who, because of
their religious belief, cannot join labor unions; the Act
prevents their being deprived of work and of the means of
livelihood. In determining whether any particular measure is
for public advantage, it is not necessary that the entire state
be directly benefited it is sufficient that a portion of the
state be benefited thereby.
Social justice also means the adoption by the Government of
measures calculated to insure economic stability of all
component elements of society, through the maintenance of
a proper economic and social equilibrium in the interrelations of the members of the community. 64 Republic Act
No. 3350 insures economic stability to the members of a
religious sect, like the Iglesia ni Cristo, who are also

component elements of society, for it insures security in their

employment, notwithstanding their failure to join a labor
union having a closed shop agreement with the employer.
The Act also advances the proper economic and social
equilibrium between labor unions and employees who cannot
join labor unions, for it exempts the latter from the
compelling necessity of joining labor unions that have closed
shop agreements and equalizes, in so far as opportunity to
work is concerned, those whose religion prohibits
membership in labor unions with those whose religion does
not prohibit said membership. Social justice does not imply
social equality, because social inequality will always exist as
long as social relations depend on personal or subjective
proclivities. Social justice does not require legal equality
because legal equality, being a relative term, is necessarily
premised on differentiations based on personal or natural
conditions. 65 Social
justice
guarantees
equality
of
66
opportunity , and this is precisely what Republic Act No.
3350 proposes to accomplish it gives laborers, irrespective
of their religious scrupples, equal opportunity for work.
7. As its last ground, appellant contends that the amendment
introduced by Republic Act No. 3350 is not called for in
other words, the Act is not proper, necessary or desirable.
Anent this matter, it has been held that a statute which is not
necessary is not, for that reason, unconstitutional; that in
determining the constitutional validity of legislation, the
courts are unconcerned with issues as to the necessity for
the enactment of the legislation in question. 67 Courts do
inquire into the wisdom of laws. 68 Moreover, legislatures,
being chosen by the people, are presumed to understand and
correctly appreciate the needs of the people, and it may
change the laws accordingly. 69 The fear is entertained by
appellant that unless the Act is declared unconstitutional,
employers will prefer employing members of religious sects
that prohibit their members from joining labor unions, and
thus be a fatal blow to unionism. We do not agree. The threat

to unionism will depend on the number of employees who are

members of the religious sects that control the demands of
the labor market. But there is really no occasion now to go
further and anticipate problems We cannot judge with the
material now before Us. At any rate, the validity of a statute
is to be determined from its general purpose and its efficacy
to accomplish the end desired, not from its effects on a
particular case. 70 The essential basis for the exercise of
power, and not a mere incidental result arising from its
exertion, is the criterion by which the validity of a statute is
to be measured. 71
II. We now pass on the second assignment of error, in support
of which the Union argued that the decision of the trial court
ordering the Union to pay P500 for attorney's fees directly
contravenes Section 24 of Republic Act No. 875, for the
instant action involves an industrial dispute wherein the
Union was a party, and said Union merely acted in the
exercise of its rights under the union shop provision of its
existing collective bargaining contract with the Company;
that said order also contravenes Article 2208 of the Civil
Code; that, furthermore, Appellee was never actually
dismissed by the defendant Company and did not therefore
suffer any damage at all . 72
In refuting appellant Union's arguments, Appellee claimed
that in the instant case there was really no industrial dispute
involved in the attempt to compel Appellee to maintain its
membership in the union under pain of dismissal, and that
the Union, by its act, inflicted intentional harm on Appellee;
that since Appellee was compelled to institute an action to
protect his right to work, appellant could legally be ordered
to pay attorney's fees under Articles 1704 and 2208 of the
Civil Code. 73
The second paragraph of Section 24 of Republic Act No. 875
which is relied upon by appellant provides that:

No suit, action or other proceedings shall be maintainable in

any court against a labor organization or any officer or
member thereof for any act done by or on behalf of such
organization in furtherance of an industrial dispute to which it
is a party, on the ground only that such act induces some
other person to break a contract of employment or that it is
in restraint of trade or interferes with the trade, business or
employment of some other person or with the right of some
other person to dispose of his capital or labor. (Emphasis
supplied)
That there was a labor dispute in the instant case cannot be
disputed for appellant sought the discharge of respondent by
virtue of the closed shop agreement and under Section 2 (j)
of Republic Act No. 875 a question involving tenure of
employment is included in the term "labor dispute". 74 The
discharge or the act of seeking it is the labor dispute itself. It
being the labor dispute itself, that very same act of the Union
in asking the employer to dismiss Appellee cannot be "an act
done ... in furtherance of an industrial dispute". The mere
fact that appellant is a labor union does not necessarily mean
that all its acts are in furtherance of an industrial
dispute. 75 Appellant Union, therefore, cannot invoke in its
favor Section 24 of Republic Act No. 875. This case is not
intertwined with any unfair labor practice case existing at the
time when Appellee filed his complaint before the lower
court.
Neither does Article 2208 of the Civil Code, invoked by the
Union, serve as its shield. The article provides that attorney's
fees and expenses of litigation may be awarded "when the
defendant's act or omission has compelled the plaintiff ... to
incur expenses to protect his interest"; and "in any other
case where the court deems it just and equitable that
attorney's fees and expenses of litigation should be
recovered". In the instant case, it cannot be gainsaid that
appellant Union's act in demanding Appellee's dismissal

caused Appellee to incur expenses to prevent his being

dismissed from his job. Costs according to Section 1, Rule
142, of the Rules of Court, shall be allowed as a matter of
course to the prevailing party.
WHEREFORE, the instant appeal is dismissed, and the
decision, dated August 26, 1965, of the Court of First
Instance of Manila, in its Civil Case No. 58894, appealed from
is affirmed, with costs against appellant Union. It is so
ordered.
Makalintal, C.J, Castro, Teehankee, Barredo, Makasiar,
Antonio, Esguerra, Muoz Palma and Aquino, JJ., concur.

Separate Opinions

FERNANDO, J, concurring:
The decision arrived at unanimously by this Court that
Republic Act No. 3350 is free from the constitutional
infirmities imputed to it was demonstrated in a manner
wellnigh conclusive in the learned, scholarly, and
comprehensive opinion so typical of the efforts of
the ponente, Justice Zaldivar. Like the rest of my brethren, I
concur fully. Considering moreover, the detailed attention
paid to each and every objection raised as to its validity and
the clarity and persuasiveness with which it was shown to be
devoid of support in authoritative doctrines, it would appear
that the last word has been written on this particular subject.
Nonetheless, I deem it proper to submit this brief expression
of my views on the transcendent character of religious
freedom 1 and its primacy even as against the claims of
protection to labor, 2 also one of the fundamental principles
of the Constitution.

1. Religious freedom is identified with the liberty every

individual possesses to worship or not a Supreme Being, and
if a devotee of any sect, to act in accordance with its creed.
Thus is constitutionally safeguarded, according to Justice
Laurel, that "profession of faith to an active power that binds
and elevates man to his Creator ...." 3 The choice of what a
man wishes to believe in is his and his alone. That is a
domain left untouched, where intrusion is not allowed, a
citadel to which the law is denied entry, whatever be his
thoughts or hopes. In that sphere, what he wills reigns
supreme. The doctrine to which he pays fealty may for some
be unsupported by evidence, devoid of rational foundation.
No matter. There is no requirement as to its conformity to
what has found acceptance. It suffices that for him such a
concept holds undisputed sway. That is a recognition of
man's freedom. That for him is one of the ways of selfrealization. It would be to disregard the dignity that attaches
to every human being to deprive him of such an attribute.
The "fixed star on our constitutional constellation," to borrow
the felicitous phrase of Justice Jackson, is that no official, not
excluding the highest, has it in his power to prescribe what
shall be orthodox in matters of conscience or to mundane
affairs, for that matter.
Gerona v. Secretary of Education 4 speaks similarly. In the
language of its ponente, Justice Montemayor: "The realm of
belief and creed is infinite and limitless bounded only by
one's imagination and thought. So is the freedom of belief,
including religious belief, limitless and without bounds. One
may believe in most anything, however strange, bizarre and
unreasonable the same may appear to others, even heretical
when weighed in the scales of orthodoxy or doctrinal
standards." 5 There was this qualification though: "But
between the freedom of belief and the exercise of said belief,
there is quite a stretch of road to travel. If the exercise of
said religious belief clashes with the established institutions
of society and with the law, then the former must yield and

give way to the latter. The Government steps in and either

restrains said exercise or even prosecutes the one exercising
it." 6 It was on that basis that the daily compulsory flag
ceremony in accordance with a statute 7 was found free from
the constitutional objection on the part of a religious sect, the
Jehovah's Witnesses, whose members alleged that their
participation would be offensive to their religious beliefs. In a
case not dissimilar, West Virginia State Board of Education v.
Barnette, 8 the American Supreme Court reached a contrary
conclusion. Justice Jackson's eloquent opinion is, for this
writer, highly persuasive. Thus: "The case is made difficult
not because the principles of its decision are obscure but
because the flag involved is our own. Nevertheless, we apply
the limitations of the Constitution with no fear that freedom
to be intellectually and spiritually diverse or even contrary
will disintegrate the social organization. To believe that
patriotism will not flourish if patriotic ceremonies are
voluntary and spontaneous instead of a compulsory routine is
to make an unflattering estimate of the appeal of our
institutions to free minds. We can have intellectual
individualism and the rich cultural diversities that we owe to
exceptional minds only at the price of occasional eccentricity
and abnormal attitudes. When they are so harmless to others
or to the State as those we deal with here, the price is not
too great. But freedom to differ is not limited to things that
do not matter much. That would be a mere shadow of
freedom. The test of its substance is the right to differ as to
things that touch the heart of the existing order." 9
There is moreover this ringing affirmation by Chief Justice
Hughes of the primacy of religious freedom in the forum of
conscience even as against the command of the State itself:
"Much has been said of the paramount duty to the state, a
duty to be recognized, it is urged, even though it conflicts
with convictions of duty to God. Undoubtedly that duty to the
state exists within the domain of power, for government may
enforce obedience to laws regardless of scruples. When one's

belief collides with the power of the state, the latter is

supreme within its sphere and submission or punishment
follows. But, in the forum of conscience, duty to a moral
power higher than the state has always been maintained.
The reservation of that supreme obligation, as a matter of
principle, would unquestionably be made by many of our
conscientious and law-abiding citizens. The essence of
religion is belief in a relation to God involving duties superior
to those arising from any human relation." 10 The American
Chief Justice spoke in dissent, it is true, but with him in
agreement were three of the foremost jurists who ever sat in
that Tribunal, Justices Holmes, Brandeis, and Stone.
2. As I view Justice Zaldivar's opinion in that light, my
concurrence, as set forth earlier, is wholehearted and entire.
With such a cardinal postulate as the basis of our polity, it
has a message that cannot be misread. Thus is intoned with
a reverberating clang, to paraphrase Cardozo, a fundamental
principle that drowns all weaker sounds. The labored effort to
cast doubt on the validity of the statutory provision in
question is far from persuasive. It is attended by futility. It is
not for this Court, as I conceive of the judicial function, to
restrict the scope of a preferred freedom.
3. There is, however, the question of whether such an
exception possesses an implication that lessens the
effectiveness of state efforts to protect labor, likewise, as
noted, constitutionally ordained. Such a view, on the surface,
may not be lacking in plausibility, but upon closer analysis, it
cannot stand scrutiny. Thought must be given to the freedom
of association, likewise an aspect of intellectual liberty. For
the late Professor Howe a constitutionalist and in his lifetime
the biographer of the great Holmes, it even partakes of the
political theory of pluralistic sovereignty. So great is the
respect
for
the
autonomy
accorded
voluntary
societies. 11 Such a right implies at the very least that one
can determine for himself whether or not he should join or

refrain from joining a labor organization, an institutional

device for promoting the welfare of the working man. A
closed shop, on the other hand, is inherently coercive. That is
why, as is unmistakably reflected in our decisions, the latest
of which isGuijarno v. Court of Industrial Relations, 12 it is far
from being a favorite of the law. For a statutory provision
then to further curtail its operation, is precisely to follow the
dictates of sound public policy.
The exhaustive and well-researched opinion of Justice
Zaldivar thus is in the mainstream of constitutional tradition.
That, for me, is the channel to follow.
Separate Opinions
FERNANDO, J, concurring:
The decision arrived at unanimously by this Court that
Republic Act No. 3350 is free from the constitutional
infirmities imputed to it was demonstrated in a manner
wellnigh conclusive in the learned, scholarly, and
comprehensive opinion so typical of the efforts of
the ponente, Justice Zaldivar. Like the rest of my brethren, I
concur fully. Considering moreover, the detailed attention
paid to each and every objection raised as to its validity and
the clarity and persuasiveness with which it was shown to be
devoid of support in authoritative doctrines, it would appear
that the last word has been written on this particular subject.
Nonetheless, I deem it proper to submit this brief expression
of my views on the transcendent character of religious
freedom 1 and its primacy even as against the claims of
protection to labor, 2 also one of the fundamental principles
of the Constitution.
1. Religious freedom is identified with the liberty every
individual possesses to worship or not a Supreme Being, and
if a devotee of any sect, to act in accordance with its creed.
Thus is constitutionally safeguarded, according to Justice

Laurel, that "profession of faith to an active power that binds

and elevates man to his Creator ...." 3 The choice of what a
man wishes to believe in is his and his alone. That is a
domain left untouched, where intrusion is not allowed, a
citadel to which the law is denied entry, whatever be his
thoughts or hopes. In that sphere, what he wills reigns
supreme. The doctrine to which he pays fealty may for some
be unsupported by evidence, devoid of rational foundation.
No matter. There is no requirement as to its conformity to
what has found acceptance. It suffices that for him such a
concept holds undisputed sway. That is a recognition of
man's freedom. That for him is one of the ways of selfrealization. It would be to disregard the dignity that attaches
to every human being to deprive him of such an attribute.
The "fixed star on our constitutional constellation," to borrow
the felicitous phrase of Justice Jackson, is that no official, not
excluding the highest, has it in his power to prescribe what
shall be orthodox in matters of conscience or to mundane
affairs, for that matter.
Gerona v. Secretary of Education 4 speaks similarly. In the
language of its ponente, Justice Montemayor: "The realm of
belief and creed is infinite and limitless bounded only by
one's imagination and thought. So is the freedom of belief,
including religious belief, limitless and without bounds. One
may believe in most anything, however strange, bizarre and
unreasonable the same may appear to others, even heretical
when weighed in the scales of orthodoxy or doctrinal
standards." 5 There was this qualification though: "But
between the freedom of belief and the exercise of said belief,
there is quite a stretch of road to travel. If the exercise of
said religious belief clashes with the established institutions
of society and with the law, then the former must yield and
give way to the latter. The Government steps in and either
restrains said exercise or even prosecutes the one exercising
it." 6 It was on that basis that the daily compulsory flag
ceremony in accordance with a statute 7 was found free from

the constitutional objection on the part of a religious sect, the

Jehovah's Witnesses, whose members alleged that their
participation would be offensive to their religious beliefs. In a
case not dissimilar, West Virginia State Board of Education v.
Barnette, 8 the American Supreme Court reached a contrary
conclusion. Justice Jackson's eloquent opinion is, for this
writer, highly persuasive. Thus: "The case is made difficult
not because the principles of its decision are obscure but
because the flag involved is our own. Nevertheless, we apply
the limitations of the Constitution with no fear that freedom
to be intellectually and spiritually diverse or even contrary
will disintegrate the social organization. To believe that
patriotism will not flourish if patriotic ceremonies are
voluntary and spontaneous instead of a compulsory routine is
to make an unflattering estimate of the appeal of our
institutions to free minds. We can have intellectual
individualism and the rich cultural diversities that we owe to
exceptional minds only at the price of occasional eccentricity
and abnormal attitudes. When they are so harmless to others
or to the State as those we deal with here, the price is not
too great. But freedom to differ is not limited to things that
do not matter much. That would be a mere shadow of
freedom. The test of its substance is the right to differ as to
things that touch the heart of the existing order." 9
There is moreover this ringing affirmation by Chief Justice
Hughes of the primacy of religious freedom in the forum of
conscience even as against the command of the State itself:
"Much has been said of the paramount duty to the state, a
duty to be recognized, it is urged, even though it conflicts
with convictions of duty to God. Undoubtedly that duty to the
state exists within the domain of power, for government may
enforce obedience to laws regardless of scruples. When one's
belief collides with the power of the state, the latter is
supreme within its sphere and submission or punishment
follows. But, in the forum of conscience, duty to a moral
power higher than the state has always been maintained.

The reservation of that supreme obligation, as a matter of

principle, would unquestionably be made by many of our
conscientious and law-abiding citizens. The essence of
religion is belief in a relation to God involving duties superior
to those arising from any human relation." 10 The American
Chief Justice spoke in dissent, it is true, but with him in
agreement were three of the foremost jurists who ever sat in
that Tribunal, Justices Holmes, Brandeis, and Stone.
2. As I view Justice Zaldivar's opinion in that light, my
concurrence, as set forth earlier, is wholehearted and entire.
With such a cardinal postulate as the basis of our polity, it
has a message that cannot be misread. Thus is intoned with
a reverberating clang, to paraphrase Cardozo, a fundamental
principle that drowns all weaker sounds. The labored effort to
cast doubt on the validity of the statutory provision in
question is far from persuasive. It is attended by futility. It is
not for this Court, as I conceive of the judicial function, to
restrict the scope of a preferred freedom.
3. There is, however, the question of whether such an
exception possesses an implication that lessens the
effectiveness of state efforts to protect labor, likewise, as
noted, constitutionally ordained. Such a view, on the surface,
may not be lacking in plausibility, but upon closer analysis, it
cannot stand scrutiny. Thought must be given to the freedom
of association, likewise an aspect of intellectual liberty. For
the late Professor Howe a constitutionalist and in his lifetime
the biographer of the great Holmes, it even partakes of the
political theory of pluralistic sovereignty. So great is the
respect
for
the
autonomy
accorded
voluntary
11
societies. Such a right implies at the very least that one
can determine for himself whether or not he should join or
refrain from joining a labor organization, an institutional
device for promoting the welfare of the working man. A
closed shop, on the other hand, is inherently coercive. That is
why, as is unmistakably reflected in our decisions, the latest

of which isGuijarno v. Court of Industrial Relations, 12 it is far

from being a favorite of the law. For a statutory provision
then to further curtail its operation, is precisely to follow the
dictates of sound public policy.
The exhaustive and well-researched opinion of Justice
Zaldivar thus is in the mainstream of constitutional tradition.
That, for me, is the channel to follow.

G.R. Nos. 43633-34 September 14, 1990

PABLO ARIZALA, SERGIO MARIBAO, LEONARDO JOVEN,
and
FELINO
BULANDUS, petitioners,
vs.

THE COURT OF APPEALS and THE PEOPLE OF THE

PHILIPPINES, respondents.
Januario T. Seno for petitioners.

NARVASA, J.:
Under the Industrial Peace Act, 1 government-owned or
controlled corporations had the duty to bargain collectively
and were otherwise subject to the obligations and duties of
employers in the private sector. 2 The Act also prohibited
supervisors to become, or continue to be, members of labor
organizations composed of rank-and-file employees, 3 and
prescribed criminal sanctions for breach of the prohibition. 4
It was under the regime of said Industrial Peace Act that the
Government Service Insurance System (GSIS, for short)
became bound by a collective bargaining agreement
executed between it and the labor organization representing
the majority of its employees, the GSIS Employees
Association. The agreement contained a "maintenance-ofmembership" clause, 5 i.e., that all employees who, at the
time of the execution of said agreement, were members of
the union or became members thereafter, were obliged to
maintain their union membership in good standing for the
duration of the agreement as a condition for their continued
employment in the GSIS.
There appears to be no dispute that at that time, the
petitioners occupied supervisory positions in the GSIS. Pablo
Arizala and Sergio Maribao were, respectively, the Chief of
the Accounting Division, and the Chief of the Billing Section
of said Division, in the Central Visayas Regional Office of the
GSIS. Leonardo Joven and Felino Bulandus were, respectively,
the Assistant Chief of the Accounting Division (sometimes
Acting Chief in the absence of the Chief) and the Assistant

Chief of the Field Service and Non-Life Insurance Division

(and Acting Division Chief in the absence of the Chief), of the
same Central Visayas Regional Office of the GSIS. Demands
were made on all four of them to resign from the GSIS
Employees Association, in view of their supervisory positions.
They refused to do so. Consequently, two (2) criminal cases
for violation of the Industrial Peace Act were lodged against
them in the City Court of Cebu: one involving Arizala and
Maribao 6 and the other, Joven and Bulandus. 7
Both criminal actions resulted in the conviction of the
accused in separate decisions. 8 They were each sentenced
"to pay a fine of P 500.00 or to suffer subsidiary
imprisonment in case of insolvency." They appealed to the
Court of Appeals. 9 Arizala's and Maribao's appeal was
docketed as CA-G.R. No. 14724-CR; that of Joven and
Bulandus, as CA-G.R. No. 14856-CR.
The appeals were consolidated on motion of the appellants,
and eventuated in a judgment promulgated on January 29,
1976 affirming the convictions of all four appellants. The
appellants moved for reconsideration. They argued that when
the so called "1973 Constitution" took effect on January 17,
1973 pursuant to Proclamation No. 1104, the case of Arizala
and Maribao was still pending in the Court of Appeals and
that of Joven and Bulandus, pending decision in the City
Court of Cebu; that since the provisions of that constitution
and of the Labor Code subsequently promulgated (eff.,
November 1, 1974), repealing the Industrial Peace Act-placed
employees of all categories in government-owned or
controlled corporations without distinction within the Civil
Service, and provided that the terms and conditions of their
employment were to be "governed by the Civil Service Law,
rules and regulations" and hence, no longer subject of
collective bargaining, the appellants ceased to fall within the
coverage of the Industrial Peace Act and should thus no
longer continue to be prosecuted and exposed to punishment

for a violation thereof. They pointed out further that the

criminal sanction in the Industrial Peace Act no longer
appeared in the Labor Code. The Appellate Court denied their
plea for reconsideration.
Hence, the present petition for review on certiorari.
The crucial issue obviously is whether or not the petitioners'
criminal liability for a violation of the Industrial Peace Act
may be deemed to have been obliterated in virtue of
subsequent legislation and the provisions of the 1973 and
1987 Constitutions.
The petitioners' contention that their liability had been
erased is made to rest upon the following premises:
1. Section 1, Article XII-B of the 1973 Constitution does
indeed provide that the "Civil Service embraces every
branch, agency, subdivision and instrumentality of the
government, including government-owned or controlled
corporations, .. administered by an independent Civil Service
Commission.
2. Article 292 of the Labor Code repealed such parts and
provisions of the Industrial Peace Act as were "not adopted as
part" of said Code "either directly or by reference." The Code
did not adopt the provision of the Industrial Peace Act
conferring on employees of government-owned or controlled
corporations the right of self-organization and collective
bargaining; in fact it made known that the "terms and
conditions of employment of all government employees,
including employees of government-owned and controlled
corporations," would thenceforth no longer be fixed by
collective bargaining but "be governed by the Civil Service
Law, rules and regulations." 10

3. The specific penalty for violation of the prohibition on

supervisors being members in a labor organization of
employees under their supervision has disappeared.
4. The Code also modified the concept of unfair labor
practice, decreeing that thenceforth, "it shall be considered
merely as an administrative offense rather than a criminal
offense (and that) (u)nfair labor practice complaints shall x x
be processed like any ordinary labor disputes." 11
On the other hand, in justification of the Appellate Tribunal's
affirmance of the petitioners' convictions of violations of the
Industrial Peace Act, the People1) advert to the fact that said Labor Code also states that "all
actions or claims accruing prior to ... (its) effectivity ... shall
be determined in accordance with the laws in force at the
time of their accrual;" and
2) argue that the legislature cannot generally intervene and
vacate the judgment of the courts, either directly or
indirectly, by the repeal of the statute under which said
judgment has been rendered.
The legal principles governing the rights of self-organization
and collective bargaining of rank-and-file employees in the
government- particularly as regards supervisory, and high
level or managerial employees have undergone alterations
through the years.
Republic Act No. 875
As already intimated, under RA 875 (the Industry Peace
Act), 12 persons "employed in proprietary functions of the
Government, including but not limited to governmental
corporations," had the right of self-organization and collective
bargaining, including the right to engage in concerted
activities to attain their objectives, e.g. strikes.

But those "employed in governmental functions" were

forbidden to "strike for the purpose of securing changes or
modification in their terms and conditions of employment" or
join labor organizations which imposed on their members the
duty to strike. The reason obviously was that the terms and
conditions of their employment were "governed by law" and
hence could not be fixed, altered or otherwise modified by
collective bargaining.
Supervisory employees were forbidden to join labor
organizations composed of employees under them, but could
form their own unions. Considered "supervisors' were those
'having authority in the interest of an employer to hire,
transfer, suspend, lay-off, recall, discharge, assign,
recommend, or discipline other employees, or responsibly to
direct them, and to adjust their grievance or effectively to
recommend such acts if, in connection with the foregoing,
the exercise of such authority is not merely routinary or
clerical in nature but requires the use of independent
judgment." 13
Republic Act No. 2260
Similar provisions were found in R.A. No. 2260, the Civil
Service Act of 1959. This Act declared that the "Philippine
Civil Service ... (embraced) all branches, subdivisions and
instrumentalities of the government including governmentowned and controlled corporations." 14
It prohibited such civil service employees who were
"employed in governmental functions" to belong to any labor
organization which imposed on their members "the obligation
to strike or to join strikes." And one of the first issuances of
the President after the proclamation of martial law in
September,
1972,
was
General
Order
No.
5
which inter alia banned strikes in vital industries," as well as
'all rallies, demonstrations and other forms of group
actions." 15

Not so prohibited, however, were those "employed in

proprietary functions of the Government including, but not
limited to, governmental corporations." 16 The Act also
penalized any person who "violates, refuses or neglects to
comply with any ... provisions (of the Act) or rules
(thereunder promulgated) ... by a fine not exceeding one
thousand pesos or by imprisonment not exceeding six
months or both such fine and imprisonment in the discretion
of the court." 17
The 1973 Constitution
The 1973 Constitution laid down the broad principle that
"(t)he State shall assure the rights of workers to selforganization, collective bargaining, security of tenure, and
just and humane conditions of work," 18 and directed that the
"National Assembly shall provide for the standardization of
compensation
of
government
officials
and
employees, including those in government-owned or
controlled corporations, taking into account the nature of the
responsibilities pertaining to, and the qualifications required
for, the positions concerned." 19
PD 442, The Labor Code
The Labor Code of the Philippines, Presidential Decree No.
442, enacted within a year from effectivity of the 1973
Constitution, 20 incorporated the proposition that the "terms
and conditions of employment of all government employees,
including employees of government-owned and controlled
corporations ... (are) governed by the Civil Service Law, rules
and regulations." 21 It incorporated, too, the constitutional
mandate that the salaries of said employees "shall be
standardized by the National Assembly."
The Labor Code, 22 however "exempted" government
employees from the right to self-organization for purposes of
collective bargaining. While the Code contained provisions

acknowledging the right of "all persons employed in

commercial, industrial and agricultural enterprises, including
religious, medical or educational institutions operating for
profit" to "self-organization and to form, join or assist labor
organizations for purposes of collective bargaining," they
"exempted from the foregoing provisions:
a) security guards;
b) government
employees,
including
government
government-owned
and/
corporations;

employees
of
or
controlled

c) managerial employees; and

d) employees of religious, charitable, medical and
educational institutions not operating for profit, provided the
latter do not have existing collective agreements or
recognized unions at the time of the effectivity of the code or
have voluntarily waived their exemption." 23
The reason for denying to government employees the right to
"self-organization and to form, join or assist labor
organizations for purposes of collective bargaining" is
presumably the same as that under the Industrial Peace Act,
i.e., that the terms and conditions of government
employment are fixed by law and not by collective
bargaining.
Some inconsistency appears to have arisen between the
Labor Code and the Civil Service Act of 1959. Under the Civil
Service Act, persons "employed in proprietary functions of
the government including, but not limited to, governmental
corporations'-not being within "the policy of the Government
that the employees therein shall not strike for the purpose of
securing changes in their terms and conditions of
employment"-could legitimately bargain with their respective
employers through their labor organizations, and corollarily

engage in strikes and other concerted activities in an attempt

to bring about changes in the conditions of their work. They
could not however do so under the Labor Code and its
Implementing Rules and Regulations; these provided that
"government
employees,
including
employees
of
government-owned and/or controlled corporations," without
distinction as to function, were "exempted" (excluded is the
better term) from "the right to self-organization and to form,
join or assist labor organizations for purposes of collective
bargaining," and by implication, excluded as well from the
right to engage in concerted activities, such as strikes, as
coercive measures against their employers.
Members of supervisory unions who were not managerial
employees, were declared by the Labor Code to be "eligible
to join or assist the rank and file labor organization, and if
none exists, to form or assist in the forming of such rank and
file organization " 24 Managerial employees, on the other
hand, were pronounced as 'not eligible to join, assist or form
any labor organization." 25 A "managerial employee" was
defined as one vested with power or prerogatives to lay down
and execute management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline
employees, or to effectively recommend such managerial
actions." 26
Presidential Decree No. 807
Clarification of the matter seems to have been very shortly
attempted by the Civil Service Decree of the Philippines,
Presidential Decree No. 807 (eff., Oct. 6,1975) which
superseded the Civil Service Law of 1959 (RA 2260) 27 and
repealed or modified "all laws, rules and regulations or parts
thereof inconsistent with the provisions" thereof. The Decree
categorically described the scope and coverage of the "Civil
Service" as embracing 44 every branch, agency, subdivision,
and instrumentality of the government, including every

government owned or controlled corporation whether

performing governmental or propriety function. 28 The effect
was seemingly to prohibit government employees (including
those
"employed
in
proprietary
functions
of
the
Government") to "strike for the purpose of securing changes
of their terms and conditions of employment," 29 something
which, as aforestated, they were allowed to do under the Civil
Service Act of 1959. 30
Be this as it may it seems clear that PD 807 (the Civil Service
Decree) did not modify the declared ineligibility of
"managerial
employees"
from
joining,
assisting
or
forming any labor organization.
Executive Order No. 111
Executive Order No. 111, issued by President Corazon C.
Aquino on December 24, 1986 in the exercise of legislative
powers under the Freedom Constitution, modified the general
disqualification above mentioned of 'government employees,
including employees of government-owned and/or controlled
corporations" from "the right to self-organization and to form,
join or assist labor organizations for purposes of collective
bargaining.' It granted to employees "of government
corporations established under the Corporation Code x x the
right to organize and to bargain collectively with their
respective employers." 31 To all 'other employees in the civil
service, ... (it granted merely) the right to form associations
for purposes not contrary to law," 32 not for "purposes of
collective bargaining."
The 1987 Constitution
The provisions of the present Constitution on the matter
appear to be somewhat more extensive. They declare that
the "right to self organization shall not be denied to
government employees;" 33 that the State "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;" and that said workers "shall be entitled to security of
tenure, humane conditions of work, and a living wage, ...
(and) also participate in policy and decision-making
processes affecting their rights and benefits as may be
provided by law. 34
CSC Memorandum Circular No. 6
Memorandum Circular No. 6 of the Civil Service Commission,
issued on April 21, 1987 enjoined strikes by government
officials and employees, to wit: 35
... Prior to the enactment by Congress of applicable laws
concerning strike by government employees, and considering
that there are existing laws which prohibit government
officials and employees from resorting to strike, the
Commission enjoins, under pain of administrative sanctions,
all government officers and employees from staging strikes,
demonstrations, mass leaves, walk-outs and other forms of
mass action which will result in temporary stoppage or
disruption of public services. To allow otherwise is to
undermine or prejudice the government system.
Executive Order No. 180
The scope of the constitutional right to self-organization of
"government employees" above mentioned, was defined and
delineated in Executive Order No. 180 (eff. June 1, 1987).
According to this Executive Order, the right of selforganization does indeed pertain to all "employees of all
branches, subdivisions, instrumentalities and agencies of the
Government, including government-owned or controlled
corporations with original charters;" 36such employees "shall
not be discriminated against in respect of their employment
by reason of their membership in employees' organizations
or participation in the normal activities of their organization x

x (and their) employment shall not be subject to the

condition that they shall not join or shall relinquish their
membership in the employees' organizations. 37
However, the concept of the government employees' right of
self-organization differs significantly from that of employees
in the private sector. The latter's right of self-organization,
i.e., "to form, join or assist labor organizations for purposes
of collective bargaining," admittedly includes the right to
deal and negotiate with their respective employers in order
to fix the terms and conditions of employment and also, to
engage in concerted activities for the attainment of their
objectives, such as strikes, picketing, boycotts. But the right
of government employees to "form, join or assist employees
organizations of their own choosing" under Executive Order
No. 180 is not regarded as existing or available for "purposes
of collective bargaining," but simply "for the furtherance and
protection of their interests." 38
In other words, the right of Government employees to deal
and negotiate with their respective employers is not quite as
extensive as that of private employees. Excluded from
negotiation by government employees are the "terms and
conditions of employment ... that are fixed by law," it being
only those terms and conditions not otherwise fixed by law
that "may be subject of negotiation between the duly
recognized employees' organizations and appropriate
government authorities," 39 And while EO No. 180 concedes
to government employees, like their counterparts in the
private sector, the right to engage in concerted
activities, including the right to strike, the executive order is
quick to add that those activities must be exercised in
accordance with law, i.e. are subject both to "Civil Service
Law and rules" and "any legislation that may be enacted by
Congress," 40 that "the resolution of complaints, grievances
and cases involving government employees" is not ordinarily
left to collective bargaining or other related concerted

activities, but to "Civil Service Law and labor laws and

procedures whenever applicable;" and that in case "any
dispute remains unresolved after exhausting all available
remedies under existing laws and procedures, the parties
may jointly refer the dispute to the (Public Sector LaborManagement) Council for appropriate action." 41 What is
more, the Rules and Regulations implementing Executive
Order No. 180 explicitly provide that since the "terms and
conditions of employment in the government, including any
political subdivision or instrumentality thereof and
government-owned and controlled corporations with original
charters are governed by law, the employees therein shall
not strike for the purpose of securing changes thereof. 42
On the matter of limitations on membership in labor unions
of government employees, Executive Order No. 180 declares
that "high level employees whose functions are normally
considered as policy making or managerial, or whose duties
are of a highly confidential nature shall not be eligible to join
the organization of rank-and-file government employees. 43 A
"high level employee" is one "whose functions are normally
considered policy determining, managerial or one whose
duties are highly confidential in nature. A managerial
function refers to the exercise of powers such as: 1. To
effectively recommend such managerial actions; 2. To
formulate or execute management policies and decisions; or
3. To hire, transfer, suspend, lay off, recall, dismiss, assign or
discipline employees. 44
Republic Act No. 6715
The rule regarding membership in labor organizations of
managerial and supervisory employees just adverted to, was
clarified and refined by Republic Act No. 6715, effective on
March 21, 1989, further amending the Labor Code.
Under RA 6715 labor unions are regarded as organized either
(a) "for purposes of negotiation," or (b) "for furtherance and

protection"of the members' rights. Membership in unions

organized "for purposes of negotiation" is open only to rankand-file employees. "Supervisory employees" are ineligible
"for membership in a labor organization of the rank-and-file
employees but may join, assist or form separate labor
organizations of their own," i.e., one organized "for
furtherance and protection" of their rights and interests.
However, according to the Rules implementing RA 6715,
"supervisory employees who are included in an existing rankand- file bargaining unit, upon the effectivity of Republic Act
No. 6715 shall remain in that unit ..." Supervisory employees
are "those who, in the interest of the employer, effectively
recommend such managerial actions 45 if the exercise of such
authority is not merely routinary or clerical in nature but
requires the use of independent judgment. 46
Membership in employees' organizations formed for purposes
of negotiation are open to rank-and-file employees only, as
above mentioned, and not to high level employees. 47 Indeed,
"managerial employees" or "high level employees" are, to
repeat, "not eligible to join, assist or form any labor
organization" at all. 48 A managerialemployee is defined as
"one who is vested with powers or prerogatives to lay down
and execute, management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline
employees." 49
This is how the law now stands, particularly with respect to
supervisory employees vis a vis labor organizations of
employees under them.
Now, the GSIS performs proprietary functions. It is a nonstock corporation, managed by a Board of Trustees exercising
the "usual corporate powers." 50 In other words, it exercises
all the powers of a corporation under the Corporation Law in
so far as they are not otherwise inconsistent with other
applicable law. 51 It is engaged essentially in insurance, a

business that "is not inherently or exclusively a governmental

function, ... (but) is on the contrary, in essence and practice,
of a private nature and interest." 52
1. The petitioners contend that the right of self-organization
and collectivebargaining had been withdrawn by the Labor
Code from government employees including those in
government-owned and controlled corporations- chiefly for
the reason that the terms and conditions of government
employment, all embraced in civil service, may not be
modified by collective bargaining because set by law. It is
therefore immaterial, they say, whether supervisors are
members of rank-and-file unions or not; after all, the
possibility of the employer's control of the members of the
union thru supervisors thus rendering collective bargaining
illusory, which is the main reason for the prohibition, is no
longer of any consequence.
This was true, for a time. As already discussed, both under
the Labor Code and PD 807, government employees,
including those in government-owned or controlled
corporations, were indeed precluded from bargaining as
regards terms and conditions of employment because these
were set by law and hence could not possibly be altered by
negotiation.
But EO 111 restored the right to organize and to negotiate
and bargain of employees of "government corporations
established under the Corporation Code." And EO 180, and
apparently RA 6715, too, granted to all government
employees the right of collective bargaining or negotiation
except as regards those terms of their employment which
were fixed by law; and as to said terms fixed by law, they
were prohibited to strike to obtain changes thereof.
2. The petitioners appear to be correct in their view of the
disappearance from the law of the prohibition on supervisors
being members of labor organizations composed of

employees under their supervision. The Labor Code (PD 442)

allowed supervisors (if not managerial) to join rank-and-file
unions. And under the Implementing Rules of RA 6715,
supervisors who were members of existing labor
organizations on the effectivity of said RA 6715 were
explicitly authorized to "remain therein."
3. The correctness of the petitioners' theory that unfair labor
practices ceased to be crimes and were deemed merely
administrative offenses in virtue of the Labor Code, cannot
be gainsaid. Article 250 of the Labor Code did provide as
follows:
ART. 250. Concept of unfair labor practice.-The concept of
unfair labor practice is hereby modified. Henceforth, it shall
be considered merely as an administrative offense rather
than a criminal offense. Unfair labor practice complaints
shall, therefore, be processed like any ordinary labor
disputes.
But unfair labor practices were declared to be crimes again
by later amendments of the Labor Code effected by Batas
Pambansa Blg. 70, approved on May 1, 1980. As thus
amended, the Code now pertinently reads as follows:
ART. 248. Concept of unfair labor practice and procedure for
prosecution thereof. Unfair labor practices violate the right
of workers and employees to self organization, are inimical to
the legitimate interests of both labor and management
including their right to bargain collectively and otherwise
deal with each other in an atmosphere of freedom and
mutual respect, and hinder the promotion of healthy and
stable labor management relations. Consequently, unfair
labor practices are not only violations of the civil rights of
both labor and management but are also offenses against
the State which shall be subject to prosecution and
punishment as herein provided.

xxx xxx xxx

Recovery of civil liability in the administrative proceedings
shall bar recovery under the Civil Code.
No criminal prosecution under this title may be instituted
without a final judgment, finding that an unfair labor practice
was committed having been first obtained in the preceding
paragraph. ...
The decisive consideration is that at present, supervisors who
were already members of a rank-and-file labor organization
at the time of the effectivity of R.A. No. 6715, are authorized
to "remain therein." It seems plain, in other words, that the
maintenance by supervisors of membership in a rank-and-file
labor organization even after the enactment of a statute
imposing a prohibition on such membership, is not only not a
crime, but is explicitly allowed, under present law.
Now, in a case decided as early as 1935, People v.
Tamayo, 53 where the appellants had appealed from a
judgment convicting them of a violation of a municipal
-ordinance, and while their appeal was pending, the
ordinance was repealed such that the act complained of
ceased to be a criminal act but became legal, this Court
dismissed the criminal proceedings, pronouncing the effects
of the repeal to be as follows:
In the leading case of the United States vs. Cuna (12 Phil.
241), and Wing vs. United States (218 U.S. 272), the doctrine
was clearly established that in the Philippines repeal of a
criminal act by its reenactment, even without a saving clause
would not destroy criminal liability. But not a single sentence
in either derision indicates that there was any desire to hold
that a person could be prosecuted convicted, and punished
for acts no longer criminal.

There is no question that at common law and in America a

much more favorable attitude towards the accused exists
relative to statutes that have been repealed than has been
adopted here. Our rule is more in conformity with the Spanish
doctrine, but even in Spain, where the offense ceased to be
criminal, petition cannot be had (1 Pacheco, Commentaries,
296).
The repeal here was absolute and not a reenactment and
repeal by implication. Nor was there any saving clause. The
legislative intent as shown by the action of the municipal is
that such conduct, formerly denounced, is no longer deemed
criminal, and it would be illogical for this court to attempt to
sentence appellant for the offense that no longer exists.
We are therefore of the opinion that the proceedings against
appellant must be dismissed.
To the same effect and in even more unmistakable language
is People v. Almuete 54 where the defendants-appellees were
charged under section 39 of Republic Act No. 1199, as
amended (the Agricultural Land Tenancy Law of 1954) which
penalized pre-threshing by either agricultural tenant or his
landlord. They sought and secured a dismissal on the ground,
among others, that there was no law punishing the act
charged-a reference to the fact that Republic Act No. 1199
had already been superseded by the Agricultural Land
Reform Code of 1963 which instituted the leasehold system
and abolished share tenancy subject to certain conditions. On
appeal by the Government, this Court upheld the dismissal,
saying:
The legislative intent not to punish anymore the tenant's act
of pre-reaping and pre-threshing without notice to the
landlord is inferable from the fact that, as already noted, the
Code of Agrarian Reforms did not reenact section 39 of the
Agricultural Tenancy Law and that it abolished share tenancy

which is the basis for penalizing clandestine pre-reaping and

pre-threshing.
xxx xxx xxx
As held in the Adillo case, 55 the act of pre-reaping and prethreshing without notice to the landlord, which is an offense
under the Agricultural Tenancy Law, had ceased to be an
offense under the subsequent law, the Code of Agrarian
Reforms. To prosecute it as an offense when the Code of
Agrarian Reforms is already in force would be repugnant or
abhorrent to the policy and spirit of that Code and would
subvert the manifest legislative intent not to punish anymore
pre-reaping and pre-threshing without notice to the
landholder.
xxx xxx xxx
The repeal of a penal law deprives the courts of jurisdiction
to punish persons charged with a violation of the old penal
law prior to its repeal (People vs. Tamayo, 61 Phil. 225;
People vs. Sindiong and Pastor, 77 Phil. 1000; People vs.
Binuya, 61 Phil. 208; U.S. vs. Reyes, 10 Phil. 423; U.S. vs.
Academia, 10 Phil. 431. See dissent in Lagrimas vs. Director
of Prisons, 57 Phil. 247, 252, 254).
The foregoing precedents dictate absolution of the appellants
of the offenses imputed to them.
WHEREFORE, the judgments of conviction in CA-G.R. No.
14724-CR and CA-G.R. No. 14856-CR, subject of the appeal,
as well as those in Crim. Case No. 5275-R and Crim. Case No.
4130-R rendered by the Trial Court, are REVERSED and the
accused-appellants ACQUITTED of the charges against them,
with costs de officio.
SO ORDERED.

taken a position not contrary to that of petitioner and, in fact,

has manifested . . that he is not opposing the petition . . ." 2

G.R. No. 96189 July 14, 1992

UNIVERSITY
OF
THE
PHILIPPINES, petitioner,
vs.
HON. PURA FERRER-CALLEJA, Director of the Bureau of
Labor
Relations,
Department
of
Labor
and
Employment, and THE ALL U.P. WORKERS' UNION,
represented
by
its
President,
Rosario
del
Rosario,respondent.

NARVASA, C.J.:
In this special civil action of certiorari the University of the
Philippines seeks the nullification of the Order dated October
30, 1990 of Director Pura Ferrer-Calleja of the Bureau of
Labor Relations holding that "professors, associate professors
and assistant professors (of the University of the Philippines)
are . . rank-and-file employees . . ;" consequently, they
should, together with the so-called non-academic, nonteaching, and all other employees of the University, be
represented by only one labor organization. 1 The University
is joined in this undertaking by the Solicitor General who "has

The case 3 was initiated in the Bureau of Labor Relations by a

petition filed on March 2, 1990 by a registered labor union,
the "Organization of Non-Academic Personnel of UP"
(ONAPUP). 4 Claiming to have a membership of 3,236
members comprising more than 33% of the 9,617 persons
constituting the non-academic personnel of UP-Diliman, Los
Baos, Manila, and Visayas, it sought the holding of a
certification election among all said non-academic employees
of the University of the Philippines. At a conference thereafter
held on March 22, 1990 in the Bureau, the University stated
that it had no objection to the election.
On April 18, 1990, another registered labor union, the "All UP
Workers' Union," 5 filed a comment, as intervenor in the
certification
election
proceeding.
Alleging
that
its
membership covers both academic and non-academic
personnel, and that it aims to unite all UP rank-and-file
employees in one union, it declared its assent to the holding
of the election provided the appropriate organizational unit
was first clearly defined. It observed in this connection that
the Research, Extension and Professional Staff (REPS), who
are academic non-teaching personnel, should not be deemed
part of the organizational unit.
For its part, the University, through its General
Counsel, 6 made of record its view that there should be two
(2) unions: one for academic, the other for non-academic or
administrative, personnel considering the dichotomy of
interests, conditions and rules governing these employee
groups.
Director Calleja ruled on the matter on August 7, 1990. 7 She
declared that "the appropriate organizational unit . . should
embrace all the regular rank-and-file employees, teaching
and non-teaching, of the University of the Philippines,

including all its branches" and that there was no sufficient

evidence "to justify the grouping of the non-academic or
administrative personnel into an organization unit apart and
distinct from that of the academic or teaching personnel."
Director Calleja adverted to Section 9 of Executive Order No.
180, viz.:
Sec. 9. The appropriate organizational unit shall be the
employer unit consisting of rank-and-file employees, unless
circumstances otherwise require.
and Section 1, Rule IV of the Rules Implementing said EO 180
(as amended by SEC. 2, Resolution of Public Sector Labor
Management Council dated May 14, 1989, viz.:
xxx xxx xxx
For purposes of registration, an appropriate organizational
unit may refer to:
xxx xxx xxx
d. State universities or colleges, government-owned or
controlled corporations with original charters.
She went on to say that the general intent of EO 180 was
"not to fragmentize the employer unit, as "can be gleaned
from the definition of the term "accredited employees'
organization," which refers to:
. . a registered organization of the rank-and-file employees as
defined in these rules recognized to negotiate for the
employees in an organizational unit headed by an officer with
sufficient authority to bind the agency, such as . . . . . . state
colleges and universities.
The Director thus commanded that a certification election be
"conducted among rank-and-file employees, teaching and
non-teaching" in all four autonomous campuses of the UP,

and that management appear and bring copies of the

corresponding payrolls for January, June, and July, 1990 at
the "usual pre-election conference . . ."
At the pre-election conference held on March 22, 1990 at the
Labor Organizational Division of the DOLE, 8 the University
sought further clarification of the coverage of the term,
"rank-and-file" personnel, asserting that not every employee
could properly be embraced within both teaching and nonteaching categories since there are those whose positions are
in truth managerial and policy-determining, and hence,
excluded by law.
At a subsequent hearing (on October 4, 1990), the University
filed a Manifestation seeking the exclusion from the
organizational unit of those employees holding supervisory
positions among non-academic personnel, and those in
teaching staff with the rank of Assistant Professor or higher,
submitting the following as grounds therefor:
1) Certain "high-level employees" with policy-making,
managerial, or confidential functions, are ineligible to join
rank-and-file employee organizations under Section 3, EO
180:
Sec. 3. High-level employees whose functions are normally
considered as policy-making or managerial or whose duties
are of a highly confidential nature shall not be eligible to join
the organization of rank-and file government employees;
2) In the University hierarchy, not all teaching and nonteaching personnel belong the rank-and file: just as there are
those occupying managerial positions within the nonteaching roster, there is also a dichotomy between various
levels of the teaching or academic staff;
3) Among the non-teaching employees composed of
Administrative Staff and Research personnel, only those

holding positions below Grade 18 should be regarded as

rank-and-file, considering that those holding higher grade
positions, like Chiefs of Sections, perform supervisory
functions including that of effectively recommending
termination of appointments or initiating appointments and
promotions; and
4) Not all teaching personnel may be deemed included in the
term, "rank-and-file;" only those holding appointments at the
instructor level may be so considered, because those holding
appointments from Assistant Professor to Associate Professor
to full Professor take part, as members of the University
Council, a policy-making body, in the initiation of policies and
rules with respect to faculty tenure and promotion. 9
The ONAPUP quite categorically made of record its position;
that it was not opposing the University's proferred
classification of rank-and file employees. On the other hand,
the "All UP Workers' Union" opposed the University's view, in
a Position Paper presented by it under date of October 18,
1990.
Director Calleja subsequently promulgated an Order dated
October 30, 1990, resolving the "sole issue" of "whether or
not professors, associate professors and assistant professors
are included in the definition of high-level employee(s)" in
light of Rule I, Section (1) of the Implementing Guidelines of
Executive Order No. 180, defining "high level employee" as
follows:

2. To formulate or execute management policies and

decisions; or
3. To hire, transfer, suspend, lay-off, recall, dismiss, assign or
discipline employees.
The Director adjudged that said teachers are rank-and-file
employees "qualified to join unions and vote in certification
elections." According to her
A careful perusal of the University Code . . shows that the
policy-making powers of the Council are limited to academic
matters, namely, prescribing courses of study and rules of
discipline, fixing student admission and graduation
requirements, recommending to the Board of Regents the
conferment of degrees, and disciplinary power over students.
The policy-determining functions contemplated in the
definition of a high-level employee pertain to managerial,
executive, or organization policies, such as hiring, firing, and
disciplining of employees, salaries, teaching/working hours,
other monetary and non-monetary benefits, and other terms
and conditions of employment. They are the usual issues in
collective bargaining negotiations so that whoever wields
these powers would be placed in a situation of conflicting
interests if he were allowed to join the union of rank-and-file
employees.
The University seasonably moved for reconsideration,
seeking to make the following points, to wit:

1. High Level Employee is one whose functions are

normally considered policy determining, managerial or one
whose duties are highly confidential in nature. A managerial
function refers to the exercise of powers such as:

1) UP professors do "wield the most potent managerial

powers: the power to rule on tenure, on the creation of new
programs and new jobs, and conversely, the abolition of old
programs and the attendant re-assignment of employees.

1. To effectively recommend such managerial actions;

2) To say that the Council is "limited to (acting on) academic

matters" is error, since academic decisions "are the most

important decisions made in a University . . (being, as it

were) the heart, the core of the University as a workplace.

dichotomy of interests, conditions and rules existing between

them.

3) Considering that the law regards as a "high level"

employee, one who performs either policy-determining,
managerial, or confidential functions, the Director erred in
applying only the "managerial functions" test, ignoring the
"policy-determining functions" test.

As regards the first issue, the Court is satisfied that it has

been correctly resolved by the respondent Director of Bureau
Relations. In light of Executive Order No. 180 and its
implementing rules, as well as the University's charter and
relevant regulations, the professors, associate professors and
assistant professors (hereafter simply referred to as
professors) cannot be considered as exercising such
managerial or highly confidential functions as would justify
their being categorized as "high-level employees" of the
institution.

4) The Director's interpretation of the law would lead to

absurd results, e.g.: "an administrative officer of the College
of Law is a high level employee, while a full Professor who
has published several treatises and who has distinguished
himself in argument before the Supreme Court is a mere
rank-and-file employee. A dormitory manager is classified as
a high level employee, while a full Professor or Political
Science with a Ph. D. and several Honorary doctorates is
classified as rank-and-file." 10
The motion for reconsideration was denied by Director
Calleja, by Order dated November 20, 1990.
The University would now have this Court declare void the
Director's Order of October 30, 1990 as well as that of
November 20, 1990. 11 A temporary restraining order was
issued by the Court, by Resolution dated December 5, 1990
conformably to the University's application therefor.
Two issues arise from these undisputed facts. One is whether
or not professors, associate professors and assistant
professors are "high-level employees" "whose functions are
normally considered policy determining, managerial or . .
highly confidential in nature." The other is whether or not,
they,
and
other
employees
performing
academic
12
functions, should comprise a collective bargaining unit
distinct and different from that consisting of the nonacademic employees of the University, 13 considering the

The Academic Personnel Committees, through which the

professors supposedly exercise managerial functions, were
constituted "in order to foster greater involvement of the
faculty and other academic personnel in appointments,
promotions, and other personnel matters that directly affect
them." 14 Academic
Personnel
Committees
at
the
departmental and college levels were organized "consistent
with, and demonstrative of the very idea of consulting the
faculty and other academic personnel on matters directly
affecting them" and to allow "flexibility in the determination
of guidelines peculiar to a particular department or
college." 15
Personnel actions affecting the faculty and other academic
personnel should, however, "be considered under uniform
guidelines and consistent with the Resolution of the Board (of
Regents) adopted during its 789th Meeting (11-26-69)
creating the University Academic Personnel Board." 16 Thus,
the Departmental Academic Personnel Committee is given
the function of "assist(ing) in the review of the
recommendations initiated by the Department Chairman with
regard to recruitment, selection, performance evaluation,
tenure and staff development, in accordance with the general

guidelines formulated by the University Academic Personnel

Board and the implementing details laid down by the College
Academic Personnel Committee;" 17 while the College
Academic Personnel Committee is entrusted with the
following functions: 18
1. Assist the Dean in setting up the details for the
implementation of policies, rules, standards or general
guidelines as formulated by the University Academic
Personnel Board;
2. Review the recommendation submitted by the DAPCs with
regard to recruitment, selection, performance evaluation,
tenure, staff development, and promotion of the faculty and
other academic personnel of the College;
3. Establish departmental priorities in the allocation of
available funds for promotion;
4. Act on cases of disagreement between the Chairman and
the members of the DAPC particularly on personnel matters
covered by this Order;
5. Act on complaints and/or protests against personnel
actions made by the Department Chairman and/or the DAPC.
The University Academic Personnel Board, on the other hand,
performs the following functions: 19
1. Assist the Chancellor in
recommendations of the CAPC'S.

the

review

of

the

2. Act on cases of disagreement between the Dean and the

CAPC.
3. Formulate policies, rules, and standards with respect to the
selection, compensation, and promotion of members of the
academic staff.

4. Assist the Chancellor in the review of recommendations on

academic promotions and on other matters affecting faculty
status and welfare.
From the foregoing, it is evident that it is the University
Academic Personnel Committee, composed of deans, the
assistant for academic affairs and the chief of personnel,
which formulates the policies, rules and standards respecting
selection, compensation and promotion of members of the
academic staff. The departmental and college academic
personnel committees' functions are purely recommendatory
in nature, subject to review and evaluation by the University
Academic Personnel Board. In Franklin Baker Company of the
Philippines vs. Trajano,20 this Court reiterated the principle
laid down in National Merchandising Corp. vs. Court of
Industrial Relations, 21that the power to recommend, in order
to qualify an employee as a supervisor or managerial
employee "must not only be effective but the exercise of
such authority should not be merely of a routinary or clerical
nature but should require the use of independent judgment."
Where such recommendatory powers, as in the case at bar,
are subject to evaluation, review and final action by the
department heads and other higher executives of the
company, the same, although present, are not effective and
not an exercise of independent judgment as required by law.
Significantly, the personnel actions
that may be
recommended by the departmental and college academic
personnel committees must conform with the general
guidelines drawn up by the university personnel academic
committee. This being the case, the members of the
departmental and college academic personnel committees
are not unlike the chiefs of divisions and sections of the
National Waterworks and Sewerage Authority whom this
Court considered as rank-and-file employees in National
Waterworks & Sewerage Authority vs. NWSA Consolidated
Unions, 22 because "given ready policies to execute and

standard practices to observe for their execution, . . . they

have little freedom of action, as their main function is merely
to carry out the company's orders, plans and policies."
The power or prerogative pertaining to a high-level employee
"to effectively recommend such managerial actions, to
formulate or execute management policies or decisions
and/or to hire, transfer, suspend, lay-off, recall, dismiss,
assign or discipline employees" 23 is exercised to a certain
degree
by
the
university
academic
personnel
board/committees and ultimately by the Board of Regents in
accordance
with
Section
6
of
the
University
24
Charter, thus:
(e) To appoint, on the recommendation of the President of the
University, professors, instructors, lecturers and other
employees of the University; to fix their compensation, hours
of service, and such other duties and conditions as it may
deem proper; to grant them in its discretion leave of absence
under such regulations as it may promulgate, any other
provision of law to the contrary notwithstanding, and to
remove them for cause after investigation and hearing shall
have been had.
Another factor that militates against petitioner's espousal of
managerial employment status for all its professors through
membership in the departmental and college academic
personnel committees is that not all professors are members
thereof. Membership and the number of members in the
committees are provided as follows: 25
Sec. 2. Membership in Committees. Membership in
committees may be made either through appointment,
election, or by some other means as may be determined by
the faculty and other academic personnel of a particular
department or college.

Sec. 3. Number of Members. In addition to the Chairman,

in the case of a department, and the Dean in the case of a
college, there shall be such number of members representing
the faculty and academic personnel as will afford a fairly
representative, deliberative and manageable group that can
handle evaluation of personnel actions.
Neither can membership in the University Council elevate the
professors to the status of high-level employees. Section 6 (f)
and 9 of the UP Charter respectively provide: 26
Sec. 6. The Board of Regents shall have the following powers
and duties . . . ;
xxx xxx xxx
(f) To approve the courses of study and rules of discipline
drawn up by the University Council as hereinafter
provided; . . .
Sec. 9. There shall be a University Council consisting of the
President of the University and of all instructors in the
university holding the rank of professor, associate professor,
or assistant professor. The Council shall have the power to
prescribe the courses of study and rules of discipline, subject
to the approval of the Board of Regents. It shall fix the
requirements for admission to any college of the university,
as well as for graduation and the receiving of a degree. The
Council alone shall have the power to recommend students
or others to be recipients of degrees. Through its president or
committees, it shall have disciplinary power over the
students within the limits prescribed by the rules of discipline
approved by the Board of Regents. The powers and duties of
the President of the University, in addition to those
specifically provided in this Act shall be those usually
pertaining to the office of president of a university.

It is readily apparent that the policy-determining functions of

the University Council are subject to review, evaluation and
final approval by the Board of Regents. The Council's power
of discipline is likewise circumscribed by the limits imposed
by the Board of Regents. What has been said about the
recommendatory powers of the departmental and college
academic personnel committees applies with equal force to
the alleged policy-determining functions of the University
Council.
Even assuming arguendo that UP professors discharge policydetermining functions through the University Council, still
such exercise would not qualify them as high-level
employees within the context of E.O. 180. As correctly
observed by private respondent, "Executive Order No. 180 is
a law concerning public sector unionism. It must therefore be
construed within that context. Within that context, the
University of the Philippines represents the government as an
employer. 'Policy-determining' refers to policy-determination
in university mattes that affect those same matters that may
be the subject of negotiation between public sector
management and labor. The reason why 'policy-determining'
has been laid down as a test in segregating rank-and-file
from management is to ensure that those who lay down
policies in areas that are still negotiable in public sector
collective bargaining do not themselves become part of those
employees who seek to change these policies for their
collective welfare." 27
The policy-determining functions of the University Council
refer to academic matters, i.e. those governing the
relationship between the University and its students, and not
the University as an employer and the professors as
employees. It is thus evident that no conflict of interest
results in the professors being members of the University
Council and being classified as rank-and-file employees.

Be that as it may, does it follow, as public respondent would

propose, that all rank-and-file employees of the university are
to be organized into a single collective bargaining unit?
A "bargaining unit" has been defined as a group of
employees of a given employer, comprised of all or less than
all of the entire body of employees, which the collective
interest of all the employees, consistent with equity to the
employer, indicate to be the best suited to serve the
reciprocal rights and duties of the parties under the collective
bargaining provisions of the law. 28
Our labor laws do not however provide the criteria for
determining the proper collective bargaining unit. Section 12
of the old law, Republic Act No. 875 otherwise known as the
Industrial Peace Act, simply reads as follows: 29
Sec. 12. Exclusive Collective Bargaining Representation for
Labor Organizations. The labor organization designated or
selected for the purpose of collective bargaining by the
majority of the employees in an appropriate collective
bargaining unit shall be the exclusive representative of all the
employees in such unit for the purpose of collective
bargaining in respect to rates of pay, wages, hours of
employment, or other conditions of employment; Provided,
That any individual employee or group of employees shall
have the right at any time to present grievances to their
employer.
Although said Section 12 of the Industrial Peace Act was
subsequently incorporated into the Labor Code with minor
changes, no guidelines were included in said Code for
determination of an appropriate bargaining unit in a given
case. 30 Thus, apart from the single descriptive word
"appropriate," no specific guide for determining the proper
collective bargaining unit can be found in the statutes.

Even Executive Order No. 180 already adverted to is not

much help. All it says, in its Section 9, is that "(t)he
appropriate organizational unit shall be the employer unit
consisting of rank-and-file employees, unless circumstances
otherwise require." Case law fortunately furnishes some
guidelines.
When first confronted with the task of determining the proper
collective bargaining unit in a particular controversy, the
Court had perforce to rely on American jurisprudence.
In Democratic Labor Association vs. Cebu Stevedoring
Company, Inc., decided on February 28, 1958, 31 the Court
observed that "the issue of how to determine the proper
collective bargaining unit and what unit would be appropriate
to
be
the
collective
bargaining
agency" . . . "is novel in this jurisdiction; however, American
precedents on the matter abound . . (to which resort may be
had) considering that our present Magna Carta has been
patterned after the American law on the subject." Said the
Court:
. . . Under these precedents, there are various factors which
must be satisfied and considered in determining the proper
constituency of a bargaining unit. No one particular factor is
itself decisive of the determination. The weight accorded to
any particular factor varies in accordance with the particular
question or questions that may arise in a given case. What
are these factors? Rothenberg mentions a good number, but
the most pertinent to our case are: (1) will of the employees
(Globe Doctrine); (2) affinity and unit of employees' interest,
such as substantial similarity of work and duties, or similarity
of compensation and working conditions; (3) prior collective
bargaining history; and (4) employment status, such as
temporary, seasonal probationary employees. . . .
xxx xxx xxx

An enlightening appraisal of the problem of defining an

appropriate bargaining unit is given in the 10th Annual
Report of the National Labor Relations Board wherein it is
emphasized that the factors which said board may consider
and weigh in fixing appropriate units are: the history, extent
and type of organization of employees; the history of their
collective bargaining; the history, extent and type of
organization of employees in other plants of the same
employer, or other employers in the same industry; the skill,
wages, work, and working conditions of the employees; the
desires of the employees; the eligibility of the employees for
membership in the union or unions involved; and the
relationship between the unit or units proposed and the
employer's organization, management, and operation. . . .
. . In said report, it is likewise emphasized that the basic test
in determining the appropriate bargaining unit is that a unit,
to be appropriate, must affect a grouping of employees who
have substantial, mutual interests in wages, hours, working
conditions and other subjects of collective bargaining (citing
Smith on Labor Laws, 316-317; Francisco, Labor Laws, 162). .
..
The Court further explained that "(t)he test of the grouping is
community or mutuality of interests. And this is so because
'the basic test of an asserted bargaining unit's acceptability
is whether or not it is fundamentally the combination which
will best assure to all employees the exercise of their
collective bargaining rights' (Rothenberg on Labor Relations,
490)." Hence, in that case, the Court upheld the trial court's
conclusion that two separate bargaining units should be
formed, one consisting of regular and permanent employees
and another consisting of casual laborers or stevedores.
Since then, the "community or mutuality of interests"
test has provided the standard in determining the proper
constituency of a collective bargaining unit. In Alhambra

Cigar & Cigarette Manufacturing Company, et al. vs.

Alhambra Employees' Association (PAFLU), 107 Phil. 23, the
Court, noting that the employees in the administrative, sales
and dispensary departments of a cigar and cigarette
manufacturing firm perform work which have nothing to do
with production and maintenance, unlike those in the raw
lead (malalasi), cigar, cigarette, packing (precintera) and
engineering and garage departments, authorized the
formation of the former set of employees into a separate
collective bargaining unit. The ruling in the Democratic Labor
Association case, supra, was reiterated in Philippine Land-AirSea Labor Unit vs. Court of Industrial Relations, 110 Phil. 176,
where casual employees were barred from joining the union
of the permanent and regular employees.
Applying the same "community or mutuality of interests"
test, but resulting in the formation of only one collective
bargaining units is the case of National Association of Free
Trade Unions vs. Mainit Lumber Development Company
Workers Union-United Lumber and General Workers of the
Phils., G.R. No. 79526, December 21, 1990, 192 SCRA 598. In
said case, the Court ordered the formation of a single
bargaining unit consisting of the Sawmill Division in Butuan
City and the Logging Division in Zapanta Valley, Kitcharao,
Agusan Norte of the Mainit Lumber Development Company.
The Court reasoned:
Certainly, there is a mutuality of interest among the
employees of the Sawmill Division and the Logging Division.
Their functions mesh with one another. One group needs the
other in the same way that the company needs them both.
There may be difference as to the nature of their individual
assignments but the distinctions are not enough to warrant
the formation of a separate bargaining unit.
In the case at bar, the University employees may, as already
suggested, quite easily be categorized into two general

classes: one, the group composed of employees whose

functions are non-academic, i.e., janitors, messengers,
typists, clerks, receptionists, carpenters, electricians,
grounds-keepers,
chauffeurs,
mechanics,
32
plumbers; and two, the group made up of those performing
academic functions, i.e., full professors, associate professors,
assistant professors, instructors who may be judges or
government executives and research, extension and
professorial staff. 33 Not much reflection is needed to
perceive that the community or mutuality of interests which
justifies the formation of a single collective bargaining unit is
wanting between the academic and non-academic personnel
of the university. It would seem obvious that teachers would
find very little in common with the University clerks and
other non-academic employees as regards responsibilities
and functions, working conditions, compensation rates, social
life and interests, skills and intellectual pursuits, cultural
activities, etc. On the contrary, the dichotomy of interests,
the dissimilarity in the nature of the work and duties as well
as in the compensation and working conditions of the
academic and non-academic personnel dictate the separation
of these two categories of employees for purposes of
collective bargaining. The formation of two separate
bargaining units, the first consisting of the rank-and-file nonacademic personnel, and the second, of the rank-and-file
academic employees, is the set-up that will best assure to all
the employees the exercise of their collective bargaining
rights. These special circumstances, i.e., the dichotomy of
interests and concerns as well as the dissimilarity in the
nature and conditions of work, wages and compensation
between the academic and non-academic personnel, bring
the case at bar within the exception contemplated in Section
9 of Executive Order No. 180. It was grave abuse of
discretion on the part of the Labor Relations Director to have
ruled otherwise, ignoring plain and patent realities.

WHEREFORE, the assailed Order of October 30, 1990 is

hereby AFFIRMED in so far as it declares the professors,
associate professors and assistant professors of the
University of the Philippines as rank-and-file employees. The
Order of August 7, 1990 is MODIFIED in the sense that the
non-academic rank-and-file employees of the University of
the Philippines shall constitute a bargaining unit to the
exclusion of the academic employees of the institution i.e.,
full professors, associate professors, assistant professors,
instructors, and the research, extension and professorial
staff, who may, if so minded, organize themselves into a
separate collective bargaining unit; and that, therefore, only
said non-academic rank-and-file personnel of the University
of the Philippines in Diliman, Manila, Los Baos and the
Visayas are to participate in the certification election.
SO ORDERED.

LITHOGRAPHIC
SERVICES,
INC.
SUPERVISORY,
ADMINISTRATIVE,
PERSONNEL,
PRODUCTION,
ACCOUNTING
AND
CONFIDENTIAL
EMPLOYEES
ASSOCIATION-KAISAHAN NG MANGGAWANG PILIPINO
(KAMPIL-KATIPUNAN), respondents.
Romero, Lagman, Valdecantos & Arreza Law Offices for
petitioner.
Esteban M. Mendoza for private respondent.

GUTIERREZ, JR., J.:p

This is a petition for certiorari under Rule 65 of the Rules of
Court seeking the modification of the Order dated 14
December 1990 and the Resolution dated 21 November 1990
issued by the public respondents.
The antecedent facts of the case as gathered from the
records are as follows:
On July 16, 1990, the supervisory, administrative personnel,
production, accounting and confidential employees of the
petitioner Atlas Lithographic Services, Inc. (ALSI) affiliated
with private respondent Kaisahan ng Manggagawang Pilipino,
a national labor organization. The local union adopted the
name Atlas Lithographic Services, Inc. Supervisory,
Administrative, Personnel, Production, Accounting and
Confidential Employees Association or ALSI-SAPPACEAKAMPIL in short and which we shall hereafter refer to as the
"supervisors" union.

G.R. No. 96566 January 6, 1992

ATLAS
LITHOGRAPHIC
SERVICES,
INC., petitioner,
vs.
UNDERSECRETARY
BIENVENIDO
E.
LAGUESMA
(Department of Labor and Employment) and ATLAS

Shortly thereafter, private respondent Kampil-Katipunan filed

on behalf of the "supervisors" union a petition for certification
election so that it could be the sole and exclusive bargaining
agent of the supervisory employees.

The petitioners opposed the private respondent's petition

claiming that under Article 245 of the Labor bode the private
respondent cannot represent the supervisory employees for
collective bargaining purposeless because the private
respondent also represents the rank-and-file employees'
union.
On September 18, 1990, the Med-Arbiter issued an order in
favor of the private respondent, the dispositive portion of
which provides:
WHEREFORE, premises considered, a certification election
among the supervisory employees belonging to the
Administrative,
Personnel,
Production,
Accounting
Departments as well as confidential employees performing
supervisory functions of Atlas Lithographic Services,
Incorporated is hereby ordered conducted within 20 days
from receipt hereof, subject to usual pre-election conference,
with the following choices:
1. KAMPIL (KATIPUNAN);
2. No union.
SO ORDERED. (Rollo, pp. 39-40)
The petitioners, as expected, appealed for the reversal of the
above order. The public respondent, however, issued a
resolution affirming the Med-Arbiter's order.
The petitioners, in turn, filed a motion for reconsideration but
the same was denied. Hence, this petition forcertiorari.
The sole issue to be resolved in this case is whether or not,
under Article 245 of the Labor Code, a local union of
supervisory employees may be allowed to affiliate with a
national federation of labor organizations of rank-and-file
employees and which national federation actively represents
its affiliates in collective bargaining negotiations with the

same employer of the supervisors and in the implementation

of resulting collective bargaining agreements.
The petitioner argues that KAMPIL-KATIPUNAN already
represents its rank-and-file employees and, therefore, to
allow the supervisors of those employees to affiliate with the
private respondent is tantamount to allowing the
circumvention of the principle of the separation of unions
under Article 245 of the Labor Code.
It further argues that the intent of the law is to prevent a
single labor organization from representing different classes
of employees with conflicting interests.
The public respondent, on the other hand, contends that
despite affiliation with a national federation, the local union
does not lose its personality which is separate, and distinct
from the national federation. It cites as its legal basis the
case of Adamson & Adamson, Inc. v. CIR (127 SCRA 268
[1984]).
It maintains that Rep. Act No. 6715 contemplates the
principle laid down by this Court in the Adamson case
interpreting Section 3 of Rep. Act No. 875 (the Industrial
Peace Act) on the right of a supervisor's union to affiliate. The
private respondent asserts that the legislature must have
noted the Adamson ruling then prevailing when it conceived
the reinstatement in the present Labor Code of a similar
provision on the right of supervisors to organize.
Under the Industrial Peace Act of 1953, employees were
classified into three groups, namely: (1) managerial
employees; (2) supervisors; and (3) rank-and file employees.
Supervisors, who were considered employees in relation to
their employer could join a union but not a union of rank-andfile employees.

With the enactment in 1974 of the Labor Code (Pres Decree

No. 442), employees were classified into managerial and
rank-and-file employees. Neither the category of supervisors
nor their right to organize under the old statute were
recognized. So that, in Bulletin Publishing Corporation
v. Sanchez (144 SCRA 628 [1986]), the Court interpreted the
superseding labor law to have removed from supervisors the
right to unionize among themselves. The Court ruled:
In the light of the factual background of this case, We are
constrained to hold that the supervisory employees of
petitioner firm may not, under the law, form a supervisors
union, separate and distinct from the existing bargaining unit
(BEU), composed of the rank-and-file employees of the
Bulletin Publishing Corporation. It is evident that most of the
private respondents are considered managerial employees.
Also, it is distinctly stated in Section 11, Rule II, of the
Omnibus Rules Implementing the Labor Code, that
supervisory unions are presently no longer recognized nor
allowed to exist and operate as such. (pp. 633, 634)
In Section 11, Rule II, Book V of the Omnibus Rules
implementing Pres. Decree No. 442, the supervisory unions
existing since the effectivity of the New Code in January 1,
1975 ceased to operate as such and the members who did
not qualify as managerial employees under this definition in
Article 212 (k) therein became eligible to form, to join or
assist a rank-and-file union.
A revision of the Labor Code undertaken by the bicameral
Congress brought about the enactment of Rep. Act No. 6715
in March 1989 in which employees were reclassified into
three groups, namely: (1) the managerial employees; (2)
supervisors; and (3) the rank and file employees. Under the
present law, the category of supervisory employees is once
again recognized. Hence, Art. 212 (m) states:

(m) . . . Supervisory employees are those who, in the interest

of the employer, effectively recommend such managerial
actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of
independent judgment. . . .
The rationale for the amendment is the government's
recognition of the right of supervisors to organize with the
qualification that they shall not join or assist in the
organization of rank-and-file employees. The reason behind
the Industrial Peace Act provision on the same subject matter
has been adopted in the present statute. The interests of
supervisors on the one hand, and the rank-and-file
employees on the other, are separate and distinct. The
functions of supervisors, being recommendatory in nature,
are more identified with the interests of the employer. The
performance of those functions may, thus, run counter to the
interests of the rank-and-file.
This intent of the law is made clear in the deliberations of the
legislators on then Senate Bill 530 now enacted as Rep. Act
No. 6715.
The definition of managerial employees was limited to those
having authority to hire and fire while those who only
recommend effectively the hiring or firing or transfers of
personnel would be considered as closer to rank-and-file
employees. The exclusion, therefore, of middle level
executives from the category of managers brought about a
third classification, the supervisory employees. These
supervisory employees are allowed to form their own union
but they are not allowed to join the rank-and-file union
because of conflict of interest (Journal of the Senate, First
Regular
Session,
1987,
1988,
Volume
3,
p. 2245).
In terms of classification, however, while they are more
closely identified with the rank-and-file they are still not

allowed to join the union of rank-and-file employees. To quote

the Senate Journal:

of employees under their supervision. Sec. 3 of the Industrial

Peace Act provides:

In reply to Sen. Guingona's query whether "supervisors" are

included in the term "employee", Sen. Herrera stated that
while they are considered as rank-and-file employees, they
cannot join the union and they would have to form their own
supervisors' union pursuant to Rep. Act 875. (supra, p. 2288)

Sec. 3 Employees' Right to Self Organization. Employees

shall have the right to self-organization and to form, join or
assist labor organizations of their own choosing for the
purpose of collective bargaining through representatives of
their own choosing and to engage in concerted activities for
the purpose of collective bargaining and other mutual aid or
protection. Individuals employed as supervisors shall not be
eligible for membership in a labor organization of employees
under their supervision but may form separate organizations
of their own (Emphasis supplied).

The peculiar role of supervisors is such that while they are

not managers, when they recommend action implementing
management policy or ask for the discipline or dismissal of
subordinates, they identify with the interests of the employer
and may act contrary to the interests of the rank-and-file.
We agree with the petitioner's contention that a conflict of
interest may arise in the areas of discipline, collective
bargaining and strikes.

This was not the consideration in the Adamson case because

as mentioned earlier, the rank-and-file employees in
the Adamson case were not under the supervision of the
supervisors involved.

Members of the supervisory union might refuse to carry out

disciplinary measures against their co-member rank-and-file
employees.

Meanwhile, Article 245 of the Labor Code as amended by

Rep. Act No. 6715 provides:

In the area of bargaining, their interests cannot be

considered identical. The needs of one are different from
those of the other. Moreover, in the event of a strike, the
national federation might influence the supervisors' union to
conduct a sympathy strike on the sole basis of affiliation.

Art. 245. Ineligibility of managerial employees to join any

labor organization: right of supervisory employees.
Managerial employees are not eligible to join, assist or form
any labor organization. Supervisory employees shall not be
eligible for membership in a labor organization of the rankand-file employees but may join, assist or form separate
labor organizations of their own.

More important, the factual issues in the Adamson case are

different from the present case. First, the rank-and-file
employees in the Adamson case are not directly under the
supervisors who comprise the supervisors' union. In the case
at bar, the rank-and file employees are directly under the
supervisors organized by one and the same federation.
The contemplation of the law in Sec. 3 of the Industrial Peace
Act is to prohibit supervisors from joining a labor organization

The Court construes Article 245 to mean that, as in Section 3

of the Industrial Peace Act, supervisors shall not be given an
occasion to bargain together with the rank-and-file against
the interests of the employer regarding terms and conditions
of work
Second, the national union in the Adamson case did not
actively represent its local chapters. In the present case, the

local union is actively represented by the national federation.

In fact, it was the national federation, theKAMPIL-KATIPUNAN,
which initially filed a petition for certification in behalf of the
respondent union.
Thus, if the intent of the law is to avoid a situation where
supervisors would merge with the rank and-file or where the
supervisors' labor organization would represent conflicting
interests, then a local supervisors' union should not be
allowed to affiliate with the national federation of union of
rank-and-file employees where that federation actively
participates in union activity in the company.
The petitioner further contends that the term labor
organization includes a federation considering that Art. 212
(g) mentions "any union or association of employees."
The respondent, however, argues that the phrase refers to a
local union only in which case, the prohibition in Art. 245 is
inapplicable to the case at bar.
The prohibition against a supervisors' union joining a local
union of rank-and-file is replete with jurisprudence. The Court
emphasizes that the limitation is not confined to a case of
supervisors wanting to join a rank-and-file local union. The
prohibition extends to a supervisors' local union applying for
membership in a national federation the members of which
include local unions of rank-and-file employees. The intent of
the law is clear especially where, as in the case at bar, the
supervisors will be co-mingling with those employees whom
they directly supervise in their own bargaining unit.
Technicalities should not be allowed to stand in the way of
equitably and completely resolving the rights and obligations
of the parties. (Rapid Manpower Consultants, Inc. v. NLRC,
190 SCRA 747 [1990]) What should be paramount is the
intent behind the law, not its literal construction. Where one
interpretation would result in mischievous consequences

while another would bring about equity, justice, and the

promotion of labor peace, there can be no doubt as to what
interpretation shall prevail.
Finally, the respondent contends that the law prohibits the
employer from interfering with the employees' right to selforganization.
There is no question about this intendment of the law. There
is, however, in the present case, no violation of such a
guarantee to the employee. Supervisors are not prohibited
from forming their own union. What the law prohibits is their
membership in a labor organization of rank-and-file
employees (Art. 245, Labor Code) or their joining a national
federation of rank-and-file employees that includes the very
local union which they are not allowed to directly join.
In a motion dated November 15, 1991 it appears that the
petitioner has knuckled under to the respondents' pressures
and agreed to let the national federation KAMPIL-KATIPUNAN
represent its supervisors in negotiating a collective
bargaining agreement. Against the advise of its own counsel
and on the basis of alleged "industrial peace", the petitioner
expressed a loss of interest in pursuing this action. The
petitioner is, of course, free to grant whatever concessions it
wishes to give to its employees unilaterally or through
negotiations but we cannot allow the resulting validation of
an erroneous ruling and policy of the Department of Labor
and Employment (DOLE) to remain on the basis of the
petitioner's loss of interest. The December 14, 1990 order
and the November 21, 1990 resolution of DOLE are contrary
to law and must be declared as such.
WHEREFORE, the petition is hereby GRANTED. The private
respondent is disqualified from affiliating with a national
federation of labor organizations which includes the
petitioner's rank-and-file employees.

SO ORDERED.

G.R. No. 82819 February 8, 1989

LUZ
LUMANTA,
ET
AL., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FOOD
TERMINAL, INC., respondents.

J. S. Torregoza and Associates for petitioners.

The Solicitor General for public respondent.
The Government Corporate Counsel for Food Terminal, Inc.
RESOLUTION

FELICIANO, J.:
The present Petition for certiorari seeks to annul and set
aside the Decision of the National Labor Relations
Commission rendered on 18 March 1988 in NLRC-NCR Case
No. 00- 0301035-87, entitled "Luz Lumanta, et al., versus
Food Terminal Incorporated." The Decision affirmed an order
of the Labor Arbiter dated 31 August 1987 dismissing
petitioners' complaint for lack of Jurisdiction.
On 20 March 1987, petitioner Luz Lumanta, joined by fiftyfour (54) other retrenched employees, filed a complaint for
unpaid 'd retrenchment or separation pay against private
respondent Food Terminal, Inc. ("FTI") with the Department of
Labor and Employment. The complaint was later amended to
include charges of underpayment of wages and non-payment
of emergency cost of living allowances (ECOLA).
Private respondent FTI moved to dismiss the complaint on
the ground of lack of jurisdiction. It argued that being a
government-owned and controlled corporation, its employees
are governed by the Civil Service Law not by the Labor Code,
and that claims arising from employment fall within the
jurisdiction of the Civil Service Commission and not the
Department of Labor and Employment.
The petitioners opposed the Motion to Dismiss contending
that although FTI is a corporation owned and controlled by
the government, it has still the marks of a private

corporation: it directly hires its employees without seeking

approval from the Civil Service Commission and its personnel
are covered by the Social Security System and not the
Government Service Insurance System. Petitioners also
argued that being a government-owned and controlled
corporation without original charter, private respondent FTl
clearly falls outside the scope of the civil service as marked
out in Section 2 (1), Article IX of the 1987 Constitution.
On 31 August 1987, Labor Arbiter Isabel P. Oritiguerra issued
an Order, 1 the dispositive part of which read:
On account of the above findings the instant case is
governed by the Civil Service Law. The case at bar lies
outside the jurisdictional competence of this Office.
WHEREFORE, premises considered this case is hereby
directed to be DISMISSED for lack of jurisdiction of this Office
to hear and decide the case.
SO ORDERED.
On 18 March 1988, the public respondent National Labor
Relations Commission affirmed on appeal the order of the
Labor Arbiter and dismissed the petitioners' appeal for lack of
merit.
Hence this Petition for Certiorari.
The only question raised in the present Petition is whether or
not a labor law claim against a government-owned and
controlled corporation, such as private respondent FTI, falls
within the jurisdiction of the Department of Labor and
Employment.
In refusing to take cognizance of petitioners' complaint
against private respondent, the Labor Arbiter and the
National Labor Relations Commission relied chiefly on this
Court's ruling in National Housing Authority v. Juco, 2which

held that "there should no longer be any question at this time

that employees of government-owned or controlled
corporations are governed by the civil service law and civil
service rules and regulations.
Juco was decided under the 1973 Constitution, Article II-B,
Section 1 (1) of which provided:
The civil service embraces every branch, agency,
subdivision, and instrumentality of the Government, including
every government-owned or controlled corporation.
The 1987 Constitution which took effect on 2 February 1987,
has on this point a notably different provision which reads:
The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original
charter. (Article IX-B, Section 2 [1]).
The Court, in National Service Corporation (NASECO) v.
National Labor Relations Commission, G.R. No. 69870,
promulgated on 29 November 1988, 3 quoting extensively
from the deliberations 4 of the 1986 Constitutional
Commission in respect of the intent and meaning of the new
phrase "with original charter," in effect held that
government-owned and controlled corporations with original
charter refer to corporations chartered by special lawas
distinguished from corporations organized under our general
incorporation statute-the Corporation Code. InNASECO, the
company involved had been organized under the general
incorporation statute and was a subsidiary of the National
Investment Development Corporation (NIDC) which in turn
was a subsidiary of the Philippine National Bank, a bank
chartered by a special statute. Thus, government-owned or
controlled corporations like NASECO are effectively excluded
from the scope of the Civil Service.

It is the 1987 Constitution, and not the case law embodied

in Juco, 5 which applies in the case at bar, under the principle
that jurisdiction is determined as of the time of the filing of
the complaint. 6 At the time the complaint against private
respondent FTI was filed (i.e., 20 March 1987), and at the
time the decisions of the respondent Labor Arbiter and
National Labor Relations Commission were rendered (i.e., 31
August 1987 and 18 March 1988, respectively), the 1987
Constitution had already come into effect. latter of
Instruction No. 1013, dated 19 April 1980, included Food
Terminal, Inc. in the category of "government-owned or
controlled corporations." 7 Since then, FTI served as the
marketing arm of the National Grains Authority (now known
as the National Food Authority). The pleadings show that FTI
was previously a privately owned enterprise, created and
organized under the general incorporation law, with the
corporate name "Greater Manila Food Terminal Market,
Inc." 8 The record does not indicate the precise amount of the
capital stock of FM that is owned by the government; the
petitioners' claim, and this has not been disputed, that FTl is
not hundred percent (100%) government-owned and that it
has some private shareholders.
We conclude that because respondent FTI is governmentowned and controlled corporation without original charter, it
is the Department of Labor and Employment, and not the
Civil Service Commission, which has jurisdiction over the
dispute arising from employment of the petitioners with
private respondent FTI, and that consequently, the terms and
conditions of such employment are governed by the Labor
Code and not by the Civil Service Rules and Regulations.
Public respondent National Labor Relations Commission acted
without or in excess of its jurisdiction in dismissing
petitioners complaint.

ACCORDINGLY, the Petition for certiorari is hereby GRANTED

and the Decision of public respondent Labor Arbiter dated 31
August 1987 and the Decision of public respondent
Commission dated 18 March 1988, both in NLRC-NCR Case
No. 00-03-01035-87 are hereby SET ASIDE. The case is
hereby REMANDED to the Labor Arbiter for further
appropriate proceedings.

G.R. No. 85279 July 28, 1989

SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION
(SSSEA), DIONISION T. BAYLON, RAMON MODESTO,
JUANITO MADURA, REUBEN ZAMORA, VIRGILIO DE
ALDAY, SERGIO ARANETA, PLACIDO AGUSTIN, VIRGILIO
MAGPAYO, petitioner,
vs.
THE COURT OF APPEALS, SOCIAL SECURITY SYSTEM
(SSS), HON. CEZAR C. PERALEJO, RTC, BRANCH 98,
QUEZON CITY, respondents.
Vicente T. Ocampo & Associates for petitioners.

CORTES, J:
Primarily, the issue raised in this petition is whether or not
the Regional Trial Court can enjoin the Social Security System
Employees Association (SSSEA) from striking and order the
striking employees to return to work. Collaterally, it is
whether or not employees of the Social Security System
(SSS) have the right to strike.
The antecedents are as follows:
On June 11, 1987, the SSS filed with the Regional Trial Court
of Quezon City a complaint for damages with a prayer for a

writ of preliminary injunction against petitioners, alleging

that on June 9, 1987, the officers and members of SSSEA
staged an illegal strike and baricaded the entrances to the
SSS Building, preventing non-striking employees from
reporting for work and SSS members from transacting
business with the SSS; that the strike was reported to the
Public Sector Labor - Management Council, which ordered the
strikers to return to work; that the strikers refused to return
to work; and that the SSS suffered damages as a result of the
strike. The complaint prayed that a writ of preliminary
injunction be issued to enjoin the strike and that the strikers
be ordered to return to work; that the defendants (petitioners
herein) be ordered to pay damages; and that the strike be
declared illegal.
It appears that the SSSEA went on strike after the SSS failed
to act on the union's demands, which included:
implementation of the provisions of the old SSS-SSSEA
collective bargaining agreement (CBA) on check-off of union
dues; payment of accrued overtime pay, night differential
pay and holiday pay; conversion of temporary or contractual
employees with six (6) months or more of service into regular
and permanent employees and their entitlement to the same
salaries, allowances and benefits given to other regular
employees of the SSS; and payment of the children's
allowance of P30.00, and after the SSS deducted certain
amounts from the salaries of the employees and allegedly
committed acts of discrimination and unfair labor practices
[Rollo, pp. 21-241].
The court a quo, on June 11, 1987, issued a temporary
restraining order pending resolution of the application for a
writ of preliminary injunction [Rollo, p. 71.] In the meantime,
petitioners filed a motion to dismiss alleging the trial court's
lack of jurisdiction over the subject matter [Rollo, pp. 72-82.]
To this motion, the SSS filed an opposition, reiterating its
prayer for the issuance of a writ of injunction [Rollo, pp. 209-

222]. On July 22,1987, in a four-page order, the court a quo

denied the motion to dismiss and converted the restraining
order into an injunction upon posting of a bond, after finding
that the strike was illegal [Rollo, pp. 83- 86]. As petitioners'
motion for the reconsideration of the aforesaid order was also
denied on August 14, 1988 [Rollo, p. 94], petitioners filed a
petition for certiorari and prohibition with preliminary
injunction before this Court. Their petition was docketed as
G.R. No. 79577. In a resolution dated October 21, 1987, the
Court, through the Third Division, resolved to refer the case
to the Court of Appeals. Petitioners filed a motion for
reconsideration thereof, but during its pendency the Court of
Appeals on March 9,1988 promulgated its decision on the
referred case [Rollo, pp. 130-137]. Petitioners moved to recall
the Court of Appeals' decision. In the meantime, the Court on
June 29,1988 denied the motion for reconsideration in G.R.
No. 97577 for being moot and academic. Petitioners' motion
to recall the decision of the Court of Appeals was also denied
in view of this Court's denial of the motion for reconsideration
[Rollo, pp. 141- 143]. Hence, the instant petition to review
the decision of the Court of Appeals [Rollo, pp. 12-37].
Upon motion of the SSS on February 6,1989, the Court issued
a temporary restraining order enjoining the petitioners from
staging another strike or from pursuing the notice of strike
they filed with the Department of Labor and Employment on
January 25, 1989 and to maintain the status quo [Rollo, pp.
151-152].
The Court, taking the comment as answer, and noting the
reply and supplemental reply filed by petitioners, considered
the issues joined and the case submitted for decision.
The position of the petitioners is that the Regional Trial Court
had no jurisdiction to hear the case initiated by the SSS and
to issue the restraining order and the writ of preliminary
injunction, as jurisdiction lay with the Department of Labor

and Employment or the National Labor Relations

Commission, since the case involves a labor dispute.
On the other hand, the SSS advances the contrary view, on
the ground that the employees of the SSS are covered by
civil service laws and rules and regulations, not the Labor
Code, therefore they do not have the right to strike. Since
neither the DOLE nor the NLRC has jurisdiction over the
dispute, the Regional Trial Court may enjoin the employees
from striking.
In dismissing the petition for certiorari and prohibition with
preliminary injunction filed by petitioners, the Court of
Appeals held that since the employees of the SSS, are
government employees, they are not allowed to strike, and
may be enjoined by the Regional Trial Court, which had
jurisdiction over the SSS' complaint for damages, from
continuing with their strike.
Thus, the sequential questions to be resolved by the Court in
deciding whether or not the Court of Appeals erred in finding
that the Regional Trial Court did not act without or in excess
of jurisdiction when it took cognizance of the case and
enjoined the strike are as follows:
1. Do the employees of the SSS have the right to strike?
2. Does the Regional Trial Court have jurisdiction to hear the
case initiated by the SSS and to enjoin the strikers from
continuing with the strike and to order them to return to
work?
These shall be discussed and resolved seriatim
I
The 1987 Constitution, in the Article on Social Justice and
Human Rights, provides that the State "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" [Art. XIII, Sec. 31].
By itself, this provision would seem to recognize the right of
all workers and employees, including those in the public
sector, to strike. But the Constitution itself fails to expressly
confirm this impression, for in the Sub-Article on the Civil
Service Commission, it provides, after defining the scope of
the
civil
service
as
"all
branches,
subdivisions,
instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original
charters," that "[t]he right to self-organization shall not be
denied to government employees" [Art. IX(B), Sec. 2(l) and
(50)]. Parenthetically, the Bill of Rights also provides that
"[tlhe right of the people, including those employed in the
public and private sectors, to form unions, associations, or
societies for purposes not contrary to law shall not abridged"
[Art. III, Sec. 8]. Thus, while there is no question that the
Constitution recognizes the right of government employees
to organize, it is silent as to whether such recognition also
includes the right to strike.
Resort to the intent of the framers of the organic law
becomes helpful in understanding the meaning of these
provisions. A reading of the proceedings of the Constitutional
Commission that drafted the 1987 Constitution would show
that in recognizing the right of government employees to
organize, the commissioners intended to limit the right to the
formation of unions or associations only, without including
the right to strike.
Thus, Commissioner Eulogio R. Lerum, one of the sponsors of
the provision that "[tlhe right to self-organization shall not be
denied to government employees" [Art. IX(B), Sec. 2(5)], in
answer to the apprehensions expressed by Commissioner
Ambrosio B. Padilla, Vice-President of the Commission,
explained:

MR. LERUM. I think what I will try to say will not take that
long. When we proposed this amendment providing for selforganization of government employees, it does not mean
that because they have the right to organize, they also have
the right to strike. That is a different matter. We are only
talking about organizing, uniting as a union. With regard to
the right to strike, everyone will remember that in the Bill of
Rights, there is a provision that the right to form associations
or societies whose purpose is not contrary to law shall not be
abridged. Now then, if the purpose of the state is to prohibit
the strikes coming from employees exercising government
functions, that could be done because the moment that is
prohibited, then the union which will go on strike will be an
illegal union. And that provision is carried in Republic Act
875. In Republic Act 875, workers, including those from the
government-owned and controlled, are allowed to organize
but they are prohibited from striking. So, the fear of our
honorable Vice- President is unfounded. It does not mean
that because we approve this resolution, it carries with it the
right to strike. That is a different matter. As a matter of fact,
that subject is now being discussed in the Committee on
Social Justice because we are trying to find a solution to this
problem. We know that this problem exist; that the moment
we allow anybody in the government to strike, then what will
happen if the members of the Armed Forces will go on strike?
What will happen to those people trying to protect us? So
that is a matter of discussion in the Committee on Social
Justice. But, I repeat, the right to form an organization does
not carry with it the right to strike. [Record of the
Constitutional Commission, vol. 1, p. 569].
It will be recalled that the Industrial Peace Act (R.A. No. 875),
which was repealed by the Labor Code (P.D. 442) in 1974,
expressly banned strikes by employees in the Government,
including
instrumentalities
exercising
governmental
functions, but excluding entities entrusted with proprietary
functions:

.Sec. 11. Prohibition Against Strikes in the Government.

The terms and conditions of employment in the
Government,
including
any
political
subdivision
or
instrumentality thereof, are governed by law and it is
declared to be the policy of this Act that employees therein
shall not strike for the purpose of securing changes or
modification in their terms and conditions of employment.
Such employees may belong to any labor organization which
does not impose the obligation to strike or to join in
strike:Provided, however, That this section shall apply only to
employees employed in governmental functions and not
those employed in proprietary functions of the Government
including but not limited to governmental corporations.
No similar provision is found in the Labor Code, although at
one time it recognized the right of employees of government
corporations established under the Corporation Code to
organize and bargain collectively and those in the civil
service to "form organizations for purposes not contrary to
law" [Art. 244, before its amendment by B.P. Blg. 70 in 1980],
in the same breath it provided that "[t]he terms and
conditions of employment of all government employees,
including employees of government owned and controlled
corporations, shall be governed by the Civil Service Law,
rules and regulations" [now Art. 276]. Understandably, the
Labor Code is silent as to whether or not government
employees may strike, for such are excluded from its
coverage [Ibid]. But then the Civil Service Decree [P.D. No.
807], is equally silent on the matter.
On June 1, 1987, to implement the constitutional guarantee
of the right of government employees to organize, the
President issued E.O. No. 180 which provides guidelines for
the exercise of the right to organize of government
employees. In Section 14 thereof, it is provided that "[t]he
Civil Service law and rules governing concerted activities and
strikes in the government service shall be observed, subject

to any legislation that may be enacted by Congress." The

President was apparently referring to Memorandum Circular
No. 6, s. 1987 of the Civil Service Commission under date
April 21, 1987 which, "prior to the enactment by Congress of
applicable
laws
concerning
strike
by
government
employees ... enjoins under pain of administrative sanctions,
all government officers and employees from staging strikes,
demonstrations, mass leaves, walk-outs and other forms of
mass action which will result in temporary stoppage or
disruption of public service." The air was thus cleared of the
confusion. At present, in the absence of any legislation
allowing government employees to strike, recognizing their
right to do so, or regulating the exercise of the right, they are
prohibited
from
striking, by express
provision
of
Memorandum Circular No. 6 and as implied in E.O. No. 180.
[At this juncture, it must be stated that the validity of
Memorandum Circular No. 6 is not at issue].
But are employees of the SSS covered by the prohibition
against strikes?
The Court is of the considered view that they are.
Considering that under the 1987 Constitution "[t]he civil
service
embraces
all
branches,
subdivisions,
instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original
charters" [Art. IX(B), Sec. .2(l) see also Sec. 1 of E.O. No. 180
where the employees in the civil service are denominated as
"government employees"] and that the SSS is one such
government-controlled corporation with an original charter,
having been created under R.A. No. 1161, its employees are
part of the civil service [NASECO v. NLRC, G.R. Nos. 69870 &
70295, November 24,1988] and are covered by the Civil
Service Commission's memorandum prohibiting strikes. This
being the case, the strike staged by the employees of the
SSS was illegal.

The statement of the Court in Alliance of Government

Workers v. Minister of Labor and Employment [G.R. No.
60403, August 3, 1:983, 124 SCRA 11 is relevant as it
furnishes the rationale for distinguishing between workers in
the private sector and government employees with regard to
the right to strike:
The general rule in the past and up to the present is that 'the
terms and conditions of employment in the Government,
including any political subdivision or instrumentality thereof
are governed by law" (Section 11, the Industrial Peace Act,
R.A. No. 875, as amended and Article 277, the Labor Code,
P.D. No. 442, as amended). Since the terms and conditions of
government employment are fixed by law, government
workers cannot use the same weapons employed by workers
in the private sector to secure concessions from their
employers. The principle behind labor unionism in private
industry is that industrial peace cannot be secured through
compulsion by law. Relations between private employers and
their employees rest on an essentially voluntary basis.
Subject to the minimum requirements of wage laws and
other labor and welfare legislation, the terms and conditions
of employment in the unionized private sector are settled
through the process of collective bargaining. In government
employment, however, it is the legislature and, where
properly given delegated power, the administrative heads of
government which fix the terms and conditions of
employment. And this is effected through statutes or
administrative circulars, rules, and regulations, not through
collective bargaining agreements. [At p. 13; Emphasis
supplied].
Apropos is the observation of the Acting Commissioner of
Civil Service, in his position paper submitted to the 1971
Constitutional Convention, and quoted with approval by the
Court in Alliance, to wit:

It is the stand, therefore, of this Commission that by reason

of the nature of the public employer and the peculiar
character of the public service, it must necessarily regard the
right to strike given to unions in private industry as not
applying to public employees and civil service employees. It
has been stated that the Government, in contrast to the
private employer, protects the interest of all people in the
public service, and that accordingly, such conflicting interests
as are present in private labor relations could not exist in the
relations between government and those whom they employ.
[At pp. 16-17; also quoted in National Housing Corporation v.
Juco, G.R. No. 64313, January 17,1985,134 SCRA 172,178179].
E.O. No. 180, which provides guidelines for the exercise of
the right to organize of government employees, while
clinging to the same philosophy, has, however, relaxed the
rule to allow negotiation where the terms and conditions of
employment involved are not among those fixed by law.
Thus:
.SECTION 13. Terms and conditions of employment or
improvements thereof, except those that are fixed by law,
may be the subject of negotiations between duly recognized
employees' organizations and appropriate government
authorities.
The same executive order has also provided for the general
mechanism for the settlement of labor disputes in the public
sector to wit:
.SECTION 16. The Civil Service and labor laws and
procedures, whenever applicable, shall be followed in the
resolution of complaints, grievances and cases involving
government employees. In case any dispute remains
unresolved after exhausting all the available remedies under
existing laws and procedures, the parties may jointly refer

the dispute to the [Public Sector Labor- Management] Council

for appropriate action.
Government employees may, therefore, through their unions
or associations, either petition the Congress for the
betterment of the terms and conditions of employment which
are within the ambit of legislation or negotiate with the
appropriate government agencies for the improvement of
those which are not fixed by law. If there be any unresolved
grievances, the dispute may be referred to the Public Sector
Labor - Management Council for appropriate action. But
employees in the civil service may not resort to strikes, walkouts and other temporary work stoppages, like workers in the
private sector, to pressure the Govemment to accede to their
demands. As now provided under Sec. 4, Rule III of the Rules
and Regulations to Govern the Exercise of the Right of
Government- Employees to Self- Organization, which took
effect after the instant dispute arose, "[t]he terms and
conditions of employment in the government, including any
political subdivision or instrumentality thereof and
government- owned and controlled corporations with original
charters are governed by law and employees therein shall
not strike for the purpose of securing changes thereof."
II
The strike staged by the employees of the SSS belonging to
petitioner union being prohibited by law, an injunction may
be issued to restrain it.
It is futile for the petitioners to assert that the subject labor
dispute falls within the exclusive jurisdiction of the NLRC and,
hence, the Regional Trial Court had no jurisdiction to issue a
writ of injunction enjoining the continuance of the strike. The
Labor Code itself provides that terms and conditions of
employment of government employees shall be governed by
the Civil Service Law, rules and regulations [Art. 276]. More
importantly, E.O. No. 180 vests the Public Sector Labor -

Management Council with jurisdiction over unresolved labor

disputes involving government employees [Sec. 16]. Clearly,
the NLRC has no jurisdiction over the dispute.
This being the case, the Regional Trial Court was not
precluded, in the exercise of its general jurisdiction under B.P.
Blg. 129, as amended, from assuming jurisdiction over the
SSS's complaint for damages and issuing the injunctive writ
prayed for therein. Unlike the NLRC, the Public Sector Labor Management Council has not been granted by law authority
to issue writs of injunction in labor disputes within its
jurisdiction. Thus, since it is the Council, and not the NLRC,
that has jurisdiction over the instant labor dispute, resort to
the general courts of law for the issuance of a writ of
injunction to enjoin the strike is appropriate.
Neither could the court a quo be accused of imprudence or
overzealousness, for in fact it had proceeded with caution.
Thus, after issuing a writ of injunction enjoining the
continuance of the strike to prevent any further disruption of
public service, the respondent judge, in the same order,
admonished the parties to refer the unresolved controversies
emanating from their employer- employee relationship to the
Public Sector Labor - Management Council for appropriate
action [Rollo, p. 86].
III
In their "Petition/Application for Preliminary and Mandatory
Injunction," and reiterated in their reply and supplemental
reply, petitioners allege that the SSS unlawfully withheld
bonuses and benefits due the individual petitioners and they
pray that the Court issue a writ of preliminary prohibitive and
mandatory injunction to restrain the SSS and its agents from
withholding payment thereof and to compel the SSS to pay
them. In their supplemental reply, petitioners annexed an
order of the Civil Service Commission, dated May 5, 1989,
which ruled that the officers of the SSSEA who are not

preventively suspended and who are reporting for work

pending the resolution of the administrative cases against
them are entitled to their salaries, year-end bonuses and
other fringe benefits and affirmed the previous order of the
Merit Systems Promotion Board.
The matter being extraneous to the issues elevated to this
Court, it is Our view that petitioners' remedy is not to petition
this Court to issue an injunction, but to cause the execution
of the aforesaid order, if it has already become final.
WHEREFORE, no reversible error having been committed by
the Court of Appeals, the instant petition for review is hereby
DENIED and the decision of the appellate court dated March
9, 1988 in CA-G.R. SP No. 13192 is AFFIRMED. Petitioners'
"Petition/Application
for
Preliminary
and
Mandatory
Injunction" dated December 13,1988 is DENIED.
SO ORDERED.

G.R. No. 87676 December 20, 1989

REPUBLIC OF THE PHILIPPINES, represented by the
NATIONAL
PARKS
DEVELOPMENT
COMMITTEE,petitioner,
vs.
THE HON. COURT OF APPEALS and THE NATIONAL

PARKS DEVELOPMENT SUPERVISORY ASSOCIATION &

THEIR MEMBERS, respondents.
Bienvenido D. Comia for respondents.

GRIO-AQUINO, J.:
The Regional Trial Court of Manila, Branch III, dismissed for
lack of jurisdiction, the petitioner's complaint in Civil Case No.
88- 44048 praying for a declaration of illegality of the strike
of the private respondents and to restrain the same. The
Court of Appeals denied the petitioner's petition for certiorari,
hence, this petition for review.
The key issue in this case is whether the petitioner, National
Parks Development Committee (NPDC), is a government
agency, or a private corporation, for on this issue depends
the right of its employees to strike.
This issue came about because although the NPDC was
originally created in 1963 under Executive Order No. 30, as
the Executive Committee for the development of the Quezon
Memorial, Luneta and other national parks, and later
renamed as the National Parks Development Committee
under Executive Order No. 68, on September 21, 1967, it was
registered in the Securities and Exchange Commission (SEC)
as a non-stock and non-profit corporation, known as "The
National Parks Development Committee, Inc."
However, in August, 1987, the NPDC was ordered by the SEC
to show cause why its Certificate of Registration should not
be suspended for: (a) failure to submit the General
Information Sheet from 1981 to 1987; (b) failure to submit its
Financial Statements from 1981 to 1986; (c) failure to
register its Corporate Books; and (d) failure to operate for a
continuous period of at least five (5) years since September
27, 1967.

On August 18, 1987, the NPDC Chairman, Amado Lansang,

Jr., informed SEC that his Office had no objection to the
suspension, cancellation, or revocation of the Certificate of
Registration of NPDC.
By virtue of Executive Order No. 120 dated January 30, 1989,
the NPDC was attached to the Ministry (later Department) of
Tourism and provided with a separate budget subject to audit
by the Commission on Audit.
On September 10, 1987, the Civil Service Commission
notified NPDC that pursuant to Executive Order No. 120, all
appointments and other personnel actions shall be submitted
through the Commission.
Meanwhile,
the
Rizal
Park
Supervisory
Employees
Association, consisting of employees holding supervisory
positions in the different areas of the parks, was organized
and it affiliated with the Trade Union of the Philippines and
Allied Services (TUPAS) under Certificate No. 1206.
On June 15, 1987, two collective bargaining agreements were
entered into between NPDC and NPDCEA (TUPAS local
Chapter No. 967) and NPDC and NPDCSA (TUPAS Chapter No.
1206), for a period of two years or until June 30, 1989.
On March 20, 1988, these unions staged a stake at the Rizal
Park, Fort Santiago, Paco Park, and Pook ni Mariang Makiling
at Los Banos, Laguna, alleging unfair labor practices by
NPDC.
On March 21, 1988, NPDC filed in the Regional Trial Court in
Manila, Branch III, a complaint against the union to declare
the strike illegal and to restrain it on the ground that the
strikers, being government employees, have no right to strike
although they may form a union.
On March 24, 1988, the lower court dismissed the complaint
and lifted the restraining order for lack of jurisdiction. It held

that the case "properly falls under the jurisdiction of the

Department of Labor," because "there exists an employeremployee relationship" between NPDC and the strikers, and
"that the acts complained of in the complaint, and which
plaintiff seeks to enjoin in this action, fall under paragraph 5
of Article 217 of the Labor Code, ..., in relation to Art. 265 of
the same Code, hence, jurisdiction over said acts does not
belong to this Court but to the Labor Arbiters of the
Department of Labor." (p. 142, Rollo.).
Petitioner went to the Court of Appeals on certiorari (CA-G.R.
SP No. 14204). On March 31, 1989, the Court of appeals
affirmed the order of the trial court, hence, this petition for
review. The petitioner alleges that the Court of Appeals erred:
1) in not holding that the NPDC employees are covered by
the Civil Service Law; and
2) in ruling that petitioner's labor dispute with its employees
is cognizable by the Department of Labor.
We have considered the petition filed by the Solicitor General
on behalf of NPDC and the comments thereto and are
persuaded that it is meritorious.
In Jesus P. Perlas, Jr. vs. People of the Philippines, G.R. Nos.
84637-39, August 2, 1989, we ruled that the NPDC is an
agency of the government, not a government-owned or
controlled corporation, hence, the Sandiganbayan had
jurisdiction over its acting director who committed estafa. We
held thus:
The National Parks Development Committee was created
originally as an Executive Committee on January 14,1963, for
the development of the Quezon Memorial, Luneta and other
national parks (Executive Order No. 30). It was later
designated as the National Parks Development Committee
(NPDC) on February 7, 1974 (E.O. No. 69). On January 9,

1966, Mrs. Imelda R. Marcos and Teodoro F. Valencia were

designated Chairman and Vice- Chairman respectively (E.O.
No. 3). Despite an attempt to transfer it to the Bureau of
Forest Development, Department of Natural Resources, on
December 1, 1975 (Letter of Implementation No. 39, issued
pursuant to PD No. 830, dated November 27, 1975), the
NPDC has remained under the Office of the President (E.O.
No. 709, dated July 27, 1981).
Since 1977 to 1981, the annual appropriations decrees listed
NPDC as a regular government agency under the Office of
the President and allotments for its maintenance and
operating expenses were issued direct to NPDC (Exh. 10-A
Perlas, Item No. 2, 3). (Italics ours.)
Since NPDC is a government agency, its employees are
covered by civil service rules and regulations (Sec. 2, Article
IX, 1987 Constitution). Its employees are civil service
employees (Sec. 14, Executive Order No. 180).
While NPDC employees are allowed under the 1987
Constitution to organize and join unions of their choice, there
is as yet no law permitting them to strike. In case of a labor
dispute between the employees and the government, Section
15 of Executive Order No. 180 dated June 1, 1987 provides
that the Public Sector Labor- Management Council, not the
Department of Labor and Employment, shall hear the
dispute. Clearly, the Court of Appeals and the lower court
erred in holding that the labor dispute between the NPDC and
the members of the NPDSA is cognizable by the Department
of Labor and Employment.
WHEREFORE, the petition for review is granted. The decision
of the Court of Appeals in CA-G.R. SP No. 14204 is hereby set
aside. The private respondents' complaint should be filed in
the Public Sector Labor-Management Council as provided in
Section 15 of Executive Order No. 180. Costs against the
private respondents.

SO ORDERED.

G.R. No. 91902 May 20, 1991

MANILA
ELECTRIC
COMPANY, petitioner,
vs.
THE HON. SECRETARY OF LABOR AND EMPLOYMENT,
STAFF AND TECHNICAL EMPLOYEES ASSOCIATION OF
MERALCO, and FIRST LINE ASSOCIATION OF MERALCO
SUPERVISORY EMPLOYEES,respondents.
Rolando R. Arbues, Atilano S. Guevarra, Jr. and Gil S. San
Diego for petitioner.
The Solicitor General for public respondent.
Felipe Gojar for STEAM-PCWF.
Wakay & Wakay Legal Services for First Line Association of
Meralco Supervisory Employees.

The facts are as follows:

On November 22, 1988, the Staff and Technical Employees
Association of MERALCO (hereafter "STEAM-PCWF") a labor
organization of staff and technical employees of MERALCO,
filed a petition for certification election, seeking to represent
regular employees of MERALCO who are: (a) non-managerial
employees with Pay Grades VII and above; (b) nonmanagerial employees in the Patrol Division, Treasury
Security Services Section, Secretaries who are automatically
removed from the bargaining unit; and (c) employees within
the rank and file unit who are automatically disqualified from
becoming union members of any organization within the
same bargaining unit.
Among others, the petition alleged that "while there exists a
duly-organized union for rank and file employees in Pay
Grade I-VI, which is the MERALCO Employees and Worker's
Association (MEWA) which holds a valid CBA for the rank and
file employees, 1 there is no other labor organization except
STEAM-PCWF claiming to represent the MERALCO employees.
The petition was premised on the exclusion/disqualification of
certain MERALCO employees pursuant to Art. I, Secs. 2 and 3
of the existing MEWA CBA as follows:
ARTICLE I

MEDIALDEA, J.:p
This petition seeks to review the Resolution of respondent
Secretary of Labor and Employment Franklin M. Drilon dated
November 3, 1989 which affirmed an Order of Med-Arbiter
Renato P. Parungo (Case No. NCR-O-D-M-1-70), directing the
holding of a certification election among certain employees
of petitioner Manila Electric Company (hereafter "MERALCO")
as well as the Order dated January 16, 1990 which denied the
Motion for Reconsideration of MERALCO.

SCOPE
xxx xxx xxx
Sec. 2. Excluded from the appropriate bargaining unit and
therefore outside the scope of this Agreement are:
(a) Employees in Patrol Division;
(b) Employees in Treasury Security Services Section;
(c) Managerial Employees; and

(d) Secretaries.

(p. 19, Rollo)

Any member of the Union who may now or hereafter be

assigned or transferred to Patrol Division or Treasury Security
Services Section, or becomes Managerial Employee or a
Secretary, shall be considered automatically removed from
the bargaining unit and excluded from the coverage of this
agreement. He shall thereby likewise be deemed
automatically to have ceased to be member of the union, and
shall desist from further engaging in union activity of any
kind.

MERALCO moved for the dismissal of the petition on the

following grounds:
I

1. Office of the Corporate Secretary

The employees sought to be represented by petitioner are

either 1) managerial who are prohibited by law from forming
or joining supervisory union; 2) security services personnel
who are prohibited from joining or assisting the rank-and-file
union; 3) secretaries who do not consent to the petitioner's
representation and whom petitioner can not represent; and
4) rank-and-file employees represented by the certified or
duly recognized bargaining representative of the only rankand-file bargaining unit in the company, the Meralco
Employees Workers Association (MEWA), in accordance with
the existing Collective Bargaining Agreement with the latter.

2. Corporate Staff Services Department

II

3. Managerial Payroll Office

4. Legal Service Department

The petition for certification election will disturb the

administration of the existing Collective Bargaining
Agreement in violation of Art. 232 of the Labor Code.

5. Labor Relations Division

III

6. Personnel Administration Division

The petition itself shows that it is not supported by the

written consent of at least twenty percent (20%) of the
alleged 2,500 employees sought to be represented.
(Resolution, Sec. of Labor, pp. 223-224, Rollo)

Sec. 3. Regular rank-and-file employees in the organization

elements herein below listed shall be covered within the
bargaining unit, but shall be automatically disqualified from
becoming union members:

7. Manpower Planning & Research Division

8. Computer Services Department
9. Financial Planning & Control Department
10. Treasury Department, except Cash Section
11. General Accounting Section
xxx xxx xxx

Before Med-Arbiter R. Parungo, MERALCO contended that

employees from Pay Grades VII and above are classified as
managerial employees who, under the law, are prohibited
from forming, joining or assisting a labor organization of the
rank and file. As regards those in the Patrol Division and
Treasury Security Service Section, MERALCO maintains that
since these employees are tasked with providing security to

the company, they are not eligible to join the rank and file
bargaining unit, pursuant to Sec. 2(c), Rule V, Book V of the
then Implementing Rules and Regulations of the Labor Code
(1988) which reads as follows:

the holding of a certification election would allow them to

fully translate their sentiment on the matter, and thus
directed the holding of a certification election. The dispositive
portion of the Resolution provides as follows:

Sec. 2. Who may file petition. The employer or any

legitimate labor organization may file the petition.

WHEREFORE, premises considered, a certification election is

hereby ordered conducted among the regular rank-and-file
employees of MERALCO to wit:

The petition, when filed by a legitimate labor organization,

shall contain, among others:
xxx xxx xxx
(c) description of the bargaining unit which shall be the
employer unit unless circumstances otherwise require,
and provided, further: that the appropriate bargaining unit of
the rank and file employees shall not include security guards
(As amended by Sec. 6, Implementing Rules of EO 111)
xxx xxx xxx
(p. 111, Labor Code, 1988 Ed.)
As regards those rank and file employees enumerated in Sec.
3, Art. I, MERALCO contends that since they are already
beneficiaries of the MEWA-CBA, they may not be treated as a
separate and distinct appropriate bargaining unit.
MERALCO raised the same argument with respect to
employees sought to be represented by STEAM-PCWF,
claiming that these were already covered by the MEWA-CBA.
On March 15, 1989, the Med-Arbiter ruled that having been
excluded from the existing Collective Bargaining Agreement
for rank and file employees, these employees have the right
to form a union of their own, except those employees
performing managerial functions. With respect to those
employees who had resented their alleged involuntary
membership in the existing CBA, the Med-Arbiter stated that

1. Non-managerial employees with Pay Grades VII and above;

2. Non-managerial employees of Patrol Division, Treasury
Security Services Section and Secretaries; and
3. Employees prohibited from actively participating as
members of the union.
within 20 days from receipt hereof, subject to the usual preelection conference with the following choices:
1. Staff and Technical, Employees Association of MERALCO
(STEAM-PCWF);
2. No Union.
SO ORDERED. (p. 222, Rollo)
On April 4, 1989, MERALCO appealed, contending that "until
such time that a judicial finding is made to the effect that
they are not managerial employee, STEAM-PCWF cannot
represent employees from Pay Grades VII and above,
additionally reiterating the same reasons they had advanced
for disqualifying respondent STEAM-PCWF.
On April 7, 1989, MEWA filed an appeal-in-intervention,
submitting as follows:
A. The Order of the Med-Arbiter is null and void for being in
violation of Article 245 of the Labor Code;

B. The Order of the Med-Arbiter violates Article 232 of the

Labor Code; and
C. The Order is invalid because the bargaining unit it
delineated is not an appropriated (sic) bargaining unit.

Let, therefore, the pertinent records of the case be

immediately forwarded to the Office of origin for the conduct
of the certification election.
SO ORDERED. (p. 7, Rollo)

On May 4, 1989, STEAM-PCWF opposed the appeal-inintervention.

MERALCO's motion for reconsideration was denied on January

16, 1990.

With the enactment of RA 6715 and the rules and regulations

implementing the same, STEAM-PCWF renounced its
representation of the employees in Patrol Division, Treasury
Security Services Section and rank-and-file employees in Pay
Grades I-VI.

On February 9, 1990, MERALCO filed this petition, premised

on the following ground:

On September 13, 1989, the First Line Association of Meralco

Supervisory Employees. (hereafter FLAMES) filed a similar
petition (NCR-OD-M-9-731-89) seeking to represent those
employees with Pay Grades VII to XIV, since "there is no other
supervisory union at MERALCO." (p. 266,Rollo). The petition
was consolidated with that of STEAM-PCWF.

RESPONDENT SECRETARY ACTED WITH GRAVE ABUSE OF

DISCRETION
AND/OR
IN
EXCESS
OF
JURISDICTION
AMOUNTING TO LACK OF JURISDICTION IN RULING THAT:
I. ANOTHER RANK-AND-FILE BARGAINING UNIT CAN BE
ESTABLISHED INDEPENDENT, DISTINCT AND SEPARATE FROM
THE EXISTING RANK-AND-FILE BARGAINING UNIT.
II. THE EMPLOYEES FROM PAY GRADES VII AND ABOVE ARE
RANK-AND-FILE EMPLOYEES.

On November 3, 1989, the Secretary of Labor affirmed with

modification, the assailed order of the Med-Arbiter, disposing
as follows:

III. THE SECURITY GUARDS OR PERSONNEL MAY BE LUMPED

TOGETHER WITH THE RANK-AND-FILE UNION AND/OR THE
SUPERVISORY UNION. (p. 8, Rollo)

WHEREFORE, premises considered, the Order appealed from

is hereby affirmed but modified as far as the employees
covered by Section 3, Article I of the exist CBA in the
Company are concerned. Said employees shall remain in the
unit of the rank-and-file already existing and may exercise
their right to self organization as above enunciated.

On February 26, 1990, We issued a temporary restraining

order (TRO) against the implementation of the disputed
resolution.

Further, the First Line Association of Meralco Supervisory

Employees (FLAMES) is included as among the choices in the
certification election.

In its petition, MERALCO has relented and recognized

respondents
STEAM-PCWF
and
FLAMES'
desired
representation of supervisory employees from Grades VII up.
However, it believes that all that the Secretary of Labor has
to do is to establish a demarcation line between supervisory
and managerial rank, and not to classify outright the group of
employees represented by STEAM-PCWF and FLAMES as rank
and file employees.

In questioning the Secretary of Labor's directive allowing

security guards (Treasury/Patrol Services Section) to be
represented by respondents, MERALCO contends that this
contravenes the provisions of the recently passed RA 6715
and its implementing rules (specifically par. 2, Sec. 1, Rule II,
Book V) which disqualifies supervisory employees and
security guards from membership in a labor organization of
the rank and file (p. 11, Rollo).
The Secretary of Labor's Resolution was obviously premised
on the provisions of Art. 212, then par. (k), of the 1988 Labor
Code defining "managerial" and "rank and file" employees,
the law then in force when the complaint was filed. At the
time, only two groups of employees were recognized, the
managerial and rank and file. This explains the absence of
evidence on job descriptions on who would be classified
managerial employees. It is perhaps also for this reason why
the Secretary of Labor limited his classification of the Meralco
employees belonging to Pay Grades VII and up, to only two
groups, the managerial and rank and file.
However, pursuant to the Department of Labor's goal of
strenghthening the constitutional right of workers to selforganization, RA 6715 was subsequently passed which
reorganized the employee-ranks by including a third group,
or the supervisory employees, and laying down the
distinction between supervisory employees and those of
managerial ranks in Art. 212, renumbered par. [m],
depending on whether the employee concerned has the
power to lay down and execute management policies, in the
case of managerial employees, or merely to recommend
them, in case of supervisory employees.
In this petition, MERALCO has admitted that the employees
belonging to Pay Grades VII and up are supervisory (p.
10, Rollo). The records also show that STEAM-PCWF had
"renounced its representation of the employees in Patrol

Division, Treasury Security Service Section and rank and file

employees in Pay Grades I-VI" (p. 6, Rollo); while FLAMES, on
the other hand, had limited its representation to employees
belonging to Pay Grades VII-XIV,generally accepted as
supervisory employees, as follows:
It must be emphasized that private respondent First Line
Association of Meralco Supervisory Employees seeks to
represent only the Supervisory Employees with Pay Grades
VII to XIV.
Supervisory Employees with Pay Grades VII to XIV are not
managerial employees. In fact the petition itself of petitioner
Manila Electric Company on page 9, paragraph 3 of the
petition stated as follows, to wit:
There was no need for petitioner to prove that these
employees are not rank-and-file. As adverted to above, the
private respondents admit that these are not the rank-andfile but the supervisory employees, whom they seek to
represent. What needs to be established is the rank where
supervisory ends and managerial begins.
and First Line Association of Meralco Supervisory Employees
herein states that Pay Grades VII to XIV are not managerial
employees. In fact, although employees with Pay Grade XV
carry the Rank of Department Managers, these employees
only
enjoys
(sic)
the
Rank
Manager
but
their
recommendatory powers are subject to evaluation, review
and final action by the department heads and other higher
executives of the company. (FLAMES' Memorandum, p.
305, Rollo)
Based on the foregoing, it is clear that the employees from
Pay Grades VII and up have been recognized and accepted as
supervisory. On the other hand, those employees who have
been automatically disqualified have been directed by the
Secretary of Labor to remain in the existing labor

organization for the rank and file, (the condition in the CBA
deemed as not having been written into the contract, as
unduly restrictive of an employee's exercise of the right to
self-organization). We shall discuss the rights of the excluded
employees (or those covered by Sec. 2, Art. I, MEWA-CBA
later.
Anent the instant petition therefore, STEAM-PCWF, and
FLAMES would therefore represent supervisory employees
only. In this regard, the authority given by the Secretary of
Labor for the establishment of two labor organizations for the
rank and file will have to be disregarded since We hereby
uphold certification elections only for supervisory employees
from Pay Grade VII and up, with STEAM-PCWF and FLAMES as
choices.
As to the alleged failure of the Secretary of Labor to establish
a demarcation line for purposes of segregating the
supervisory from the managerial employees, the required
parameter is really not necessary since the law itself, Art.
212-m, (as amended by Sec. 4 of RA 6715) has already laid
down the corresponding guidelines:
Art. 212. Definitions. . . .
(m) "Managerial employee" is one who is vested with powers
or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the
exercise of such authority is not merely routinary or clerical
in nature but requires the use of independent judgment. All
employees not falling within any of the above definitions are
considered rank-and-file employees for purposes of to Book.
In his resolution, the Secretary of Labor further elaborated:

. . . Thus, the determinative factor in classifying an employee

as managerial, supervisory or rank-and-file is the nature of
the work of the employee concerned.
In National Waterworks and Sewerage Authority vs. National
Waterworks and Sewerage Authority Consolidated Unions (11
SCRA 766) the Supreme Court had the occasion to come out
with an enlightening dissertation of the nature of the work of
a managerial employees as follows:
. . . that the employee's primary duty consists of the
management of the establishment or of a customarily
recognized department or subdivision thereof, that he
customarily and regularly directs the work of other
employees therein, that he has the authority to hire or
discharge other employees or that his suggestions and
recommendations as to the hiring and discharging and or to
the advancement and promotion or any other change of
status of other employees are given particular weight, that
he customarily and regularly exercises discretionary
powers . . . (56 CJS, pp. 666-668. (p. 226, Rollo)
We shall now discuss the rights of the security guards to selforganize. MERALCO has questioned the legality of allowing
them to join either the rank and file or the supervisory union,
claiming that this is a violation of par. 2, Sec. 1, Rule II, Book
V of the Implementing Rules of RA 6715, which states as
follows:
Sec 1. Who may join unions. . . .
xxx xxx xxx
Supervisory employees and security guards shall not be
eligible for membership in a labor organization of the rankand-file employees but may join, assist or form separate
labor organizations of their own; . . .
xxx xxx xxx

(emphasis ours)
Paragraph 2, Sec. 1, Rule II, Book V, is similar to Sec. 2 (c),
Rule V, also of Book V of the implementing rules of RA 6715:
Rule
REPRESENTATION
INTERNAL-UNION CONFLICTS

CASES

V.
AND

Sec. 1. . . .
Sec. 2. Who may file.Any legitimate labor organization or
the employer, when requested to bargain collectively, may
file the petition.
The petition, when filed by a legitimate labor-organization
shall contain, among others:
(a) . . .
(b) . . .
(c) description of the bargaining unit which shall be the
employer unit unless circumstances otherwise require;
and provided further, that the appropriate bargaining unit of
the rank-and-file employees shall not include supervisory
employees and/or security guards;
xxx xxx xxx
(emphasis ours)
Both rules, barring security guards from joining a rank and
file organization, appear to have been carried over from the
old rules which implemented then Art. 245 of the Labor Code,
and which provided thus:
Art. 245. Ineligibility of security personnel to join any labor
organization.Security
guards
and
other
personnel
employed for the protection and security of the person,

properties and premises of the employer shall not be eligible

for membership in any labor organization.
On December 24, 1986, Pres. Corazon C. Aquino issued E.O.
No. 111 which eliminated the above-cited provision on the
disqualification of security guards. What was retained was
the disqualification of managerial employees, renumbered as
Art. 245 (previously Art. 246), as follows:
Art. 245. Ineligibility of managerial employees to joint any
labor organization.Managerial employees are not eligible to
join, assist or form any labor organization.
With the elimination, security guards were thus free to join a
rank and file organization.
On March 2, 1989, the present Congress passed RA
6715. 2 Section 18 thereof amended Art. 245, to read as
follows:
Art. 245. Ineligibility of managerial employees to join any
labor organization; right of supervisory employees.
Managerial employees are not eligible to join, assist or form
any labor organization.Supervisory employees shall not be
eligible for membership in a labor organization of the rankand-file employees but may join, assist, or form separate
labor organizations of their own. (emphasis ours)
As will be noted, the second sentence of Art. 245 embodies
an amendment disqualifying supervisory employeesfrom
membership in a labor organization of the rank-and-file
employees. It does not include security guards in the
disqualification.
The implementing rules of RA 6715, therefore, insofar as they
disqualify security guards from joining a rank and file
organization are null and void, for being not germane to the
object and purposes of EO 111 and RA 6715 upon which such
rules purportedly derive statutory moorings. In Shell

Philippines, Inc. vs. Central Bank, G.R. No. 51353, June 27,
1988, 162 SCRA 628, We stated:
The rule-making power must be confined to details for
regulating the mode or proceeding to carry into effect the law
as it has been enacted. The power cannot be extended to
amending or expanding the statutory requirements or to
embrace matters not covered by the statute. Rules that
subvert the statute cannot be sanctioned. (citing University
of Sto. Tomas vs. Board of Tax Appeals, 93 Phil. 376).
While therefore under the old rules, security guards were
barred from joining a labor organization of the rank and file,
under RA 6715, they may now freely join a labor organization
of the rank and file or that of the supervisory union,
depending on their rank. By accommodating supervisory
employees, the Secretary of Labor must likewise apply the
provisions of RA 6715 to security guards by favorably
allowing them free access to a labor organization, whether
rank and file or supervisory, in recognition of their
constitutional right to self-organization.
We are aware however of possible consequences in the
implementation of the law in allowing security personnel to
join labor unions within the company they serve. The law is
apt to produce divided loyalties in the faithful performance of
their duties. Economic reasons would present the employees
concerned with the temptation to subordinate their duties to
the allegiance they owe the union of which they are
members, aware as they are that it is usually union action
that obtains for them increased pecuniary benefits.
Thus, in the event of a strike declared by their union, security
personnel may neglect or outrightly abandon their duties,
such as protection of property of their employer and the
persons of its officials and employees, the control of access
to the employer's premises, and the maintenance of order in
the event of emergencies and untoward incidents.

It is hoped that the corresponding amendatory and/or

suppletory laws be passed by Congress to avoid possible
conflict of interest in security personnel.
ACCORDINGLY, the petition is hereby DISMISSED. We AFFIRM
with modification the Resolution of the Secretary of Labor
dated November 3, 1989 upholding an employee's right to
self-organization. A certification election is hereby ordered
conducted among supervisory employees of MERALCO,
belonging to Pay Grades VII and above, using as guideliness
an employee's power to either recommend or execute
management policies, pursuant to Art. 212 (m), of the Labor
Code, as amended by Sec. 4 of RA 6715, with respondents
STEAM-PCWF and FLAMES as choices.
Employees of the Patrol Division, Treasury Security Services
Section and Secretaries may freely join either the labor
organization of the rank and file or that of the supervisory
union depending on their employee rank. Disqualified
employees covered by Sec. 3, Art. I of the MEWA-CBA, shall
remain with the existing labor organization of the rank and
file, pursuant to the Secretary of Labor's directive:
By the parties' own agreement, they find the bargaining unit,
which includes the positions enumerated in Section 3, Article
I of their CBA, appropriate for purposes of collective
bargaining. The composition of the bargaining unit should be
left to the agreement of the parties, and unless there are
legal infirmities in such agreement, this Office will not
substitute its judgment for that of the parties. Consistent with
the story of collective bargaining in the company, the
membership of said group of employees in the existing rankand-file unit should continue, for it will enhance stability in
that unit already well establish. However, we cannot approve
of the condition set in Section 3, Article I of the CBA that the
employees covered are automatically disqualified from
becoming union members. The condition unduly restricts the

exercise of the right to self organization by the employees in

question. It is contrary to law and public policy and,
therefore, should be considered to have not been written into
the contract. Accordingly, the option to join or not to join the
union should be left entirely to the employees themselves.
(p. 229, Rollo)
The Temporary Restraining Order (TRO) issued on February
26, 1990 is hereby LIFTED. Costs against petitioner.
SO ORDERED.

G.R. No. 88957 June 25, 1992

PHILIPS INDUSTRIAL DEVELOPMENT, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
PHILIPS EMPLOYEES ORGANIZATION (FFW),respondents.

DAVIDE, JR., J.:

In this petition for certiorari and prohibition under Rule 65 of
the Rules of Court with a prayer for a temporary restraining
order and/or a writ of preliminary injunction, petitioner Philips
Industrial Development, Inc. (PIDI) seeks to set aside the
Decision and Resolution, dated 16 January 1989 and 17

March 1989, respectively, of the National Labor Relations

Commission (NLRC) in Case No. NLRC-NCR-00-11-03936-87
on the ground that it committed grave abuse of discretion
amounting to lack of jurisdiction in holding that service
engineers, sales representatives and confidential employees
of PIDI are qualified to be included in the existing bargaining
unit.
PIDI is a domestic corporation engaged in the manufacturing
and marketing of electronic products Since 1971, it had a
total of six (6) collective bargaining agreements (CBAs) with
private respondent Philips Employees Organization-FFW
(PEO-FFW), a registered labor union and the certified
bargaining agent of all the rank and file employees of PIDI. In
the first CBA (1971-1974), the supervisors referred to in R.A.
No. 875, confidential employees, security guards, temporary
employees and sales representatives were excluded from the
bargaining unit. In the second to the fifth CBAs (1975-1977;
1978-1980; 1981-1983; and 1984-1986), the sales force,
confidential employees and heads of small units, together
with the managerial employees, temporary employees and
security personnel, were specifically excluded from the
bargaining unit. 1 The confidential employees are the division
secretaries of light/telecom/data and consumer electronics,
marketing managers, secretaries of the corporate planning
and business manager, fiscal and financial system manager
and audit and EDP manager, and the staff of both the
General Management and the Personnel Department. 2
In the sixth CBA covering the years 1987 to 1989, it was
agreed upon, among others, that the subject of inclusion or
exclusion of service engineers, sales personnel and
confidential employees in the coverage of the bargaining unit
would be submitted for arbitration. Pursuant thereto, on June
1987, PEO-FFW filed a petition before the Bureau of Labor
Relations (BLR) praying for an order "directing the parties to

select a voluntary arbitrator in accordance with its rules and

regulations."
As the parties failed to agree on a voluntary arbitrator, the
BLR endorsed the petition to the Executive Labor Arbiter of
the National Capital Region for compulsory arbitration
pursuant to Article 228 of the Labor Code. Docketed as Case
No. NLRC-NCR-00-11-03936-87, the case was assigned to
Executive Labor Arbiter Arthur Amansec.
On 17 March 1988, Labor Arbiter Amansec rendered a
decision, the dispositive portion of which states:
In view of the foregoing, a decision is hereby rendered,
ordering the respondent to conduct a referendum to
determine the will of the service engineers, sales
representatives as to their inclusion or exclusion in the
bargaining unit.
It is hereby declared that the Division Secretaries and all
Staff of general management, personnel and industrial
relations department, secretaries of audit, EDP, financial
system are confidential employees and as such are hereby
deemed excluded in the bargaining unit.
SO ORDERED.
PEO-FFW appealed from the decision to the NLRC.
On
16
January
1989,
the
NLRC
rendered
the
questioned decision, the dispositive portion of which reads:
WHEREFORE, the foregoing premises considered, the
appealed decision of the Executive Labor Arbiter is hereby
SET ASIDE and a new one entered declaring respondent
company's Service Engineers, Sales Force, division
secretaries, all Staff of General Management, Personnel and
Industrial Relations Department, Secretaries of Audit, EDP

and Financial Systems are included within the rank and file
bargaining unit.
SO ORDERED.
The reversal is anchored on the respondent NLRC's
conclusion that based on Section 1, 3 Rule II, Book V of the
Omnibus Rules Implementing the Labor Code, as amended
by Section 3, Implementing Rules of E.O. No. 111; paragraph
(c) Section 2, Rule V of the same Code, as amended by
Section 6 4 of the Implementing Rules of E.O. No. 111; and
Article 245 5 of the Labor Code, as amended:
. . . all workers, except managerial employees and security
personnel, are qualified to join or be a part of the bargaining
unit. . . .
It further ruled that:
The Executive Labor Arbiters directive that the service
engineers and sales representatives to (sic) conduct a
referendum among themselves is erroneous inasmuch as it
arrogates unto said employees the right to define what the
law means. It would not be amiss to state at this point that
there would be no one more interested in excluding the
subject employees from the bargaining unit than
management and that it would not be improbable for the
latter to lobby and/or exert pressure on the employees
concerned, thus agitating unrest among the rank-and-file.
Likewise, the Executive Labor Arbiter's declaration that the
Division Secretaries and all Staff of general management,
personnel and industrial relations department, secretaries of
audit, EDP and financial system "are confidential employees
and as such are hereby deemed excluded in (sic) the
bargaining unit" is contrary to law for the simple reason that
the law, as earlier quoted, does not mention them as among
those to be excluded from the bargaining unit only
(sic) managerial employees and security guards. As a matter

of fact, supervisory unions have already been dissolved and

their members who do not fall within the definition of
managerial employees have become eligible to join or assist
the rank-and-file organization. 6
Its motion for the reconsideration of this decision having
been denied by the NLRC in its Resolution of 16 March 1989,
a copy of which it received on 8 June 1989, petitioner PIDI
filed the instant petition on 20 July 1989, alleging that:
I
THE NLRC COMMITTED ABUSE OF DISCRETION AMOUNTING
TO LACK OF JURISDICTION IN HOLDING THAT SERVICE
ENGINEERS, SALES REPRESENTATIVES AND CONFIDENTIAL
EMPLOYEES OF PETITIONER ARE QUALIFIED TO BE PART OF
THE EXISTING BARGAINING UNIT.
II
THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN NOT APPLYING THE
TIME HONORED "GLOBE DOCTRINE." 7
On 31 July 1989, this Court; required the respondents to
comment on the petition, which PEO-FFW complied with on
28 August 1989. Public respondent NLRC, thru its counsel,
the Solicitor General, moved for, and was granted a 30-day
extension to file its Comment.
On 18 September 1989, this Court required the parties to
show cause why the petition should not be dismissed in view
of the finality of the NLRC decision as provided for by the
penultimate sentence of Article 223 of the Labor Code, as
amended by R.A. No. 6715 R..A. No. 6715, which amended
Article 223 of the Labor Code, was enacted on 2 March 1989
and took effect on 21 March 1989. The parties subsequently
complied with the Resolution.

On 16 May 1990, this Court required the parties to

submit Memoranda explaining the effect in this case of
Article 223 of the Labor Code, as amended by Section 12 of
R.A. No-6715 with respect to the finality of decisions of the
NLRC. The parties complied separately with the same.
On 10 September 1990, this Court gave due course to the
petition and required the parties to submit their respective
Memoranda. The petitioner and the Office of the Solicitor
General filed their separate Memoranda. On the other hand,
PEO-FFW moved that its Motion and manifestation dated 23
August 1989 be considered as its Memorandum; this Court
granted the same.
As stated earlier, the principal issue in this case is whether
the NLRC committed grave abuse of discretion in holding that
service engineers, sales representatives and confidential
employees
(division
secretaries,
staff
of
general
management, personnel and industrial relations department,
secretaries of audit, EDP and financial system) are qualified
to be included in the existing bargaining unit. Petitioner
maintains that it did, and in support of its stand that said
employees should not be absorbed by the existing bargaining
unit, it urges this Court to consider these points:
1) The inclusion of the group in the existing bargaining unit
would run counter to the history of this parties CBA. The
parties' five (5) previous CBAs consistently excluded this
group of employees from the scope of the bargaining unit.
The rationale for such exclusion is that these employees hold
positions which are highly sensitive, confidential and of a
highly fiduciary nature; to include them in the bargaining unit
may subject the company to breaches in security and the
possible revelation of highly sensitive and confidential
matters. It would cripple the company's bargaining position
and would give undue advantage to the union.

2) The absence of mutuality of interests between this group

of employees and the regular rank and file militates against
such inclusion. A table prepared by the petitioner shows the
disparity of interests between the said groups:
SERVICE
ENGINEERS
SALES REPRESENTATIVES TECHNICIANS

SERVICE

(Non-Bargaining
(Bargaining
AREAS OF INTEREST Unit Employees) Unit Employees)
Qualifications
Professional
Employees
High
School/
Vocational
Grads.
Work
Schedule
With
Night
Shift
None
Schedule
Night
Shift
10%
of
Basic
Rate
None
Differential
Pay
Stand-By
Call
&
On
Stand-By
Call
with:
None
Allowance
First
Line:15%
of
basic
rate
Second
Line:
10%
of
basic
rate
Uniforms
None
2
sets
of
polo
&
pants
every
6
months
Retirement Benefits 15 yrs. ser.70% 15 yrs. serv. 50%
16
75%
16
85%
17
80%
17
90%
18
85%
18
100%
19
90%
19
115%
20
100%
20
135%
Year End Performance Merit Increase system None
Evaluation
Sales
Commission
Yes
None
Car
Loan
Yes
None

Precalculated
Kilometer allowance

Yes

None

The Office of the Solicitor General supports the decision of

the Executive Labor Arbiter and refuses to uphold the
position of the NLRC. It holds the view that the division
Secretaries; the staff members of General Management,
Personnel and the Industrial Relations Department; and the
secretaries of Audit, EDP and Financial Systems, are
disqualified from joining the PEO-FFW as they are confidential
employees. They cannot even form a union of their own for,
as held in Golden Farms, Inc. vs. Ferrer-Calleja, 8 the
rationale for the disqualification of managerial employees
from joining unions holds true also for confidential
employees. As regards the sales representatives and service
engineers, however, there is no doubt that they are entitled
to join or form a union, as they are not disqualified by law
from doing so. Considering that they have interests dissimilar
to those of the rank and file employees comprising the
existing bargaining unit, and following the Globe Doctrine
enunciated in In Re: Globe Machine and Stamping
Company 9 to the effect that in determining the proper
bargaining unit the express will or desire of the employees
shall be considered, they should be allowed to determine for
themselves what union to join or form. The best way to
determine their preference is through a referendum. As
shown by the records, such a. referendum was decreed by
the Executive Labor Arbiter.
The petition is impressed with merit.
At the outset, We express Our agreement with the
petitioner's view that respondent NLRC did not quite
accurately comprehend the issue raised before it. Indeed, the
issue is not whether the subject employees may join or form
a union, but rather, whether or not they may be part of the

existing bargaining unit for the rank and file employees of

PIDI.
Even if the issue was, indeed, as perceived by the NLRC, still,
a palpable error was committed by it in ruling that under the
law, all workers, except managerial employees and security
personnel, are qualified to join a union, or form part of a
bargaining unit. At the time Case No. NLRC-NCR-00-1103936-87 was filed in 1987, security personnel were no
longer disqualified from joining or forming a union.
Section 6 of E.O. No. 111, enacted on 24 December 1986,
repealed the original provisions of Article 245 of the Labor
Code, reading as follows:
Art. 245. Ineligibility of security personnel to join any labor
organization. Security guards and other personnel
employed for the protection and security of the person,
properties and premises of the employer shall not be eligible
for membership, in any labor organization.
and substituted it with the following provision:
Art. 245. Right of employees in the public service.

10

xxx xxx xxx

By virtue of such repeal and substitution, security guards
became eligible for membership in any labor organization. 11
On the main issue raised before Us, it is quite obvious that
respondent NLRC committed grave abuse of discretion in
reversing the decision of the Executive Labor Arbiter and in
decreeing that PIDI's "Service Engineers, Sales Force, division
secretaries, all Staff of General Management, Personnel and
Industrial Relations Department, Secretaries of Audit, EDP
and Financial Systems are included within the rank and file
bargaining unit."

In the first place, all these employees, with the exception of

the service engineers and the sales force personnel, are
confidential employees. Their classification as such is not
seriously disputed by PEO-FFW; the five (5) previous CBAs
between PIDI and PEO-FFW explicitly considered them as
confidential employees. By the very nature of their functions,
they assist and act in a confidential capacity to, or have
access to confidential matters of, persons who exercise
managerial functions in the field of labor relations. 12 As such,
the rationale behind the ineligibility of managerial employees
to form, assist or join a labor union equally applies to them.
In Bulletin
Publishing
Co.,
Inc.
vs.
Hon
Augusto
13
Sanchez, this Court elaborated on this rationale, thus:
. . . The rationale for this inhibition has been stated to be,
because if these managerial employees would belong to or
be affiliated with a Union, the latter might not be assured of
their loyalty, to the Union in view of evident conflict of
interests. The Union can also become company-dominated
with the presence of managerial employees in Union
membership.
In Golden Farms, Inc. vs. Ferrer-Calleja, 14 this Court explicitly
made this rationale applicable to confidential employees:
This rationale holds true also for confidential employees such
as accounting personnel, radio and telegraph operators, who
having access to confidential information, may become the
source of undue advantage. Said employee(s) may act as a
spy
or,
spies
of
either
party
to
a
collective
bargainingagreement. This is specially true in the present
case where the petitioning Union is already the bargaining
agent of the rank-and-file employees in the establishment. To
allow the confidential employees to join the existing Union of
the rank-and-file would be in violation of the terms of the
Collective Bargaining Agreement wherein this kind of

employees by the nature of their functions/ positions are

expressly excluded.
As regards the service engineers and the sales
representatives, two (2) points which respondent NLRC
likewise arbitrarily and erroneously ruled upon agreed to be
discussed. Firstly, in holding that they are included in the
bargaining unit for the rank and file employees of PIDI, the
NLRC practically forced them to become members of PEOFFW or to be subject to its sphere of influence, it being the
certified bargaining agent for the subject bargaining unit.
This violates, obstructs, impairs and impedes the service
engineers' and the sales representatives' constitutional right
to
form
unions
or
associations 15 and
to
self16
organization. In Victoriano vs. Elizalde Rope Workers
Union, 17 this Court already ruled:
. . . Notwithstanding the different theories propounded by the
different schools of jurisprudence regarding the nature and
contents of a "right", it can be safely said that whatever
theory one subscribes to, a right comprehends at least two
broad notions, namely: first, liberty or freedom, i.e., the
absence of legal restraint, whereby an employee may act for
himself without being prevented by law; and second, power,
whereby an employee may, as he pleases, join or refrain
from joining an association. It is, therefore, the employee
who should decide for himself whether he should join or not
an association; and should he choose to join, he himself
makes up his mind as to which association he would join; and
even after he has joined, he still retains the liberty and the
power to leave and cancel his membership with said
organization at any time. 18 It is clear, therefore, that the
right to join a union includes the right to abstain from joining
any
union. 19 Inasmuch as what both the Constitution and the
Industrial Peace Act have recognized, and guaranteed to the
employee, is the "right" to join associations of his choice, it

would be absurd to say that the law also imposes, in the

same breath, upon the employee the duty to join
associations. The law does not enjoin an employee to sign up
with any association.
The decision then of the Executive Labor Arbiter in merely
directing the holding of a referendum "to determine the will
of the service engineers, sales representatives as to their
inclusion or exclusion in (sic) the bargaining unit" is the most
appropriate procedure that conforms with their right to form,
assist or join in labor union or organization. However, since
this decision was rendered before the effectivity of R.A. No.
6715, it must now be stressed that its future application to
the private parties in this case should, insofar as service
engineers and sales representatives holding supervisory
positions or functions are concerned, take into account the
present Article 245 20 of the Labor Code which, as amended
by R.A. No. 6715, now reads:
ARTICLE 245. Ineligibility of managerial employees to join
any labor organization; right of supervisory employees.
Managerial employees are not eligible to join, assist or form
any labor organization.Supervisory employees shall not be
eligible for membership in a labor organization of the rankand-file employees but may join, assist or form separate
labor organizations of their own. (emphasis supplied)
The foregoing disquisitions render unnecessary a discussion
on the second ground on the alleged grave abuse of
discretion on the part of the NLRC in not applying the "Globe
Doctrine". Suffice it to state here that since the only issue is
the subject employees' inclusion in or exclusion from the
bargaining unit in question, and PIDI never questioned the
decision of the Executive Labor Arbiter, the Globe Doctrine
finds no application. Besides, this doctrine applies only in
instances of evenly balanced claims by competitive groups

for the right to be established as the bargaining unit,

do not obtain in this case.

21

which

WHEREFORE, the petition is hereby GRANTED. The Decision

of public respondent National Labor Relations Commission in
Case No. NLRC-NCR-00-11-03936-87, promulgated on 16
January 1989, is hereby SET ASIDE while the Decision of the
Executive Labor Arbiter in said case dated 17 March 1988 is
hereby REINSTATED, subject to the modifications above
indicated. Costs against private respondent.
SO ORDERED.

HON. BIENVENIDO E. LAGUESMA and PEPSI-COLA

PRODUCTS, PHILIPPINES, INC. respondents.

MENDOZA, J.:
Petitioner is a union of supervisory employees. It appears
that on March 20, 1995 the union filed a petition for
certification election on behalf of the route managers at
Pepsi-Cola Products Philippines, Inc. However, its petition was
denied by the med-arbiter and, on appeal, by the Secretary
of Labor and Employment, on the ground that the route
managers are managerial employees and, therefore,
ineligible for union membership under the first sentence of
Art. 245 of the Labor Code, which provides:
Ineligibility of managerial employees to join any labor
organization; right of supervisory employees. Managerial
employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for
membership in a labor organization of the rank-and-file
employees but may join, assist or form separate labor
organizations of their own.
Petitioner brought this suit challenging the validity of the
order dated August 31, 1995, as reiterated in the order dated
September 22, 1995, of the Secretary of Labor and
Employment. Its petition was dismissed by the Third Division
for lack of showing that respondent committed grave abuse
of discretion. But petitioner filed a motion for reconsideration,
pressing for resolution its contention that the first sentence
of Art. 245 of the Labor Code, so far as it declares managerial
employees to be ineligible to form, assist or join unions,
contravenes Art. III, 8 of the Constitution which provides:

G.R. No. 122226 March 25, 1998

UNITED
PEPSI-COLA
(UPSU), petitioner,
vs.

SUPERVISORY

UNION

The right of the people, including those employed in the

public and private sectors, to form unions, associations, or

societies for purposes not contrary to law shall not be

abridged.

Supervisor)
====================

For this reason, the petition was referred to the Court en

banc.

Operatives

The Issues in this Case

or

Two questions are presented by the petition: (1) whether the

route managers at Pepsi-Cola Products Philippines, Inc. are
managerial employees and (2) whether Art. 245, insofar as it
prohibits managerial employees from forming, joining or
assisting labor unions, violates Art. III, 8 of the Constitution.

Operating

In resolving these issues it would be useful to begin by

defining who are "managerial employees" and considering
the types of "managerial employees."
Types of Managerial Employees
The term "manager" generally refers to "anyone who is
responsible for subordinates and other organizational
resources." 1 As a class, managers constitute three levels of a
pyramid:
Top management

Middle
Management

First-Line
Management
(also called

Employees
FIRST-LINE MANAGERS The lowest level in an organization
at which individuals are responsible for the work of others is
called first-line or first-level management. First-line managers
direct operating employees only; they do not supervise other
managers. Examples of first-line managers are the "foreman"
or production supervisor in a manufacturing plant, the
technical supervisor in a research department, and the
clerical supervisor in a large office. First-level managers are
often called supervisors.
MIDDLE MANAGERS The term middle management can
refer to more than one level in an organization. Middle
managers direct the activities of other managers and
sometimes also those of operating employees. Middle
managers' principal responsibilities are to direct the activities
that implement their organizations' policies and to balance
the demands of their superiors with the capacities of their
subordinates. A plant manager in an electronics firm is an
example of a middle manager.
TOP MANAGERS Composed of a comparatively small group
of executives, top management is responsible for the overall
management of the organization. It establishes operating
policies and guides the organization's interactions with its
environment. Typical titles of top managers are "chief
executive officer," "president," and "senior vice-president."
Actual titles vary from one organization to another and are

not always a reliable guide to membership in the highest

management classification. 2
As can be seen from this description, a distinction exists
between those who have the authority to devise, implement
and control strategic and operational policies (top and middle
managers) and those whose task is simply to ensure that
such policies are carried out by the rank-and-file employees
of an organization (first-level managers/supervisors). What
distinguishes them from the rank-and-file employees is that
they act in the interest of the employer in supervising such
rank-and-file employees.
"Managerial employees" may therefore be said to fall into
two distinct categories: the "managers" per se, who compose
the former group described above, and the "supervisors" who
form the latter group. Whether they belong to the first or the
second
category,
managers, vis-a-vis employers,
are,
3
likewise, employees.
The first question is whether route managers are managerial
employees or supervisors.
Previous
Administrative
the
Question
Whether
are Managerial Employees

Determinations
of
Route
Managers

It appears that this question was the subject of two previous

determinations by the Secretary of Labor and Employment, in
accordance with which this case was decided by the medarbiter.
In Case No. OS-MA-10-318-91, entitled Worker's Alliance
Trade Union (WATU) v. Pepsi-Cola Products Philippines, Inc.,
decided on November 13, 1991, the Secretary of Labor
found:
We examined carefully the pertinent job descriptions of the
subject employees and other documentary evidence on

record vis-a-vis paragraph (m), Article 212 of the Labor Code,

as amended, and we find that only those employees
occupying the position of route manager and accounting
manager are managerial employees. The rest i.e. quality
control manager, yard/transport manager and warehouse
operations manager are supervisory employees.
To qualify as managerial employee, there must be a clear
showing of the exercise of managerial attributes under
paragraph (m), Article 212 of the Labor Code as amended.
Designations or titles of positions are not controlling. In the
instant case, nothing on record will support the claim that the
quality control manager, yard/transport manager and
warehouse operations manager are vested with said
attributes. The warehouse operations manager, for example,
merely assists the plant finance manager in planning,
organizing, directing and controlling all activities relative to
development
and
implementation
of
an
effective
management control information system at the sale offices.
The exercise of authority of the quality control manager, on
the other hand, needs the concurrence of the manufacturing
manager.
As to the route managers and accounting manager, we are
convinced that they are managerial employees. Their job
descriptions clearly reveal so.
On July 6, 1992, this finding was reiterated in Case No. OS-A3-71-92. entitled In Re: Petition for Direct Certification and/or
Certification
Election-Route
Managers/Supervisory
Employees of Pepsi-Cola Products Phils.Inc., as follows:
The issue brought before us is not of first impression. At one
time, we had the occasion to rule upon the status of route
manager in the same company vis a vis the issue as to
whether or not it is supervisory employee or a managerial
employee. In the case of Workers Alliance Trade Unions
(WATU) vs. Pepsi Cola Products, Phils., Inc. (OS-MA-A-10-318-

91 ), 15 November 1991, we ruled that a route manager is a

managerial employee within the context of the definition of
the law, and hence, ineligible to join, form or assist a union.
We have once more passed upon the logic of our Decision
aforecited in the light of the issues raised in the instant
appeal, as well as the available documentary evidence on
hand, and have come to the view that there is no cogent
reason to depart from our earlier holding. Route Managers
are, by the very nature of their functions and the authority
they wield over their subordinates, managerial employees.
The prescription found in Art. 245 of the Labor Code, as
amended therefore, clearly applies to them. 4
Citing our ruling in Nasipit Lumber Co. v. National Labor
Relations Commission, 5 however, petitioner argues that
these previous administrative determinations do not have the
effect of res judicata in this case, because "labor relations
proceedings" are "non-litigious and summary in nature
without regard to legal technicalities." 6 Nasipit Lumber Co.
involved a clearance to dismiss an employee issued by the
Department of Labor. The question was whether in a
subsequent proceeding for illegal dismissal, the clearance
was res judicata. In holding it was not, this Court made it
clear that it was referring to labor relations proceedings of a
non-adversary character, thus:
The requirement of a clearance to terminate employment
was a creation of the Department of labor to carry out the
Labor Code provisions on security of tenure and termination
of employment. The proceeding subsequent to the filing of an
application for clearance to terminate employment was
outlined in Book V, Rule XIV of the Rules and Regulations
Implementing the Labor Code. The fact that said rule allowed
a procedure for the approval of the clearance with or without
the opposition of the employee concerned (Secs. 7 & 8),
demonstrates the non-litigious and summary nature of the
proceeding. The clearance requirement was therefore

necessary only as an expeditious shield against arbitrary

dismissal without the knowledge and supervision of the
Department of Labor. Hence, a duly approved clearance
implied that the dismissal was legal or for cause (Sec. 2). 7
But the doctrine of res judicata certainly applies to adversary
administrative proceedings. As early as 1956, inBrillantes
v. Castro, 8 we sustained the dismissal of an action by a trial
court on the basis of a prior administrative determination of
the same case by the Wage Administration Service, applying
the principle of res judicata. Recently, in Abad v. NLRC 9 we
applied the related doctrine of stare decisis in holding that
the prior determination that certain jobs at the Atlantic Gulf
and Pacific Co., were project employments was binding in
another case involving another group of employees of the
same company. Indeed, in Nasipit Lumber Co., this Court
clarified toward the end of its opinion that "the doctrine
of res
judicata applies
.
.
.
to
judicial
or quasi
judicial proceedings and not to the exercise of administrative
powers." 10 Now proceedings for certification election, such as
those involved in Case No. OS-M-A-10-318-91 and Case No.
OS-A-3-71-92, are quasi judicial in nature and, therefore,
decisions rendered in such proceedings can attain finality. 11
Thus, we have in this case an expert's view that the
employees concerned are managerial employees within the
purview of Art. 212 which provides:
(m) "managerial employee" is one who is vested with powers
or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay off, recall,
discharge, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the
exercise of such authority is not merely routinary or clerical
in nature but requires the use of independent judgment. All
employees not falling within any of the above definitions are

considered rank-and-file employees for purposes of this

Book.

activities which will make it possible for you to achieve your

sales objectives.

At the very least, the principle of finality of administrative

determination compels respect for the finding of the
Secretary of Labor that route managers are managerial
employees as defined by law in the absence of anything to
show that such determination is without substantial evidence
to support it. Nonetheless, the Court, concerned that
employees who are otherwise supervisors may wittingly or
unwittingly be classified as managerial personnel and thus
denied the right of self-organization, has decided to review
the record of this case.

B. PRINCIPAL ACCOUNTABILITIES

DOLE's
Finding
that
Route
Managers
Managerial
Employees
Supported
Substantial Evidence in the Record

are
by

The Court now finds that the job evaluation made by the
Secretary of Labor is indeed supported by substantial
evidence. The nature of the job of route managers is given in
a four-page pamphlet, prepared by the company, called
"Route Manager Position Description," the pertinent parts of
which read:
A. BASIC PURPOSE
A Manager achieves objectives through others.
As a Route Manager, your purpose is to meet the sales plan;
and you achieve this objective through the skillful
MANAGEMENT OF YOUR JOB AND THE MANAGEMENT OF
YOUR PEOPLE.
These then are your functions as Pepsi-Cola Route Manager.
Within these functions managing your job and managing
your people you are accountable to your District Manager
for the execution and completion of various tasks and

1.0 MANAGING YOUR JOB

The Route Manager is accountable for the following:
1.1 SALES DEVELOPMENT
1.1.1 Achieve the sales plan.
1.1.2 Achieve all distribution and new account objectives.
1.1.3 Develop new business opportunities thru personal
contacts with dealers.
1.1.4 Inspect and ensure that all merchandizing [sic]
objectives are achieved in all outlets.
1.1.5 maintain and improve productivity of all cooling
equipment and kiosks.
1.1.6 Execute and control all authorized promotions.
1.1.7 Develop and maintain dealer goodwill.
1.1.8 Ensure all accounts comply with company suggested
retail pricing.
1.1.9 Study from time to time individual route coverage and
productivity for possible adjustments to maximize utilization
of resources.
1.2 Administration
1.2.1 Ensure the proper loading of route trucks before checkout and the proper sorting of bottles before check-in.

1.2.2 Ensure the upkeep of all route sales reports and all
other related reports and forms required on an accurate and
timely basis.
1.2.3 Ensure proper implementation of the various company
policies and procedures incl. but not limited to shakedown;
route shortage; progressive discipline; sorting; spoilages;
credit/collection; accident; attendance.
1.2.4 Ensure
accounts.

collection

of

receivables

and

delinquent

2.0 MANAGING YOUR PEOPLE

The Route Manager is accountable for the following:
2.1 Route Sales Team Development
2.1.2 Conduct route rides to train, evaluate and develop all
assigned route salesmen and helpers at least 3 days a week,
to be supported by required route ride documents/reports &
back check/spot check at least 2 days a week to be
supported by required documents/reports.

distinction is evident in the work of the route managers

which sets them apart from supervisors in general. Unlike
supervisors who basically merely direct operating employees
in line with set tasks assigned to them, route managers are
responsible for the success of the company's main line of
business through management of their respective sales
teams. Such management necessarily involves the planning,
direction, operation and evaluation of their individual teams
and areas which the work of supervisors does not entail.
The route managers cannot thus possibly be classified as
mere supervisors because their work does not only involve,
but goes far beyond, the simple direction or supervision of
operating employees to accomplish objectives set by those
above them. They are not mere functionaries with simple
oversight functions but business administrators in their own
right. An idea of the role of route managers as managers per
se can be gotten from a memo sent by the director of metro
sales operations of respondent company to one of the route
managers. It reads: 13
03 April 1995

2.1.2 Conduct sales meetings and morning huddles. Training

should focus on the enhancement of effective sales and
merchandizing [sic] techniques of the salesmen and helpers.
Conduct group training at least 1 hour each week on a
designated day and of specific topic.

To : CESAR T . REOLADA

2.2 Code of Conduct

2.2.1 Maintain the company's reputation through strict
adherence to PCPPI's code of conduct and the universal
standards
of
unquestioned
business
12
ethics.

Effective 01 April 1995, your basic monthly salary of P11,710

will be increased to P12,881 or an increase of 10%. This
represents the added managerial responsibilities you will
assume due to the recent restructuring and streamlining of
Metro Sales Operations brought about by the continuous
losses for the last nine (9) months.

Earlier in this opinion, reference was made to the distinction

between managers per se (top managers and middle
managers) and supervisors (first-line managers). That

Let me remind you that for our operations to be profitable,

we have to sustain the intensity and momentum that your
group and yourself have shown last March. You just have

From : REGGIE M. SANTOS

Subj : SALARY INCREASE

to deliver the desired volume targets, better negotiated

concessions, rationalized sustaining deals, eliminate or
reduced overdues, improved collections, more cash
accounts, controlled operating expenses, etc. Also, based on
the agreed set targets, your monthly performance will be
closely monitored.
You have proven in the past that your capable of achieving
your targets thru better planning, managing your group as a
fighting team, and thru aggressive selling. I am looking
forward to your success and I expect that you just have to
exert your doubly best in turning around our operations from
a losing to a profitable one!
Happy Selling!!
(Sgd.) R.M. SANTOS
The plasticized card given to route managers, quoted in the
separate opinion of Justice Vitug, although entitled "RM's Job
Description," is only a summary of performance standards. It
does not show whether route managers are managers per
se or supervisors. Obviously, these performance standards
have to be related to the specific tasks given to route
managers in the four-page "Route Manager Position
Description," and, when this is done, the managerial nature
of their jobs is fully revealed. Indeed, if any, the card
indicates the great latitude and discretion given to route
managers from servicing and enhancing company goodwill
to supervising and auditing accounts, from trade (new
business) development to the discipline, training and
monitoring of performance of their respective sales teams,
and so forth, if they are to fulfill the company's
expectations in the "key result areas."
Article 212(m) says that "supervisory employees are those
who,
in
the
interest
of
the
employer,
effectivelyrecommend such managerial actions if the

exercise of such authority is not merely routinary or clerical

in nature but requires the use of independent judgment."
Thus, their only power is to recommend. Certainly, the route
managers in this case more than merely recommend
effective management action. They perform operational,
human resource, financial and marketing functions for the
company, all of which involve the laying down of operating
policies for themselves and their teams. For example, with
respect to marketing, route managers, in accordance with
B.1.1.1 to B.1.1.9 of the Route Managers Job Description, are
charged, among other things, with expanding the dealership
base of their respective sales areas, maintaining the goodwill
of current dealers, and distributing the company's various
promotional items as they see fit. It is difficult to see how
supervisors can be given such responsibility when this
involves not just the routine supervision of operating
employees but the protection and expansion of the
company's business vis-a-vis its competitors.
While route managers do not appear to have the power to
hire and fire people (the evidence shows that they only
"recommended" or "endorsed" the taking of disciplinary
action against certain employees), this is because this
is a function of the Human Resources or Personnel
Department of the company. 14 And neither should it be
presumed that just because they are given set benchmarks
to observe, they are ipso facto supervisors. Adequate control
methods (as embodied in such concepts as "Management by
Objectives [MBO]" and "performance appraisals") which
require a delineation of the functions and responsibilities of
managers by means of ready reference cards as here, have
long been recognized in management as effective tools for
keeping businesses competitive.
This brings us to the second question, whether the first
sentence of Art. 245 of the Labor Code, prohibiting
managerial employees from forming, assisting or joining any

labor organization, is constitutional in light of Art. III, 8 of

the Constitution which provides:

is not of a merely routinary or clerical nature but requires the

use of independent judgment. 16

The right of the people, including those employed in the

public and private sectors, to form unions, associations, or
societies for purposes not contrary to law shall not be
abridged.

The right of supervisors to form their own organizations was

affirmed:

As already stated, whether they belong to the first category

(managers per se) or the second category (supervisors),
managers are employees. Nonetheless, in the United States,
as Justice Puno's separate opinion notes, supervisors have no
right to form unions. They are excluded from the definition of
the term "employee" in 2(3) of the Labor-Management
Relations Act of 1947. 15 In the Philippines, the question
whether managerial employees have a right of selforganization has arisen with respect to first-level managers
or supervisors, as shown by a review of the course of labor
legislation in this country.
Right
of
Self-Organization
Employees under Pre-Labor Code Laws

of

Managerial

Before the promulgation of the Labor Code in 1974, the field

of labor relations was governed by the Industrial Peace Act
(R.A. No. 875).
In accordance with the general definition above, this law
defined "supervisor" as follows:
Sec. 2. . . .
(k) "Supervisor" means any person having authority in the
interest of an employer, to hire, transfer, suspend, lay-off,
recall, discharge, assign, recommend, or discipline other
employees, or responsibly to direct them, and to adjust their
grievances, or effectively to recommend such acts, if, in
connection with the foregoing, the exercise of such authority

Sec. 3. Employees' Right to Self-Organization. Employees

shall have the right to self-organization and to form, join or
assist labor organizations of their own choosing for the
purpose of collective bargaining through representatives of
their own choosing and to engage in concerted activities for
the purpose of collective bargaining and other mutual aid
and protection. Individuals employed as supervisors shall not
be eligible for membership in a labor organization of
employees under their supervision but may form separate
organizations of their own. 17
For its part, the Supreme Court upheld in several of its
decisions the right of supervisors to organize for purposes of
labor relations. 18
Although it had a definition of the term "supervisor," the
Industrial Peace Act did not define the term "manager." But,
using the commonly-understood concept of "manager," as
above stated, it is apparent that the law used the term
"supervisors" to refer to the sub-group of "managerial
employees" known as front-line managers. The other subgroup of "managerial employees," known as managers per
se, was not covered.
However, in Caltex Filipino Managers and Supervisors
Association v. Court of Industrial Relations, 19 the right of all
managerial employees to self-organization was upheld as a
general proposition, thus:
It would be going too far to dismiss summarily the point
raised by respondent Company that of the alleged identity
of interest between the managerial staff and the employing

firm. That should ordinarily be the case, especially so where

the dispute is between management and the rank and file. It
does not necessarily follow though that what binds the
managerial staff to the corporation forecloses the possibility
of conflict between them. There could be a real difference
between what the welfare of such group requires and the
concessions the firm is willing to grant. Their needs might
not be attended to then in the absence of any organization of
their own. Nor is this to indulge in empty theorizing. The
record of respondent Company, even the very case cited by
it, is proof enough of their uneasy and troubled relationship.
Certainly the impression is difficult to erase that an alien firm
failed to manifest sympathy for the claims of its Filipino
executives. To predicate under such circumstances that
agreement inevitably marks their relationship, ignoring that
discord would not be unusual, is to fly in the face of reality.
. . . The basic question is whether the managerial personnel
can organize. What respondent Company failed to take into
account is that the right to self-organization is not merely a
statutory creation. It is fortified by our Constitution. All are
free to exercise such right unless their purpose is contrary to
law. Certainly it would be to attach unorthodoxy to, not to
say an emasculation of, the concept of law if managers as
such were precluded from organizing. Having done so and
having been duly registered, as did occur in this case, their
union is entitled to all the rights under Republic Act No. 875.
Considering what is denominated as unfair labor practice
under Section 4 of such Act and the facts set forth in our
decision, there can be only one answer to the objection
raised that no unfair labor practice could be committed by
respondent Company insofar as managerial personnel is
concerned. It is, as is quite obvious, in the negative. 20
Actually, the case involved front-line managers or
supervisors only, as the plantilla of employees, quoted in the
main opinion, 21 clearly indicates:

CAFIMSA members holding the following Supervisory Payroll

Position Title are Recognized by the Company
Payroll Position Title
Assistant to Mgr. National Acct. Sales
Jr. Sales Engineer
Retail Development Asst.
Staff Asst. 0 Marketing
Sales Supervisor
Supervisory Assistant
Jr. Supervisory Assistant
Credit Assistant
Lab. Supvr. Pandacan
Jr. Sales Engineer B
Operations Assistant B
Field Engineer
Sr. Opers. Supvr. MIA A/S
Purchasing Assistant
Jr. Construction Engineer
Sr. Sales Supervisor
Deport Supervisor A
Terminal Accountant B
Merchandiser

Dist. Sales Prom. Supvr.

Instr. Merchandising
Asst. Dist. Accountant B
Sr. Opers. Supervisor
Jr. Sales Engineer A
Asst. Bulk Ter. Supt.
Sr. Opers. Supvr.
Credit Supervisor A
Asst. Stores Supvr. A
Ref. Supervisory Draftsman
Refinery Shift Supvr. B
Asst. Supvr. A Operations (Refinery)
Refinery Shift Supvr. B
Asst. Lab. Supvr. A (Refinery)
St. Process Engineer B (Refinery)
Asst. Supvr. A Maintenance (Refinery)
Asst. Supvr. B Maintenance (Refinery)
Supervisory Accountant (Refinery)
Communications Supervisor (Refinery)
Finally, also deemed included are all other employees
excluded from the rank and file unions but not classified as
managerial or otherwise excludable by law or applicable
judicial precedents.

Right
of
Self-Organization
Employees under the Labor Code

of

Managerial

Thus, the dictum in the Caltex case which allowed at least for
the theoretical unionization of top and middle managers by
assimilating them with the supervisory group under the
broad phrase "managerial personnel," provided the lynchpin
for later laws denying the right of self-organization not only
to top and middle management employees but to front line
managers or supervisors as well. Following the Caltex case,
the Labor Code, promulgated in 1974 under martial law,
dropped the distinction between the first and second subgroups of managerial employees. Instead of treating the
terms "supervisor" and "manager" separately, the law
lumped them together and called them "managerial
employees," as follows:
Art. 212. Definitions . . . .
(k) "Managerial Employee" is one who is vested with powers
or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay off, recall,
discharge, assign or discipline employees, or to effectively
recommend such managerial actions. All employees not
falling within this definition are considered rank and file
employees for purposes of this Book. 22
The definition shows that it is actually a combination of the
commonly understood definitions of both groups of
managerial employees, grammatically joined by the phrase
"and/or."
This general definition was perhaps legally necessary at that
time for two reasons. First, the 1974 Code denied supervisors
their right to self-organize as theretofore guaranteed to them
by the Industrial Peace Act. Second, it stood the dictum in
the Caltex case on its head by prohibiting all types of
managers from forming unions. The explicit general

prohibition was contained in the then Art. 246 of the Labor

Code.

because no such unions of top and middle managers really

then existed.

The practical effect of this synthesis of legal concepts was

made apparent in the Omnibus Rules Implementing the
Labor Code which the Department of Labor promulgated on
January 19, 1975. Book V, Rule II, 11 of the Rules provided:

Real Intent of the 1986 Constitutional Commission

Supervisory unions and unions of security guards to cease

operation. All existing supervisory unions and unions of
security guards shall, upon the effectivity of the Code, cease
to operate as such and their registration certificates shall be
deemed automatically canceled. However, existing collective
agreements with such unions, the life of which extends
beyond the date of effectivity of the Code, shall be respected
until their expiry date insofar as the economic benefits
granted therein are concerned.
Members of supervisory unions who do not fall within the
definition of managerial employees shall become eligible to
join or assist the rank and file labor organization, and if none
exists, to form or assist in the forming of such rank and file
organization. The determination of who are managerial
employees and who are not shall be the subject of
negotiation between representatives of the supervisory
union and the employer. If no agreement is reached between
the parties, either or both of them may bring the issue to the
nearest Regional Office for determination.
The Department of Labor continued to use the term
"supervisory unions" despite the demise of the legal
definition of "supervisor" apparently because these were the
unions of front line managers which were then allowed as a
result of the statutory grant of the right of self-organization
under the Industrial Peace Act. Had the Department of Labor
seen fit to similarly ban unions of top and middle managers
which may have been formed following the dictum in Caltex,
it obviously would have done so. Yet it did not, apparently

This was the law as it stood at the time the Constitutional

Commission considered the draft of Art. III, 8. Commissioner
Lerum sought to amend the draft of what was later to
become Art. III, 8 of the present Constitution:
MR. LERUM. My amendment is on Section 7, page 2, line 19,
which is to insert between the words "people" and "to" the
following: WHETHER EMPLOYED BY THE STATE OR PRIVATE
ESTABLISHMENTS. In other words, the section will now read
as follows: "The right of the people WHETHER EMPLOYED BY
THE STATE OR PRIVATE ESTABLISHMENTS to form
associations, unions, or societies for purposes not contrary to
law shall not be abridged." 23
Explaining his proposed amendment, he stated:
MR. LERUM. Under the 1935 Bill of Rights, the right to form
associations is granted to all persons whether or not they are
employed in the government. Under that provision, we allow
unions in the government, in government-owned and
controlled corporations and in other industries in the private
sector, such as the Philippine Government Employees'
Association, unions in the GSIS, the SSS, the DBP and other
government-owned and controlled corporations. Also, we
have unions of supervisory employees and of security
guards. But what is tragic about this is that after the 1973
Constitution was approved and in spite of an express
recognition of the right to organize in P.D. No. 442, known as
the Labor Code, the right of government workers,
supervisory employees and security guards to form unions
was abolished.

And we have been fighting against this abolition. In every

tripartite conference attended by the government,
management and workers, we have always been insisting on
the return of these rights. However, both the government
and employers opposed our proposal, so nothing came out of
this until this week when we approved a provision which
states:
Notwithstanding any provision of this article, the right to selforganization shall not be denied to government employees.
We are afraid that without any corresponding provision
covering the private sector, the security guards, the
supervisory employees or majority employees [sic] will still
be excluded, and that is the purpose of this amendment.
I will be very glad to accept any kind of wording as long as it
will amount to absolute recognition of private sector
employees, without exception, to organize.
THE PRESIDENT. What does the Committee say?
FR. BERNAS. Certainly, the sense is very acceptable, but the
point raised by Commissioner Rodrigo is well-taken. Perhaps,
we can lengthen this a little bit more to read: "The right of
the people WHETHER UNEMPLOYED OR EMPLOYED BY STATE
OR PRIVATE ESTABLISHMENTS.
I want to avoid also the possibility of having this interpreted
as applicable only to the employed.
MR. DE LOS REYES. Will the proponent accept an amendment
to the amendment, Madam President?
MR. LERUM. Yes, as long as it will carry the idea that the right
of the employees in the private sector is recognized. 24
Lerum thus anchored his proposal on the fact that (1)
government employees, supervisory employees, and security

guards, who had the right to organize under the Industrial

Peace Act, had been denied this right by the Labor Code, and
(2) there was a need to reinstate the right of these
employees. In consonance with his objective to reinstate the
right of government, security, and supervisory employees to
organize, Lerum then made his proposal:
MR. LERUM. Mr. Presiding Officer, after a consultation with
several Members of this Commission, my amendment will
now read as follows: "The right of the people INCLUDING
THOSE EMPLOYED IN THE PUBLIC AND PRIVATE SECTORS to
form associations, unions, or societies for purposes not
contrary to law shall not be abridged. In proposing that
amendment I ask to make of record that I want the following
provisions of the Labor Code to be automatically abolished,
which read:
Art. 245. Security guards and other personnel employed for
the protection and security of the person, properties and
premises of the employers shall not be eligible for
membership in a labor organization.
Art. 246. Managerial employees are not eligible to join,
assist, and form any labor organization.
THE PRESIDING OFFICER (Mr. Bengzon). What does the
Committee say?
FR. BERNAS. The Committee accepts.
THE PRESIDING OFFICER. (Mr. Bengzon) The Committee has
accepted the amendment, as amended.
Is there any objection? (Silence) The Chair hears none; the
amendment, as amended, is approved. 25
The question is what Commissioner Lerum meant in seeking
to "automatically abolish" the then Art. 246 of the Labor
Code. Did he simply want "any kind of wording as long as it

will amount to absolute recognition of private sector

employees, without exception, to organize"? 26 Or, did he
instead intend to have his words taken in the context of the
cause which moved him to propose the amendment in the
first place, namely, the denial of the right of supervisory
employees to organize, because he said, "We are afraid that
without any corresponding provision covering the private
sector, security guards, supervisory employees or majority
[of] employees will still be excluded, and that is the purpose
of this amendment"? 27
It would seem that Commissioner Lerum simply meant to
restore the right of supervisory employees to organize. For
even though he spoke of the need to "abolish" Art. 246 of the
Labor Code which, as already stated, prohibited "managerial
employees" in general from forming unions, the fact was that
in explaining his proposal, he repeatedly referred to
"supervisory employees" whose right under the Industrial
Peace Act to organize had been taken away by Art. 246. It is
noteworthy that Commissioner Lerum never referred to the
then definition of "managerial employees" in Art. 212(m) of
the Labor Code which put together, under the broad phrase
"managerial employees," top and middle managers and
supervisors. Instead, his repeated use of the term
"supervisory employees," when such term then was no
longer in the statute books, suggests a frame of mind that
remained grounded in the language of the Industrial Peace
Act.
Nor did Lerum ever refer to the dictum in Caltex recognizing
the right of all managerial employees to organize, despite
the fact that the Industrial Peace Act did not expressly
provide for the right of top and middle managers to organize.
If Lerum was aware of the Caltex dictum, then his insistence
on the use of the term "supervisory employees" could only
mean that he was excluding other managerial employees
from his proposal. If, on the other hand, he was not aware of

the Caltex statement sustaining the right to organize to top

and middle managers, then the more should his repeated
use of the term "supervisory employees" be taken at face
value, as it had been defined in the then Industrial Peace Act.
At all events, that the rest of the Commissioners understood
his proposal to refer solely to supervisors and not to other
managerial employees is clear from the following account of
Commissioner Joaquin G. Bernas, who writes:
In presenting the modification on the 1935 and 1973 texts,
Commissioner Eulogio R. Lerum explained that the
modification included three categories of workers: (1)
government employees, (2) supervisory employees, and (3)
security guards. Lerum made of record the explicit intent to
repeal provisions of P.D. 442, the Labor Code. The provisions
referred to were:
Art. 245. Security guards and other personnel employed for
the protection and security of the person, properties and
premises of the employers shall not be eligible for
membership in a labor organization.
Art. 246. Managerial employees are not eligible to join,
assist, and form any labor organization. 28
Implications of the Lerum Proposal
In sum, Lerum's proposal to amend Art. III, 8 of the draft
Constitution by including labor unions in the guarantee of
organizational right should be taken in the context of
statements that his aim was the removal of the statutory ban
against security guards and supervisory employees joining
labor organizations. The approval by the Constitutional
Commission of his proposal can only mean, therefore, that
the Commission intended the absolute right to organize of
government workers, supervisory employees, and security
guards to be constitutionally guaranteed. By implication, no

similar absolute constitutional right to organize for labor

purposes should be deemed to have been granted to toplevel and middle managers. As to them the right of selforganization may be regulated and even abridged
conformably to Art. III, 8.
Constitutionality of Art. 245
Finally, the question is whether the present ban against
managerial employees, as embodied in Art. 245 (which
superseded Art. 246) of the Labor Code, is valid. This
provision reads:
Art. 245. Ineligibility of managerial employees to join any
labor organization; right of supervisory employees.
Managerial employees are not eligible to join, assist or form
any labor organization. Supervisory employees shall not be
eligible for membership in a labor organization of the rankand-file employees but may join, assist or form separate
labor organizations of their own. 29
This provision is the result of the amendment of the Labor
Code in 1989 by R.A. No. 6715, otherwise known as the
Herrera-Veloso Law. Unlike the Industrial Peace Act or the
provisions of the Labor Code which it superseded, R.A. No.
6715 provides separate definitions of the terms "managerial"
and "supervisory employees," as follows:
Art. 212. Definitions. . . .
(m) "managerial employee" is one who is vested with powers
or prerogatives to lay down and execute management
policies and/or to hire transfer, suspend, lay off, recall,
discharge, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the
exercise of such authority is not merely routinary or clerical
in nature but requires the use of independent judgment. All

employees not falling within any of the above definitions are

considered rank-and-file employees for purposes of this
Book.
Although the definition of "supervisory employees" seems to
have been unduly restricted to the last phrase of the
definition in the Industrial Peace Act, the legal significance
given to the phrase "effectively recommends" remains the
same. In fact, the distinction between top and middle
managers, who set management policy, and front-line
supervisors, who are merely responsible for ensuring that
such policies are carried out by the rank and file, is
articulated in the present definition. 30 When read in relation
to this definition in Art. 212(m), it will be seen that Art. 245
faithfully carries out the intent of the Constitutional
Commission in framing Art. III, 8 of the fundamental law.
Nor is the guarantee of organizational right in Art. III, 8
infringed by a ban against managerial employees forming a
union. The right guaranteed in Art. III, 8 is subject to the
condition that its exercise should be for purposes "not
contrary to law." In the case of Art. 245, there is a rational
basis for prohibiting managerial employees from forming or
joining labor organizations. As Justice Davide, Jr., himself a
constitutional commissioner, said in his ponencia inPhilips
Industrial Development, Inc. v. NLRC: 31
In the first place, all these employees, with the exception of
the service engineers and the sales force personnel, are
confidential employees. Their classification as such is not
seriously disputed by PEO-FFW; the five (5) previous CBAs
between PIDI and PEO-FFW explicitly considered them as
confidential employees. By the very nature of their functions,
they assist and act in a confidential capacity to, or have
access to confidential matters of, persons who exercise
managerial functions in the field of labor relations. As such,

the rationale behind the ineligibility of managerial employees

to form, assist or joint a labor union equally applies to them.
In Bulletin Publishing Co., Inc. v. Hon. Augusto Sanchez, this
Court elaborated on this rationale, thus:
. . . The rationale for this inhibition has been stated to be,
because if these managerial employees would belong to or
be affiliated with a Union, the latter might not be assured of
their loyalty to the Union in view of evident conflict of
interests. The Union can also become company-dominated
with the presence of managerial employees in Union
membership. 32
To be sure, the Court in Philips Industrial was dealing with the
right of confidential employees to organize. But the same
reason for denying them the right to organize justifies even
more the ban on managerial employees from forming unions.
After all, those who qualify as top or middle managers are
executives who receive from their employers information
that not only is confidential but also is not generally available
to the public, or to their competitors, or to other employees.
It is hardly necessary to point out that to say that the first
sentence of Art. 245 is unconstitutional would be to
contradict the decision in that case.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
Narvasa, C.J., Regalado, Romero, Bellosillo, Martinez and
Purisima, JJ., concur.

DAVIDE, JR., J., concurring and dissenting;

I concur with the majority that the "route managers" of
private respondent Pepsi-Cola Products Philippines, Inc.
are managerial employees. However, I respectfully submit
that contrary to the majority's holding, Article 245 of the
Labor Code is unconstitutional, as it abridges Section 8,
Article III of the Constitution.
Section 8, Article III of the 1987 Constitution was taken from
Section 7, Article IV of the 1973 Constitution which, in turn,
was lifted from Section 6, Article III of the 1935 Constitution.
Section 7 of the 1973 Constitution provided as follows:
Sec. 7. The right to form associations or societies for purpose
not contrary to law shall not be abridged.
This Section was adopted in Section 7 of Proposed Resolution
No. 486 of the 1986 Constitutional Commission, entitled
Resolution to Incorporate in the New Constitution an Article
on the Bill of Rights, 1 submitted by the Committee on
Citizenship, Bill of Rights, Political Rights and Obligations,
and Human Rights, with a modification, however, consisting
of the insertion of the word union between the words
"associations" and "societies." Thus the proposed Section 7
provided as follows:
Sec. 7. The right of the people to form associations, unions,
or societies for purposes not contrary to law shall not be
abridged (emphasis supplied).
Commissioner Joaquin G. Bernas, in his sponsorship speech
on the proposed Article on the Bill of Rights, expounded on
the nature of the proposed provision, in this wise:

Separate Opinions

Section 7 preserves the old provision not because it is strictly

needed but because its removal might be subject to
misinterpretation. It reads:
xxx xxx xxx
It strictly does not prepare the old provision because it adds
the word UNION, and in the explanation we received from
Commissioner Lerum, the term envisions not just unions in
private corporations but also in the government. This
preserves our link with the Malolos Constitution as far as the
right to form associations or societies for purposes not
contrary to law is concerned. 2
During the period of individual amendments, Commissioner
Lerum introduced an amendment to the proposed section
consisting of the insertion of the clause "WHETHER
EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS,
which, after consulting other Commissioners, he modified his
proposed amendment to read: "INCLUDING THOSE
EMPLOYED IN THE PUBLIC AND PRIVATE SECTORS." At that
time, the section read:
Sec. 7. The right of the people including those employed in
the public and private sectors to form associations, unions or
societies for purposes not contrary to law shall not be
abridged.
Pertinently to this dispute Commissioner Lerum's intention
that the amendment "automatically abolish" Articles 245 and
246 of the Labor Code. The Committee accepted the
amendment, and there having been no objection from the
floor, the Lerum amendment was approved, thus:
MR. LERUM: . . . In proposing that amendment I ask to make
of record that I want the following provisions of the Labor
Code to be automatically abolished, which read:

Art. 245. Security guards and other personnel employed for

the protection and security of the person, properties and
premises of the employers shall not be eligible for
membership in a labor organization.
Art. 246. Managerial employees are not eligible to join,
assist, and form any labor organization.
THE PRESIDING OFFICER (Mr. Bengzon):
What does the Committee say?
FR. BERNAS: The Committee accepts.
THE PRESIDING OFFICER (Mr. Bengzon):
The Committee has accepted the amendment, as amended.
Is there any objection? (Silence) The Chair hears none; the
amendment, as amended, is approved. 3
The Committee on Style then recommended that commas be
placed after the words people and sectors, while
Commissioner Lerum likewise moved to place the word
unions before the word associations. 4 Section 7, which was
subsequently renumbered as Section 8 as presently
appearing in the text ratified in the plebiscite of 2 February
1987, then read as follows:
The right of the people, including those employed in the
public and private sectors, to form unions, associations, or
societies for purposes not contrary to law shall not be
abridged.
It is then indubitably clear from the foregoing that the intent
of the Constitutional Commission was to abrogate the law
prohibiting managerial employees from joining, assisting, or
forming unions or labor organizations. In this regard, there is
absolutely no need to decipher the intent of the framers of
the 1987 Constitution vis-a-vis Article 245 (originally 246) of

the Labor Code, there being no ambiguity or vagueness in

the wording of the present Section 8, Article III of the 1987
Constitution. The provision is clear and written in simple
language; neither were there any confusing debates thereon.
More importantly, the purpose of Commissioner Lerum's
amendments was unequivocal: he did not merely intend an
implied repeal, but an express repeal of the offending article
of the Labor Code. The approval of the amendments left no
doubt whatsoever, as faithfully disclosed in the Records of
the Constitutional Commission, that all employees meaning
rank-and-file, supervisory and managerial whether from
the public or the private sectors, have the right to form
unions for purposes not contrary to law.
The Labor Code referred to by Commissioner Lerum was P.D.
No. 442, promulgated on 1 May 1974. With the repeal of
Article 239 by Executive Order No. 111 issued on 24
December
1986, 5 Article
246
(as
mentioned
by
Commissioner Lerum) became Article 245. Thereafter, R.A.
No. 6715 6 amended the new Article 245 (originally Article
246) to read, as follows:
Sec. 245. Ineligibility of managerial employees to join any
labor organization; right of supervisory employees.
Managerial employees are not eligible to join, assist or form
any labor organization. Supervisory employees shall not be
eligible for membership in a labor organization of the rankand-file employees but may join, assist or form separate
labor organizations of their own. 7
With the abrogation of the former Article 246 of the Labor
Code, 8 and the constitutional prohibition against any law
prohibiting managerial employees from joining, assisting or
forming unions or labor organizations, the first sentence then
of the present Article 245 of the Labor Code must be struck
down as unconstitutional. 9 However, due to an obvious
conflict of interest being closely identified with the

interests of management in view of the inherent nature of

their functions, duties and responsibilities managerial
employees may only be eligible to join, assist or form unions
or labor organizations of their own rank, and not those of the
supervisory employees nor the rank-and-file employees.
In the instant case, the petitioner's name United PepsiCola Supervisory Union (UPSU) indubitably attests that it is
a union of supervisory employees. In light of the earlier
discussion,
the route
managers who
aremanagerial
employees, cannot join or assist UPSU. Accordingly, the MedArbiter and public respondent Laguesma committed no error
in denying the petition for direct certification or for
certification election.
I thus vote to GRANT, IN PART, the instant petition. That
portion of the challenged resolution of public respondent
holding that since the route managers of private respondent
Pepsi-Cola Products Philippines, Inc., are managerial
employees, they are "not eligible to assist, join or form a
union or any other organization" should be SET ASIDE for
being violative of Section 8 of Article III of the Constitution,
while that portion thereof denying petitioner's appeal from
the Med-Arbiter's decision dismissing the petition for direct
certification or for a certification election should be
AFFIRMED.
PUNO, J., separate concurring;
With due respect, it is my submission that Article 245 of the
Labor Code was not repealed by section 8, Article III of the
1987 Constitution for reasons discussed below.
A. Types of Employees.
For purposes of applying the law on labor relations, the Labor
Code in Article 212 (m) defines three (3) categories of

employees. They are managerial, supervisory and rank-andfile, thus:

Art. 212 (m). "Managerial Employee" is one who is vested
with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, layoff, recall, discharge, assign or discipline employees.
"Supervisory employees" are those who, in the interest of the
employer, effectively recommended such managerial actions
if the exercise of such authority is not merely routinary or
clerical in nature but requires the use of independent
judgment. All employees not falling within any of the above
definitions
are
considered rank-and-file employees
for
purposes of this Book.
The test of "managerial" or "supervisory" status depends on
whether a person possesses authority to act in the interest of
his employer and whether such authority is not routinary or
clerical in nature but requires the use of independent
judgment. 1 The rank-and-file employee performs work that is
routinary and clerical in nature. The distinction between
these employees is significant because supervisory and rankand-file employees may form, join or assist labor
organizations. Managerial employees cannot.
B. The Exclusion of Managerial Employees: Its Historical
Roots in the United States.
The National Labor Relations Act (NLRA), also known as the
Wagner Act, enacted by the U.S. Congress in 1935, was the
first law that regulated labor relations in the United States
and embodied its national labor policy. 2 The purpose of the
NLRA was to eliminate obstructions to the free flow of
commerce through the practice of collective bargaining. The
NLRA also sought to protect the workers' full freedoms of
association,
self-organization,
and
designation
of
representatives of their own choosing, for the purpose of
negotiating the terms and conditions of their employment or

other mutual aid and protection. 3 The NLRA established the

right of employees to organize, required employers to
bargain with employees collectively through employeeelected representatives, gave employees the right to engage
in concerted activities for collective bargaining purposes or
other mutual aid or protection, and created the National
Labor Relations Board (NLRB) as the regulatory agency in
labor-management matters. 4
The NLRA was amended in 1947 by the Labor Management
Relations Act (LMRA), also known as the Taft-Hartley Act. This
Act sought to lessen industrial disputes and placed
employers in a more nearly equal position with unions in
bargaining and labor relations procedures. 5
The NLRA did not make any special provision for "managerial
employees." 6 The privileges and benefits of the Act were
conferred on "employees." Labor organizations thus
clamored for the inclusion of supervisory personnel in the
coverage of the Act on the ground that supervisors were also
employees. Although traditionally, supervisors were regarded
as part of management, the NLRB was constrained to
recognize supervisors as employees under the coverage of
the law. Supervisors were then granted collective bargaining
rights. 7 Nonetheless, the NLRB refused to consider managers
as covered by the law. 8
The LMRA took away the collective bargaining rights of
supervisors. The sponsors of the amendment feared that
their unionization would break down industrial discipline as it
would blur the traditional distinction between management
and labor. They felt it necessary to deny supervisory
personnel the right of collective bargaining to preserve their
loyalty to the interests of their employers. 9
Several amendments were later made on the NLRA but the
exclusion of managers and supervisors from its coverage
was preserved. Until now managers and supervisors are

excluded from the law. 10 Their exclusion hinges on the

theory that the employer is entitled to the full loyalty of
those whom it chooses for positions of responsibility,
entailing action on the employers' behalf. A supervisor's and
manager's ability to control the work of others would be
compromised by his sharing of employee status with them. 11
C. Historical Development in the Philippines.
Labor-management relations in the Philippines were first
regulated under the Industrial Peace Act 12 which took effect
in 1953. Hailed as the Magna Carta of Labor, it was modelled
after the NLRA and LMRA of the United States. 13 Most of the
basic principles of the NLRA have been carried over to the
Industrial Peace Act and the Labor Code. 14 This is significant
because we have ruled that where our labor statutes are
based on statutes in foreign jurisdiction, the decisions of the
high courts in those jurisdictions construing and interpreting
the Act are given persuasive effects in the application of
Philippine law. 15
The Industrial Peace Act did not carry any provision
prohibiting managerial employees from joining labor
organizations. Section 3 of said law merely provided:
Sec. 3. Employees' Right to Self-Organization. Employees
shall have the right to self-organization and to form, join or
assist labor organizations of their own choosing for the
purpose of collective bargaining through representatives of
their own choosing and to engage in concerted activities for
the purpose of collective bargaining and other mutual aid
and protection. Individuals employed as supervisors shall not
be eligible for membership in a labor organization of
employees under their supervision but may form separate
organizations of their own.

Significantly, the Industrial Peace Act did not define a

manager or managerial employee. It defined a "supervisor"
but not a "manager." Thus:
Sec. 2. . . .
(k) "Supervisor" means any person having authority in the
interest of an employer, to hire, transfer, suspend, lay-off,
recall, discharge, assign, recommend, or discipline other
employees, or responsibly to direct them, and to adjust their
grievances, or effectively to recommend such acts, if, in
connection with the foregoing, the exercise of such authority
is not of a merely routinary or clerical nature but requires the
use of independent judgment.
In 1972, we interpreted Section 3 of the Industrial Peace Act
to give supervisors the right to join and form labor
organizations of their own. 16 Soon we grappled with the right
of managers to organize. In a case involving Caltex
managers, we recognized their right to organize, viz:
It would be going too far to dismiss summarily the point
raised by respondent company, that of the alleged identity of
interest between the managerial staff and the employing
firm. That should ordinarily be the case, especially so where
the dispute is between management and the rank-and-file. It
does not necessarily follow though that what binds the
managerial staff to the corporation forecloses the possibility
of conflict between them. There could be a real difference
between what the welfare of such group requires and the
concessions the firm is willing to grant. Their needs might
not be attended to then in the absence of any organization of
their own. Nor is this to indulge in empty theorizing. The
records of respondent company, even the very case cited by
it, is proof enough of their uneasy and troubled relationship.
Certainly the impression is difficult to erase that an alien firm
failed to manifest sympathy for the claims of its Filipino
executives. 17

The Industrial Peace Act was repealed in 1975 by P.D. 442,

the Labor Code of the Philippines. The Labor Code changed
existing jurisprudence when it prohibited supervisory and
managerial
employees
from
joining
labor
organizations. Supervisory unions were no longer recognized
nor allowed to exist and operate as such. 18 We affirmed this
statutory
change
in Bulletin
Publishing
19
Corp. v. Sanchez. Similarly, Article 246 of the Labor Code
expressly prohibited managerial employees from forming,
assisting and joining labor organizations, to wit:
Art. 246. Ineligibility of managerial employees to join any
labor organization. Managerial employees are not eligible
to join, assist or form any labor organization.
In the same Bulletin case, the Court applied Article 246 and
held that managerial employees are the very type of
employees who, by the nature of their positions and
functions, have been decreed disqualified from bargaining
with management. This prohibition is based on the rationale
that if managerial employees were to belong or be affiliated
with a union, the union might not be assured of their loyalty
in view of evident conflict of interest or that the union can be
company-dominated with the presence of managerial
employees in the union membership. 20 In the collective
bargaining process, managerial employees are supposed to
be on the side of the employer, to act as its representative,
and to see to it that its interests are well protected. The
employer is not assured of such protection if these
employees themselves become union members. 21
The prohibition on managerial employees to join, assist or
form labor organizations was retained in the Labor Code
despite substantial amendments made in 1989 by R.A. 6715,
the Herrera-Veloso Law. R.A. 6715 was passed after the
effectivity of the 1987 Constitution and this law did not
abrogate, much less amend the prohibition on managerial

employees to join labor organizations. The express

prohibition in Article 246 remained. However, as an
addendum to this same Article, R.A. 6715 restored to
supervisory employees the right to join labor organizations of
their own. 22 Article 246 now reads:
Art. 246. Ineligibility of managerial employees to join any
labor organization; right of supervisory employees.
Managerial employees are not eligible to join, assist or form
any labor organization. Supervisory employees shall not be
eligible for membership in a labor organization of the rankand-file employees but may join, assist or form separate
labor organizations of their own.
Article 246 became Article 245 after then Article 244 was
repealed by E.O. 111. Article 246 is presently Article 245 of
the Labor Code.
Indeed, Article 245 of the Labor Code prohibiting managerial
employees from joining labor organizations has a social and
historical significance in our labor relations law. This
significance should be considered in deciphering the intent of
the framers of the 1987 Constitution vis-a-vis the said Article.
With due respect, I do not subscribe to the view that section
8, Article III of the Constitution abrogated Article 245 of the
Labor Code. A textual analysis of section 8, Article III of the
Constitution will not justify this conclusion. With due respect,
the resort by Mr. Justice Davide to the deliberations of the
Constitutional Commission does not suffice. It is generally
recognized that debates and other proceedings in a
constitutional convention are of limited value and are an
unsafe guide to the intent of the people. 23 Judge Cooley has
stated that:
When the inquiry is directed to ascertaining the mischief
designed to be remedied, or the purpose sought to be
accomplished by a particular provision, it may be proper to

examine the proceedings of the convention which framed the

instrument. Where the proceedings clearly point out the
purpose of the provision, the aid will be valuable and
satisfactory; but where the question is one of abstract
meaning, it will be difficult to derive from this source much
reliable assistance in interpretation. Every member of such a
convention acts upon such motives and reasons as influence
him personally, and the motions and debates do not
necessarily indicate the purpose of a majority of a
convention in adopting a particular clause. It is quite possible
for a particular clause to appear so clear and unambiguous
to the members of the convention as to require neither
discussion nor illustration; and the few remarks made
concerning it in the convention might have a plain tendency
to lead directly away from the meaning in the minds of the
majority. It is equally possible for a part of the members to
accept a clause in one sense and a part in another. And even
if we were certain we had attained to the meaning of the
convention, it is by no means to be allowed a controlling
force, especially if that meaning appears not to be the one
which the words would most naturally and obviously convey.
For as the constitution does not derive its force from the
convention which framed, but from the people who ratified it,
the intent to be arrived at is that of the people, and it is not
to be supposed that they have looked for any dark and
abstruse meaning in the words employed, but rather that
they have accepted them in the sense most obvious to the
common understanding, and ratified the instrument in the
belief that was the sense designed to be conveyed. 24
It is for this reason that proceedings of constitutional
conventions are less conclusive of the proper construction of
the instrument than are legislative proceedings of the proper
construction of the statute. 25 In the statutes, it is the intent
of the legislature that is being sought, while in constitutions,
it is the intent of the people that is being ascertained
through the discussions and deliberations of their

representatives. 26 The proper interpretation of constitutional

provisions depends more on how it was understood by the
people adopting it than in the framers' understanding
thereof. 27
Thus, debates and proceedings of the constitutional
convention are never of binding force. They may be valuable
but are not necessarily decisive. 28 They may shed a useful
light upon the purpose sought to be accomplished or upon
the meaning attached to the words employed. And the courts
are free to avail themselves of any light that may be derived
from such sources, but they are not bound to adopt it as the
sole ground of their decision. 29
Clearly then, a statute cannot be declared void on the sole
ground that it is repugnant to a supposed intent or spirit
declared in constitutional convention proceedings.
D. Freedom of Association
The right of association flows from freedom of
expression. 30 Like the right of expression, the exercise of the
right of association is not absolute. It is subject to certain
limitations.
Article 243 of the Labor Code reiterates the right of
association of people in the labor sector. Article 243
provides:
Art. 243. Coverage of employees' right to self-organization.
All persons employed in commercial, industrial and
agricultural enterprises and in religious, charitable, medical,
or educational institutions whether operating for profit or not,
shall have the right to self-organization and to form, join, or
assist labor organizations of their own choosing for purposes
of collective bargaining. Ambulant, intermittent and itinerant
workers, self-employed people, rural workers and those

without any definite employers may form labor organizations

for their mutual aid and protection.
Article 243 guarantees the right to self-organization and
association to "all persons." This seemingly all-inclusive
coverage of "all persons," however, actually admits of
exceptions.
Article 244 31 of the Labor Code mandates that all employees
in the civil service, i.e, those not employed in government
corporations established under the Corporation Code, may
only form associations but may not collectively bargain on
terms and conditions fixed by law. An employee of a
cooperative who is a member and co-owner thereof cannot
invoke the right of collective bargaining and negotiation visa-vis the cooperative. 32 An owner cannot bargain with
himself or his co-owners. 33 Employees in foreign embassies
or consulates or in foreign international organizations
granted international immunities are also excluded from the
right
to
form
labor
organizations. 34 International
organizations are organized mainly as a means for
conducting general international business in which the
member-states have an interest and the immunities granted
them shield their affairs from political pressure or control by
the host country and assure the unimpeded performance of
their functions. 35
Confidential employees have also been denied the right to
form labor-organizations. Confidential employees do not
constitute a distinct category for purposes of organizational
right. Confidentiality may attach to a managerial or nonmanagerial
position.
We
have,
however,
excluded
confidential employees from joining labor organizations
following the rationale behind the disqualification of
managerial employees in Article 245. In the case of National
Association of Trade Unions-Republic Planters' Bank
Supervisors Chapter v. Torres, 36 we held:

In the collective bargaining process, managerial employees

are supposed to be on the side of the employer, to act as its
representatives, and to see to it that its interests are well
protected. The employer is not assured of such protection if
these employees themselves are union members. Collective
bargaining in such a situation can become one-sided. It is the
same reason that impelled this Court to consider the position
of confidential employees as included in the disqualification
found in Article 245 as if the disqualification of confidential
employees were written in the provision. If confidential
employees could unionize in order to bargain for advantages
for themselves, then they could be governed by their own
motives rather than the interest of the employers. Moreover,
unionization of confidential employees for the purpose of
collective bargaining would mean the extension of the law to
persons or individuals who are supposed to act "in the
interest of" the employers. It is not farfetched that in the
course of collective bargaining, they might jeopardize that
interest which they are duty-bound to protect. 37
E. The disqualification extends only to labor organizations.
It must be noted that Article 245 of the Labor Code deprives
managerial employees of their right to join "labor
organizations." A labor organization is defined under the
Labor Code as:
Art. 212 (g). "Labor organization" means any union or
association of employees which exists in whole or in part for
the purpose of collective bargaining or of dealing with the
employer concerning terms and conditions of employment.
A labor organization has two broad rights: (1) to bargain
collectively and (2) to deal with the employer concerning
terms and conditions of employment. To bargain collectively
is a right given to a labor organization once it registers itself
with the Department of Labor and Employment (DOLE).
Dealing with the employer, on the other hand, is a generic

description of interaction between employer and employees

concerning grievances, wages, work hours and other terms
and conditions of employment, even if the employees' group
is not registered with the DOLE. 38 Any labor organization
which may or may not be a union may deal with the
employer. This explains why a workers' Organization does
not always have to be a labor union and why employeremployee collective interactions are not always collective
bargaining. 39
In the instant case, it may be argued that managerial
employees' labor organization will merely "deal with the
employer concerning terms and conditions of employment"
especially when top management is composed of aliens,
following the circumstances in the Caltex case.
Although the labor organization may exist wholly for the
purpose of dealing with the employer concerning terms and
conditions of employment, there is no prohibition in the
Labor Code for it to become a legitimate labor organization
and engage in collective bargaining. Once a labor
organization registers with the DOLE and becomes
legitimate, it is entitled to the rights accorded under Articles
242 and 263 (b) of the Labor Code. And these include the
right to strike and picket.
Notably, however, Article 245 does not absolutely disqualify
managerial employees from exercising their right of
association. What it prohibits is merely the right to join labor
organizations. Managerial employees may form associations
or organizations so long as they are not labor organizations.
The freedom of association guaranteed under the
Constitution remains and has not been totally abrogated by
Article 245.
To declare Article 245 of the Labor Code unconstitutional cuts
deep into our existing industrial life and will open the
floodgates to unionization at all levels of the industrial

hierarchy. Such a ruling will wreak havoc on the existing setup between management and labor. If all managerial
employees will be allowed to unionize, then all who are in the
payroll of the company, starting from the president, vicepresident, general managers and everyone, with the
exception of the directors, may go on strike or picket the
employer. 40 Company officers will join forces with the
supervisors and rank-and-file. Management and labor will
become a solid phalanx with bargaining rights that could be
enforced against the owner of the company. 41 The basic
opposing forces in the industry will not be management and
labor but the operating group on the one hand and the
stockholder and bondholder group on the other. The
industrial problem defined in the Labor Code comes down to
a contest over a fair division of the gross receipts of industry
between these two groups. 42 And this will certainly bring illeffects on our economy.
The framers of the Constitution could not have intended a
major upheaval of our labor and socio-economic systems.
Their intent cannot be made to override substantial policy
considerations
and
create
absurd
or
impossible
43
situations. A constitution must be viewed as a continuously
operative charter of government. It must not be interpreted
as demanding the impossible or the impracticable; or as
effecting the unreasonable or absurd. 44 Courts should always
endeavour to give such interpretation that would make the
constitutional provision and the statute consistent with
reason, justice and the public interest. 45
I vote to dismiss the petition.
VITUG, J., separate concurring and dissenting;
The pivotal issues raised in the case at bar, aptly stated by
the Office of the Solicitor General, are:

(1) Whether or not public respondent, Undersecretary of the

Department of Labor and Employment ("DOLE") Bienvenido
E. Laguesma, gravely abused his discretion in categorizing
the members of petitioner union to be managerial employees
and thus ineligible to form or join labor organizations; and
(2) Whether or not the provision of Article 245 of the Labor
Code, disqualifying managerial employees from joining,
assisting or forming any labor organization, violates Section
8, Article III, of the 1987 Constitution, which expresses that
"(t)he right of the people, including those employed in public
and private sectors to form unions, associations or societies
for purposes not contrary to law shall not be abridged."
The case originated from a petition for direct certification or
certification election among route managers/supervisory
employees of Pepsi-Cola Products Phils., Inc. ("Pepsi"), filed
by the United Pepsi-Cola Supervisory Union ("Union"),
claiming to be a legitimate labor organization duly registered
with the Department of Labor and Employment under
Registration Certificate No. NCR-UR-3-1421-95. Pepsi
opposed the petition on the thesis that the case was no more
than a mere duplication of a previous petition for direct
certification 1 filed by the same route managers through the
Pepsi-Cola Employees Association (PCEA-Supervisory) which
petition had already been denied by Undersecretary
Laguesma. The holding reiterated a prior decision in Workers
Alliance Trade Unions ("WATU") vs. Pepsi-Cola Products Phils.,
Inc., 2 that route managers were managerial employees.
In its decision, dated 05 May 1995, Med-Arbiter Brigida C.
Fadrigon dismissed for lack of merit the petition of the Union,
stating that the issue on the proper classification and status
of route managers had already been ruled with finality in the
previous decisions, aforementioned, rendered by DOLE.
The union appealed the decision. In his resolution of 31
August 1995, Undersecretary Laguesma dismissed the

appeal, saying that there was no compelling reason to

abandon the ruling in the two old cases theretofore decided
by DOLE. In his order of 22 September 1995, Undersecretary
Laguesma denied the Union's motion for reconsideration.
The Union went to this Court, via a petition for certiorari,
assailing the cancellation of its certificate of registration. The
Court, after considering the petition and the comments
thereon filed by both public and private respondents, as well
as the consolidated reply of petitioner, dismissed the case in
its resolution of 08 July 1996 on the premise that no grave
abuse of discretion had been committed by public
respondent.
Undaunted, the Union moved, with leave, for the
reconsideration of the dismissal of its petition by the
Court En Banc. In its resolution of 16 June 1997, the case was
referred to the Court En Banc en consulta with the movant's
invocation of unconstitutionality of Article 245 of the Labor
Code vis-a-vis Section 8, Article III, of the 1987 Constitution.
There is merit, in my view, in petitioner's motion for
reconsideration but not on constitutional grounds.
There are, in the hierarchy of management, those who fall
below the level of key officers of an enterprise whose terms
and conditions of employment can well be, indeed are not
infrequently,
provided
for
in
collective
bargaining
agreements. To this group belong the supervisory
employees. The "managerial employees," upon the other
hand, and relating the matter particularly to the Labor Code,
are those "vested with powers or prerogatives to lay down
and execute management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline
employees" as distinguished from the supervisory employees
whose duties in these areas are so designed as to verily be
implementary to the policies or rules and regulations already
outstanding and priorly taken up and passed upon by

management. The managerial level is the source, as well as

prescribes the compliance, of broad mandates which, in the
field of labor relations, are to be carried out through the next
rank of employees charged with actually seeing to the
specific personnel action required. In fine, the real authority,
such as in hiring or firing of employees, comes from
management and exercised by means of instructions, given
in general terms, by the "managerial employees;" the
supervisory employees, although ostensibly holding that
power, in truth, however, only act in obedience to the
directives handed down to them. The latter unit, unlike the
former, cannot be considered the alter ego of the owner of
enterprise.

80% Seven-Up

The duties and responsibilities of the members of petitioner

union, shown by their "job description" below

ASSET MANAGEMENT 30 cases for ice-coolers

PCPPI
RM's JOB DESCRIPTION
A. GENERAL/OVERALL OBJECTIVE OF THIS POSITION
To contribute to the growth and profitability of PCPPI via wellselected, trained and motivated Route Sales Team who sell,
collect and merchandise, following the Pepsi Way, and
consistent with Company policies and procedures as well as
the corporate vision of Customer Satisfaction.

40% Mirinda
65% Mt. Dew
5% Out of Stock
ACCOUNTS RECEIVABLE 65% Current (Incl. Legal & Col.)
MANAGEMENT 80:20 Cash to Credit Ratio
DSO assigned Std. to Division
by the District

80 cases for electric coolers

BLOWAGA on Division Vehicles
60 cases on Rolling/Permanent
Kiosks
TRADE DEVELOPMENT 100% Buying Customers Based
on master list that bought once
5 months payback on concessions

B. SPECIFIC JOB DESCRIPTION:

4 CED's/Rte.

KEY RESULT AREAS STANDARD OR PERFORMANCE

EXPENSE MANAGEMENT a). 5% Absentism rate Excl. VL

SALES VOLUME *100% Vs. NRC Target

b). 280 cases/route/day

_____% NTG

c). 15% cost-to-sales ratio

DISTRIBUTION * Product Availability

ROUTE MANAGEMENT 3 Days on RR/Wk

70% Pepsi

Days on BC-SC- Financial &

Co. Assets

c). ANNOUNCEMENT

Days on TD

6. RM's PRESENCE DURING CHECK-OUT

75% Load Factor

a). SLM PRACTICES BLOWAGA ON ROUTE TRUCK

18 Productive Calls

b). PRIVATE COUNSELING WITH RST (AM & PM IF NECESSARY)

CUSTOMER SATISFACTION Customer Complaint attended to

within the next working day

c). PROPER HANDLING OF SELLING/MDSG. MATERIALS

HUMAN RESOURCE 5% Absentism Excl. VL

d). YESTERDAY's FINAL SETTLEMENT REVIEW

MANAGEMENT (approved) 3 Documented RR/

7. UPDATE REPORTS, MONITORS, DOCUMENTS & TELEPHONE

CONMATION

Week using SLM's Training Log

8. ATTENDS TO PRODUCT COMPLAINTS (GFM)

ADMINISTRATIVE Complete, timely and accurate

9. CONDUCTS ADMINISTRATIVE INVESTIGATION OR ATTENDS

DM's MEETING (on Saturdays)

MANAGEMENT reports.

B. FIELD WORK

PCPPI

ROUTE RIDE

RM's BASIC DAILY ACTIVITIES

1. CHECKS SLMS. TRAINING LOG (PROGRESS & DEV'T.)

A. AT THE SALES OFFICE

1. PRACTICES BLOWAGA ON SERVICE VEHICLE (AT HOME)

3. ROUTE COVERAGE EVALUATION

2. REPORTS FOR WORK ON OR BEFORE 6:15 A.M.

3. REPORTS
GROOMING)

IN

CLEAN

AND

NEAT

UNIFORM

2. SALESMAN's CPC

(GOOD

4. LOAD FACTOR
5. SALESMAN's ROUTING SYSTEM EVALUATION

4. DAILY BRIEFING WITH THE DM

BC/SC

5. CONDUCTS SKILLS ENHANCEMENT OR HUDDLES WITH

RST's

1. FINANCIAL & ASSET VERIFICATION, CONFIRMATION &

AUDIT

a). ATTENDANCE/GROOMING

2. BACKCHECKS FIRST 5 CUSTOMERS SERVED FOR THE DAY

b). OPERATIONAL DIRECTIONS & PRIORITIES

a). MERCHANDISING

b). SERVICING
c). RM's TERRITORY FAMILIARITY
d). KEY ACCOUNTS GOODWILL
TRADE DEVELOPMENT
1. PREPARATION PRIOR TO CALL
2. ACTUAL CALL
3. POST CALL ANALYSIS
(HOW DID I FARE? WHY? WHAT ACTIONS TO TAKE)
4. FOLLOW-UP ACTION
C. AT CLOSE OF DAY
1. MAINTAINS & UPDATES CORRECT & ACCURATE RECORDS &
REPORTS

As a Route Manager, your purpose is to meet the sales plan;

and you achieve this objective through the skillful
management of your job and the management of your
people.
These then are your functions as Pepsi-Cola Route Manager.
Within these functions managing your job and managing
your people you are accountable to your District Manager
for the execution and completion of various tasks and
activities which will make it possible for you to achieve your
sales objectives.
B. PRINCIPAL ACCOUNTABILITIES
1.0 MANAGING YOUR JOB
The Route Manager is accountable for the following:
1.1 SALES DEVELOPMENT
1.1.1 Achieve the sales plan.

2. RM-SLM DEBRIEFING

1.1.2 Achieve all distribution and new account objectives.

3. SLR DISCUSSION (BASED ON A.M. SLR)

1.1.3 Develop new business opportunities thru personal

contacts with dealers.

4. COORDINATES WITH DM ON PLANS & PROGRAMS

5. PREPARATIONS FOR NEXT DAY's ACTIVITIES 3
convey no more than those that are aptly consigned to the
"supervisory" group by the relatively small unit of
"managerial" employees. Certain portions of a pamphlet, the
so-called "Route Manager Position Description" referred to by
Mr. Justice Vicente Mendoza, in his ponencia, hereunder
reproduced for easy reference, thus
A. BASIC PURPOSE
A Manager achieves objectives through others.

1.1.4 Inspect and ensure that all merchandising objectives

are achieved in all outlets.
1.1.5 Maintain and improve productivity of all cooling
equipment and kiosks.
1.1.6 Execute and control all authorized promotions.
1.1.7 Develop and maintain dealer goodwill.
1.1.8 Ensure all accounts comply with company suggested
retail pricing.

1.1.9 Study from time to time individual route coverage and

productivity for possible adjustments to maximize utilization
of resources.

2.2.1 Maintain the company's reputation through strict

adherence to PCPPI's code of conduct and the universal
standards of unquestioned business ethics.

1.2 Administration

offer nothing at all that can approximate the authority and

functions of those who actually and genuinely hold the reins
of management.

1.2.1 Ensure the proper loading of route trucks before checkout and the proper sorting of bottles before check-in.
1.2.2 Ensure the upkeep of all route sales reports and all
other related reports and forms required on an accurate and
timely basis.
1.2.3 Ensure proper implementation of the various company
policies and procedures include but not limited to
shakedown; route shortage; progressive discipline; sorting;
spoilages; credit/collection; accident; attendance.
1.2.4 Ensure
accounts.

collection

of

receivables

and

delinquent

2.0 MANAGING YOUR PEOPLE

The Route Manager is accountable for the following:
2.1 Route Sales Team Development
2.1.1 Conduct route rides to train, evaluate and develop all
assigned route salesmen and helpers at least 3 days a week,
to be supported by required route ride documents/reports &
back check/spot check at least 2 days a week to be
supported by required documents/reports.
2.1.2 Conduct sales meetings and morning huddles. Training
should focus on the enhancement of effective sales and
merchandising techniques of the salesmen and helpers.
Conduct group training at least 1 hour each week on a
designated day and of specific topic.
2.2 Code of Conduct

I submit, with due respect, that the members of petitioning

union, not really being "managerial employees" in the true
sense of the term, are not disqualified from forming or
joining labor organizations under Article 245 of the Labor
Code.
I shall now briefly touch base on the constitutional question
raised by the parties on Article 245 of the Labor Code.
The Constitution acknowledges "the right of the people,
including those employed in the public and private sectors,
to form unions, associations or societies for purposes not
contrary to law . . . ." 4 Perforce, petitioner claims, that part
of Article 245 5 of the Labor Code which states: "Managerial
employees are not eligible to join, assist or form any labor
organization," being in direct collision with the Constitutional
provision, must now be declared abrogated in the law.
Frankly, I do not see such a "direct collision." The
Constitution did not obviously grant a limitless right "to form
unions, associations or societies" for it has clearly seen it fit
to subject its exercise to possible legislative judgment such
as may be appropriate or, to put it in the language of the
Constitution itself, to "purposes not contrary to law."
Freedom of association, like freedom of expression, truly
occupies a choice position in the hierarchy of constitutional
values. Even while the Constitution itself recognizes the
State's prerogative to qualify this right, heretofore discussed,
any limitation, nevertheless, must still be predicated on the

existence
of
a
substantive
evil
sought
to
be
6
addressed. Indeed, in the exercise of police power, the
State may, by law, prescribe proscriptions, provided
reasonable and legitimate of course, against even the most
basic rights of individuals.
The restriction embodied in Article 245 of the Labor Code is
not without proper rationale. Concededly, the prohibition to
form labor organizations on the part of managerial
employees narrows down their freedom of association. The
very nature of managerial functions, however, should
preclude those who exercise them from taking a position
adverse to the interest they are bound to serve and protect.
The mere opportunity to undermine that interest can validly
be restrained. To say that the right of managerial employees
to form a "labor organization" within the context and ambit
of the Labor Code should be deemed totally separable from
the right to bargain collectively is not justified by related
provisions of the Code. For instance
Art. 212. Definitions. 7 . . .
(g) "Labor organization" means any union or association of
employees which exists in whole or in part for the purpose of
collective bargaining or of dealing with employers concerning
terms and conditions of employment.
xxx xxx xxx
(m) "Managerial employee" is one who is vested with powers
or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the
exercise of such authority is not merely routinely or clerical
in nature but requires the use of independent judgment. All
employees not falling within any of the above definitions are

considered rank-and-file employees for purposes of this

Book.
Art. 263. . . .
(b) Workers shall have the right to engage in concerted
activities for purposes of collective bargaining or for their
mutual benefit and protection. The right of legitimate labor
organizations to strike and picket and of employers to
lockout, consistent with the national interest, shall continue
to be recognized and respected.
The maxim "ut res magis quam pereat" requires not merely
that a statute should be given such a consequence as to be
deemed whole but that each of its express provisions equally
should be given the intended effect.
I find it hard to believe that the fundamental law could have
envisioned the use by managerial employees of coercive
means against their own employers over matters entrusted
by the latter to the former. Whenever trust and confidence is
a major aspect of any relationship, a conflict of interest on
the part of the person to whom that trust and confidence is
reposed must be avoided and when, unfortunately, it does
still arise its containment can rightly be decreed.
Article 245 of the Labor Code indeed aligns itself to the
Corporation Code, the basic law on by far the most
commonly used business vehicle the corporation which
prescribes the tenure of office, as well as the duties and
functions, including terms of employment (governed in most
part by the Articles of Incorporation, the By-laws of the
Corporation, or resolutions of the Board of Directors), of
corporate officers for both the statutory officers,i.e., the
president, the treasurer and the corporate secretary, and the
non-statutory officers, i.e., those who occupy positions
created by the corporate by-laws who are deemed essential
for effective management of the enterprise. I cannot imagine

these officers as being legally and morally capable of

associating themselves into a labor organization and
asserting collective bargaining rights against the very entity
in whose behalf they act and are supposed to act.
I submit, accordingly, that, firstly, the members of petitioner
union or the so-called route managers, being no more than
supervisory employees, can lawfully organize themselves
into a labor union within the meaning of the Labor Code, and
that, secondly, the questioned provision of Article 245 of the
Labor Code has not been revoked by the 1987 Constitution.
WHEREFORE, I vote, given all the foregoing, for the reversal
of the resolution of 31 August 1995, and the order of 22
September 1995, of public respondent.
Kapunan, Panganiban and Quisumbing, JJ., concur and
dissent.

This Section was adopted in Section 7 of Proposed Resolution

No. 486 of the 1986 Constitutional Commission, entitled
Resolution to Incorporate in the New Constitution an Article
on the Bill of Rights, 1 submitted by the Committee on
Citizenship, Bill of Rights, Political Rights and Obligations,
and Human Rights, with a modification, however, consisting
of the insertion of the word union between the words
"associations" and "societies." Thus the proposed Section 7
provided as follows:
Sec. 7. The right of the people to form associations, unions,
or societies for purposes not contrary to law shall not be
abridged (emphasis supplied).
Commissioner Joaquin G. Bernas, in his sponsorship speech
on the proposed Article on the Bill of Rights, expounded on
the nature of the proposed provision, in this wise:

Separate Opinions

Section 7 preserves the old provision not because it is strictly

needed but because its removal might be subject to
misinterpretation. It reads:

DAVIDE, JR., J., concurring and dissenting;

xxx xxx xxx

I concur with the majority that the "route managers" of

private respondent Pepsi-Cola Products Philippines, Inc.
are managerial employees. However, I respectfully submit
that contrary to the majority's holding, Article 245 of the
Labor Code is unconstitutional, as it abridges Section 8,
Article III of the Constitution.

It strictly does not prepare the old provision because it adds

the word UNION, and in the explanation we received from
Commissioner Lerum, the term envisions not just unions in
private corporations but also in the government. This
preserves our link with the Malolos Constitution as far as the
right to form associations or societies for purposes not
contrary to law is concerned. 2

Section 8, Article III of the 1987 Constitution was taken from

Section 7, Article IV of the 1973 Constitution which, in turn,
was lifted from Section 6, Article III of the 1935 Constitution.
Section 7 of the 1973 Constitution provided as follows:
Sec. 7. The right to form associations or societies for purpose
not contrary to law shall not be abridged.

During the period of individual amendments, Commissioner

Lerum introduced an amendment to the proposed section
consisting of the insertion of the clause "WHETHER
EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS,
which, after consulting other Commissioners, he modified his
proposed amendment to read: "INCLUDING THOSE

EMPLOYED IN THE PUBLIC AND PRIVATE SECTORS." At that

time, the section read:
Sec. 7. The right of the people including those employed in
the public and private sectors to form associations, unions or
societies for purposes not contrary to law shall not be
abridged.
Pertinently to this dispute Commissioner Lerum's intention
that the amendment "automatically abolish" Articles 245 and
246 of the Labor Code. The Committee accepted the
amendment, and there having been no objection from the
floor, the Lerum amendment was approved, thus:
MR. LERUM: . . . In proposing that amendment I ask to make
of record that I want the following provisions of the Labor
Code to be automatically abolished, which read:
Art. 245. Security guards and other personnel employed for
the protection and security of the person, properties and
premises of the employers shall not be eligible for
membership in a labor organization.
Art. 246. Managerial employees are not eligible to join,
assist, and form any labor organization.
THE PRESIDING OFFICER (Mr. Bengzon):
What does the Committee say?
FR. BERNAS: The Committee accepts.
THE PRESIDING OFFICER (Mr. Bengzon):
The Committee has accepted the amendment, as amended.
Is there any objection? (Silence) The Chair hears none; the
amendment, as amended, is approved. 3

The Committee on Style then recommended that commas be

placed after the words people and sectors, while
Commissioner Lerum likewise moved to place the word
unions before the word associations. 4 Section 7, which was
subsequently renumbered as Section 8 as presently
appearing in the text ratified in the plebiscite of 2 February
1987, then read as follows:
The right of the people, including those employed in the
public and private sectors, to form unions, associations, or
societies for purposes not contrary to law shall not be
abridged.
It is then indubitably clear from the foregoing that the intent
of the Constitutional Commission was to abrogate the law
prohibiting managerial employees from joining, assisting, or
forming unions or labor organizations. In this regard, there is
absolutely no need to decipher the intent of the framers of
the 1987 Constitution vis-a-vis Article 245 (originally 246) of
the Labor Code, there being no ambiguity or vagueness in
the wording of the present Section 8, Article III of the 1987
Constitution. The provision is clear and written in simple
language; neither were there any confusing debates thereon.
More importantly, the purpose of Commissioner Lerum's
amendments was unequivocal: he did not merely intend an
implied repeal, but an express repeal of the offending article
of the Labor Code. The approval of the amendments left no
doubt whatsoever, as faithfully disclosed in the Records of
the Constitutional Commission, that all employees meaning
rank-and-file, supervisory and managerial whether from
the public or the private sectors, have the right to form
unions for purposes not contrary to law.
The Labor Code referred to by Commissioner Lerum was P.D.
No. 442, promulgated on 1 May 1974. With the repeal of
Article 239 by Executive Order No. 111 issued on 24
December
1986, 5 Article
246
(as
mentioned
by

Commissioner Lerum) became Article 245. Thereafter, R.A.

No. 6715 6 amended the new Article 245 (originally Article
246) to read, as follows:
Sec. 245. Ineligibility of managerial employees to join any
labor organization; right of supervisory employees.
Managerial employees are not eligible to join, assist or form
any labor organization. Supervisory employees shall not be
eligible for membership in a labor organization of the rankand-file employees but may join, assist or form separate
labor organizations of their own. 7
With the abrogation of the former Article 246 of the Labor
Code, 8 and the constitutional prohibition against any law
prohibiting managerial employees from joining, assisting or
forming unions or labor organizations, the first sentence then
of the present Article 245 of the Labor Code must be struck
down as unconstitutional. 9 However, due to an obvious
conflict of interest being closely identified with the
interests of management in view of the inherent nature of
their functions, duties and responsibilities managerial
employees may only be eligible to join, assist or form unions
or labor organizations of their own rank, and not those of the
supervisory employees nor the rank-and-file employees.
In the instant case, the petitioner's name United PepsiCola Supervisory Union (UPSU) indubitably attests that it is
a union of supervisory employees. In light of the earlier
discussion,
the route
managers who
aremanagerial
employees, cannot join or assist UPSU. Accordingly, the MedArbiter and public respondent Laguesma committed no error
in denying the petition for direct certification or for
certification election.
I thus vote to GRANT, IN PART, the instant petition. That
portion of the challenged resolution of public respondent
holding that since the route managers of private respondent
Pepsi-Cola Products Philippines, Inc., are managerial

employees, they are "not eligible to assist, join or form a

union or any other organization" should be SET ASIDE for
being violative of Section 8 of Article III of the Constitution,
while that portion thereof denying petitioner's appeal from
the Med-Arbiter's decision dismissing the petition for direct
certification or for a certification election should be
AFFIRMED.
PUNO, J., separate concurring;
With due respect, it is my submission that Article 245 of the
Labor Code was not repealed by section 8, Article III of the
1987 Constitution for reasons discussed below.
A. Types of Employees.
For purposes of applying the law on labor relations, the Labor
Code in Article 212 (m) defines three (3) categories of
employees. They are managerial, supervisory and rank-andfile, thus:
Art. 212 (m). "Managerial Employee" is one who is vested
with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, layoff, recall, discharge, assign or discipline employees.
"Supervisory employees" are those who, in the interest of the
employer, effectively recommended such managerial actions
if the exercise of such authority is not merely routinary or
clerical in nature but requires the use of independent
judgment. All employees not falling within any of the above
definitions
are
considered rank-and-file employees
for
purposes of this Book.
The test of "managerial" or "supervisory" status depends on
whether a person possesses authority to act in the interest of
his employer and whether such authority is not routinary or
clerical in nature but requires the use of independent
judgment. 1 The rank-and-file employee performs work that is

routinary and clerical in nature. The distinction between

these employees is significant because supervisory and rankand-file employees may form, join or assist labor
organizations. Managerial employees cannot.
B. The Exclusion of Managerial Employees: Its Historical
Roots in the United States.
The National Labor Relations Act (NLRA), also known as the
Wagner Act, enacted by the U.S. Congress in 1935, was the
first law that regulated labor relations in the United States
and embodied its national labor policy. 2 The purpose of the
NLRA was to eliminate obstructions to the free flow of
commerce through the practice of collective bargaining. The
NLRA also sought to protect the workers' full freedoms of
association,
self-organization,
and
designation
of
representatives of their own choosing, for the purpose of
negotiating the terms and conditions of their employment or
other mutual aid and protection. 3 The NLRA established the
right of employees to organize, required employers to
bargain with employees collectively through employeeelected representatives, gave employees the right to engage
in concerted activities for collective bargaining purposes or
other mutual aid or protection, and created the National
Labor Relations Board (NLRB) as the regulatory agency in
labor-management matters. 4
The NLRA was amended in 1947 by the Labor Management
Relations Act (LMRA), also known as the Taft-Hartley Act. This
Act sought to lessen industrial disputes and placed
employers in a more nearly equal position with unions in
bargaining and labor relations procedures. 5
The NLRA did not make any special provision for "managerial
employees." 6 The privileges and benefits of the Act were
conferred on "employees." Labor organizations thus
clamored for the inclusion of supervisory personnel in the
coverage of the Act on the ground that supervisors were also

employees. Although traditionally, supervisors were regarded

as part of management, the NLRB was constrained to
recognize supervisors as employees under the coverage of
the law. Supervisors were then granted collective bargaining
rights. 7 Nonetheless, the NLRB refused to consider managers
as covered by the law. 8
The LMRA took away the collective bargaining rights of
supervisors. The sponsors of the amendment feared that
their unionization would break down industrial discipline as it
would blur the traditional distinction between management
and labor. They felt it necessary to deny supervisory
personnel the right of collective bargaining to preserve their
loyalty to the interests of their employers. 9
Several amendments were later made on the NLRA but the
exclusion of managers and supervisors from its coverage
was preserved. Until now managers and supervisors are
excluded from the law. 10 Their exclusion hinges on the
theory that the employer is entitled to the full loyalty of
those whom it chooses for positions of responsibility,
entailing action on the employers' behalf. A supervisor's and
manager's ability to control the work of others would be
compromised by his sharing of employee status with them. 11
C. Historical Development in the Philippines.
Labor-management relations in the Philippines were first
regulated under the Industrial Peace Act 12 which took effect
in 1953. Hailed as the Magna Carta of Labor, it was modelled
after the NLRA and LMRA of the United States. 13 Most of the
basic principles of the NLRA have been carried over to the
Industrial Peace Act and the Labor Code. 14 This is significant
because we have ruled that where our labor statutes are
based on statutes in foreign jurisdiction, the decisions of the
high courts in those jurisdictions construing and interpreting
the Act are given persuasive effects in the application of
Philippine law. 15

The Industrial Peace Act did not carry any provision

prohibiting managerial employees from joining labor
organizations. Section 3 of said law merely provided:
Sec. 3. Employees' Right to Self-Organization. Employees
shall have the right to self-organization and to form, join or
assist labor organizations of their own choosing for the
purpose of collective bargaining through representatives of
their own choosing and to engage in concerted activities for
the purpose of collective bargaining and other mutual aid
and protection. Individuals employed as supervisors shall not
be eligible for membership in a labor organization of
employees under their supervision but may form separate
organizations of their own.
Significantly, the Industrial Peace Act did not define a
manager or managerial employee. It defined a "supervisor"
but not a "manager." Thus:
Sec. 2. . . .
(k) "Supervisor" means any person having authority in the
interest of an employer, to hire, transfer, suspend, lay-off,
recall, discharge, assign, recommend, or discipline other
employees, or responsibly to direct them, and to adjust their
grievances, or effectively to recommend such acts, if, in
connection with the foregoing, the exercise of such authority
is not of a merely routinary or clerical nature but requires the
use of independent judgment.
In 1972, we interpreted Section 3 of the Industrial Peace Act
to give supervisors the right to join and form labor
organizations of their own. 16 Soon we grappled with the right
of managers to organize. In a case involving Caltex
managers, we recognized their right to organize, viz:
It would be going too far to dismiss summarily the point
raised by respondent company, that of the alleged identity of

interest between the managerial staff and the employing

firm. That should ordinarily be the case, especially so where
the dispute is between management and the rank-and-file. It
does not necessarily follow though that what binds the
managerial staff to the corporation forecloses the possibility
of conflict between them. There could be a real difference
between what the welfare of such group requires and the
concessions the firm is willing to grant. Their needs might
not be attended to then in the absence of any organization of
their own. Nor is this to indulge in empty theorizing. The
records of respondent company, even the very case cited by
it, is proof enough of their uneasy and troubled relationship.
Certainly the impression is difficult to erase that an alien firm
failed to manifest sympathy for the claims of its Filipino
executives. 17
The Industrial Peace Act was repealed in 1975 by P.D. 442,
the Labor Code of the Philippines. The Labor Code changed
existing jurisprudence when it prohibited supervisory and
managerial
employees
from
joining
labor
organizations. Supervisory unions were no longer recognized
nor allowed to exist and operate as such. 18 We affirmed this
statutory
change
in Bulletin
Publishing
Corp. v. Sanchez. 19 Similarly, Article 246 of the Labor Code
expressly prohibited managerial employees from forming,
assisting and joining labor organizations, to wit:
Art. 246. Ineligibility of managerial employees to join any
labor organization. Managerial employees are not eligible
to join, assist or form any labor organization.
In the same Bulletin case, the Court applied Article 246 and
held that managerial employees are the very type of
employees who, by the nature of their positions and
functions, have been decreed disqualified from bargaining
with management. This prohibition is based on the rationale
that if managerial employees were to belong or be affiliated

with a union, the union might not be assured of their loyalty

in view of evident conflict of interest or that the union can be
company-dominated with the presence of managerial
employees in the union membership. 20 In the collective
bargaining process, managerial employees are supposed to
be on the side of the employer, to act as its representative,
and to see to it that its interests are well protected. The
employer is not assured of such protection if these
employees themselves become union members. 21
The prohibition on managerial employees to join, assist or
form labor organizations was retained in the Labor Code
despite substantial amendments made in 1989 by R.A. 6715,
the Herrera-Veloso Law. R.A. 6715 was passed after the
effectivity of the 1987 Constitution and this law did not
abrogate, much less amend the prohibition on managerial
employees to join labor organizations. The express
prohibition in Article 246 remained. However, as an
addendum to this same Article, R.A. 6715 restored to
supervisory employees the right to join labor organizations of
their own. 22 Article 246 now reads:
Art. 246. Ineligibility of managerial employees to join any
labor organization; right of supervisory employees.
Managerial employees are not eligible to join, assist or form
any labor organization. Supervisory employees shall not be
eligible for membership in a labor organization of the rankand-file employees but may join, assist or form separate
labor organizations of their own.
Article 246 became Article 245 after then Article 244 was
repealed by E.O. 111. Article 246 is presently Article 245 of
the Labor Code.
Indeed, Article 245 of the Labor Code prohibiting managerial
employees from joining labor organizations has a social and
historical significance in our labor relations law. This

significance should be considered in deciphering the intent of

the framers of the 1987 Constitution vis-a-vis the said Article.
With due respect, I do not subscribe to the view that section
8, Article III of the Constitution abrogated Article 245 of the
Labor Code. A textual analysis of section 8, Article III of the
Constitution will not justify this conclusion. With due respect,
the resort by Mr. Justice Davide to the deliberations of the
Constitutional Commission does not suffice. It is generally
recognized that debates and other proceedings in a
constitutional convention are of limited value and are an
unsafe guide to the intent of the people. 23 Judge Cooley has
stated that:
When the inquiry is directed to ascertaining the mischief
designed to be remedied, or the purpose sought to be
accomplished by a particular provision, it may be proper to
examine the proceedings of the convention which framed the
instrument. Where the proceedings clearly point out the
purpose of the provision, the aid will be valuable and
satisfactory; but where the question is one of abstract
meaning, it will be difficult to derive from this source much
reliable assistance in interpretation. Every member of such a
convention acts upon such motives and reasons as influence
him personally, and the motions and debates do not
necessarily indicate the purpose of a majority of a
convention in adopting a particular clause. It is quite possible
for a particular clause to appear so clear and unambiguous
to the members of the convention as to require neither
discussion nor illustration; and the few remarks made
concerning it in the convention might have a plain tendency
to lead directly away from the meaning in the minds of the
majority. It is equally possible for a part of the members to
accept a clause in one sense and a part in another. And even
if we were certain we had attained to the meaning of the
convention, it is by no means to be allowed a controlling
force, especially if that meaning appears not to be the one

which the words would most naturally and obviously convey.

For as the constitution does not derive its force from the
convention which framed, but from the people who ratified it,
the intent to be arrived at is that of the people, and it is not
to be supposed that they have looked for any dark and
abstruse meaning in the words employed, but rather that
they have accepted them in the sense most obvious to the
common understanding, and ratified the instrument in the
belief that was the sense designed to be conveyed. 24
It is for this reason that proceedings of constitutional
conventions are less conclusive of the proper construction of
the instrument than are legislative proceedings of the proper
construction of the statute. 25 In the statutes, it is the intent
of the legislature that is being sought, while in constitutions,
it is the intent of the people that is being ascertained
through the discussions and deliberations of their
representatives. 26 The proper interpretation of constitutional
provisions depends more on how it was understood by the
people adopting it than in the framers' understanding
thereof. 27
Thus, debates and proceedings of the constitutional
convention are never of binding force. They may be valuable
but are not necessarily decisive. 28 They may shed a useful
light upon the purpose sought to be accomplished or upon
the meaning attached to the words employed. And the courts
are free to avail themselves of any light that may be derived
from such sources, but they are not bound to adopt it as the
sole ground of their decision. 29
Clearly then, a statute cannot be declared void on the sole
ground that it is repugnant to a supposed intent or spirit
declared in constitutional convention proceedings.
D. Freedom of Association

The right of association flows from freedom of

expression. 30 Like the right of expression, the exercise of the
right of association is not absolute. It is subject to certain
limitations.
Article 243 of the Labor Code reiterates the right of
association of people in the labor sector. Article 243
provides:
Art. 243. Coverage of employees' right to self-organization.
All persons employed in commercial, industrial and
agricultural enterprises and in religious, charitable, medical,
or educational institutions whether operating for profit or not,
shall have the right to self-organization and to form, join, or
assist labor organizations of their own choosing for purposes
of collective bargaining. Ambulant, intermittent and itinerant
workers, self-employed people, rural workers and those
without any definite employers may form labor organizations
for their mutual aid and protection.
Article 243 guarantees the right to self-organization and
association to "all persons." This seemingly all-inclusive
coverage of "all persons," however, actually admits of
exceptions.
Article 244 31 of the Labor Code mandates that all employees
in the civil service, i.e, those not employed in government
corporations established under the Corporation Code, may
only form associations but may not collectively bargain on
terms and conditions fixed by law. An employee of a
cooperative who is a member and co-owner thereof cannot
invoke the right of collective bargaining and negotiation visa-vis the cooperative. 32 An owner cannot bargain with
himself or his co-owners. 33 Employees in foreign embassies
or consulates or in foreign international organizations
granted international immunities are also excluded from the
right
to
form
labor
organizations. 34 International
organizations are organized mainly as a means for

conducting general international business in which the

member-states have an interest and the immunities granted
them shield their affairs from political pressure or control by
the host country and assure the unimpeded performance of
their functions. 35
Confidential employees have also been denied the right to
form labor-organizations. Confidential employees do not
constitute a distinct category for purposes of organizational
right. Confidentiality may attach to a managerial or nonmanagerial
position.
We
have,
however,
excluded
confidential employees from joining labor organizations
following the rationale behind the disqualification of
managerial employees in Article 245. In the case of National
Association of Trade Unions-Republic Planters' Bank
Supervisors Chapter v. Torres, 36 we held:
In the collective bargaining process, managerial employees
are supposed to be on the side of the employer, to act as its
representatives, and to see to it that its interests are well
protected. The employer is not assured of such protection if
these employees themselves are union members. Collective
bargaining in such a situation can become one-sided. It is the
same reason that impelled this Court to consider the position
of confidential employees as included in the disqualification
found in Article 245 as if the disqualification of confidential
employees were written in the provision. If confidential
employees could unionize in order to bargain for advantages
for themselves, then they could be governed by their own
motives rather than the interest of the employers. Moreover,
unionization of confidential employees for the purpose of
collective bargaining would mean the extension of the law to
persons or individuals who are supposed to act "in the
interest of" the employers. It is not farfetched that in the
course of collective bargaining, they might jeopardize that
interest which they are duty-bound to protect. 37

E. The disqualification extends only to labor organizations.

It must be noted that Article 245 of the Labor Code deprives
managerial employees of their right to join "labor
organizations." A labor organization is defined under the
Labor Code as:
Art. 212 (g). "Labor organization" means any union or
association of employees which exists in whole or in part for
the purpose of collective bargaining or of dealing with the
employer concerning terms and conditions of employment.
A labor organization has two broad rights: (1) to bargain
collectively and (2) to deal with the employer concerning
terms and conditions of employment. To bargain collectively
is a right given to a labor organization once it registers itself
with the Department of Labor and Employment (DOLE).
Dealing with the employer, on the other hand, is a generic
description of interaction between employer and employees
concerning grievances, wages, work hours and other terms
and conditions of employment, even if the employees' group
is not registered with the DOLE. 38 Any labor organization
which may or may not be a union may deal with the
employer. This explains why a workers' Organization does
not always have to be a labor union and why employeremployee collective interactions are not always collective
bargaining. 39
In the instant case, it may be argued that managerial
employees' labor organization will merely "deal with the
employer concerning terms and conditions of employment"
especially when top management is composed of aliens,
following the circumstances in the Caltex case.
Although the labor organization may exist wholly for the
purpose of dealing with the employer concerning terms and
conditions of employment, there is no prohibition in the
Labor Code for it to become a legitimate labor organization

and engage in collective bargaining. Once a labor

organization registers with the DOLE and becomes
legitimate, it is entitled to the rights accorded under Articles
242 and 263 (b) of the Labor Code. And these include the
right to strike and picket.
Notably, however, Article 245 does not absolutely disqualify
managerial employees from exercising their right of
association. What it prohibits is merely the right to join labor
organizations. Managerial employees may form associations
or organizations so long as they are not labor organizations.
The freedom of association guaranteed under the
Constitution remains and has not been totally abrogated by
Article 245.
To declare Article 245 of the Labor Code unconstitutional cuts
deep into our existing industrial life and will open the
floodgates to unionization at all levels of the industrial
hierarchy. Such a ruling will wreak havoc on the existing setup between management and labor. If all managerial
employees will be allowed to unionize, then all who are in the
payroll of the company, starting from the president, vicepresident, general managers and everyone, with the
exception of the directors, may go on strike or picket the
employer. 40 Company officers will join forces with the
supervisors and rank-and-file. Management and labor will
become a solid phalanx with bargaining rights that could be
enforced against the owner of the company. 41 The basic
opposing forces in the industry will not be management and
labor but the operating group on the one hand and the
stockholder and bondholder group on the other. The
industrial problem defined in the Labor Code comes down to
a contest over a fair division of the gross receipts of industry
between these two groups. 42 And this will certainly bring illeffects on our economy.

The framers of the Constitution could not have intended a

major upheaval of our labor and socio-economic systems.
Their intent cannot be made to override substantial policy
considerations
and
create
absurd
or
impossible
43
situations. A constitution must be viewed as a continuously
operative charter of government. It must not be interpreted
as demanding the impossible or the impracticable; or as
effecting the unreasonable or absurd. 44 Courts should always
endeavour to give such interpretation that would make the
constitutional provision and the statute consistent with
reason, justice and the public interest. 45
I vote to dismiss the petition.
VITUG, J., separate concurring and dissenting;
The pivotal issues raised in the case at bar, aptly stated by
the Office of the Solicitor General, are:
(1) Whether or not public respondent, Undersecretary of the
Department of Labor and Employment ("DOLE") Bienvenido
E. Laguesma, gravely abused his discretion in categorizing
the members of petitioner union to be managerial employees
and thus ineligible to form or join labor organizations; and
(2) Whether or not the provision of Article 245 of the Labor
Code, disqualifying managerial employees from joining,
assisting or forming any labor organization, violates Section
8, Article III, of the 1987 Constitution, which expresses that
"(t)he right of the people, including those employed in public
and private sectors to form unions, associations or societies
for purposes not contrary to law shall not be abridged."
The case originated from a petition for direct certification or
certification election among route managers/supervisory
employees of Pepsi-Cola Products Phils., Inc. ("Pepsi"), filed
by the United Pepsi-Cola Supervisory Union ("Union"),
claiming to be a legitimate labor organization duly registered

with the Department of Labor and Employment under

Registration Certificate No. NCR-UR-3-1421-95. Pepsi
opposed the petition on the thesis that the case was no more
than a mere duplication of a previous petition for direct
certification 1 filed by the same route managers through the
Pepsi-Cola Employees Association (PCEA-Supervisory) which
petition had already been denied by Undersecretary
Laguesma. The holding reiterated a prior decision in Workers
Alliance Trade Unions ("WATU") vs. Pepsi-Cola Products Phils.,
Inc., 2 that route managers were managerial employees.
In its decision, dated 05 May 1995, Med-Arbiter Brigida C.
Fadrigon dismissed for lack of merit the petition of the Union,
stating that the issue on the proper classification and status
of route managers had already been ruled with finality in the
previous decisions, aforementioned, rendered by DOLE.
The union appealed the decision. In his resolution of 31
August 1995, Undersecretary Laguesma dismissed the
appeal, saying that there was no compelling reason to
abandon the ruling in the two old cases theretofore decided
by DOLE. In his order of 22 September 1995, Undersecretary
Laguesma denied the Union's motion for reconsideration.
The Union went to this Court, via a petition for certiorari,
assailing the cancellation of its certificate of registration. The
Court, after considering the petition and the comments
thereon filed by both public and private respondents, as well
as the consolidated reply of petitioner, dismissed the case in
its resolution of 08 July 1996 on the premise that no grave
abuse of discretion had been committed by public
respondent.
Undaunted, the Union moved, with leave, for the
reconsideration of the dismissal of its petition by the
Court En Banc. In its resolution of 16 June 1997, the case was
referred to the Court En Banc en consulta with the movant's

invocation of unconstitutionality of Article 245 of the Labor

Code vis-a-vis Section 8, Article III, of the 1987 Constitution.
There is merit, in my view, in petitioner's motion for
reconsideration but not on constitutional grounds.
There are, in the hierarchy of management, those who fall
below the level of key officers of an enterprise whose terms
and conditions of employment can well be, indeed are not
infrequently,
provided
for
in
collective
bargaining
agreements. To this group belong the supervisory
employees. The "managerial employees," upon the other
hand, and relating the matter particularly to the Labor Code,
are those "vested with powers or prerogatives to lay down
and execute management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline
employees" as distinguished from the supervisory employees
whose duties in these areas are so designed as to verily be
implementary to the policies or rules and regulations already
outstanding and priorly taken up and passed upon by
management. The managerial level is the source, as well as
prescribes the compliance, of broad mandates which, in the
field of labor relations, are to be carried out through the next
rank of employees charged with actually seeing to the
specific personnel action required. In fine, the real authority,
such as in hiring or firing of employees, comes from
management and exercised by means of instructions, given
in general terms, by the "managerial employees;" the
supervisory employees, although ostensibly holding that
power, in truth, however, only act in obedience to the
directives handed down to them. The latter unit, unlike the
former, cannot be considered the alter ego of the owner of
enterprise.
The duties and responsibilities of the members of petitioner
union, shown by their "job description" below
PCPPI

RM's JOB DESCRIPTION

BLOWAGA on Division Vehicles

A. GENERAL/OVERALL OBJECTIVE OF THIS POSITION

60 cases on Rolling/Permanent

To contribute to the growth and profitability of PCPPI via wellselected, trained and motivated Route Sales Team who sell,
collect and merchandise, following the Pepsi Way, and
consistent with Company policies and procedures as well as
the corporate vision of Customer Satisfaction.

Kiosks

B. SPECIFIC JOB DESCRIPTION:

KEY RESULT AREAS STANDARD OR PERFORMANCE
SALES VOLUME *100% Vs. NRC Target
_____% NTG
DISTRIBUTION * Product Availability
70% Pepsi
80% Seven-Up
40% Mirinda
65% Mt. Dew
5% Out of Stock
ACCOUNTS RECEIVABLE 65% Current (Incl. Legal & Col.)

TRADE DEVELOPMENT 100% Buying Customers Based

on master list that bought once
5 months payback on concessions
4 CED's/Rte.
EXPENSE MANAGEMENT a). 5% Absentism rate Excl. VL
b). 280 cases/route/day
c). 15% cost-to-sales ratio
ROUTE MANAGEMENT 3 Days on RR/Wk
Days on BC-SC- Financial &
Co. Assets
Days on TD
75% Load Factor
18 Productive Calls

MANAGEMENT 80:20 Cash to Credit Ratio

CUSTOMER SATISFACTION Customer Complaint attended to

within the next working day

DSO assigned Std. to Division

HUMAN RESOURCE 5% Absentism Excl. VL

by the District

MANAGEMENT (approved) 3 Documented RR/

ASSET MANAGEMENT 30 cases for ice-coolers

Week using SLM's Training Log

80 cases for electric coolers

ADMINISTRATIVE Complete, timely and accurate

MANAGEMENT reports.

9. CONDUCTS ADMINISTRATIVE INVESTIGATION OR ATTENDS

DM's MEETING (on Saturdays)

PCPPI

B. FIELD WORK

RM's BASIC DAILY ACTIVITIES

ROUTE RIDE

A. AT THE SALES OFFICE

1. PRACTICES BLOWAGA ON SERVICE VEHICLE (AT HOME)

2. SALESMAN's CPC

2. REPORTS FOR WORK ON OR BEFORE 6:15 A.M.

3. REPORTS
GROOMING)

IN

CLEAN

AND

NEAT

UNIFORM

1. CHECKS SLMS. TRAINING LOG (PROGRESS & DEV'T.)

(GOOD

3. ROUTE COVERAGE EVALUATION

4. LOAD FACTOR

4. DAILY BRIEFING WITH THE DM

5. SALESMAN's ROUTING SYSTEM EVALUATION

5. CONDUCTS SKILLS ENHANCEMENT OR HUDDLES WITH

RST's

BC/SC

a). ATTENDANCE/GROOMING

1. FINANCIAL & ASSET VERIFICATION, CONFIRMATION &

AUDIT

b). OPERATIONAL DIRECTIONS & PRIORITIES

2. BACKCHECKS FIRST 5 CUSTOMERS SERVED FOR THE DAY

c). ANNOUNCEMENT

a). MERCHANDISING

6. RM's PRESENCE DURING CHECK-OUT

b). SERVICING

a). SLM PRACTICES BLOWAGA ON ROUTE TRUCK

c). RM's TERRITORY FAMILIARITY

b). PRIVATE COUNSELING WITH RST (AM & PM IF NECESSARY)

d). KEY ACCOUNTS GOODWILL

c). PROPER HANDLING OF SELLING/MDSG. MATERIALS

TRADE DEVELOPMENT

d). YESTERDAY's FINAL SETTLEMENT REVIEW

1. PREPARATION PRIOR TO CALL

7. UPDATE REPORTS, MONITORS, DOCUMENTS & TELEPHONE

CONMATION

2. ACTUAL CALL

8. ATTENDS TO PRODUCT COMPLAINTS (GFM)

3. POST CALL ANALYSIS

(HOW DID I FARE? WHY? WHAT ACTIONS TO TAKE)
4. FOLLOW-UP ACTION

C. AT CLOSE OF DAY

1.1 SALES DEVELOPMENT

1. MAINTAINS & UPDATES CORRECT & ACCURATE RECORDS &

REPORTS

1.1.1 Achieve the sales plan.

2. RM-SLM DEBRIEFING
3. SLR DISCUSSION (BASED ON A.M. SLR)
4. COORDINATES WITH DM ON PLANS & PROGRAMS
5. PREPARATIONS FOR NEXT DAY's ACTIVITIES 3
convey no more than those that are aptly consigned to the
"supervisory" group by the relatively small unit of
"managerial" employees. Certain portions of a pamphlet, the
so-called "Route Manager Position Description" referred to by
Mr. Justice Vicente Mendoza, in his ponencia, hereunder
reproduced for easy reference, thus
A. BASIC PURPOSE
A Manager achieves objectives through others.
As a Route Manager, your purpose is to meet the sales plan;
and you achieve this objective through the skillful
management of your job and the management of your
people.
These then are your functions as Pepsi-Cola Route Manager.
Within these functions managing your job and managing
your people you are accountable to your District Manager
for the execution and completion of various tasks and
activities which will make it possible for you to achieve your
sales objectives.
B. PRINCIPAL ACCOUNTABILITIES
1.0 MANAGING YOUR JOB
The Route Manager is accountable for the following:

1.1.2 Achieve all distribution and new account objectives.

1.1.3 Develop new business opportunities thru personal
contacts with dealers.
1.1.4 Inspect and ensure that all merchandising objectives
are achieved in all outlets.
1.1.5 Maintain and improve productivity of all cooling
equipment and kiosks.
1.1.6 Execute and control all authorized promotions.
1.1.7 Develop and maintain dealer goodwill.
1.1.8 Ensure all accounts comply with company suggested
retail pricing.
1.1.9 Study from time to time individual route coverage and
productivity for possible adjustments to maximize utilization
of resources.
1.2 Administration
1.2.1 Ensure the proper loading of route trucks before checkout and the proper sorting of bottles before check-in.
1.2.2 Ensure the upkeep of all route sales reports and all
other related reports and forms required on an accurate and
timely basis.
1.2.3 Ensure proper implementation of the various company
policies and procedures include but not limited to
shakedown; route shortage; progressive discipline; sorting;
spoilages; credit/collection; accident; attendance.

1.2.4 Ensure
accounts.

collection

of

receivables

and

delinquent

2.0 MANAGING YOUR PEOPLE

The Route Manager is accountable for the following:
2.1 Route Sales Team Development
2.1.1 Conduct route rides to train, evaluate and develop all
assigned route salesmen and helpers at least 3 days a week,
to be supported by required route ride documents/reports &
back check/spot check at least 2 days a week to be
supported by required documents/reports.
2.1.2 Conduct sales meetings and morning huddles. Training
should focus on the enhancement of effective sales and
merchandising techniques of the salesmen and helpers.
Conduct group training at least 1 hour each week on a
designated day and of specific topic.
2.2 Code of Conduct
2.2.1 Maintain the company's reputation through strict
adherence to PCPPI's code of conduct and the universal
standards of unquestioned business ethics.
offer nothing at all that can approximate the authority and
functions of those who actually and genuinely hold the reins
of management.
I submit, with due respect, that the members of petitioning
union, not really being "managerial employees" in the true
sense of the term, are not disqualified from forming or
joining labor organizations under Article 245 of the Labor
Code.
I shall now briefly touch base on the constitutional question
raised by the parties on Article 245 of the Labor Code.

The Constitution acknowledges "the right of the people,

including those employed in the public and private sectors,
to form unions, associations or societies for purposes not
contrary to law . . . ." 4 Perforce, petitioner claims, that part
of Article 245 5 of the Labor Code which states: "Managerial
employees are not eligible to join, assist or form any labor
organization," being in direct collision with the Constitutional
provision, must now be declared abrogated in the law.
Frankly, I do not see such a "direct collision." The
Constitution did not obviously grant a limitless right "to form
unions, associations or societies" for it has clearly seen it fit
to subject its exercise to possible legislative judgment such
as may be appropriate or, to put it in the language of the
Constitution itself, to "purposes not contrary to law."
Freedom of association, like freedom of expression, truly
occupies a choice position in the hierarchy of constitutional
values. Even while the Constitution itself recognizes the
State's prerogative to qualify this right, heretofore discussed,
any limitation, nevertheless, must still be predicated on the
existence
of
a
substantive
evil
sought
to
be
6
addressed. Indeed, in the exercise of police power, the
State may, by law, prescribe proscriptions, provided
reasonable and legitimate of course, against even the most
basic rights of individuals.
The restriction embodied in Article 245 of the Labor Code is
not without proper rationale. Concededly, the prohibition to
form labor organizations on the part of managerial
employees narrows down their freedom of association. The
very nature of managerial functions, however, should
preclude those who exercise them from taking a position
adverse to the interest they are bound to serve and protect.
The mere opportunity to undermine that interest can validly
be restrained. To say that the right of managerial employees
to form a "labor organization" within the context and ambit

of the Labor Code should be deemed totally separable from

the right to bargain collectively is not justified by related
provisions of the Code. For instance
Art. 212. Definitions. 7 . . .
(g) "Labor organization" means any union or association of
employees which exists in whole or in part for the purpose of
collective bargaining or of dealing with employers concerning
terms and conditions of employment.

I find it hard to believe that the fundamental law could have

envisioned the use by managerial employees of coercive
means against their own employers over matters entrusted
by the latter to the former. Whenever trust and confidence is
a major aspect of any relationship, a conflict of interest on
the part of the person to whom that trust and confidence is
reposed must be avoided and when, unfortunately, it does
still arise its containment can rightly be decreed.

Art. 263. . . .

Article 245 of the Labor Code indeed aligns itself to the

Corporation Code, the basic law on by far the most
commonly used business vehicle the corporation which
prescribes the tenure of office, as well as the duties and
functions, including terms of employment (governed in most
part by the Articles of Incorporation, the By-laws of the
Corporation, or resolutions of the Board of Directors), of
corporate officers for both the statutory officers,i.e., the
president, the treasurer and the corporate secretary, and the
non-statutory officers, i.e., those who occupy positions
created by the corporate by-laws who are deemed essential
for effective management of the enterprise. I cannot imagine
these officers as being legally and morally capable of
associating themselves into a labor organization and
asserting collective bargaining rights against the very entity
in whose behalf they act and are supposed to act.

(b) Workers shall have the right to engage in concerted

activities for purposes of collective bargaining or for their
mutual benefit and protection. The right of legitimate labor
organizations to strike and picket and of employers to
lockout, consistent with the national interest, shall continue
to be recognized and respected.

I submit, accordingly, that, firstly, the members of petitioner

union or the so-called route managers, being no more than
supervisory employees, can lawfully organize themselves
into a labor union within the meaning of the Labor Code, and
that, secondly, the questioned provision of Article 245 of the
Labor Code has not been revoked by the 1987 Constitution.

The maxim "ut res magis quam pereat" requires not merely
that a statute should be given such a consequence as to be
deemed whole but that each of its express provisions equally
should be given the intended effect.

WHEREFORE, I vote, given all the foregoing, for the reversal

of the resolution of 31 August 1995, and the order of 22
September 1995, of public respondent.

xxx xxx xxx

(m) "Managerial employee" is one who is vested with powers
or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the
exercise of such authority is not merely routinely or clerical
in nature but requires the use of independent judgment. All
employees not falling within any of the above definitions are
considered rank-and-file employees for purposes of this
Book.

composed of both rank-and-file and supervisory employees in

violation of law. 2 Attached to the position paper was a list of
union members and their respective job classifications,
indicating that many of the signatories to the petition for
certification election occupied supervisory positions and were
not in fact rank-and-file employees. 3

G.R. No. 121084 February 19, 1997

TOYOTA
MOTOR
PHILIPPINES
CORPORATION
, petitioner,
vs.
TOYOTA MOTOR PHILIPPINES CORPORATION LABOR
UNION AND THE SECRETARY OF LABOR AND
EMPLOYMENT, respondents.

KAPUNAN, J.:
On November 26, 1992, the Toyota Motor Philippines
Corporation Labor Union (TMPCLU) filed a petition for
certification election with the Department of Labor, National
Capital Region, for all rank-and-file employees of the Toyota
Motor Corporation. 1
In response, petitioner filed a Position Paper on February 23,
1993 seeking the denial of the issuance of an Order directing
the holding of a certification election on two grounds: first,
that the respondent union, being "in the process of
registration" had no legal personality to file the same as it
was not a legitimate labor organization as of the date of the
filing of the petition; and second, that the union was

The Med-Arbiter, Paterno D. Adap, dismissed respondent

union's petition for certification election for lack of merit. In
his March 8, 1993 Order, the Med-Arbiter found that the labor
organization's membership was composed of supervisory and
rank-and-file employees in violation of Article 245 of the
Labor Code, 4 and that at the time of the filing of its petition,
respondent union had not even acquired legal personality
yet. 5
On appeal, the Office of the Secretary of Labor, in a
Resolution 6 dated
November
9,
1993
signed
by
Undersecretary Bienvenido E. Laguesma, set aside the MedArbiter's Order of March 3, 1993, and directed the holding of
a certification election among the regular rank.-and-file
employees of Toyota Motor Corporation. In setting aside the
questioned Order, the Office of the Secretary contended that:
Contrary to the allegation of herein respondent-appellee,
petitioner-appellant was already a legitimate labor
organization at the time of the filing of the petition on 26
November 1992. Records show that on 24 November 1992 or
two (2) days before the filing of the said petition, it was
issued a certificate of registration.
We also agree with petitioner-appellant that the Med-Arbiter
should have not dismissed the petition for certification
election based on the ground that the proposed bargaining
unit is a mixture of supervisory and rank-and-file employees,
hence, violative of Article 245 of the Labor Code as amended.

A perusal of the petition and the other documents submitted

by petitioner-appellant will readily show that what the former
really seeks to represent are the regular rank-and-file
employees in the company numbering about 1,800 more or
less, a unit which is obviously appropriate for bargaining
purposes. This being the case, the mere allegation of
respondent-appellee that there are about 42 supervisoy
employees in the proposed bargaining unit should have not
caused the dismissal of the instant petition. Said issue could
very well be taken cared of during the pre-election
conference where inclusion/exclusion proceedings will be
conducted to determine the list of eligible voters. 7

filed petitioner is (sic) not yet the holder of a registration

certificate; that what was actually issued on 24 November
1992 or two (2) days before the filing of the petition was an
official receipt of payment for the application fee; and, that
the date appearing in the Registration certificate which is
November 24, 1992 is not the date when petitioner was
actually registered, but the date when the registration
certificate was prepared by the processor. Movant also
ratiocinates that if indeed petitioner has been in possession
of the registration certificate at the time this petition was
filed on November 26, 1992, it would have attached the
same to the petition.

Not satisfied with the decision of the Office of the Secretary

of Labor, petitioner filed a Motion for Reconsideration of the
Resolution of March 3, 1993, reiterating its claim that as of
the date of filing of petition for certification election,
respondent TMPCLU had not yet acquired the status of a
legitimate labor organization as required by the Labor Code,
and that the proposed bargaining unit was inappropriate.

The foregoing issues are factual ones, the resolution of which

is crucial to the petition. For if indeed it is true that at the
time of filing of the petition, the said registration certificate
has not been approved yet, then, petitioner lacks the legal
personality to file the petition and the dismissal order is
proper. Sadly, we can not resolve the said questions by
merely perusing the records. Further hearing and
introduction of evidence are required. Thus, there is a need
to remand the case to the Med-Arbiter solely for the purpose.

Acting on petitioner's motion for reconsideration, the public

respondent, on July 13, 1994 set aside its earlier resolution
and remanded the case to the Med-Arbiter concluding that
the issues raised by petitioner both on appeal and in its
motion for reconsideration were factual issues requiring
further hearing and production of evidence. 8 The Order
stated
We carefully re-examined the records vis-a-vis the arguments
raised by the movant, and we note that movant correctly
pointed out that petitioner submitted a copy of its certificate
of registration for the first time on appeal and that in its
petition, petitioner alleges that it is an independent
organization which is in the process of registration." Movant
strongly argues that the foregoing only confirms what it has
been pointing out all along, that at the time the petition was

WHEREFORE, the motion is hereby granted and our

Resolution is hereby set aside. Let the case be remanded to
the Med-Arbiter for the purpose aforestated.
SO ORDERED. 9
Pursuant to the Order, quoted above, Med-Arbiter Brigida C.
Fodrigon submitted her findings on September 28, 1994,
stating the following: 10
[T]he controvertible fact is that petitioner could not have
been issued its Certificate of Registration on November 24,
1992 when it applied for registration only on November 23,
1992 as shown by the official receipt of payment of filing fee.
As Enrique Nalus, Chief LEG, this office, would attest in his

letter dated September 8, 1994 addressed to Mr. Porfirio T.

Reyes, Industrial Relations Officer of respondent company, in
response to a query posed by the latter, "It is unlikely that an
application for registration is approved on the date that it is
filed or the day thereafter as the processing course has to
pass thought routing, screening, and assignment, evaluation,
review and initialing, and approval/disapproval procedure,
among others, so that a 30-day period is provided for under
the Labor Code for this purpose, let alone opposition thereto
by interested parties which must be also given due course.
Another evidence which petitioner presented. . . is the "Union
Registration 1992 Logbook of IRD". . . and the entry date
November 25, 1992 as allegedly the date of the release of
the registration certificate. . . On the other hand, respondent
company presented . . . a certified true copy of an entry on
page 265 of the Union Registration Logbook showing the
pertinent facts about petitioner but which do not show the
petitioner's registration was issued on or before November
26, 1992. 11
Further citing other pieces of evidence presented before her,
the Med-Arbiter concluded that respondent TMPCLU could not
have "acquire[d] legal personality at the time of the filing of
(its) petition." 12
On April 20, 1996, the public respondent issued a new
Resolution, "directing the conduct of a certification election
among the regular rank-and-file employees of the Toyota
Motor Philippines Corporation. 13 Petitioner's motion for
reconsideration was denied by public respondent in his Order
dated July 14, 1995. 14
Hence, this special civil action for certiorari under Rule 65 of
the Revised Rules of Court, where petitioner contends that
"the Secretary of Labor and Employment committed grave
abuse of discretion amounting to lack or excess of jurisdiction
in reversing, contrary to law and facts the findings of the

Med-Arbiters to the effect that: 1) the inclusion of the

prohibited mix of rank-and file and supervisory employees in
the roster of members and officers of the union cannot be
cured by a simple inclusion-exclusion proceeding; and that 2)
the respondent union had no legal standing at the time of the
filing of its petition for certification election. 15
We grant the petition.
The purpose of every certification election is to determine
the exclusive representative of employees in an appropriate
bargaining unit for the purpose of collective bargaining. A
certification election for the collective bargaining process is
one of the fairest and most effective ways of determining
which labor organization can truly represent the working
force. 16 In determining the labor organization which
represents the interests of the workforce, those interests
must be, as far as reasonably possible, homogeneous, so as
to genuinely reach the concerns of the individual members of
a labor organization.
According to Rothenberg, 17 an appropriate bargaining unit is
a group of employees of a given employer, composed of all
or less than the entire body of employees, which the
collective interests of all the employees, consistent with
equity to the employer indicate to be best suited to serve
reciprocal rights and duties of the parties under the collective
bargaining provisions of law. In Belyca Corporation v. Ferrer
Calleja, 18 we defined the bargaining unit as "the legal
collectivity for collective bargaining purposes whose
members have substantially mutual bargaining interests in
terms and conditions of employment as will assure to all
employees their collective bargaining rights." This in mind,
the Labor Code has made it a clear statutory policy to
prevent
supervisory
employees
from
joining
labor
organizations consisting of rank-and-file employees as the

concerns which involve members of either group are

normally disparate and contradictory. Article 245 provides:

parts and equipments. He also coordinates with other

sections in the Production Department.

Art. 245 Ineligibility of managerial employees to join any

labor organization; right of supervisory employees.
Managerial Employees are not eligible to join, assist or form
any labor organization. Supervisory employees shall not be
eligible for membership in a labor organization of the rankand-file employees but may join, assist or form separate
labor organizations of their own.

LEVEL 5 He is responsible for overseeing initial production

of new models, prepares and monitors construction
schedules for new models, identifies manpower requirements
for production, facilities and equipment, and lay-out
processes. He also oversees other sections in the production
process (e.g. assembly, welding, painting)." (Annex "V" of
Respondent TMP's Position Paper; which is the Job Description
for an Engineer holding Level 5 position in the Production
Engineering Section of the Production Planning and Control
Department).

Clearly, based on this provision, a labor organization

composed of both rank-and-file and supervisory employees is
no labor organization at all. It cannot, for any guise or
purpose, be a legitimate labor organization. Not being one,
an organization which carries a mixture of rank-and-file and
supervisory employees cannot possess any of the rights of a
legitimate labor organization, including the right to file a
petition for certification election for the purpose of collective
bargaining. It becomes necessary, therefore, anterior to the
granting of an order allowing a certification election, to
inquire into the composition of any labor organization
whenever the status of the labor organization is challenged
on the basis of Article 245 of the Labor Code.
It is the petitioner's contention that forty-two (42) of the
respondent union's members, including three of its officers,
occupy supervisory positions 19 In its position paper dated
February 22, 1993, petitioner identified fourteen (14) union
members occupying the position of Junior Group Chief
11 20 and twenty-seven (27) members in level five positions.
Their respective job-descriptions are quoted below:
LEVEL 4 (JUNIOR GROUP CHIEF II) He is responsible for all
operators and assigned stations, prepares production reports
related to daily production output. He oversees smooth flow
of production, quality of production, availability of manpower,

While there may be a genuine divergence of opinion as to

whether or not union members occupying Level 4 positions
are supervisory employees, it is fairly obvious, from a reading
of the Labor Code's definition of the term that those
occupying Level 5 positions are unquestionably supervisory
employees. Supervisory employees, as defined above, are
those who, in the interest of the employer, effectively
recommend managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but
require the use of independent judgment. 21 Under the job
description for level five employees, such personnel all
engineers having a number of personnel under them, not
only oversee production of new models but also determine
manpower requirements, thereby influencing important
hiring decisions at the highest levels. This determination is
neither routine nor clerical but involves the independent
assessment of factors affecting production, which in turn
affect decisions to hire or transfer workers. The use of
independent judgment in making the decision to hire, fire or
transfer in the identification of manpower requirements
would be greatly impaired if the employee's loyalties are torn
between the interests of the union and the interests of
management. A supervisory employee occupying a level five

position would therefore find it difficult to objectively identify

the exact manpower requirements dictated by production
demands.
This is precisely what the Labor Code, in requiring separate
unions among rank-and-file employees on one hand, and
supervisory employees on the other, seeks to avoid. The
rationale behind the Code's exclusion of supervisors from
unions of rank-and-file employees is that such employees,
while in the performance of supervisory functions, become
the alter ego of management in the making and the
implementing of key decisions at the sub-managerial level.
Certainly, it would be difficult to find unity or mutuality of
interests in a bargaining unit consisting of a mixture of rankand-file and supervisory employees. And this is so because
the fundamental test of a bargaining unit's acceptability is
whether or not such a unit will best advance to all employees
within the unit the proper exercise of their collective
bargaining rights. 22 The Code itself has recognized this, in
preventing supervisory employees from joining unions of
rank-and-file employees.
In the case at bar, as respondent union's membership list
contains the names of at least twenty-seven (27) supervisory
employees in Level Five positions. the union could not, prior
to purging itself of its supervisory employee members, attain
the status of a legitimate labor organization. Not being one, it
cannot possess the requisite personality to file a petition for
certification election.
The foregoing discussion, therefore, renders entirely
irrelevant, the technical issue raised as to whether or not
respondent union was in possession of the status of a
legitimate labor organization at the time of filing, when, as
petitioner vigorously claims, the former was still at the stage
of processing of its application for recognition as a legitimate
labor organization. The union's composition being in violation

of the Labor Code's Prohibition of unions composed of

supervisory and rank-and-file employees, it could not possess
the requisite personality to file for recognition as a legitimate
labor organization. In any case, the factual issue, albeit
ignored by the public respondent's assailed Resolution, was
adequately threshed out in the Med-Arbiter's September 28,
1994 Order
The holding of a certification election is based on clear
statutory policy which cannot be circumvented. 23 Its rules,
strictly construed by this Court, are designed to eliminate
fraud and manipulation. As we emphasized inProgressive
Development Corporation v. Secretary, Department of Labor
and Employment, 24 the Court's conclusion should not be
interpreted as impairing any union's right to be certified as
the employees' bargaining agent in the petitioner's
establishment. Workers of an appropriate bargaining unit
must be allowed to freely express their choice in an election
where everything is open to sound judgment and the
possibility for fraud and misrepresentation is absent. 25
WHEREFORE, the petition is GRANTED. The assailed
Resolution dated April 20, 1995 and Order dated July 14,
1995 of respondent Secretary of Labor are hereby SET ASIDE.
The Order dated September 28, 1994 of the Med-Arbiter is
REINSTATED.
SO ORDERED.

G.R. No. 110399 August 15, 1997

SAN MIGUEL CORPORATION SUPERVISORS AND
EXEMPT
UNION
AND
ERNESTO
L.
PONCE,
President,petitioners,
vs.
HONORABLE BIENVENIDO E. LAGUESMA IN HIS
CAPACITY AS UNDERSECRETARY OF LABOR AND
EMPLOYMENT, HONORABLE DANILO L. REYNANTE IN
HIS CAPACITY AS MED-ARBITER AND SAN MIGUEL
CORPORATION, respondents.

ROMERO, J.:
This is a Petition for Certiorari with Prayer for the Issuance of
Preliminary Injunction seeking to reverse and set aside the
Order of public respondent, Undersecretary of the

Department of Labor and Employment, Bienvenido E.

Laguesma, dated March 11, 1993, in Case No. OS MA A-2-7091 1 entitled "In Re: Petition for Certification Election Among
the Supervisory and Exempt Employees of the San Miguel
Corporation Magnolia Poultry Plants of Cabuyao, San
Fernando and Otis, San Miguel Corporation Supervisors and
Exempt Union, Petitioner." The Order excluded the employees
under supervisory levels 3 and 4 and the so-called exempt
employees from the proposed bargaining unit and ruled out
their participation in the certification election.

employees sought
bargaining unit.

The antecedent facts are undisputed:

On September 21, 1991, respondent company, San Miguel

Corporation filed a Motion for Reconsideration with Motion to
suspend proceedings.

On October 5, 1990, petitioner union filed before the

Department of Labor and Employment (DOLE) a Petition for
Direct Certification or Certification Election among the
supervisors and exempt employees of the SMC Magnolia
Poultry Products Plants of Cabuyao, San Fernando and Otis.
On December 19, 1990, Med-Arbiter Danilo L. Reynante
issued an Order ordering the conduct of certification election
among the supervisors and exempt employees of the SMC
Magnolia Poultry Products Plants of Cabuyao, San Fernando
and Otis as one bargaining unit.
On January 18, 1991, respondent San Miguel Corporation
filed a Notice of Appeal with Memorandum on Appeal,
pointing out, among others, the Med-Arbiter's error in
grouping together all three (3) separate plants, Otis, Cabuyao
and San Fernando, into one bargaining unit, and in including
supervisory levels 3 and above whose positions are
confidential in nature.
On July 23, 1991, the public respondent, Undersecretary
Laguesma, granted respondent company's Appeal and
ordered the remand of the case to the Med-Arbiter of origin
for determination of the true classification of each of the

to

be

included

in

the

appropriate

Upon petitioner-union's motion dated August 7, 1991,

Undersecretary Laguesma granted the reconsideration
prayed for on September 3, 1991 and directed the conduct of
separate certification elections among the supervisors ranked
as supervisory levels 1 to 4 (S1 to S4) and the exempt
employees in each of the three plants at Cabuyao, San
Fernando and Otis.

On March 11, 1993, an Order was issued by the public

respondent granting the Motion, citing the doctrine
enunciated
in Philips
Industrial
Development,
2
Inc. v. NLRC case. Said Order reads in part:
. . . Confidential employees, like managerial employees, are
not allowed to form, join or assist a labor union for purposes
of collective bargaining.
In this case, S3 and S4 Supervisors and the so-called exempt
employees are admittedly confidential employees and
therefore, they are not allowed to form, join or assist a labor
union for purposes of collective bargaining following the
above court's ruling. Consequently, they are not allowed to
participate in the certification election.
WHEREFORE, the Motion is hereby granted and the Decision
of this Office dated 03 September 1991 is hereby modified to
the extent that employees under supervisory levels 3 and 4
(S3 and S4) and the so-called exempt employees are not
allowed to join the proposed bargaining unit and are
therefore excluded from those who could participate in the
certification election. 3

Hence this petition.

For resolution in this case are the following issues:
1. Whether Supervisory employees 3 and 4 and the exempt
employees of the company are considered confidential
employees, hence ineligible from joining a union.
2. If they are not confidential employees, do the employees
of the three plants constitute an appropriate single
bargaining unit.
On the first issue, this Court rules that said employees do not
fall within the term "confidential employees" who may be
prohibited from joining a union.
There is no question that the said employees, supervisors
and the exempt employees, are not vested with the powers
and prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, layoff, recall,
discharge or dismiss employees. They are, therefore, not
qualified to be classified as managerial employees who,
under Article 245 4 of the Labor Code, are not eligible to join,
assist or form any labor organization. In the very same
provision, they are not allowed membership in a labor
organization of the rank-and-file employees but may join,
assist or form separate labor organizations of their own. The
only question that need be addressed is whether these
employees are properly classified as confidential employees
or not.
Confidential employees are those who (1) assist or act in a
confidential capacity, (2) to persons who formulate,
determine, and effectuate management policies in the field
of labor relations. 5 The two criteria are cumulative, and both
must be met if an employee is to be considered a confidential
employee that is, the confidential relationship must exist
between the employee and his supervisor, and the supervisor

must handle the prescribed responsibilities relating to labor

relations. 6
The exclusion from bargaining units of employees who, in the
normal course of their duties, become aware of management
policies relating to labor relations is a principal objective
sought to be accomplished by the ''confidential employee
rule." The broad rationale behind this rule is that employees
should not be placed in a position involving a potential
conflict of interests. 7 "Management should not be required to
handle labor relations matters through employees who are
represented by the union with which the company is required
to deal and who in the normal performance of their duties
may obtain advance information of the company's position
with regard to contract negotiations, the disposition of
grievances, or other labor relations matters." 8
There have been precedents in this regards, thus in Bulletin
Publishing Company v. Hon. Augusto Sanchez, 9 the Court
held that "if these managerial employees would belong to or
be affiliated with a Union, the latter might not be assured of
their loyalty to the Union in view of evident conflict of
interest. The Union can also become company-dominated
with the presence of managerial employees in Union
membership." The same rationale was applied to confidential
employees in "Golden Farms, Inc. v. Ferrer-Calleja" 10 and in
the more recent case of "Philips Industrial Development,
Inc. v. NLRC" 11 which held that confidential employees, by
the very nature of their functions, assist and act in a
confidential capacity to, or have access to confidential
matters of, persons who exercise managerial functions in the
field of labor relations. Therefore, the rationale behind the
ineligibility of managerial employees to form, assist or join a
labor union was held equally applicable to them. 12
An important element of the "confidential employee rule" is
the employee's need to use labor relations information. Thus,

in determining the confidentiality of certain employees, a key

question frequently considered is the employee's necessary
access to confidential labor relations information. 13
It is the contention of respondent corporation that Supervisor
employees 3 and 4 and the exempt employees come within
the meaning of the term "confidential employees" primarily
because they answered in the affirmative when asked "Do
you handle confidential data or documents?" in the Position
Questionnaires submitted by the Union. 14In the same
questionnaire, however, it was also stated that the
confidential information handled by questioned employees
relate to product formulation, product standards and product
specification which by no means relate to "labor relations." 15
Granting arguendo that an employee has access to
confidential labor relations information but such is merely
incidental to his duties and knowledge thereof is not
necessary in the performance of such duties, said access
does not render the employee a confidential employee. 16 "If
access to confidential labor relations information is to be a
factor in the determination of an employee's confidential
status, such information must relate to the employer's labor
relations policies. Thus, an employee of a labor union, or of a
management association, must have access to confidential
labor relations information with respect to his employer, the
union, or the association, to be regarded a confidential
employee, and knowledge of labor relations information
pertaining to the companies with which the union deals, or
which the association represents, will not cause an employee
to be excluded from the bargaining unit representing
employees of the union or association." 17 "Access to
information which is regarded by the employer to be
confidential from the business standpoint, such as financial
information 18 or technical trade secrets, will not render an
employee a confidential employee." 19

Herein listed are the functions of supervisors 3 and higher:

1. To undertake decisions to discontinue/temporarily stop
shift operations when situations require.
2. To effectively oversee the quality control function at the
processing lines in the storage of chicken and other products.
3. To administer efficient system of evaluation of products in
the outlets.
4. To be directly responsible for the recall, holding and
rejection of direct manufacturing materials.
5. To recommend and initiate actions in the maintenance of
sanitation and hygiene throughout the plant. 20
It is evident that whatever confidential data the questioned
employees may handle will have to relate to their functions.
From the foregoing functions, it can be gleaned that the
confidential information said employees have access to
concern the employer's internal business operations. As held
in Westinghouse Electric Corporation v.National Labor
Relations Board, 21 "an employee may not be excluded from
appropriate bargaining unit merely because he has access to
confidential information concerning employer's internal
business operations and which is not related to the field of
labor relations."
It must be borne in mind that Section 3 of Article XIII of the
1987 Constitution mandates the State to guarantee to "all"
workers the right to self-organization. Hence, confidential
employees who may be excluded from bargaining unit must
be strictly defined so as not to needlessly deprive many
employees of their right to bargain collectively through
representatives of their choosing. 22
In the case at bar, supervisors 3 and above may not be
considered confidential employees merely because they

handle "confidential data" as such must first be strictly

classified as pertaining to labor relations for them to fall
under said restrictions. The information they handle are
properly classifiable as technical and internal business
operations data which, to our mind, has no relevance to
negotiations and settlement of grievances wherein the
interests of a union and the management are invariably
adversarial. Since the employees are not classifiable under
the confidential type, this Court rules that they may
appropriately form a bargaining unit for purposes of
collective bargaining. Furthermore, even assuming that they
are confidential employees, jurisprudence has established
that there is no legal prohibition against confidential
employees who are not performing managerial functions to
form and join a union. 23
In this connection, the issue of whether the employees of San
Miguel Corporation Magnolia Poultry Products Plants of
Cabuyao, San Fernando, and Otis constitute a single
bargaining unit needs to be threshed out.
It is the contention of the petitioner union that the creation of
three (3) separate bargaining units, one each for Cabuyao,
Otis and San Fernando as ruled by the respondent
Undersecretary, is contrary to the one-company, one-union
policy. It adds that Supervisors level 1 to 4 and exempt
employees of the three plants have a similarity or a
community of interests.
This Court finds the contention of the petitioner meritorious.
An appropriate bargaining unit may be defined as "a group of
employees of a given employer, comprised of all or less than
all of the entire body of employees, which the collective
interest of all the employees, consistent with equity to the
employer, indicate to be best suited to serve the reciprocal
rights and duties of the parties under the collective

bargaining
law." 24

provisions

of

the

A unit to be appropriate must effect a grouping of employees

who have substantial, mutual interests in wages, hours,
working conditions and other subjects of collective
bargaining. 25
It is readily seen that the employees in the instant case have
"community or mutuality of interests," which is the standard
in determining the proper constituency of a collective
bargaining unit. 26 It is undisputed that they all belong to the
Magnolia Poultry Division of San Miguel Corporation. This
means that, although they belong to three different plants,
they perform work of the same nature, receive the same
wages and compensation, and most importantly, share a
common stake in concerted activities.
In light of these considerations, the Solicitor General has
opined that separate bargaining units in the three different
plants of the division will fragmentize the employees of the
said division, thus greatly diminishing their bargaining
leverage. Any concerted activity held against the private
respondent for a labor grievance in one bargaining unit will,
in all probability, not create much impact on the operations
of the private respondent. The two other plants still in
operation can well step up their production and make up for
the slack caused by the bargaining unit engaged in the
concerted activity. This situation will clearly frustrate the
provisions of the Labor Code and the mandate of the
Constitution. 27
The fact that the three plants are located in three different
places, namely, in Cabuyao, Laguna, in Otis, Pandacan, Metro
Manila, and in San Fernando, Pampanga is immaterial.
Geographical location can be completely disregarded if the
communal or mutual interests of the employees are not
sacrificed as demonstrated in UP v.Calleja-Ferrer where all

non-academic rank and file employee of the University of the

Philippines in Diliman, Quezon City, Padre Faura, Manila, Los
Baos, Laguna and the Visayas were allowed to participate in
a certification election. We rule that the distance among the
three plants is not productive of insurmountable difficulties in
the administration of union affairs. Neither are there regional
differences that are likely to impede the operations of a
single bargaining representative.

Petition for certiorari to annul the decision 1 of the National

Labor Relations Commission (NLRC) dated July 20, 1979
which found petitioner Sweden Ice Cream guilty of unfair
labor practice for unjustified refusal to bargain, in violation of
par. (g) of Article 249 2 of the New Labor Code, 3 and declared
the draft proposal of the Union for a collective bargaining
agreement as the governing collective bargaining agreement
between the employees and the management.

WHEREFORE, the assailed Order of March 11, 1993 is hereby

SET ASIDE and the Order of the Med-Arbiter on December 19,
1990 is REINSTATED under which a certification election
among the supervisors (level 1 to 4) and exempt employees
of the San Miguel Corporation Magnolia Poultry Products
Plants of Cabuyao, San Fernando, and Otis as one bargaining
unit is ordered conducted.

The pertinent background facts are as follows:

SO ORDERED.

G.R. No. L-54334 January 22, 1986

KIOK LOY, doing business under the name and style
SWEDEN
ICE
CREAM
PLANT, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and
PAMBANSANG
KILUSAN
NG
PAGGAWA
(KILUSAN), respondents.
CUEVAS, J.:

In a certification election held on October 3, 1978, the

Pambansang Kilusang Paggawa (Union for short), a legitimate
late labor federation, won and was subsequently certified in a
resolution dated November 29, 1978 by the Bureau of Labor
Relations as the sole and exclusive bargaining agent of the
rank-and-file employees of Sweden Ice Cream Plant
(Company
for short).
The
Company's
motion
for
reconsideration of the said resolution was denied on January
25, 1978.
Thereafter, and more specifically on December 7, 1978, the
Union furnished 4 the Company with two copies of its
proposed collective bargaining agreement. At the same time,
it requested the Company for its counter proposals. Eliciting
no response to the aforesaid request, the Union again wrote
the Company reiterating its request for collective bargaining
negotiations and for the Company to furnish them with its
counter proposals. Both requests were ignored and remained
unacted upon by the Company.
Left with no other alternative in its attempt to bring the
Company to the bargaining table, the Union, on February 14,
1979, filed a "Notice of Strike", with the Bureau of Labor
Relations (BLR) on ground of unresolved economic issues in
collective bargaining. 5

Conciliation proceedings then followed during the thirty-day

statutory cooling-off period. But all attempts towards an
amicable settlement failed, prompting the Bureau of Labor
Relations to certify the case to the National Labor Relations
Commission (NLRC) for compulsory arbitration pursuant to
Presidential Decree No. 823, as amended. The labor arbiter,
Andres Fidelino, to whom the case was assigned, set the
initial hearing for April 29, 1979. For failure however, of the
parties to submit their respective position papers as required,
the said hearing was cancelled and reset to another date.
Meanwhile, the Union submitted its position paper. The
Company did not, and instead requested for a resetting
which was granted. The Company was directed anew to
submit its financial statements for the years 1976, 1977, and
1978.
The case was further reset to May 11, 1979 due to the
withdrawal of the Company's counsel of record, Atty. Rodolfo
dela Cruz. On May 24, 1978, Atty. Fortunato Panganiban
formally entered his appearance as counsel for the Company
only to request for another postponement allegedly for the
purpose of acquainting himself with the case. Meanwhile, the
Company submitted its position paper on May 28, 1979.
When the case was called for hearing on June 4, 1979 as
scheduled, the Company's representative, Mr. Ching, who
was supposed to be examined, failed to appear. Atty.
Panganiban then requested for another postponement which
the labor arbiter denied. He also ruled that the Company has
waived its right to present further evidence and, therefore,
considered the case submitted for resolution.
On July 18, 1979, labor arbiter Andres Fidelino submitted its
report to the National Labor Relations Commission. On July
20, 1979, the National Labor Relations Commission rendered
its decision, the dispositive portion of which reads as follows:

WHEREFORE, the respondent Sweden Ice Cream is hereby

declared guilty of unjustified refusal to bargain, in violation of
Section (g) Article 248 (now Article 249), of P.D. 442, as
amended. Further, the draft proposal for a collective
bargaining agreement (Exh. "E ") hereto attached and made
an integral part of this decision, sent by the Union (Private
respondent) to the respondent (petitioner herein) and which
is hereby found to be reasonable under the premises, is
hereby declared to be the collective agreement which should
govern the relationship between the parties herein.
SO ORDERED. (Emphasis supplied)
Petitioner now comes before Us assailing the aforesaid
decision contending that the National Labor Relations
Commission acted without or in excess of its jurisdiction or
with grave abuse of discretion amounting to lack of
jurisdiction in rendering the challenged decision. On August
4, 1980, this Court dismissed the petition for lack of merit.
Upon motion of the petitioner, however, the Resolution of
dismissal was reconsidered and the petition was given due
course in a Resolution dated April 1, 1981.
Petitioner Company now maintains that its right to procedural
due process has been violated when it was precluded from
presenting further evidence in support of its stand and when
its request for further postponement was denied. Petitioner
further contends that the National Labor Relations
Commission's finding of unfair labor practice for refusal to
bargain is not supported by law and the evidence considering
that it was only on May 24, 1979 when the Union furnished
them with a copy of the proposed Collective Bargaining
Agreement and it was only then that they came to know of
the Union's demands; and finally, that the Collective
Bargaining Agreement approved and adopted by the National
Labor Relations Commission is unreasonable and lacks legal
basis.

The petition lacks merit. Consequently, its dismissal is in

order.

disregard of, and failure to live up to, what is enjoined by the

Labor Code to bargain in good faith.

Collective bargaining which is defined as negotiations

towards a collective agreement, 6 is one of the democratic
frameworks under the New Labor Code, designed to stabilize
the relation between labor and management and to create a
climate of sound and stable industrial peace. It is a mutual
responsibility of the employer and the Union and is
characterized as a legal obligation. So much so that Article
249, par. (g) of the Labor Code makes it an unfair labor
practice for an employer to refuse "to meet and convene
promptly and expeditiously in good faith for the purpose of
negotiating an agreement with respect to wages, hours of
work, and all other terms and conditions of employment
including proposals for adjusting any grievance or question
arising under such an agreement and executing a contract
incorporating such agreement, if requested by either party.

We are in total conformity with respondent NLRC's

pronouncement that petitioner Company is GUILTY of unfair
labor practice. It has been indubitably established that (1)
respondent Union was a duly certified bargaining agent; (2) it
made a definite request to bargain, accompanied with a copy
of the proposed Collective Bargaining Agreement, to the
Company not only once but twice which were left
unanswered and unacted upon; and (3) the Company made
no counter proposal whatsoever all of which conclusively
indicate lack of a sincere desire to negotiate. 8 A Company's
refusal to make counter proposal if considered in relation to
the entire bargaining process, may indicate bad faith and this
is specially true where the Union's request for a counter
proposal is left unanswered. 9 Even during the period of
compulsory arbitration before the NLRC, petitioner
Company's approach and attitude-stalling the negotiation by
a series of postponements, non-appearance at the hearing
conducted, and undue delay in submitting its financial
statements, lead to no other conclusion except that it is
unwilling to negotiate and reach an agreement with the
Union. Petitioner has not at any instance, evinced good faith
or willingness to discuss freely and fully the claims and
demands set forth by the Union much less justify its
opposition thereto.10

While it is a mutual obligation of the parties to bargain, the

employer, however, is not under any legal duty to initiate
contract negotiation. 7 The mechanics of collective bargaining
is set in motion only when the following jurisdictional
preconditions are present, namely, (1) possession of the
status of majority representation of the employees'
representative in accordance with any of the means of
selection or designation provided for by the Labor Code; (2)
proof of majority representation; and (3) a demand to bargain
under Article 251, par. (a) of the New Labor Code . ... all of
which preconditions are undisputedly present in the instant
case.
From the over-all conduct of petitioner company in relation to
the task of negotiation, there can be no doubt that the Union
has a valid cause to complain against its (Company's)
attitude, the totality of which is indicative of the latter's

The case at bar is not a case of first impression, for in

the Herald Delivery Carriers Union (PAFLU) vs. Herald
Publications 11the rule had been laid down that "unfair labor
practice is committed when it is shown that the respondent
employer, after having been served with a written bargaining
proposal by the petitioning Union, did not even bother to
submit an answer or reply to the said proposal This doctrine
was reiterated anew in Bradman vs. Court of Industrial
Relations 12 wherein it was further ruled that "while the law

does not compel the parties to reach an agreement, it does

contemplate that both parties will approach the negotiation
with an open mind and make a reasonable effort to reach a
common ground of agreement
As a last-ditch attempt to effect a reversal of the decision
sought to be reviewed, petitioner capitalizes on the issue of
due process claiming, that it was denied the right to be heard
and present its side when the Labor Arbiter denied the
Company's motion for further postponement.
Petitioner's aforesaid submittal failed to impress Us.
Considering the various postponements granted in its behalf,
the claimed denial of due process appeared totally bereft of
any legal and factual support. As herein earlier stated,
petitioner had not even honored respondent Union with any
reply to the latter's successive letters, all geared towards
bringing the Company to the bargaining table. It did not even
bother to furnish or serve the Union with its counter proposal
despite persistent requests made therefor. Certainly, the
moves and overall behavior of petitioner-company were in
total derogation of the policy enshrined in the New Labor
Code which is aimed towards expediting settlement of
economic disputes. Hence, this Court is not prepared to affix
its imprimatur to such an illegal scheme and dubious
maneuvers.
Neither are WE persuaded by petitioner-company's stand
that the Collective Bargaining Agreement which was
approved and adopted by the NLRC is a total nullity for it
lacks the company's consent, much less its argument that
once the Collective Bargaining Agreement is implemented,
the Company will face the prospect of closing down because
it has to pay a staggering amount of economic benefits to
the Union that will equal if not exceed its capital. Such a
stand and the evidence in support thereof should have been

presented before the Labor Arbiter which is the proper forum

for the purpose.
We agree with the pronouncement that it is not obligatory
upon either side of a labor controversy to precipitately accept
or agree to the proposals of the other. But an erring party
should not be tolerated and allowed with impunity to resort
to schemes feigning negotiations by going through empty
gestures. 13 More so, as in the instant case, where the
intervention of the National Labor Relations Commission was
properly sought for after conciliation efforts undertaken by
the BLR failed. The instant case being a certified one, it must
be resolved by the NLRC pursuant to the mandate of P.D.
873, as amended, which authorizes the said body to
determine the reasonableness of the terms and conditions of
employment embodied in any Collective Bargaining
Agreement. To that extent, utmost deference to its findings of
reasonableness of any Collective Bargaining Agreement as
the governing agreement by the employees and
management must be accorded due respect by this Court.
WHEREFORE, the instant petition is DISMISSED. The
temporary restraining order issued on August 27, 1980, is
LIFTED and SET ASIDE.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 163942

November 11, 2008

NATIONAL UNION OF WORKERS IN THE HOTEL

RESTAURANT AND ALLIED INDUSTRIES (NUWHRAINAPL-IUF) DUSIT HOTEL NIKKO CHAPTER, petitioner,
vs.
THE HONORABLE COURT OF APPEALS (Former Eighth
Division),
THE
NATIONAL
LABOR
RELATIONS

COMMISSION (NLRC), PHILIPPINE HOTELIERS INC.,

owner and operator of DUSIT HOTEL NIKKO and/or
CHIYUKI
FUJIMOTO,
and
ESPERANZA
V.
ALVEZ, respondents.

Hoteliers, Inc. located in Makati City. Chiyuki Fuijimoto and

Esperanza V. Alvez are impleaded in their official capacities
as the Hotel's General Manager and Director of Human
Resources, respectively.

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

On October 24, 2000, the Union submitted its Collective

Bargaining Agreement (CBA) negotiation proposals to the
Hotel. As negotiations ensued, the parties failed to arrive at
mutually acceptable terms and conditions. Due to the
bargaining deadlock, the Union, on December 20, 2001, filed
a Notice of Strike on the ground of the bargaining deadlock
with the National Conciliation and Mediation Board (NCMB),
which was docketed as NCMB-NCR-NS-12-369-01. Thereafter,
conciliation hearings were conducted which proved
unsuccessful. Consequently, a Strike Vote8 was conducted by
the Union on January 14, 2002 on which it was decided that
the Union would wage a strike.

G.R. No. 166295

November 11, 2008

NUWHRAIN-DUSIT HOTEL NIKKO CHAPTER, petitioner,

vs.
SECRETARY OF LABOR AND EMPLOYMENT and
PHILIPPINE HOTELIERS, INC., respondents.
DECISION
VELASCO, JR., J.:
In G.R. No. 163942, the Petition for Review on Certiorari
under Rule 45 of the National Union of Workers in the Hotel
Restaurant and Allied Industries Dusit Hotel Nikko Chapter
(Union) seeks to set aside the January 19, 2004 Decision 1 and
June 1, 2004 Resolution2 of the Court of Appeals (CA) in CAG.R. SP No. 76568 which affirmed the October 9, 2002
Decision3 of the National Labor Relations Commission (NLRC)
in NLRC NCR CC No. 000215-02.
In G.R. No. 166295, the Petition for Certiorari under Rule 65
of the Union seeks to nullify the May 6, 2004 Decision 4 and
November 25, 2004 Resolution5 of the CA in CA-G.R. SP No.
70778 which affirmed the January 31, 2002 6 and March 15,
20027 Orders of the Secretary of Labor and Employment,
Patricia A. Sto. Tomas (Secretary).
Evolution of the Present Petitions
The Union is the certified bargaining agent of the regular
rank-and-file employees of Dusit Hotel Nikko (Hotel), a five
star service establishment owned and operated by Philippine

Soon thereafter, in the afternoon of January 17, 2002, the

Union held a general assembly at its office located in the
Hotel's basement, where some members sported closely
cropped hair or cleanly shaven heads. The next day, or on
January 18, 2002, more male Union members came to work
sporting the same hair style. The Hotel prevented these
workers from entering the premises claiming that they
violated the Hotel's Grooming Standards.
In view of the Hotel's action, the Union staged a picket
outside the Hotel premises. Later, other workers were also
prevented from entering the Hotel causing them to join the
picket. For this reason the Hotel experienced a severe lack of
manpower which forced them to temporarily cease
operations in three restaurants.
Subsequently, on January 20, 2002, the Hotel issued notices
to Union members, preventively suspending them and
charging them with the following offenses: (1) violation of the
duty to bargain in good faith; (2) illegal picket; (3) unfair

labor practice; (4) violation of the Hotel's Grooming

Standards; (5) illegal strike; and (6) commission of illegal acts
during the illegal strike. The next day, the Union filed with
the NCMB a second Notice of Strike on the ground of unfair
labor practice and violation of Article 248(a) of the Labor
Code on illegal lockout, which was docketed as NCMB-NCRNS-01-019-02. In the meantime, the Union officers and
members submitted their explanations to the charges alleged
by the Hotel, while they continued to stage a picket just
inside the Hotel's compound.
On January 26, 2002, the Hotel terminated the services of
twenty-nine (29) Union officers and sixty-one (61) members;
and suspended eighty-one (81) employees for 30 days, fortyeight (48) employees for 15 days, four (4) employees for 10
days, and three (3) employees for five days. On the same
day, the Union declared a strike. Starting that day, the Union
engaged in picketing the premises of the Hotel. During the
picket, the Union officials and members unlawfully blocked
the ingress and egress of the Hotel premises.
Consequently, on January 31, 2002, the Union filed its third
Notice of Strike with the NCMB which was docketed as NCMBNCR-NS-01-050-02, this time on the ground of unfair labor
practice and union-busting.
On the same day, the Secretary, through her January 31,
2002 Order, assumed jurisdiction over the labor dispute and
certified the case to the NLRC for compulsory arbitration,
which was docketed as NLRC NCR CC No. 000215-02. The
Secretary's Order partly reads:
WHEREFORE, in order to have a complete determination of
the bargaining deadlock and the other incidents of the
dispute, this Office hereby consolidates the two Notices of
Strike - NCMB-NCR-NS-12-369-01 and NCMB-NCR-NS-01-01902 - and CERTIFIES the entire labor dispute covered by these
Notices and the intervening events, to the NATIONAL LABOR

RELATIONS COMMISSION for compulsory arbitration pursuant

to Article 263 (g) of the Labor Code, as amended, under the
following terms:
xxxx
d. the Hotel is given the option, in lieu of actual
reinstatement, to merely reinstate the dismissed or
suspended workers in the payroll in light of the special
circumstances attendant to their reinstatement;
xxxx
SO ORDERED. (Emphasis added.)
Pursuant to the Secretary's Order, the Hotel, on February 1,
2002, issued an Inter-Office Memorandum, 9directing some of
the employees to return to work, while advising others not to
do so, as they were placed under payroll reinstatement.
Unhappy with the Secretary's January 31, 2002 Order, the
Union moved for reconsideration, but the same was denied
per the Secretary's subsequent March 15, 2002 Order.
Affronted by the Secretary's January 31, 2002 and March 15,
2002 Orders, the Union filed a Petition for Certiorari with the
CA which was docketed as CA-G.R. SP No. 70778.
Meanwhile, after due proceedings, the NLRC issued its
October 9, 2002 Decision in NLRC NCR CC No. 000215-02, in
which it ordered the Hotel and the Union to execute a CBA
within 30 days from the receipt of the decision. The NLRC
also held that the January 18, 2002 concerted action was an
illegal strike in which illegal acts were committed by the
Union; and that the strike violated the "No Strike, No
Lockout" provision of the CBA, which thereby caused the
dismissal of 29 Union officers and 61 Union members. The
NLRC ordered the Hotel to grant the 61 dismissed Union
members financial assistance in the amount of month's
pay for every year of service or their retirement benefits

under their retirement plan whichever was higher. The NLRC

explained that the strike which occurred on January 18, 2002
was illegal because it failed to comply with the mandatory
30-day cooling-off period10 and the seven-day strike
ban,11 as the strike occurred only 29 days after the
submission of the notice of strike on December 20, 2001 and
only four days after the submission of the strike vote on
January 14, 2002. The NLRC also ruled that even if the Union
had complied with the temporal requirements mandated by
law, the strike would nonetheless be declared illegal because
it was attended by illegal acts committed by the Union
officers and members.
The Union then filed a Motion for Reconsideration of the
NLRC's Decision which was denied in the February 7, 2003
NLRC Resolution. Unfazed, the Union filed a Petition for
Certiorari under Rule 65 with the CA, docketed as CA-G.R. SP
No. 76568, and assailed both the October 9, 2002 Decision
and the February 7, 2003 Resolution of the NLRC.
Soon thereafter, the CA promulgated its January 19, 2004
Decision in CA-G.R. SP No. 76568 which dismissed the
Union's petition and affirmed the rulings of the NLRC. The CA
ratiocinated that the Union failed to demonstrate that the
NLRC committed grave abuse of discretion and capriciously
exercised its judgment or exercised its power in an arbitrary
and despotic manner.
For this reason, the Union filed a Motion for Reconsideration
which the CA, in its June 1, 2004 Resolution, denied for lack
of merit.
In the meantime, the CA promulgated its May 6, 2004
Decision in CA-G.R. SP No. 70778 which denied due course to
and consequently dismissed the Union's petition. The Union
moved to reconsider the Decision, but the CA was
unconvinced and denied the motion for reconsideration in its
November 25, 2004 Resolution.

Thus, the Union filed the present petitions.

The Union raises several interwoven issues in G.R. No.
163942, most eminent of which is whether the Union
conducted an illegal strike. The issues presented for
resolution are:
-AWHETHER OR NOT THE UNION, THE 29 UNION OFFICERS AND
61 MEMBERS MAY BE ADJUDGED GUILTY OF STAGING AN
ILLEGAL
STRIKE
ON
JANUARY
18,
2002
DESPITE
RESPONDENTS' ADMISSION THAT THEY PREVENTED SAID
OFFICERS AND MEMBERS FROM REPORTING FOR WORK FOR
ALLEGED
VIOLATION
OF
THE
HOTEL'S
GROOMING
STANDARDS
-BWHETHER OR NOT THE 29 UNION OFFICERS AND 61
MEMBERS MAY VALIDLY BE DISMISSED AND MORE THAN 200
MEMBERS BE VALIDLY SUSPENDED ON THE BASIS OF FOUR
(4) SELF-SERVING AFFIDAVITS OF RESPONDENTS
-CWHETHER OR NOT RESPONDENTS IN PREVENTING UNION
OFFICERS AND MEMBERS FROM REPORTING FOR WORK
COMMITTED AN ILLEGAL LOCK-OUT12
In G.R. No. 166295, the Union solicits a riposte from this
Court on whether the Secretary has discretion to impose
"payroll" reinstatement when he assumes jurisdiction over
labor disputes.
The Court's Ruling
The Court shall first dispose of G.R. No. 166295.

According to the Union, there is no legal basis for allowing

payroll reinstatement in lieu of actual or physical
reinstatement. As argued, Art. 263(g) of the Labor Code is
clear on this point.
The Hotel, on the other hand, claims that the issue is now
moot and any decision would be impossible to execute in
view of the Decision of the NLRC which upheld the dismissal
of the Union officers and members.
The Union's position is untenable.
The Hotel correctly raises the argument that the issue was
rendered moot when the NLRC upheld the dismissal of the
Union officers and members. In order, however, to settle this
relevant and novel issue involving the breadth of the power
and jurisdiction of the Secretary in assumption of jurisdiction
cases, we now decide the issue on the merits instead of
relying on mere technicalities.
We held in University of Immaculate Concepcion, Inc. v.
Secretary of Labor:
With respect to the Secretary's Order allowing payroll
reinstatement instead of actual reinstatement for the
individual respondents herein, an amendment to the previous
Orders issued by her office, the same is usually not allowed.
Article 263(g) of the Labor Code aforementioned states that
all workers must immediately return to work and all
employers must readmit all of them under the same terms
and conditions prevailing before the strike or lockout. The
phrase "under the same terms and conditions" makes it clear
that the norm is actual reinstatement. This is consistent with
the idea that any work stoppage or slowdown in that
particular industry can be detrimental to the national
interest.13

Thus, it was settled that in assumption of jurisdiction cases,

the Secretary should impose actual reinstatement in
accordance with the intent and spirit of Art. 263(g) of the
Labor Code. As with most rules, however, this one is subject
to exceptions. We held in Manila Diamond Hotel Employees'
Union v. Court of Appeals that payroll reinstatement is a
departure from the rule, and special circumstances which
make actual reinstatement impracticable must be shown. 14 In
one case, payroll reinstatement was allowed where the
employees previously occupied confidential positions,
because their actual reinstatement, the Court said, would be
impracticable and would only serve to exacerbate the
situation.15In another case, this Court held that the NLRC did
not commit grave abuse of discretion when it allowed payroll
reinstatement as an option in lieu of actual reinstatement for
teachers who were to be reinstated in the middle of the first
term.16 We held that the NLRC was merely trying its best to
work out a satisfactory ad hoc solution to a festering and
serious problem.17
The peculiar circumstances in the present case validate the
Secretary's decision to order payroll reinstatement instead of
actual reinstatement. It is obviously impracticable for the
Hotel to actually reinstate the employees who shaved their
heads or cropped their hair because this was exactly the
reason they were prevented from working in the first place.
Further, as with most labor disputes which have resulted in
strikes, there is mutual antagonism, enmity, and animosity
between the union and the management. Payroll
reinstatement, most especially in this case, would have been
the only avenue where further incidents and damages could
be avoided. Public officials entrusted with specific
jurisdictions enjoy great confidence from this Court. The
Secretary surely meant only to ensure industrial peace as she
assumed jurisdiction over the labor dispute. In this case, we
are not ready to substitute our own findings in the absence of
a clear showing of grave abuse of discretion on her part.

The issues raised in G.R. No. 163942, being interrelated, shall

be discussed concurrently.
To be determined whether legal or not are the following acts
of the Union:
(1) Reporting for work with their bald or cropped hair style on
January 18, 2002; and
(2) The picketing of the Hotel premises on January 26, 2002.
The Union maintains that the mass picket conducted by its
officers and members did not constitute a strike and was
merely an expression of their grievance resulting from the
lockout effected by the Hotel management. On the other
hand, the Hotel argues that the Union's deliberate defiance
of the company rules and regulations was a concerted effort
to paralyze the operations of the Hotel, as the Union officers
and members knew pretty well that they would not be
allowed to work in their bald or cropped hair style. For this
reason, the Hotel argues that the Union committed an illegal
strike on January 18, 2002 and on January 26, 2002.
We rule for the Hotel.
Art. 212(o) of the Labor Code defines a strike as "any
temporary stoppage of work by the concerted action of
employees as a result of an industrial or labor dispute."
In Toyota Motor Phils. Corp. Workers Association (TMPCWA) v.
National Labor Relations Commission, we cited the various
categories of an illegal strike, to wit:
Noted authority on labor law, Ludwig Teller, lists six (6)
categories of an illegal strike, viz.:
(1) [when it] is contrary to a specific prohibition of law, such
as strike by employees performing governmental functions;
or

(2) [when it] violates a specific requirement of law[, such as

Article 263 of the Labor Code on the requisites of a valid
strike]; or
(3) [when it] is declared for an unlawful purpose, such as
inducing the employer to commit an unfair labor practice
against non-union employees; or
(4) [when it] employs unlawful means in the pursuit of its
objective, such as a widespread terrorism of non-strikers [for
example, prohibited acts under Art. 264(e) of the Labor
Code]; or
(5) [when it] is declared in violation of an existing injunction[,
such as injunction, prohibition, or order issued by the DOLE
Secretary and the NLRC under Art. 263 of the Labor Code]; or
(6) [when it] is contrary to an existing agreement, such as a
no-strike clause or conclusive arbitration clause. 18
With the foregoing parameters as guide and the following
grounds as basis, we hold that the Union is liable for
conducting an illegal strike for the following reasons:
First, the Union's violation of the Hotel's Grooming Standards
was clearly a deliberate and concerted action to undermine
the authority of and to embarrass the Hotel and was,
therefore, not a protected action. The appearances of the
Hotel employees directly reflect the character and well-being
of the Hotel, being a five-star hotel that provides service to
top-notch clients. Being bald or having cropped hair per se
does not evoke negative or unpleasant feelings. The reality
that a substantial number of employees assigned to the food
and beverage outlets of the Hotel with full heads of hair
suddenly decided to come to work bald-headed or with
cropped hair, however, suggests that something is amiss and
insinuates a sense that something out of the ordinary is
afoot. Obviously, the Hotel does not need to advertise its

labor problems with its clients. It can be gleaned from the

records before us that the Union officers and members
deliberately and in apparent concert shaved their heads or
cropped their hair. This was shown by the fact that after
coming to work on January 18, 2002, some Union members
even had their heads shaved or their hair cropped at the
Union office in the Hotel's basement. Clearly, the decision to
violate the company rule on grooming was designed and
calculated to place the Hotel management on its heels and to
force it to agree to the Union's proposals.

accounts, picketing, sit-down strikes, sympathy strikes or any

other form of interference and/or interruptions with any of
the normal operations of the HOTEL during the life of this
Agreement.

In view of the Union's collaborative effort to violate the

Hotel's Grooming Standards, it succeeded in forcing the Hotel
to choose between allowing its inappropriately hair styled
employees to continue working, to the detriment of its
reputation, or to refuse them work, even if it had to cease
operations in affected departments or service units, which in
either way would disrupt the operations of the Hotel. This
Court is of the opinion, therefore, that the act of the Union
was not merely an expression of their grievance or
displeasure but, indeed, a calibrated and calculated act
designed to inflict serious damage to the Hotel's finances or
its reputation. Thus, we hold that the Union's concerted
violation of the Hotel's Grooming Standards which resulted in
the temporary cessation and disruption of the Hotel's
operations is an unprotected act and should be considered as
an illegal strike.

Third, the Union officers and members' concerted action to

shave their heads and crop their hair not only violated the
Hotel's Grooming Standards but also violated the Union's
duty and responsibility to bargain in good faith. By shaving
their heads and cropping their hair, the Union officers and
members violated then Section 6, Rule XIII of the
Implementing Rules of Book V of the Labor Code. 20 This rule
prohibits the commission of any act which will disrupt or
impede the early settlement of the labor disputes that are
under conciliation. Since the bargaining deadlock is being
conciliated by the NCMB, the Union's action to have their
officers and members' heads shaved was manifestly
calculated to antagonize and embarrass the Hotel
management and in doing so effectively disrupted the
operations of the Hotel and violated their duty to bargain
collectively in good faith.

Second, the Union's concerted action which disrupted the

Hotel's operations clearly violated the CBA's "No Strike, No
Lockout" provision, which reads:

Fourth, the Union failed to observe the mandatory 30-day

cooling-of period and the seven-day strike ban before it
conducted the strike on January 18, 2002. The NLRC correctly
held that the Union failed to observe the mandatory periods
before conducting or holding a strike. Records reveal that the
Union filed its Notice of Strike on the ground of bargaining
deadlock on December 20, 2001. The 30-day cooling-off
period should have been until January 19, 2002. On top of
that, the strike vote was held on January 14, 2002 and was

ARTICLE XXII - NO STRIKE/WORK STOPPAGE AND LOCKOUT

SECTION 1. No Strikes
The Union agrees that there shall be no strikes, walkouts,
stoppage or slow-down of work, boycott, refusal to handle

The facts are clear that the strike arose out of a bargaining
deadlock in the CBA negotiations with the Hotel. The
concerted action is an economic strike upon which the aforequoted "no strike/work stoppage and lockout" prohibition is
squarely applicable and legally binding. 19

submitted to the NCMB only on January 18, 2002; therefore,

the 7-day strike ban should have prevented them from
holding a strike until January 25, 2002. The concerted action
committed by the Union on January 18, 2002 which resulted
in the disruption of the Hotel's operations clearly violated the
above-stated mandatory periods.
Last, the Union committed illegal acts in the conduct of its
strike. The NLRC ruled that the strike was illegal since, as
shown by the pictures 21 presented by the Hotel, the Union
officers and members formed human barricades and
obstructed the driveway of the Hotel. There is no merit in the
Union's argument that it was not its members but the Hotel's
security guards and the police officers who blocked the
driveway, as it can be seen that the guards and/or police
officers were just trying to secure the entrance to the Hotel.
The pictures clearly demonstrate the tense and highly
explosive situation brought about by the strikers' presence in
the Hotel's driveway.
Furthermore, this Court, not being a trier of facts, finds no
reason to alter or disturb the NLRC findings on this matter,
these findings being based on substantial evidence and
affirmed by the CA.22 Factual findings of labor officials, who
are deemed to have acquired expertise in matters within
their respective jurisdictions, are generally accorded not only
respect but even finality, and bind us when supported by
substantial evidence.23 Likewise, we are not duty-bound to
delve into the accuracy of the factual findings of the NLRC in
the absence of clear showing that these were arrived at
arbitrarily and/or bereft of any rational basis. 24
What then are the consequent liabilities of the Union officers
and members for their participation in the illegal strike?
Regarding the Union officers and members' liabilities for their
participation in the illegal picket and strike, Art. 264(a),
paragraph 3 of the Labor Code provides that "[a]ny union

officer who knowingly participates in an illegal strike

and any worker or union officer who knowingly
participates in the commission of illegal acts during a
strike may be declared to have lost his employment
status x x x." The law makes a distinction between union
officers and mere union members. Union officers may be
validly terminated from employment for their participation in
an illegal strike, while union members have to participate in
and commit illegal acts for them to lose their employment
status.25 Thus, it is necessary for the company to adduce
proof of the participation of the striking employees in the
commission of illegal acts during the strikes. 26
Clearly, the 29 Union officers may be dismissed pursuant to
Art. 264(a), par. 3 of the Labor Code which imposes the
penalty of dismissal on "any union officer who knowingly
participates in an illegal strike." We, however, are of the
opinion that there is room for leniency with respect to the
Union members. It is pertinent to note that the Hotel was
able to prove before the NLRC that the strikers blocked the
ingress to and egress from the Hotel. But it is quite apparent
that the Hotel failed to specifically point out the participation
of each of the Union members in the commission of illegal
acts during the picket and the strike. For this lapse in
judgment or diligence, we are constrained to reinstate the 61
Union members.
Further, we held in one case that union members who
participated in an illegal strike but were not identified to have
committed illegal acts are entitled to be reinstated to their
former positions but without backwages. 27 We then held in G
& S Transport Corporation v. Infante:
With respect to backwages, the principle of a "fair day's wage
for a fair day's labor" remains as the basic factor in
determining the award thereof. If there is no work performed
by the employee there can be no wage or pay unless, of

course, the laborer was able, willing and ready to work but
was illegally locked out, suspended or dismissed or otherwise
illegally prevented from working. While it was found that
respondents expressed their intention to report back to work,
the latter exception cannot apply in this case. In Philippine
Marine Officer's Guild v. Compaia Maritima, as affirmed
in Philippine Diamond Hotel and Resort v. Manila Diamond
Hotel Employees Union, the Court stressed that for this
exception to apply, it is required that the strike be legal, a
situation that does not obtain in the case at bar. 28
In this light, we stand by our recent rulings and reinstate the
61 Union members without backwages.
WHEREFORE, premises considered, the CA's May 6, 2004
Decision in CA-G.R. SP No. 70778 is hereby AFFIRMED.
The CA's January 19, 2004 Decision in CA-G.R. SP No. 76568
is hereby SET ASIDE. The October 9, 2002 Decision of the
NLRC
in
NLRC
NCR
CC
No.
000215-02
is
hereby AFFIRMED withMODIFICATIONS, as follows:
The 29 Union officials are hereby declared to have lost their
employment status, to wit:
1. LEO ANTONIO ATUTUBO
2. EDWIN E. BALLESTEROS
3. LORETTA DIVINA DE LUNA
4. INISUSAN DE VELEZ
5. DENNIS HABER
6. MARITES HERNANDEZ
7. BERNARD HUGO
8. NORZAMIA INTAL
9. LAURO JAVIER
10. SHANE LAUZ
11. MAY BELEN LEANO
12. EDGAR LINGHON
13. MILAGROS LOPEZ

14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.

JOSE MUZONES
RAY NERVA
JESUS NONAN
MARLYN OLLERO
CATHY ORDUNA
REYNALDO RASING
JUSTO TABUNDA
BARTOLOME TALISAYON
JUN TESORO
LYNDON TESORO
SALVADOR TIPONES
SONNY UY
WILFREDO VALLES, JR.
MEL VILLAHUCO
EMMA Q. DANAO
JORDAN ALEJANDRO

The 61 Union members are hereby REINSTATED to their

former positions without backwages:
1. DANILO AGUINALDO
2. CLARO ABRANTE
3. FELIX ARRIESGADO
4. DAN BAUTISTA
5. MA. THERESA BONIFACIO
6. JUAN BUSCANO
7. ELY CHUA
8. ALLAN DELAGON
9. FRUMENCIO DE LEON
10. ELLIE DEL MUNDO
11. EDWIN DELOS CIENTOS
12. SOLOMON DIZON
13. YLOTSKI DRAPER
14. ERLAND COLLANTES
15. JONAS COMPENIDO
16. RODELIO ESPINUEVA
17. ARMANDO ESTACIO

18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.

SHERWIN FALCES
JELA FRANZUELA
REY GEALOGO
ALONA GERNOMINO
VINCENT HEMBRADOR
ROSLYN IBARBIA
JAIME IDIOMA, JR.
OFELIA LLABAN
RENATON LUZONG
TEODULO MACALINO
JAKE MACASAET
HERNANIE PABILONIA
HONORIO PACIONE
ANDREA VILLAFUERTE
MARIO PACULAN
JULIO PAJINAG
JOSELITO PASION
VICENTE PASIOLAN
HAZEL PENA
PEDRO POLLANTE
EDUARDO RAMOS
IMELDA RASIN
DELFIN RAZALAN
EVANGELINE REYES
RODOLFO REYES
BRIGILDO RUBIO
RIO SALCEDO
JUANITO SANCHEZ
MA. THERESA SANCHEZ
DONATO SAN AGUSTIN
RICARDO SOCORRO
VALERIO SOLIS
DOMINADOR SUAREZ
ORLANDO TABUGOCA
HELEN TALEON
ROBERT TANEGRA

54.
55.
56.
57.
58.
59.
60.
61.

LOURDES TAYAG
ROLANDO TOLENTINO
REYNALDO TRESNADO
RICHARD SABLADA
MAE YAP-DIANGCO
GILBERTO VEDASTO
DOMINGO VIDAROZAGA
DAN VILLANUEVA

In view of the possibility that the Hotel might have already

hired regular replacements for the afore-listed 61 employees,
the Hotel may opt to pay SEPARATION PAY computed at
one (1) month's pay for every year of service in lieu
of REINSTATEMENT, a fraction of six (6) months being
considered one year of service.
SO ORDERED.

G.R. No. L-19778

September 30, 1964

CROMWELL COMMERCIAL EMPLOYEES AND LABORERS

UNION
(PTUC), petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS and CROMWELL
COMMERCIAL CO., INC., respondents.
Vicente
T.
Ocampo
for
petitioner.
Jalandoni & Jamir for respondent Cromwell Commercial
Company,
Inc.
Vidal C. Magbanua for respondent Court of Industrial
Relations.
REGALA, J.:
On July 10, 1956, Cromwell Commercial Co. and the
Cromwell Commercial Employees and Laborers Union (PTUC)
signed a collective bargaining agreement which provided
among other things, for the following:
3. The Company agrees to consider as permanent
employees and workers all those who have rendered three
(3) months continuous, satisfactory service, and as such shall
be entitled to all privileges enjoyed by all permanent and
regular employees; provided, however, that the COMPANY
reserves the right to dismiss any employee for cause;
4. A "Grievance Committee" composed of three (3)
representatives appointed by the COMPANY and three (3)

UNION members elected by the UNION shall be immediately

constituted. This Committee shall meet not more than once a
week as may be called by proper notice of any three (3)
members of said committee to hear and decide any
differences on labor management relations. The committee
shall hear the grievance and the witnesses of the parties
concerned, if any, and shall submit its recommendation to
the President of the COMPANY who shall decide the same,
within thirty (30) days from transmittal of said
recommendation by the president's representative in the
Philippines.
7. Considering that the COMPANY has put into effect,
effective April 16, 1956, a minimum wage of P140.00 a
month to permanent employees in its office and has given
merit increase to a few others, the COMPANY agrees in
principle to the demand of the UNION for a general increase
of salaries and wages, if the financial position of the
COMPANY shows that it can afford to give an increase after
the second quarter of 1956 but reserves its decision as to the
amount. The COMPANY further reserves its right as to
whether to give or not to give increases to those who already
received merit increases effective April 16, 1956, provided,
however, that those whose salaries were slashed in 1956 and
were restored on April 16, 1956, shall not be considered as
having received a merit increase;
8. That the COMPANY shall restore all salesmen to the
status of salary basis effective May 1, 1956 and shall also
restore the helper's allowance of provincial salesmen
effective the same date;
9. The COMPANY agrees in principle to consider the
giving of share of its profits to its employees and workers, the
amount and the time to depend on the sole discretion of the
management of the COMPANY.

However, it appears that, contrary to paragraph 7, the

company gave no salary increases to its employees, except
to three who were not union members, despite the fact that
it had made a P90,000 profit at the close of the second
quarter of 1956.
With respect to paragraph 10 of the agreement, it
appears that salesmen of the company used to be paid on a
straight salary basis. Some were receiving P300, others P320
while still others were getting P350 a month. In addition,
those assigned to the provinces were given a so-called
helper's allowance of P120 a month, a per diemof P8 and an
allowance for postage and other expenses incurred in
remitting their collections. For some reason, however, the
company reduced the salary of salesmen to P200 a month
and their helper's allowance from P120 to P60 a month,
although it paid them a commission of 1 per cent of their
collections.
This is the reason why paragraph 10, which provided
for the restoration of cuts in the salaries and allowances of
salesmen, was inserted in the agreement. But instead of
restoring the salaries in full, the company merely paid P300
even to those who, before salaries were reduced, were
already receiving P320 or P350 a month. The so-called
helper's allowance, which as already stated had been
reduced from P120 to P60 a month, was not restored at all.
What is worse, effective March 1, 1957, the company
reverted all salesmen to salary and commission basis,
stopped their helper's allowance altogether and discontinued
the payment of per diem and other allowances to provincial
salesmen, so much so that the latter found themselves again
in the same situation they were in before the signing of the
collective bargaining agreement. Worst of all, the company
increased the quotas of some salesmen and threatened them
with dismissal if they could not fill their quotas.

These changes in the working conditions in the

company and the latter's failure to carry out its part of the
agreement became a source of complaint among the
employees. But beyond promising that the matter would be
looked into as soon as its President arrived from the United
States, the company did nothing. The grievance machinery
set up in the agreement could not function on account of the
company's refusal to name its representatives in the
committee.
Meanwhile, daily wage employees in the shipping
department began agitating for the application of paragraph
10 to them. In a letter sent to the company on March 2,
1957, Jose J. Hernandez of the Philippine Trade Union Council
asked that these employees be put on a monthly salary
basis. He also called attention to the failure of the company
to send representatives to the grievance committee.

From then on the relation between the company and

the union steadily deteriorated.
On March 8, the company took back the keys from the
warehouseman and ordered the salesmen to put their trucks
in the garage.
On March 9, the parties met to resolve their differences
only to part ways later still poles apart.
Finally, on March 11, the union struck and picketed the
premises of the company.
The company in turn gave the strikers until 8 a.m. of
March 14, 1957 within which to return to work otherwise they
would be considered dismissed for cause. It warned them
that the strike was illegal for being against the no strike
clause of the collective bargaining agreement.

Three days after, the company dismissed Francisco

Gaddi and Cresenciano Andrada, leaders of the shipping
department-employees. And so on March 7, the union
dispatched another letter to the company, calling attention to
the contents of its March 2 letter and protesting the dismissal
of Gaddi and Andrada. It gave the company 48 hours within
which to act on its grievance and reinstate the dismissed
employees.

In a conference called by the Department of Labor, the

strikers offered to return to work provided the company
observed the provisions of the bargaining contract. But the
company insisted that the strikers could be taken back only
under the terms of its March 1 order. As already stated, this
order reverted salesmen to salary and commission basis,
abolished their helper's allowance and stopped the payment
of per diem and other allowances to provincial salesmen.

On March 6, the company President replied, stating in

part that

In addition, the company set as price for continued

conciliation conference the remittance by the salesmen of
their collections and the return of delivery trucks and stocks
on hand. The union replied that the strikers had not lost their
employee status and that at any rate they were bonded. It
suffered though to deposit with the Conciliation Service of
the Department of Labor the things demanded by the
company, but the company was unyielding in its demand.
Anyway, nothing came out of the conference. The employees

... Effective March 1st, I reduced all salesmen's

salaries, I discontinued the helper's allowance and, in the
case of provincial salesmen, I discontinued the payment of
any per diems.
In another letter sent the following day, the company
explained that the relief of Gaddi and Andrada was in line
with its policy of laying off extra employees.

gradually gave up the strike and the salesmen later settled

their accounts and returned the property of the company.
On September 19, 1957 this case was filed in the Court
of Industrial Relations, charging the company, together with
its President and Vice President, with unfair labor practice.
After trial, the court rendered judgment as follows:
IN VIEW OF ALL THE FOREGOING, the Respondent and
all its officers and agents are hereby ordered:
(1) To cease and desist from:
a) refusing to bargain collectively in good faith with the
Union.
b) refusing to bargain collectively in good faith with respect
to the grievance of the Union by appointing its
representatives to the grievance committee as provided for
in the said agreement.
c) making changes in the working condition, of the salesmen
who are members of the Union with respect to their salaries
and the helper's allowance of provincial salesmen without
complying with the requirements of Sec. 13 of Republic Act
875.
(2) To take the following affirmative acts which the Court
finds will effectuate the policy of the Act:
a) to reinstate Francisco Gaddi with half backpay from March
5, 1957 to actual date of his reinstatement, minus whatever
salaries he might have earned during the pendency of this
case, unless he has found a substantial employment
elsewhere. And with respect to Cresenciano Andrada, his
onehalf back wages shall be from March 5, 1957 until the
date he committed illegal acts in the picket line. Angel Dario
is not entitled to reinstatement.

b) to reinstate salesmen Antonio Jacinto, Celestino Gualberto,

Constantino Atienza, Elias Berrova and Pedro del Rosario with
half backwages from the date they have cleared their
accountabilities or responsibilities with the Company, minus
what they have earned during the pendency of the dispute
unless they have found substantial employment elsewhere.
The case of Teofilo Nuez is dismissed as heretofore
indicated. With respect to Roberto Dijamco as also
mentioned, there is a pending separate unfair labor practice
in the Court (Case No. 1271-ULP).
c) To reinstate all the strikers listed in Annex "A" of the
complaint, without backwages, in view of the circumstances,
as explained on the subject of the strike, unless they have
found substantial employment elsewhere during the
pendency of this case.
In addition, respondent is hereby ordered to post a
copy of this order in the company's bulletin board, if any or in
default thereof, in any conspicuous place at company's
premises, and report to the Court as soon as possible its
compliance.
The union moved for a reconsideration of the decision,
contending that the trial judge erred (1) in awarding only half
back wages to Francisco Gaddi and the five salesmen, (2) in
awarding no back wages to the rest of the strikers and (3) in
denying reinstatement to Cresenciano Andrada and Angel
Dario and to those who might have found substantially
equivalent employment elsewhere. The court in banc
affirmed the decision. Hence this appeal.
The issues in this appeal relate to the power of the
Court of Industrial Relations to order reinstatement and the
payment of back wages in unfair labor practice cases as a
means of effectuating the policy of the law.
Section 5 (c) of the Industrial Peace Act states:

... If, after investigation, the Court shall be of the

opinion that any person named in the complaint has engaged
in or is engaging in any unfair labor practice, then the Court
shall state its findings of fact and shall issue and cause to be
served on such person an order requiring such person to
cease and desist from such unfair labor practice and take
such affirmative action as will effectuate the policies of this
Act, including (but not limited to) reinstatement of employees
with or without backpay and including rights of the
employees prior to dismissal including seniority. ...
At the outset, two types of employees involved in this
case must be distinguished, namely, those who were
discriminatorily dismissed for union activities and those who
voluntarily went on strike. To the first class belong Francisco
Gaddi and Cresenciano Andrada, both of whom, as earlier
shown, had been dismissed for union activities, and the five
salesmen who were virtually locked out by the company
when they were ordered to put their trucks in the garage. To
the second class belong those who declared a strike on
March 11, 1957, following the failure of the company-union
conference to settle their dispute.
Both types of employees are entitled to reinstatement.
Indeed, it is said that striking employees are entitled to
reinstatement whether or not the strike was the consequence
of the employer's unfair labor practice, unless, where the
strike was not due to any unfair labor practice, the employer
has hired others to take the place of the strikers and has
promised them continued employment. (Teller, 2 Labor
Disputes and Collective Bargaining, Sec. 371, pp. 396-397)
From this rule, however, must be excepted those who,
although discriminatorily discharged, must nevertheless be
denied reinstatement because of (1) unlawful conduct or (2)
because of violence. For while the Court of Industrial
Relations has indeed discretion in determining the remedy in

case of unfair labor practice, its discretion is not unbounded.

(Big Five Products Workers Union (CLP) v. Court of Industrial
Relations, et al., G.R. No. L-17600, July 31, 1963). It cannot
exercise its right beyond the point which the object of
"effectuation" of the act requires. It can not order the
reinstatement of those convicted of violence upon the
employer's property. (Rothenberg on Labor Relations, 573574; Philippine Education Co., Inc. v. Court of Industrial
Relations, et al., G.R. No. L-7156, May 31, 1955; Consolidated
Labor Ass'n of the Phil. v. Marsman & Co., Inc., et al., G.R. No.
L-17038, July 31, 1964).
Such is the case of Cresenciano Andrada and Angel
Dario who were found guilty of acts of violence consisting of
hurling stones which smashed glass windows of the building
of the company and the headlights of a car and the utterance
of obscenities such as "Putang ina".
But the union contends that the acts committed by
Andrada and Dario were not so serious as to call for the
forfeiture of their right to reinstatement. It is not for Us to
judge the effect of misconduct by employees. That is
primarily for the Court of Industrial Regulations to determine.
(See NLRB v. Weissman Co., 170 F [24] 952). In the absence
of proof of abuse of discretion on the part of the Court of
Industrial Relations, this Court will not interfere with the
exercise of that discretion.
The same thing may be said of the denial of
reinstatement to those who might have found substantial
employment elsewhere. We agree with the union that under
the ruling of Phelps Dodge Corp. v. NLRB 313 U.S. 177, 85 L.
ed. 1271 (See also Cox and Bok Cases on Labor Law. 259, 5th
ed.), the mere fact that strikers or dismissed employees have
found such employment elsewhere is not necessarily a bar to
their reinstatement.1 But it is just as true to say that
the Phelps
Dodge case
did
not
rule
that in
any

event discriminatorily dismissed employees must be ordered

reinstated even though they have in the meanwhile found
substantially equivalent employment somewhere else. While
denying that employees who have obtained equivalent
employment are ineligible as a matter of law to
reinstatement, the Supreme Court of the United States at the
same time denied also that the definition of the term
"employee" can be disregarded by the National Labor
Relations Board in exercising its power under Section 10(c) of
the Wagner Act, which corresponds to Section 5(c) of our
Industrial Peace Act, to direct the taking of affirmative action
by an employer to remedy unfair labor practices. According
to the Court, it is for the Board in each case to weigh the
particular facts and to determine, in the exercise of wise
administrative discretion, whether the Act would best be
effectuated by directing reinstatement despite the fact that
the given employees had found equivalent employment.
Obviously it was after considering the facts in this case
that the Court of Industrial Relations predicated the
reinstatement of the employees concerned on the fact that
they had not found substantially equivalent employment
elsewhere. Thus, it made clear in the dispositive portion of its
decision that it was ordering the taking of affirmative acts
"which the Court finds will effectuate the policy of the Act".
The union has not shown that in so doing the Court of
Industrial Relations abused its discretion.
Coming now to the question of backpay, the decision
under review directs the company "to reinstate all the
strikers listed in Annex 'A' of the complaint, without
backwages, in view of the circumstances, as explained on
the subject of the strike, unless they have found substantial
employment elsewhere during the pendency of this case."
The union assails this order as erroneous. According to the
union, it is unfair to deny backwages to the strikers after
finding that the strike declared by them was legal because it

was provoked by unfair labor practices of the company.

Indeed a reading of the 46-page decision of the Court of
Industrial Relations fails to yield the reason that impelled the
court to deny backwages to the strikers.
Nevertheless, We believe that the denial of backpay
may be justified, although on a different ground. For this
purpose, We shall advert again to the distinction earlier made
between discriminatorily dismissed employees and those
who struck, albeit in protest against the company's unfair
labor practice. Discriminatorily dismissed employees
received backpay from the date of the act of discrimination,
that is from the day of their discharge. On this score, the
award of backpay to Gaddi, Andrada and the salesmen may
be justified. The salesmen, as already stated, were practically
locked out when they were ordered to put their trucks in the
garage; they did not voluntarily strike. (See Macleod & Co. of
the Phil. v. Progressive Federation of Labor, G.R. No. L-7887,
May 31, 1955) Hence, the award of backwages.
In contrast, the rest of the employees struck as a
voluntary act of protest against what they considered unfair
labor practices of the company. The stoppage of their work
was not the direct consequence of the company's unfair labor
practice. Hence their economic loss should not be shifted to
the employer. (See Dinglasan v. National Labor Union, G.R.
No. L-14183, Nov. 28, 1959) As explained by the National
Labor Relations Board in the case of American Manufacturing
Co., NLRB 443, "When employees voluntarily go on strike,
even if in protest against unfair labor practices, it has been
our policy not to award them backpay during the strike.
However, when the strikers abandon the strike and apply for
reinstatement despite the unfair labor practices and the
employer either refuses to reinstate them or imposes upon
their reinstatement new conditions that constitute unfair
labor practices, We are of the opinion that the considerations
impelling our refusal to award backpay are no longer

controlling. Accordingly, We hold that where, as in this case,

an employer refuses to reinstate strikers except upon their
acceptance of the new conditions that discriminate against
them because of their union membership or activities, the
strikers who refuse to accept the conditions and are
consequently refused reinstatement are entitled to be made
whole for any losses of pay they may have suffered by
reason of the respondent's discriminatory acts." (Quoted in
Teller, 2 Labor Disputes and Collective Bargaining, Sec. 371,
pp. 997-998)1awphl.nt
While it is true that the strikers in this case offered to
return to work on March 14, 1957, We find that their offer
was conditional. Their offer was predicated on the company's
observance of the provisions of the collective bargaining
agreement the very bone of contention between the
parties by reason of which the union walked out. To be
effective so as to entitle the strikers to backpay, the offer
must have been unconditional. The strikers must have
offered to return to work under the same conditions under
which they just before their strike so that the company's
refusal would have placed on the blame for their economic
loss. But that is not the case here. Indeed the offer of the
company to accept the striker under the conditions obtaining
before the strike (without prejudice of course to taking up the
grievances of the strike can be considered in its favor in
denying back wages to the strikers. (Dinglasan v. National
Labor Union, G. R. No. L-14183, Nov. 28, 1959)
Nor may it be said that the strikers could not have
offered to return to work because the company dismissed
them upon their failure to return to work on March 14, 1957.
For the notice given by the company was merely a "tactical"
threat designed to break the strike and not really to
discharge the striking employees. (Majestic Mfg. Co., et al.,
64 NLRB 961; Rockwood Stove Works, 63 NLRB 1297;
American Mfg. Co., 7 NLRB 753)

WHEREFORE, the decision and resolution of the Court

of Industrial Relations appealed from are hereby affirmed,
without pronouncement as to costs.
Bengzon, C.J., Bautista Angelo, Paredes, Dizon, Makalintal
Bengzon,
J.P.,
and
Zaldivar,
JJ.,
concur.
Concepcion, J., concurs with the dissenting opinion of Justice
J.B.L.
Reyes.
Barrera, J., took no part.

Separate Opinions

REYES, J.B.L., J., dissenting:

I can not agree to the ruling laid down in the opinion in
so far as it denies backpay to the reinstated laborers. There
is no dispute that the employer was the first to infringe the
collective bargaining agreement by refusing to implement its
provisions, particularly by its March 1 order, and by insisting
on it as a condition for taking back the strikers. I can not see
how the objectives and policies of the Industrial Peace Act
can be said to be promoted by placing the economic loss on
the strikers, denying them backpay; the discouraging of
unfair labor practices is certainly one of unfair labor policies,
and the denial of backpay to the victims of unfair labor
practices is a direct encouragement for the employer to
continue its reprobable misconduct.
While the laborers technically violated the no-strike
clause, the facts as found reveal that the employer goaded
the laborers into striking, by repeatedly violating the
collective bargaining agreement and by preventing the

organization of the grievance committee through

Company's refusal to name its representatives therein.

the

vs.
HON. COURT OF APPEALS, THE CIVIL SERVICE
COMMISSION
and
THE
SECRETARY
OF
THE
DEPARTMENT
OF
EDUCATION,
CULTURE
AND
SPORTS, respondents.

REGALADO, J.:
This is an appeal by certiorari from the judgment of the Court
of Appeals in CA-G.R. SP No. 38316, which affirmed several
resolutions of the Civil Service Commission finding petitioners
guilty of conduct prejudicial to the best interest of the
service, as well as its resolution of April 12, 1996 denying
petitioners' motion for reconsideration. 1
Petitioners, except Rodolfo Mariano, were among the 800
public school teachers who staged "mass actions" on
September 17 to 19, 1990 to dramatize their grievances
concerning, in the main, the alleged failure of the public
authorities to implement in a just and correct manner certain
laws and measures intended for their material benefit.

G.R. No. 124678 July 31, 1997

DELIA BANGALISAN, LUCILIN CABALFIN, EMILIA DE
GUZMAN, CORAZON GOMEZ, CORAZON GREGORIO,
LOURDES LAREDO, RODOLFO MARIANO, WILFREDO
MERCADO,
LIGAYA
MONTANCES
and
CORAZON
PAGPAGUITAN, petitioners,

On September 17, 1990, the Secretary of the Department of

Education, Culture and Sports (DECS) issued a Return-toWork Order. Petitioners failed to comply with said order,
hence they were charged by the Secretary with "grave
misconduct; gross neglect of duty; gross violation of Civil
Service law, rules and regulations and reasonable office
regulations; refusal to perform official duty; gross
insubordination; conduct prejudicial to the best interest of
the service; and absence without official leave in violation of
PD 807, otherwise known as the Civil Service Decree of the
Philippines." They were simultaneously placed under
preventive suspension.

Despite due notice, petitioners failed to submit their answer

to the complaint. On October 30, 1990, the DECS Secretary
rendered a decision finding petitioners guilty as charged and
dismissing them from the service effective immediately.
Acting on the motions for reconsideration filed by petitioners
Bangalisan, Gregorio, Cabalfin, Mercado, Montances and
Pagpaguitan, the Secretary subsequently modified the
penalty of dismissal to suspension for nine months without
pay.
Petitioner Gomez likewise moved for reconsideration with the
DECS and then appealed to the Merit Systems Protection
Board (MSPB). The other petitioners also filed individual
appeals to the MSPB, but all of their appeals were dismissed
for lack of merit.
Not satisfied with the aforestated adjudication of their
respective cases, petitioners appealed to the Civil Service
Commission (CSC). The appeals of petitioners Cabalfin,
Montances and Pagpaguitan were dismissed for having been
filed out of time. On motion for reconsideration, however, the
CSC decided to rule on the merits of their appeal in the
interest of justice.
Thereafter, the CSC issued Resolution No. 94-1765 finding
Cabalfin guilty of conduct prejudicial to the best interest of
the service and imposing on him a penalty of six months
suspension without pay. The CSC also issued Resolutions Nos.
94-2806 and 94-2384 affirming the penalty of nine months
suspension without pay theretofore imposed on petitioners
Montances and Pagpaguitan.
With respect to the appeals of the other petitioners, the CSC
also found them guilty of conduct prejudicial to the best
interest of the service. It, however, modified the penalty of
nine months suspension previously meted to them to six

months suspension with automatic reinstatement in the

service but without payment of back wages.
All the petitioners moved for reconsideration of the CSC
resolutions but these were all denied, 2 except that of
petitioner Rodolfo Mariano who was found guilty only of a
violation of reasonable office rules and regulations because
of his failure to inform the school of his intended absence and
to file an application for leave therefor. This petitioner was
accordingly given only a reprimand. 3
Petitioners then filed a petition for certiorari with this Court
but, on August 29, 1995, their petition was referred to the
Court of Appeals pursuant to Revised Administrative Circular
No. 1-95. 4
On October 20, 1995, the Court of Appeals dismissed the
petition for lack of merit. 5 Petitioners' motion for
reconsideration was also denied by respondent court, 6 hence
the instant petition alleging that the Court of Appeals
committed grave abuse of discretion when it upheld the
resolutions of the CSC (1) that penalized petitioners whose
only offense was to exercise their constitutional right to
peaceably assemble and petition the government for redress
of grievances; (2) that penalized petitioner Mariano even
after respondent commission found out that the specific basis
of the charges that former Secretary Cario filed against him
was a falsehood; and (3) that denied petitioners their right to
back wages covering the period when they were illegally not
allowed to teach. 7
It is the settled rule in this jurisdiction that employees in the
public service may not engage in strikes. While the
Constitution recognizes the right of government employees
to organize, they are prohibited from staging strikes,
demonstrations, mass leaves, walk-outs and other forms of
mass action which will result in temporary stoppage or
disruption of public services. The right of government

employees to organize is limited only to the formation of

unions or associations, without including the right to strike. 8
Petitioners contend, however, that they were not on strike
but were merely exercising their constitutional right
peaceably to assemble and petition the government for
redress of grievances. We find such pretension devoid of
merit.
The issue of whether or not the mass action launched by the
public school teachers during the period from September up
to the first half of October, 1990 was a strike has been
decided by this Court in a resolution, dated December 18,
1990, in the herein cited case of Manila Public School
Teachers Association, et al. vs. Laguio, Jr.,supra. It was there
held "that from the pleaded and admitted facts, these 'mass
actions' were to all intents and purposes a strike; they
constituted a concerted and unauthorized stoppage of, or
absence from, work which it was the teachers' duty to
perform, undertaken for essentially economic reasons."
It is an undisputed fact that there was a work stoppage and
that petitioners' purpose was to realize their demands by
withholding their services. The fact that the conventional
term "strike" was not used by the striking employees to
describe their common course of action is inconsequential,
since the substance of the situation, and not its appearance,
will be deemed to be controlling. 9
The ability to strike is not essential to the right of association.
In the absence of statute, public employees do not have the
right to engage in concerted work stoppages for any
purpose. 10
Further, herein petitioners, except Mariano, are being
penalized not because they exercised their right of peaceable
assembly and petition for redress of grievances but because
of their successive unauthorized and unilateral absences

which produced adverse effects upon their students for

whose education they are responsible. The actuations of
petitioners definitely constituted conduct prejudicial to the
best interest of the service, punishable under the Civil
Service law, rules and regulations.
As aptly stated by the Solicitor General, "It is not the exercise
by the petitioners of their constitutional right to peaceably
assemble that was punished, but the manner in which they
exercised such right which resulted in the temporary
stoppage or disruption of public service and classes in
various public schools in Metro Manila. For, indeed, there are
efficient but non-disruptive avenues, other than the mass
actions in question, whereby petitioners could petition the
government for redress of grievances." 11
It bears stressing that suspension of public services, however
temporary, will inevitably derail services to the public, which
is one of the reasons why the right to strike is denied
government employees. 12 It may be conceded that the
petitioners had valid grievances and noble intentions in
staging the "mass actions," but that will not justify their
absences to the prejudice of innocent school children. Their
righteous indignation does not legalize an illegal work
stoppage.
As expounded by this Court in its aforementioned resolution
of December 18, 1990, in the Manila Public School Teachers
Association case, ante:
It is, of course, entirely possible that petitioners and their
member-teachers had and have some legitimate grievances.
This much may be conceded. After all, and for one thing,
even the employees of the Court have found reason to
complain about the manner in which the provisions of the
salary standardization law on pay adjustments and position
classification have been, or are being, implemented.
Nonetheless, what needs to be borne in mind, trite though it

may be, is that one wrong cannot be righted by another, and

that redress, for even the most justifiable complaints, should
not be sought through proscribed or illegal means. The belief
in the righteousness of their cause, no matter how deeply
and fervently held, gives the teachers concerned no license
to abandon their duties, engage in unlawful activity, defy
constituted authority and set a bad example to their
students.
Petitioners also assail the constitutionality of Memorandum
Circular No. 6 issued by the Civil Service Commission. The
resolution of the said issue is not really necessary in the case
at bar. The argument of petitioners that the said circular was
the basis of` their liability is off tangent.
As a general rule, even in the absence of express statutory
prohibition like Memorandum Circular No. 6, public
employees are denied the right to strike or engage in a work
stoppage against a public employer. 13 The right of the
sovereign to prohibit strikes or work stoppages by public
employees was clearly recognized at common law. Indeed, it
is frequently declared that modern rules which prohibit such
strikes, either by statute or by judicial decision, simply
incorporate or reassert the common law rule. 14
To grant employees of the public sector the right to strike,
there must be a clear and direct legislative authority
therefor. 15 In the absence of any express legislation allowing
government employees to strike, recognizing their right to do
so, or regulating the exercise of the right, employees in the
public service may not engage in strikes, walkouts and
temporary work stoppages like workers in the private
sector. 16
On the issue of back wages, petitioners' claim is premised on
the allegation that their preventive suspension, as well as the
immediate execution of the decision dismissing or

suspending
incorrect.

them,

are

illegal.

These

submissions

are

Section 51 of Executive Order No. 292 provides that "(t)he

proper disciplining authority may preventively suspend any
subordinate officer or employee under his authority pending
an investigation, if the charge against such officer or
employee involves dishonesty, oppression or grave
misconduct, or neglect in the performance of duty, or if there
are reasons to believe that the respondent is guilty of
charges which would warrant his removal from the service."
Under the aforesaid provision, it is the nature of the charge
against an officer or employee which determines whether he
may be placed under preventive suspension. In the instant
case, herein petitioners were charged by the Secretary of the
DECS with grave misconduct, gross neglect of duty, gross
violation of Civil Service law, rules and regulations, and
reasonable office regulations, refusal to perform official duty,
gross insubordination, conduct prejudicial to the best interest
of the service and absence without official leave (AWOL), for
joining the teachers' mass actions held at Liwasang Bonifacio
on September 17 to 21, 1990. Hence, on the basis of the
charges against them, it was within the competence of the
Secretary to place herein petitioners under preventive
suspension.
As to the immediate execution of the decision of the
Secretary against petitioners, the same is authorized by
Section 47, paragraph (2), of Executive Older No. 292, thus:
"The
Secretaries
and
heads
of
agencies
and
instrumentalities, provinces, cities and municipalities shall
have jurisdiction to investigate and decide matters involving
disciplinary action against officers and employees under their
jurisdiction. Their decisions shall be final in case the penalty
imposed is suspension for not more than thirty days or fine in
an amount not exceeding thirty days' salary. In case the

decision rendered by a bureau or office head is appealable to

the Commission, the same shall be executory except when
the penalty is removal, in which case the same shall be
executory only after confirmation by the Secretary
concerned."
Petitioners' claim of denial of due process must also fail. The
records of this case clearly show that they were given
opportunity to refute the charges against them but they
failed to avail themselves of the same. The essence of due
process is simply an opportunity to be heard or, as applied to
administrative proceedings, an opportunity to seek
reconsideration of the action or ruling complained of. 17 For as
long as the parties were given the opportunity to be heard
before judgment was rendered, the demands of due process
were sufficiently met. 18
Having ruled that the preventive suspension of petitioners
and the immediate execution of the DECS decision are in
accordance with law, the next query is whether or not
petitioners may be entitled to back wages.
The issue regarding payment of back salaries during the
period of suspension of a member of the civil service who is
subsequently ordered reinstated, is already settled in our
jurisdiction. Such payment of salaries corresponding to the
period when an employee is not allowed to work may be
decreed if he is found innocent of the charges which caused
the suspension and when the suspension is unjustified. 19
With respect to petitioner Rodolfo Mariano, payment of his
back wages is in order. A reading of the resolution of the Civil
Service Commission will show that he was exonerated of the
charges which formed the basis for his suspension. The
Secretary of the DECS charged him with and he was later
found guilty of grave misconduct, gross neglect of duty, gross
violation of the Civil Service Law, rules and regulations and
reasonable office regulations, refusal to perform official duty,

gross insubordination conduct prejudicial to the best interest

of the service, and absence without official leave, for his
participation in the mass actions on September 18, 20 and
21, 1990. It was his alleged participation in the mass actions
that was the basis of his preventive suspension and, later, his
dismissal from the service.
However, the Civil Service Commission, in the questioned
resolution, made a finding that Mariano was not involved in
the "mass actions" but was absent because he was in Ilocos
Sur to attend the wake and interment of his grandmother.
Although the CSC imposed upon him the penalty of
reprimand, the same was for his violation of reasonable office
rules and regulations because he failed to inform the school
or his intended absence and neither did he file an application
for leave covering such absences. 20
Under Section 23 of the Rules Implementing Book V of
Executive Order No. 292 and other pertinent civil service
laws, in violations of reasonable office rules and regulations,
the first offense is punishable by reprimand. To deny
petitioner Mariano his back wages during his suspension
would be tantamount to punishing him after his exoneration
from the charges which caused his dismissal from the
service. 21
However, with regard to the other petitioners, the payment of
their back wages must be denied. Although the penalty
imposed on them was only suspension, they were not
completely exonerated of the charges against them. The CSC
made specific findings that, unlike petitioner Mariano, they
indeed participated in the mass actions. It will be noted that
it was their participation in the mass actions that was the
very basis of the charges against them and their subsequent
suspension.
The denial of salary to an employee during the period of his
suspension, if he should later be found guilty, is proper

because he had given ground for his suspension. It does not

impair his constitutional rights because the Constitution itself
allows suspension for cause as provided by law and the law
provides that an employee may be suspended pending an
investigation or by way of penalty. 22
Moreover, the general proposition is that a public official is
not entitled to any compensation if he has not rendered any
service. As he works, he shall earn. Since petitioners did not
work during the period for which they are now claiming
salaries, there can be no legal or equitable basis to order the
payment of such salaries. 23
It is also noteworthy that in its resolutions, the Civil Service
Commission expressly denied petitioners' right to back
wages. In the case of Yacia vs. City of Baguio, 24 the decision
of the Commissioner of Civil Service ordering the dismissal of
a government employee on the ground of dishonesty was
immediately executed pending appeal, but, on appeal, the
Civil Service Board of Appeals modified that penalty to a fine
equivalent to six months pay. We ruled that the claim of an
employee for back wages, for the period during which he was
not allowed to work because of the execution of the decision
of the Commissioner, should be denied.
The appeal board's modified decision did not exonerate the
employee nor did it affect the validity of his dismissal or
separation from work pending appeal, as ordered by the Civil
Service Commissioner. Such separation from work pending
his appeal remained valid and effective until it was set aside
and modified with the imposition of the lesser penalty by the
appeals board. If the Civil Service Appeals Board had
intended to grant him back salaries and to reduce his penalty
to six months fine deductible from such unearned back
salaries, the board could and should have so expressly stated
in its decision.

WHEREFORE, the decision of the Court of Appeals is hereby

AFFIRMED, but with the MODIFICATION that petitioner Rodolfo
Mariano shall be given back wages without deduction or
qualification from the time he was suspended until his actual
reinstatement which, under prevailing jurisprudence, should
not exceed five years.
SO ORDERED.

Bonuses The parties also agree to maintain the present

practice on the grant of Christmas bonus, milling bonus, and
amelioration bonus to the extent as the latter is required by
law.
The Christmas and milling bonuses amount to 1- months'
salary.
G.R. No. L-59743 May 31 1982
NATIONAL
FEDERATION
OF
SUGAR
WORKERS
(NFSW), petitioner,
vs.
ETHELWOLDO R. OVEJERA, CENTRAL AZUCARERA DE
LA CARLOTA (CAC), COL. ROGELIO DEINLA, as
Provincial Commander, 3311st P.C. Command, Negros
Occidental, respondents.

PLANA, J:
This is a petition for prohibition seeking to annul the decision
dated February 20, 1982 of Labor Arbiter Ethelwoldo R.
Ovejera of the National Labor Relations Commission (NLRC)
with station at the Regional Arbitration Branch No. VI-A,
Bacolod City, which, among others, declared illegal the
ongoing strike of the National Federation of Sugar Workers
(NFSW) at the Central Azucarera de la Carlota (CAC), and to
restrain the implementation thereof.
I. FACTS
1. NFSW has been the bargaining agent of CAC rank and file
employees (about 1200 of more than 2000 personnel) and
has concluded with CAC a collective bargaining agreement
effective February 16, 1981 February 15, 1984. Under Art.
VII, Sec. 5 of the said CBA

2. On November 28, 1981, NFSW struck allegedly to compel

the payment of the 13th month pay under PD 851, in
addition to the Christmas, milling and amelioration bonuses
being enjoyed by CAC workers.
3. To settle the strike, a compromise agreement was
concluded between CAC and NFSW on November 30,1981.
Under paragraph 4 thereof
The parties agree to abide by the final decision of the
Supreme Court in any case involving the 13th Month Pay Law
if it is clearly held that the employer is liable to pay a 13th
month pay separate and distinct from the bonuses already
given.
4. As of November 30, 1981, G.R. No. 51254 (Marcopper
Mining Corp. vs. Blas Ople and Amado Inciong, Minister and
Deputy Minister of Labor, respectively, and Marcopper
Employees Labor Union, Petition for certiorari and Prohibition)
was still pending in the Supreme Court. The Petition had been
dismissed on June 11, 1981 on the vote of seven Justices. 1 A
motion for reconsideration thereafter filed was denied in a
resolution dated December 15, 1981, with only five Justices
voting for denial. (3 dissented; 2 reserved their votes: 4 did
not take part.)
On December 18, 1981 the decision of June 11, 1981
having become final and executory entry of judgment was
made.

5. After the Marcopper decision had become final, NFSW

renewed its demand that CAC give the 13th month pay. CAC
refused.
6. On January 22, 1982, NFSW filed with the Ministry of Labor
and Employment (MOLE) Regional Office in Bacolod City a
notice to strike based on non-payment of the 13th month
pay. Six days after, NFSW struck.
7. One day after the commencement of the strike, or on
January 29, 1982, a report of the strike-vote was filed by
NFSW with MOLE.
8. On February 8, 1982, CAC filed a petition (R.A.B. Case No.
0110-82) with the Regional Arbitration Branch VI-A, MOLE, at
Bacolod City to declare the strike illegal, principally for being
violative of Batas Pambansa Blg. 130, that is, the strike was
declared before the expiration of the 15-day cooling-off
period for unfair labor practice (ULP) strikes, and the strike
was staged before the lapse of seven days from the
submission to MOLE of the result of the strike-vote.

suspension but without prejudice to the said employees'

instituting appropriate actions before this Ministry relative to
whatever causes of action they may have obtained
proceeding from said memorandum;
4. Directing the Central to pay effective from the date of
resumption of operations the salaries of those to be placed
on preventive suspension as per February 1, 1982
memorandum during their period of preventive suspension;
and
5. Directing, in view of the finding that the subject strike is
illegal, NFSW, its officers, members, as well as sympathizers
to immediately desist from committing acts that may impair
or impede the milling operations of the Central
The law enforcement authorities are hereby requested to
assist in the peaceful enforcement and implementation of
this Decision.
SO ORDERED.

hereby

10. On February 26, 1982, the NFSW by passing the NLRC

filed the instant Petition for prohibition alleging that Labor
Arbiter Ovejera, CAC and the PC Provincial Commander of
Negros Occidental were threatening to immediately enforce
the February 20, 1982 decision which would violate
fundamental rights of the petitioner, and praying that

1. Declaring the strike commenced by NFSW on January 28,

1982, illegal,

WHEREFORE, on the foregoing considerations, it is prayed of

the Honorable Court that on the Petition for Preliminary
Injunction, an order, after hearing, issue:

2. Directing the Central to resume operations immediately

upon receipt hereof;

1. Restraining implementation or enforcement of the Decision

of February 20, 1982;

3. Directing the Central to accept back to work all employees

appearing in its payroll as of January 28, 1982 except those
covered by the February 1, 1982 memorandum on preventive

2. Enjoining respondents to refrain from the threatened acts

violative of the rights of strikers and peaceful picketers;

9. After the submission of position papers and hearing, Labor

Arbiter Ovejera declared the NFSW strike illegal. The
dispositive part of his decision dated February 20, 1982
reads:
Wherefore,
rendered:

premises

considered,

judgment

is

3. Requiring maintenance of the status quo as of February

20, 1982, until further orders of the Court;
and on the Main Petition, judgment be rendered after
hearing.
1. Declaring the Decision of February 2O, l982 null and void;
2. Making the preliminary injunction permanent;
3. Awarding such other relief as may be just in the premises.
11. Hearing was held, after which the parties submitted their
memoranda. No restraining order was issued.
II ISSUES
The parties have raised a number of issues, including some
procedural points. However, considering their relative
importance and the impact of their resolution on ongoing
labor disputes in a number of industry sectors, we have
decided in the interest of expediency and dispatch to
brush aside non-substantial items and reduce the remaining
issues to but two fundamental ones:
1. Whether the strike declared by
resolution of which mainly depends
directory character of the cooling-off
strike ban after report to MOLE of the
as prescribed in the Labor Code.

NFSW is illegal, the

on the mandatory or
period and the 7-day
result of a strike-vote,

2. Whether under Presidential Decree 851 (13th Month Pay

Law), CAC is obliged to give its workers a 13th month
salary in addition to Christmas, milling and amelioration
bonuses, the aggregate of which admittedly exceeds by far
the disputed 13th month pay. (See petitioner's memorandum
of April 12, 1982, p. 2; CAC memorandum of April 2, 1982,
pp. 3-4.) Resolution of this issue requires an examination of
the thrusts and application of PD 851.

III. DISCUSSION
1. Articles 264 and 265 of the Labor Code, insofar as
pertinent, read:
Art. 264, Strikes, picketing and lockouts. ...
(c) In cases of bargaining deadlocks, the certified or duly
recognized bargaining representative may file a notice of
strike with the Ministry (of Labor and Employment) at
least thirty (30) days before the intended date thereof. In
cases of unfair labor practices, the period of notice shall be
shortened tofifteen (15) days; ...
(d) During the cooling-off period, it shall be the duty of the
voluntary sttlement. Should the dispute remain unsettled
until the lapse of the requisite number of days from the
mandatory filing of the notice, the labor union may strike or
the employer may declare a lockout.
(f) A decision to declae a strike must be approved by at least
two-thirds (2/3) of the total union membership in the
bargaining unit concerened by secret ballots in meetings or
referenda. A decision to declae a lockout must be approved
by at least two-thirds (2/3) of the board of direcotrs of the
employer corporation or association or of the partners in a
partnership obtained by secret ballot in a meeting called for
the purpose. the decision shall be valid for the duration of
the dispute based on substantially the same grounds
considered when the strike or lockout vote was taken . The
Ministry, may at its own intitiative or upon the request of any
affected party, supervise the conduct of the secret
balloting. In every case, the union of the employer shall
furnish the Ministry the results of the voting at least seven
(7) days before the intended strike or lockout, subject to the
cooling-off periodherein provided. (Emphasis supplied).

ART. 265. Prohibited activities. It shall be unlawful for any

labor organization or employer to declare a strike or lockout
without first having bargained collectively in accordance with
Title VII of this Book or without first having filed the notice
required in the preceding Article or without the necessary
strike or lockout vote first having been obtained and reported
to the Ministry.
It shall likewise be unlawful to declare a strike or lockout
after assumption of jurisdiction by the President or the
Minister or after certification or submission of the dispute to
compulsory or voluntary arbitration or during the pendency
of cases involving the same grounds for the strike or lockout.
(Emphasis supplied.)
(a) Language of the law. The foregoing provisions hardly
leave any room for doubt that the cooling-off period in Art.
264(c) and the 7-day strike ban after the strike-vote report
prescribed in Art. 264(f) were meant to be, and should be
deemed, mandatory.
When the law says "the labor union may strike" should the
dispute "remain unsettled until the lapse of the requisite
number of days (cooling-off period) from the filing of the
notice," the unmistakable implication is that the union may
not strike before the lapse of the cooling-off period. Similarly,
the mandatory character of the 7-day strike ban after the
report on the strike-vote is manifest in the provision that "in
every case," the union shall furnish the MOLE with the results
of the voting "at least seven (7) days before the intended
strike, subject to the (prescribed) cooling-off period." It must
be stressed that the requirements of cooling-off period and 7day strike ban must both be complied with, although the
labor union may take a strike vote and report the same
within the statutory cooling-off period.
If only the filing of the strike notice and the strike-vote report
would be deemed mandatory, but not the waiting periods so

specifically
and
emphatically
prescribed
by
law,
the purposes (hereafter discussed) for which the filing of the
strike notice and strike-vote report is required would not be
achieved, as when a strike is declaredimmediately after a
strike notice is served, or when as in the instant case
the strike-vote report is filed with MOLE after the strike had
actually commenced Such interpretation of the law ought not
and cannot be countenanced. It would indeed be selfdefeating for the law to imperatively require the filing on a
strike notice and strike-vote report without at the same time
making the prescribed waiting periods mandatory.
(b) Purposes of strike notice and strike-vote report. In
requiring a strike notice and a cooling-off period, the avowed
intent of the law is to provide an opportunity for mediation
and conciliation. It thus directs the MOLE "to exert all efforts
at mediation and conciliation to effect a voluntary
settlement" during the cooling-off period . As applied to the
CAC-NFSW dispute regarding the 13th month pay, MOLE
intervention
could
have
possibly
induced
CAC
to provisionally give the 13th month pay in order to avert
great business loss arising from the project strike,without
prejudice to the subsequent resolution of the legal dispute by
competent authorities; or mediation/conciliation could have
convinced NFSW to at least postpone the intended strike so
as to avoid great waste and loss to the sugar central, the
sugar planters and the sugar workers themselves, if the
strike would coincide with the mining season.
So, too, the 7-day strike-vote report is not without a purpose.
As pointed out by the Solicitor General
Many disastrous strikes have been staged in the past based
merely on the insistence of minority groups within the union.
The submission of the report gives assurance that a strike
vote has been taken and that, if the report concerning it is
false, the majority of the members can take appropriate

remedy before it is too late. (Answer of public respondents,

pp. 17-18.)
If the purpose of the required strike notice and strike-vote
report are to be achieved, the periods prescribed for their
attainment must, as aforesaid, be deemed mandatory.,
... when a fair interpretation of the statute, which directs acts
or proceedings to be done in a certain way, shows the
legislature intended a compliance with such provision to be
essential to the validity of the act or proceeding, or when
some antecedent and prerequisite conditions must exist prior
to the exercise of power or must be performed before certain
other powers can be exercised, the statute must be regarded
as mandatory. So it has been held that, when a statute is
founded on public policy [such as the policy to encourage
voluntary settlement of disputes without resorting to strikes],
those to whom it applies should not be permitted to waive its
provisions. (82 C.J.S. 873-874. Emphasis supplied.)
(c) Waiting period after strike notice and strike-vote report,
valid regulation of right to strike. To quote Justice Jackson
in International Union vs. Wisconsin Employment Relations
Board, 336 U.S. 245, at 259
The right to strike, because of its more serious impact upon
the public interest, is more vulnerable to regulation than the
right to organize and select representatives for lawful
purposes of collective bargaining ...
The cooling-off period and the 7-day strike ban after the filing
of a strike- vote report, as prescribed in Art. 264 of the Labor
Code, are reasonable restrictions and their imposition is
essential to attain the legitimate policy objectives embodied
in the law. We hold that they constitute a valid exercise of the
police power of the state.

(d) State policy on amicable settlement of criminal liability.

Petitioner contends that since the non-compliance (with PD
851) imputed to CAC is an unfair labor practice which is an
offense against the state, the cooling-off period provided in
the Labor Code would not apply, as it does not apply to ULP
strikes. It is argued that mediation or conciliation in order to
settle a criminal offense is not allowed.
In the first place, it is at best unclear whether the refusal of
CAC to give a 13th month pay to NFSW constitutes a criminal
act. Under Sec. 9 of the Rules and regulations Implementing
Presidential Decree No. 851
Non-payment of the thirteenth-month pay provided by the
Decree and these rules shall be treated as money claims
cases and shall be processed in accordance with the Rules
Implementing the Labor Code of the Philippines and the Rules
of the National Labor Relations Commission.
Secondly, the possible dispute settlement, either permanent
or temporary, could very well be along legally permissible
lines, as indicated in (b) above or assume the form of
measures designed to abort the intended strike, rather than
compromise criminal liability, if any. Finally, amicable
settlement of criminal liability is not inexorably forbidden by
law. Such settlement is valid when the law itself clearly
authorizes it. In the case of a dispute on the payment of the
13th month pay, we are not prepared to say that its
voluntary settlement is not authorized by the terms of Art.
264(e) of the Labor Code, which makes it the duty of the
MOLE to exert all efforts at mediation and conciliation to
effect a voluntary settlement of labor disputes.
(e) NFSW strike is illegal. The NFSW declared the strike six
(6) days after filing a strike notice, i.e., before the lapse of
the mandatory cooling-off period. It also failed to file with the
MOLE beforelaunching the strike a report on the strike-vote,
when it should have filed such report "at least seven (7) days

before the intended strike." Under the circumstances, we are

perforce constrained to conclude that the strike staged by
petitioner is not in conformity with law. This conclusion
makes it unnecessary for us to determine whether the
pendency of an arbitration case against CAC on the same
issue of payment of 13th month pay [R.A.B No. 512-81,
Regional Arbitration Branch No. VI-A, NLRC, Bacolod City, in
which the National Congress of Unions in the Sugar Industry
of the Philippines (NACUSIP) and a number of CAC workers
are the complainants, with NFSW as Intervenor seeking the
dismissal of the arbitration case as regards unnamed CAC
rank and file employees] has rendered illegal the above
strike under Art. 265 of the Labor Code which provides:

Keenly sensitive to the needs of the workingmen, yet mindful

of the mounting production cost that are the woe of capital
which provides employment to labor, President Ferdinand E.
Marcos issued Presidential Decree No. 851 on 16 December
1975. Thereunder, "all employers are hereby required to pay
salary of not more than all their employees receiving a basic
P1,000 a month, regardless of the nature of their
employment, a 13th month pay not later than December 24
of every year." Exempted from the obligation however are:

It shall likewise be unlawful to declare a strike or lockout

after assumption of jurisdiction by the President or the
Minister, or after certification or submission of the dispute to
compulsory or voluntary arbitration or during the pendency
of cases involving the same grounds for the strike or lockout.
(Emphasis supplied.)

The evident intention of the law, as revealed by the law itself,

was to grant an additional income in the form of a 13th
month pay to employees not already receiving the same.
Otherwise put, the intention was to grant some relief not
to all workers but only to the unfortunate ones not actually
paid a 13th month salary or what amounts to it, by whatever
name called; but it was not envisioned that a double burden
would be imposed on the employer already paying his
employees a 13th month pay or its equivalent whether out
of pure generosity or on the basis of a binding agreement
and, in the latter ease, regardless of the conditional
character of the grant (such as making the payment
dependent on profit), so long as there is actual payment.
Otherwise, what was conceived to be a 13th month salary
would in effect become a 14th or possibly 15th month pay.

(2) The Second Issue. At bottom, the NFSW strike arose

from a dispute on the meaning and application of PD 851,
with NFSW claiming entitlement to a 13th month pay on top
of bonuses given by CAC to its workers, as against the
diametrically opposite stance of CAC. Since the strike was
just an offshoot of the said dispute, a simple decision on the
legality or illegality of the strike would not spell the end of
the NFSW-CAC labor dispute. And considering further that
there are other disputes and strikes actual and impending
involving the interpretation and application of PD 851, it is
important for this Court to definitively resolve the problem:
whether under PD 851, CAC is obliged to give its workers a
13th month salary in addition to Christmas, milling and
amelioration bonuses stipulated in a collective bargaining
agreement amounting to more than a month's pay.

Employers already paying their employees a 13th month pay

or
its
equivalent
...
(Section 2.)

This view is justified by the law itself which makes no

distinction in the grant of exemption: "Employers already
paying their employees a 13th month
pay or its
equivalent are not covered by this Decree." (P.D. 851.)
The Rules Implementing P.D. 851 issued by MOLE
immediately after the adoption of said law reinforce this
stand. Under Section 3(e) thereof

The term "its equivalent" ... shall include Christmas bonus,

mid-year bonus, profit-sharing payments and other cash
bonuses amounting to not less than 1/12th of the basic
salary but shall not include cash and stock dividends, cost of
living allowances and all other allowances regularly enjoyed
by the employee, as well as non-monetary benefits. Where
an employer pays less than 1/12th of the employee's basic
salary, the employer shall pay the difference." (Italics
supplied.)
Having been issued by the agency charged with the
implementation of PD 851 as its contemporaneous
interpretation of the law, the quoted rule should be accorded
great weight.
Pragmatic considerations also weigh heavily in favor of
crediting both voluntary and contractual bonuses for the
purpose of determining liability for the 13th month pay. To
require employers (already giving their employees a 13th
month salary or its equivalent) to give a second 13th month
pay would be unfair and productive of undesirable results. To
the employer who had acceded and is already bound to give
bonuses to his employees, the additional burden of a 13th
month pay would amount to a penalty for his munificence or
liberality. The probable reaction of one so circumstance would
be to withdraw the bonuses or resist further voluntary grants
for fear that if and when a law is passed giving the same
benefits, his prior concessions might not be given due credit;
and this negative attitude would have an adverse impact on
the employees.
In the case at bar, the NFSW-CAC collective bargaining
agreement provides for the grant to CAC workers of
Christmas bonus, milling bonus and amelioration bonus, the
aggregate of which is very much more than a worker's
monthly pay. When a dispute arose last year as to whether
CAC
workers
receiving
the
stipulated
bonuses

wouldadditionally be entitled to a 13th month pay, NFSW and

CAC concluded a compromise agreement by which they
agree(d) to abide by the final decision of the Supreme Court
in any case involving the 13th Month Pay Law if it is clearly
held that the employer is liable to pay a 13th month pay
separate and distinct from the bonuses already given.
When this agreement was forged on November 30,1981, the
original
decision
dismissing
the
petition
in
the
aforecited Marcopper case had already been promulgated by
this Court. On the votes of only 7 Justices, including the
distinguished Chief Justice, the petition of Marcopper Mining
Corp. seeking to annul the decision of Labor Deputy Minister
Amado Inciong granting a 13th month pay to Marcopper
employees (in addition to mid- year and Christmas bonuses
under a CBA) had been dismissed. But a motion for
reconsideration filed by Marcopper was pending as of
November 30, 1981. In December 1981, the original decision
was affirmed when this Court finally denied the motion for
reconsideration. But the resolution of denial was supported
by the votes of only 5 Justices. The Marcopper decision is
therefore a Court decision but without the necessary eight
votes to be doctrinal. This being so, it cannot be said that
the Marcopper decision "clearly held" that "the employer is
liable to pay a 13th month pay separate and distinct from the
bonuses already given," within the meaning of the NFSW-CAC
compromise agreement. At any rate, in view of the rulings
made herein, NFSW cannot insist on its claim that its
members are entitled to a 13th month pay in addition to the
bonuses already paid by CAC. WHEREFORE, the petition is
dismissed for lack of merit. No costs.
SO ORDERED.
Aquino, Guerrero, Escolin, Vasquez, Relova and Gutierrez, JJ.,
concur.

Concepcion, J., is on leave.

Teehankee, J., concurs in the result.

Separate Opinions

MAKASIAR, J., concurring:

Concurs in the separate opinion of qualified concurrence as
to the illegality of the strike and of dissent as to the
interpretation of Presidential Decree No. 851 submitted by
the Chief Justice.
FERNANDO, CJ., concurring:
With qualifications on the questions of the legality of the
strike and dissenting on the interpretation to be accorded
Presidential Decree No. 851 on the thirteenth-month
additional pay.,
There is at the outset due acknowledgmen t on my part of
the high quality of craftsmanship in the opinion of the Court
penned by Justice Efren Plana. It is distinguished by its
lucidity. There is the imprint of inevitability in the conclusion
approached based on the basic premise that underlies it. So
it should be if the decisive consideration is the language used
both of the applicable provisions of the Labor Code, Article
264 (c), (e), and (f) and Article 265, as well as of Presidential
Decree No. 851. In that sense, the decision of the Court can
stand the test of scrutiny based on sheer logic.
That for me would not suffice. Such an approach, to my mind,
is quite limited. The standard that should govern is the one
supplied by the Constitution. That is the clear implication of

constitutionalism. Anything less would deprive it of its quality

as the fundamental law. It is my submission, therefore, that
statutes, codes, decrees, administrative rules, municipal
ordinances and any other jural norms must be construed in
the light of and in accordance with the Constitution. There is
this explicit affirmation in the recently decided case of De la
Llana v. Alba sustaining the validity of Batas Pambansa Blg.
129 reorganizing the judiciary: "The principle that the
Constitution enters into and forms part of every act to avoid
any unconstitutional taint must be applied. Nunez v.
Sandiganbayan, promulgated last January, has this relevant
excerpt: 'It is true that the other Sections of the Decree could
have been so worded as to avoid any constitutional
objection. As of now, however, no ruling is called for. The
view is given expression in the concurring and dissenting
opinion of Justice Makasiar that in such a case to save the
Decree from the dire fate of invalidity, they must be
construed in such a way as to preclude any possible erosion
on the powers vested in this Court by the Constitution. That
is a proposition too plain to be contested. It commends itself
for approval.'" 1
1. It may not be amiss to start with the dissenting portion of
this separate opinion. It is worthwhile to recall the decision
in Marcopper Mining Corporation v. Hon. Blas Ople. 2 It came
from a unanimous Court. It is true that only seven Justices
signed the opinion, two of the members of this Tribunal, who
participated in the deliberation, Justices Teehankee and
Melencio-Herrera having reserved their votes. Justice
Concepcion Jr. was on leave. It is accurate, therefore, to state
that Marcopper as stated in Justice Plana's opinion, is not
doctrinal in character, the necessary eight votes not having
been obtained. It is a plurality as distinguished from a
majority opinion. It is quite apparent, however, that there
was not a single dissenting vote. There was subsequently a
motion for reconsideration. This Court duly weighed the
arguments for and against the merit of the unanimous

opinion rendered. The resolution denying the motion for

reconsideration was not issued until December 15, 1981 on
which occasion three Justices dissented. 3 In the brief
resolution denying the option for reconsideration, with five
Justices adhering to their original stand 4 it was set forth that
such denial was based: "primarily [on] the reason that the
arguments advanced had been duly considered and found
insufficient to call for a decision other than that promulgated
on June 11, 1981, which stands unreversed and unmodified.
This is a case involving the social justice concept, which, as
pointed out in Carillo v. Allied Workers Association of the
Philippines involves 'the effectiveness of the community's
effort to assist the economically under- privileged. For under
existing conditions, without such succor and support, they
might not, unaided, be able to secure justice for themselves.'
In an earlier decision, Del Rosario v. De los Santos, it was
categorically stated that the social justice principle 'is the
translation into reality of its significance as popularized by
the late President Magsaysay: He who has less in life should
have more in law.'" 5 In his dissent, Justice Fernandez took
issue on the interpretation of social justice by relying on the
well- known opinion of Justice Laurel in Calalang v.
William 6 and concluded: "It is as much to the benefit of labor
that the petitioner be accorded social justice. For if the
mining companies, like the petitioner, can no longer operate,
all the laborers employed by aid company shall be laidoff." 7 To reinforce such a conclusion, it was further stated:
"The decision in this case is far reaching. It affects all
employers similarly situated as the petitioner. The natural
reaction of employers similarly situated as the petitioner will
be to withdraw gratuities that they have been giving
employees voluntarily. In the long run, the laborers will suffer.
In the higher interest of all concerned the contention of the
petitioner that the mid-year bonus and Christmas bonus that
it is giving to the laborers shall be applied to the 13th month
pay should be sustained." 8 Such pragmatic consideration is

likewise evident in the opinion of the Court in this case. It is

quite obvious from the above resolution of denial that the
approach based on the Constitution, compelling in its
character set forth in the opinion of the Court of June 11,
1981, is the one followed by the members of this Court either
adhering to or departing from the previous unanimous
conclusion reached. The main reliance to repeat, is on the
social justice provision 9 as reinforced by the protection to
labor provision. 10 As noted, such concepts were enshrined in
the 1935 Constitution. 11 The opinion pursued the matter
further: "Even then, there was a realization of their
importance in vitalizing a regime of liberty not just as
immunity from government restraint but as the assumption
by the State of an obligation to assure a life of dignity for all,
especially the poor and the needy. The expanded social
justice and protection to labor provisions of the present
Constitution lend added emphasis to the concern for social
and economic rights. ... That was so under the 1935
Constitution. Such an approach is even more valid now. As a
matter of fact, in the first case after the applicability of the
1973 constitution where social and economic rights were
involved, this Court in Alfanta v. Noe, through Justice Antonio,
stated: 'In the environment of a new social order We can do
no less. Thus, under the new Constitution, property
ownership has been impressed with a social function. This
implies that the owner has the obligation to use his property
not only to benefit himself but society as well. Hence, it
provides under Section 6 of Article II thereof, that in the
promotion of social justice, the State "shall regulate the
acquisition, ownership, use, enjoyment, and disposition of
private property, and equitably diffuse property ownership
and profits." The Constitution also ensures that the worker
shall have a just and living wage which should assure for
himself and his family an existence worthy of human dignity
and give him opportunity for a better life.' Such a sentiment
finds expression in subsequent opinions. 12

2. It thus becomes apparent, therefore, why predicated on

what for me is the significance of the social justice and the
protection to labor mandates of the Constitution, I cannot,
with due respect, concur with my brethren. The stand taken
by this Court, I submit, cannot be justified by the hitherto
hospitable scope accorded such provisions. It is to the credit
of this Administration that even during the period of crisis
government, the social and economic rights were fully
implemented. As a matter of fact, some critics, not fully
informed of the actual state of affairs, would predicate their
assessment of its accomplishments in this sphere on their
inaccurate and unsympathetic appraisal of how much
success had been achieved. It is a matter of pride for the
Philippines that as far back as her 1935 Constitution,
provisions assuring liberty in its positive sense, enabling her
citizens to live a life of humanity and dignity, were already
incorporated. The social and economic rights found therein
antedated by thirteen years the Universal Declaration of
Human Rights. When it is considered that, as pointed out in
the opinion of Justice Antonio in Alfanta, rendered in the first
year of the present Constitution, the social justice principle
now lends itself to the equitable diffusion of property
ownership and profits, it becomes difficult for me to justify
why any lurking ambiguity in Presidential Decree No. 851
could be construed against the rights of labor. This Court is
not acting unjustly if it promotes social justice. This Court is
not acting unjustly if it protects labor. This Court is just being
true to its mission of fealty to the Constitution. Under the
concept of separation of powers, while the political branches
enact the laws and thereafter enforce them, any question as
to their interpretation, justiciable in character, is for the
courts, ultimately this Tribunal, to decide. That is its sworn
duty. It cannot be recreant to such a trust. Its role, therefore,
is far from passive. It may be said further that if the object Of
statutory construction is in the well-known language of
Learned Hand "proliferation of purpose," there is warrant for

the view that I espouse. That is to attain its basic objective,

namely, to cope with the ravages of inflation. Moreover, the
Decree only benefits the low-salaried employees. There is
thus ample warrant for a more liberal approach. It only
remains to be added that there was in Marcopper not only a
recognition of the administrative determination by the
Minister of Labor as well as the then Deputy Minister of Labor
but also an acceptance of the ably-written memorandum of
Solicitor General Mendoza. Hence, to repeat, my inability to
concur on this point with my brethren whose views, as I
stated earlier, are deserving of the fullest respect.
3. There is, however and it must be so recognized an
obstacle to the approach above followed. There is an
agreement both on the part of management and labor in this
case quoted in the main opinion to this effect, "to abide by
the final decision of the Supreme Court in any case involving
the 13th Month Pay Law if it is clearly heldthat the employer
is liable to pay a 13th month pay separate and distinct from
the bonuses already given." Such an obstacle, on further
reflection, is not, for me, insurmountable. The only case then
within the contemplation of the parties is Marcopper. With
the unanimous opinion rendered and a subsequent denial of
a motion for reconsideration, it would appear that while it
lacked doctrinal force, this Court "clearly held" that there is
liability on the part of the employer to pay a 13-month pay
separate and distinct from the bonuses already given.
Perhaps the parties, especially labor, could have been more
accurate and more precise. It take comfort from the view
expressed by Justice Cardozo in Wood v. Duff-Gordon: 13 "The
law has outgrown its primitive stage of formalism when the
precise word was the sovereign talisman, and every slip was
fatal. It takes a broader view today. A promise may be
lacking, and yet the whole writing may be 'instinct with an
obligation,' imperfectly expressed." 14

4. Now as to the qualified concurrence. Based on the codal

provisions the finding of the illegality of strike is warranted.
That for me does not fully resolve the questions raised by
such a declaration. From my reading of the opinion of the
Court, it does not go as far as defining the consequences of
such illegal strike. Again the approach I propose to follow is
premised on the two basic mandates of social justice and
protection to labor, for while they are obligations imposed on
the government by the fundamental law, compulsory
arbitration as a result of which there could be a finding of
illegality is worded in permissive not in mandatory language.
It would be, for me, a departure from principles to which this
Court has long remained committed, if thereby loss of
employment, even loss of seniority rights or other privileges
is ultimately incurred. That is still an open question. The
decision has not touched on that basic aspect of this
litigation. The issue is not foreclosed. It seems fitting that this
brief concurrence and dissent should end with a relevant
excerpt from Free Telephone Workers Union v. The Minister of
Labor: 15 "It must be stressed anew, however, that the power
of compulsory arbitration, while allowable under the
Constitution and quite understandable in labor disputes
affected with a national interest, to be free from the taint of
unconstitutionality, must be exercised in accordance with the
constitutional mandate of protection to labor. The arbiter
then is called upon to take due care that in the decision to be
reached, there is no violation of 'the rights of workers to selforganization, collective bargaining, security of tenure, and
just and humane conditions of work.' It is of course manifest
that there is such unconstitutional application if a law 'fair on
its face and impartial in appearance [is] applied and
administered by public authority with an evil eye and an
unequal hand.' It does not even have to go that far. An
instance of unconstitutional application would be discernible
if what is ordained by the fundamental law, the protection of
labor, is ignored or disregarded. 16

I am authorized to state that Justice Makasiar joins me in this

separate opinion.
BARREDO, J., concurring:
At this stage of my tenure in the Supreme Court which is to
end in about four months from now, I feel it is but fitting and
proper that I make my position clear and unmistakable in
regard to certain principles that have to be applied to this
labor case now before Us. Few perhaps may have noticed it,
but the fact is that in most cases of this nature I have
endeavored my very best to fully abide by the part that
pertains to the judiciary in the social justice and protection to
labor clauses of the Constitution, not alone because. I
consider it as an obligation imposed by the fundamental law
of the land but by natural inclination, perhaps because I
began to work as a common worker at the age of thirteen,
and I cannot in any sense be considered as a capitalist or
management-inclined just because I happen to have joined,
within the legal bounds of the position I occupy, some
business ventures with the more affluent members of my
family and with some good and faithful old time friends. I
need not say that I am pro-labor; I only wish to deny most
vehemently that I am anti-labor
Having been one of the seven members of the Court who cosigned with our learned Chief Justice the Marcopper
"decision" and later on reserved my vote when a motion for
reconsideration thereof was filed for me to concur now by
merely cosigning the brilliant opinion of our distinguished
colleague, Mr. Justice Plana, is to my mind short of what all
concerned might expect from me. For me to merely vote in
support of the judgment herein without any explanation of
my peculiar situation does not satisfy my conscience, not to
mention that I owe such explanation to those who would all
probably be raising their eyebrows since they must come to

feel they could depend on me to always vote in favor of

labor.
The Supreme Court is a court of law and of equity at the
same time but, understandably, equity comes in only when
law is inadequate to afford the parties concerned the essence
of justice, fairness and square dealing. It is to this basic tenet
that I am bound by my oath of office before God and our
people Having this Ideal in mind, the paramount thought that
should dominate my actuations is complete and absolute
impartiality in the best light God has given me. Hence, when
the aid of the Court is sought on legal grounds, We can resort
to equity only when there is no law that can be properly
applied. My view of the instant case is that it is one of law,
not of equity. It is on this fundamental basis that I have
ventured to write this concurrence.
Looking back at my concurrence in Marcopper, and guided by
the observations in the main opinion herein, as to the
doctrinal value of Our decision therein, I have come to the
realization, after mature deliberation, that the conclusion
reached in the opinion of the Chief Justice may not always be
consistent with the evident intent and purpose of Section 2 of
P.D. No. 851 which, indeed, unequivocally provides that
"(E)mployers already paying their employees a 13th month
pay or its equivalent are not covered by this decree", albeit it
does not clarify what it means by the "equivalent" of the 13th
month pay. Such being the case, nothing can be more proper
than for everyone to abide by or at least give due respect to
the meaning thereof as has been officially expressed by the
usual executive authority called upon to implement the
same, none other than the Ministry of Labor (MOLE, for
short), unless, of course, the understanding of MOLE appears
to be manifestly and palpably erroneous and completely alien
to the evident intent of the decree. And Section 3(e) of the
Rules Implementing P.D. 851 issued by MOLE reads thus:

The term "its equivalent" as used in paragraph (c) hereof

shall include Christmas bonus, midyear bonus, profit-sharing
payments and other cash bonuses amounting to not less
than 1/12th of the basic but shall not include cash and stock
dividends, cost of living allowances and all other allowances
regularly enjoyed by the employee, as well as non-monetary
benefits. Where an employer pays less than 1/12th of the
employee's basic salary the employer shall pay the
difference.
Petitioner National Federation of Sugar Workers (NFSW, for
short) is now before Us with the plea that because in its
agreement with respondent Central Azucarera de la Carlota
(CAC, for short) of November 30, 1981 to the effect that:
The parties agree to abide by the final decision of the
Supreme Court in any case involving the 13th Month Pay Law
if it is clearly held that the employer is liable to pay a 13th
month pay separate and distinct from the bonuses already
given. (Par. 4)
and because this Court dismissed, in legal effect, for lack of
necessary votes, the petition in the Marcopper case seeking
the setting aside of Deputy Minister Inciong's decision which
considered the midyear and Christmas bonuses being given
to the Marcopper workers as not the equivalent of the 13th
month pay enjoined by P.D. 851, We should now order CAC to
pay NFSW members in the same way as stated in the opinion
of the Chief Justice in the Marcopper case.
At first glance, such a pause does appear tenable and
plausible. But looking deeper at the precise wording of the
November 30, 1981 agreement between NFSW and CAC
abovequoted, the proposition in the main opinion herein that
what must be deemed contemplated in said agreement is
that the final decision of the Supreme Court therein referred
to must be one wherein it would be "clearly held that the
employer is liable to pay 13th month pay separate and

distinct from the bonuses already given", compels

concurrence on my part. I find said agreement to be
definitely worded. There is no room at all for doubt as to the
meaning thereof. And tested in the light of such
unambiguous terminology of the said agreement, the
Marcopper opinion signed by only seven members of this
Court, cannot, under the Constitution and prevailing binding
legal norms, unfortunately, have doctrinal worth and cannot
be considered as stare decisis. Hence, it cannot be said to be
the "definite" decision of the Supreme Court the parties (CAC
and NFSW) had in mind. Accordingly, it is my considered
opinion that NFSW's plea in this case is premature and rather
off tangent.
I am not unmindful of the possibility or even probability that
labor may argue that in signing the November 30, 1981
agreement, NFSW little cared, for it was not fully informed
about what doctrinal and what is not doctrinal signify in law.
Labor may argue that it is enough that Marcopper workers
got their 13th month pay in addition to their bonuses by
virtue of the denial by this Supreme Court of Marcopper
Company's appeal to US, and NFSW members should not be
left getting less. And it would only be rational to expect labor
to invoke in support of their plea no less than the social
justice and protection to labor provisions of the Constitution.
As I have said at the outset, I am about to leave this Court.
Nothing could warm my heart and lift my spirit more than to
part with the noble thought that during my tenure of fourteen
years in this Supreme Court, I have given labor the most that
it has been within my power to give. But again I must
emphasize that what is constitutionally ordained, and by that
I mean also by God and by our country and people, is for me
to jealously guard that the scales of justice are in perfect
balance. No fondness for any sector of society, no love for
any man or woman, no adherence to any political party, no
feeling for any relative or friend nor religious consideration or

belief should ever induce me to allow it to tilt in the slightest

degree in favor of anyone.
The concept of social justice has been variously explained in
previous decisions of this Court. In Talisay Silay, 1penned by
this writer, We went as far as to hold that when it comes to
labor-management relationship, the social justice principle is
more pervasive and imperious than police power. It is indeed
consecrated as one of the most valued principles of national
policy in the Constitution. (Sec. 6, Art. II) So also is protection
to labor. (See. 9, Id.) I am of the firm conviction, however,
that these constitutional injunctions are primarily directed to
and
are
responsibilities
of
the
policy-determining
departments of the government. In the enforcement of said
principles, the role of the judiciary is to a certain degree less
active. The courts are supposed to be called upon only to
strike down any act or actuation of anyone violative thereof,
and, of course 6 in case of doubt in any given situation, to
resolve the same in favor of labor. Verily, neither the
Supreme Court nor any other court is enjoined to favor labor
merely for labor's sake, even as the judiciary is duty bound
never to place labor at a disadvantage, for that would not be
only unconstitutional but inhuman, contrary to the Universal
Declaration of Human Rights and unpardonably degrading to
the dignity of man who has been precisely created in the
image of God. At bottom the Ideal in social justice is precisely
to maintain the forces of all the economic segments of
society in undisturbed and undisturbable equilibrium, as
otherwise there would be no justice for anyone of them at all.
In the case at bar, I do not feel at liberty to disregard what
the parties have freely agreed upon, assuming, as I must,
that in entering into such agreement both parties were fully
aware of their legal rights and responsibilities. In this
connection, I take particular note of the fact that if CAC is a
big financially well conditioned concern, NFSW is not just one
ignorant laborer or group of laborers, but a federation with

leaders and lawyers of adequate if not expert knowledgeability in regard to their rights and other relevant matters
affecting labor. I am satisfied that there is here no occasion
to apply the Civil Code rule regarding vigilance whenever
there is inequality in the situations of the parties to an
agreement or transaction.
In conclusion, I concur fully in the main opinion of Justice
Plana as regards both issues of illegality of the strike here in
question and the non- applicability hereto of whatever has
been said in Marcopper. I have added the above remarks only
to make myself clear on labor-management issues before I
leave this Court, lest there be no other appropriate occasion
for me to do so.

on the grant of Christmas bonus, milling bonus, and

amelioration bonus to the extent as the latter is required by
law." It can thus be said that La Carlota is already paying the
equivalent of the 13th-month pay. 2. In Marcopper, the
company's liability for the 13th month pay was determined
by no less than the Deputy Minister of Labor, Amado G.
Inciong. I have always given much weight to the
determination of officers who are tasked with implementing
legislation because their expertise qualifies them in making
authoritative decisions. In the present case of La Carlota,
there has been no determination that the employees are
entitled to the 13th-month pay. In fact, a negative conclusion
can be implied from the declaration of Labor Arbiter Ovejera
that the labor union's strike against La Carlota was illegal.

ABAD SANTOS, J., concurring:

MELENCIO-HERRERA, J., concurring.

I concur but lest I be accused of inconsistency because

in Marcopper Mining Corporation vs. Ople, et al., No. 51254,
June 11, 1981, 105 SCRA 75, I voted to dismiss the petition
for lack of merit and as a result Marcopper had to give the
13th-month pay provided in P.D. No. 851 even as its
employees under the CBA had mid-year and end-of-year
bonuses, I have to state that Marcopper and La Carlota have
different factual situations as follows: 1. In Marcopper, the
CBA clearly stated that the company was obligated to "grant
midyear and end-of-year bonuses to employees following
years in which it had profitable operations." Thus the
payment of the bonuses was contingent upon the realization
of profits. If there were no profits, there were to be no
bonuses. Accordingly, it was fair and proper to conclude that
Marcopper had not shown that it was already paying its
employees the 13th-month pay or its equivalent as provided
in Sec. 2 of P.D. No. 851. However, in the instant case of La
Carlota the obligation of the employer to pay bonuses is not
contingent on the realization of profits. The CBA stipulates
that the "parties also agree to maintain the present practice

A. The question of law involved in this Petition for Prohibition

with Preliminary Injunction is based on the following relevant
facts which are indicated in the record:
1. Prior to December 16, 1975, Central Azucarera de la
Carlota (LA CARLOTA, for short), which operates a sugar mill
in La Carlota, Negros Occidental, may be deemed as paying
to its employees milling bonus, amelioration bonus, and
Christmas bonus equal at least to a months' salary.
2. PD 851, effective on the aforementioned date of December
16, 1975, required employers to pay their employees a 13the
month pay, provided the employer was not already paying
the said 13th month pay or itsequivalent.
3. On December 22, 1975, the then Department of Labor
promulgated a regulation stating that "Christmas bonus" is
an equivalent of the 13th month pay,
4. From 1975 to 1981, LA CARLOTA was not paying 13th
month pay on the assumption that the "Christmas bonus" it

was paying was an "equivalent" of the 13th month pay. The

employees of LA CARLOTA and their labor unions had not
protested the non-payment of the 13th month pay in addition
to the Christmas bonus.
5. On June 11, 1981, this Court promulgated its Decision in
the "Marcopper" case, which involved a relationship between
the " 13th month pay" and the "Christmas bonus" being paid
by an employer. A Motion for reconsideration of the Decision
was subsequently filed in said case, which was denied only
on December 15,1981.
6. In the meantime, on November 29, 1981, the National
Federation of Sugar Workers (NFSW), as the labor union
representing the majority of employees at LA CARLOTA,
staged a strike because LA CARLOTA had refused to pay the
13th month pay in addition to Christmas bonus. The strike
lasted one day on November 30, 1981, LA CARLOTA and
NFSW entered into a settlement agreement, paragraph 4
whereof provided as follows:

practice, and that it could declare the strike even before the
expiration of fifteen (15) days thereafter. The unfair labor
practice relied upon was management's alleged renegation
of the November 30, 1981 agreement, considering that the
finality of the Marcopper Decision had "clearly held that the
employer is liable to pay a 13th month pay separate and
distinct from "the Christmas bonus".
2. On the other hand, LA CARLOTA took the position that the
strike was not a ULP strike but an economic strike subject to
a cooling period of thirty (30) days with its attendant
requirements.
3. It is clear that the controversy between NFSW and LA
CARLOTA substantially hinges on the question of whether or
not the Marcopper Decision has clearly held that a Christmas
bonus, in whatsoever form, should not deter the employer's
obligation to the payment of the 13th month pay.
C. The proceedings in the case below were as follows:

4. The parties agree to abide by the final decision of the

Supreme Court in any case involving the 13th Month Pay Law
if it is clearly held that the employer is liable to pay a 13th
Month Pay separate and distinct from the bonuses already
given;

1. On February 4, 1982, LA CARLOTA filed a petition to

declare the strike of January 28, 1982 as illegal in R. A. B.
Case No. 110- 82 of the Regional Arbitration Branch No. VI-A
of the National Labor Commission in Bacolod City (the CASE
BELOW).

7. On January 28, 1982, NFSW declared a strike on the

ground that, despite the finality of the Marcopper Decision,
LA CARLOTA had refused to grant 13th month pay to its
employees, in addition to Christmas bonus, as agreed upon
in the settlement agreement of November 30, 1981.

2. After relatively protracted hearings, respondent Labor

Arbiter rendered a Decision declaring illegal the strike of
January 28, 1982. That is the Decision assailed by NFSW in
this instance claiming it to be null and void.

B. The legal controversy in the matter may be explained as

follows:
1. NFSW filed a notice of strike on January 22, 1982, claiming
that the contemplated strike was based on an unfair labor

D. Reference to a collateral proceeding may be made at this

juncture:
1. It appears that, in LA CARLOTA, there is another labor
union under the name of National Congress of Unions in the
Sugar Industry in the Philippines (NACUSIP).

2. On July 30, 1981, NACUSIP filed a complaint in FSD Case

No. 1192-81 before R. A. B. No. VI-A in Bacolod City praying
that an Order be issued directing LA CARLOTA to pay 13th
month pay to its employees from the effective date of PD 851
(the COLLATERAL PROCEEDING).
3. On December 4, 1981, NFSW filed a notice to intervene in
the COLLATERAL PROCEEDING.
4. On January 26, 1982, a Decision was rendered in the
COLLATERAL PROCEEDING which, in part, said:
On the contrary, what this Labor Arbiter is aware of, with
which he can take notice, is the policy declaration of the
Honorable Minister of Labor and Employment contained in a
telegram addressed to Asst. Director Dante G. Ardivilla
Bacolod District Office, this Ministry, and disseminated for the
information of this Branch which states, among other things,
that where bonuses in CBAs are not contingent on realization
of profit as in the Marcopper case, the decision (of the
Supreme Court, re: Marcopper case), does not apply, and
cases thereon should be resolved under the provisions of PD
851 and its implementing rules.
5. On February 15, 1982, NFSW
Reconsideration of the Decision.

filed

Motion

for

Upon the foregoing exposition, there is justification for an

outright dismissal of the Petition for Prohibition for the simple
reason that the strike of January 28, 1982 may not be
considered a ULP strike. When the strike was declared, it
could not be validly claimed that there was already a final
decision made by this Court which "clearly held that the
employer is liable to pay a 13th month pay separate and
distinct from" the Christmas bonus being paid by LA
CARLOTA. However, since the Marcopper Decision has
engendered controversies in labor-management relations in
several industrial/commercial firms, the Court has resolved to

rule on the merits of the substantial question between LA

CARLOTA and NFSW for the public benefit with a clarification
of the Marcopper judgment.
I agree with the proposition taken by the Ministry of Labor
and Employment that Christmas bonus, not contingent on
realization of profit as in the Marcoper case, is
the equivalent of the 13th month pay. In regards to the
juxtaposition of the terms "13th month pay" and "Christmas
bonus" in an amount not less than a month's salary, the
following may be explained:
Within recent time, it has been usual for an industrial or
commercial firm, which has had a successful year, to grant a
bonus to its employees generally denominated before as
year-end bonus. A firm usually knows whether or not it has
had a successful year by the middle of December. In case of
profitability, payment of the year-end bonus does not have to
await the end of the year, but it is often times given some
days before New Year, generally about Christmas day. Before
long, the year-end bonus became also known as Christmas
bonus, following the change of the Christmas gift-giving day
from January 6th to December 25th. Thus, it has been stated:
"a less formal use of the bonus concept, which is designed to
reward workers for a successful business year, is the annual
or Christmas bonus" (3 Ency. Brit., 918).
Although the original concept of a year-end bonus or
Christmas bonus, was that it depended on a successful year,
the bonus, in many instances, has been developed into an
obligatory payment as part of wages and not related to
profitability of operations. As part of wages, they are subject
to CBA negotiation. That has been the general trend in the
United States and in our country.
... But where so-called gifts are so tied to the remuneration
which employees receive for their work that they are in fact a

part of it, they are in reality wages within the meaning of the
Act.

and Regulations Implementing Presidential Decree 851 ",

with the following relevant provision:

xxx xxx xxx

The term "its equivalent" as used in paragraph (c) hereof

shall include Christmas bonus, mid-year bonus, profit-sharing
payments and other cash bonuses amounting to not less
than 1/12th of the basic salary but shall not include cash and
stock dividends cost of living allowances and all other
allowances regularly enjoyed by the employee, as well as
non-monetary benefits. Where an employer pays less than
1/12th of the employees basic salary, the employer shall pay
the difference.

In a number of cases an employer has been held required to

bargain concerning bonuses, including regularly given
Christmas bonuses. (48 Am Jur 2d., p. 455).
Moreover, once a Christmas bonus becomes institutionalized,
it has to be non-discriminatory. "An employer violates 29 USC
(Sec.) 158(a) (3) where, to discourage union membership, he
ceases giving a Christmas bonus to all employees and gives
the bonus only to office and supervisory employees after
unionization of his production and maintenance employees."
(48 Am Jur 2d., p. 420).
The Christmas bonus, as it clearly denotes, has
a literal religious connection, "Christmas" being a term within
the Christian religion. Considering that the Christmas bonus
has become obligatory and non- discriminatory in many
jurisdictions, a tendency arose to disassociate that bonus
from its religious connotation. Some countries, with nonchristian or "liberal" christian segments, have opted to make
the year-end or Christmas bonus obligatory, and they called
it the 13th month pay. It is, perhaps, having our Moslem
brothers in mind that the Government had decided to set up
in our country the obligatory payment of the 13th month pay
Thereby, the orthodox non-christian employee is not
subjected to "discrimination" due to his inability to accept the
Christmas bonus because of strict allegiance to this own
faith. It should, therefore, be apparent that "christmas bonus"
and "13th month pay" should be equated one with the other.
PD 851 does not contain a provision for rules and regulations
to be promulgated by the Department of Labor for
implementation of the Decree. Notwithstanding, on
December 22, 1975, the Department of Labor issued "Rules

When administrative rules and regulations are not properly

"delegated", they cannot have the force and effect of law. It
has been stated that:
Administrative rules and regulations. As discussed in Public
Administrative Bodies and Procedure (Sec.) 108, rules and
regulations duly promulgated and adopted in pursuance of
properly delegated authority have the force and effect of law
where they are legislative in character, but rules and
regulations which are merely executive or administrative
views as to the meaning and construction of the statute are
not controlling on the courts, and cannot alter or extend the
plain meaning of a statute, although they are entitled to
great weight where the statute is ambiguous. (82 C.J.S., pp.
770, 771).
Although the rule defining the term "equivalent" as used in
PD 851 does not have the force and effect of law, it can and
should be considered as an administrative view entitled to
great weight as it is an interpretation of "equivalent" made
by the administrative agency which has the duty to enforce
the Decree.
In the light of the foregoing views, I concur with the dismissal
of the Petition for Prohibition with the express statements

that LA CARLOTA's Christmas bonus and other bonuses

exempts it from giving 13th month pay to its employees, and
that the strike of January 28, 1982 was not a ULP strike and
should be considered illegal even if NFSW had complied with
all statutory requirements for the strike.

Separate Opinions
MAKASIAR, J., concurring:
Concurs in the separate opinion of qualified concurrence as
to the illegality of the strike and of dissent as to the
interpretation of Presidential Decree No. 851 submitted by
the Chief Justice.
FERNANDO, CJ., concurring:
With qualifications on the questions of the legality of the
strike and dissenting on the interpretation to be accorded
Presidential Decree No. 851 on the thirteenth-month
additional pay.,
There is at the outset due acknowledgmen t on my part of
the high quality of craftsmanship in the opinion of the Court
penned by Justice Efren Plana. It is distinguished by its
lucidity. There is the imprint of inevitability in the conclusion
approached based on the basic premise that underlies it. So
it should be if the decisive consideration is the language used
both of the applicable provisions of the Labor Code, Article
264 (c), (e), and (f) and Article 265, as well as of Presidential
Decree No. 851. In that sense, the decision of the Court can
stand the test of scrutiny based on sheer logic.
That for me would not suffice. Such an approach, to my mind,
is quite limited. The standard that should govern is the one
supplied by the Constitution. That is the clear implication of
constitutionalism. Anything less would deprive it of its quality

as the fundamental law. It is my submission, therefore, that

statutes, codes, decrees, administrative rules, municipal
ordinances and any other jural norms must be construed in
the light of and in accordance with the Constitution. There is
this explicit affirmation in the recently decided case of De la
Llana v. Alba sustaining the validity of Batas Pambansa Blg.
129 reorganizing the judiciary: "The principle that the
Constitution enters into and forms part of every act to avoid
any unconstitutional taint must be applied. Nunez v.
Sandiganbayan, promulgated last January, has this relevant
excerpt: 'It is true that the other Sections of the Decree could
have been so worded as to avoid any constitutional
objection. As of now, however, no ruling is called for. The
view is given expression in the concurring and dissenting
opinion of Justice Makasiar that in such a case to save the
Decree from the dire fate of invalidity, they must be
construed in such a way as to preclude any possible erosion
on the powers vested in this Court by the Constitution. That
is a proposition too plain to be contested. It commends itself
for approval.'" 1
1. It may not be amiss to start with the dissenting portion of
this separate opinion. It is worthwhile to recall the decision
in Marcopper Mining Corporation v. Hon. Blas Ople. 2 It came
from a unanimous Court. It is true that only seven Justices
signed the opinion, two of the members of this Tribunal, who
participated in the deliberation, Justices Teehankee and
Melencio-Herrera having reserved their votes. Justice
Concepcion Jr. was on leave. It is accurate, therefore, to state
that Marcopper as stated in Justice Plana's opinion, is not
doctrinal in character, the necessary eight votes not having
been obtained. It is a plurality as distinguished from a
majority opinion. It is quite apparent, however, that there
was not a single dissenting vote. There was subsequently a
motion for reconsideration. This Court duly weighed the
arguments for and against the merit of the unanimous
opinion rendered. The resolution denying the motion for

reconsideration was not issued until December 15, 1981 on

which occasion three Justices dissented. 3 In the brief
resolution denying the option for reconsideration, with five
Justices adhering to their original stand 4 it was set forth that
such denial was based: "primarily [on] the reason that the
arguments advanced had been duly considered and found
insufficient to call for a decision other than that promulgated
on June 11, 1981, which stands unreversed and unmodified.
This is a case involving the social justice concept, which, as
pointed out in Carillo v. Allied Workers Association of the
Philippines involves 'the effectiveness of the community's
effort to assist the economically under- privileged. For under
existing conditions, without such succor and support, they
might not, unaided, be able to secure justice for themselves.'
In an earlier decision, Del Rosario v. De los Santos, it was
categorically stated that the social justice principle 'is the
translation into reality of its significance as popularized by
the late President Magsaysay: He who has less in life should
have more in law.'" 5 In his dissent, Justice Fernandez took
issue on the interpretation of social justice by relying on the
well- known opinion of Justice Laurel in Calalang v.
William 6 and concluded: "It is as much to the benefit of labor
that the petitioner be accorded social justice. For if the
mining companies, like the petitioner, can no longer operate,
all the laborers employed by aid company shall be laidoff." 7 To reinforce such a conclusion, it was further stated:
"The decision in this case is far reaching. It affects all
employers similarly situated as the petitioner. The natural
reaction of employers similarly situated as the petitioner will
be to withdraw gratuities that they have been giving
employees voluntarily. In the long run, the laborers will suffer.
In the higher interest of all concerned the contention of the
petitioner that the mid-year bonus and Christmas bonus that
it is giving to the laborers shall be applied to the 13th month
pay should be sustained." 8 Such pragmatic consideration is
likewise evident in the opinion of the Court in this case. It is

quite obvious from the above resolution of denial that the

approach based on the Constitution, compelling in its
character set forth in the opinion of the Court of June 11,
1981, is the one followed by the members of this Court either
adhering to or departing from the previous unanimous
conclusion reached. The main reliance to repeat, is on the
social justice provision 9 as reinforced by the protection to
labor provision. 10 As noted, such concepts were enshrined in
the 1935 Constitution. 11 The opinion pursued the matter
further: "Even then, there was a realization of their
importance in vitalizing a regime of liberty not just as
immunity from government restraint but as the assumption
by the State of an obligation to assure a life of dignity for all,
especially the poor and the needy. The expanded social
justice and protection to labor provisions of the present
Constitution lend added emphasis to the concern for social
and economic rights.** That was so under the 1935
Constitution. Such an approach is even more valid now. As a
matter of fact, in the first case after the applicability of the
1973 constitution where social and economic rights were
involved, this Court in Alfanta v. Noe, through Justice Antonio,
stated: 'In the environment of a new social order We can do
no less. Thus, under the new Constitution, property
ownership has been impressed with a social function. This
implies that the owner has the obligation to use his property
not only to benefit himself but society as well. Hence, it
provides under Section 6 of Article II thereof, that in the
promotion of social justice, the State "shall regulate the
acquisition, ownership, use, enjoyment, and disposition of
private property, and equitably diffuse property ownership
and profits." The Constitution also ensures that the worker
shall have a just and living wage which should assure for
himself and his family an existence worthy of human dignity
and give him opportunity for a better life.' Such a sentiment
finds expression in subsequent opinions. 12

2. It thus becomes apparent, therefore, why predicated on

what for me is the significance of the social justice and the
protection to labor mandates of the Constitution, I cannot,
with due respect, concur with my brethren. The stand taken
by this Court, I submit, cannot be justified by the hitherto
hospitable scope accorded such provisions. It is to the credit
of this Administration that even during the period of crisis
government, the social and economic rights were fully
implemented. As a matter of fact, some critics, not fully
informed of the actual state of affairs, would predicate their
assessment of its accomplishments in this sphere on their
inaccurate and unsympathetic appraisal of how much
success had been achieved. It is a matter of pride for the
Philippines that as far back as her 1935 Constitution,
provisions assuring liberty in its positive sense, enabling her
citizens to live a life of humanity and dignity, were already
incorporated. The social and economic rights found therein
antedated by thirteen years the Universal Declaration of
Human Rights. When it is considered that, as pointed out in
the opinion of Justice Antonio in Alfanta, rendered in the first
year of the present Constitution, the social justice principle
now lends itself to the equitable diffusion of property
ownership and profits, it becomes difficult for me to justify
why any lurking ambiguity in Presidential Decree No. 851
could be construed against the rights of labor. This Court is
not acting unjustly if it promotes social justice. This Court is
not acting unjustly if it protects labor. This Court is just being
true to its mission of fealty to the Constitution. Under the
concept of separation of powers, while the political branches
enact the laws and thereafter enforce them, any question as
to their interpretation, justiciable in character, is for the
courts, ultimately this Tribunal, to decide. That is its sworn
duty. It cannot be recreant to such a trust. Its role, therefore,
is far from passive. It may be said further that if the object Of
statutory construction is in the well-known language of
Learned Hand "proliferation of purpose," there is warrant for

the view that I espouse. That is to attain its basic objective,

namely, to cope with the ravages of inflation. Moreover, the
Decree only benefits the low-salaried employees. There is
thus ample warrant for a more liberal approach. It only
remains to be added that there was in Marcopper not only a
recognition of the administrative determination by the
Minister of Labor as well as the then Deputy Minister of Labor
but also an acceptance of the ably-written memorandum of
Solicitor General Mendoza. Hence, to repeat, my inability to
concur on this point with my brethren whose views, as I
stated earlier, are deserving of the fullest respect.
3. There is, however and it must be so recognized an
obstacle to the approach above followed. There is an
agreement both on the part of management and labor in this
case quoted in the main opinion to this effect, "to abide by
the final decision of the Supreme Court in any case involving
the 13th Month Pay Law if it is clearly heldthat the employer
is liable to pay a 13th month pay separate and distinct from
the bonuses already given." Such an obstacle, on further
reflection, is not, for me, insurmountable. The only case then
within the contemplation of the parties is Marcopper. With
the unanimous opinion rendered and a subsequent denial of
a motion for reconsideration, it would appear that while it
lacked doctrinal force, this Court "clearly held" that there is
liability on the part of the employer to pay a 13-month pay
separate and distinct from the bonuses already given.
Perhaps the parties, especially labor, could have been more
accurate and more precise. It take comfort from the view
expressed by Justice Cardozo in Wood v. Duff-Gordon: 13 "The
law has outgrown its primitive stage of formalism when the
precise word was the sovereign talisman, and every slip was
fatal. It takes a broader view today. A promise may be
lacking, and yet the whole writing may be 'instinct with an
obligation,' imperfectly expressed." 14

4. Now as to the qualified concurrence. Based on the codal

provisions the finding of the illegality of strike is warranted.
That for me does not fully resolve the questions raised by
such a declaration. From my reading of the opinion of the
Court, it does not go as far as defining the consequences of
such illegal strike. Again the approach I propose to follow is
premised on the two basic mandates of social justice and
protection to labor, for while they are obligations imposed on
the government by the fundamental law, compulsory
arbitration as a result of which there could be a finding of
illegality is worded in permissive not in mandatory language.
It would be, for me, a departure from principles to which this
Court has long remained committed, if thereby loss of
employment, even loss of seniority rights or other privileges
is ultimately incurred. That is still an open question. The
decision has not touched on that basic aspect of this
litigation. The issue is not foreclosed. It seems fitting that this
brief concurrence and dissent should end with a relevant
excerpt from Free Telephone Workers Union v. The Minister of
Labor: 15 "It must be stressed anew, however, that the power
of compulsory arbitration, while allowable under the
Constitution and quite understandable in labor disputes
affected with a national interest, to be free from the taint of
unconstitutionality, must be exercised in accordance with the
constitutional mandate of protection to labor. The arbiter
then is called upon to take due care that in the decision to be
reached, there is no violation of 'the rights of workers to selforganization, collective bargaining, security of tenure, and
just and humane conditions of work.' It is of course manifest
that there is such unconstitutional application if a law 'fair on
its face and impartial in appearance [is] applied and
administered by public authority with an evil eye and an
unequal hand.' It does not even have to go that far. An
instance of unconstitutional application would be discernible
if what is ordained by the fundamental law, the protection of
labor, is ignored or disregarded . 16

I am authorized to state that Justice Makasiar joins me in this

separate opinion.
BARREDO, J., concurring:
At this stage of my tenure in the Supreme Court which is to
end in about four months from now, I feel it is but fitting and
proper that I make my position clear and unmistakable in
regard to certain principles that have to be applied to this
labor case now before Us. Few perhaps may have noticed it,
but the fact is that in most cases of this nature I have
endeavored my very best to fully abide by the part that
pertains to the judiciary in the social justice and protection to
labor clauses of the Constitution, not alone because. I
consider it as an obligation imposed by the fundamental law
of the land but by natural inclination, perhaps because I
began to work as a common worker at the age of thirteen,
and I cannot in any sense be considered as a capitalist or
management-inclined just because I happen to have joined,
within the legal bounds of the position I occupy, some
business ventures with the more affluent members of my
family and with some good and faithful old time friends. I
need not say that I am pro-labor; I only wish to deny most
vehemently that I am anti-labor
Having been one of the seven members of the Court who cosigned with our learned Chief Justice the Marcopper
"decision" and later on reserved my vote when a motion for
reconsideration thereof was filed for me to concur now by
merely cosigning the brilliant opinion of our distinguished
colleague, Mr. Justice Plana, is to my mind short of what all
concerned might expect from me. For me to merely vote in
support of the judgment herein without any explanation of
my peculiar situation does not satisfy my conscience, not to
mention that I owe such explanation to those who would all
probably be raising their eyebrows since they must come to

feel they could depend on me to always vote in favor of

labor.
The Supreme Court is a court of law and of equity at the
same time but, understandably, equity comes in only when
law is inadequate to afford the parties concerned the essence
of justice, fairness and square dealing. It is to this basic tenet
that I am bound by my oath of office before God and our
people Having this Ideal in mind, the paramount thought that
should dominate my actuations is complete and absolute
impartiality in the best light God has given me. Hence, when
the aid of the Court is sought on legal grounds, We can resort
to equity only when there is no law that can be properly
applied. My view of the instant case is that it is one of law,
not of equity. It is on this fundamental basis that I have
ventured to write this concurrence.
Looking back at my concurrence in Marcopper, and guided by
the observations in the main opinion herein, as to the
doctrinal value of Our decision therein, I have come to the
realization, after mature deliberation, that the conclusion
reached in the opinion of the Chief Justice may not always be
consistent with the evident intent and purpose of Section 2 of
P.D. No. 851 which, indeed, unequivocally provides that
"(E)mployers already paying their employees a 13th month
pay or its equivalent are not covered by this decree", albeit it
does not clarify what it means by the "equivalent" of the 13th
month pay. Such being the case, nothing can be more proper
than for everyone to abide by or at least give due respect to
the meaning thereof as has been officially expressed by the
usual executive authority called upon to implement the
same, none other than the Ministry of Labor (MOLE, for
short), unless, of course, the understanding of MOLE appears
to be manifestly and palpably erroneous and completely alien
to the evident intent of the decree. And Section 3(e) of the
Rules Implementing P.D. 851 issued by MOLE reads thus:

The term "its equivalent" as used in paragraph (c) hereof

shall include Christmas bonus, midyear bonus, profit-sharing
payments and other cash bonuses amounting to not less
than 1/12th of the basic but shall not include cash and stock
dividends, cost of living allowances and all other allowances
regularly enjoyed by the employee, as well as non-monetary
benefits. Where an employer pays less than 1/12th of the
employee's basic salary the employer shall pay the
difference.
Petitioner National Federation of Sugar Workers (NFSW, for
short) is now before Us with the plea that because in its
agreement with respondent Central Azucarera de la Carlota
(CAC, for short) of November 30, 1981 to the effect that:
The parties agree to abide by the final decision of the
Supreme Court in any case involving the 13th Month Pay Law
if it is clearly held that the employer is liable to pay a 13th
month pay separate and distinct from the bonuses already
given. (Par. 4)
and because this Court dismissed, in legal effect, for lack of
necessary votes, the petition in the Marcopper case seeking
the setting aside of Deputy Minister Inciong's decision which
considered the midyear and Christmas bonuses being given
to the Marcopper workers as not the equivalent of the 13th
month pay enjoined by P.D. 851, We should now order CAC to
pay NFSW members in the same way as stated in the opinion
of the Chief Justice in the Marcopper case.
At first glance, such a pause does appear tenable and
plausible. But looking deeper at the precise wording of the
November 30, 1981 agreement between NFSW and CAC
abovequoted, the proposition in the main opinion herein that
what must be deemed contemplated in said agreement is
that the final decision of the Supreme Court therein referred
to must be one wherein it would be "clearly held that the
employer is liable to pay 13th month pay separate and

distinct from the bonuses already given", compels

concurrence on my part. I find said agreement to be
definitely worded. There is no room at all for doubt as to the
meaning thereof. And tested in the light of such
unambiguous terminology of the said agreement, the
Marcopper opinion signed by only seven members of this
Court, cannot, under the Constitution and prevailing binding
legal norms, unfortunately, have doctrinal worth and cannot
be considered as stare decisis. Hence, it cannot be said to be
the "definite" decision of the Supreme Court the parties (CAC
and NFSW) had in mind. Accordingly, it is my considered
opinion that NFSW's plea in this case is premature and rather
off tangent.
I am not unmindful of the possibility or even probability that
labor may argue that in signing the November 30, 1981
agreement, NFSW little cared, for it was not fully informed
about what doctrinal and what is not doctrinal signify in law.
Labor may argue that it is enough that Marcopper workers
got their 13th month pay in addition to their bonuses by
virtue of the denial by this Supreme Court of Marcopper
Company's appeal to US, and NFSW members should not be
left getting less. And it would only be rational to expect labor
to invoke in support of their plea no less than the social
justice and protection to labor provisions of the Constitution.
As I have said at the outset, I am about to leave this Court.
Nothing could warm my heart and lift my spirit more than to
part with the noble thought that during my tenure of fourteen
years in this Supreme Court, I have given labor the most that
it has been within my power to give. But again I must
emphasize that what is constitutionally ordained, and by that
I mean also by God and by our country and people, is for me
to jealously guard that the scales of justice are in perfect
balance. No fondness for any sector of society, no love for
any man or woman, no adherence to any political party, no
feeling for any relative or friend nor religious consideration or

belief should ever induce me to allow it to tilt in the slightest

degree in favor of anyone.
The concept of social justice has been variously explained in
previous decisions of this Court. In Talisay Silay, 1penned by
this writer, We went as far as to hold that when it comes to
labor-management relationship, the social justice principle is
more pervasive and imperious than police power. It is indeed
consecrated as one of the most valued principles of national
policy in the Constitution. (Sec. 6, Art. II) So also is protection
to labor. (See. 9, Id.) I am of the firm conviction, however,
that these constitutional injunctions are primarily directed to
and
are
responsibilities
of
the
policy-determining
departments of the government. In the enforcement of said
principles, the role of the judiciary is to a certain degree less
active. The courts are supposed to be called upon only to
strike down any act or actuation of anyone violative thereof,
and, of course 6 in case of doubt in any given situation, to
resolve the same in favor of labor. Verily, neither the
Supreme Court nor any other court is enjoined to favor labor
merely for labor's sake, even as the judiciary is duty bound
never to place labor at a disadvantage, for that would not be
only unconstitutional but inhuman, contrary to the Universal
Declaration of Human Rights and unpardonably degrading to
the dignity of man who has been precisely created in the
image of God. At bottom the Ideal in social justice is precisely
to maintain the forces of all the economic segments of
society in undisturbed and undisturbable equilibrium, as
otherwise there would be no justice for anyone of them at all.
In the case at bar, I do not feel at liberty to disregard what
the parties have freely agreed upon, assuming, as I must,
that in entering into such agreement both parties were fully
aware of their legal rights and responsibilities. In this
connection, I take particular note of the fact that if CAC is a
big financially well conditioned concern, NFSW is not just one
ignorant laborer or group of laborers, but a federation with

leaders and lawyers of adequate if not expert knowledgeability in regard to their rights and other relevant matters
affecting labor. I am satisfied that there is here no occasion
to apply the Civil Code rule regarding vigilance whenever
there is inequality in the situations of the parties to an
agreement or transaction.
In conclusion, I concur fully in the main opinion of Justice
Plana as regards both issues of illegality of the strike here in
question and the non- applicability hereto of whatever has
been said in Marcopper. I have added the above remarks only
to make myself clear on labor-management issues before I
leave this Court, lest there be no other appropriate occasion
for me to do so.

on the grant of Christmas bonus, milling bonus, and

amelioration bonus to the extent as the latter is required by
law." It can thus be said that La Carlota is already paying the
equivalent of the 13th-month pay. 2. In Marcopper, the
company's liability for the 13th month pay was determined
by no less than the Deputy Minister of Labor, Amado G.
Inciong. I have always given much weight to the
determination of officers who are tasked with implementing
legislation because their expertise qualifies them in making
authoritative decisions. In the present case of La Carlota,
there has been no determination that the employees are
entitled to the 13th-month pay. In fact, a negative conclusion
can be implied from the declaration of Labor Arbiter Ovejera
that the labor union's strike against La Carlota was illegal.

ABAD SANTOS, J., concurring:

MELENCIO-HERRERA, J., concurring.

I concur but lest I be accused of inconsistency because

in Marcopper Mining Corporation vs. Ople, et al., No. 51254,
June 11, 1981, 105 SCRA 75, I voted to dismiss the petition
for lack of merit and as a result Marcopper had to give the
13th-month pay provided in P.D. No. 851 even as its
employees under the CBA had mid-year and end-of-year
bonuses, I have to state that Marcopper and La Carlota have
different factual situations as follows: 1. In Marcopper, the
CBA clearly stated that the company was obligated to "grant
midyear and end-of-year bonuses to employees following
years in which it had profitable operations." Thus the
payment of the bonuses was contingent upon the realization
of profits. If there were no profits, there were to be no
bonuses. Accordingly, it was fair and proper to conclude that
Marcopper had not shown that it was already paying its
employees the 13th-month pay or its equivalent as provided
in Sec. 2 of P.D. No. 851. However, in the instant case of La
Carlota the obligation of the employer to pay bonuses is not
contingent on the realization of profits. The CBA stipulates
that the "parties also agree to maintain the present practice

A. The question of law involved in this Petition for Prohibition

with Preliminary Injunction is based on the following relevant
facts which are indicated in the record:
1. Prior to December 16, 1975, Central Azucarera de la
Carlota (LA CARLOTA, for short), which operates a sugar mill
in La Carlota, Negros Occidental, may be deemed as paying
to its employees milling bonus, amelioration bonus, and
Christmas bonus equal at least to a months' salary.
2. PD 851, effective on the aforementioned date of December
16, 1975, required employers to pay their employees a 13the
month pay, provided the employer was not already paying
the said 13th month pay or itsequivalent.
3. On December 22, 1975, the then Department of Labor
promulgated a regulation stating that "Christmas bonus" is
an equivalent of the 13th month pay,
4. From 1975 to 1981, LA CARLOTA was not paying 13th
month pay on the assumption that the "Christmas bonus" it

was paying was an "equivalent" of the 13th month pay. The

employees of LA CARLOTA and their labor unions had not
protested the non-payment of the 13th month pay in addition
to the Christmas bonus.
5. On June 11, 1981, this Court promulgated its Decision in
the "Marcopper" case, which involved a relationship between
the " 13th month pay" and the "Christmas bonus" being paid
by an employer. A Motion for reconsideration of the Decision
was subsequently filed in said case, which was denied only
on December 15,1981.
6. In the meantime, on November 29, 1981, the National
Federation of Sugar Workers (NFSW), as the labor union
representing the majority of employees at LA CARLOTA,
staged a strike because LA CARLOTA had refused to pay the
13th month pay in addition to Christmas bonus. The strike
lasted one day on November 30, 1981, LA CARLOTA and
NFSW entered into a settlement agreement, paragraph 4
whereof provided as follows:

practice, and that it could declare the strike even before the
expiration of fifteen (15) days thereafter. The unfair labor
practice relied upon was management's alleged renegation
of the November 30, 1981 agreement, considering that the
finality of the Marcopper Decision had "clearly held that the
employer is liable to pay a 13th month pay separate and
distinct from "the Christmas bonus".
2. On the other hand, LA CARLOTA took the position that the
strike was not a ULP strike but an economic strike subject to
a cooling period of thirty (30) days with its attendant
requirements.
3. It is clear that the controversy between NFSW and LA
CARLOTA substantially hinges on the question of whether or
not the Marcopper Decision has clearly held that a Christmas
bonus, in whatsoever form, should not deter the employer's
obligation to the payment of the 13th month pay.
C. The proceedings in the case below were as follows:

4. The parties agree to abide by the final decision of the

Supreme Court in any case involving the 13th Month Pay Law
if it is clearly held that the employer is liable to pay a 13th
Month Pay separate and distinct from the bonuses already
given;

1. On February 4, 1982, LA CARLOTA filed a petition to

declare the strike of January 28, 1982 as illegal in R. A. B.
Case No. 110- 82 of the Regional Arbitration Branch No. VI-A
of the National Labor Commission in Bacolod City (the CASE
BELOW).

7. On January 28, 1982, NFSW declared a strike on the

ground that, despite the finality of the Marcopper Decision,
LA CARLOTA had refused to grant 13th month pay to its
employees, in addition to Christmas bonus, as agreed upon
in the settlement agreement of November 30, 1981.

2. After relatively protracted hearings, respondent Labor

Arbiter rendered a Decision declaring illegal the strike of
January 28, 1982. That is the Decision assailed by NFSW in
this instance claiming it to be null and void.

B. The legal controversy in the matter may be explained as

follows:
1. NFSW filed a notice of strike on January 22, 1982, claiming
that the contemplated strike was based on an unfair labor

D. Reference to a collateral proceeding may be made at this

juncture:
1. It appears that, in LA CARLOTA, there is another labor
union under the name of National Congress of Unions in the
Sugar Industry in the Philippines (NACUSIP).

2. On July 30, 1981, NACUSIP filed a complaint in FSD Case

No. 1192-81 before R. A. B. No. VI-A in Bacolod City praying
that an Order be issued directing LA CARLOTA to pay 13th
month pay to its employees from the effective date of PD 851
(the COLLATERAL PROCEEDING).
3. On December 4, 1981, NFSW filed a notice to intervene in
the COLLATERAL PROCEEDING.
4. On January 26, 1982, a Decision was rendered in the
COLLATERAL PROCEEDING which, in part, said:
On the contrary, what this Labor Arbiter is aware of, with
which he can take notice, is the policy declaration of the
Honorable Minister of Labor and Employment contained in a
telegram addressed to Asst. Director Dante G. Ardivilla
Bacolod District Office, this Ministry, and disseminated for the
information of this Branch which states, among other things,
that where bonuses in CBAs are not contingent on realization
of profit as in the Marcopper case, the decision (of the
Supreme Court, re: Marcopper case), does not apply, and
cases thereon should be resolved under the provisions of PD
851 and its implementing rules.
5. On February 15, 1982, NFSW
Reconsideration of the Decision.

filed

Motion

for

Upon the foregoing exposition, there is justification for an

outright dismissal of the Petition for Prohibition for the simple
reason that the strike of January 28, 1982 may not be
considered a ULP strike. When the strike was declared, it
could not be validly claimed that there was already a final
decision made by this Court which "clearly held that the
employer is liable to pay a 13th month pay separate and
distinct from" the Christmas bonus being paid by LA
CARLOTA. However, since the Marcopper Decision has
engendered controversies in labor-management relations in
several industrial/commercial firms, the Court has resolved to

rule on the merits of the substantial question between LA

CARLOTA and NFSW for the public benefit with a clarification
of the Marcopper judgment.
I agree with the proposition taken by the Ministry of Labor
and Employment that Christmas bonus, not contingent on
realization of profit as in the Marcoper case, is
the equivalent of the 13th month pay. In regards to the
juxtaposition of the terms "13th month pay" and "Christmas
bonus" in an amount not less than a month's salary, the
following may be explained:
Within recent time, it has been usual for an industrial or
commercial firm, which has had a successful year, to grant a
bonus to its employees generally denominated before as
year-end bonus. A firm usually knows whether or not it has
had a successful year by the middle of December. In case of
profitability, payment of the year-end bonus does not have to
await the end of the year, but it is often times given some
days before New Year, generally about Christmas day. Before
long, the year-end bonus became also known as Christmas
bonus, following the change of the Christmas gift-giving day
from January 6th to December 25th. Thus, it has been stated:
"a less formal use of the bonus concept, which is designed to
reward workers for a successful business year, is the annual
or Christmas bonus" (3 Ency. Brit., 918).
Although the original concept of a year-end bonus or
Christmas bonus, was that it depended on a successful year,
the bonus, in many instances, has been developed into an
obligatory payment as part of wages and not related to
profitability of operations. As part of wages, they are subject
to CBA negotiation. That has been the general trend in the
United States and in our country.
... But where so-called gifts are so tied to the remuneration
which employees receive for their work that they are in fact a

part of it, they are in reality wages within the meaning of the
Act.

and Regulations Implementing Presidential Decree 851 ",

with the following relevant provision:

xxx xxx xxx

The term "its equivalent" as used in paragraph (c) hereof

shall include Christmas bonus, mid-year bonus, profit-sharing
payments and other cash bonuses amounting to not less
than 1/12th of the basic salary but shall not include cash and
stock dividends cost of living allowances and all other
allowances regularly enjoyed by the employee, as well as
non-monetary benefits. Where an employer pays less than
1/12th of the employees basic salary, the employer shall pay
the difference.

In a number of cases an employer has been held required to

bargain concerning bonuses, including regularly given
Christmas bonuses. (48 Am Jur 2d., p. 455).
Moreover, once a Christmas bonus becomes institutionalized,
it has to be non-discriminatory. "An employer violates 29 USC
(Sec.) 158(a) (3) where, to discourage union membership, he
ceases giving a Christmas bonus to all employees and gives
the bonus only to office and supervisory employees after
unionization of his production and maintenance employees."
(48 Am Jur 2d., p. 420).
The Christmas bonus, as it clearly denotes, has
a literal religious connection, "Christmas" being a term within
the Christian religion. Considering that the Christmas bonus
has become obligatory and non- discriminatory in many
jurisdictions, a tendency arose to disassociate that bonus
from its religious connotation. Some countries, with nonchristian or "liberal" christian segments, have opted to make
the year-end or Christmas bonus obligatory, and they called
it the 13th month pay. It is, perhaps, having our Moslem
brothers in mind that the Government had decided to set up
in our country the obligatory payment of the 13th month pay
Thereby, the orthodox non-christian employee is not
subjected to "discrimination" due to his inability to accept the
Christmas bonus because of strict allegiance to this own
faith. It should, therefore, be apparent that "christmas bonus"
and "13th month pay" should be equated one with the other.
PD 851 does not contain a provision for rules and regulations
to be promulgated by the Department of Labor for
implementation of the Decree. Notwithstanding, on
December 22, 1975, the Department of Labor issued "Rules

When administrative rules and regulations are not properly

"delegated", they cannot have the force and effect of law. It
has been stated that:
Administrative rules and regulations. As discussed in Public
Administrative Bodies and Procedure (Sec.) 108, rules and
regulations duly promulgated and adopted in pursuance of
properly delegated authority have the force and effect of law
where they are legislative in character, but rules and
regulations which are merely executive or administrative
views as to the meaning and construction of the statute are
not controlling on the courts, and cannot alter or extend the
plain meaning of a statute, although they are entitled to
great weight where the statute is ambiguous. (82 C.J.S., pp.
770, 771).
Although the rule defining the term "equivalent" as used in
PD 851 does not have the force and effect of law, it can and
should be considered as an administrative view entitled to
great weight as it is an interpretation of "equivalent" made
by the administrative agency which has the duty to enforce
the Decree.
In the light of the foregoing views, I concur with the dismissal
of the Petition for Prohibition with the express statements

that LA CARLOTA's Christmas bonus and other bonuses

exempts it from giving 13th month pay to its employees, and
that the strike of January 28, 1982 was not a ULP strike and
should be considered illegal even if NFSW had complied with
all statutory requirements for the strike.

G.R. No. 86000 September 21, 1990

GOLD CITY INTEGRATED PORT SERVICES, INC.
(INPORT), petitioner,
vs.
THE
HONORABLE
NATIONAL
LABOR
RELATIONS
COMMISSION (NLRC) and JOSE L. BACALSO,respondents.
Jerry M. Pacuribot for petitioner.
Francisco D. Alas for private respondent.

FELICIANO, J.:
Private respondent Jose Bacalso was employed as an
admeasurer by the petitioner Gold City Integrated Port
Services, Inc. ("Gold City"). He was suspected by
management of under measuring cargo. Hence, on 23
January 1987, the cargo control officer ordered two (2) other
admeasurers to re-measure three (3) pallets of bananas
which
had
already
been
measured
by
private
1
respondent. The re-measurement revealed that respondent
had under-measured the bananas by 1.427 cubic meters. 2
Private respondent felt insulted by the re-measurement and
so the next day he went to the office of the Chief
Admeasurer, Rolando Guanaco, and there confronted Nigel
Mabalacad, one of the two (2) admeasurers who had rechecked his work, regarding the matter. Private respondent
quarreled with Mabalacad in the presence of Guanaco, their
immediate superior, inside the latter's office. Guanaco
directed private respondent to stop provoking Mabalacad and
told both that being in his office, they should behave
properly. Private respondent ignored this oral directive and a

fistfight erupted then and there between him and Mabalacad.

Both were eventually pacified by their co-workers. 3
Private respondent Bacalso was then charged with assaulting
a co-employee and falsifying reports and records of the
company relative to the performance of his duties, and was
preventively suspended pending investigation of his case by
the union-management grievance committee. 4 In a letter
dated 20 March 1987, the grievance committee referred the
disposition of the matter to management in view of the
objections of the aggrieved parties to the proposal that
private respondent be meted out a penalty of forty-five (45)
days suspension. 5 Apparently, Guangco and Mabalacad did
not consider suspension an adequate sanction considering
private respondent's alleged inability to get along with the
other admeasurers and with the company's customers. On 11
April 1987, private respondent received a notice of
termination of services upon the grounds of assaulting a coemployee and of insubordination. 6
Private respondent Bacalso filed a complaint for illegal
dismissal with the Regional Arbitration Branch No. 10 of the
Department of Labor and Employment on 25 May 1987. He
controverted the finding of insubordination, contending that
there was no evidence he had wilfully disobeyed any order
given by his superior during the incident. He admitted
assaulting his co-employee but claimed that that did not
constitute just cause for his dismissal under Article 282 (d) of
the Labor Code because that act was not an offense
committed
against
his
employer's
duly
authorized
representative. He prayed for reinstatement with backwages
and damages. 7
Petitioner Gold City in its answer argued that Bacalso's failure
to heed Guangco's order to stop provoking Mabalacad
constituted insubordination or disrespect towards a superior
officer punishable by dismissal under the Schedule of

disciplinary sanctions and norms of conduct, incorporated in

the existing Collective Bargaining Agreement ("CBA") with
the union. 8
The Labor Arbiter rendered an award in favor of private
respondent Bacalso holding that the dismissal was illegal
because there was no evidence to support the charge of
insubordination, and that assault on a co-employee was
punishable only with fifteen (15) days suspension under the
CBA's Schedule of penalties. In view of the strained relations
between the parties, however, the Labor Arbiter did not order
reinstatement and awarded Bacalso separation pay and
attorney's fees instead. 9
Both parties appealed to the National Labor Relations
Commission ("NLRC").
The NLRC, in a decision dated 30 August 1988, held that only
Bacalso's appeal was meritorious. It declined to characterize
the assailed conduct of Bacalso as insubordination under
Article 282 (a) of the Labor Code because Guangco's order
was "not connected with" Bacalso's work, and did not amount
to wilful or gross disrespect. The NLRC modified the Labor
Arbiter's decision by ordering private respondent Bacalso's
reinstatement with backwages. 10
Petitioner, having moved for reconsideration without success,
is before this Court on certiorari. On 20 February 1989, the
Court issued a temporary restraining order enjoining
execution of the NLRC's decision pending resolution of this
Petition, effective upon petitioner's posting of a cash or
surety bond in the amount of P60,000.00. 11 Petitioner Gold
City posted a cash deposit in the required amount. 12
In its Petition, Gold City emphasizes management's
prerogative to promulgate rules of discipline and to enforce
the Schedule of disciplinary sanctions providing for dismissal

of an employee who commits gross disrespect of a superior

officer. 13
In his Comment on the Petition, private respondent Bacalso
alleged that he was apprised of the charge of insubordination
only in his notice of termination, and that he was thereby
denied an opportunity to be heard on this charge before
being dismissed, in violation of Sections 2 and 5 of Rule 14 of
the Omnibus Rules Implementing the Labor Code. 14
Two (2) issues are posed for resolution in this case; (a)
whether private respondent was denied due process in the
course of his dismissal; and (b) whether private respondent
was dismissed for a just cause.
In respect of the first issue, it must be noted that petitioner
did not properly inform private respondent of all the
infractions of company regulations which subsequently
became the justification for his dismissal. After being
preventively suspended, he was charged with assaulting a
co-employee and falsifying reports and records of the
company relating to the performance of his duties.
Consequently, throughout the investigation conducted at the
company level, private respondent's explanations in defense
were shaped to meet only those charges. Petitioner
discovered it could not sustain the charge of falsification of
company records against private respondent. Since assault
upon a co-employee, the charge admitted by private
respondent, is punishable only with fifteen (15) days
suspension under the CBA's Schedule of penalties, it in effect
became necessary for petitioner to characterize said assault
as an act of "insubordination or disrespect towards a superior
officer", an offense punishable with dismissal under the
Schedule. 15 So it came to pass that when private respondent
received his notice of termination, the causes therefor were
stated as assault on a co-employee and insubordination.

The Court considers that there was here at least a partial

deprivation of private respondent's right to procedural due
process. He could not be expected adequately to defend
himself as he was not fully or correctly informed of the
charges against him which management intended to prove. It
is less than fair for management to charge an employee with
one offense and then to dismiss him for having committed
another offense with which he had not been charged and
against which he was therefore unable adequately to defend
himself. Correct specification of private respondent's alleged
wrongdoing was obviously important here, since the penalty
that could appropriately be meted out depended upon what
offense was charged and proven. It has been stressed by the
Court that the right of an employee to procedural due
process consists of the twin rights of notice and
hearing. 16 The purpose of the requirement of notice is
obviously to enable the employee to defend himself against
the charge preferred against him by presenting and
substantiating his version of the facts. Since Gold City here in
effect charged private respondent with a second offense
other than falsification of company records, it was incumbent
upon petitioner employer to have given private respondent
additional time and opportunity to meet the new charge
against him of insubordination. Gold City failed to do that
here. In so failing, Gold City failed to accord to private
respondent the full measure of his right to procedural due
process. The fact that in the proceedings before the Labor
Arbiter the conduct of private respondent that petitioner
regarded as insubordination was substantiated, does not
militate against this conclusion.
Coming to the second issue, Article 282 of the Labor Code
provides in part:
Art. 282. Termination by Employer.-An employer may
terminate an employment for any of the following causes: a)
Serious misconduct or wilful disobedience by the employee

of the lawful orders of his employer or representative in

connection with his work.
xxx xxx xxx
(Emphasis supplied)
Wilful disobedience of the employer's lawful orders, as a just
cause for the dismissal of an employee, envisages the
concurrence of at least two (2) requisites: the employee's
assailed conduct must have been wilful or intentional, the
wilfulness being characterized by a "wrongful and perverse
attitude"; and the order violated must have been reasonable,
lawful, made known to the employee and must pertain to the
duties which he had been engaged to discharge. 17 Both
requisites are present in the instant case.
By private respondent Bacalso's own admission, he felt
insulted by the re-measurement of the cargo he had already
measured. He was apparently much offended by the
implication he perceived that management was uncertain
either about his honesty or his competence or possibly both.
He determined to lose his temper, became very angry and
picked a fight with one of the co-workers who had been
instructed by their common superior to carry out the remeasurement of private respondent's pallets of bananas. In
the process, private respondent Bacalso completely
disregarded the courtesy and respect due from a subordinate
to his superior. Indeed, he may have been, consciously or
otherwise, precisely sending a signal to his superior officer in
whose presence he provoked and then engaged in physical
violence with his co-worker. Prior to the fistfight, Guangco
had warned Bacalso to desist from further provoking his coworker with insulting language. This warning constituted an
order from private respondent's immediate superior not to
breach the peace and order of the Surveyors'(Admeasurers')
Division; Guangco was obviously attempting to maintain
basic employee discipline in the workplace.

It is thus not easy to understand how public respondent NLRC

could have reasonably concluded that Guangco's order and
warning were "not connected" with private respondent's
work. We believe and so hold that private respondent's act
constituted wilful disobedience to a lawful order of
petitioner's representative obviously connected with private
respondent's work.
It does not follow, however, that private respondent Bacalso's
services were lawfully terminated either under Article 282 (a)
of the Labor Code or under the CBA Schedule of penalties.
We believe that not every case of insubordination or wilful
disobedience by an employee of a lawful work-connected
order of the employer or its representative is reasonably
penalized with dismissal. For one thing, Article 282 (a) refers
to "serious misconduct or wilful disobedience". There must be
reasonable proportionality between, on the one hand, the
wilful disobedience by the employee and, on the other hand,
the penalty imposed therefor. Examination of the
circumstances surrounding private respondent's assault upon
his co-employee shows that no serious or substantial danger
had been posed by that fistfight to the well-being of his other
co-employees or of the general public doing business with
petitioner employer; and neither did such behavior threaten
substantial prejudice for the business of his employer. The
fistfight occurred inside the offices of the Surveyors' Division,
more particularly, Mr. Guangco's office, away from the view
of petitioner's customers or of the general public. In Lausa v.
National Labor Relations Commission, 18 petitioner Lausa
exhibited disorderly and pugnacious behavior in the course of
an argument with his immediate superior, in the presence of
passengers and other crewmen on board the inter-island
vessel of which Lausa was a crew-member. In that case, the
Court sustained the dismissal of petitioner Reynaldo Lausa
considering that his "behavior could easily have provoked or
triggered off a brawl and mindless panic on board the vessel,
and endangered the safety of people and crew-members, and

under certain conditions, the safety of the vessel itself."

In Wenphil Corporation v. National Labor Relations
Commission, 19 the Court also sustained the dismissal of
private respondent Roberto Mallare who, while tending the
salad bar of a fast food restaurant, engaged in an altercation
a co-worker slapping the latter on the head, stepping on his
foot, brandishing an ice scooper against him and refusing to
be pacified, right in front and in plain sight of customers
dining in the restaurant, thus posing a substantial threat of
disorder in the restaurant. In the instant case, private
respondent Bacalso's disorderly behavior did not present a
comparable threat to the safety or peace of mind of his coworkers or that of the customers of Gold City.
Considering that private respondent Bacalso's unruly temper
did not become an effective threat to his co-workers or the
safety of the customers dealing with his employer, or to the
goodwill of his employer, and considering further that he had
been quite candid in admitting that he had been at fault as
soon as the investigation began in the company level, we
agree with the NLRC that termination of his services was a
disproportionately heavy penalty. We believe that suspension
without pay for three (3) months would be an adequate
penalty for the assault on a co-worker and act of
insubordination that private respondent Bacalso actually
committed.
It follows that private respondent Bacalso is entitled to
reinstatement. 20 Should reinstatement to his previous
position not be feasible because of his relationship or lack of
relationship with his fellow admeasurers, he should be
reinstated to a substantially equivalent position in another
division of the company. If that is not possible or feasible
either, then in lieu of such reinstatement, petitioner shall pay
private respondent separation pay equivalent to one-month's
pay for every year of service. 21 Private respondent is also
entitled to his backwages; however, an amount equivalent to

his three (3) months pay shall be deducted from such

backwages. The award of attorney's fees stays.
WHEREFORE, the Petition for certiorari is hereby DISMISSED
for lack of merit, and the Decision dated 30 August 1988 of
public respondent NLRC is hereby AFFIRMED with the
modifications that: (1) from private respondent's backwages,
there shall be deducted an amount equivalent to his threemonth's pay corresponding to the penalty properly imposable
upon him; and (2) should reinstatement to private
respondent Bacalso's former position, or to a substantially
equivalent position in another division of petitioner Gold City,
not be feasible, petitioner shall pay private respondent
Bacalso, in lieu of such reinstatement, separation pay
equivalent to one-month's pay for every year of service. The
temporary restraining order dated 20 February 1989 is
hereby LIFTED. No pronouncement as to costs.
SO ORDERED.

This case originated from a complaint for illegal strike filed

with the NLRC by the petitioner3 against private respondents
due to an alleged "wildcat strike" and other concerted action
staged in the company premises on June 24, 25 and 26,
1999.
The undisputed facts are as follows:
G.R. No. 150437

July 17, 2006

SUKHOTHAI CUISINE and RESTAURANT, petitioner,

vs.
COURT OF APPEALS, NATIONAL LABOR PHILIPPINE
LABOR ALLIANCE COUNCIL (PLAC) Local 460 Sukhothai
Restaurant
Chapter,
EMMANUEL
CAYNO,
ALEX
MARTINEZ,
BILLY
BACUS,
HERMIE
RAZ,
JOSE
LANORIAS, LITO ARCE, LINO SALUBRE, CESAR
SANGREO, ROLANDO FABREGAS, JIMMY BALAN, JOVEN
LUALHATI, ANTONIO ENEBRAD, JOSE NEIL ARCILLA,
REY ARSENAL, ROEL ESANCHA, EDGAR EUGENIO,
ALBERT
AGBUYA,
ROLANDO
PUGONG,
ARNEL
SALVADOR, RICKY DEL PRADO, CLAUDIO PANALIGAN,
BERNIE DEL MUNDO, JOHN BATHAN, ROBERTO ECO,
JOVEN TALIDONG, LENY LUCENTE, ANALIZA CABLAY,
RIGOBERTO TUBAON and MERLY NAZ, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before this Court is a petition for certiorari under Rule 45
questioning the Decision1 dated August 8, 2001 promulgated
by the Court of Appeals (CA) in CA-G.R. SP No. 63864 which
affirmed in toto the Decision dated November 29, 2000 of the
National Labor Relations Commission (NLRC); and the CA
Resolution2 dated October 18, 2001 which denied the
petitioner's Motion for Reconsideration.

Sometime in March 1998, the majority of the employees of

the petitioner organized themselves into a union which
affiliated with the Philippine Labor Alliance Council (PLAC),
and was
designated as PLAC Local 460 Sukhothai Restaurant Chapter
(Union).4
On December 3, 1998, private respondent Union filed a
Notice of Strike with the National Conciliation and Mediation
Board (NCMB) on the ground of unfair labor practice, and
particularly, acts of harassment, fault-finding, and union
busting through coercion and interference with union affairs.
On December 10, 1998, in a conciliation conference, the
representatives of the petitioner agreed and guaranteed that
there will be no termination of the services of private
respondents during the pendency of the case, with the
reservation of the management prerogative to issue memos
to erring employees for the infraction, or violation of
company policies. On the following day, or on December 11,
1998, a Strike Vote was conducted and supervised by NCMB
personnel, and the results of the vote were submitted to the
NCMB on December 21, 1998.
On January 21, 1999, the petitioner and the Union entered
into a Submission Agreement, thereby agreeing to submit the
issue of unfair labor practice the subject matter of the
foregoing Notice of Strike and the Strike Vote for voluntary
arbitration with a view to prevent the strike.

On March 24, 1999, during the pendency of the voluntary

arbitration proceedings, the petitioner, through its president,
Ernesto Garcia, dismissed Eugene Lucente, a union member,
due to an alleged petty quarrel with a co-employee in
February 1999. In view of this termination, private
respondent Union filed with the NLRC a complaint for illegal
dismissal.
In the morning of June 24, 1999, private respondent Jose
Lanorias, a union member, was relieved from his post, and
his employment as cook, terminated. Subsequently,
respondent Billy Bacus, the union vice-president, conferred
with Ernesto Garcia and protested Lanorias's dismissal.
Shortly thereafter, respondents staged a "wildcat strike."
On June 25, 1999, a Notice of Strike was re-filed by the
private respondents and the protest, according to the
respondents, was converted into a "sit-down strike." On the
next day, or on June 26, 1999, the same was transformed
into an "actual strike."
On June 29, 1999, the petitioner filed a complaint for illegal
strike with the NLRC against private respondents, seeking to
declare the strike illegal, and to declare respondents, who
participated in the commission of illegal acts, to have lost
their employment status. Having arrived at no amicable
settlement, the parties submitted their position papers,
together with supporting documents, affidavits of witnesses,
and photographs, in compliance with the orders of the Labor
Arbiter. On October 12, 1999, the Labor Arbiter rendered a
Decision the dispositive portion of which reads:
WHEREFORE, premises considered, respondents are hereby
declared to have staged an illegal strike, and the
employment of union officers and all individual respondents
are deemed validly terminated in accordance with law.

Finally, all individual respondents are hereby directed to

immediately remove their picket lines and all physical
obstructions that impede ingress and egress to petitioner's
premises.
SO ORDERED.5
The principal question before the Labor Arbiter was whether
the private respondents staged an illegal strike. Ruling in the
affirmative, the Labor Arbiter held that the Notice of Strike
dated December 3, 1998 as well as the Strike Vote of
December 11, 1998 referred to a prior dispute submitted for
voluntary arbitration and, hence, they cannot apply to the
strike staged about six months later, which commenced on
June 24, 1999 and ended on June 26, 1999; that, for these
reasons, the Union failed to comply with the mandatory
requisites for a lawful strike; that the issuance of memos by
the petitioner to instill discipline on erring employees is a
lawful exercise of management prerogative and do not
amount to acts of unfair labor practice; that, instead of
resorting to a strike, private respondents should have availed
of the proper legal remedies such as the filing of complaints
for illegal suspension or illegal dismissal with the NLRC; that,
the root causes of the controversy are the petition for
certification election and petition for cancellation of union
registration which were then pending before the Department
of Labor as well as the issue on unfair labor practice then
pending before the voluntary arbitrator, and, hence, the
parties should have awaited the resolution of the cases in the
proper fora; and that even if private respondents complied
with all the requisites of a valid strike, the strike is still illegal
due to the commission of prohibited acts, including the
obstruction of free ingress and egress of the premises,
intimidation, and threat inflicted upon non-striking
employees.

Private respondents appealed to the NLRC which, on

November 29, 2000, promulgated its Decision the dispositive
portion of which states:
WHEREFORE, the appeal is hereby granted. Accordingly, the
Decision dated October 12, 1999 in the above entitled case is
hereby vacated and set-aside. Consequently, the complaint
of illegal strike is hereby dismissed for lack of merit.
All striking workers are hereby ordered to return to work
immediately and Sukhothai Restaurant to accept them back
to their former or equivalent positions. If the same is no
longer possible, Sukhothai Restaurant is ordered to pay them
separation pay equivalent to one month salary for every year
of service reckoned from their initial date of employment up
to the present.
SO ORDERED.6
In overruling the Labor Arbiter, the NLRC held that the
petitioner is guilty of union busting; that the petitioner
violated the Submission Agreement dated December 10,
1998 in that no termination shall be effected during the
voluntary arbitration proceedings and, hence, the strike was
justified; that the Notice of Strike and Strike Vote dated
December 3, 1998 and December 11, 1998, respectively, are
applicable to the strike of June 24, 25, and 26, 1999 since the
same issues of unfair labor practice were involved and that
unfair labor practices are continuing offenses; that even if
the foregoing Notice of Strike and Strike Vote were not
applicable, the Union may take action immediately since the
petitioner is guilty of union busting; and that the re-filing of a
Notice of Strike on June 25, 1999 cured the defect of noncompliance with the mandatory requirements.
After the NLRC denied the Motion for Reconsideration, the
petitioner appealed to the CA and raised the following issues:

I. WHETHER OR NOT THE STRIKE STAGED BY THE PRIVATE

RESPONDENTS IS LEGAL; and
II. WHETHER OR NOT THE PRIVATE RESPONDENTS WHO
PARTICIPATED IN THE STRIKE AND COMMITTED ILLEGAL ACTS
WERE PROPERLY AND VALIDLY DECLARED TO HAVE LOST
THEIR EMPLOYMENT STATUS.7
As stated above, the CA denied the petition and affirmed the
NLRC. Petitioner is now before this Court, raising the
following grounds:
I. THE COURT OF APPEALS GRAVELY ERRED AND DECIDED
THE ISSUES IN THE INSTANT CASE IN A MANNER CONTRARY
TO ESTABLISHED LAW AND JURISPRUDENCE BY RULING THAT
THE WILDCAT STRIKE OF JUNE 24, 1999 IS VALID AND LEGAL
DESPITE CLEAR AND INCONTROVERTIBLE EVIDENCE THAT:
A. PRIVATE RESPONDENTS FAILED TO COMPLY WITH THE
REQUISITES FOR A VALID STRIKE AS PRESCRIBED BY THE
PERTINENT PROVISIONS OF THE LABOR CODE;
B. THERE WERE NO STRIKEABLE ISSUES; AND
C. PRIVATE RESPONDENTS COMMITTED
PROHIBITED ACTS DURING THE STRIKE.

ILLEGAL

AND

II. THE COURT OF APPEALS GRAVELY ERRED BY FAILING TO

ADDRESS THE OTHER ISSUES RAISED BY THE PETITIONER IN
ITS PETITION FOR CERTIORARI WHICH FAILURE AMOUNTED
TO A DENIAL OF ITS RIGHT TO DUE PROCESS OF LAW. 8
The petition is meritorious.
The questions before this Court are whether the strike staged
by the private respondents is illegal; and whether private
respondents are deemed to have lost their employment
status by participating in the commission of illegal acts
during the strike.

Respondents insist that the filing of the Notice of Strike on

December 3, 1998, the Strike Vote of December 11, 1998,
the submission of the results of the vote to the NCMB on
December 21, 1998, and their observation of the 15-day
cooling-off period in case of unfair labor practice as well as
the seven-day reporting period of the results of the strike
vote, all satisfy the mandatory requirements under Article
2639 of the Labor Code and are applicable to the June 1999
strike. In support of this theory, respondents invoke Article
263(f) in that the decision to strike is valid for the duration of
the dispute based on substantially the same grounds
considered when the strike vote was taken, thus, there is no
need to repeat the process. Furthermore, according to the
respondents, even assuming for the sake of argument that
the Notice of Strike and Strike Vote in December 1998 cannot
be made to apply to the concerted actions in June 1999,
these requirements may nonetheless be dispensed with since
the petitioner is guilty of union busting and, hence, the Union
can take action immediately.
The undisputed fact, however, is that at the time the strike
was staged in June 1999, voluntary arbitration between the
parties was ongoing by virtue of the January 21, 1999
Submission Agreement. The issue to be resolved under those
proceedings pertained to the very same issues stated in the
Notice of Strike of December 3, 1998: the commission of
unfair labor practices, such as acts of harassment, faultfinding, and union busting through coercion and interference
with union affairs.
Article 264 of the Labor Code provides:
Art. 264. Prohibited activities.
xxxx
No strike or lockout shall be declared after assumption of
jurisdiction by the President or the Secretary or after

certification or submission of the dispute to compulsory or

voluntary arbitration or during the pendency of cases
involving the same grounds for the strike or lockout.
x x x x (emphasis supplied)
This Court has held that strikes staged in violation of
agreements providing for arbitration are illegal, since these
agreements must be strictly adhered to and respected if their
ends are to be achieved.10 The rationale of the prohibition
under Article 264 is that once jurisdiction over the labor
dispute has been properly acquired by competent authority,
that jurisdiction should not be interfered with by the
application of the coercive processes of a strike. 11 Indeed it is
among the chief policies of the State to promote and
emphasize the primacy of free collective bargaining and
negotiations, including voluntary arbitration, mediation, and
conciliation, as modes of settling labor, or industrial
disputes.12 In Alliance of Government Workers v. Minister of
Labor,13 Chief Justice Fernando declared that the principle
behind labor unionism in private industry is that industrial
peace cannot be secured through compulsion by law.
Relations between private employers and their employees
rest on an essentially voluntary basis, subject to the
minimum requirements of wage laws and other labor and
welfare legislation.14
The alleged dismissals of Lucente and respondent Lanorias,
both union members, which allegedly triggered the wildcat
strike, are not sufficient grounds to justify the radical
recourse on the part of the private respondents. The
questions that surround their dismissal, as private
respondents so affirm, are connected to the alleged breach of
the "guarantee" by the petitioner not to dismiss its
employees during the pendency of the arbitration case, the
very questions which they also link to the other incidents of
unfair labor practices allegedly committed by the petitioner

these matters should have been raised and resolved in the

voluntary arbitration proceedings that were commenced
precisely to address them. On the other hand, if private
respondents believed that the disciplinary measures had
nothing to do with the issues under arbitration, then they
should have availed of the appropriate remedies under the
Labor Code, such as the institution of cases of illegal
dismissal15 or, by agreement of the parties, the submission of
the cases to the grievance machinery of the CBA, if one is
available, so that they may be subjected to separate
voluntary arbitration proceedings,16 or simply seek to
terminate the pending voluntary arbitration case and
complete the mandatory procedure for a lawful strike. Private
respondents should have availed themselves of any of these
alternative remedies instead of resorting to a drastic and
unlawful measure, specifically, the holding a wildcat
strike.17 And because of the fact that the Union was fully
aware that the arbitration proceedings were pending, good
faith cannot be invoked as a defense. 18
For failing to exhaust all steps in the arbitration proceedings
by virtue of the Submission Agreement, in view of the
proscription under Article 264 of the Labor Code, and the
prevailing state policy as well as its underlying rationale, this
Court declares that the strike staged by the private
respondents is illegal.19
With respect to respondents' averment that assuming
arguendo that the Notice of Strike and Strike Vote in
December 1998 cannot be made to apply to the strike in June
1999, the requirements for a valid strike may nonetheless be
dispensed
with in case of union busting, 20 the Court finds it unnecessary
to discuss the question at length, especially in view of the
foregoing declaration that the strike is illegal, as well as the
considerations of established doctrine: the language of the

law leaves no room for doubt that the cooling-off period and
the seven-day strike ban after the strike-vote report were
intended to be mandatory, 21 and in case of union busting
where the existence of the union is threatened, it is only the
15-day cooling-off period that may be dispensed with.
Article 263(f) in part states: "In every case, the union or the
employer shall furnish the Department the results of the
voting at least seven days before the intended strike or
lockout, subject to the cooling-off period herein provided."
This provision should be read with Section 3, Rule XXII, Book
V of the Rules Implementing the Labor Code, then applicable
at the time of the dispute, the relevant provisions of which
state:
However, in case of unfair labor practice involving the
dismissal from employment of any union officer duly elected
in accordance with the union constitution and by-laws which
may constitute union-busting where the existence of the
union is threatened, the fifteen-day cooling-off period shall
not apply and the union may take action immediately after
the strike vote is conducted and the results thereof
submitted to the appropriate regional branch of the
Board. (emphasis supplied)
The NCMB Primer on Strike, Picketing, and Lockout (January
31, 1992) provide the same wording. The foregoing provision
of the implementing rules should also be compared to the
provisions of the Labor Code under Article 263(c):
(c) x x x However, in case of dismissal from employment of
union officers duly elected in accordance with the union
constitution and by-laws, which may constitute union busting
where the existence of the union is threatened, the 15-day
cooling-off period shall not apply and the union may take
action immediately.

The implementing rules clarify Article 263(c) in that the union

may strike "immediately" provided that the strike vote is
conducted, the results thereof submitted "in every case" at
least seven days before the intended strike or lockout. In
sum, in case of alleged union busting, the three remaining
requirements notice, strike vote, and seven-day report
period cannot be dispensed with.22
What is more, the strike had been attended by the
widespread commission of prohibited acts. Well-settled is the
rule that even if the strike were to be declared valid because
its objective or purpose is lawful, the strike may still be
declared invalid where the means employed are
illegal.23 Among such limits are the prohibited activities under
Article 264 of the Labor Code, particularly paragraph (e),
which states that no person engaged in picketing shall:
a) commit any act of violence, coercion, or intimidation or
b) obstruct the free ingress to or egress from the employer's
premises for lawful purposes, or
c) obstruct public thoroughfares.
The following acts have been held to be prohibited activities:
where the strikers shouted slanderous and scurrilous words
against the owners of the vessels;24 where the strikers used
unnecessary and obscene language25 or epithets to prevent
other laborers to go to work, 26 and circulated libelous
statements against the employer which show actual
malice;27 where the protestors used abusive and threatening
language towards the patrons of a place of business or
against co-employees, going beyond the mere attempt to
persuade customers to withdraw their patronage; 28 where the
strikers formed a human cordon and blocked all the ways and
approaches to the launches and vessels of the vicinity of the
workplace29 and perpetrated acts of violence and coercion to
prevent work from being performed; 30 and where the strikers

shook their fists and threatened non-striking employees with

bodily harm if they persisted to proceed to the
workplace.31 Permissible activities of the picketing workers do
not include obstruction of access of customers. 32
The evidence in the record clearly and extensively shows that
the individual respondents engaged in illegal acts during the
strike, such as the intimidation and harassment of a
considerable number of customers to turn them away and
discourage them from patronizing the business of the
petitioner;33 waving their arms and shouting at the
passersby, "Huwag kayong pumasok sa Sukhothai!"[34] and
"Nilagyan na namin ng lason ang pagkain d'yan!"[35]as well
as numerous other statements made to discredit the
reputation of the establishment;36 preventing the entry of
customers;37 angry and unruly behavior calculated to cause
commotion38 which affected neighboring establishments
within the mall;39 openly cursing and shouting at the
president in front of customers 40 and using loud and abusive
language, such as "Putang ina niyong lahat!", toward the rest
of the management41 as well as their co-workers who refused
to go on strike;42 physically preventing non-strikers from
entering the premises,43 as well as deliberately blocking their
movements inside the restaurant, 44 at times by sharply
bumping
into
them45 or
through
indecent
physical
46
contact; openly threatening non-strikers with bodily harm,
such as "Pag hindi sila pumayag, upakan mo!";47 and
shouting at the security guard "Granada!" which caused
panic among the customers and prompted security to report
a possible death threat to management and the security
agency.48
In the determination of the liabilities of the individual
respondents, the applicable provision is Article 264(a) of the
Labor Code:
Art. 264. Prohibited Activities (a) x x x

xxxx

customers;52Intimidating,
harassing, preventing, and
discouraging customers from
entering the
restaurant;53 publicly
denouncing the reputation of
the establishment;54 openly
threatening non-strikers with
bodily harm;55

x x x x Any union officer who knowingly participates in an

illegal strike and any worker or union officer who knowingly
participates in the commission of illegal acts during a strike
may be declared to have lost his employment status:
Provided, That mere participation of a worker in a lawful
strike shall not constitute sufficient ground for termination of
his employment, even if a replacement had been hired by the
employer during such lawful strike.
xxxx
In Samahang Manggagawa sa Sulpicio Lines, Inc.-NAFLU v.
Sulpicio Lines, Inc.49 this Court explained that the effects of
such illegal strikes, outlined in Article 264, make a distinction
between workers and union officers who participate therein:
an ordinary striking worker cannot be terminated for mere
participation in an illegal strike. There must be proof that he
or she committed illegal acts during a strike. A union officer,
on the other hand, may be terminated from work when he
knowingly participates in an illegal strike, and like other
workers, when he commits an illegal act during a strike. 50 In
all cases, the striker must be identified. But proof beyond
reasonable doubt is not required. Substantial evidence
available under the attendant circumstances, which may
justify the imposition of the penalty of dismissal, may
suffice.51 Liability for prohibited acts is to be determined on
an individual basis:
Rank in
Private
Respondent
Respondent Union
Illegal Acts
Emmanuel
Cayno

President

Knowingly participating in an
illegal strike; shouting at the
security guard "Granada!"
which caused panic among the

Billy Bacus

Analiza
Cablay
Jose Neil
Arcilla

Knowingly participating in an
illegal strike; Intimidating,
harassing, preventing, and
discouraging customers from
entering the restaurant;56 use of
abusive language towards
management or nonstrikers;57 deliberately blocking
the movements of management
or non-strikers inside the
Vice President restaurant;58

Secretary
Treasurer

Knowingly participating in an
illegal strike; Intimidating,
harassing, preventing, and
discouraging customers from
entering the restaurant;59
Knowingly participating in an
illegal strike; Intimidating,
harassing, preventing, and
discouraging customers from
entering the
restaurant;60 publicly
denouncing the reputation of
the establishment;61 coercing
non-strikers to strike;62 Cursing

and use of abusive language

towards management, nonstrikers, or customers;63

management or non-strikers
inside the
restaurant;71 intimidating,
harassing, preventing, and
discouraging customers from
entering the restaurant;72

Roel Esancha Auditor

Knowingly participating in an
illegal strike; intimidating,
harassing, preventing, and
discouraging customers from
entering the restaurant;64

Claudio
Panaligan

Board
Member

Knowingly participating in an
illegal strike; use of abusive
language towards
management, non-strikers, or
customers;65 intimidating,
harassing, preventing, and
discouraging customers from
entering the
restaurant;66deliberately
blocking the movements of
management or non-strikers
inside the restaurant;67

Member

Intimidating, harassing,
preventing, and discouraging
customers from entering the
restaurant;68
Jimmy Balan

Alex Martinez Member

Intimidating, harassing,
preventing, and discouraging
customers from entering the
restaurant;69
Cursing and use of abusive
language towards
management, non-strikers, or
customers;70deliberately
blocking the movements of

Joven Lualhati Member

Intimidating, harassing,
preventing, and discouraging
customers from entering the
restaurant;81

Antonio
Enebrad

Member

Id.82

Edgar

Member

Id.;83 cursing and use of abusive

Rey Arsenal

Hermie Raz

Member

Jose Lanorias Member

Intimidating, harassing,
preventing, and discouraging
customers from entering the
restaurant;73

Lito Arce

Member

Id.74

Cesar
Sangreo

Member

Id.75

Rolando
Fabregas

Member

Id.76

Member

Id.;77 deliberately blocking

movements of non-strikers
inside the restaurant by sharply
bumping into them78 or through
indecent physical
contact; 79 cursing and use of
abusive language towards
management, non-strikers, or
customers;80

Eugenio

language towards
management, non-strikers, or
customers;84

Albert Agbuya Member

Intimidating, harassing,
preventing, and discouraging
customers from entering the
restaurant;85

Arnel
Salvador

Member

Id.86

Ricky Del
Prado

Member

Id.87

Bernie Del
Mundo

Member

Id.

88

Roberto Eco

Member

Id.89

Joven Talidong Member

Id.90

Leny Lucente Member

Id.;91 threatening non-strikers

with bodily harm;92

Rigoberto
Tubaon

Member

Intimidating, harassing,
preventing, and discouraging
customers from entering the
restaurant;93 cursing and use of
abusive language towards
management, non-strikers, or
customers;94

Merly Naz

Member

Intimidating, harassing,
preventing, and discouraging
customers from entering the
restaurant;95 cursing and use of
abusive language towards
management, non-strikers, or

customers;96

Lino Salubre
Rolando
Pugong

John Bathan

Member

Preventing and discouraging

customers from entering the
restaurant;97

Member

Preventing and discouraging

customers from entering the
restaurant;98

Member

Intimidating, harassing,
preventing, and discouraging
customers from entering the
restaurant;99

Thus, the Labor Arbiter is correct in ruling that the

employment of all individual private respondents are deemed
validly terminated.
WHEREFORE, the petition is granted. The Decision and
Resolution of the Court of Appeals together with the Decision
dated November 29, 2000 of the National Labor Relations
Commission are REVERSED and SET ASIDE. The Decision of
the
Labor
Arbiter
dated
October
12,
1999
is REINSTATED. The Court finds the strike illegal and, as a
consequence thereto, the union officers who participated in
the illegal strike and in the commission of illegal acts,
namely, Emmanuel Cayno, Billy Bacus, Analiza Cablay, Jose
Neil Arcilla, Roel Esancha, and Claudio Panaligan, as well as
the union members who participated in the commission of
illegal acts during the strike, namely, Rey Arsenal, Alex
Martinez, Hermie Raz, Jose Lanorias, Lito Arce, Cesar
Sangreo, Rolando Fabregas, Jimmy Balan, Joven Lualhati,
Antonio Enebrad, Edgar Eugenio, Albert Agbuya, Arnel
Salvador, Ricky Del Prado, Bernie Del Mundo, Roberto Eco,
Joven Talidong, Leny Lucente, Rigoberto Tubaon, Merly Naz,
Lino Salubre, Rolando Pugong, and John Bathan, all private

respondents, are hereby

employment status.

declared

to

have

lost

their

No pronouncement as to costs.
SO ORDERED.

Manggagawang Pang-Edukasyon sa Sta. Eskolastika-NAFTEU

(UNION, for brevity) initiated negotiations for a first-ever
collective bargaining agreement. A deadlock in the
negotiations prompted the UNION to file on 4 October 1990 a
Notice of Strike with the Department of Labor and
Employment (DEPARTMENT, for brevity), docketed as NCMBNCR-NS-10-826.
On 5 November 1990, the UNION declared a strike which
paralyzed the operations of the COLLEGE. Affecting as it did
the interest of the students, public respondent SECRETARY
immediately assumed jurisdiction over the labor dispute and
issued on the same day, 5 November 1990, a return-to-work
order. The following day, 6 November 1990, instead of
returning to work, the UNION filed a motion for
reconsideration of the return-to-work order questioning inter
alia the assumption of jurisdiction by the SECRETARY over the
labor dispute.

G.R. No. 100158 June 2, 1992

ST. SCHOLASTICA'S COLLEGE, petitioner,
vs.
HON. RUBEN TORRES, in his capacity as SECRETARY OF
LABOR AND EMPLOYMENT, and SAMAHANG NG
MANGGAGAWANG
PANG-EDUKASYON
SA
STA.
ESKOLASTIKA-NAFTEU, respondents.
BELLOSILLO, J.:
The principal issue to be resolved in this recourse is whether
striking union members terminated for abandonment of work
after failing to comply with return-to-work orders of the
Secretary of Labor and Employment (SECRETARY, for brevity)
should by law be reinstated.
On 20 July 1990, petitioner St. Scholastica's College
(COLLEGE, for brevity) and private respondent Samahan ng

On 9 November 1990, the COLLEGE sent individual letters to

the striking employees enjoining them to return to work not
later than 8:00 o'clock A.M. of 12 November 1990 and, at the
same time, giving notice to some twenty-three (23) workers
that their return would be without prejudice to the filing of
appropriate charges against them. In response, the UNION
presented a list of (6) demands to the COLLEGE in a dialogue
conducted on 11 November 1990. The most important of
these demands was the unconditional acceptance back to
work of the striking employees. But these were flatly
rejected.
Likewise, on 9 November 1990, respondent SECRETARY
denied reconsideration of his return-to-work order and sternly
warned the striking employees to comply with its terms. On
12 November 1990, the UNION received the Order.
Thereafter, particularly on 14 and 15 November 1990, the
parties held conciliation meetings before the National

Conciliation and Mediation Board where the UNION pruned

down its demands to three (3), viz.: that striking employees
be reinstated under the same terms and conditions before
the strike; that no retaliatory or disciplinary action be taken
against them; and, that CBA negotiations be continued.
However, these efforts proved futile as the COLLEGE
remained steadfast in its position that any return-to-work
offer should be unconditional.
On 16 November 1990, the COLLEGE manifested to
respondent SECRETARY that the UNION continued to defy his
return-to-work order of 5 November 1990 so that
"appropriate steps under the said circumstances" may be
undertaken by him. 1
On 23 November 1990, the COLLEGE mailed individual
notices of termination to the striking employees, which were
received on 26 November 1990, or later. The UNION officers
and members then tried to return to work but were no longer
accepted by the COLLEGE.
On 5 December 1990, a Complaint for Illegal Strike was filed
against the UNION, its officers and several of its members
before the National Labor Relations Commission (NLRC),
docketed as NLRC Case No. 00-12-06256-90.
The UNION moved for the enforcement of the return-to-work
order before respondent SECRETARY, citing "selective
acceptance of returning strikers" by the COLLEGE. It also
sought dismissal of the complaint. Since then, no further
hearings were conducted.
Respondent SECRETARY required the parties to submit their
respective position papers. The COLLEGE prayed that
respondent SECRETARY uphold the dismissal of the
employees who defied his return-to-work order.

On 12 April 1991, respondent SECRETARY issued the assailed

Order which, inter alia, directed the reinstatement of striking
UNION members, premised on his finding that no violent or
otherwise illegal act accompanied the conduct of the strike
and that a fledgling UNION like private respondent was
"naturally expected to exhibit unbridled if inexperienced
enthusiasm, in asserting its existence". 2 Nevertheless, the
aforesaid Order held UNION officers responsible for the
violation of the return-to-work orders of 5 and 9 November
1990 and, correspondingly, sustained their termination.
Both parties moved for partial reconsideration of the Order,
with petitioner COLLEGE questioning the wisdom of the
reinstatement of striking UNION members, and private
respondent UNION, the dismissal of its officers.
On 31 May 1991, in a Resolution, respondent SECRETARY
denied both motions. Hence, this Petition for Certiorari, with
Prayer for the Issuance of a Temporary Restraining Order.
On 26 June 1991, We restrained the SECRETARY from
enforcing his assailed Orders insofar as they directed the
reinstatement of the striking workers previously terminated.
Petitioner questions the assumption by respondent
SECRETARY of jurisdiction to decide on termination disputes,
maintaining that such jurisdiction is vested instead in the
Labor Arbiter pursuant to Art. 217 of the Labor Code, thus
Art. 217. Jurisdiction of Labor Arbiters and the Commission.
(a) Except as otherwise provided under this Code, the
Labor Arbiters shall have original and exclusive jurisdiction to
hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without
extension, the following cases involving all workers, whether
agricultural or non-agricultural: . . . 2. Termination disputes . .
. 5. Cases arising from any violation of Article 264 of this

Code, including questions on the legality of strikes and lockouts . . .

In support of its position, petitioner invokes Our ruling in PAL
v. Secretary of Labor and Employment 3 where We held:
The labor Secretary exceeded his jurisdiction when he
restrained PAL from taking disciplinary measures against its
guilty employees, for, under Art. 263 of the Labor Code, all
that the Secretary may enjoin is the holding of the strike but
not the company's right to take action against union officers
who participated in the illegal strike and committed illegal
acts.
Petitioner further contends that following the doctrine laid
down in Sarmiento v. Tuico 4 and Union of Filipro Employees
v. Nestle Philippines, Inc., 5 workers who refuse to obey a
return-to-work order are not entitled to be paid for work not
done, or to reinstatement to the positions they have
abandoned of their refusal to return thereto as ordered.
Taking a contrary stand, private respondent UNION pleads for
reinstatement of its dismissed officers considering that the
act of the UNION in continuing with its picket was never
characterized as a "brazen disregard of successive legal
orders", which was readily apparent in Union Filipro
Employees v. Nestle Philippines, Inc., supra, nor was it a
willful refusal to return to work, which was the basis of the
ruling in Sarmiento v. Tuico, supra. The failure of UNION
officers and members to immediately comply with the returnto-work orders was not because they wanted to defy said
orders; rather, they held the view that academic institutions
were not industries indispensable to the national interest.
When respondent SECRETARY denied their motion for
reconsideration, however, the UNION intimated that efforts
were immediately initiated to fashion out a reasonable
return-to-work agreement with the COLLEGE, albeit, if failed.

The issue on whether respondent SECRETARY has the power

to assume jurisdiction over a labor dispute and its incidental
controversies, causing or likely to cause a strike or lockout in
an industry indispensable to the national interest, was
already settled in International Pharmaceuticals, Inc. v.
Secretary of Labor and Employment. 6 Therein, We ruled that:
. . . [T]he Secretary was explicitly granted by Article 263 (g)
of the Labor Code the authority to assume jurisdiction over a
labor dispute causing or likely to cause a strike or lockout in
an industry indispensable to the national interest, and decide
the same accordingly. Necessarily, this authority to assume
jurisdiction over the said labor dispute must include and
extend to all questions and include and extend to all
questions and controversies arising therefrom, including
cases over which the Labor Arbiter has exclusive jurisdiction.
And rightly so, for, as found in the aforesaid case, Article 217
of the Labor Code did contemplate of exceptions thereto
where the SECRETARY is authorized to assume jurisdiction
over a labor dispute otherwise belonging exclusively to the
Labor Arbiter. This is readily evident from its opening proviso
reading "(e)xcept as otherwise provided under this Code . . .
Previously, We held that Article 263 (g) of the Labor Code
was broad enough to give the Secretary of Labor and
Employment the power to take jurisdiction over an issue
involving unfair labor practice. 7
At first glance, the rulings above stated seem to run counter
to that of PAL v. Secretary of Labor and Employment,
supra, which was cited by petitioner. But the conflict is only
apparent, not real.
To recall, We ruled in the latter case that the jurisdiction of
the Secretary of Labor and Employment in assumption and/or
certification cases is limited to the issues that are involved in
the disputes or to those that are submitted to him for

resolution. The seeming difference is, however, reconcilable.

Since the matter on the legality or illegality of the strike was
never submitted to him for resolution, he was thus found to
have exceeded his jurisdiction when he restrained the
employer from taking disciplinary action against employees
who staged an illegal strike.
Before the Secretary of Labor and Employment may take
cognizance of an issue which is merely incidental to the labor
dispute, therefore, the same must be involved in the labor
disputed itself, or otherwise submitted to him for resolution.
If it was not, as was the case in PAL v. Secretary or Labor and
Employment, supra, and he nevertheless acted on it, that
assumption of jurisdiction is tantamount to a grave abuse of
discretion.
Otherwise,
the
ruling
in International
Pharmaceuticals, Inc. v. Secretary of Labor and Employment,
supra, will apply.
The submission of an incidental issue of a labor dispute, in
assumption and/or certification cases, to the Secretary of
Labor and Employment for his resolution is thus one of the
instances referred to whereby the latter may exercise
concurrent jurisdiction together with the Labor Arbiters.
In the instant petition, the COLLEGE in its Manifestation,
dated 16 November 1990, asked the "Secretary of Labor to
take the appropriate steps under the said circumstances." It
likewise prayed in its position paper that respondent
SECRETARY uphold its termination of the striking employees.
Upon the other hand, the UNION questioned the termination
of its officers and members before respondent SECRETARY by
moving for the enforcement of the return-to-work orders.
There is no dispute then that the issue on the legality of the
termination of striking employees was properly submitted to
respondent SECRETARY for resolution.
Such an interpretation will be in consonance with the
intention of our labor authorities to provide workers

immediate access to their rights and benefits without being

inconvenienced by the arbitration and litigation process that
prove to be not only nerve-wracking, but financially
burdensome in the long run. Social justice legislation, to be
truly meaningful and rewarding to our workers, must not be
hampered in its application by long-winded arbitration and
litigation. Rights must be asserted and benefits received with
the least inconvenience. For, labor laws are meant to
promote, not defeat, social justice (Maternity Children's
Hospital v. Hon. Secretary of Labor ). 8 After all, Art. 4 of the
Labor Code does state that all doubts in the implementation
and
interpretation
of
its
provisions,
including
its
implementing rules and regulations, shall be resolved in favor
of labor.
We now come to the more pivotal question of whether
striking union members, terminated for abandonment of
work after failing to comply strictly with a return-to-work
order, should be reinstated.
We quote hereunder the pertinent provisions of law which
govern the effects of defying a return-to-work order:
1. Article 263 (g) of the Labor Code
Art. 263. Strikes, picketing, and lockouts. . . . (g) When, in
his opinion, there exists a labor dispute causing or likely to
cause a strike or lockout in an industry indispensable to the
national interest, the Secretary of Labor and Employment
may assume jurisdiction over the dispute and decide it or
certify the same to the Commission for compulsory
arbitration. Such assumption or certification shall have the
effect of automatically enjoining the intended or impending
strike or lockout as specified in the assumption or
certification order. If one has already taken place at the time
of assumption or certification, all striking or locked out
employees shall immediately return to work and the
employer shall immediately resume operations and readmit

all workers under the same terms and conditions prevailing

before the strike or lockout. The Secretary of Labor and
Employment or the Commission may seek the assistance of
law enforcement agencies to ensure compliance with this
provision as well as with such orders as he may issue to
enforce the same . . . (as amended by Sec. 27, R.A. 6715;
emphasis supplied).
2. Article 264, same Labor Code
Art. 264. Prohibited activities. (a) No labor organization or
employer shall declare a strike or lockout without first having
bargained collectively in accordance with Title VII of this Book
or without first having filed the notice required in the
preceding Article or without the necessary strike or lockout
vote first having been obtained and reported to the Ministry.
No strike or lockout shall be declared after assumption of
jurisdiction by the President or the Minister or after
certification or submission of the dispute to compulsory or
voluntary arbitration or during the pendency of cases
involving the same grounds for the strike or lockout
. . . (emphasis supplied).
Any worker whose employment has been terminated as
consequence of an unlawful lockout shall be entitled to
reinstatement with full back wages. Any union officer who
knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission
of illegal acts during a strike may be declared to have lost his
employment status: Provided, That mere participation of a
worker in a lawful strike shall not constitute sufficient ground
for termination of his employment, even if a replacement
had been hired by the employer during such lawful
strike . . . (emphasis supplied).
3. Section 6, Rule IX, of the New Rules of Procedure of the
NLRC (which took effect on 31 August 1990)

Sec. 6. Effects of Defiance. Non-compliance with the

certification order of the Secretary of Labor and Employment
or a return to work order of the Commission shall be
considered an illegal act committed in the course of the
strike or lockout and shall authorize the Secretary of Labor
and Employment or the Commission, as the case may be, to
enforce the same under pain or loss of employment status or
entitlement to full employment benefits from the locking-out
employer or backwages, damages and/or other positive
and/or affirmative reliefs, even to criminal prosecution
against the liable parties . . . (emphasis supplied).
Private respondent UNION maintains that the reason they
failed to immediately comply with the return-to-work order of
5 November 1990 was because they questioned the
assumption of jurisdiction of respondent SECRETARY. They
were of the impression that being an academic institution,
the school could not be considered an industry indispensable
to national interest, and that pending resolution of the issue,
they were under no obligation to immediately return to work.
This position of the UNION is simply flawed. Article 263 (g) of
the Labor Code provides that if a strike has already taken
place at the time of assumption, "all striking . . . employees
shall immediately return to work." This means that by its very
terms, a return-to-work order is immediately effective and
executory notwithstanding the filing of a motion for
reconsideration (University of Sto. Tomas v. NLRC). 9 It must
be strictly complied with even during the pendency of any
petition questioning its validity (Union of Filipro Employees v.
Nestle Philippines, Inc., supra). After all, the assumption
and/or certification order is issued in the exercise of
respondent SECRETARY's compulsive power of arbitration
and, until set aside, must therefore be immediately complied
with.

The rationale for this rule is explained in University of Sto.

Tomas v. NLRC, supra, citing Philippine Air Lines Employees
Association v. Philippine Air Lines, Inc., 10 thus
To say that its (return-to-work order) effectivity must wait
affirmance in a motion for reconsideration is not only to
emasculate it but indeed to defeat its import, for by then the
deadline fixed for the return to work would, in the ordinary
course, have already passed and hence can no longer be
affirmed insofar as the time element is concerned.
Moreover, the assumption of jurisdiction by the Secretary of
Labor and Employment over labor disputes involving
academic institutions was already upheld in Philippine School
of Business Administration v. Noriel 11 where We ruled thus:
There is no doubt that the on-going labor dispute at the
school adversely affects the national interest. The school is a
duly registered educational institution of higher learning with
more or less 9,000 students. The on-going work stoppage at
the school unduly prejudices the students and will entail
great loss in terms of time, effort and money to all
concerned. More important, it is not amiss to mention that
the school is engaged in the promotion of the physical,
intellectual and emotional well-being of the country's youth.
Respondent UNION's failure to immediately comply with the
return-to-work order of 5 November 1990, therefore, cannot
be condoned.
The respective liabilities of striking union officers and
members who failed to immediately comply with the returnto-work order is outlined in Art. 264 of the Labor Code which
provides that any declaration of a strike or lockout after the
Secretary of Labor and Employment has assumed jurisdiction
over the labor dispute is considered an illegal. act. Any
worker or union officer who knowingly participates in a strike

defying a return-to-work order may, consequently, "be

declared to have lost his employment status."
Section 6 Rule IX, of the New Rules of Procedure of the NLRC,
which provides the penalties for defying a certification order
of the Secretary of Labor or a return-to-work order of the
Commission, also reiterates the same penalty. It specifically
states that non-compliance with the aforesaid orders, which
is considered an illegal act, "shall authorize the Secretary of
Labor and Employment or the Commission . . . to enforce the
same under pain of loss of employment status." Under the
Labor Code, assumption and/or certification orders are
similarly treated.
Thus, we held in Sarmiento v. Tuico, supra, that by insisting
on staging the restrained strike and defiantly picketing the
company premises to prevent the resumption of operations,
the strikers have forfeited their right to be readmitted,
having abandoned their positions, and so could be validly
replaced.
We recently reiterated this stance in Federation of Free
Workers v. Inciong, 12 wherein we cited Union of Filipro
Employees v. Nestle Philippines, Inc., supra, thus
A strike undertaken despite the issuance by the Secretary of
Labor of an assumption or certification order becomes a
prohibited activity and thus illegal, pursuant to the second
paragraph of Art. 264 of the Labor Code as amended . . . The
union officers and members, as a result, are deemed to have
lost their employment status for having knowingly
participated in an illegal act.
Despite knowledge of the ruling in Sarmiento v. Tuico,
supra, records of the case reveal that private respondent
UNION opted to defy not only the return-to-work order of 5
November 1990 but also that of 9 November 1990.

While they claim that after receiving copy of the Order of 9

November 1990 initiatives were immediately undertaken to
fashion out a return-to-work agreement with management,
still, the unrebutted evidence remains that the striking union
officers and members tried to return to work only eleven (11)
days after the conciliation meetings ended in failure, or
twenty (20) days after they received copy of the first returnto-work order on 5 November 1990.
The sympathy of the Court which, as a rule, is on the side of
the laboring classes (Reliance Surety & Insurance Co., Inc. v.
NLRC), 13 cannot be extended to the striking union officers
and members in the instant petition. There was willful
disobedience not only to one but two return-to-work orders.
Considering that the UNION consisted mainly of teachers,
who are supposed to be well-lettered and well-informed, the
Court cannot overlook the plain arrogance and pride
displayed by the UNION in this labor dispute. Despite
containing threats of disciplinary action against some union
officers and members who actively participated in the strike,
the letter dated 9 November 1990 sent by the COLLEGE
enjoining the union officers and members to return to work
on 12 November 1990 presented the workers an opportunity
to return to work under the same terms and conditions or
prior to the strike. Yet, the UNION decided to ignore the
same. The COLLEGE, correspondingly, had every right to
terminate the services of those who chose to disregard the
return-to-work orders issued by respondent SECRETARY in
order to protect the interests of its students who form part of
the youth of the land.
Lastly, the UNION officers and members also argue that the
doctrine laid down in Sarmiento v. Tuico, supra, and Union of
Filipro Employees v. Nestle, Philippines, Inc., supra, cannot be
made applicable to them because in the latter two cases,
workers defied the return-to-work orders for more than five

(5) months. Their defiance of the return-to-work order, it is

said, did not last more than a month.
Again, this line of argument must be rejected. It is clear from
the provisions above quoted that from the moment a worker
defies a return-to-work order, he is deemed to have
abandoned his job. It is already in itself knowingly
participating in an illegal act. Otherwise, the worker will just
simply refuse to return to his work and cause a standstill in
the company operations while retaining the positions they
refuse to discharge or allow the management to fill
(Sarmiento v. Tuico, supra).Suffice it to say, in Federation of
Free Workers v. Inciong, supra, the workers were terminated
from work after defying the return-to-work order for only nine
(9) days. It is indeed inconceivable that an employee, despite
a return-to-work order, will be allowed in the interim to stand
akimbo and wait until five (5) orders shall have been issued
for their return before they report back to work. This is
absurd.
In fine, respondent SECRETARY gravely abused his discretion
when he ordered the reinstatement of striking union
members who refused to report back to work after he issued
two (2) return-to-work orders, which in itself is knowingly
participating in an illegal act. The Order in question is,
certainly, contrary to existing law and jurisprudence.
WHEREFORE, the Petition for Certiorari is hereby GRANTED.
The Order of 12 April 1991 and the Resolution 31 May 1991
both issued by respondent Secretary of Labor and
Employment are SET ASIDE insofar as they order the
reinstatement of striking union members terminated by
petitioner, and the temporary restraining order We issued on
June 26, 1991, is made permanent.
No costs.
SO ORDERED.

G.R. No. 122743 & 127215. December 12, 1997]

TELEFUNKEN SEMICONDUCTORS EMPLOYEES UNION FFW, petitioner, vs. SECRETARY OF LABOR AND
EMPLOYMENT AND TEMIC TELEFUNKEN MICROELECTRONICS (PHILS.), INC., respondent.
TEMIC TELEFUNKEN MICRO-ELECTRONICS (PHILS.)
INC., petitioner, vs. HON. LEONARDO A. QUISUMBING
in his capacity as Secretary of Labor and Employment,
and TELEFUNKEN SEMICONDUCTORS EMPLOYEES
UNION - FFW, respondents.
DECISION
BELLOSILLO, J.:
Two (2) petitions for certiorari are before us: first, the petition
instituted by Telefunken Semiconductors Employees UnionFFW (UNION for brevity), questioning the exclusion of union
officers, shop stewards and those with pending criminal
charges in the order of the Acting Secretary of the
Department of Labor and Employment (DOLE) directing the
company to accept back all striking workers, docketed as
G.R. No. 122743, and second, the petition filed a year later
by Temic Telefunken Microelectronics (Phils.), Inc. (COMPANY
for brevity), seeking to set aside altogether the writ of
execution issued to implement the order, docketed as G.R.
No. 127215.
On 25 August 1995 the dispute between the parties started
when the COMPANY and the UNION reached a deadlock in
their negotiations for a new collective bargaining agreement.

Hence on 28 august 1995 the UNION filed a Notice of Strike

with the National Conciliation and Mediation Board. On 8
September 1995, upon petition of the COMPANY considering
the nature of its business and the corresponding effects to
the country's economy, then Acting Secretary of Labor and
Employment Jose S. Brillantes, after ascertaining that the
labor dispute involved a matter of national interest,
intervened and assumed jurisdiction over the dispute
pursuant to Art. 263, par. (g), of the Labor Code.
Nevertheless, on 14 September 1995 the UNION struck. Two
(2) days later, or on 16 September 1995, Acting Secretary
Brillantes ordered the striking workers to return to work
within twenty-four (24) hours. But the striking UNION
members failed to return to work; instead, they continued
with their pickets. As a result, on 23 September 1995
violence erupted in the picket lines. The service bus ferrying
non-striking workers was stoned causing injuries to its
passengers. Thereafter complaints for threats, defamation,
illegal detention and physical injuries were filed against the
strikers.
Meanwhile, on 26 September 1995 the COMPANY
sent show cause memoranda to the UNION members who
joined the strike and defied the return-to work orders,
directing them to submit their written explanation why they
should not be disciplined or dismissed from employment. Not
one reportedly submitted an explanation. Still, a number of
UNION members continued refusing to return to work. Thus
on 1 October 1995 the UNION members were placed under
preventive suspension and asked to appear in the
administrative hearing that was conducted. Only two (2)
workers appeared. Consequently, on 2 October 1995 letters
of termination for cause were personally delivered to UNION
members who failed to report for work notwithstanding the
assumption and return-to-work orders.

On 29 October 1995 Acting Secretary Brillantes issued an

Order dated 27 October 1995 a portion of which reads Atty. Tito F. Genilo, Technical Assistant, Office of the
Secretary, this Department, is hereby designated to
immediately call the parties and hear and receive evidence
on the matter of illegal strike, including the reciprocal
demands of the parties for damages arising therefrom, and
to submit the appropriate report and recommendations on
the case within ten (10) days from termination of the
proceedings thereon.
Pending resolution of the issue involving the legality of the
strike, the Company is hereby directed to accept back
all striking workers, except the Union Officers, shop
stewards, and all those with pending criminal charges,
whose termination shall be among the issues to be
heard by Atty. Genilo.
Relative thereto, the parties are hereby directed to submit
their position papers and evidence within ten (10) days from
receipt of this Order (emphasis supplied).[1]
On 9 November 1995 both the COMPANY and the UNION filed
their respective motions for reconsideration. On 24
November 1995 Acting Secretary Brillantes issued an order
modifying in part his 27 October 1995 Order, but affirmed
that portion which excluded the union officers, shop stewards
and those with pending criminal charges, from the order to
accept back all striking workers pending the resolution of the
issue involving the legality of the strike.
On 5 December 1995, the UNION, aggrieved by the Order of
27 October 1995 instituted a petition for certiorari before this
Court questioning the order excluding all union officers, shop
stewards and all those with pending criminal charges. The
UNION argued that since, as stated in the Order of 27
October 1995, the termination (of all union officers, shop

stewards and all those with pending criminal charges) shall

be among the issues to be heard by Atty. Genilo, they
should not have been excluded at all in the first place, as
their immediate exclusion is in effect termination without due
process.
Meanwhile, as a result of the dispute, some 1,500 striking
workers many of whom had been charged before the Office
of the Prosecutor after 27 October 1995 have yet to be
reinstated. On 7 December 1995 Acting Secretary Brillantes
issued a clarificatory order the dispositive portion of which
states WHEREFORE, as clarified above, we hereby rule that the
phrase those with pending criminal charges shall only
cover those workers with pending criminal charges at the
time of the issuance of the Order dated 27 October 1995. [2]
Pending resolution of the petition filed by the UNION before
this Court, Secretary of Labor and Employment Leonardo A.
Quisumbing issued a Writ of Execution the dispositive portion
of which states ACCORDINGLY, A Writ of Execution is here issued
commanding Sheriff Edgar Paredes of the National Capital
Regional Office, this Department, to proceed to the premises
of Temic Telefunken Microelectronics (Phils.) Inc., at the Temic
Building, Bagsakan Road, FTI Estate, Taguig, Metro Manila,
and execute fully and faithfully the Decision of the Secretary
dated October 27, 1995 and November 24, 1995 by seeing
the actual and physical reinstatement of the remaining
striking workers listed in the 32 page Annex A who are yet to
be readmitted as ordered in the Decisions under the same
terms and conditions prevailing before the strike on
September 14, 1995 and, if necessary, to seek the aid of the
Taguig Police Station, Taguig, Metro Manila, which is here
deputized for the purpose of aiding this Office in the
enforcement of its Orders and to make a return within thirty

(30) days from issuance of the Writ to the Office of the

Secretary, copy furnished the Legal Service. [3]
The COMPANY filed a Motion to Quash, Recall or Suspend the
Writ of Execution. On 17 October 1996 the motion was
denied for lack of merit and an alias writ of execution was
issued directing the reinstatement of the strikers in the
payroll if actual and physical reinstatement was not possible.
On 23 October 1996 the COMPANY filed a motion for
reconsideration which on 21 November 1996 was denied. On
9 December 1996 the COMPANY, not satisfied with the
rulings of the Secretary of Labor and Employment, petitioned
this Court for a writ of certiorari.
In these twin petitions, the UNION argues that the exclusion
of union officers, shop stewards and those with pending
criminal charges from the directive to the COMPANY to
accept back the striking workers is tantamount to illegal
dismissal since the workers are in effect being terminated
without due process of law. The COMPANY on the other hand
maintains that the dismissal of those who failed to comply
with the assumption and return-to-work orders is valid and in
accordance with jurisprudence.
Furthermore, the COMPANY asserts that the Secretary of
Labor and Employment should have refrained from issuing a
writ of execution mandating the immediate reinstatement of
some 1,500 dismissed striking workers since the exclusion of
union officers, shop stewards and those with pending
criminal charges from the directive to the COMPANY to
accept back the striking workers is still pending before this
Court. Also, the COMPANY claims that the Secretary of Labor
gravely abused his discretion when he ruled that complaints
lodged with the police authorities before 27 October 1995
and subsequently filed with the provincial prosecutor after 27
October 1995 are not within the ambit of the phrase with
pending criminal charges.

In the main, the consolidated case raise three (3) issues:

whether the Secretary of Labor and Employment gravely
abused his discretion, first, in excluding union officers, shop
stewards and those with pending criminal charges in his
order to the COMPANY to accept back the striking
workers; second, in issuing a writ of execution pending
resolution of a related petition for certioraribefore this
Court; and third, in holding that complaints lodged before
the police authorities before 27 October 1995 and
subsequently filed with the provincial prosecutor after 27
October 1995 are not within the ambit of the phrase with
pending criminal charges.
We first resolve the exclusion of certain employees. In Union
of Filipro Employees v. Nestle Philippines, Inc. [4] we said x x x an assumption and/or certification order of the
Secretary of Labor automatically results in return-to-work of
all striking workers, whether or not a corresponding order has
been issued by the Secretary of Labor x x x x Article 264 (g)
is clear. Once an assumption/certification order is issued,
strikes are enjoined, or if one has already taken place, all
strikers shall immediately return to work.
A strike that is undertaken despite the issuance of the
Secretary of Labor of an assumption or certification order
becomes a prohibited activity and thus illegal, pursuant to
the second paragraph of Art. 264 of the Labor Code as
amended (Zamboanga Wood Products, Inc. v. NLRC, G.R. No.
82088, October 13, 1989; 178 SCRA 482).
In Gold City Integrated Port Service, Inc. v. National Labor
Relations Commission [5] we explained The effects of such illegal strikes, outlined in Article 265 (now
Article 264) of the Labor Code, make a distinction between
workers and union officers who participate therein.

A union officer who knowingly participates in an illegal strike

and any worker or union officer who knowingly participates in
the commission of illegal acts during a strike may be
declared to have lost their employment status. An ordinary
striking worker cannot be terminated for mere participation
in an illegal strike. There must be proof that he committed
illegal acts during a strike. A union officer, on the other hand,
may be terminated from work when he knowingly
participates in an illegal strike, and like other workers, when
he commits an illegal act during a strike.
But as we said in Batangas Laguna Tayabas Bus Company v.
NLRC- [6]
That is only half the picture. As the NLRC further explained, it
was not inclined to declare a wholesale forfeiture of
employment status of all those who participated in the
strike because, first of all, there was an inadequate service
of the certification order on the union as of the date the
strike was declared and there was no showing that the
striking members had been apprised of such order by the
NAFLU x x x x We agree with the Solicitor General that the
mere filing of charges against an employee for alleged illegal
acts during a strike does not by itself justify his dismissal.
The charges must be proved at an investigation duly called
where the employee shall be given an opportunity to defend
himself. This is true even if the alleged ground constitute a
criminal offense x x x x
In the case before us, we cannot see how respondent
Secretary of Labor and Employment arrived at his decision of
excluding union officers, shop stewards and those with
pending criminal charges in his directive to the COMPANY to
accept back the striking workers. For in the same assailed
Order he said on the illegal strike issue Taking into account that the determination of this issue
requires the appreciation of evidentiary matters and

testimonies of the parties involved, this Office likewise finds

it appropriate to conduct further hearing hereon. Hence,
resolution on this issue is hereby deferred until the
termination of the appropriate proceedings hereon.
Thus in the dispositive portion of his Order the Secretary of
Labor stated that the termination of subject employees shall
be among the issues yet to be heard by Atty. Genilo who was
designated to immediately call the parties and hear and
receive evidence on the matter of illegal strike, including the
reciprocal demands of the parties for damages arising
therefrom x x x x [7]
It may be true that the workers struck after the Secretary of
Labor and Employment had assumed jurisdiction over the
case and that they may have failed to immediately return to
work even after the issuance of a return-to-work order,
making their continued strike illegal. For, a return-to-work
order is immediately effective and executory notwithstanding
the filing of a motion for reconsideration. [8] But, the liability
of each of the union officers and the workers, if any, has yet
to be determined. More so in the instant case where the
UNION alleges inadequate service upon the UNION leadership
of the Assumption Order of 8 September 1995 and the
return-to-work order of 16 September 1995. [9] Thus, did all or
some of the UNION leaders knowingly participate in the
illegal strike? Did any or all of the members of the UNION
who then had pending criminal charges knowingly participate
in the commission, if any, of illegal acts during the strike?
The records do not bear the answers to these questions, but
not expectedly so, for Atty. Genilo of the DOLE has yet to
hear and receive evidence on the matter, and to submit a
report and recommendation thereon.
Thus to exclude union officers, shop stewards and those with
pending criminal charges in the directive to the COMPANY to
accept back the striking workers without first determining

whether they knowingly committed illegal acts would be

tantamount to dismissal without due process of law. We
therefore hold that the Honorable Secretary of Labor gravely
abused his discretion in excluding union officers, shop
stewards and those with pending criminal charges in the
order to the COMPANY to accept back the striking workers
pending resolution of the issue involving the legality of the
strike.
We however sustain the authority of the Secretary of Labor
and Employment to issue the assailed writ of execution- [10]
We likewise do not find any merit in the Company's
contention that when the Union filed a Petition
for Certiorari with the Supreme Court (docketed as G.R. No.
122743), with a prayer that the Company be directed to
accept back all striking workers without any exception, it has
effectively raised the matter to the Supreme Court.
We must emphasize that the issue involved in
the certiorari case now pending before the Supreme Court is
the legality of the exclusion of the Union officers, shop
stewards and those against whom criminal charges were filed
on October 27, 1995, vis-a-vis, this Office's return-to-work
order. On the other hand, the pending issue before this Office
is the propriety of the issuance of a Writ of Execution to
enforce the twin orders dated October 27, 1995 and
November 24, 1995 which have long become final and
executory.
We need not remind the Company that the decision of this
Office is final and executory ten (10) calendar days after
receipt thereof by the parties. Thus, in clear and categorical
language, Art. 263 (1) of the Labor code, as amended,
provides:
Art. 263 (1) The Secretary of Labor and Employment, the
Commission or the Voluntary Arbitrator shall decide or

resolve the dispute, as the case may be. The decision of the
President, the Secretary of Labor and Employment, the
Commission or the Voluntary Arbitrator shall be final and
executory ten (10) calendar days after receipt thereof by the
parties.
In the case at bar, the Supreme Court did not issue any
Temporary Restraining Order. There is therefore no legal
impediment to the enforcement of the Writ of Execution and
Alias Writ of Execution previously issued by this Office.
This, to say the least, is elementary. Thus, as correctly cited
by the UNION, [11] this Court in Santiago v. Vasquez [12] said Petitioner further posits, however, that the filing of the
instant special civil action for certiorari divested the
Sandiganbayan of its jurisdiction over the case therein.
Whether generated by misconception or design, we shall
address this proposition which, in the first place, had no
reason for being and should not hereafter be advanced under
like similar procedural scenarios.
The original and special civil action filed with this Court is, for
all intents and purposes, an invocation for the exercise of its
supervisory powers over the lower courts. It does not have
the effect of divesting the inferior courts of jurisdiction validly
acquired over the case pending before them. It is elementary
that the mere pendency of a special civil action for certiorari,
commenced in relation to a case pending before a lower
court, does not even interrupt the course of the latter when
there is no writ of injunction restraining it. The inevitable
conclusion is that for as long as no writ of injunction or
restraining order is issued in the special civil action
for certiorari, no impediments exists and there is nothing to
prevent the lower court from exercising its jurisdiction and
proceeding with the case pending before it. And, even if such
injunctive writ or order is issued, the lower court nevertheless
continues to retain its jurisdiction over the principal action.

The COMPANY likewise argues that the Secretary of Labor

gravely abuse his discretion when he ruled that complaints
filed with the police authorities before 27 October 1995 and
subsequently with the provincial prosecutor after 27 October
1995 are not within the ambit of the phrase with pending
criminal charges. Suffice it to say that this issue has been
rendered moot. For, we have earlier said that no striker
should have been excluded it appearing from the record that
the strike has yet to be ruled upon and the liability of each
striker still to be determined.
But if only for the sake of argument, the contention of the
COMPANY is still specious. The Secretary of Labor could not
have explained this point any better -[13]
In clarifying the workers excluded by the order dated 27
October 1995, we are guided by the principle that the returnto-work Order issued herein was designed to restore the
Company's normal operations and at the same time provide
employment to the greater majority of its employees pending
resolution of the labor dispute. It would does be absurd, nay,
illogical for us to interpret and conclude that the phrase
those with pending criminal charges covers criminal cases
filed against the striking workers after the issuance of the
Order dated 27 October 1995. To our mind, such an
interpretation would open the floodgates to the massive
exclusion from work of the striking workers thru the simple
expedient of filing criminal charges against them long after
the issuance of the return-to-work Order.
At best the raising of this issue by COMPANY appears to be
an afterthought as the COMPANY has failed to seek the
reversal of the Order of 7 December 1995 holding that the
phrase those with pending criminal charges' shall only cover
those workers with pending criminal charges at the time of
the issuance of the Order dated 27 October 1995. The
COMPANY merely questioned this ruling after a writ of

execution was already issued on 27 June 1996, or long after

the clarificatory order dated 7 December 1995 had become
final and executory.
In fine, we repeat what the Solicitor General astutely
observed in Batangas Laguna Tayabas Bus Company v.
NLRC- [14]
The assailed Resolution does not prevent petitioner from
continuing with its investigations and come up with evidence
against these workers. But they have to be admitted back to
their work first. This is clearly a situation where the social
justice provisions of our laws and jurisprudence come in aid
of labor. Since such investigations might be extended,
intentionally or otherwise, the workers are in danger of losing
their livelihood. As compared to the management that is in a
position to wage an extended legal struggle against labor,
the latter cannot do so. This is where the State intervenes to
equalize matters between labor and management.
While this Court prefers to rule likewise on the legality or
illegality of the strike and determine the individual liability of
the strikers, if any, to put an end to this protracted labor
dispute, this Court is unable to do so as the record is wanting
of any evidence to support a conclusion. We thus order the
Secretary of Labor to resolve the instant case with utmost
dispatch and determine whether the strike was illegal and
the liability of the individual strikers, if any.
A word of admonition to petitioner-employees who camped in
front of the Supreme Court Building, commenced a hunger
strike, and who now appear to have vowed to continue with
their protest march until the end The right of petition is conceded to be an inherent right of
the citizen under all free governments. However, such right,
natural and inherent though it may be, has never been
invoke to shatter the standards of propriety entertained for

the conduct of courts. For,it is a traditional conviction

of civilized society everywhere that courts and juries, in the
decision of issues of fact and law, should be immune from
every extraneous influence; the facts should be decided
upon evidence produced in court; and that the determination
of such facts should be uninfluenced by bias, prejudice or
sympathies x x x x Moreover, parties have a constitutional
right to have their causes tried fairly in court by an impartial
tribunal, uninfluenced by publication or public clamor. Every
citizen has a profound personal interest in the enforcement of
the fundamental right to have justice administered by the
courts, under the protection and forms of law free from
outside coersion or interference.' The aforecited acts of the
respondents are therefore not only an affront to the dignity of
this Court, but equally a violation of the above-stated right of
the adverse parties and the citizenry at large x x x x The
Court will not hesitate in future similar situations to apply the
full force of the law and punish for contempt those who
attempt to pressure the Court into acting one way or the
other in any case pending before it. Grievances, if any, must
be ventilated through the proper channels, i.e., through
appropriate petitions, motions or other pleadings in keeping
with the respect due to the Courts as impartial administrators
of justice entitled to proceed to the disposition of its
business in an orderly manner, free from outside interference
obstructive of its functions and tending to embarrass the
administration of justice.' [15]
Here, the Court will do no less. It will not yield its judicial
prerogatives to petitioning strikers if only to appease them,
much less give in to their demand for a favorable decision
and violate the basic tenets of due process. For when
petitioners marched with their placards in front of the
premises of the Court, pitched their tents on the sidewalk
across the street and went on hunger strike while
demanding an early disposition in their favor, until they
moved over to the Department of Justice next door, the

petition in G.R. No. 127215 was not even submitted yet for
decision. The pleadings had yet to be completed.
Indeed, it would be unfeeling, if not unchristian, to ignore the
hunger strike of the workers and allow them to be exposed
to the elements - the cold of the night and the scorching heat
of the noonday sun. But the strikers must realize that judicial
decisions are not issued on pity and sympathy. They are
weighed according to the established facts and the merits of
the arguments of the parties. This Court at times may show
compassion and mercy but it cannot hem and haw to lay
aside its emotional nuance and sacrifice the broader interest
of fair play and justice. Let this then be a stern warning to all
those who hanker for justice yet desire to obtain it through
improper pressure and influence, e.g., demonstrations,
pretensions, mass actions, etc. This schematic artifice will
take them nowhere. On the contrary, such wantonness and
unrestrained misconduct gravely offend and affront the
dignity of the Court.
WHEREFORE, the petition in G.R. No. 122743 is GRANTED.
Respondent
TEMIC
TELEFUNKEN
MICROELECTRONICS
(PHILS.), INC., is ORDERED to accept back immediately all
striking
workers
of
TELEFUNKEN
SEMICONDUCTORS
EMPLOYEES UNION - FFW WITHOUT EXCEPTION.
In G.R. No. 127215, the petition is DISMISSED for lack of
merit. Accordingly, respondent Secretary of Labor and
Employment is DIRECTED to ensure the effective
enforcement of the writ of execution he issued and determine
WITH DISPATCH the legality of the strike as well as the
liability of the individual strikers, if any. The members of the
TELEFUNKEN SEMICONDUCTORS EMPLOYEES UNION - FFW
are WARNED that a repetition of the same or similar mass
demonstration within or about the premises of this Court will
be dealt with severely.
SO ORDERED.

G.R. Nos. 92981-83 January 9, 1992

INTERNATIONAL PHARMACEUTICALS, INC., petitioner,
vs.
HON. SECRETARY OF LABOR and ASSOCIATED LABOR
UNION (ALU), respondents.
E.B. Ramos & Associates for petitioner.
Celso C. Reales for private respondent.

REGALADO, J.:

The issue before us is whether or not the Secretary of the

Department of Labor and Employment has the power to
assume jurisdiction over a labor dispute and its incidental
controversies, including unfair labor practice cases, causing
or likely to cause a strike or lockout in an industry
indispensable to the national interest.
The operative facts which culminated in the present recourse
are undisputed.
Prior to the expiration on January 1, 1989 of the collective
bargaining agreement between petitioner International
Pharmaceuticals, Inc. (hereafter, Company) and the
Associated Labor Union (Union, for brevity), the latter
submitted to the Company its economic and political
demands. These were not met by the Company, hence a
deadlock ensued.
On June 27, 1989, the Union filed a notice of strike with
Regional Office No. VII of the National Conciliation and
Mediation Board, Department of Labor and Employment,
which was docketed as NCMB-RBVII-NS-06-050-89. After all
conciliation efforts had failed, the Union went on strike on
August 8, 1989 and the Company's operations were
completely paralyzed.
Subsequently, three other labor cases involving the same
parties were filed with the National Labor Relations
Commission (NLRC) to wit:
1. International Pharmaceuticals, Inc. vs. Associated Labor
Union, NLRC Case No. VII-09-0810-89, 1 a petition for
injunction and damages with temporary restraining order
filed by the Company against the Union and some of its
members for picketing the Company's establishment in Cebu,
Davao, and Metro Manila allegedly without the required
majority of the employees approving and agreeing to the
strike and with simulated strike votes, in direct violation of

the provisions of their collective bargaining agreement and in

total and complete defiance of the provisions of the Labor
Code;
2.
Associated
Labor
Union
vs. International
Pharmaceuticals, Inc., et al., NLRC Case No-VII-08-071589, 2 a complaint for unfair labor practice with prayer for
damages and attorney's fees filed by the Union against the
Company, its personnel manager, and the Workers Alliance of
Trade Unions (WATU) as a result of the Company's refusal to
include the sales workers in the bargaining unit resulting in a
deadlock in the bargaining negotiations; for coddling the
respondent WATU as a separate bargaining agent of the sales
workers despite a contrary ruling of the Med-Arbiter; and
undue interference by the Company in the right of the
workers to self-organization through harassment and
dispersal of a peaceful picket during the strike; and
3. International Pharmaceuticals, Inc., et al. vs. Associated
Labor Union, NLRC Case No. VII-08-0742-89, 3 a petition to
declare the strike illegal with prayer for damages filed by the
Company alleging, among others, that the notice of strike
filed by the Union with the National Conciliation and
Mediation Board did not conform with the requirements of
the Labor Code, and that the Union, in violation of the Labor
Code provisions on the conduct of the strike, totally
blockaded and continued to blockade the ingress and egress
of the Company's premises by human barricades, placards,
benches and other obstructions, completely paralyzing its
business operations.
Meanwhile, considering that the Company belongs to an
industry indispensable to national interest, it being engaged
in the manufacture of drugs and pharmaceuticals and
employing around 600 workers, then Acting Secretary of
Labor, Ricardo C. Castro, invoking Article 263 (g) of the Labor
Code, issued an order dated September 26, 1989 assuming

jurisdiction over the aforesaid case docketed as NCMB-RBVIINS-06-050-89 and directing the parties to return to the status
quo before the work stoppage. The decretal portion of the
order reads:
WHEREFORE, PREMISES CONSIDERED, this Office hereby
assumes jurisdiction over the labor dispute at the
International Pharmaceuticals, Incorporated pursuant to
Article 263 (g) of the Labor Code, as amended.
Accordingly, all striking workers are hereby directed to return
to work and management to accept them under the same
terms and conditions prevailing before the work stoppage,
within twenty four (24) hours from receipt of this Order.
Management is directed to post copies of this Order in three
(3) conspicuous places in the company premises.
The parties are likewise ordered to cease and desist from
committing any and all acts that will prejudice either party
and aggravate the situation as well as the normalization of
operations.
SO ORDERED.

On January 15, 1990, the Union filed a motion in NCMB-RBVIINS-06-050-85, the case over which jurisdiction had been
assumed by the Secretary of Labor and Employment
(hereafter referred to as the Secretary), seeking the
consolidation of the three NLRC cases (NLRC Cases Nos. VII09-0810-89, VII-08-0715-89, and VII-08-0742-89) with the
first stated case.
In an order dated January 31, 1990, Secretary of Labor Ruben
D. Torres granted the motion and ordered the consolidation of
the three NLRC cases with NCMB-RBVII-NS-06-050-89, as
follows:
WHEREFORE, finding the Associated Labor Union's Motion to
be meritorious, the same is granted and NLRC Cases Nos. VII-

09-0810-89, VII-08-0715-89 and VII-08-0742-89 are hereby

ordered consolidated with the instant proceedings. The Labor
Arbiter handling the same is directed to immediately transmit
the records of the said cases to the Asst. Regional Director,
DOLE Regional Office No. 7 who has been designated to hear
and receive the evidence of the parties.
SO ORDERED.

The Company's subsequent motion for reconsideration of the

order consolidating the cases was denied by the Secretary on
March 5, 1990. 6 Thereafter, the Assistant Regional Director
of Regional Office No. VII, as directed, assumed jurisdiction
over the consolidated cases and set the same for reception of
evidence.
Petitioner Company now comes to this Court assailing the
aforesaid orders and alleging grave abuse of discretion on
the part of the public respondent in the issuance thereof. The
Union, as the bargaining agent of the rank and file workers of
the Company, was impleaded as the private respondent.
Petitioner Company submits that the exclusive jurisdiction to
hear and decide the three NLRC cases above-specified is
vested in the labor arbiter as provided in paragraph (a) (1)
and (5) of Article 217 of the Labor Code.
Moreover, petitioner insists that there is nothing in Article
263 (g) of the Labor Code which directs the labor arbiter to
hold in abeyance all proceedings in the NLRC cases and await
instruction from the Secretary. Otherwise, so it postulates,
Section 6, Rule V of the Revised Rules of the NLRC which is
invoked by the Secretary is null and void since it orders the
cessation of all proceedings before the labor arbiter and
orders him to await instructions from the Secretary in labor
disputes where the Secretary bas assumed jurisdiction,
thereby amending Article 263 (g) of the Labor Code by
enlarging the jurisdiction of the Secretary.

Petitioner further contends that, granting arguendo that

Section 6, Rule V of the Revised Rules of the NLRC is in
accordance with Article 263 (g) of the Labor Code, still the
Secretary should not have ordered the consolidation of the
three unfair labor practice cases with NCMB-RBVII-NS-06-05089, since the Secretary assumed jurisdiction only over the
deadlock in the negotiation of the collective bargaining
agreement and the petition for contempt as a result of the
said deadlock.
Respondents, on the other band, assert that the authority to
assume jurisdiction over labor disputes, vested in the
Secretary by Article 263 (g) of the Labor Code, extends to all
questions and incidents arising therein causing or likely to
cause strikes or lockouts in industries indispensable to
national interest.
Moreover, respondents counter that Section 6, Rule V of the
Revised Rules of the NLRC is in accordance with Article 263
(g) of the Labor Code, notwithstanding the provisions of
Article 217 of the Labor Code. To rule otherwise, they point
out, would encourage splitting of jurisdiction, multiplicity of
suits, and possible conflicting findings and decisions which
could only result in delay and complications in the disposition
of the labor disputes.
It was also stressed that the three NLRC cases which
respondent Secretary ordered consolidated with the labor
dispute over which he had assumed jurisdiction arose from or
are directly related to and are incidents of the said labor
dispute.
Finally, respondents invoke the rule that all doubts in the
implementation and interpretation of the Labor Code
provisions should be resolved in favor of labor. By virtue of
the assailed orders, the Union and its members were relieved
of the burden of having to litigate their interrelated cases in
different fora.

There are three governing labor law provisions which are

determinative of the present issue of jurisdiction, viz.:
1. Article 217 (a) (1) and (5) of the Labor Code which
provides:
Art. 217. Jurisdiction of Labor Arbiters and the Commission
(a) Except as otherwise provided under this Code the
Labor Arbiters shall have original and exclusive jurisdiction to
hear and decide . . . the following cases involving all workers.
...
1. Unfair labor practice cases;
xxx xxx xxx
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and
lockouts; . . .
2. Article 263 (g) of the Labor Code which declares:
(g) When, in his opinion, there exists a labor dispute causing
or likely to cause a strike of lockout in an industry
indispensable to the national interest, the Secretary of Labor
and Employment may assume jurisdiction over the dispute
and decide it or certify the same to the Commission for
compulsory arbitration. . . .
3. Section 6, Rule V of the Revised Rules of the NLRC which
states:
Sec. 6. Disposition of cases. . . .
Provided, that when the Minister (Secretary) of Labor and
Employment has assumed jurisdiction over a strike or lockout
dispute or certified the same to the Commission, the parties
to such dispute shall immediately inform the Minister
(Secretary) or the Commission as the case may be, of all
cases between them pending before any Regional Arbitration

Branch, and the Labor Arbiter handling the same of such

assumption or certification, whereupon all proceedings
before the Labor Arbiter concerning such cases shall cease
and the Labor Arbiter shall await instructions from the
Minister (Secretary) or the Commission.
The foregoing provisions persuade us that the Secretary did
not gravely abuse his discretion when he issued the
questioned orders.
As early as 1913, this Court laid down in Herrera vs. Baretto,
et al., 7 the fundamental normative rule that jurisdiction is
the authority to bear and determine a cause the right to
act in a case. However, this should be distinguished from the
exercise of jurisdiction. The authority to decide a case at all
and not the decision rendered therein is what makes up
jurisdiction. Where there is jurisdiction over the person and
the subject matter, the decision of all other questions arising
in the case is but an exercise of that jurisdiction. 8
In the present case, the Secretary was explicitly granted by
Article 263 (g) of the Labor Code the authority to assume
jurisdiction over a labor dispute causing or likely to cause a
strike or lockout in an industry indispensable to the national
interest, and decide the same accordingly. Necessarily, this
authority to assume jurisdiction over the said labor dispute
must include and extend to all questions and controversies
arising therefrom, including cases over which the labor
arbiter has exclusive jurisdiction.
Moreover, Article 217 of the Labor Code is not without, but
contemplates, exceptions thereto. This is evident from the
opening proviso therein reading "(e)xcept as otherwise
provided under this Code . . ." Plainly, Article 263 (g) of the
Labor Code was meant to make both the Secretary (or the
various regional directors) and the labor arbiters share
jurisdiction, subject to certain conditions. 9 Otherwise, the
Secretary would not be able to effectively and efficiently

dispose of the primary dispute. To hold the contrary may

even lead to the absurd and undesirable result wherein the
Secretary and the labor arbiter concerned may have
diametrically opposed rulings. As we have said, "(i)t is
fundamental that a statute is to be read in a manner that
would breathe life into it, rather than defeat it." 10
In fine, the issuance of the assailed orders is within the
province of the Secretary as authorized by Article 263 (g) of
the Labor Code and Article 217 (a) (1) and (5) of the same
Code, taken conjointly and rationally construed to subserve
the objective of the jurisdiction vested in the Secretary.
Our pronouncement on this point should be distinguished
from the situation which obtained and our consequent ruling
in Servando's,
Inc. vs. The
Secretary
of
Labor
and
11
Employment, et al. wherein we referred to the appropriate
labor arbiter a case previously decided by the Secretary. The
said case was declared to be within the exclusive jurisdiction
of the labor arbiter since the aggregate claims of each of the
employees involved exceeded P5,000.00. In Servando, the
Secretary invoked his visitorial and enforcement powers to
assume jurisdiction over the case, the exclusive and original
jurisdiction of which belongs to the labor arbiter. We said that
to uphold the Secretary would empower him, under his
visitorial powers, to hear and decide an employee's claim of
more than P5,000.00. We held that he could not do that and
we, therefore, overruled him.
In the present case, however, by virtue of Article 263 (g) of
the Labor Code, the Secretary has been conferred jurisdiction
over cases which would otherwise be under the original and
exclusive jurisdiction of labor arbiters. There was an existing
labor dispute as a result of a deadlock in the negotiation for a
collective bargaining agreement and the consequent strike,
over which the Secretary assumed jurisdiction pursuant to
Article 263 (g) of the Labor Code. The three NLRC cases were

just offshoots of the stalemate in the negotiations and the

strike. We, therefore, uphold the Secretary's order to
consolidate the NLRC cases with the labor dispute pending
before him and his subsequent assumption of jurisdiction
over the said NLRC cases for him to be able to competently
and efficiently dispose of the dispute in its totality.
Petitioner's thesis that Section 6, Rule V of the Revised Rules
of the NLRC is null and void has no merit. The aforesaid rule
has been promulgated to implement and enforce Article 263
(g) of the Labor Code. The rule is in harmony with the
objectives sought to be achieved by Article 263 (g) of the
Labor Code, particularly the Secretary's assumption of
jurisdiction over a labor dispute and his subsequent
disposition of the same in the most expeditious and
conscientious manner. To be able to completely dispose of a
labor dispute, all its incidents would have to be taken into
consideration. Clearly, the purpose of the questioned
regulation is to carry into effect the broad provisions of
Article 263 (g) of the Labor Code.
By and large, Section 6, Rule V of the Revised Rules of the
NLRC is germane to the objects and purposes of Article 263
(g) of the Labor Code, and it is not in contradiction with but
conforms to the standards the latter requires. Thus, we hold
that the terms of the questioned regulation are within the
statutory power of the Secretary to promulgate as a
necessary implementing rule or regulation for the
enforcement and administration of the Labor Code, in
accordance with Article 5 of the same Code.
Besides, to uphold petitioner Company's arguments that the
NLRC cases are alien and totally separate and distinct from
the deadlock in the negotiation of the collective bargaining
agreement is to sanction split jurisdiction which is obnoxious
to the orderly administration of justice. 12

Moreover, the rule is that all doubts in the interpretation and

implementation of labor laws should be resolved in favor of
labor. In upholding the assailed orders of the Secretary, the
Court is only giving meaning to this rule. The Court should
help labor authorities provide workers immediate access to
their rights and benefits, without being hampered by
arbitration or litigation processes that prove to be not only
nerve-wracking, but financially burdensome in the long
run. 13 Administrative rules of procedure should be construed
liberally in order to promote their object and assist the
parties, especially the workingman, in obtaining just, speedy,
and inexpensive determination of their respective claims and
defenses. By virtue of the assailed orders. The Union and its
members are relieved of the burden of litigating their
interrelated cases in different tribunals.
WHEREFORE. there being no grave abuse of discretion
committed by the Secretary of Labor and Employment, the
petition at bar is hereby DISMISSED.
SO ORDERED.

vs.
BCI EMPLOYEES & WORKERS UNION-PAFLU and
DONACIANO S. ANDRADA and the COURT OF
INDUSTRIAL RELATIONS, respondents.
Ross, Selph, Salcedo, Del Rosario, Bito & Misa for petitioners.
Leonardo C. Fernandez and Cipriano Cid & Associates for
respondents.
BENGZON, J.P., J.:
On May 3, 1963, respondent labor union and
Donaciano Andrada filed an unfair labor practice charge in
the Court of Industrial Relations against petitioner company
alleging that the latter unduly discriminated against
respondent Andrade, one of its employees, with regard to his
status and conditions of employment in violation of Sec. 4(a)
(4) of Republic Act 875.
After investigating the charge, the acting prosecutor of
the Court filed on September 4, 1963, the formal complaint
against petitioners company and some of its officials. The
principal averment in the complaint was 1
That in the year 1954, complainant Danaciano Andrada
was promoted to the position of Invoice Processing Clerk, but
respondents refused to implement his wage scale as
embodied in the several collective bargaining agreements
between the Benguet Balatoc Workers Union, the
complainant labor organization and the company, starting
1954, on account of:
(a) His militant union activities;
G.R. No. L-25471

March 27, 1968

BENGUET CONSOLIDATED, INC., STANLEY WILLIMONT,

EUGENE KNEEBONE, C.W. HEROLD, A.P. DAVIDSON,
G.N. WRIGHT and O.M. WESTERFIELD, petitioners,

(b) his persistent refusal to disaffiliate from complainant

union;
(c) his petitions for the betterment of his co-employees for
which he was discriminated by the company;1wph1.t

Petitioners filed their answer on September 28, 1963

denying the alleged discrimination against respondent
Andrada and the alleged unjust refusal on their part to
implement the wage scale under the Collective Bargaining
Agreements.
Issues having been joined, trial was conducted. On
March 23, 1965, Associate Judge Amando Bugayong before
whom the hearings were made, rendered decision finding
petitioners guilty of unfair labor practice based on the
following of facts:2
Respondent Benguet Consolidated, Inc., is a domestic
corporation engaged in the mining industry with respondents
Stanley Willimont, Eugene Kneebone, C.W. Herold, G.N.
Wright, O.M. Westerfield, A.P. Davidson and William Johnson
as its officers. Complainant BCI Employees and Workers
Union (PAFLU) is a legitimate labor union while complainant
Donaciano Andrada is a member thereof.
Prior to December 19, 1954, complainant Andrada was
a payroll clerk in the respondent Company with a salary of
P3.24 per day. On August 28, 1954, he and several others
petitioned the respondent company that they be given the
rates of pay as prescribed in the collective bargaining
contract. It appears that at that time there was an existing
collective bargaining contract between the respondent
company then operating under the trade name Benguet
Consolidated Mining Company and Balatoc Mining Company
and the Benguet-Balatoc Workers Union of which complainant
Andrada was then a member. Said contract (Exh. "A")
provides for the wage scales of the workers and pursuant
thereto, the wage scale of a payroll clerk, first class category,
was P3.56 per day (Exh. "A-1"). Thus, complainant Andrada,
together with several others, requested for adjustment of
their wages (Exh. "B") and the respondent company, in
compliance thereto made the necessary salary adjustment

with the exception of complainant Andrada who, although he

was reclassified from clerk second class to clerk first class,
did not receive any corresponding increase in his pay (Exh.
"1").
Then, on or about January 1, 1955, he was transferred
from the Accounting Department, clerk first class, to the
Purchasing Department also as clerk first class with the same
salary of P97.20 per month or P3.24 per day (Exh. "E"). His
assignment in the Purchasing Department was recommended
by S.J. Willimont, his former department head, and C.W.
Herold, head of the Purchasing Department, and approved by
A.P. Davidson, General Superintendent. He was assigned to
replace Ramon M. Alvia, a bodeguero performing invoice
clearing duties who resigned December 19, 1954 and who
was receiving a salary of P4.60 per day (Exh. "E-1").
To support his claim that he was discriminated against
because of his militant union activities, complainant Andrada
testified that sometime after he, together with several
others, petitioned the respondent company for a
reclassification and readjustment of their wages, as first class
clerk (Exh. "B") he brought the matter to the attention of his
union, then the Benguet-Balatoc Workers Union and
accordingly the latter, through Braulio Oximana, union
steward, wrote a letter dated October 6, 1954 (Exh. "F") to
the respondent company requesting information as to the
action taken by said respondent on the aforesaid petition for
reclassification. He also testified that an or about October 8,
1954, he had occasion to talk with Stanley Willimont, then
his department head, and the latter told him that had he not
brought his petition to the union, his future would have been
better; and that as a matter of fact he was the only
employee who did not receive any adjustment in his salary
although he was placed in the first class clerk category.
Complaint Andrada further testified that sometime in 1955
after he was transferred to the Purchasing Department, as

replacement of Ramon M. Alvia, a "bodeguero" performing

invoice clearing duties and who was receiving a salary of
P4.60 per day, he received the same salary as payroll clerk
which was P97.20 per month or P3.24 per day. So, he
approached C. W. Herold, head of the Purchasing
Department, and complained to the latter about his situation
hoping that he will be extended the proper wage
appertaining to the position of "bodeguero" as provided in
the collective bargaining contract, but nothing came out of
his request.
He also declared that on or about August 26, 1967, on
the occasion of a grievance meeting concerning the
adjustment of his wages, Eugene Kneebone, one of the
respondent herein, said to him, "am spending much of my
time for your complaint. My time is precious. I tell you that as
long as I am still connected with Benguet Consolidated, Inc.,
this office cannot give you any change of classification
whatsoever"; That
Mr.
Kneebone
further
said,
"By
representing your grievance to the union, you are cutting
your neck entirely, and I tell you to think it over or retract
your complaint"; that complaint again met Mr. Kneebone who
said to him, "The question with you is, you are too vocal of
your union activities. Had you shut your mouth, your case
should not have happened like that." He also testified that
sometime in 1958, he was elected district governor for
Balatoc and on July 28, 1958 the union's counsel sent a letter
to the respondent company informing the latter of the
appointment of complainant Andrada as union steward for
Balatoc (Exh. "D"); that as district governor and steward of
the union, he was most often alone in representing the
workers in his district; that sometime in 1959, the respondent
company offered to transfer him as "bodeguero" to the Kias
Dynamite Storage area, but the same was intended to take
him far from the company where he performs his duties as
union district steward. Complaint further testified that
sometime in July, 1962, there was an increase of P.24 to all

kinds of categories and that he was not benefitted by the

increase; that he asked O.M. Westerfield, his department
head, to give him also an increase, but the latter said to him,
"If you will not stop asking or complaining about your rate,
Mr. Crosby will step over your head."
xxx

xxx

x x x1wph1.t

Accordingly, petitioners were ordered "to implement

the salary scale with respect to the daily wage of
complainant Donaciano S. Andrada from 1954 until his wage
reaches the level as embodied in the collective bargaining
agreements between the Benguet-Balatoc Workers Union, the
complainant labor organization, and the respondent
company."
Petitioners subsequently moved for reconsideration,
which the lower court, en banc, denied altho one of the five
judges dissented. They then elevated the case to this Court
for review by way of certiorari. Pending the appeal and at
petitioners' instance, this Court issued preliminary injunction
to prevent immediate execution of the judgment.
Petitioners' principal submission, in the first three
errors assigned, is that they were held liable for
discriminating against respondent Andrada in 1954 on
account of militant union activities which, however, were
conducted in 1958. This is erroneous on two counts. First,
what was charged was not discrimination committed in 1954
alone but rather continuing acts of discrimination committed
"starting 1954" as alleged in par. 3 of the complaint for unfair
labor practice. The charge of discrimination, consisting in
petitioners' refusal to implement the proper salary scale as to
respondent Andrada is adequately supported by the following
findings of the court a quo. In August, 1954, Andrada's
category was changed to clerk first class but he received no
salary adjustment unlike the other employees. In 1955, after
he was transferred to the Purchasing Department and was

assigned to perform the work done by one Ramon Alvia who

held the category of bodeguero (with a higher pay rate)
respondent Andrada still received no corresponding pay
increase. In July, 1962, there was a general pay hike but
Andrada was not benefitted.
Second, the militant union activity, involved is not
Andrada's having been elected as Union District Governor
and Steward and his actuations as such, but rather Andrada's
having sought the help of his union in pursuing what he
believed was his right to salary adjustment. It should be
noted that the damaging statement on this score 3imputed to
co-petitioners Stanley Willimont and Eugene Kneebone by
respondent Andrada in his testimony to which the court a
quo gave credence, were never denied or controverted by
them. And it is unquestionable that the seeking of the union's
help by one of its members in connection with the latter's
correct wages constitutes proper union activity.

pay rate to be the same. This finding of the court is based on

the admission of Willimont, one co-petitioner company's own
officials.
In fine, this Court finds that the findings of fact below
furnish satisfactory answers to the questions presented here
by petitioners. And there is not even a slight suggestion from
them that these findings are not based on substantial
evidence. Hence, said findings are controlling.
WHEREFORE, the judgment sought to be reviewed is
hereby affirmed and the preliminary injunction previously
issued is hereby revoked and set aside. Costs against
petitioners. So ordered.

The claim that respondent Andrada was guilty of

laches is without merit. The discriminations, from 1954 to
1962, were continuing. Moreover, as counsel for respondents
correctly points out, the unfair labor practice charge was filed
only in 1963 because respondent's complaint was first
coursed thru a series of conciliation meetings between the
union and petitioner company.
In this connection, petitioner's final submission that
respondent's complaint had already been satisfactorily
settled in the grievance proceedings as the latter himself
admitted is not borne out in the portion of Andrada's
testimony reproduced in Annex D of the petition. What could
be inferred therefrom is that respondent Andrada, who was
on a monthly wage basis, refused to be classified on a daily
wage basis. But as the lower court found, 4respondent was
justified in so refusing, since; an employee on a daily wage
basis gets less than one on the monthly basis assuming the

G.R. No. 91307 January 24, 1991

SINGER
SEWING
MACHINE
COMPANY, petitioner
vs.
HON. FRANKLIN M. DRILON, MED-ARBITER FELIX B.
CHAGUILE, JR., and SINGER MACHINE COLLECTORS
UNION-BAGUIO (SIMACUB), respondents.
Misa, Castro, Villanueva, Oposa, Narvasa & Pesigan for
petitioner.

Domogan, Lockey, Orate & Dao-ayan Law Office for private

respondent.

GUTIERREZ, JR., J.:p

This is a petition for certiorari assailing the order of MedArbiter Designate Felix B. Chaguile, Jr., the resolution of then
Labor Secretary Franklin M. Drilon affirming said order on
appeal and the order denying the motion for reconsideration
in the case entitled "In Re: Petition for Direct Certification as
the Sole and Exclusive Collective Bargaining Agent of
Collectors of Singer Sewing Machine Company-Singer
Machine Collectors Union-Baguio (SIMACUB)" docketed as OSMA-A-7-119-89 (IRD Case No. 02-89 MED).
On February 15, 1989, the respondent union filed a petition
for direct certification as the sole and exclusive bargaining
agent of all collectors of the Singer Sewing Machine
Company, Baguio City branch (hereinafter referred to as "the
Company").
The Company opposed the petition mainly on the ground that
the union members are actually not employees but are
independent contractors as evidenced by the collection
agency agreement which they signed.
The respondent Med-Arbiter, finding that there exists an
employer-employee relationship between the union members
and the Company, granted the petition for certification
election. On appeal, Secretary of Labor Franklin M. Drilon
affirmed it. The motion for reconsideration of the Secretary's
resolution was denied. Hence, this petition in which the
Company alleges that public respondents acted in excess of
jurisdiction and/or committed grave abuse of discretion in
that:

a) the Department of Labor and Employment (DOLE) has no

jurisdiction over the case since the existence of employeremployee relationship is at issue;
b) the right of petitioner to due process was denied when the
evidence of the union members' being commission agents
was disregarded by the Labor Secretary;
c) the public respondents patently erred in finding that there
exists an employer-employee relationship;
d) the public respondents whimsically disregarded the wellsettled rule that commission agents are not employees but
are independent contractors.
The respondents, on the other hand, insist that the provisions
of the Collection Agency Agreement belie the Company's
position that the union members are independent
contractors. To prove that union members are employees, it
is asserted that they "perform the most desirable and
necessary activities for the continuous and effective
operations of the business of the petitioner Company"
(citing Article 280 of the Labor Code). They add that the
termination of the agreement by the petitioner pending the
resolution of the case before the DOLE "only shows the
weakness of petitioner's stand" and was "for the purpose of
frustrating the constitutionally mandated rights of the
members of private respondent union to self-organization
and collective organization." They also contend that under
Section 8, Rule 8, Book No. III of the Omnibus Rules
Implementing the Labor Code, which defines job-contracting,
they cannot legally qualify as independent contractors who
must be free from control of the alleged employer, who carry
independent businesses and who have substantial capital or
investment in the form of equipment, tools, and the like
necessary in the conduct of the business.

The present case mainly calls for the application of the

control test, which if not satisfied, would lead us to conclude
that no employer-employee relationship exists. Hence, if the
union members are not employees, no right to organize for
purposes of bargaining, nor to be certified as such bargaining
agent can ever be recognized. The following elements are
generally considered in the determination of the employeremployee relationship; "(1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employee's
conduct although the latter is the most important
element" (Mafinco Trading Corporation v. Ople, 70 SCRA 139
[1976]; Development Bank of the Philippines v. National
Labor Relations Commission, 175 SCRA 537 [1989]; Rosario
Brothers, Inc. v. Ople, 131 SCRA 72 [1984]; Broadway Motors
Inc. v. NLRC, 156 SCRA 522 [1987]; Brotherhood Labor Unity
Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]).
The Collection Agency Agreement defines the relationship
between the Company and each of the union members who
signed a contract. The petitioner relies on the following
stipulations in the agreements: (a) a collector is designated
as a collecting agent" who is to be considered at all times as
an independent contractor and not employee of the
Company; (b) collection of all payments on installment
accounts are to be made monthly or oftener; (c) an agent is
paid his compensation for service in the form of a
commission of 6% of all collections made and turned over
plus a bonus on said collections; (d) an agent is required to
post a cash bond of three thousand pesos (P3,000.00) to
assure the faithful performance and observance of the terms
and conditions under the agreement; (e) he is subject to all
the terms and conditions in the agreement; (f) the agreement
is effective for one year from the date of its execution and
renewable on a yearly basis; and (g) his services shall be
terminated in case of failure to satisfy the minimum monthly
collection performance required, failure to post a cash bond,

or cancellation of the agreement at the instance of either

party unless the agent has a pending obligation or
indebtedness in favor of the Company.
Meanwhile, the respondents rely on other features to
strengthen their position that the collectors are employees.
They quote paragraph 2 which states that an agent shall
utilize only receipt forms authorized and issued by the
Company. They also note paragraph 3 which states that an
agent has to submit and deliver at least once a week or as
often as required a report of all collections made using report
forms furnished by the Company. Paragraph 4 on the monthly
collection quota required by the Company is deemed by
respondents as a control measure over the means by which
an agent is to perform his services.
The nature of the relationship between a company and its
collecting agents depends on the circumstances of each
particular relationship. Not all collecting agents are
employees and neither are all collecting agents independent
contractors. The collectors could fall under either category
depending on the facts of each case.
The Agreement confirms the status of the collecting agent in
this case as an independent contractor not only because he
is explicitly described as such but also because the provisions
permit him to perform collection services for the company
without being subject to the control of the latter except only
as to the result of his work. After a careful analysis of the
contents of the agreement, we rule in favor of the petitioner.
The requirement that collection agents utilize only receipt
forms and report forms issued by the Company and that
reports shall be submitted at least once a week is not
necessarily an indication of control over the means by which
the job of collection is to be performed. The agreement itself
specifically explains that receipt forms shall be used for the
purpose of avoiding a co-mingling of personal funds of the

agent with the money collected on behalf of the Company.

Likewise, the use of standard report forms as well as the
regular time within which to submit a report of collection are
intended to facilitate order in office procedures. Even if the
report requirements are to be called control measures, any
control is only with respect to the end result of the collection
since the requirements regulate the things to be done after
the performance of the collection job or the rendition of the
service.

agents required to account for their time and submit a record

of their activity.

The monthly collection quota is a normal requirement found

in similar contractual agreements and is so stipulated to
encourage a collecting agent to report at least the minimum
amount of proceeds. In fact, paragraph 5, section b gives a
bonus, aside from the regular commission every time the
quota is reached. As a requirement for the fulfillment of the
contract, it is subject to agreement by both parties. Hence, if
the other contracting party does not accede to it, he can
choose not to sign it. From the records, it is clear that the
Company and each collecting agent intended that the former
take control only over the amount of collection, which is a
result of the job performed.

5. The collection agents are paid strictly on commission

basis. The amounts paid to them are based solely on the
amounts of collection each of them make. They do not
receive any commission if they do not effect any collection
even if they put a lot of effort in collecting. They are paid
commission on the basis of actual collections.

The respondents' contention that the union members are

employees of the Company is based on selected provisions of
the Agreement but ignores the following circumstances which
respondents never refuted either in the trial proceedings
before the labor officials nor in its pleadings filed before this
Court.
1. The collection agents are not required to observe office
hours or report to Singer's office everyday except, naturally
and necessarily, for the purpose of remitting their collections.
2. The collection agents do not have to devote their time
exclusively for SINGER. There is no prohibition on the part of
the collection agents from working elsewhere. Nor are these

3. The manner and method of effecting collections are left

solely to the discretion of the collection agents without any
interference on the part of Singer.
4. The collection agents shoulder their transportation
expenses incurred in the collections of the accounts assigned
to them.

6. The commissions earned by the collection agents are

directly deducted by them from the amount of collections
they are able to effect. The net amount is what is then
remitted to Singer." (Rollo, pp. 7-8)
If indeed the union members are controlled as to the manner
by which they are supposed to perform their collections, they
should have explicitly said so in detail by specifically denying
each of the facts asserted by the petitioner. As there seems
to be no objections on the part of the respondents, the Court
finds that they miserably failed to defend their position.
A thorough examination of the facts of the case leads us to
the conclusion that the existence of an employer-employee
relationship between the Company and the collection agents
cannot be sustained.
The plain language of the agreement reveals that the
designation as collection agent does not create an
employment relationship and that the applicant is to be
considered at all times as an independent contractor. This is

consistent with the first rule of interpretation that the literal

meaning of the stipulations in the contract controls (Article
1370, Civil Code; La Suerte Cigar and Cigarette Factory v.
Director of Bureau of Labor, Relations, 123 SCRA 679 [1983]).
No such words as "to hire and employ" are present.
Moreover, the agreement did not fix an amount for wages nor
the required working hours. Compensation is earned only on
the basis of the tangible results produced, i.e., total
collections made (Sarra v. Agarrado, 166 SCRA 625 [1988]).
In Investment Planning Corp. of the Philippines v. Social
Security System, 21 SCRA 924 [1967] which involved
commission agents, this Court had the occasion to rule, thus:
We are convinced from the facts that the work of petitioner's
agents
or
registered
representatives
more
nearly
approximates that of an independent contractor than that of
an employee. The latter is paid for the labor he performs,
that is, for the acts of which such labor consists the former is
paid for the result thereof . . . .
xxx xxx xxx
Even if an agent of petitioner should devote all of his time
and effort trying to sell its investment plans he would not
necessarily be entitled to compensation therefor. His right to
compensation depends upon and is measured by the tangible
results he produces."
Moreover, the collection agent does his work "more or less at
his own pleasure" without a regular daily time frame imposed
on him (Investment Planning Corporation of the Philippines v.
Social Security System, supra; See alsoSocial Security
System v. Court of Appeals, 30 SCRA 210 [1969]).
The grounds specified in the contract for termination of the
relationship do not support the view that control exists "for
the causes of termination thus specified have no relation to
the means and methods of work that are ordinarily required

of or imposed upon employees." (Investment Planning Corp.

of the Phil. v. Social Security System, supra)
The last and most important element of the control test is not
satisfied by the terms and conditions of the contracts. There
is nothing in the agreement which implies control by the
Company not only over the end to be achieved but also over
the means and methods in achieving the end (LVN Pictures,
Inc. v. Philippine Musicians Guild, 1 SCRA 132 [1961]).
The Court finds the contention of the respondents that the
union members are employees under Article 280 of the Labor
Code to have no basis. The definition that regular employees
are those who perform activities which are desirable and
necessary for the business of the employer is not
determinative in this case. Any agreement may provide that
one party shall render services for and in behalf of another
for a consideration (no matter how necessary for the latter's
business) even without being hired as an employee. This is
precisely true in the case of an independent contractorship
as well as in an agency agreement. The Court agrees with
the petitioner's argument that Article 280 is not the yardstick
for determining the existence of an employment relationship
because it merely distinguishes between two kinds of
employees, i.e., regular employees and casual employees,
for purposes of determining the right of an employee to
certain benefits, to join or form a union, or to security of
tenure. Article 280 does not apply where the existence of an
employment relationship is in dispute.
Even Section 8, Rule 8, Book III of the Omnibus Rules
Implementing the Labor Code does not apply to this case.
Respondents assert that the said provision on job contracting
requires that for one to be considered an independent
contractor, he must have "substantial capital or investment
in the form of tools, equipment, machineries, work premises,
and other materials which are necessary in the conduct of his

business." There is no showing that a collection agent needs

tools and machineries. Moreover, the provision must be
viewed in relation to Article 106 of the Labor Code which
provides:
Art. 106. Contractor or subcontractor. Whenever an
employer enters into a contract with another person for the
performance of the former's work, the employees of the
contractor and of the latter's subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay
the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same
manner and extent that he is liable to employees directly
employed by him.
xxx xxx xxx
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries,
work premises, among others, and the workers recruited and
placed by such persons are performing activities which are
directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered
merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latter
were directly employed by him." (p. 20)
It can readily be seen that Section 8, Rule 8, Book Ill and
Article 106 are relevant in determining whether the employer
is solidarily liable to the employees of an alleged contractor
and/or sub-contractor for unpaid wages in case it is proven
that there is a job-contracting situation.

The assumption of jurisdiction by the DOLE over the case is

justified as the case was brought on appeal by the petitioner
itself which prayed for the reversal of the Order of the MedArbiter on the ground that the union members are not its
employees. Hence, the petitioner submitted itself as well as
the issue of existence of an employment relationship to the
jurisdiction of the DOLE which was faced with a dispute on an
application for certification election.
The Court finds that since private respondents are not
employees of the Company, they are not entitled to the
constitutional right to join or form a labor organization for
purposes of collective bargaining. Accordingly, there is no
constitutional and legal basis for their "union" to be granted
their petition for direct certification. This Court made this
pronouncement in La Suerte Cigar and Cigarette Factory
v. Director of Bureau of Labor Relations, supra:
. . . The question of whether employer-employee relationship
exists is a primordial consideration before extending labor
benefits under the workmen's compensation, social security,
medicare, termination pay and labor relations law. It is
important in the determination of who shall be included in a
proposed bargaining unit because, it is the sine qua non, the
fundamental and essential condition that a bargaining unit be
composed of employees. Failure to establish this juridical
relationship between the union members and the employer
affects the legality of the union itself. It means the
ineligibility of the union members to present a petition for
certification election as well as to vote therein . . . . (At p.
689)
WHEREFORE, the Order dated June 14,1989 of Med-Arbiter
Designate Felix B. Chaguile, Jr., the Resolution and Order of
Secretary Franklin M. Drilon dated November 2, 1989 and
December 14, 1989, respectively are hereby REVERSED and
SET ASIDE. The petition for certification election is ordered

dismissed and the temporary restraining order issued by the

Court on December 21, 1989 is made permanent.
SO ORDERED.

G.R. No. 70705 August 21, 1989

MOISES
DE
LEON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and LA
TONDE;A INC., respondents.
Amorito V. Canete for petitioner.
Pablo R. Cruz for private respondent.

FERNAN, C.J.:
This petition for certiorari seeks to annul and set aside: (1)
the majority decision dated January 28, 1985 of the National
Labor Relations Commission First Division in Case No. NCR83566-83, which reversed the Order dated April 6,1984 of
Labor Arbiter Bienvenido S. Hernandez directing the
reinstatement of petitioner Moises de Leon by private
respondent La Tonde;a Inc. with payment of backwages and
other benefits due a regular employee; and, (2) the
Resolution dated March 21, 1985 denying petitioner's motion
for reconsideration.
It appears that petitioner was employed by private
respondent La Tonde;a Inc. on December 11, 1981, at the
Maintenance Section of its Engineering Department in Tondo,
Manila. 1 His work consisted mainly of painting company
building and equipment, and other odd jobs relating to
maintenance. He was paid on a daily basis through petty
cash vouchers.
In the early part of January, 1983, after a service of more
than one (1) year, petitioner requested from respondent
company that lie be included in the payroll of regular

workers, instead of being paid through petty cash vouchers.

Private respondent's response to this request was to dismiss
petitioner from his employment on January 16, 1983. Having
been refused reinstatement despite repeated demands,
petitioner
filed
a
complaint
for
illegal
dismissal,
reinstatement and payment of backwages before the Office
of the Labor Arbiter of the then Ministry now Department of
Labor and Employment.
Petitioner alleged that he was dismissed following his request
to be treated as a regular employee; that his work consisted
of painting company buildings and maintenance chores like
cleaning and operating company equipment, assisting
Emiliano Tanque Jr., a regular maintenance man; and that
weeks after his dismissal, he was re-hired by the respondent
company indirectly through the Vitas-Magsaysay Village
Livelihood Council, a labor agency of respondent company,
and was made to perform the tasks which he used to do.
Emiliano Tanque Jr. corroborated these averments of
petitioner in his affidavit. 2
On the other hand, private respondent claimed that
petitioner was not a regular employee but only a casual
worker hired allegedly only to paint a certain building in the
company premises, and that his work as a painter terminated
upon the completion of the painting job.
On April 6, 1984, Labor Arbiter Bienvenido S. Hernandez
rendered a decision 3 finding the complaint meritorious and
the dismissal illegal; and ordering the respondent company
to reinstate petitioner with full backwages and other benefits.
Labor Arbiter Hernandez ruled that petitioner was not a mere
casual employee as asserted by private respondent but a
regular employee. He concluded that the dismissal of
petitioner from the service was prompted by his request to
be included in the list of regular employees and to be paid
through the payroll and is, therefore, an attempt to

circumvent the legal obligations of an employer towards a

regular employee.
Labor Arbiter Hernandez found as follows:
After a thorough examination of the records of the case and
evaluation of the evidence and versions of the parties, this
Office finds and so holds that the dismissal of complainant is
illegal. Despite the impressive attempt of respondents to
show that the complainant was hired as casual and for the
work on particular project, that is the repainting of Mama
Rosa Building, which particular work of painting and
repainting is not pursuant to the regular business of the
company, according to its theory, we find differently.
Complainant's being hired on casual basis did not dissuade
from the cold fact that such painting of the building and the
painting and repainting of the equipment and tools and other
things belonging to the company and the odd jobs assigned
to him to be performed when he had no painting and
repainting works related to maintenance as a maintenance
man are necessary and desirable to the better operation of
the business company. Respondent did not even attempt to
deny and refute the corroborating statements of Emiliano
Tanque Jr., who was regularly employed by it as a
maintenance man doing same jobs not only of painting and
repainting of building, equipment and tools and machineries
or machines if the company but also other odd jobs in the
Engineering and Maintenance Department that complainant
Moises de Leon did perform the same odd jobs and
assignments as were assigned to him during the period de
Leon was employed for more than one year continuously by
Id respondent company. We find no reason not to give credit
and weight to the affidavit and statement made therein by
Emiliano Tanque Jr. This strongly confirms that complainant
did the work pertaining to the regular business in which the
company had been organized. Respondent cannot be
permitted to circumvent the law on security of tenure by

considering complainant as a casual worker on daily rate

basis and after working for a period that has entitled him to
be
regularized
that
he
would
be
automatically
4
terminated. ... .
On appeal, however, the above decision of the Labor Arbiter
was reversed by the First Division of the National Labor
Relations Commission by virtue of the votes of two
members 5 which constituted a majority. Commissioner
Geronimo Q. Quadra dissented, voting "for the affirmation of
the well-reasoned decision of the Labor Arbiter below." 6 The
motion for reconsideration was denied. Hence, this recourse.
Petitioner asserts that the respondent Commission erred and
gravely abuse its discretion in reversing the Order of the
Labor Arbiter in view of the uncontroverted fact that the
tasks he performed included not only painting but also other
maintenance work which are usually necessary or desirable
in the usual business of private respondent: hence, the
reversal violates the Constitutional and statutory provisions
for the protection of labor.
The private respondent, as expected, maintains the opposite
view and argues that petitioner was hired only as a painter to
repaint specifically the Mama Rosa building at its Tondo
compound, which painting work is not part of their main
business; that at the time of his engagement, it was made
clear to him that he would be so engaged on a casual basis,
so much so that he was not required to accomplish an
application form or to comply with the usual requisites for
employment; and that, in fact, petitioner was never paid his
salary through the regular payroll but always through petty
cash vouchers. 7
The Solicitor General, in his Comment, recommends that the
petition be given due course in view of the evidence on
record supporting petitioner's contention that his work was
regular in nature. In his view, the dismissal of petitioner after

he demanded to be regularized was a subterfuge to

circumvent the law on regular employment. He further
recommends that the questioned decision and resolution of
respondent Commission be annulled and the Order of the
Labor Arbiter directing the reinstatement of petitioner with
payment of backwages and other benefits be upheld. 8
After a careful review of the records of this case, the Court
finds merit in the petition as We sustain the position of the
Solicitor General that the reversal of the decision of the Labor
Arbiter by the respondent Commission was erroneous.
The law on the matter is Article 281 of the Labor Code which
defines regular and casual employment as follows:
Art. 281. Regular and casual employment. The provisions of a
written agreement to the contrary notwithstanding and
regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or services
to be performed is seasonal in nature and the employment is
for the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
while such actually exists.
This provision reinforces the Constitutional mandate to
protect the interest of labor. Its language evidently manifests

the intent to safeguard the tenurial interest of the worker

who may be denied the rights and benefits due a regular
employee by virtue of lopsided agreements with the
economically powerful employer who can maneuver to keep
an employee on a casual status for as long as convenient.
Thus, contrary agreements notwithstanding, an employment
is deemed regular when the activities performed by the
employee are usually necessary or desirable in the usual
business or trade of the employer. Not considered regular are
the so-called "project employment" the completion or
termination of which is more or less determinable at the time
of employment, such as those employed in connection with a
particular construction project 9 and seasonal employment
which by its nature is only desirable for a limited period of
time. However, any employee who has rendered at least one
year of service, whether continuous or intermittent, is
deemed regular with respect to the activity he performed and
while such activity actually exists.
The primary standard, therefore, of determining a regular
employment is the reasonable connection between the
particular activity performed by the employee in relation to
the usual business or trade of the employer. The test is
whether the former is usually necessary or desirable in the
usual business or trade of the employer. The connection can
be determined by considering the nature of the work
performed and its relation to the scheme of the particular
business or trade in its entirety. Also, if the employee has
been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law
deems the repeated and continuing need for its performance
as sufficient evidence of the necessity if not indispensability
of that activity to the business. Hence, the employment is
also considered regular, but only with respect to such activity
and while such activity exists.

In the case at bar, the respondent company, which is

engaged in the business of manufacture and distillery of
wines and liquors, claims that petitioner was contracted on a
casual basis specifically to paint a certain company building
and that its completion rendered petitioner's employment
terminated. This may have been true at the beginning, and
had it been shown that petitioner's activity was exclusively
limited to painting that certain building, respondent
company's theory of casual employment would have been
worthy of consideration.
However, during petitioner's period of employment, the
records reveal that the tasks assigned to him included not
only painting of company buildings, equipment and tools but
also cleaning and oiling machines, even operating a drilling
machine, and other odd jobs assigned to him when he had no
painting job. A regular employee of respondent company,
Emiliano Tanque Jr., attested in his affidavit that petitioner
worked with him as a maintenance man when there was no
painting job.
It is noteworthy that, as wisely observed by the Labor Arbiter,
the respondent company did not even attempt to negate the
above averments of petitioner and his co- employee. Indeed,
the respondent company did not only fail to dispute this vital
point, it even went further and confirmed its veracity when it
expressly admitted in its comment that, "The main bulk of
work and/or activities assigned to petitioner was painting and
other related activities. Occasionally, he was instructed to do
other odd things in connection with maintenance while he
was waiting for materials he would need in his job or when he
had finished early one assigned to him. 10
The respondent Commission, in reversing the findings of the
Labor Arbiter reasoned that petitioner's job cannot be
considered as necessary or desirable in the usual business or
trade of the employer because, "Painting the business or

factory building is not a part of the respondent's

manufacturing or distilling process of wines and liquors. 11

Engineering Department, manned by regular employees like

Emiliano Tanque Jr., whom petitioner often worked with.

The fallacy of the reasoning is readily apparent in view of the

admitted fact that petitioner's activities included not only
painting but other maintenance work as well, a fact which
even the respondent Commission, like the private
respondent, also expressly recognized when it stated in its
decision that, 'Although complainant's (petitioner) work was
mainly painting, he was occasionally asked to do other odd
jobs in connection with maintenance work. 12 It misleadingly
assumed that all the petitioner did during his more than one
year of employment was to paint a certain building of the
respondent company, whereas it is admitted that he was
given other assignments relating to maintenance work
besides painting company building and equipment.

Furthermore, the petitioner performed his work of painting

and maintenance activities during his employment in
respondent's business which lasted for more than one year,
until early January, 1983 when he demanded to be
regularized and was subsequently dismissed. Certainly, by
this fact alone he is entitled by law to be considered a regular
employee. And considering further that weeks after his
dismissal, petitioner was rehired by the company through a
labor agency and was returned to his post in the
Maintenance Section and made to perform the same
activities that he used to do, it cannot be denied that as
activities as a regular painter and maintenance man still
exist.

It is self-serving, to say the least, to isolate petitioner's

painting job to justify the proposition of casual employment
and conveniently disregard the other maintenance activities
of petitioner which were assigned by the respondent
company when he was not painting. The law demands that
the nature and entirety of the activities performed by the
employee be considered. In the case of petitioner, the
painting and maintenance work given him manifest a
treatment consistent with a maintenance man and not just a
painter, for if his job was truly only to paint a building there
would have been no basis for giving him other work
assignments In between painting activities.

It is of no moment that petitioner was told when he was hired

that his employment would only be casual, that he was paid
through cash vouchers, and that he did not comply with
regular employment procedure. Precisely, the law overrides
such conditions which are prejudicial to the interest of the
worker whose weak bargaining position needs the support of
the State. That determines whether a certain employment is
regular or casual is not the will and word of the employer, to
which the desperate worker often accedes, much less the
procedure of hiring the employee or the manner of paying his
salary. It is the nature of the activities performed in relation
to the particular business or trade considering all
circumstances, and in some cases the length of time of its
performance and its continued existence.

It is not tenable to argue that the painting and maintenance

work of petitioner are not necessary in respondent's business
of manufacturing liquors and wines, just as it cannot be said
that only those who are directly involved in the process of
producing wines and liquors may be considered as necessary
employees. Otherwise, there would have been no need for
the regular Maintenance Section of respondent company's

Finally, considering its task to give life and spirit to the

Constitutional mandate for the protection of labor, to enforce
and uphold our labor laws which must be interpreted liberally
in favor of the worker in case of doubt, the Court cannot
understand the failure of the respondent Commission to

perceive the obvious attempt on the part of the respondent

company to evade its obligations to petitioner by dismissing
the latter days after he asked to be treated as a regular
worker on the flimsy pretext that his painting work was
suddenly finished only to rehire him indirectly weeks after his
dismissal and assign him to perform the same tasks he used
to perform. The devious dismissal is too obvious to escape
notice. The inexplicable disregard of established and decisive
facts which the Commission itself admitted to be so, in
justifying a conclusion adverse to the aggrieved laborer
clearly spells a grave abuse of discretion amounting to lack
of jurisdiction.
WHEREFORE, the petition is GRANTED. The assailed Decision
and Resolution of the National Labor Relations Commission
are hereby annulled and set aside. The Order of Labor arbiter
Bienvenido S. Hernandez dated April 6, 1984 is reinstated.
Private respondent is ordered to reinstate petitioner as a
regular maintenance man and to pay petitioner 1) backwages
equivalent to three years from January 16,1983, in
accordance with the Aluminum Wage Orders in effect for the
period covered, 2) ECOLA 3) 13th Month Pay, 4) and other
benefits under pertinent Collective Bargaining Agreements, if
any.
SO ORDERED.

extent of the liability of private respondent? These are the

questions raised in this petition.

G.R. Nos. 92777-78 March 13, 1991

ISAGANI
ECAL,
CRISOLOGO
ECAL,
NELSON
BUENAOBRA,
NARDING
BANDOGELIO,
WILMER
ECHAGUE, ROGELIO CASTILLO, ALFREDO FERNANDO,
OLIGARIO BIGATA, ROBERTO FERRER AND HONESTO
TANAEL, Represented by ISAGANI ECAL, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD
DIVISION), JIMMY MATCHUKA AND HI-LINE TIMBER,
INC., respondents.
Armando A. San Antonio for petitioners.
Chicote Abad & Macaisip Law Offices for private respondents.

GANCAYCO, J.:p
Is there an employer-employee relationship between
petitioners and private respondent Hi-Line Timber, Inc. or
merely an employer-independent contractor relationship
between said private respondent and petitioner Isagani Ecal
with the other petitioners being mere contract workers of
Ecal? In the case of the latter, is Ecal engaged in "job"
contracting or "labor-only" contracting? What then is the

This case traces its origin from two consolidated complaints

for illegal dismissal and money claims filed by petitioners
Isagani Ecal, Crisologo Ecal, Nelson Buenaobra, Narding
Bandogelio, Wilmer Echague, Rogelio Castillo, Alfredo
Fernando, Oligario Bigata, Roberto Ferrer and Honesto Tanael
against private respondents Hi-Line Timber, Inc. (hereinafter
referred to as Hi-Line) and Jimmy Matchuka, the company
foreman, with the Department of Labor and Employment
docketed as NLRC case No. RAB-03-09-0107-87 and No. RAB
III-09-0116-87.
In their complaints/position papers, petitioners alleged,
among others, that they have been employed by Hi-Line as
follows: Isagani Ecal, from February, 1986; Crisologo Ecal,
Buenaobra, Bandogelio, Fernando, Bigata, Ferrer and Tanael,
from March 3, 1986; and Castillo and Echague, from May 1,
1986; that except for Isagani Ecal, they were all receiving a
salary of P 35.00 a day; that they were required to report for
work 7 days a week including rest days, legal holidays,
except Christmas and Good Friday from 7:00 A.M. to 7:00
P.M.; that they were not given living allowance, overtime pay,
premium pay for rest days and legal holidays, 13th month
pay and service incentive leave pay; and, that on June 6,
1987, they were not allowed to work and instead were
informed that their services were no longer needed.
Private respondents, on the other hand, denied the existence
of an employer-employee relationship between the company
and the petitioners claiming that the latter are under the
employ of an independent contractor, petitioner Isagani Ecal,
an employee of the company until his resignation on
February 4, 1987.
After submission of the supplemental position papers and
other evidence by the parties, the labor arbiter rendered his

decision dated June 10, 1988 finding no employer-employee

relationship between the parties. Thus, he dismissed the two
cases for lack of merit. 1
On appeal, public respondent National Labor Relations
Commission (NLRC) affirmed the aforesaid decision of the
labor arbiter in a resolution dated October 2, 1989. 2
The motion for reconsideration of petitioners was denied in a
resolution dated March 12, 1990. 3
In this petition for certiorari, petitioners primarily question
the finding of the public respondent NLRC that no employeremployee relationship existed between them and Hi-Line
Timber, Inc. They contend that petitioner Isagani Ecal is not
an independent contractor but a mere employee of Hi-Line
Line.
In response, the Solicitor General points out that the issue of
whether or not an employer-employee relationship exists
between the parties is a question of fact and the findings of
the labor arbiter and the NLRC on this issue are conclusive
upon this Court if they are supported by substantial
evidence 4 as in this case.
The NLRC ruled
We have carefully examined and evaluated the basis of the
decision of the Labor Arbiter and to Our mind his factual
findings are indeed supported by substantial evidence. Thus,
we cite a few of the clear and convincing evidence and
record which compelled the Labor Arbiter to disregard the
claim of the complainants that there was (an) employeremployee relationship between the contending parties.
Firstly, the affidavit of respondents' personnel officer,
Elizabeth Natividad, dated 22 April 1988, clearly attesting to
the fact that complainants, except Isagani Ecal, who worked
at their plant at Bocaue, Bulacan, from 24 April 1986 up to 4

February 1987 and who tendered his resignation on the latter

date, were not at all employees of respondents; secondly, the
payrolls of the respondents do not indicate that said
complainants were employees of the respondents; thirdly,
the Sinumpaang Salaysay of Jose Mendoza, the SecretaryTreasurer of the Hi-Line Workers Union-Confederation of Free
Laborers (CFL), a registered labor Union under Reg. Cert. No.
(FED-425)-6756-11, issued March, 1987, to the effect that
none of the complainants, except Isagani Ecal, were listed as
members of the union and/or employees of respondents; and
lastly, two (2) Sinumpaang Salaysay dated 22 April 1988
executed by respondents' company guard Honorio T. Battung
and Foreman Clemente S. Sales, respectively, attesting that
it was only Isagani Ecal who worked with respondents but
resigned on 4 February 1987 to work as (an) independent
contractor. 5
Petitioners claim that the NLRC based its decision solely on
the evidence aforestated and completely ignored the
evidence they presented thus denying them due process.
The Court carefully examined the records of the case and
finds that the NLRC limited itself to a superficial evaluation of
the relationship of the parties based mainly on the
aforestated documents with emphasis on the company
payrolls without regard to the particular circumstances of the
case.
The finding of the NLRC that Isagani Ecal is no longer an
employee of Hi-Line line is amply supported by the evidence
on record. His resignation letter dated February 4, 1987
stating "ako po ay magreresign na sa aking trabaho bilang
"laborer" sapagka't nakita ko na mas malaki ang kikitain
kung mangongontrata na lamang " 6speaks for itself. This
was unsuccessfully rebutted by petitioners.
To determine whether there exists an employer-employee
relationship, the four-way test should be applied, namely: (1)

selection and engagement of the employee; (2) the payment

of wages; (3) the power of dismissal; and (4) the power to
control the employee's conductthe last being the most
important element. 7 Neither the NLRC nor the labor arbiter
utilized these guides in their disposition of the complaint.
The records show that Hi-Line does not choose the workers
but merely accepts whoever may be selected by petitioner
Isagani Ecal. Petitioners are not included in the payroll.
Instead a lump sum of P1,400.00 is given to Isagani Ecal or
his representative Solomon de los Santos, every four days, to
cover their wages for the period which the petitioners divide
among themselves.
Private respondents allege that Isagani Ecal customarily
removes some of his laborers at the Hi-Line sawmill and
assigns them to other sawmills; however, there was no
evidence adduced to show that indeed Ecal regularly or even
once transferred some of his workers to other sawmills.
Petitioners worked at the company compound at Wakas,
Bocaue, Bulacan, at least eight hours a day, for seven days a
week so that it would be impossible for them to find time to
work in some other sawmill. On June 6, 1987, the company
unilaterally terminated the services of petitioners without
notice allegedly on the ground that its contract with Isagani
Ecal has already expired.
As to the matter of control, it would seem that petitioners
were mostly left on their own to devise the most expeditious
way of segregating lumber materials as to sizes and of
loading and unloading the same in the chamber for drying.
However, their task is performed within the work premises of
Hi-Line, specifically at its Kiln Drying Section, so it cannot be
said that no amount of control and supervision is exerted
upon them by the company through their foremen, private
respondent Matchuka and Clemente S. Sales. Moreover, the
very nature of the task performed by petitioners requires

very limited supervision as there are only so many ways of

segregating lumber according to their sizes and of loading
and unloading them in the dryer so that all that the company
has to do is to check on the results of their work.
The foregoing observation suggests that there is a certain
relationship existing between the parties although a clear-cut
characterization of such relationship whether it is an
employer-employee relationship or an employer-independent
contractor relationship is unavailing. Hence, a closer
scrutiny of said relationship is in order.
Petitioners urge that even assuming arguendo that Isagani
Ecal is an independent contractor, he should be considered
only a labor supplier who is deemed an agent of the company
so that petitioners should enjoy the status of being its
employees; therefore, Hi-Line should be held liable for
illegally dismissing petitioners and for the non-payment of
benefits due them. Private respondents, however, maintain
that Isagani Ecal is an independent contractor or a job
contractor.
The Solicitor General adopts the theory that Ecal is an
independent contractor. However, he faults the labor arbiter
for his failure to determine the benefits due petitioners, an
issue raised by the latter, on the ground that Hi-Line, being
an indirect employer, is jointly and severally liable with
Isagani Ecal to the extent of the work performed by the
employees as if they were directly employed by it. He,
therefore, seeks the remand of the case to the labor arbiter
for determination of the unpaid benefits of petitioners.
The pertinent provisions of the Labor Code, as amended, are:
Art. 106. Contractor or subcontractor. Whenever an
employer enters into a contract with another person for the
performance of the former's work, the employees of the

contractor and of the latter's subcontractor, if any, shall be

paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay
the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same
manner and extent that he is liable to employees directly
employed by him.
The Secretary of Labor may, by appropriate regulations,
restrict or prohibit the contracting out of labor to protect the
rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job
contracting as well as differentiations within these types of
contracting and determine who among the parties involved
shall be considered the employer for purposes of this Code,
to prevent any violation or circumvention of any provision of
this Code.
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries,
work premises, among others, and the workers recruited and
placed by such person are performing activities which are
directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered
merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latter
were directly employed.
Art. 107. Indirect Employer. The provisions of the
immediately preceding Article shall likewise apply to any
person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor
for the performance of any work, task, job or project.

Under the provisions of Article 106, paragraphs 1 and 2, an

employer who enters into a contract with a contractor for the
performance of work for the employer does not thereby
establish an employer-employee relationship between
himself and the employees of the contractor. The law itself,
however, creates such a relationship when a contractor fails
to pay the wages of his employees in accordance with the
Labor Code, and only for this limited purpose, i.e. to ensure
that the latter will be paid the wages due them. 8
On the other hand, the legal effect of a finding that a
contractor is merely a "labor only" contractor was explained
in Philippine Bank of Communications vs. National Labor
Relations Commission, et al., 9
. . . The "labor-only" contractor i.e., "the person or
intermediary" is considered "merely as an agent of the
employer." The employer is made by the statute responsible
to the employees of the "labor only" contractor as if such
employee had been directly employed by the employer.
Thus, where "labor-only" contracting exists in a given case,
the statute itself implies or establishes an employeremployee relationship between the employer (the owner of
the project) and the employees of the "labor-only" contractor,
this time for a comprehensive purpose: "employer for
purposes of this Code, to prevent any violation or
circumvention of any provision of this Code." The law in
effect holds both the employer and the 'labor-only' contractor
responsible to the latter's employees for the more effective
safeguarding of the employees' rights under the Labor Code.
Sections 8 and 9, Rule VIII, Book III of the Omnibus Rules
implementing the Labor Code set forth the distinctions
between "job" contracting and "labor-only" contracting
Sec. 8. Job contracting. There is job contracting
permissible under the Code if the following conditions are
met:

(1) The contractor carries on an independent business and

undertakes the contract work on his own account under his
own responsibility according to his own manner and method,
free from control and direction of his employer or principal in
all matters connected with the performance of the work
except as to the results thereof, and
(2) The contractor has substantial capital or investment in
the form of tools, equipments, machineries, work premises,
and other materials which are necessary in the conduct of his
business.
Sec. 9. Labor-only contracting (a) Any person who
undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where such
person:
(1) Does not have substantial capital or investment in the
form of tools, equipments, machineries, work premises and
other materials; and
(2) The workers recruited and placed by such person are
performing activities which are directly related to the
principal business or operations of the employer in which
workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby
prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly
employed by him.
xxx xxx xxx
Applying the foregoing provisions, the Court finds petitioner
Isagani Ecal to be a "labor-only" contractor, a mere supplier
of manpower to Hi-Line. Isagani Ecal was only poor laborer at
the time of his resignation on February 4, 1987 who cannot

even afford to have his daughter treated for malnutrition. He

resigned and became a supplier of laborers for Hi-Line,
because he saw an opportunity for him to earn more than
what he was earning while still in the payroll of the company.
At the same time, he continued working for the company as a
laborer at the kiln drying section. He definitely does not have
sufficient capital to invest in tools and machineries. Private
respondents, however, claim that the business contracted by
Ecal did not require the use of tools, equipment and
machineries and the contracted task had to be executed in
the premises of Hi-Line. Precisely, the job assigned to
petitioners has to be executed within the work premises of
Hi-Line where they use the machineries and equipment of the
company for the drying of lumber materials. Even the
company's personnel officer Elizabeth Natividad admitted
that Ecal resigned in order to supply manpower to the
company on a task basis. 10 By the very allegations of private
respondents, it is quite clear that Isagani Ecal only supplies
manpower to Hi-Line within the context of "labor-only"
contracting as defined by law.
There is also no question that the task performed by
petitioners is directly related to the business of Hi-Line.
Petitioners were assigned to sort out the lumber materials
whether wet or fresh kiln as to sizes and to carry them from
the stockpile to the dryer where they are loaded for drying
after which they are unloaded. The work of petitioners is an
integral part of the operation of the sawmill of Hi-Line without
which production and company sales will suffer.
A finding that Isagani Ecal is a "labor-only" contractor is
equivalent to a finding that an employer-employee
relationship exists between the company and Ecal including
the latter's "contract workers" herein petitioners, the
relationship being such as provided by the law itself. 11

Indeed, the law prohibits "labor-only" contracting and creates

an employer- employee relationship for the protection of the
laborers. The Court had in fact observed that businessmen,
with the aid of lawyers, have tried to avoid the bringing
about of an employer-employee relationship in some of their
enterprises because that juridical relation spawns obligations
connected with workmen's compensation, social security,
medicare, minimum wage, termination pay and unionism. 12
This unscrupulous practice is quite evident in the case at bar.
It is company policy that once an employee is assigned to the
kiln drying section, he is no longer included in the payroll and
is then paid on a task basis, even if he had long been
employed with the company. Since the employee will no
longer be included in the payroll, it becomes easy for the
company to deny the regular employment of such a worker
and is able to avoid whatever obligations it may have under
an employer-employee relationship. Moreover, Hi-Line limits
the period of undertaking to only four days presumably to
make termination of the services of petitioners easier and to
prevent them from attaining regular status. The company
had no doubt taken advantage of these laborers in order to
escape liability for benefits and privileges accruing to one
holding a regular employment. Without a law prohibiting
"labor-only" contracting to protect the rights of labor, these
poor workers will always be at the mercy of the employer.
Since petitioners perform tasks which are usually necessary
or desirable in the main business of Hi-Line, they should be
deemed regular employees of the latter 13 and as such are
entitled to all the benefits and rights appurtenant to regular
employment.
Being regular employees, they should have been afforded
due process prior to their dismissal. 14 Instead they were
unceremoniously dismissed on June 6, 1987 when they were
not allowed to enter the company's premises by the security

guards. The argument of private respondents that the

contract of Ecal with the company expired cannot be
sustained. Petitioners may only be dismissed for an
authorized or just cause and after due process.
At this juncture, We note that petitioners and private
respondents allege conflicting dates of employment of the
former. Petitioners claim that as early as March or May, 1986,
they have already been working with Hi-Line Line, while
private respondents contend that it was only in April, 1987
that they had been engaged by the company. This Court is
not a trier of facts and there is not enough basis in the
records to enable Us to come up with definite dates of
employment. However, whatever be the date of their
employment, petitioners will still be considered employees of
the company. If petitioners had started their employment in
1986, they would have rendered more than 1 year of service
at the time of their dismissal and, therefore, should be
considered regular employees. Even if they have been
engaged only in April of 1987, they will still be deemed
regular employees for as earlier indicated, Isagani Ecal is a
"labor-only" contractor and petitioners perform activities
directly related to the principal business of Hi-Line Line.
Petitioners, having been illegally dismissed on June 6, 1987,
are entitled to backwages equivalent to three years without
qualifications and deductions in line with prevailing
jurisprudence.
WHEREFORE, the decision of public respondent NLRC is
hereby REVERSED and SET ASIDE. Private respondent Hi-Line
Timber, Inc. is hereby ordered to reinstate petitioners to their
former positions with backwages equivalent to three (3)
years without deductions and qualifications. The records of
the case are remanded to the labor arbiter for determination
of the unpaid benefits due petitioners. No costs.
SO ORDERED.

G.R. No. 74969 May 7, 1990

TELESFORO
MAGANTE, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
CONSTRESS PHILIPPINES, INC., respondents.
Jose V. Juan, Mercedes M. Respicio and Roberto C. Omandam
for petitioner.
Topacio/Tagoc & Associates for private respondent.

FERNAN, C.J.:

The issue in this petition for certiorari is whether public

respondent National Labor Relations Commission committed
grave abuse of discretion in reversing and setting aside the
decision of Labor Arbiter Domingo V. del Rosario dated June
22, 1983 directing private respondent in Case No. NLRC-NCR8-5215-82 entitled "Telesforo Magante, complainant, vs.
Constress Philippines, Inc., respondent" to reinstate
petitioner to his position with full backwages with all the
rights and benefits granted by law. In lieu of the aforesaid
decision, public respondent commission entered a new
judgment dismissing petitioner's complaint for illegal
dismissal on the ground that said petitioner is a project
employee whose employment terminated upon the
completion of the project to which he was assigned. 1
The undisputed facts of the case as culled from the records of
the case are:
Private respondent Constress Philippines Inc. is engaged in
the concrete structural business with address at Ortigas
Avenue, Pasig, Metro Manila. Petitioner Telesforo Magante, on
the other hand, was employed by the former as a carpenter
from April 17, 1980 until his dismissal on March 6, 1982
earning three hundred pesos (P300.00), more or less, a week
excluding allowance and rendering about fourteen (14) hours
of work daily from 7:00 in the morning to 10:00 in the
evening. His work involved the making of molds (forma or
siding of cement post) for bridges, buildings, charcoal builder
sea file, and others. Apparently. petitioner was never
assigned to work outside the plant of private respondent.
Every three (3) months, petitioner was made to fill up and
sign an employment contract relating to a particular phase of
work in a specific project. Allegedly, the terms of the contract
written in English were not understood by petitioner nor was
the same explained to him. The last hiring agreement
entered into between petitioner and private respondent was

on December 7, 1981 which was to take effect on even date

with an agreed compensation of P21.36 a day.
On March 6, 1982, private respondent posted a notice of
termination on its bulletin board to take effect the following
day, March 7, 1989, which included petitioner and other
employees as among those whose services were being
terminated by private respondent. Petitioner was told that he
cannot work anymore because he is already old, that his
contract had already expired and was not renewed being a
project employee. The termination of petitioner and his fellow
workers was reported to the Ministry of Labor.
Consequently, petitioner filed a complaint with the then
Ministry (now Department) of Labor and Employment for
illegal dismissal. After the filing of the respective position
papers by the parties, Labor Arbiter Domingo del Rosario
rendered a decision 2 on June 22, 1983 with the following
pronouncement:
The terms of the contract that complainant is a project
worker is not the determining factor of the status of
complainant or any worker but the work performed by him
and the place where he performed his assignment. The
contract entered into by respondent and complainant is more
of a scheme to evade its liability or obligation under the law.
WHEREFORE, respondent is directed to reinstate complainant
to his position with full backwages with all the rights and
benefits granted by law and by respondent Company. 3
From the foregoing decision of the labor arbiter, private
respondent filed an appeal before the National Labor
Relations Commission premised on the ground that the
termination of petitioner's employment was occasioned by
the completion of the phase of work in the project for which
he was specifically hired and that he was duly notified
thereof in compliance with the requirements of law.

Finding merit in the appeal, public respondent held that

petitioners employment falls squarely within the purview of
Policy Instructions No. 20, a regulation intended for
stabilizing employer-employee relations in the construction
industry which has aptly taken into consideration the unique
characteristics of respondent's business herein, quoting the
pertinent provisions as follows:
Generally, there are two types
construction industry namely:

of

employees

in

the

1) Project employees, and

2) Non-project employees
Project employees are those employed in connection with a
particular construction project. . . .
Project employees are not entitled to termination pay if they
are terminated as a result of the completion of the project or
any phase thereof in which they are employed, regardless of
the number of projects in which they have been employed by
a particular construction company. 4
Public respondent further found that upon completion of a
particular phase of work in the project for which petitioner's
services have been hired, his termination was indubitably for
cause. With these justifications, public respondent set aside
the appealed decision of the labor arbiter and entered a new
judgment dismissing the complaint for lack of merit.
Petitioner filed a motion for reconsideration of the aforesaid
decision but the same was denied.
Petitioner now comes before Us by way of certiorari to set
aside the aforesaid decision of public respondent
promulgated on August 1, 1984 for having been issued with
grave abuse of discretion. It is asserted in the instant petition
that private respondent's argument that petitioner was only
hired for a fixed period of time cannot escape the factual

finding of the Labor Arbiter's decision that the contract

entered into by private respondent with the petitioner is
more of a scheme to evade its liability or obligation under the
law by making it appear that said petitioner is a project to
project employee.
The Solicitor-General, when required to file a Comment to the
instant petition, took the same stand as petitioner citing the
case Fequirin et al. vs. National Labor Relations Commission,
et al. 5 as the basis for considering petitioner as a regular and
permanent employee, who should therefore be reinstated to
his position with backwages. 6
In view of the Solicitor-General's contrary stand to the
decision of public respondent National Labor Relations
Commission, the latter was given an opportunity to file its
own comment to the petition. In the aforesaid comment,
public respondent defends its decision in line with Article 281
of the Labor Code which provides the exception to regular
and casual employment, that is, when the employment has
been fixed for a specific project or undertaking the
completion or termination of which has been determined at
the time of the engagement of employment. Public
respondent contends that petitioner's case falls within the
exception and the Fegurin case relied upon by petitioner
does not stand on all fours with the present case because the
complainants in said case had lengths of service for nine (9),
eight (8) and six (6) years, the shortest being three (3) years.
In the instant case, petitioner worked only for over a year, his
last contract lasting only a span of four (4) months.
Furthermore, Article 281 of this Labor Code is intended for all
industries except the construction industry. Precisely, Policy
Instruction No. 20 was promulgated for the reason that
problems of regularity of employment in the construction
industry has continued to plague it. This policy merely
implements the exception to Article 281 of the Labor Code. 7

We find merit in the petition as We sustain the position of the

Solicitor-General that petitioner Telesforo Magante was a
regular employee of private respondent.
Article 281 of the Labor Code provides:
Art. 281. Regular and Casual Employment. The provisions
of written agreement to the contrary notwithstanding and
regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade
of the employer except where the employment has been
fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or service to
be performed is seasonal in nature and the employment is
for the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph:Provided, that, any
employee who has rendered at least one year of service,
whether such service is continuous or broken shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
while such actually exists.
As aptly observed by the Solicitor-General, petitioner has
established that since the very inception of his employment
in 1980, he was never deployed from project to project of
private respondent but had been regularly assigned to
perform carpentry work under the supervision of a certain
Bernardo Padaon who, since 1964 until his resignation on
January 2, 1982 worked for private respondent as the
supervisor of its Carpentry Department. This goes to show
two things: that petitioner was assigned to perform tasks
which are usually necessary or desirable in the usual
business or trade of private respondent; and that said

assignments did not end on a project to project basis,

although the contrary was made to appear by private
respondent through the signing of separate employment
contracts allegedly for different projects because it is indeed
obvious that petitioner continued to perform the same kind of
work throughout his period of employment allegedly
considered to have been done on a project to project basis.
Although petitioner had only rendered almost two years of
service, nevertheless this should not detract from his status
of being a regular employee because as correctly stated by
the labor arbiter, the determining factor of the status of
complainant-petitioner or any worker is the nature of the
work performed by the latter and the place where he
performed his assignment.
We have re-examined the case of Fegurin vs. National Labor
Relations Commission 8 and found that although the facts of
the said case are not on all fours with the instant petition
there being a work pool to which the complaining employees
therein belonged, nonetheless, the doctrine therein may be
similarly applied in the case at bar considering that the
nature of the work of petitioner herein and in said case also
involved carpentry work and there was a continuous
assignment of similar workload from project to project.
We held therein that the employment of petitioners with the
company for several years [four (4) of whom for nine (9)
years, one (1) for eight (8) years, another for six (6) years,
the shortest term being three (3) years] despite the shorter
employment periods specified in their notices of
employment, performing activities usually necessary or
desirable in the usual business of the company, shows that
they are regular employees.
Moreover, if petitioner were employed as a "project
employee" private respondent should have submitted a
report of termination to the nearest public employment office

every time his employment is terminated due to completion

of each construction project, as required by Policy Instruction
No. 20, 9 which provides:
Project employees are not entitled to termination pay if they
are terminated as a result of the completion of the project or
any phase thereof in which they are employed, regardless of
the number of projects in which they have been employed by
a particular construction company. Moreover, the company is
not required to obtain a clearance from the Secretary of
Labor in connection with such termination. What is required
of the company is a report to the nearest Public Employment
Office for statistical purposes. (Emphasis Supplied)
Throughout the duration of petitioner's employment, there
should have been filed as many reports of termination as
there were construction projects actually finished if it were
true that petitioner Telesforo Magante was only a project
worker.
The foregoing considered, public respondent National Labor
Relations Commission gravely abused its discretion in closing
its eyes to the evidence on record and the factual findings of
the labor arbiter in setting aside the decision of the latter.
Construing the employment contract signed by petitioner
with private respondent solely on its face without considering
the surrounding circumstances in this case serves to defeat
the purpose for which the Labor Code and its implementing
rules were enacted.
WHEREFORE, the petition for certiorari is granted, and the
decision of the National Labor Relations Commission, dated
August 1, 1984 is hereby REVERSED and SET ASIDE and the
decision of the Labor Arbiter dated June 22, 1983 is hereby
AFFIRMED and REINSTATED.
SO ORDERED.

Petitioner Baguio Country Club Corporation (corporation) is a

recreational establishment certified by the Ministry of Labor
and
Employment
as
an"
entertainment-service"
establishment.
Respondent
National
Labor
Relations
Commission (Commission) is a government instrumentality
created by law, impleaded in its official capacity, while
private respondent Associated Labor Union (union) is a duly
registered labor organization and private respondent Jimmy
Calamba is an employee of the petitioner corporation as
laborer, dishwasher, and gardener.
G.R. No. 71664 February 28, 1992
BAGUIO COUNTRY CLUB CORPORATION, petitioner,
vs.
NATIONAL
LABOR
RELATIONS
COMMISSION,
ASSOCIATED
LABOR
UNION
(ALU)
and
JIMMY
CALAMBA,respondents.
Guillermo B. Bandonill and A.N. Bolinao, Jr. for petitioner.
Jose C. Evangelista for Jimmy Calamba.

MEDIALDEA, J.:
This petition for certiorari seeks to annul and set aside the
resolution issued by the respondent National Labor Relations
Commission dated June 10, 1985 dismissing the appeal of
petitioner for lack of merit and affirming in toto the decision
of the Executive Labor Arbiter dated September 15, 1982
declaring private respondent Calamba as a regular employee
entitled to reinstatement to the position of gardener without
loss of seniority and with full backwages, benefits and
privileges from the time of his dismissal up to reinstatement
including 13th month pay.
The antecedent facts are as follows:

Private respondent Jimmy Calamba was employed on a day

to day basis in various capacities as laborer and dishwasher
for a period of ten (10) months from October 1, 1979 to July
24, 1980. On September 1, 1980 to October 1, 1980, private
respondent Calamba was hired as a gardener and rehired as
such on November 15, 1980 to January 4, 1981 when he was
dismissed by the petitioner corporation. (see Rollo, pp. 2836)
On August 3, 1981, private respondent Jimmy Calamba
assisted by private respondent union instituted a complaint
against petitioner corporation with the Ministry of Labor (now
Department of Labor and Employment), Baguio District
Office, Baguio City for unfair labor practice, illegal dismissal
and non-payment of 13th month pay for 1979 and 1980.
The Executive Labor Arbiter Sotero L. Tumang rendered a
decision on September 15, 1982 declaring private
respondent Calamba as a regular employee and ordering
petitioner to reinstate private respondent to the position of
gardener without loss of seniority and with full backwages,
benefits and privileges from the time of his dismissal up to
reinstatement including 13th month pay.
Labor Arbiter Tumang found as follows:

After a careful perusal of the facts presented by the parties,

we find the complaint for illegal dismissal and non-payment
of thirteenth (13th) month pay, meritorious for the following
reasons:
1. Complainant Jimmy Calamba has attained regular status
as an employee of the Club on account of the nature of the
job he was hired, to perform continuously and on staggered
basis for a span of thirteen months. True that there were
employment contracts executed between the Club and the
complainant indicating the period or the number of days the
complainant is being needed but what is to be considered is
not the agreement, written or otherwise, of the parties in
determining the regularity or casualness of job but it should
be the nature of the job. Clearly, the work of a gardener is
not a seasonal or for a specific period undertaking but it is a
whole year round activity. We must not lose sight of the fact
that the Baguio Country Club Corporation is an exclusive Club
with sustaining members who avails (sic) of its facilities the
whole year round and it is necessary, is has been observed
and of common knowledge, that the gardens including the
green of its golf course where the complainant was assigned
must be properly kept and maintained.
2. Being a regular employee with more than one (1) year
length of service with the respondent, Jimmy Calamba could
not be terminated without a just or valid cause. This is so
explicit in our Constitution that the security of tenure of a
worker must be safeguarded and protected and Jimmy
Calamba should enjoy no less protection.
3. Jimmy Calamba was dismissed without any written
clearance from the Ministry of Labor and Employment prior to
his termination. Worse, the respondent fired the complainant
from his job due to the a (sic) alleged expiration of his
employment contract ten (10) times but not even a single

report of his dismissal as mandated by law was submitted to

the Ministry of Labor and Employment.
4. The Company did not refute the claim of Jimmy Calamba
for payment of his thirteenth (13th) month pay under P.D.
851 nor presented any report of compliance to that effect
with the Ministry of Labor and Employment and, therefore, he
must be paid correspondingly. (Rollo, pp. 39-40)
Hence, the petitioner interposed an appeal to the respondent
Commission.
On June 10, 1985, after finding that there existed no
sufficient justification to disturb the appealed decision, the
respondent Commission rendered a resolution dismissing the
appeal for lack of merit.
Hence, this present petition raising four (4) assignments of
errors, which are as follows:
I
THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN
HOLDING THAT PRIVATE RESPONDENT JIMMY CALAMBA WAS
A "CASUAL" EMPLOYEE AND HAD ATTAINED THE STATUS OF A
REGULAR EMPLOYEE, DESPITE THE INCONTROVERTIBLE FACT
THAT SAID PRIVATE RESPONDENT WAS A CONTRACTUAL AND
SEASONAL EMPLOYEE.
II
THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN
HOLDING THAT THE CONCLUSIONS OF THE EXECUTIVE
LABOR ARBITER WERE FULLY SUPPORTED BY THE EVIDENCE
AND IN UPHOLDING THE REINSTATEMENT OF PRIVATE
RESPONDENT JIMMY CALAMBA.
III

THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN

HOLDING THAT THE DISMISSAL OF PRIVATE RESPONDENT
JIMMY CALAMBA REQUIRED PRIOR CLEARANCE FROM THE
MINISTRY OF LABOR AND EMPLOYMENT EACH TIME HIS
CONTRACT OF EMPLOYMENT EXPIRED.
IV
THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN
NOT HOLDING THAT PRIVATE RESPONDENT ASSOCIATED
LABOR UNION HAS NO LEGAL PERSONALITY TO FILE THIS
CASE FOR PRIVATE RESPONDENT JIMMY CALAMBA BEFORE
THE REGIONAL OFFICE OF THE NATIONAL LABOR RELATIONS
COMMISSION, AS SAID PRIVATE RESPONDENT BEING A
CONTRACTUAL EMPLOYEE IS EXPRESSLY EXCLUDED FROM
THE BARGAINING UNIT UNDER THE COLLECTIVE BARGAINING
AGREEMENT (Rollo, pp. 98-99)
Petitioner maintains that private respondent Calamba was a
contractual employee whose employment was for a fixed and
specific period as set forth and evidenced by the private
respondent's contracts of employment, the pertinent portions
of which are quoted as follows:
xxx xxx xxx
. . . the employment may be terminated any time without
liability to the Baguio Country Club other than for salary
actually earned up to and including the date of last service.
His/her employment shall be on a day to day BASIS for
a temporary period . . . subject to termination at any time at
the discretion of the Baguio Country Club Corporation.
xxx xxx xxx
(Rollo, p. 7)

In addition, petitioner stresses that there was absolutely no

oral or documentary evidence to support the conclusion of
the Executive Labor Arbiter which was subsequently affirmed
by the respondent Commission that private respondent
Calamba has rendered thirteen (13) months of continuous
service.
On the contrary, respondent Commission through the
Solicitor General argues that private respondent Calamba,
having rendered services as laborer, gardener and
dishwasher for more than one (1) year, was a regular
employee at the time his employment was terminated.
Moreover, the nature of private respondent Calamba's
employment as laborer, gardener, and dishwasher pertains
to a regular employee because they are necessary or
desirable in the usual business of petitioner as a recreational
establishment.
The pivotal issue therefore in whether or not the private
respondent Jimmy Calamba has acquired the status of a
regular employee at the time his employment was
terminated.
After a careful review of the records of this case the Court
finds no merit in the petition and holds that the respondent
Commission did not gravely abuse its discretion when it
affirmed in toto the decision of the labor arbiter.
The law on the matter is Article 280 of the Labor Code which
defines regular and casual employment as follows:
Art. 280. Regular and Casual Employment. The provisions
of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
necessary or desirable in the usual business or trade of the

employer, except where the employment has been fixed for a

specific project or undertaking the completion or termination
of which has been determined at the time of the engagement
of the employee or where the work or services to be
performed is seasonal in nature and the employment is for
the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph:Provided, That any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
while such actually exists.
This provision reinforces the Constitutional mandate to
protect the interest of labor. Its language evidently manifests
the intent to safeguard the tenurial interest of the worker
who may be denied the rights and benefits due a regular
employee by virtue of lopsided agreements with the
economically powerful employer who can maneuver to keep
an employee on a casual status for as long as convenient.
Thus, contrary agreements notwithstanding, an employment
is deemed regular when the activities performed by the
employee are usually necessary or desirable in the usual
business or trade of the employer. Not considered regular are
the so-called "project employment" the completion or
termination of which is more or less determinable at the time
of employment, such as those employed in connection with a
particular construction project, and seasonal employment
which by its nature is only desirable for a limited period of
time. However, any employee who has rendered at least one
year of service, whether continuous or intermittent, is
deemed regular with respect to the activity he performed and
while such activity actually exits.

The primary standard, therefore, of determining a regular

employment is the reasonable connection between the
particular activity performed by the employee in relation to
the usual business or trade of the employer. The test is
whether the former is usually necessary or desirable in the
usual business or trade of the employer. The connection can
be determined by considering the nature of the work
performed and its relation to the scheme of the particular
business or trade in its entirety. Also, if the employee has
been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law
deems the repeated and continuing need for its performance
as sufficient evidence of the necessity if not indispensability
of that activity to the business. Hence, the employment is
also considered regular, but only with respect to such activity
and while such activity exists. (De Leon v. National Labor
Relations Commission, G.R. No. 70705, August 21, 1989. 176
SCRA 615, 620-621)
In the case at bar, the petitioner corporation, which is
certified by the Ministry of Labor and Employment as an
"entertainment-service" establishment, claims that private
respondent was contracted for a fixed and specific period.
However, the records are that the private respondent was
repeatedly re-hired to perform tasks ranging from
dishwashing and gardening, aside from performing
maintenance work.
Such repeated rehiring and the continuing need for his
service are sufficient evidence of the necessity and
indispensability of his service to the petitioner's business or
trade.
The law demands that the nature and entirety of the
activities performed by the employee be considered. It is not
tenable to argue that the aforementioned tasks of private
respondent are not necessary in petitioner's business as a

recreational establishment, just as it cannot be said that only

those who are directly involved in providing entertainment
service may be considered as necessary employees.
Otherwise, there would have been no need for the regular
maintenance section of petitioner corporation.
Furthermore, the private respondent performed the said
tasks which lasted for more than one year, until early
January, 1981 when he was terminated. Certainly, by this fact
alone he is entitled by law to be considered a regular
employee.
Owing to private respondent's length of service with the
petitioner corporation, he became a regular employee, by
operation of law, one year after he was employed. It is more
in consonance with the intent and spirit of the law to rule
that the status of regular employment attaches to the casual
employee on the day immediately after the end of his first
year of service. To rule otherwise is to impose a burden on
the employee which is not sanctioned by law. (see Kimberly
Independent Labor Union for Solidarity, Activism and
Nationalism in Line Industries and Agriculture v. Drilon, G.R.
No. 77629, May 9, 1990, 185 SCRA 190, 203-204)
It is of no moment that private respondent was told when he
was hired that his employment would only be "on a day to
day basis for a temporary period" and may be terminated at
any time subject to the petitioner's discretion. Precisely, the
law overrides such conditions which are prejudicial to the
interest of the worker. Evidently, the employment contracts
entered into by private respondent with the petitioner have
the purpose of circumventing the employee's security of
tenure. The Court therefore, rigorously disapproves said
contracts which demonstrate a clear attempt to exploit the
employee and deprive him of the protection sanctioned by
the Labor Code.

It is noteworthy that what determines whether a certain

employment is regular or casual is not the will and word of
the employer, to which the desperate worker often accedes.
It is the nature of the activities performed in relation to the
particular business or trade considering all circumstances,
and in some cases the length of time of its performance and
its continued existence. (see De Leon v. NLRC, Ibid)
All premises considered, the Court is convinced that the
assailed resolution of the respondent Commission is not
tainted with arbitrariness that would amount to grave abuse
of discretion or lack of jurisdiction and therefore, We find no
reason to disturb the same.
ACCORDINGLY, the petition is DISMISSED for lack of merit.
SO ORDERED.

G.R. No. 149793. April 15, 2005

WACK WACK GOLF & COUNTRY CLUB, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MARTINA
G. CAGASAN, CARMENCITA F. DOMINGUEZ, and
BUSINESS
STAFFING
AND
MANAGEMENT,
INC., Respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review of the Resolution 1 of the Court of
Appeals (CA) in CA-G.R. SP No. 63658, dismissing the petition
for certiorari before it for being insufficient in form and the
subsequent resolution denying the motion for reconsideration
thereof.

The undisputed antecedent facts are as follows:

On November 29, 1996, a fire destroyed a large portion of
the main clubhouse of the Wack Wack Golf and Country Club
(Wack Wack), including its kitchen. In view of the
reconstruction of the whole clubhouse complex, Wack Wack
filed a notice with the Department of Labor and Employment
(DOLE) on April 14, 1997 that it was going to suspend the
operations of the Food and Beverage (F & B) Department one
(1) month thereafter. Notices to 54 employees (out of a
complement of 85 employees in the department) were also
sent out, informing them that they need not report for work
anymore after April 14, 1997 but that they would still be paid
their salaries up to May 14, 1997. They were further told that
they would be informed once full operations in Wack Wack
resume.
The Wack Wack Golf Employees Union branded the
suspension of operations of the F & B Department as
arbitrary, discriminatory and constitutive of union-busting, so
they filed a notice of strike with the DOLEs National
Conciliation and Mediation Board (NCMB). Several meetings
between the officers of Wack Wack and the Union, headed by
its President, Crisanto Baluyot, Sr., and assisted by its
counsel, Atty. Pedro T. De Quiroz, were held until the parties
entered into an amicable settlement. An Agreement 2 was
forged whereby a special separation benefit/retirement
package for interested Wack Wack employees, especially
those in the F & B Department was offered. The terms and
conditions thereof reads as follows:
1. The UNION and the affected employees of F & B who are
members of the UNION hereby agree to accept the special
separation benefit package agreed upon between the CLUB
management on the one hand, and the UNION officers and
the UNION lawyer on the other, in the amount equivalent to
one-and-one-half months salary for every year of service,

regardless of the number of years of service rendered. That,

in addition, said employees shall also receive the other
benefits due them, namely, the cash equivalent of unused
vacation and sick leave credits, proportionate 13th month
pay; and other benefits, if any, computed without premium;
2. That the affected F & B employees who have already
signified intention to be separated from the service under the
special separation benefit package shall receive their
separation pay as soon as possible;
3. That the same package shall, likewise, be made available
to other employees who are members of the bargaining unit
and who may or may not be affected by future similar
suspensions of operations. The UNION re-affirms and
recognizes that it is the sole prerogative of the management
of the Club to suspend part or all of its operations as may be
necessitated by the exigencies of the situation and the
general welfare of its membership. The closure of the West
Course, which is scheduled for conversion to an All-Weather
Championship golf course, is cited as an example. It is,
however, agreed that if a sufficient number of employees,
other than F & B employees, would apply for availment of the
package within the next two months, the Club may no longer
go through the process of formally notifying the Department
of Labor. The processing and handling of benefits for these
other employees shall be done over a transition period within
one year;
4. All qualified employees who may have been separated
from the service under the above package shall be
considered under a priority basis for employment by
concessionaires and/or contractors, and even by the Club
upon
full
resumption
of
operations,
upon
the
recommendation of the UNION. The Club may even persuade
an employee-applicant for availment under the package to
remain on his/her job, or be assigned to another position. 3

Respondent Carmencita F. Dominguez, who was then working

in the Administrative Department of Wack Wack, was the first
to avail of the special separation package. 4 Computed at 1
months for every year of service pursuant to the Agreement,
her separation pay amounted to P91,116.84, while economic
benefits amounted toP6,327.53.5 On September 18, 1997,
Dominguez signed a Release and Quitclaim 6 in favor of Wack
Wack.
Respondent Martina B. Cagasan was Wack Wacks Personnel
Officer who, likewise, volunteered to avail of the separation
package.7 On September 30, 1997, she received from Wack
Wack the amount of P469,495.66 as separation pay and
other economic benefits amounting to P17,010.50.8 A
Release and Quitclaim9 was signed on September 30, 1997.
The last one to avail of the separation package was Crisanto
Baluyot, Sr. who, in a Letter10 dated January 16, 1998
addressed to Mr. Bienvenido Juan, Administrative Manager of
Wack Wack, signified his willingness to avail of the said early
retirement package. The total amount of P688,290.3011 was
received and the Release and Quitclaim 12 signed on May 14,
1998.
On October 15, 1997, Wack Wack entered into a Management
Contract13 with Business Staffing and Management, Inc.
(BSMI), a corporation engaged in the business as
Management Service Consultant undertaking and managing
for a fee projects which are specialized and technical in
character like marketing, promotions, merchandising,
financial management, operation management and the
like.14 BSMI was to provide management services for Wack
Wack in the following operational areas:
1. Golf operations management;
2. Management and maintenance of building facilities;

3 .Management of food and beverage operation;

4. Management of materials and procurement functions;
5. To provide and undertake administrative and support
services for the [said] projects. 15
Pursuant to the Agreement, the retired employees of Wack
Wack by reason of their experience were given priority by
BSMI in hiring. On October 21, 1997, respondents Cagasan
and Dominguez filed their respective applications 16 for
employment with BSMI. They were eventually hired by BSMI
to their former positions in Wack Wack as project employees
and were issued probationary contracts. 17
Aside from BSMI, Wack Wack also engaged several
contractors which were assigned in various operating
functions of the club, to wit:
1. Skills and Talent Employment Promotion (STEP) whose 90
workers are designated as locker attendants, golf bag
attendants, nurses, messengers, technical support engineer,
golf director, agriculturist, utilities and gardeners;
2. Marvel Manpower Agency - whose 19 employees are
designated as sweepers, locker attendants, drive range
attendant, telephone operator, workers and secretaries;
3 City Service Corporation contractor for janitorial services
for the whole club;
4. Microstar Business and Management Services, Inc. whose
15 employees are designated in the Finance and Accounting
departments.18
Due to these various management service contracts, BSMI
undertook an organizational analysis and manpower
evaluation to determine its efficacy, and to streamline its
operations. In the course of its assessment, BSMI saw that

the positions of Cagasan and Dominguez were redundant. In

the case of respondent Cagasan, her tasks as personnel
officer were likewise being taken cared of by the different
management service contractors; on the other hand,
Dominguezs work as telephone operator was taken over by
the personnel of the accounting department. Thus, in
separate Letters19 dated February 27, 1998, the services of
Dominguez and Cagasan were terminated. With respect to
Baluyot, he applied for the position of Chief Porter on May 12,
1998.
The
position,
however,
was
among
those
recommended to be abolished by the BSMI, so he was offered
the position of Caddie Master Aide with a starting salary
of P5,500.00 a month. Baluyot declined the offer. Pending
Wack Wacks approval of the proposed abolition of the
position of Chief Porter, Baluyot was temporarily accepted to
the position with a monthly salary of P12,000.00. In July
1998, Baluyot decided not to accept the position of Caddie
Master Aide; thus, BSMI continued with its plan to abolish the
said position of Chief Porter and Baluyot was dismissed from
the service.
Thereafter, the three (3) employees filed their respective
complaints with the National Labor Relations Commission
(NLRC) for illegal dismissal and damages against Wack Wack
and BSMI.
The complainants averred that they were dismissed without
cause. They accepted the separation package upon the
assurance that they would be given their former work and
assignments once the Food and Beverage Department of
Wack Wack resumes its operations. On the other hand, the
respondents therein alleged that the dismissal of the
complainants were made pursuant to a study and evaluation
of the different jobs and positions and found them to be
redundant.

In a Decision20 dated January 25, 2000, the Labor Arbiter

found that the dismissal of Dominguez and Cagasan was for
a valid and authorized cause, and dismissed their complaints.
The position of personnel manager occupied by Martina
Cagasan was redundated as it is allegedly not necessary,
because her functions will be taken over [by] the field
superintendent and the companys personnel and operations
manager. The work of Carmencita Dominguez on the other
hand as telephone operator will be taken over by the
accounting department personnel. Such move really are
intended to streamline operations. While admittedly, they are
still necessary in the operations of Wack Wack, their jobs can
be assigned to some other personnel, who will be performing
dual functions and does save Wack Wack money. This is
feasible on account of the fact that they are functions
pertaining to administrative work.21
As to Baluyot, however, the Labor Arbiter found that while
the position of chief porter had been abolished, the caddie
master aide had been created. Their functions were one and
the same. The porters, upon instructions from the chief
porter, are the ones who bring down the golf bags of the
players from the vehicle. The caddie master receives them
and counts the number of clubs inside the golf set. After the
game, the same procedure is repeated before the golf sets
are loaded once more into the vehicle. 22 The Labor Arbiter
found that the dismissal of Baluyot as Chief Porter was
unjustified and can not be considered redundant in the case
at bar. It was a means resorted to in order to unduly sever
Baluyots relationship with BSMI without justifiable cause. The
Labor Arbiter therefore found Baluyots dismissal to be
illegal. The dispositive portion of the decision reads as
follows:
CONFORMABLY WITH THE FOREGOING, judgment is
hereby rendered dismissing the complaints of Carmencita F.

Dominguez and Martina Cagasan for lack of merit. Finding

Crisanto Baluyots dismissal to be illegal. Consequently, he
should immediately be reinstated to his former position as
Chief Porter or Caddie Master, and paid his backwages which,
as of December 31, 1999, has accumulated in the sum
of P180,000.00 by BSMI.
All other claims are dismissed for lack of merit.23
Since Baluyot no longer appealed the decision, complainants
Dominguez and Cagasan filed a Partial Appeal on the ground
of prima facie abuse of discretion on the part of the Labor
Arbiter and serious errors in his findings of facts and law.
Their claims were anchored on the Agreement between the
Union and management, that they were promised to be
rehired upon the full resumption of operations of Wack Wack.
They asserted that Wack Wack and BSMI should not avoid
responsibility to their employment, by conniving with each
other to render useless and meaningless the Agreement.
BSMI also appealed to the NLRC, alleging that the Labor
Arbiter committed grave abuse of discretion in finding
Baluyots dismissal to be illegal, when in fact his position as
Chief
Porter
was
abolished
pursuant
to
a bona
fidereorganization of Wack Wack. It was not motivated by
factors other than the promotion of the interest and welfare
of the company.
On September 27, 2000, the NLRC rendered its
Decision24 ordering Wack Wack to reinstate Carmencita F.
Dominguez and Martina Cagasan to their positions in
respondent Wack Wack Golf & Country Club with full
backwages and other benefits from the date of their
dismissal until actually reinstated. It anchored its ruling on
the Agreement dated June 16, 1997 reached between the
Union and Wack Wack, particularly Section 4 25 thereof. The
NLRC directed Wack Wack to reinstate the respondents and
pay their backwages since "Business Staffing and

Management, Inc. (BSMI) is a contractor who [merely]

supplies workers to respondent Wack Wack. It has nothing to
do with the grievance of the complainants with their
employer, respondent Wack Wack."
Wack Wack and BSMI filed a motion for reconsideration which
was denied in the Resolution26 dated December 15, 2000.
Wack Wack, now the petitioner, consequently filed a petition
for certiorari with the Court of Appeals, docketed as CA-G.R.
SP No. 63658 alleging the following:
A. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION AND DENIAL OF DUE PROCESS IN HOLDING
THAT RESPONDENTS CAGASAN AND DOMINGUEZ HAVE
REGAINED THEIR JOBS OR EMPLOYMENT PURSUANT TO THE
AGREEMENT BETWEEN PETITIONER AND WACK WACK GOLF
EMPLOYEES UNION.
B. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION AND DENIAL OF DUE PROCESS IN RULING THAT
RESPONDENT BSMI IS NOT AN INDEPENDENT CONTRACTOR
BUT A MERE SUPPLIER OF WORKERS TO THE PETITIONER.
C. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION AND DENIAL OF DUE PROCESS IN HOLDING
PETITIONER
LIABLE
FOR
THE
REINSTATEMENT
OF
RESPONDENTS CAGASAN AND DOMINGUEZ AND FOR THE
PAYMENT OF THEIR SUPPOSED BACKWAGES DESPITE THE
ABSENCE OF EMPLOYER-EMPLOYEE RELATION BETWEEN
THEM.27
Likewise, BSMI also assailed the resolutions of the NLRC and
filed its own petition for certiorari with the CA, docketed as
CA-G.R. SP No. 63553.28 A perusal of the petition which is

attached to the records reveal that BSMI ascribes grave

abuse of discretion on the part of the NLRC in ruling that: (a)
the private respondents have regained their employment
pursuant to the Agreement between Wack Wack and the
Wack Wack Golf Employees Union; (b) the dismissal of
private respondents was made pursuant to the petitioners
exercise of its management prerogatives; and (c) the
petitioner (BSMI) is liable for the reinstatement of private
respondents and the payment of their backwages. 29
On April 3, 2001, the CA (Twelfth Division) dismissed the
petition on the ground that the petitioner therein failed to
attach an Affidavit of Service as required in Section 11, Rule
13 of the 1997 Rules of Civil Procedure. Moreover, the
verification and certification against forum shopping was
insufficient for having been executed by the general manager
who claimed to be the duly-authorized representative of the
petitioner, but did not show any proof of authority, i.e., a
board resolution, to the effect.
A motion for reconsideration was, consequently, filed
appending thereto the requisite documents of proof of
authority. It asserted that in the interest of substantial
justice, the CA should decide the case on its merits.
BSMI filed a Comment30 to the Motion for Reconsideration of
the petitioner, also urging the CA to set aside technicalities
and to consider the legal issues involved: (a) whether or not
there is a guaranty of employment in favor of the
complainants under the Agreement between the petitioner
and the Union; (b) whether or not the termination of the
employment of the complainants, based on redundancy, is
legal and valid; and (c) who are the parties liable for the
reinstatement of the complainants and the payment of
backwages. It further added that it shares the view of the
petitioner, that the assailed resolutions of the NLRC are
tainted with legal infirmities. For this reason, it was also

constrained to file its own petition for certiorari with the CA,
docketed as CA-G.R. SP No. 63553 pending with the Special
Fourth Division, just to stress that there is no guaranty of
perpetual employment in favor of the complainants.
On August 31, 2001, the CA denied petitioners motion for
reconsideration.
The petitioner is now before the Court, assailing the twin
resolutions of the CA. It points out that BSMI has filed its
petition for certiorari before the CA one day late and yet, the
Special Fourth Division admitted the petition in the interest of
substantial justice, and directed the respondents to file a
comment thereon;31 whereas, in the instant case, the mere
lack of proof of authority of Wack Wacks General Manager to
sign the certificate of non-forum shopping was considered
fatal by the CAs Twelfth Division. It further asserts that its
petition for certiorari is meritorious, considering that the
NLRC committed grave abuse of discretion in ordering Wack
Wack to reinstate the respondents Cagasan and Dominguez,
and to pay their backwages when indubitable evidence
shows that the said respondents were no longer employees
of Wack Wack when they filed their complaints with the Labor
Arbiter.
There is merit in the petition.
In Novelty Philippines, Inc. v. Court of Appeals,32 the Court
recognized the authority of the general manager to sue on
behalf of the corporation and to sign the requisite verification
and certification of non-forum shopping. The general
manager is also one person who is in the best position to
know the state of affairs of the corporation. It was also error
for the CA not to admit the requisite proof of authority when
in the Novelty case, the Court ruled that the subsequent
submission of the requisite documents constituted
substantial compliance with procedural rules. There is ample
jurisprudence holding that the subsequent and substantial

compliance of an appellant may call for the relaxation of the

rules of procedure in the interest of justice. 33 While it is true
that rules of procedure are intended to promote rather than
frustrate the ends of justice, and while the swift unclogging
of court dockets is a laudable objective, it nevertheless must
not be met at the expense of substantial justice. 34 It was,
therefore, reversible error for the CA to have dismissed the
petition for certiorari before it. The ordinary recourse for us to
take is to remand the case to the CA for proper disposition on
the merits; however, considering that the records are now
before us, we deem it necessary to resolve the instant case
in order to ensure harmony in the rulings and expediency.
Indeed, the merits of the case constitute special or
compelling reasons for us to overlook the technical rules in
this case. With the dismissal of its petition for certiorari
before the CA, the petitioner by virtue of the NLRC decision is
compelled to reinstate respondents Cagasan and Dominguez
and pay their full backwages from the time of their dismissal
until actual reinstatement when the attendant circumstances,
however, show that the respondents had no cause of action
against the petitioner for illegal dismissal and damages.
It must be recalled that said respondents availed of the
special separation package offered by the petitioner. This
special separation package was thought of and agreed by the
two parties (Wack Wack and the Union) after a series of
discussions and negotiations to avert any labor unrest due to
the closure of Wack Wack.35 Priority was given to the
employees of the F & B Department, but was, likewise,
offered to the other employees who may wish to avail of the
separation package due to the reconstruction of Wack Wack.
Respondents do not belong to the F & B Department and yet,
on their own volition opted to avail of the special separation
package. The applications which were similarly worded read
as follows:

TO : WACK WACK GOLF & COUNTRY CLUB

BOARD OF DIRECTORS AND MANAGEMENT
Based on the information that the Club and the employees
Union have reached an agreement on a special separation
benefit package equivalent to one-and-one-half months
salary for every year of service, regardless of the number of
years of service, for employees who have been affected and
may be affected by ongoing as well as forthcoming Club
renovation, construction and related activities and reportedly
even for those who may not be affected but wish to avail of
an early retirement under the above package arrangement, I
hereby register my desire to be separated from the Club and
receive the benefits under the above stated package. 36
Thereafter, the respondents signed their respective release
and quitclaims after receiving their money benefits.
It cannot be said that the respondents in the case at bar did
not fully comprehend and realize the consequences of their
acts. Herein respondents are not unlettered persons who
need special protection. They held responsible positions in
the petitioner-employer, so they presumably understood the
contents of the documents they signed. There is no showing
that the execution thereof was tainted with deceit or
coercion. Further, the respondents were paid hefty amounts
of separation pay indicating that their separation from the
company was for a valuable consideration. Where the person
making the waiver has done so voluntarily, with a full
understanding thereof, and the consideration for the
quitclaim is credible and reasonable, the transaction must be
recognized as being a valid and binding undertaking. 37 As in
contracts, these quitclaims amount to a valid and binding
compromise agreement between the parties which deserve
to be respected.38

We reiterate what was stated in the case of Periquet v.

NLRC 39 that:
Not all waivers and quitclaims are invalid as against public
policy. If the agreement was voluntarily entered into and
represents a reasonable settlement, it is binding on the
parties and may not later be disowned simply because of a
change of mind. It is only where there is clear proof that the
waiver was wangled from an unsuspecting or gullible person,
or the terms of settlement are unconscionable on its face,
that the law will step in to annul the questionable
transaction. But where it is shown that the person making the
waiver did so voluntarily, with full understanding of what he
was doing, and the consideration for the quitclaim is credible
and reasonable, the transaction must be recognized as a
valid and binding undertaking. 40
When the respondents voluntarily signed their quitclaims and
accepted the separation package offered by the petitioner,
they, thenceforth, already ceased to be employees of the
petitioner. Nowhere does it appear in the Agreement that the
petitioner
assured
the
respondents
of
continuous
employment in Wack Wack. Qualified employees were
given priority in being hired by its concessionaires and/or
contractors such as BSMI when it entered into a management
contract with the petitioner.
This brings us to the threshold issue on whether or not BSMI
is an independent contractor or a labor-only contractor. The
NLRC posits that BSMI is merely a supplier of workers or a
labor-only contractor; hence, the petitioner remains to be the
principal employer of the respondents and liable for their
reinstatement and payment of backwages.
The ruling of the NLRC is wrong. An independent contractor is
one who undertakes "job contracting," i.e., a person who: (a)
carries on an independent business and undertakes the
contract work on his own account under his own

responsibility according to his own manner and method, free

from the control and direction of his employer or principal in
all matters connected with the performance of the work
except as to the results thereof; and (b) has substantial
capital or investment in the form of tools, equipments,
machineries, work premises and other materials which are
necessary in the conduct of the business. Jurisprudential
holdings are to the effect that in determining the existence of
an independent contractor relationship, several factors may
be considered, such as, but not necessarily confined to,
whether or not the contractor is carrying on an independent
business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right
to assign the performance of specified pieces of work; the
control and supervision of the work to another; the
employers power with respect to the hiring, firing, and
payment of the contractors workers; the control of the
premises; the duty to supply premises, tools, appliances,
materials and labor; and the mode, manner and terms of
payment.41
There is indubitable evidence showing that BSMI is an
independent contractor, engaged in the management of
projects, business operations, functions, jobs and other kinds
of business ventures, and has sufficient capital and resources
to undertake its principal business. It had provided
management services to various industrial and commercial
business establishments. Its Articles of Incorporation proves
its sufficient capitalization. In December 1993, Labor
Secretary Bienvenido Laguesma, in the case of In re Petition
for Certification Election Among the Regular Rank-and-File
Employees Workers of Byron-Jackson (BJ) Services
International Incorporated, Federation of Free Workers
(FFW)-Byron
Jackson
Services
Employees
42
Chapter, recognized BSMI as an independent contractor. As
a legitimate job contractor, there can be no doubt as to the

existence of an employer-employee relationship between the

contractor and the workers.43
BSMI admitted that it employed the respondents, giving the
said retired employees some degree of priority merely
because of their work experience with the petitioner, and in
order to have a smooth transition of operations. 44 In
accordance with its own recruitment policies, the
respondents were made to sign applications for employment,
accepting the condition that they were hired by BSMI as
probationary employees only. Not being contrary to law,
morals, good custom, public policy and public order, these
employment contracts, which the parties are bound are
considered valid. Unfortunately, after a study and evaluation
of its personnel organization, BSMI was impelled to terminate
the services of the respondents on the ground of redundancy.
This right to hire and fire is another element of the employeremployee relationship45 which actually existed between the
respondents and BSMI, and not with Wack Wack.
There being no employer-employee relationship between the
petitioner and respondents Cagasan and Dominguez, the
latter have no cause of action for illegal dismissal and
damages against the petitioner. Consequently, the petitioner
cannot be validly ordered to reinstate the respondents and
pay them their claims for backwages.
WHEREFORE, the petition is GRANTED. The Resolutions of
the Court of Appeals and the NLRC are SET ASIDE and
REVERSED. The complaints of respondents Cagasan and
Dominguez are DISMISSED. No costs.
SO ORDERED

G.R. No. 89990 March 20, 1991

EUGENIO
DE
JESUS, petitioner,
vs.
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION
(Formerly CDCP), and NATIONAL LABOR RELATIONS
COMMISSION, respondents.
Venida & Associates for petitioner.
The Government Corporate Counsel for private respondent.

The Court reverses the decision of the respondent National

Labor Relations Commission in this case, dismissing the
petitioner's appeal and affirming, consequently, the dismissal
rendered by the labor arbiter.

conditions of his employment was that he was being

"employed only for the period and specific works stated" 2 in
his appointment, and that as a "project worker" he was
subject to the provisions of Policy Instructions No. 20; that his
separation was due to the completion of the project; and that
he had signed a clearance wherein he admitted having
received all remunerations due him.

In the Court's Resolution of September 20, 1989, the Court

granted leave for the petitioner to prosecute the case as a
pauper litigant. 1 Meanwhile, in a Manifestation dated January
10, 1990, the Solicitor General informed the Court that,
based on his own assessment, he is unable to defend the
decision of the National Labor Relations Commission.

As we adverted to at the outset, the labor arbiter dismissed

the complaint. The petitioner then appealed, but was
dismissed, on a finding by the National Labor Relations
Commission that the appeal had been filed unseasonably.
The latter subsequently reconsidered, but at any rate,
affirmed the appealed decision.

The records disclose that the petitioner, prior to his

separation, was a carpenter for the respondent, Philippine
National Construction Corporation; that sometime in
September, 1984, while on duty at Apalit, Pampanga, where
the respondent corporation was pursuing the construction of
the Apalit Bridge, he vomitted blood and was treated at the
company clinic after which he was sent home; that he
reported back in December, 1984, but was no longer
accepted and was informed by Moises Chiu General Manager
of the respondent corporation, that he had been replaced;
that between January and September 1985, he sought
reinstatement but invariably, he was rebuffed by the
company.

In support of this petition, the petitioner attached thereto,

among other things, certain "personnel action forms" which
showed that he was given appointments for specific projects
on June 16, 1974, 3 July 2, 1975 4 July 1, 1976,5 May 1,
1977, 6 April 5, 1978, 7 December 1, 1979, 8 July 30,
1980, 9 November 20, 1981, 10 March 16, 1982, 11August 24,
1983, 12 September 30, 1983, 13 December 30,1983, 14 and
May 1, 1984; 15 and that since January 15, 1978, he had been
a member of the CDCP Employees Savings & Loan
Association; 16 and that, as a result, he has become a regular,
not a project, employee, who may be terminated only for a
lawful cause.

SARMIENTO, J.:p

Presently, he instituted a complaint, initially, for separation

pay but upon an amendment, prayed for reinstatement on
account of an illegal dismissal plus backwages and payment
of legal benefits.
The private respondent, on the other hand, presented the
petitioner's "201-file" which disclosed that he had been hired
as Carpenter II on March 31, 1984; that among the terms and

The Government Corporate Counsel, arguing on behalf of the

respondent corporation in lieu of the Solicitor General,
alleges that the findings of fact of the National Labor
Relations Commission are binding on the Court, and that the
finding that the petitioner was a project employee is a finding
of fact; that the petitioner has been compensated fully; and
that the personnel action forms partake of new matters that
can not be appreciated at this stage of the proceedings.

The National Labor Relations Commission, on the other hand,

denies any grave abuse of discretion attributed to it because
it was not aware of the facts the petitioner now deposits.
The petition is impressed with merit.
It is clear from the records that the petitioner is, contrary to
the assailed decision, a non-project employee and is, hence,
entitled to regular employment having rendered service for
more than ten years. As such, he can not be terminated
unless for just cause.
Article 280 of the Labor Code provides, as follows:
Art. 280. Regular and Casual Employment. The provisions
of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or services
to be performed is (sic) seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph;Provided, That, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
while such actually exists.
Without question, the petitioner, a carpenter, performs work
"necessary, or desirable" in the construction business, the
respondent corporation's field of activity. The fact however

that he had been involved in project works will not alter his
status because the law requires a "specific project or
undertaking the completion or termination of which has been
determined at the time of the engagement" in order to make
a project employee a true project employee. Based on his
employment contract:
Your herein Appointment Employment will be co-terminus
with the need of Structures [of North Luzon Expressway
(Stage) II] as it will necessitate personnel in such number and
duration contingent upon the progress accomplishment from
time to time. The company shall determine the personnel
and the number as the work progresses. 17
we can not say that the petitioner's engagement has been
pre-determined because the duration of the work is
"contigent upon the progress accomplishment" and secondly,
the company, under the contract, is free to "determine the
personnel and the number as the work progresses." Clearly,
the employment is subject to no term but rather, a condition,
that is, "progress accomplishment." It can not therefore be
said to be definite that will therefore exempt the respondent
company from the effects of Article 280. 18
It is to be noted that under Policy Instructions No. 20 of the
Secretary of Labor, regular employment in specific
undertakings are recognized and defined as follows:
xxx xxx xxx
Members of a work pool from which a construction company
draws its project employees, if considered employees of the
construction company while in the work pool, are non-project
employees or employees for an indefinite period. If they are
employed in a particular project, the completion of the
project or of any phase thereof will not mean severance of
employer-employee relationship.

However, if the workers in the work pool are free to leave

anytime and offer their services to other employers then they
are project employees employed by a construction company
in a particular project or in a phase thereof.
Generally, there are three (3) types of non-project
employees: first, probationary employees; second, regular
employees; and third, casual employees.
Probationary employees are those who, upon the completion
of the probationary period, are entitled to regularization.
Regular employees are those who have completed the
probationary period or those appointed to fill up regular
positions vacated as a result of death, retirement,
resignation, or termination of the regular holders thereof. On
the other hand, casual employees are those employed for a
short term duration to perform work not related to the main
line of the business of the employer.
xxx xxx xxx
Based therefore on the personnel action forms submitted to
this Court, the petitioner is either a member of a work pool of
workers, which Policy Instructions No. 20 terms as "nonproject employees," or at the very least, a probationary
worker who, after the period of six months, has achieved a
regular status. 19
As a regular employee, the petitioner could not have been
validly terminated by reason alone of the completion of the
project.
The respondent corporation, of course, assails the various
personnel action forms as new matters that can not be
introduced in the Supreme Court without infringing its right
to due process. What the respondent firm very obviously
overlooks is the fact that: (1) it had known all along, but
concealed it from the labor arbiter, that the petitioner had

been working for the firm since 1974; (2) that

notwithstanding, it insisted that he, the petitioner, had joined
the company in 1984 only; and (3) it took an unfair
advantage of the petitioner's unfamiliarity with procedure,
and will take that advantage herein, in order to trap him, so
to speak, to its theory of the case.
It is true that this Court is normally bound by the factual
findings of the National Labor Relations Commission, that
rule is, however subject to a fundamental exception, that is,
unless it would defeat, rather than enhance, the State
protection to labor guaranteed by the Constitution. 20 No rule,
legal or judicial, can override a constitutional mandate.
The respondent corporation, as we said, was no stranger to
the personnel action forms in question, and hence it can not
rightfully say that they constitute "fresh matters." It has
failed furthermore to deny their genuineness, much less,
their existence.
To allow, therefore, the respondent company to object to the
above personnel action forms on nebulous pretenses of
violation of due process is indeed, to reward it for its own
breach of faith.
We can not, finally, accept the alleged "quitclaim" 21 executed
by the petitioner in which he denied any liability by the
employer, as a genuine act of remission in this case. There is
nothing there that suggests any acceptance by the petitioner
of his termination from work. Apart from that, the same is
couched in the English language and the respondent
company has not shown that the petitioner understands
English. We can not presume that he, a humble carpenter, is
aware of that language, much more, conversant with it, and
under the Civil Code, it is incumbent upon the respondent to
"show that the terms thereof have seen fully explained." 22 It
has not made that showing here.

WHEREFORE, the petition is GRANTED. The petitioner is

REINSTATED and awarded backwages based on the latest pay
scale corresponding to the position Carpenter II equivalent to
three years without qualification or deduction.
IT IS SO ORDERED.

G.R. No. 79869 September 5, 1991

FORTUNATO
MERCADO,
SR.,
ROSA
MERCADO,
FORTUNATO MERCADO, JR., ANTONIO MERCADO, JOSE
CABRAL, LUCIA MERCADO, ASUNCION GUEVARA, ANITA
MERCADO, MARINA MERCADO, JULIANA CABRAL,
GUADALUPE PAGUIO, BRIGIDA ALCANTARA, EMERLITA
MERCADO, ROMEO GUEVARA, ROMEO MERCADO and
LEON
SANTILLAN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC),
THIRD DIVISION; LABOR ARBITER LUCIANO AQUINO,
RAB-III; AURORA L. CRUZ; SPOUSES FRANCISCO DE
BORJA and LETICIA DE BORJA; and STO. NIO REALTY,
INCORPORATED, respondents.
Servillano S. Santillan for petitioners.
Luis R. Mauricio for private respondents.

PADILLA, J.:p

Assailed in this petition for certiorari is the decision * of the

respondent national Labor Relations Commission (NLRC)
dated 8 August 1984 which affirmed the decision of
respondent Labor Arbiter Luciano P. Aquino with the slight
modification of deleting the award of financial assistance to
petitioners, and the resolution of the respondent NLRC dated
17 August 1987, denying petitioners' motion for
reconsideration.
This petition originated from a complaint for illegal dismissal,
underpayment of wages, non-payment of overtime pay,
holiday pay, service incentive leave benefits, emergency cost
of living allowances and 13th month pay, filed by abovenamed petitioners against private respondents Aurora L.
Cruz, Francisco Borja, Leticia C. Borja and Sto. Nio Realty
Incorporated, with Regional Arbitration Branch No. III,
National Labor Relations Commission in San Fernando,
Pampanga. 1
Petitioners alleged in their complaint that they were
agricultural workers utilized by private respondents in all the
agricultural phases of work on the 7 1/2 hectares of ace land
and 10 hectares of sugar land owned by the latter; that
Fortunato Mercado, Sr. and Leon Santillan worked in the farm
of private respondents since 1949, Fortunato Mercado, Jr. and
Antonio Mercado since 1972 and the rest of the petitioners
since 1960 up to April 1979, when they were all allegedly
dismissed from their employment; and that, during the
period of their employment, petitioners received the
following daily wages:
From
1963-1965
1965-1967
1967-1970
1970-1973
1973-1975

1962-1963

P1.50
P2.00
P3.00
P4.00
P5.00
P5.00

1975-1978
1978-1979 P7.00

P6.00

Private respondent Aurora Cruz in her answer to petitioners'

complaint denied that said petitioners were her regular
employees and instead averred that she engaged their
services, through Spouses Fortunato Mercado, Sr. and Rosa
Mercado, their "mandarols", that is, persons who take charge
in supplying the number of workers needed by owners of
various farms, but only to do a particular phase of
agricultural work necessary in rice production and/or sugar
cane production, after which they would be free to render
services to other farm owners who need their services. 2
The other private respondents denied having any relationship
whatsoever with the petitioners and state that they were
merely registered owners of the land in question included as
corespondents in this case. 3
The dispute in this case revolves around the issue of whether
or not petitioners are regular and permanent farm workers
and therefore entitled to the benefits which they pray for.
And corollary to this, whether or not said petitioners were
illegally dismissed by private respondents.
Respondent Labor Arbiter Luciano P. Aquino ruled in favor of
private respondents and held that petitioners were not
regular and permanent workers of the private respondents,
for the nature of the terms and conditions of their hiring
reveal that they were required to perform phases of
agricultural work for a definite period of time after which
their services would be available to any other farm
owner. 4 Respondent Labor Arbiter deemed petitioners'
contention of working twelve (12) hours a day the whole year
round in the farm, an exaggeration, for the reason that the
planting of lice and sugar cane does not entail a whole year
as reported in the findings of the Chief of the NLRC Special
Task Force. 5 Even the sworn statement of one of the

petitioners, Fortunato Mercado, Jr., the son of spouses

Fortunato Mercado, Sr. and Rosa Mercado, indubitably show
that said petitioners were hired only as casuals, on an "on
and off" basis, thus, it was within the prerogative of private
respondent Aurora Cruz either to take in the petitioners to do
further work or not after any single phase of agricultural work
had been completed by them. 6
Respondent Labor Arbiter was also of the opinion that the
real cause which triggered the filing of the complaint by the
petitioners who are related to one another, either by
consanguinity or affinity, was the filing of a criminal
complaint for theft against Reynaldo Mercado, son of spouses
Fortunate Mercado, Sr. and Rosa Mercado, for they even
asked the help of Jesus David, Zone Chairman of the locality
to talk to private respondent, Aurora Cruz regarding said
criminal case. 7 In his affidavit, Jesus David stated under oath
that petitioners were never regularly employed by private
respondent Aurora Cruz but were, on-and-off hired to work
and render services when needed, thus adding further
support to the conclusion that petitioners were not regular
and permanent employees of private respondent Aurora
Cruz. 8
Respondent Labor Arbiter further held that only money
claims from years 1976-1977, 1977-1978 and 1978-1979
may be properly considered since all the other money claims
have prescribed for having accrued beyond the three (3) year
period prescribed by law. 9 On grounds of equity, however,
respondent Labor Arbiter awarded petitioners financial
assistance by private respondent Aurora Cruz, in the amount
of Ten Thousand Pesos (P10,000.00) to be equitably divided
among an the petitioners except petitioner Fortunato
Mercado, Jr. who had manifested his disinterest in the further
prosecution of his complaint against private respondent. 10

Both parties filed their appeal with the National Labor

Relations Commissions (NLRC). Petitioners questioned
respondent Labor Arbiter's finding that they were not regular
and permanent employees of private respondent Aurora Cruz
while private respondents questioned the award of financial
assistance granted by respondent Labor Arbiter.
The NLRC ruled in favor of private respondents affirming the
decision of the respondent Labor Arbiter, with the
modification of the deletion of the award for financial
assistance to petitioners. The dispositive portion of the
decision of the NLRC reads:
WHEREFORE, the Decision of Labor Arbiter Luciano P. Aquino
dated March 3, 1983 is hereby modified in that the award of
P10,000.00 financial assistance should be deleted. The said
Decision is affirmed in all other aspects.
SO ORDERED.

11

Petitioners filed a motion for reconsideration of the Decision

of the Third Division of the NLRC dated 8 August 1984;
however, the NLRC denied tills motion in a resolution dated
17 August 1987. 12
In the present Petition for certiorari, petitioners seek the
reversal of the above-mentioned rulings. Petitioners contend
that respondent Labor Arbiter and respondent NLRC erred
when both ruled that petitioners are not regular and
permanent employees of private respondents based on the
terms and conditions of their hiring, for said findings are
contrary to the provisions of Article 280 of the Labor
Code. 13 They submit that petitioners' employment, even
assuming said employment were seasonal, continued for so
many years such that, by express provision of Article 280 of
the Labor Code as amended, petitioners have become
regular and permanent employees. 14

Moreover, they argue that Policy Instruction No. 12 15 of the

Department of Labor and Employment clearly lends support
to this contention, when it states:
PD 830 has defined the concept of regular and casual
employment. What determines regularity or casualness is not
the employment contract, written or otherwise, but the
nature of the job. If the job is usually necessary or desirable
to the main business of the employer, then employment is
regular. If not, then the employment is casual. Employment
for a definite period which exceeds one (1) year shall be
considered re for the duration of the definite period.
This concept of re and casual employment is designed to put
an end to casual employment in regular jobs which has been
abused by many employers to prevent so-called casuals from
enjoying the benefits of regular employees or to prevent
casuals from joining unions.
This new concept should be strictly enforced to give meaning
to the constitutional guarantee of employment tenure. 16
Tested under the laws invoked, petitioners submit that it
would be unjust, if not unlawful, to consider them as casual
workers since they have been doing all phases of agricultural
work for so many years, activities which are undeniably
necessary, desirable and indispensable in the rice and sugar
cane production business of the private respondents. 17
In the Comment filed by private respondents, they submit
that the decision of the Labor Arbiter, as aimed by
respondent NLRC, that petitioners were only hired as casuals,
is based on solid evidence presented by the parties and also
by the Chief of the Special Task Force of the NLRC Regional
Office and, therefore, in accordance with the rule on findings
of fact of administrative agencies, the decision should be
given great weight. 18 Furthermore, they contend that the
arguments used by petitioners in questioning the decision of

the Labor Arbiter were based on matters which were not

offered as evidence in the case heard before the regional
office of the then Ministry of Labor but rather in the case
before the Social Security Commission, also between the
same parties. 19
Public respondent NLRC filed a separate comment prepared
by the Solicitor General. It submits that it has long been
settled that findings of fact of administrative agencies if
supported by substantial evidence are entitled to great
weight. 20 Moreover, it argues that petitioners cannot be
deemed to be permanent and regular employees since they
fall under the exception stated in Article 280 of the Labor
Code, which reads:
The provisions of written agreements to the contrary
notwithstanding and regardless of the oral agreements of the
parties, an employment shall be deemed to be regular where
the employee has been engaged to perform activities which
are usually necessary or desirable in the usual business or
trade of the employer, exceptwhere the employment has
been fixed for a specific project or undertaking the
completion or termination of which has been determined at
the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and
the
employment
is
for
the
duration
of
the
season. 21 (emphasis supplied)
The Court resolved to give due course to the petition and
required the parties to submit their respective memoranda
after which the case was deemed submitted for decision.
The petition is not impressed with merit.
The invariable rule set by the Court in reviewing
administrative decisions of the Executive Branch of the
Government is that the findings of fact made therein are
respected, so long as they are supported by substantial

evidence, even if not overwhelming or preponderant; 22 that

it is not for the reviewing court to weigh the conflicting
evidence, determine the credibility of the witnesses or
otherwise substitute its own judgment for that of the
administrative
agency
on
the
sufficiency
of
the
evidence; 23 that the administrative decision in matters
within the executive's jurisdiction can only be set aside upon
proof of gross abuse of discretion, fraud, or error of law. 24
The questioned decision of the Labor Arbiter reads:
Focusing the spotlight of judicious scrutiny on the evidence
on record and the arguments of both parties, it is our welldiscerned opinion that the petitioners are not regular and
permanent workers of the respondents. The very nature of
the terms and conditions of their hiring reveal that the
petitioners were required to perform p of cultural work for a
definite period, after which their services are available to any
farm owner. We cannot share the arguments of the
petitioners that they worked continuously the whole year
round for twelve hours a day. This, we feel, is an
exaggeration which does not deserve any serious
consideration inasmuch as the plan of rice and sugar cane
does not entail a whole year operation, the area in question
being comparatively small. It is noteworthy that the findings
of the Chief of the Special Task Force of the Regional Office
are similar to this.
In fact, the sworn statement of one of the petitioners
Fortunato Mercado, Jr., the son of spouses Fortunato
Mercado, Sr. and Rosa Mercado, indubitably shows that said
petitioners were only hired as casuals, on-and-off basis. With
this kind of relationship between the petitioners and the
respondent Aurora Cruz, we feel that there is no basis in law
upon which the claims of the petitioners should be sustained,
more specially their complaint for illegal dismissal. It is within
the prerogative of respondent Aurora Cruz either to take in

the petitioners to do further work or not after any single

phase of agricultural work has been completed by them. We
are of the opinion that the real cause which triggered the
filing of this complaint by the petitioners who are related to
one another, either by consanguinity or affinity was due to
the filing of a criminal complaint by the respondent Aurora
Cruz against Reynaldo Mercado, son of spouses Fortunato
Mercado, Sr. and Rosa Mercado. In April 1979, according to
Jesus David, Zone Chairman of the locality where the
petitioners and respondent reside, petitioner Fortunato
Mercado, Sr. asked for help regarding the case of his son,
Reynaldo, to talk with respondent Aurora Cruz and the said
Zone Chairman also stated under oath that the petitioners
were never regularly employed by respondent Aurora Cruz
but were on-and-off hired to work to render services when
needed. 25
A careful examination of the foregoing statements reveals
that the findings of the Labor Arbiter in the case are ably
supported by evidence. There is, therefore, no circumstance
that would warrant a reversal of the questioned decision of
the Labor Arbiter as affirmed by the National Labor Relations
Commission.
The contention of petitioners that the second paragraph of
Article 280 of the Labor Code should have been applied in
their case presents an opportunity to clarify the aforementioned provision of law.
Article 280 of the Labor Code reads in full:
Article 280. Regular and Casual Employment. The
provisions
of
written
agreement
to
the
contrary
notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular where
the employee has been engaged to perform activities which
are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has

been fixed for a specific project or undertaking the

completion or termination of which has been determined at
the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and
the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
while such actually exists.
The first paragraph answers the question of who are
employees. It states that, regardless of any written or oral
agreement to the contrary, an employee is deemed regular
where he is engaged in necessary or desirable activities in
the usual business or trade of the employer, except for
project employees.
A project employee has been defined to be one whose
employment has been fixed for a specific project or
undertaking, the completion or termination of which has
been determined at the time of the engagement of the
employee, or where the work or service to be performed is
seasonal in nature and the employment is for the duration of
the season 26 as in the present case.
The second paragraph of Art. 280 demarcates as "casual"
employees, all other employees who do not fan under the
definition of the preceding paragraph. The proviso, in said
second paragraph, deems as regular employees those
"casual" employees who have rendered at least one year of
service regardless of the fact that such service may be
continuous or broken.

Petitioners, in effect, contend that the proviso in the second

paragraph of Art. 280 is applicable to their case and that the
Labor Arbiter should have considered them regular by virtue
of said proviso. The contention is without merit.
The general rule is that the office of a proviso is to qualify or
modify only the phrase immediately preceding it or restrain
or limit the generality of the clause that it immediately
follows. 27 Thus, it has been held that a proviso is to be
construed with reference to the immediately preceding part
of the provision to which it is attached, and not to the statute
itself or to other sections thereof. 28 The only exception to
this rule is where the clear legislative intent is to restrain or
qualify not only the phrase immediately preceding it (the
proviso) but also earlier provisions of the statute or even the
statute itself as a whole. 29
Policy Instruction No. 12 of the Department of Labor and
Employment discloses that the concept of regular and casual
employees was designed to put an end to casual
employment in regular jobs, which has been abused by many
employers to prevent called casuals from enjoying the
benefits of regular employees or to prevent casuals from
joining unions. The same instructions show that the proviso
in the second paragraph of Art. 280 was not designed to
stifle small-scale businesses nor to oppress agricultural land
owners to further the interests of laborers, whether
agricultural or industrial. What it seeks to eliminate are
abuses of employers against their employees and not, as
petitioners would have us believe, to prevent small-scale
businesses from engaging in legitimate methods to realize
profit. Hence, the proviso is applicable only to the employees
who are deemed "casuals" but not to the "project" employees
nor the regular employees treated in paragraph one of Art.
280.

Clearly, therefore, petitioners being project employees, or, to

use the correct term, seasonal employees, their employment
legally ends upon completion of the project or the season.
The termination of their employment cannot and should not
constitute an illegal dismissal. 30
WHEREFORE, the petition is DISMISSED. The decision of the
National Labor Relations Commission affirming that of the
Labor Arbiter, under review, is AFFIRMED. No pronouncement
as to costs.
SO ORDERED.

G.R. No. L-48494 February 5, 1990

BRENT
SCHOOL,
INC.,
and
REV.
GABRIEL
DIMACHE, petitioners,
vs.
RONALDO ZAMORA, the Presidential Assistant for
Legal Afairs, Office of the President, and DOROTEO R.
ALEGRE, respondents.
Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioners.

Mauricio G. Domogon for respondent Alegre.

NARVASA, J.:
The question presented by the proceedings at bar 1 is
whether or not the provisions of the Labor Code, 2 as
amended, 3 have anathematized "fixed period employment"
or employment for a term.
The root of the controversy at bar is an employment contract
in virtue of which Doroteo R. Alegre was engaged as athletic
director by Brent School, Inc. at a yearly compensation of
P20,000.00. 4 The contract fixed a specific term for its
existence, five (5) years, i.e., from July 18, 1971, the date of
execution of the agreement, to July 17, 1976. Subsequent
subsidiary agreements dated March 15, 1973, August 28,
1973, and September 14, 1974 reiterated the same terms
and conditions, including the expiry date, as those contained
in the original contract of July 18, 1971. 5
Some three months before the expiration of the stipulated
period, or more precisely on April 20,1976, Alegre was given
a copy of the report filed by Brent School with the
Department of Labor advising of the termination of his
services effective on July 16, 1976. The stated ground for the
termination was "completion of contract, expiration of the
definite period of employment." And a month or so later, on
May 26, 1976, Alegre accepted the amount of P3,177.71, and
signed a receipt therefor containing the phrase, "in full
payment of services for the period May 16, to July 17, 1976
as full payment of contract."
However, at the investigation conducted by a Labor
Conciliator of said report of termination of his services,
Alegre protested the announced termination of his
employment. He argued that although his contract did

stipulate that the same would terminate on July 17, 1976,

since his services were necessary and desirable in the usual
business of his employer, and his employment had lasted for
five years, he had acquired the status of a regular employee
and could not be removed except for valid cause. 6 The
Regional Director considered Brent School's report as
anapplication for clearance to terminate employment (not a
report of termination), and accepting the recommendation of
the Labor Conciliator, refused to give such clearance and
instead required the reinstatement of Alegre, as a
"permanent employee," to his former position without loss of
seniority rights and with full back wages. The Director
pronounced "the ground relied upon by the respondent
(Brent) in terminating the services of the complainant
(Alegre) . . . (as) not sanctioned by P.D. 442," and, quite
oddly, as prohibited by Circular No. 8, series of 1969, of the
Bureau of Private Schools. 7
Brent School filed a motion for reconsideration. The Regional
Director denied the motion and forwarded the case to the
Secretary of Labor for review. 8 The latter sustained the
Regional Director. 9 Brent appealed to the Office of the
President. Again it was rebuffed. That Office dismissed its
appeal for lack of merit and affirmed the Labor Secretary's
decision, ruling that Alegre was a permanent employee who
could not be dismissed except for just cause, and expiration
of the employment contract was not one of the just causes
provided in the Labor Code for termination of services. 10
The School is now before this Court in a last attempt at
vindication. That it will get here.
The employment contract between Brent School and Alegre
was executed on July 18, 1971, at a time when the Labor
Code of the Philippines (P.D. 442) had not yet been
promulgated. Indeed, the Code did not come into effect until
November 1, 1974, some three years after the perfection of

the employment contract, and rights and obligations

thereunder had arisen and been mutually observed and
enforced.
At that time, i.e., before the advent of the Labor Code, there
was no doubt whatever about the validity of term
employment. It was impliedly but nonetheless clearly
recognized by the Termination Pay Law, R.A. 1052, 11 as
amended by R.A. 1787. 12 Basically, this statute provided that

In cases of employment, without a definite period, in a

commercial, industrial, or agricultural establishment or
enterprise, the employer or the employee may terminate at
any time the employment with just cause; or without just
cause in the case of an employee by serving written notice
on the employer at least one month in advance, or in the
case of an employer, by serving such notice to the employee
at least one month in advance or one-half month for every
year of service of the employee, whichever is longer, a
fraction of at least six months being considered as one whole
year.
The employer, upon whom no such notice was served in case
of termination of employment without just cause, may hold
the employee liable for damages.
The employee, upon whom no such notice was served in case
of termination of employment without just cause, shall be
entitled to compensation from the date of termination of his
employment in an amount equivalent to his salaries or wages
corresponding to the required period of notice.
There was, to repeat, clear albeit implied recognition of the
licitness of term employment. RA 1787 also enumerated
what it considered to be just causes for terminating an
employment without a definite period, either by the

employer or by the employee without incurring any liability

therefor.
Prior, thereto, it was the Code of Commerce which governed
employment without a fixed period, and also implicitly
acknowledged the propriety of employment with a fixed
period. Its Article 302 provided that
In cases in which the contract of employment does not have
a fixed period, any of the parties may terminate it, notifying
the other thereof one month in advance.
The factor or shop clerk shall have a right, in this case, to the
salary corresponding to said month.
The salary for the month directed to be given by the said
Article 302 of the Code of Commerce to the factor or shop
clerk, was known as the mesada (from mes, Spanish for
"month"). When Article 302 (together with many other
provisions of the Code of Commerce) was repealed by the
Civil Code of the Philippines, Republic Act No. 1052 was
enacted avowedly for the precise purpose of reinstating
the mesada.
Now, the Civil Code of the Philippines, which was approved
on June 18, 1949 and became effective on August 30,1950,
itself deals with obligations with a period in section 2,
Chapter 3, Title I, Book IV; and with contracts of labor and for
a piece of work, in Sections 2 and 3, Chapter 3, Title VIII,
respectively, of Book IV. No prohibition against term-or fixedperiod employment is contained in any of its articles or is
otherwise deducible therefrom.
It is plain then that when the employment contract was
signed between Brent School and Alegre on July 18, 1971, it
was perfectly legitimate for them to include in it a stipulation
fixing the duration thereof Stipulations for a term were
explicitly recognized as valid by this Court, for instance,

in Biboso v. Victorias Milling Co., Inc., promulgated on March

31, 1977, 13 and J. Walter Thompson Co. (Phil.) v. NLRC,
promulgated on December 29, 1983. 14 TheThompson case
involved an executive who had been engaged for a fixed
period of three (3) years. Bibosoinvolved teachers in a
private
school
as
regards
whom,
the
following
pronouncement was made:
What is decisive is that petitioners (teachers) were well
aware an the time that their tenure was for a limited
duration. Upon its termination, both parties to the
employment relationship were free to renew it or to let it
lapse. (p. 254)
Under American law 15 the principle is the same. "Where a
contract specifies the period of its duration, it terminates on
the expiration of such period." 16 "A contract of employment
for a definite period terminates by its own terms at the end
of such period." 17
The status of legitimacy continued to be enjoyed by fixedperiod employment contracts under the Labor Code
(Presidential Decree No. 442), which went into effect on
November 1, 1974. The Code contained explicit references
to fixed period employment, or employment with a
fixed or definite period. Nevertheless, obscuration of the
principle of licitness of term employment began to take place
at about this time
Article 320, entitled "Probationary and fixed period
employment," originally stated that the "termination of
employment of probationary employees and those employed
WITH A FIXED PERIOD shall be subject to such regulations as
the Secretary of Labor may prescribe." The asserted
objective to was "prevent the circumvention of the right of
the employee to be secured in their employment as
provided . . . (in the Code)."

Article 321 prescribed the just causes for which an employer

could terminate "an employment without a definite period."
And Article 319 undertook to define "employment without a
fixed period" in the following manner: 18
An employment shall be deemed to be without a definite
period for purposes of this Chapter where the employee has
been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination
of which has been determined at the time of the engagement
of the employee or where the work or service to be
performed is seasonal in nature and the employment is for
the duration of the season.
The question immediately provoked by a reading of Article
319 is whether or not a voluntary agreement on a fixed term
or period would be valid where the employee "has been
engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer." The
definition seems a non sequitur. From the premise that the
duties of an employee entail "activities which are usually
necessary or desirable in the usual business or trade of the
employer the" conclusion does not necessarily follow that
the employer and employee should be forbidden to stipulate
any period of time for the performance of those activities.
There is nothing essentially contradictory between a definite
period of an employment contract and the nature of the
employee's duties set down in that contract as being "usually
necessary or desirable in the usual business or trade of the
employer." The concept of the employee's duties as being
"usually necessary or desirable in the usual business or trade
of the employer" is not synonymous with or identical to
employment with a fixed term. Logically, the decisive
determinant in term employment should not be the activities

that the employee is called upon to perform, but the day

certain agreed upon by the parties for the commencement
and termination of their employment relationship, a day
certain being understood to be "that which must necessarily
come,
although
it
may
not
be
known
when." 19 Seasonal employment, and employment for a
particular project are merely instances employment in which
a period, where not expressly set down, necessarily implied.

agreement stipulating a longer period. The services of an

employee who has been engaged in a probationary basis
may be terminated for a just cause or when he fails to qualify
as a regular employee in accordance with reasonable
standards made known by the employer to the employee at
the time of his engagement. An employee who is allowed to
work after a probationary period shall be considered a
regular employee.

Of course, the term period has a definite and settled

signification. It means, "Length of existence; duration. A point
of time marking a termination as of a cause or an activity; an
end, a limit, a bound; conclusion; termination. A series of
years, months or days in which something is completed. A
time of definite length. . . . the period from one fixed date to
another fixed date . . ." 20 It connotes a "space of time which
has an influence on an obligation as a result of a juridical act,
and either suspends its demandableness or produces its
extinguishment." 21 It should be apparent that this settled
and familiar notion of a period, in the context of a contract of
employment, takes no account at all of the nature of the
duties of the employee; it has absolutely no relevance to the
character of his duties as being "usually necessary or
desirable to the usual business of the employer," or not.

Also amended by PD 850 was Article 319 (entitled

"Employment
with
a
fixed
period," supra)
by
(a) deleting mention of employment with a fixed or definite
period, (b) adding a general exclusion clause declaring
irrelevant written or oral agreements "to the contrary," and
(c) making the provision treat exclusively of "regular" and
"casual" employment. As revised, said article, renumbered
270, 23 now reads:

Subsequently, the foregoing articles regarding employment

with "a definite period" and "regular" employment were
amended by Presidential Decree No. 850, effective December
16, 1975.
Article 320, dealing with "Probationary and fixed period
employment," was altered by eliminating the reference to
persons "employed with a fixed period," and was renumbered
(becoming Article 271). The article 22 now reads:
. . . Probationary employment.Probationary employment
shall not exceed six months from the date the employee
started working, unless it is covered by an apprenticeship

. . . Regular and Casual Employment.The provisions of

written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade
of the employer except where the employment has been
fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or service to
be employed is seasonal in nature and the employment is for
the duration of the season.
An employment shall be deemed to he casual if it is not
covered by the preceding paragraph:provided, that, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in

which he is employed and his employment shall continue

while such actually exists.
The first paragraph is identical to Article 319 except that, as
just mentioned, a clause has been added, to wit: "The
provisions
of
written
agreement
to
the
contrary
notwithstanding and regardless of the oral agreements of the
parties . . ." The clause would appear to be addressed inter
alia to agreements fixing a definite period for employment.
There is withal no clear indication of the intent to deny
validity to employment for a definite period. Indeed, not only
is the concept of regular employment not essentially
inconsistent with employment for a fixed term, as above
pointed out, Article 272 of the Labor Code, as amended by
said PD 850, still impliedly acknowledged the propriety of
term employment: it listed the "just causes" for which "an
employer may terminate employment without a definite
period," thus giving rise to the inference that if the
employment be with a definite period, there need be no just
cause for termination thereof if the ground be precisely the
expiration of the term agreed upon by the parties for the
duration of such employment.
Still later, however, said Article 272 (formerly Article 321)
was further amended by Batas Pambansa Bilang 130, 24to
eliminate altogether reference to employment without a
definite period. As lastly amended, the opening lines of the
article (renumbered 283), now pertinently read: "An
employer may terminate an employment for any of the
following just causes: . . . " BP 130 thus completed the
elimination of every reference in the Labor Code, express or
implied, to employment with a fixed or definite period or
term.
It is in the light of the foregoing description of the
development of the provisions of the Labor Code bearing on
term or fixed-period employment that the question posed in

the opening paragraph of this opinion should now be

addressed. Is it then the legislative intention to outlaw
stipulations in employment contracts laying down a definite
period therefor? Are such stipulations in essence contrary to
public policy and should not on this account be accorded
legitimacy?
On the one hand, there is the gradual and progressive
elimination of references to term or fixed-period employment
in the Labor Code, and the specific statement of the
rule 25 that
. . . Regular and Casual Employment. The provisions of
written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade
of the employer except where the employment has been
fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or service to
be employed is seasonal in nature and the employment is for
the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph:provided, that, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
while such actually exists.
There is, on the other hand, the Civil Code, which has always
recognized, and continues to recognize, the validity and
propriety of contracts and obligations with a fixed or definite
period, and imposes no restraints on the freedom of the
parties to fix the duration of a contract, whatever its object,

be it specie, goods or services, except the general

admonition against stipulations contrary to law, morals, good
customs, public order or public policy. 26Under the Civil Code,
therefore, and as a general proposition, fixed-term
employment contracts are not limited, as they are under the
present Labor Code, to those by nature seasonal or for
specific projects with pre-determined dates of completion;
they also include those to which the parties by free choice
have assigned a specific date of termination.
Some familiar examples may be cited of employment
contracts which may be neither for seasonal work nor for
specific projects, but to which a fixed term is an essential and
natural appurtenance: overseas employment contracts, for
one, to which, whatever the nature of the engagement, the
concept of regular employment will all that it implies does
not appear ever to have been applied, Article 280 of the
Labor Code not withstanding; also appointments to the
positions of dean, assistant dean, college secretary, principal,
and other administrative offices in educational institutions,
which are by practice or tradition rotated among the faculty
members, and where fixed terms are a necessity, without
which no reasonable rotation would be possible. Similarly,
despite the provisions of Article 280, Policy, Instructions No. 8
of the Minister of Labor 27 implicitly recognize that certain
company officials may be elected for what would amount to
fixed periods, at the expiration of which they would have to
stand down, in providing that these officials," . . . may lose
their jobs as president, executive vice-president or vicepresident, etc. because the stockholders or the board of
directors for one reason or another did not re-elect them."
There can of course be no quarrel with the proposition that
where from the circumstances it is apparent that periods
have been imposed to preclude acquisition of tenurial
security by the employee, they should be struck down or
disregarded as contrary to public policy, morals, etc. But

where no such intent to circumvent the law is shown, or

stated otherwise, where the reason for the law does not
exist, e.g., where it is indeed the employee himself who
insists upon a period or where the nature of the engagement
is such that, without being seasonal or for a specific project,
a definite date of termination is a sine qua non, would an
agreement fixing a period be essentially evil or illicit,
therefore anathema? Would such an agreement come within
the scope of Article 280 which admittedly was enacted "to
prevent the circumvention of the right of the employee to be
secured in . . . (his) employment?"
As it is evident from even only the three examples already
given that Article 280 of the Labor Code, under a narrow and
literal interpretation, not only fails to exhaust the gamut of
employment contracts to which the lack of a fixed period
would be an anomaly, but would also appear to restrict,
without reasonable distinctions, the right of an employee to
freely stipulate with his employer the duration of his
engagement, it logically follows that such a literal
interpretation should be eschewed or avoided. The law must
be given a reasonable interpretation, to preclude absurdity in
its application. Outlawing the whole concept of term
employment and subverting to boot the principle of freedom
of contract to remedy the evil of employer's using it as a
means to prevent their employees from obtaining security of
tenure is like cutting off the nose to spite the face or, more
relevantly, curing a headache by lopping off the head.
It is a salutary principle in statutory construction that there
exists a valid presumption that undesirable consequences
were never intended by a legislative measure, and that a
construction of which the statute is fairly susceptible is
favored, which will avoid all objecionable mischievous,
undefensible, wrongful, evil and injurious consequences. 28

Nothing is better settled than that courts are not to give

words a meaning which would lead to absurd or
unreasonable consequences. That s a principle that does
back to In re Allen decided oil October 27, 1903, where it was
held that a literal interpretation is to be rejected if it would be
unjust or lead to absurd results. That is a strong argument
against its adoption. The words of Justice Laurel are
particularly apt. Thus: "The fact that the construction placed
upon the statute by the appellants would lead to an absurdity
is another argument for rejecting it. . . ." 29
. . . We have, here, then a case where the true intent of the
law is clear that calls for the application of the cardinal rule
of statutory construction that such intent of spirit must
prevail over the letter thereof, for whatever is within the
spirit of a statute is within the statute, since adherence to the
letter would result in absurdity, injustice and contradictions
and would defeat the plain and vital purpose of the statute. 30
Accordingly, and since the entire purpose behind the
development of legislation culminating in the present Article
280 of the Labor Code clearly appears to have been, as
already observed, to prevent circumvention of the
employee's right to be secure in his tenure, the clause in said
article indiscriminately and completely ruling out all written
or oral agreements conflicting with the concept of regular
employment as defined therein should be construed to refer
to the substantive evil that the Code itself has singled out:
agreements entered into precisely to circumvent security of
tenure. It should have no application to instances where a
fixed period of employment was agreed upon knowingly and
voluntarily by the parties, without any force, duress or
improper pressure being brought to bear upon the employee
and absent any other circumstances vitiating his consent, or
where it satisfactorily appears that the employer and
employee dealt with each other on more or less equal terms
with no moral dominance whatever being exercised by the

former over the latter. Unless thus limited in its purview, the
law would be made to apply to purposes other than those
explicitly stated by its framers; it thus becomes pointless and
arbitrary, unjust in its effects and apt to lead to absurd and
unintended consequences.
Such interpretation puts the seal on Bibiso 31 upon the effect
of the expiry of an agreed period of employment as still good
rulea rule reaffirmed in the recent case of Escudero
vs. Office of the President (G.R. No. 57822, April 26, 1989)
where, in the fairly analogous case of a teacher being served
by her school a notice of termination following the expiration
of the last of three successive fixed-term employment
contracts, the Court held:
Reyes (the teacher's) argument is not persuasive. It loses
sight of the fact that her employment was probationary,
contractual in nature, and one with a definitive period. At the
expiration of the period stipulated in the contract, her
appointment was deemed terminated and the letter
informing her of the non-renewal of her contract is not a
condition sine qua non before Reyes may be deemed to have
ceased in the employ of petitioner UST. The notice is a mere
reminder that Reyes' contract of employment was due to
expire and that the contract would no longer be renewed. It
is not a letter of termination. The interpretation that the
notice is only a reminder is consistent with the court's finding
in Labajo supra. ... 32
Paraphrasing Escudero, respondent Alegre's employment was
terminated upon the expiration of his last contract with Brent
School on July 16, 1976 without the necessity of any notice.
The advance written advice given the Department of Labor
with copy to said petitioner was a mere reminder of the
impending expiration of his contract, not a letter of
termination, nor an application for clearance to terminate
which needed the approval of the Department of Labor to

make the termination of his services effective. In any case,

such clearance should properly have been given, not denied.
WHEREFORE, the public respondent's Decision complained of
is REVERSED and SET ASIDE. Respondent Alegre's contract of
employment with Brent School having lawfully terminated
with and by reason of the expiration of the agreed term of
period thereof, he is declared not entitled to reinstatement
and the other relief awarded and confirmed on appeal in the
proceedings below. No pronouncement as to costs.
SO ORDERED.

G.R. No. 78693 January 28, 1991

ZOSIMO
vs.
THE
HONORABLE

CIELO, petitioner,
NATIONAL

LABOR

RELATIONS

COMMISSION,
HENRY
TRUCKINGrespondents.

LEI

and/or

HENRY

LEI

Francisco D. Alas for petitioner.

Mateo G. Delegencia for private respondent.

CRUZ, J.:p
The petitioner is a truck driver who claims he was illegally
dismissed by the private respondent, the Henry Lei Trucking
Company. The Labor Arbiter found for him and ordered his
reinstatement with back wages. 1 On appeal, the decision
was reversed by the National Labor Relations Commission,
which held that the petitioner's employment had expired
under a valid contract. 2 The petitioner then came to us
on certiorari under Rule 65 of the Rules of Court.
Required to submit a Comment (not to file a motion to
dismiss), the private respondent nevertheless moved to
dismiss on the ground that the petition was filed sixty-eight
days after service of the challenged decision on the
petitioner, hence late. The motion was untenable, of course.
Petitions for certiorari under Rule 65 may be instituted within
a reasonable period, which the Court has consistently
reckoned at three months.**
In his own Comment, the Solicitor General defended the
public respondent and agreed that the contract between the
petitioner and the private respondent was a binding
agreement not contrary to law, morals or public policy. The
petitioner's services could be legally terminated upon the
expiration of the period agreed upon, which was only six
months. The petitioner could therefore not complain that he
had been illegally dismissed.

As an examination of the claimed agreement was necessary

to the resolution of this case, the Court required its
production by the petitioner. But he could not comply
because he said he had not been given a copy by the private
respondent. A similar requirement proved fruitless when
addressed to the private respondent, which explained it could
not locate the folder of the case despite diligent search. It
was only on October 15, 1990, that the records of the case,
including the subject agreement, were finally received by the
Court from the NLRC, which had obtained them from its
Cagayan de Oro regional office. 3
The said agreement reads in full as follows:
AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement made and executed by and between:
HENRY LEI, of legal age, Filipino citizen, married, and a
resident of Digos, Davao del Sur, now and hereinafter called
the FIRST PARTY,
a n d
ZOSIMO CIELO, of legal age, married, Filipino citizen, and a
resident of Agusan, Canyon, Camp Philipps, now and
hereinafter called the SECOND PARTY,
WITNESSETH
That the FIRST PARTY is an owner of some cargo trucks.
WHEREAS, the SECOND PARTY desires to operate one of the
said cargo trucks which he himself shall drive for income;
NOW, THEREFORE, for the foregoing premises, the FIRST
PARTY does hereby assign one cargo truck of his fleet to the

SECOND PARTY
stipulations:

under

the

following

conditions

and

January 22, 1985, the petitioner filed his complaint with the
Ministry of Labor and Employment.

1. That the term of this Agreement is six (6) months from and
after the execution hereof, unless otherwise earlier
terminated at the option of either party;

In his position paper, the petitioner claimed he started

working for the private respondent on June 16, 1984, and
having done so for more than six months had acquired the
status of a regular employee. As such, he could no longer be
dismissed except for lawful cause. He also contended that he
had been removed because of his refusal to sign, as required
by the private respondent, an affidavit reading as follows:

2. That the net income of the said vehicle after fuel and oil
shall be divided by and between them on ninety/ten percent
(90/10%) basis in favor of the FIRST PARTY;
3. That there is no employer/employee relationship between
the parties, the nature of this Agreement being contractual;

AFFIDAVIT

4. In the event the SECOND PARTY needs a helper the

personnel so employed by him shall be to his personal
account, who shall be considered his own employee;

That I, ZOSIMO CIELO, Filipino, of legal age, married/single

and a resident of Agusan Canyon, Camp Philipps, after having
been duly sworn to in accordance with law, hereby depose
and say:

5. That the loss of or damage to the said vehicle shall be to

account of the SECOND PARTY; he shall return the unit upon
the expiration or termination of this contract in the condition
the same was received by him, fair wear and tear excepted.

That I am one of the drivers of the trucks of Mr. HENRY LEI

whose hauling trucks are under contract with the Philippine
Packing Corporation;

IN WITNESS WHEREOF, the parties hereunto affixed their

signature on this 30th day of June, 1984, at Digos, Davao del
Sur, Philippines.

That I have received my salary and allowances from Mr.

HENRY LEI the sum of P1,421.10 for the month of October
1984. That I have no more claim against the said Mr. Henry
Lei.

(Sgd.)
HENRY
LEI
First Party Second Party

IN WITNESS WHEREOF, I have hereunto affixed my signature

this 15th day of November 1984.

(Sgd.)

ZOSIMO

CIELO

SIGNED IN THE PRESENCE OF:

(Sgd.) VICTOR CHAN (Sgd.) AMALFE M. NG
The agreement was supposed to have commenced on June
30, 1984, and to end on December 31, 1984. On December
22, 1984, however, the petitioner was formally notified by
the private respondent of the termination of his services on
the ground of expiration of their contract. Soon thereafter, on

______________
Driver
The private respondent rests its case on the agreement and
maintains that the labor laws are not applicable because the
relations of the parties are governed by their voluntary
stipulations. The contract having expired, it was the
prerogative of the trucking company to renew it or not as it
saw fit.

The writ will issue.

While insisting that it is the agreement that regulates its
relations with the petitioner, the private respondent is
ensnared by its own words. The agreement specifically
declared that there was no employer-employee relationship
between the parties. Yet the affidavit the private respondent
prepared required the petitioner to acknowledge that "I have
received my salary and allowances from Mr. Henry Lei,"
suggesting an employment relationship. According to its
position paper, the petitioner's refusal to sign the affidavit
constituted disrespect or insubordination, which had "some
bearing on the renewal of his contract of employment with
the respondent." Of this affidavit, the private respondent had
this to say:
. . . Since October 1984, respondent adopted a new policy to
require all their employees to sign an affidavit to the effect
that they received their salaries. Copy of which is hereto
attached as Annex "C," covering the months of October and
November 1984. All other employees of the respondent
signed the said affidavit, only herein complainant refused to
do so for reasons known only to him. . . .
It appears from the records that all the drivers of the private
respondent have been hired on a fixed contract basis, as
evidenced by the mimeographed form of the agreement and
of the affidavit. The private respondent merely filled in the
blanks with the corresponding data, such as the driver's
name and address, the amount received by him, and the
date of the document. Each driver was paid through
individual vouchers 4 rather than a common payroll, as is
usual in companies with numerous employees.
The private respondent's intention is obvious. It is remarkable
that neither the NLRC nor the Solicitor General recognized it.
There is no question that the purpose behind these individual
contracts was to evade the application of the labor laws by

making it appear that the drivers of the trucking company

were not its regular employees.
Under these arrangements, the private respondent hoped to
be able to terminate the services of the drivers without the
inhibitions of the Labor Code. All it had to do was refuse to
renew the agreements, which, significantly, were uniformly
limited to a six-month period. No cause had to be established
because such renewal was subject to the discretion of the
parties. In fact, the private respondent did not even have to
wait for the expiration of the contract as it was there
provided that it could be "earlier terminated at the option of
either party."
By this clever scheme, the private respondent could also
prevent the drivers from becoming regular employees and
thus be entitled to security of tenure and other benefits, such
as a minimum wage, cost-of-living allowances, vacation and
sick leaves, holiday pay, and other statutory requirements.
The private respondent argues that there was nothing wrong
with the affidavit because all the affiant acknowledged
therein was full payment of the amount due him under the
agreement. Viewed in this light, such acknowledgment was
indeed not necessary at all because this was already
embodied in the vouchers signed by the payee-driver. But
the affidavit, for all its seeming innocuousness, imported
more than that. What was insidious about the document was
the waiver the affiant was unwarily making of the statutory
rights due him as an employee of the trucking company.
And employee he was despite the innocent protestations of
the private respondent. We accept the factual finding of the
Labor Arbiter that the petitioner was a regular employee of
the private respondent. The private respondent is engaged in
the trucking business as a hauler of cattle, crops and other
cargo for the Philippine Packing Corporation. This business
requires the services of drivers, and continuously because

the work is not seasonal, nor is it limited to a single

undertaking or operation. Even if ostensibly hired for a fixed
period, the petitioner should be considered a regular
employee of the private respondent, conformably to Article
280 of the Labor Code providing as follows:
Art. 280. Regular and Casual Employment. The provisions
of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessarily or desirable in the usual business or trade
of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or services
to be performed is seasonal in nature and the employment is
for the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph; Provided, that, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
while such actually exists. (Emphasis supplied)
In Brent School, Inc. vs. Zamora, the Court affirmed the
general principle that "where from the circumstances it is
apparent that periods have been imposed to preclude
acquisition of tenurial security by the employee, they should
be struck down or disregarded as contrary to public policy,
morals, etc." Such circumstances have been sufficiently
established in the case at bar and justify application of the
following conclusions:
Accordingly, and since the entire purpose behind the
development of legislation culminating in the present Article

280 of the Labor Code clearly appears to have been, as

already observed, to prevent circumvention of the
employee's right to be secure in his tenure, the clause in said
article indiscriminately and completely ruling out all written
or oral agreements conflicting with the concept of regular
employment as defined therein should be construed to refer
to the substantive evil that the Code itself has singled out:
agreements entered into precisely to circumvent security of
tenure.
The agreement in question had such a purpose and so was
null and void ab initio.
The private respondent's argument that the petitioner could
at least be considered on probation basis only and therefore
separable at will is self-defeating. The Labor Code clearly
provides as follows:
Art. 281. Probationary employment. Probationary
employment shall not exceed six (6) months from the date
the employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or
when he fails to qualify as a regular employee in accordance
with reasonable standards made known by the employer to
the employee at the time of his engagement. An employee
who is allowed to work after a probationary period shall be
considered a regular employee.
There is no question that the petitioner was not engaged as
an apprentice, being already an experienced truck driver
when he began working for the private respondent. Neither
has it been shown that he was informed at the time of his
employment of the reasonable standards under which he
could qualify as a regular employee. It is plain that the
petitioner was hired at the outset as a regular employee. At
any rate, even assuming that the original employment was

probationary, the Labor Arbiter found that the petitioner had

completed more than six month's service with the trucking
company and so had acquired the status of a regular
employee at the time of his dismissal.
Even if it be assumed that the six-month period had not yet
been completed, it is settled that the probationary employee
cannot be removed except also for cause as provided by law.
It is not alleged that the petitioner was separated for poor
performance; in fact, it is suggested by the private
respondent that he was dismissed for disrespect and
insubordination, more specifically his refusal to sign the
affidavit as required by company policy. Hence, even as a
probationer, or more so as a regular employee, the petitioner
could not be validly removed under Article 282 of the Labor
Code, providing as follows:
Art. 282. Termination by employer. An employer may
terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or
representative in connection with his work
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee
against the person of his employer or any immediate
member of his family or his duly authorized representative;
and
(e) Other causes analogous to the foregoing.
In refusing to sign the affidavit as required by the private
respondent, the petitioner was merely protecting his interests

against an unguarded waiver of the benefits due him under

the Labor Code. Such willful disobedience should commend
rather than prejudice him for standing up to his rights, at
great risk to his material security, against the very source of
his livelihood.
The Court looks with stern disapproval at the contract
entered into by the private respondent with the petitioner
(and who knows with how many other drivers). The
agreement was a clear attempt to exploit the unwitting
employee and deprive him of the protection of the Labor
Code by making it appear that the stipulations of the parties
were governed by the Civil Code as in ordinary private
transactions. They were not, to be sure. The agreement was
in reality a contract of employment into which were read the
provisions of the Labor Code and the social justice policy
mandated by the Constitution. It was a deceitful agreement
cloaked in the habiliments of legality to conceal the selfish
desire of the employer to reap undeserved profits at the
expense of its employees. The fact that the drivers are on the
whole practically unlettered only makes the imposition more
censurable and the avarice more execrable.
WHEREFORE, the petition is GRANTED. The decision of the
National Labor Relations Commission is SET ASIDE and that
of the Labor Arbiter REINSTATED, with costs against the
private respondents.
SO ORDERED.

PHILIPPINE AIRLINES, INC., PATRIA CHIONG and COURT

OF APPEALS, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari assails the Decision 1 of
the Court of Appeals (CA) dated August 23, 2006 in CA-G.R.
SP No. 87956 which affirmed the National Labor Relations
Commissions (NLRC) decision setting aside the Labor
Arbiters findings of illegal retrenchment and ordering the
reinstatement of the retrenched Philippine Airlines, Inc. (PAL)
employee-members of petitioner Flight Attendants and
Stewards Association of the Philippines (FASAP), with
payment of backwages, moral and exemplary damages, and
attorneys fees. Also assailed is the May 29, 2007
Resolution2 denying the motion for reconsideration.
Petitioner FASAP is the duly certified collective bargaining
representative of PAL flight attendants and stewards, or
collectively known as PAL cabin crew personnel. Respondent
PAL is a domestic corporation organized and existing under
the laws of the Republic of the Philippines, operating as a
common carrier transporting passengers and cargo through
aircraft.

G.R. No. 178083

July 22, 2008

FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF

THE
PHILIPPINES
(FASAP), Petitioner,
vs.

On June 15, 1998, PAL retrenched 5,000 of its employees,

including more than 1,400 of its cabin crew personnel, to
take effect on July 15, 1998. PAL adopted the retrenchment
scheme allegedly to cut costs and mitigate huge financial
losses as a result of a downturn in the airline industry
brought about by the Asian financial crisis. During said
period, PAL claims to have incurred P90 billion in liabilities,
while its assets stood at P85 billion.3
In implementing the retrenchment scheme, PAL adopted its
so-called "Plan 14" whereby PALs fleet of aircraft would be

reduced from 54 to 14, thus requiring the services of only

654 cabin crew personnel.4 PAL admits that the retrenchment
is wholly premised upon such reduction in fleet, 5 and to "the
strike staged by PAL pilots since this action also translated
into a reduction of flights." 6 PAL claims that the scheme
resulted in "savings x x x amounting to approximately P24
million per month savings that would greatly alleviate PALs
financial crisis."7
Prior to the full implementation of the assailed retrenchment
program, FASAP and PAL conducted a series of consultations
and meetings and explored all possibilities of cushioning the
impact of the impending reduction in cabin crew personnel.
However, the parties failed to agree on how the scheme
would be implemented. Thus PAL unilaterally resolved to
utilize the criteria set forth in Section 112 of the PAL-FASAP
Collective Bargaining Agreement8 (CBA) in retrenching cabin
crew personnel: that is, that retrenchment shall be based on
the individual employees efficiency rating and seniority.
PAL determined the cabin crew personnel efficiency ratings
through an evaluation of the individual cabin crew members
overall performance for the year 1997 alone. 9 Their
respective performance during previous years, i.e., the whole
duration of service with PAL of each cabin crew personnel,
was not considered. The factors taken into account on
whether the cabin crew member would be retrenched,
demoted or retained were: 1) the existence of excess sick
leaves; 2) the crew members being physically overweight; 3)
seniority; and 4) previous suspensions or warnings imposed. 10
While consultations between FASAP and PAL were ongoing,
the latter began implementing its retrenchment program by
initially terminating the services of 140 probationary cabin
attendants only to rehire them in April 1998. Moreover, their
employment was made permanent and regular. 11

On July 15, 1998, however, PAL carried out the retrenchment

of its more than 1,400 cabin crew personnel.
Meanwhile, in June 1998, PAL was placed under corporate
rehabilitation and a rehabilitation plan was approved per
Securities and Exchange Commission (SEC) Order dated June
23, 1998 in SEC Case No. 06-98-6004.12
On September 4, 1998, PAL, through its Chairman and Chief
Executive Officer (CEO) Lucio Tan, made an offer to transfer
shares of stock to its employees and three seats in its Board
of Directors, on the condition that all the existing Collective
Bargaining Agreements (CBAs) with its employees would be
suspended for 10 years, but it was rejected by the
employees. On September 17, 1998, PAL informed its
employees that it was shutting down its operations effective
September 23, 1998,13 despite the previous approval on June
23, 1998 of its rehabilitation plan.
On September 23, 1998, PAL ceased its operations and sent
notices of termination to its employees. Two days later, PAL
employees, through the Philippine Airlines Employees
Association (PALEA) board, sought the intervention of then
President Joseph E. Estrada. PALEA offered a 10-year
moratorium on strikes and similar actions and a waiver of
some of the economic benefits in the existing CBA. Lucio Tan,
however, rejected this counter-offer. 14
On September 27, 1998, the PALEA board again wrote the
President proposing the following terms and conditions,
subject to ratification by the general membership:
1. Each PAL employee shall be granted 60,000 shares of
stock with a par value of P5.00, from Mr. Lucio Tans
shareholdings, with three (3) seats in the PAL Board and an
additional seat from government shares as indicated by His
Excellency;

2. Likewise, PALEA shall, as far as practicable, be granted

adequate representation in committees or bodies which deal
with matters affecting terms and conditions of employment;
3. To enhance and strengthen labor-management relations,
the existing Labor-Management Coordinating Council shall be
reorganized and revitalized, with adequate representation
from both PAL management and PALEA;
4. To assure investors and creditors of industrial peace,
PALEA agrees, subject to the ratification by the general
membership, (to) the suspension of the PAL-PALEA CBA for a
period of ten (10) years, provided the following safeguards
are in place:
a. PAL shall continue recognizing PALEA as the duly certified
bargaining agent of the regular rank-and-file ground
employees of the Company;
b. The union shop/maintenance of membership provision
under the PAL-PALEA CBA shall be respected.
c. No salary deduction, with full medical benefits.
5. PAL shall grant the benefits under the 26 July 1998
Memorandum of Agreement forged by and between PAL and
PALEA, to those employees who may opt to retire or be
separated from the company.
6. PALEA members who have been retrenched but have not
received separation benefits shall be granted priority in the
hiring/rehiring of employees.
7. In the absence of applicable Company rule or regulation,
the provisions of the Labor Code shall apply. 15
In a referendum conducted on October 2, 1998, PAL
employees ratified the above proposal. On October 7, 1998,

PAL resumed domestic operations

international flights as well.16

and,

soon

after,

Meanwhile, in November 1998, or five months after the June

15, 1998 mass dismissal of its cabin crew personnel, PAL
began recalling to service those it had previously retrenched.
Thus, in November 199817 and up to March 1999,18 several of
those retrenched were called back to service. To date, PAL
claims to have recalled 820 of the retrenched cabin crew
personnel.19 FASAP, however, claims that only 80 were
recalled as of January 2001.20
In December 1998, PAL submitted a "stand-alone"
rehabilitation plan to the SEC by which it undertook a
recovery on its own while keeping its options open for the
entry of a strategic partner in the future. Accordingly, it
submitted an amended rehabilitation plan to the SEC with a
proposed revised business and financial restructuring plan,
which required the infusion of US$200 million in new equity
into the airline.
On May 17, 1999, the SEC approved the proposed "Amended
and Restated Rehabilitation Plan" of PAL and appointed a
permanent rehabilitation receiver for the latter. 21
On June 7, 1999, the SEC issued an Order confirming its
approval of the "Amended and Restated Rehabilitation Plan"
of PAL. In said order, the cash infusion of US$200 million
made by Lucio Tan on June 4, 1999 was acknowledged. 22
On October 4, 2007, PAL officially exited receivership; thus,
our ruling in Philippine Air Lines v. Kurangking 23 no longer
applies.
On June 22, 1998, FASAP filed a Complaint24 against PAL and
Patria T. Chiong25 (Chiong) for unfair labor practice, illegal
retrenchment with claims for reinstatement and payment of
salaries, allowances and backwages of affected FASAP

members, actual, moral and exemplary damages with a

prayer to enjoin the retrenchment program then being
implemented. Instead of a position paper, respondents filed a
Motion to Dismiss and/or Consolidation with NCMB Case No.
NS 12-514-97 pending with the Office of the Secretary of the
Department of Labor and Employment and/or Suspension
and Referral of Claims to the interim rehabilitation
proceedings (motion to dismiss).26
On July 6, 1998, FASAP filed its Comment to respondents
motion to dismiss. On July 23, 1998, the Labor Arbiter issued
an Order27 denying respondents motion to dismiss; granting
a writ of preliminary injunction against PALs implementation
of its retrenchment program with respect to FASAP members;
setting aside the respective notices of retrenchment
addressed to the cabin crew; directing respondents to restore
the said retrenched cabin crew to their positions and PALs
payroll until final determination of the case; and directing
respondents to file their position paper.
Respondents appealed to the NLRC which reversed the
decision of the Labor Arbiter. The NLRC directed the lifting of
the writ of injunction and to vacate the directive setting aside
the notices of retrenchment and reinstating the dismissed
cabin crew to their respective positions and in the PAL
payroll.28
FASAP filed its Position Paper 29 on September 28, 1999. On
November 8, 1999, respondents filed their Position
Paper30 with counterclaims against FASAP, to which FASAP
filed its Reply.31 Thereafter, the parties were directed to file
their respective Memoranda.32
Meanwhile, instead of being dismissed in accordance with the
Kurangking case, the FASAP case (NLRC-NCR Case No. 0605100-98) was consolidated with the following cases:

1. Ramon and Marian Joy Camahort v. PAL, et al. (NLRC-NCR

Case No. 00-07-05854-98);
2. Erlinda Arevalo and Chonas Santos v. PAL, et al. (NLRC-NCR
Case No. 00-07-09793-98); and
3. Victor Lanza v. PAL, et al. (NLRC-NCR Case No.00-0404254-99).
On July 21, 2000, Labor Arbiter Jovencio Ll. Mayor rendered a
Decision,33 the dispositive portion of which reads, as follows:
WHEREFORE, premises considered, this Office renders
judgment declaring that Philippine Airlines, Inc., illegally
retrenched One Thousand Four Hundred (1,400) cabin
attendants including flight pursers for effecting the
retrenchment program in a despotic and whimsical manner.
Philippine Airlines, Inc. is likewise hereby ordered to:
1. Reinstate the cabin attendants retrenched and/or demoted
to their previous positions;
2. Pay the concerned cabin attendants their full backwages
from the time they were illegally dismissed/retrenched up to
their actual reinstatements;
3. Pay moral and exemplary damages in the amount of Five
Hundred Thousand Pesos (P500,000.00); and
4. Ten (10%) per cent of the total monetary award as and by
way of attorneys fees.
SO ORDERED.34
Respondents appealed to the NLRC. Meanwhile, FASAP
moved for the implementation of the reinstatement aspect of
the Labor Arbiters decision. Despite respondents opposition,
the Labor Arbiter issued a writ of execution with respect to
the reinstatement directive in his decision. Respondents

moved to quash the writ, but the Labor Arbiter denied the
same. Again, respondents took issue with the NLRC.
Meanwhile, on May 31, 2004, the NLRC issued its
Decision35 in the appeal with respect to the Labor Arbiters
July 21, 2000 decision. The dispositive portion thereof reads:
WHEREFORE, premises considered, the Decision dated July
21, 2000 is hereby SET ASIDE and a new one entered
DISMISSING the consolidated cases for lack of merit.
With respect to complainant Ms. Begonia Blanco, her
demotion is hereby declared illegal and respondent PAL is
ordered to pay her salary differential covering the period
from the time she was downgraded in July 1998 up to the
time she resigned in October 1999.
Respondent PAL is likewise ordered to pay the separation
benefits to those complainants who have not received their
separation pay and to pay the balance to those who have
received partial separation pay.
The Order of the Labor Arbiter dated April 6, 2000 is also SET
ASIDE and the Writ of Execution dated November 13, 2000 is
hereby quashed.
Annexes "A" and "B" are considered part of this Decision.
SO ORDERED.36
FASAP moved for reconsideration but it was denied; hence it
filed an appeal to the Court of Appeals which was denied in
the herein assailed Decision.
FASAPs motion for reconsideration was likewise denied;
hence, the instant petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS DECIDED THE
CASE A QUO IN A WAY CONTRARY TO LAW AND/OR
APPLICABLE JURISPRUDENCE WHEN IT DENIED FASAPS

PETITION FOR CERTIORARI UNDER RULE 65 AND EFFECTIVELY

VALIDATED
THE
RETRENCHMENT
EXERCISED
BY
RESPONDENT PAL WHICH WAS INITIALLY DECLARED AS
ILLEGAL BY THE LABOR ARBITER A QUO SINCE:
FIRST, the record shows that PAL failed or neglected to adopt
less drastic cost-cutting measures before resorting to
retrenchment. No less than the Supreme Court held that
resort to less drastic cost-cutting measures is an
indispensable requirement for a valid retrenchment x x x.
SECOND, PAL arbitrarily and capriciously singled out the year
1997 as a reference in its alleged assessment of employee
efficiency. With this, it totally disregarded the employees
performance during the years prior to 1997. This resulted in
the unreasonable and unfair retrenchment or demotion of
several flight pursers and attendants who showed
impeccable service records during the years prior to 1997.
THIRD, seniority was totally disregarded in the selection of
employees to be retrenched, which is a clear and willful
violation of the CBA.
FOURTH, PAL maliciously represented in the proceedings
below that it could only operate on a fleet of fourteen (14)
planes in order to justify the retrenchment scheme. Yet, the
evidence on record revealed that PAL operated a fleet of
twenty two (22) planes. In fact, after having illegally
retrenched the unfortunate flight attendants and pursers, PAL
rehired those who were capriciously dismissed and even
hired from the outside just to fulfill their manning
requirements.
FIFTH, PAL did not use any fair and reasonable criteria in
effecting retrenchment. If there really was any, the same was
applied arbitrarily, if not discriminatorily.

FINALLY, and perhaps the worst transgression of FASAPs

rights, PAL used retrenchment to veil its union-busting
motives and struck at the heart of FASAP when it retrenched
seven (7) of its twelve (12) officers and demoted three (3)
others.37 (Emphasis supplied)
These issues boil down to the question of whether PALs
retrenchment scheme was justified.
It is a settled rule that in the exercise of the Supreme Courts
power of review, the Court is not a trier of facts and does not
normally undertake the re-examination of the evidence
presented by the contending parties during trial. However,
there are several exceptions to this rule38 such as when the
factual findings of the Labor Arbiter differ from those of the
NLRC, as in the instant case, which opens the door to a
review by this Court.39
Under the Labor Code, retrenchment
employees is authorized as follows:

or

reduction

of

ART. 283. Closure of establishment and reduction of

personnel. - The employer may also terminate the
employment of any employee due to the installation of laborsaving devices, redundancy, retrenchment to prevent losses
or the closing or cessation of operation of the establishment
or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written
notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of laborsaving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least his
one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment
to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation

pay shall be equivalent to one (1) month pay or at least onehalf (1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
The law recognizes the right of every business entity to
reduce its work force if the same is made necessary by
compelling economic factors which would endanger its
existence or stability.40 Where appropriate and where
conditions are in accord with law and jurisprudence, the
Court has authorized valid reductions in the work force to
forestall business losses, the hemorrhaging of capital, or
even to recognize an obvious reduction in the volume of
business which has rendered certain employees redundant. 41
Nevertheless, while it is true that the exercise of this right is
a prerogative of management, there must be faithful
compliance with substantive and procedural requirements of
the law and jurisprudence, for retrenchment strikes at the
very heart of the workers employment, the lifeblood upon
which he and his family owe their survival. Retrenchment is
only a measure of last resort, when other less drastic means
have been tried and found to be inadequate. 42
The burden clearly falls upon the employer to prove
economic or business losses with sufficient supporting
evidence. Its failure to prove these reverses or losses
necessarily means that the employees dismissal was not
justified.43 Any claim of actual or potential business losses
must satisfy certain established standards, all of which must
concur, before any reduction of personnel becomes
legal.44 These are:
(1) That retrenchment is reasonably necessary and likely to
prevent business losses which, if already incurred, are not
merely de minimis, but substantial, serious, actual and real,
or if only expected, are reasonably imminent as perceived
objectively and in good faith by the employer;

(2) That the employer served written notice both to the

employees and to the Department of Labor and Employment
at least one month prior to the intended date of
retrenchment;
(3) That the employer pays the retrenched employees
separation pay equivalent to one (1) month pay or at least
one-half () month pay for every year of service, whichever
is higher;
(4) That the employer exercises its prerogative to retrench
employees in good faith for the advancement of its interest
and not to defeat or circumvent the employees right to
security of tenure; and,
(5) That the employer used fair and reasonable criteria in
ascertaining who would be dismissed and who would be
retained among the employees, such as status, efficiency,
seniority, physical fitness, age, and financial hardship for
certain workers.45
In view of the facts and the issues raised, the resolution of
the instant petition hinges on a determination of the
existence of the first, fourth and the fifth elements set forth
above, as well as compliance therewith by PAL, taking to
mind that the burden of proof in retrenchment cases lies with
the employer in showing valid cause for dismissal; 46 that
legitimate business reasons exist to justify retrenchment. 47
FIRST ELEMENT: That retrenchment is reasonably necessary
and likely to prevent business losses which, if already
incurred, are not merely de minimis, but substantial, serious,
actual and real, or if only expected, are reasonably imminent
as perceived objectively and in good faith by the employer.
The employers prerogative to layoff employees is subject to
certain limitations. In Lopez Sugar Corporation v. Federation
of Free Workers,48 we held that:

Firstly, the losses expected should be substantial and not

merely de minimis in extent. If the loss purportedly sought to
be forestalled by retrenchment is clearly shown to be
insubstantial and inconsequential in character, the bona fide
nature of the retrenchment would appear to be seriously in
question. Secondly, the substantial loss apprehended must
be reasonably imminent, as such imminence can be
perceived objectively and in good faith by the employer.
There should, in other words, be a certain degree of urgency
for the retrenchment, which is after all a drastic recourse with
serious consequences for the livelihood of the employees
retired or otherwise laid-off. Because of the consequential
nature of retrenchment, it must, thirdly, be reasonably
necessary and likely to effectively prevent the expected
losses. The employer should have taken other measures prior
or parallel to retrenchment to forestall losses, i.e., cut other
costs than labor costs. An employer who, for instance, lays
off substantial numbers of workers while continuing to
dispense fat executive bonuses and perquisites or so-called
"golden parachutes," can scarcely claim to be retrenching in
good faith to avoid losses. To impart operational meaning to
the constitutional policy of providing "full protection" to labor,
the employers prerogative to bring down labor costs by
retrenching must be exercised essentially as a measure of
last resort, after less drastic means - e.g., reduction of both
management and rank-and-file bonuses and salaries, going
on reduced time, improving manufacturing efficiencies,
trimming of marketing and advertising costs, etc. - have
been tried and found wanting.
Lastly, but certainly not the least important, alleged losses if
already realized, and the expected imminent losses sought to
be forestalled, must be proved by sufficient and convincing
evidence.
The law speaks of serious business losses or financial
reverses. Sliding incomes or decreasing gross revenues are

not necessarily losses, much less serious business losses

within the meaning of the law. The fact that an employer may
have sustained a net loss, such loss, per se, absent any other
evidence on its impact on the business, nor on expected
losses that would have been incurred had operations been
continued, may not amount to serious business losses
mentioned in the law. The employer must show that its losses
increased through a period of time and that the condition of
the company will not likely improve in the near future, 49 or
that it expected no abatement of its losses in the coming
years.50 Put simply, not every loss incurred or expected to be
incurred by a company will justify retrenchment. 51
The employer must also exhaust all other means to avoid
further
losses
without
retrenching
its
52
employees. Retrenchment is a means of last resort; it is
justified only when all other less drastic means have been
tried and found insufficient.53 Even assuming that the
employer has actually incurred losses by reason of the Asian
economic crisis, the retrenchment is not completely justified
if there is no showing that the retrenchment was the last
recourse resorted to.54 Where the only less drastic measure
that the employer undertook was the rotation work scheme,
or the three-day-work-per-employee-per-week schedule, and
it did not endeavor at other measures, such as cost
reduction, lesser investment on raw materials, adjustment of
the work routine to avoid scheduled power failure, reduction
of the bonuses and salaries of both management and rankand-file, improvement of manufacturing efficiency, and
trimming of marketing and advertising costs, the claim that
retrenchment was done in good faith to avoid losses is
belied.55
Alleged losses if already realized, and the expected imminent
losses sought to be forestalled, must be proved by sufficient
and convincing evidence. The reason for requiring this is
readily apparent: any less exacting standard of proof would

render too easy the abuse of this ground for termination of

services of employees; scheming employers might be merely
feigning business losses or reverses in order to ease out
employees.56
In establishing a unilateral claim of actual or potential losses,
financial statements audited by independent external
auditors constitute the normal method of proof of profit and
loss performance of a company.57 The condition of business
losses justifying retrenchment is normally shown by audited
financial documents like yearly balance sheets and profit and
loss statements as well as annual income tax returns.
Financial statements must be prepared and signed by
independent auditors; otherwise, they may be assailed as
self-serving.58 A Statement of Profit and Loss submitted to
prove alleged losses, without the accompanying signature of
a certified public accountant or audited by an independent
auditor, is nothing but a self-serving document which ought
to be treated as a mere scrap of paper devoid of any
probative value.59
The audited financial statements should be presented before
the Labor Arbiter who is in the position to evaluate evidence.
They may not be submitted belatedly with the Court of
Appeals, because the admission of evidence is outside the
sphere of the appellate courts certiorari jurisdiction. Neither
can this Court admit in evidence audited financial
statements, or make a ruling on the question of whether the
employer incurred substantial losses justifying retrenchment
on the basis thereof, as this Court is not a trier of
facts.60 Even so, this Court may not be compelled to accept
the contents of said documents blindly and without
thinking.61
The requirement of evidentiary substantiation dictates that
not even the affidavit of the Assistant to the General
Manager is admissible to prove losses, as the same is self-

serving.62 Thus, in Central Azucarera de la Carlota v. National

Labor Relations Commission,63 the Court ruled that the mere
citation by the employer of the economic setback suffered by
the sugar industry as a whole cannot, in the absence of
adequate, credible and persuasive evidence, justify its
retrenchment program, 64 thus:

personnel. Although the Philippine economy was gravely

affected by the Asian financial crisis, however, it cannot be
assumed that it has likewise brought PAL to the brink of
bankruptcy. Likewise, the fact that PAL underwent corporate
rehabilitation does not automatically justify the retrenchment
of its cabin crew personnel.

A litany of woes, from a labor strike way back in 1982 to the

various crises endured by the sugar industry, droughts, the
1983 assassination of former Senator Benigno Aquino, Jr.,
high crop loan interests, spiraling prices of fertilizers and
spare parts, the depression of sugar prices in the world
market, cutback in the U.S. sugar quota, abandonment of
productive areas because of the insurgency problem and the
absence of fair and consistent government policies may have
contributed to the unprecedented decline in sugar production
in the country, but there is no solid evidence that they
translated into specific and substantial losses that would
necessitate retrenchment. Just exactly what negative effects
were borne by petitioner as a result, petitioner failed to
underscore.65

Records show that PAL was not even aware of its actual
financial position when it implemented its retrenchment
program. It initially decided to cut its fleet size to only 14
("Plan 14") and based on said plan, it retrenched more than
1,400 of its cabin crew personnel. Later on, however, it
abandoned its "Plan 14" and decided to retain 22 units of
aircraft ("Plan 22"). Unfortunately, it has retrenched more
than what was necessary. PAL admits that:

In Anino v. National Labor Relations Commission, 66 the Court

also held that the employers claim that retrenchment was
undertaken as a measure of self-preservation to prevent
losses brought about by the continuing decline of nickel
prices and export volume in the mining industry, as well as
its allegation that the reduction of excise taxes on mining
from 5% to 1% on a graduated basis as provided under
Republic Act No. 7729 was a clear recognition by the
government of the industrys worsening economic difficulties
was a bare claim in the absence of evidence of actual
losses in its business operations. 67
In the instant case, PAL failed to substantiate its claim of
actual and imminent substantial losses which would justify
the retrenchment of more than 1,400 of its cabin crew

[U]pon reconsideration and with some optimistic prospects

for operations, the Company (PAL) decided not to implement
"Plan 14" and instead implemented "Plan 22," which would
involve a fleet of 22 planes. Since "Plan 14" was abandoned,
the Company deemed it appropriate to recall back into
employment employees it had previously retrenched. Thus,
some of the employees who were initially laid off were
recalled back to duty, the basis of which was passing the
1997 efficiency rating to meet the Companys operational
requirements.68
PAL decided to adopt "Plan 14" on June 12, 1998. Three days
after, or on June 15, 1998, it sent notices of retrenchment to
its cabin crew personnel to take effect on July 15, 1998.
However, after allegedly realizing that it was going to retain
22 of its aircraft instead of 14, and after more than 1,400 of
its cabin crew have been fired during the period from
November 30, 1998 to December 15, 1998, it suddenly
recalled to duty 202 of the retrenched cabin crew
personnel.69

This only proves that PAL was not aware of the true state of
its finances at the time it implemented the assailed massive
retrenchment scheme. It embarked on the mass dismissal
without first undertaking a well-considered study on the
proposed retrenchment scheme. This view is underscored by
the fact that previously, PAL terminated the services of 140
probationary cabin attendants, but rehired them almost
immediately and even converted their employment into
permanent and regular, even as a massive retrenchment was
already looming in the horizon.
To prove that PAL was financially distressed, it could have
submitted its audited financial statements but it failed to
present the same with the Labor Arbiter. Instead, it narrated
a litany of woes without offering any evidence to show that
they translated into specific and substantial losses that would
necessitate retrenchment, thus:
1. It is a matter of public knowledge that PAL had been
suffering severe financial losses that reached its most critical
condition in 1998 when its liabilities amounted to about
P90,642,933,919.00, while its assets amounted to only about
P85,109,075,351.00. The precarious situation prompted PAL
to adopt cost-cutting measures to prevent it from becoming
totally bankrupt, including the reduction of its flight fleet
from 56 to 14 aircrafts and the retrenchment of unneeded
employees.
xxxx
26. To save its business, PAL had every right to undergo a
retrenchment program immediately. PAL did not need, by
law, to justify or explain to FASAP the reasons for the
retrenchment before it could implement it. Proof of actual
financial losses incurred by the company is not a condition
sine qua non for retrenchment. 70

This bare and unilateral claim does not suffice. The Labor
Arbiters finding that PAL "amply satisfied the rules imposed
by law and jurisprudence that sustain retrenchment," is
without basis, absent the presentation of documentary
evidence to that effect. In Saballa v. National Labor Relations
Commission,71 we ruled that where the decision of the Labor
Arbiter did not indicate the specific bases for such crucial
finding that the employer was suffering business reverses,
the same was arbitrary. We ratiocinated therein that since
the employer insisted that its critical financial condition was
the central and pivotal reason for its retrenchment, there was
no reason why it should have neglected or refused to submit
its audited financial statements.
PALs assertion that its finances were gravely compromised
as a result of the 1997 Asian financial crisis and the pilots
strike lacks basis due to the non-presentation of its audited
financial statements to prove actual or imminent losses. Also,
the fact that PAL was placed under receivership did not
excuse it from submitting to the labor authorities copies of its
audited financial statements to prove the urgency, necessity
and extent, of its retrenchment program. PAL should have
presented its audited financial statements for the years
immediately preceding and during which the retrenchment
was carried out. Law and jurisprudence require that alleged
losses or expected imminent losses must be proved by
sufficient and convincing evidence.
Likewise, PAL has not shown to the Courts satisfaction that
the pilots strike had gravely affected its operations. It
offered no proof to show the correlation between the pilots
strike and its alleged financial difficulties. In Guerrero v.
National Labor Relations Commission, 72 the Court held that
where the employer failed to prove its claim with competent
evidence that the employees strike paralyzed its operations
and resulted in the withdrawal of its clients orders, the
retrenchment of its employees must be declared illegal. 73

Moreover, as the Court ruled in the case of EMCO Plywood

Corporation,74 it must be shown that the employer resorted
to other means but these proved to be insufficient or
inadequate, such as cost reduction, lesser investment on raw
materials, adjustment of the work routine to avoid scheduled
power failure, reduction of the bonuses and salaries of both
management
and
rank-and-file,
improvement
of
manufacturing efficiency, and trimming of marketing and
advertising costs. In the instant case, there is no proof that
PAL engaged in cost-cutting measures other than a mere
reduction in its fleet of aircraft and the retrenchment of 5,000
of its personnel.
The only manifestation of PALs attempt at exhausting other
possible measures besides retrenchment was when it
conducted negotiations and consultations with FASAP which,
however, ended nowhere. None of the plans and suggestions
taken up during the meetings was implemented. On the
other hand, PALs September 4, 1998 offer of shares of stock
to its employees was adopted belatedly, or only after its
more than 1,400 cabin crew personnel were retrenched.
Besides, this offer can hardly be considered to be borne of
good faith, considering that it was premised on the condition
that, if accepted, all existing CBAs between PAL and its
employees would have to be suspended for 10 years. When
the offer was rejected by the employees, PAL ceased its
operations on September 23, 1998. It only resumed business
when the CBA suspension clause was ratified by the
employees
in
a
referendum
subsequently
conducted.75 Moreover, this stock distribution scheme does
not do away with PALs expenditures or liabilities, since it has
for its sole consideration the commitment to suspend CBAs
with its employees for 10 years. It did not improve the
financial standing of PAL, nor did it result in corporate
savings, vis--vis the financial difficulties it was suffering at
the time.

Also, the claim that PAL saved P24 million monthly due to the
implementation of the retrenchment program does not prove
anything; it has not been shown to what extent or degree
such savings benefited PAL, vis--vis its total expenditures or
its overall financial position. Likewise, its claim that its
liabilities reached P90 billion, while its assets amounted to
P85 billion only or a debt to asset ratio of more than 1:1
may not readily be believed, considering that it did not
submit its audited financial statements. All these allegations
are self-serving evidence.
Interestingly, PAL submitted its audited financial statements
only when the case was the subject of certiorari proceedings
in the Court of Appeals by attaching in its Comment 76 a copy
of its consolidated audited financial statements for the years
2002, 2003 and 2004.77 However, these are not the financial
statements that would have shown PALs alleged precarious
position at the time it implemented the massive
retrenchment scheme in 1998. PAL should have submitted its
financial statements for the years 1997 up to 1999; and not
for the years 2002 up to 2004 because these financial
statements cover a period markedly distant to the years in
question, which make them irrelevant and unacceptable.
Neither could PAL claim to suffer from imminent or resultant
losses had it not implemented the retrenchment scheme in
1998. It could not have proved that retrenchment was
necessary to prevent further losses, because immediately
thereafter or in February 1999 78 PAL was on the road to
recovery; this is the airlines bare admission in its Comment
to the instant petition.79 During that period, it was recalling to
duty cabin crew it had previously retrenched. In March 2000,
PAL declared a net income of P44.2 million. In March 2001, it
reported a profit of P419 million. In March 2003, it again
registered a net income of P295 million.80 All these facts are
anathema to a finding of financial difficulties.

Finally, what further belied PALs allegation that it was

suffering from substantial actual and imminent losses was
the fact that in December 1998, PAL submitted a "standalone" rehabilitation plan to the SEC, and on June 4, 1999, or
less than a year after the retrenchment, the amount of
US$200 million was invested directly into PAL by way of
additional capital infusion for its operations. 81 These facts
betray PALs claim that it was in dire financial straits. By
submitting a "stand-alone" rehabilitation plan, PAL
acknowledged that it could undertake recovery on its own
and that it possessed enough resources to weather the
financial storm, if any.
Thus said, it was grave error for the Labor Arbiter, the NLRC
and the Court of Appeals, to have simply assumed that PAL
was in grievous financial state, without requiring the latter to
substantiate such claim. It bears stressing that in
retrenchment cases, the presentation of proof of financial
difficulties through the required documents, preferably
audited financial statements prepared by independent
auditors, may not summarily be done away with.
That FASAP admitted and took for granted the existence of
PALs financial woes cannot excuse the latter from proving to
the Courts satisfaction that indeed it was bleeding
financially. It was the airlines obligation to prove that it was
in such financial distress; that it was necessary to implement
an appropriate retrenchment scheme; that it had to undergo
a retrenchment program in proportion to or commensurate
with the extent of its financial distress; and that, it was
carrying out the scheme in good faith and without
undermining the security of tenure of its employees. The
Court is mindful that the characterization of an employees
services as no longer necessary or sustainable, and
therefore, properly terminable, is an exercise of business
judgment on the part of the employer, and that the wisdom
or soundness of such characterization or decision is not

subject to discretionary review, provided of course that

violation of law or arbitrary or malicious action is not shown. 82
The foregoing principle holds true with respect to PALs claim
in its Comment that the only issue is the manner by which its
retrenchment scheme was carried out because the validity of
the scheme has been settled in its favor. 83Respondents might
have confused the right to retrench with its actual
retrenchment program, treating them as one and the same.
The first, no doubt, is a valid prerogative of management; it
is a right that exists for all employers. As to the second, it is
always subject to scrutiny in regard to faithful compliance
with substantive and procedural requirements which the law
and jurisprudence have laid down. The right of an employer
to dismiss an employee differs from and should not be
confused with the manner in which such right is exercised. 84
FOURTH ELEMENT: That the employer exercises its
prerogative to retrench employees in good faith for the
advancement of its interest and not to defeat or circumvent
the employees right to security of tenure.
Concededly, retrenchment to prevent losses is an authorized
cause for terminating employment and the decision whether
to resort to such move or not is a management prerogative.
However, the right of an employer to dismiss an employee
differs from and should not be confused with the manner in
which such right is exercised. It must not be oppressive and
abusive since it affects one's person and property. 85
In Indino v. National Labor Relations Commission, 86 the Court
held that it is almost an inflexible rule that employers who
contemplate terminating the services of their workers cannot
be so arbitrary and ruthless as to find flimsy excuses for their
decisions. This must be so considering that the dismissal of
an employee from work involves not only the loss of his
position but more important, his means of livelihood.
Applying this caveat, it is therefore incumbent for the

employer, before putting into effect any retrenchment

process on its work force, to show by convincing evidence
that it was being wrecked by serious financial problems.
Simply declaring its state of insolvency or its impending
doom will not be sufficient. To do so would render the
security of tenure of workers and employees illusory. Any
employer desirous of ridding itself of its employees could
then easily do so without need to adduce proof in support of
its action. We can not countenance this. Security of tenure is
a right guaranteed to employees and workers by the
Constitution and should not be denied on the basis of mere
speculation.
On the requirement that the prerogative to retrench must be
exercised in good faith, we have ruled that the hiring of new
employees and subsequent rehiring of "retrenched"
employees constitute bad faith;87 that the failure of the
employer to resort to other less drastic measures than
retrenchment seriously belies its claim that retrenchment
was done in good faith to avoid losses; 88 and that the
demonstrated arbitrariness in the selection of which of its
employees to retrench is further proof of the illegality of the
employers retrenchment program, not to mention its bad
faith.89
When PAL implemented Plan 22, instead of Plan 14, which
was what it had originally made known to its employees, it
could not be said that it acted in a manner compatible with
good faith. It offered no satisfactory explanation why it
abandoned Plan 14; instead, it justified its actions of
subsequently recalling to duty retrenched employees by
making it appear that it was a show of good faith; that it was
due to its good corporate nature that the decision to consider
recalling employees was made. The truth, however, is that it
was unfair for PAL to have made such a move; it was
capricious and arbitrary, considering that several thousand
employees who had long been working for PAL had lost their

jobs, only to be recalled but assigned to lower positions (i.e.,

demoted), and, worse, some as new hires, without due
regard for their long years of service with the airline.
The irregularity of PALs implementation of Plan 14 becomes
more apparent when it rehired 140 probationary cabin
attendants whose services it had previously terminated, and
yet proceeded to terminate the services of its permanent
cabin crew personnel.
In sum, we find that PAL had implemented its retrenchment
program in an arbitrary manner and with evident bad faith,
which prejudiced the tenurial rights of the cabin crew
personnel.
Moreover, the managements September 4, 1998 offer to
transfer PAL shares of stock in the name of its employees in
exchange for the latters commitment to suspend all existing
CBAs for 10 years; the closure of its operations when the
offer was rejected; and the resumption of its business after
the employees relented; all indicate that PAL had not acted in
earnest in regard to relations with its employees at the time.
FIFTH ELEMENT: That the employer used fair and reasonable
criteria in ascertaining who would be dismissed and who
would be retained among the employees, such as status,
efficiency, seniority, physical fitness, age, and financial
hardship for certain workers.
In selecting employees to be dismissed, fair and reasonable
criteria must be used, such as but not limited to: (a) less
preferred status (e.g., temporary employee), (b) efficiency
and (c) seniority.90
In Villena v. National Labor Relations Commission, 91 the Court
considered seniority an important aspect for the validity of a
retrenchment program. In Philippine Tuberculosis Society, Inc.
v. National Labor Union,92 the Court held that the

implementation of a retrenchment scheme without taking

seniority into account rendered the retrenchment invalid,
even as against factors such as dependability, adaptability,
trainability, job performance, discipline, and attitude towards
work.
In the implementation of its retrenchment scheme, PAL
evaluated the cabin crew personnels performance during the
year preceding the retrenchment (1997), based on the
following set of criteria or rating variables found in the
Performance Evaluation Form of the cabin crew personnels
Grooming and Appearance Handbook:
A. INFLIGHT PROFICIENCY EVALUATION 30%
B. JOB PERFORMANCE 35%
Special Award +5
Commendations +2
Appreciation +1
Disciplinary Actions Reminder (-3), Warning/Admonition &
Reprimands (-5), Suspension (-20), Passenger Complaints (30), Appearance (-10)
C. ATTENDANCE 35%
Perfect Attendance +2

retrenchment program; and that the criteria actually used

which was unilaterally formulated by PAL using its
Performance Evaluation Form in its Grooming and
Appearance Handbook was reasonable and fair. Indeed, PAL
was not obligated to consult FASAP regarding the standards it
would use in evaluating the performance of the each cabin
crew. However, we do not agree with the findings of the
appellate court that the criteria utilized by PAL in the actual
retrenchment were reasonable and fair.
This Court has repeatedly enjoined employers to adopt and
observe
fair
and
reasonable
standards
to
effect
retrenchment. This is of paramount importance because an
employers retrenchment program could be easily justified
considering the subjective nature of this requirement. The
adoption and implementation of unfair and unreasonable
criteria could not easily be detected especially in the
retrenchment of large numbers of employees, and in this
aspect, abuse is a very distinct and real possibility. This is
where labor tribunals should exercise more diligence; this
aspect is where they should concentrate when placed in a
position of having to judge an employers retrenchment
program.
Indeed, the NLRC made a detailed listing of the retrenchment
scheme based on the ICCD Masterank and Seniority 1997
Ratings. It found the following:

Missed Assignment -30

1. Number of employees retrenched due to inverse seniority

rule and other reasons -- 454

Sick Leaves in excess of allotment and other leaves in

excess of allotment -20

2. Number of employees retrenched due to excess sick

leaves -- 299

Tardiness -10

93

The appellate court held that there was no need for PAL to
consult with FASAP regarding standards or criteria that the
airline would utilize in the implementation of the

3. Number of employees who were retrenched due to excess

sick leave and other reasons -- 61

4. Number of employees who were retrenched due to other

reasons -- 107
5. Number of employees who were demoted -- 552
Total -- 1,473.94
Prominent from the above data is the retrenchment of cabin
crew personnel due to "other reasons" which, however, are
not specifically stated and shown to be for a valid cause. This
is not allowed because it has no basis in fact and in law.
Moreover, in assessing the overall performance of each cabin
crew personnel, PAL only considered the year 1997. This
makes the evaluation of each cabin attendants efficiency
rating capricious and prejudicial to PAL employees covered
by it. By discarding the cabin crew personnels previous years
of service and taking into consideration only one years worth
of job performance for evaluation, PAL virtually did away with
the concept of seniority, loyalty and past efficiency, and
treated all cabin attendants as if they were on equal footing,
with no one more senior than the other.

under the parties CBA. Moreover, "gross violations of CBA"

under the same Article referred to flagrant and/or malicious
refusal to comply with the economic provisions of such
agreement, which is not the issue in the instant
case.1avvphi1
Also, we fail to see any specific instance of union busting,
oppression or harassment and similar acts of FASAPs
officers. The fact that majority of FASAPs officers were either
retrenched or demoted does not prove restraint or coercion
in their right to organize. Instead, we see a simple
retrenchment scheme gone wrong for failure to abide by the
stringent rules prescribed by law, and a failure to discharge
the employers burden of proof in such cases.

In sum, PALs retrenchment program is illegal because it was

based on wrongful premise (Plan 14, which in reality turned
out to be Plan 22, resulting in retrenchment of more cabin
attendants than was necessary) and in a set of criteria or
rating variables that is unfair and unreasonable when
implemented. It failed to take into account each cabin
attendants respective service record, thereby disregarding
seniority and loyalty in the evaluation of overall employee
performance.

Quitclaims executed as a result of PALs illegal retrenchment

program are likewise annulled and set aside because they
were not voluntarily entered into by the retrenched
employees; their consent was obtained by fraud or mistake,
as volition was clouded by a retrenchment program that was,
at its inception, made without basis. The law looks with
disfavor upon quitclaims and releases by employees
pressured into signing by unscrupulous employers minded to
evade legal responsibilities. As a rule, deeds of release or
quitclaim cannot bar employees from demanding benefits to
which they are legally entitled or from contesting the legality
of their dismissal. The acceptance of those benefits would
not amount to estoppel. The amounts already received by
the retrenched employees as consideration for signing the
quitclaims should, however, be deducted from their
respective monetary awards. 95

Anent the claim of unfair labor practices committed against

petitioner, we find the same to be without basis. Article 261
of the Labor Code provides that violations of a CBA, except
those which are gross in character, shall no longer be treated
as unfair labor practice and shall be resolved as grievances

In Trendline Employees Association-Southern Philippines

Federation of Labor v. NLRC, 96 we held that where the
employer led its employees to believe that the employer was
suffering losses and as a result thereof accept retrenchment
by executing quitclaims and waivers, there was evident bad

faith on the part of the employer justifying the setting aside

of the quitclaims and waivers executed.

motion for reconsideration, are REVERSED and SET ASIDE

and a new one is rendered:

As to PALs recall and rehire process (of retrenched cabin

crew employees), the same is likewise defective. Considering
the illegality of the retrenchment, it follows that the
subsequent recall and rehire process is likewise invalid and
without effect.

1. FINDING respondent Philippine Airlines, Inc. GUILTY of

illegal dismissal;

A corporate officer is not personally liable for the money

claims of discharged corporate employees unless he acted
with evident malice and bad faith in terminating their
employment.97 We do not see how respondent Patria Chiong
may be held personally liable together with PAL, it appearing
that she was merely acting in accordance with what her
duties required under the circumstances. Being an Assistant
Vice President for Cabin Services of PAL, she takes direct
orders from superiors, or those who are charged with the
formulation of the policies to be implemented.
With respect to moral damages, we have time and again held
that as a general rule, a corporation cannot suffer nor be
entitled to moral damages. A corporation, being an artificial
person and having existence only in legal contemplation, has
no feelings, no emotions, no senses; therefore, it cannot
experience physical suffering and mental anguish. Mental
suffering can be experienced only by one having a nervous
system and it flows from real ills, sorrows, and griefs of life
all of which cannot be suffered by an artificial, juridical
person.98 The Labor Arbiters award of moral damages was
therefore improper.
WHEREFORE, the instant petition is GRANTED. The assailed
Decision of the Court of Appeals in CA-G.R. SP No. 87956
dated August 23, 2006, which affirmed the Decision of the
NLRC setting aside the Labor Arbiters findings of illegal
retrenchment and its Resolution of May 29, 2007 denying the

2. ORDERING Philippine Air Lines, Inc. to reinstate the cabin

crew personnel who were covered by the retrenchment and
demotion scheme of June 15, 1998 made effective on July 15,
1998, without loss of seniority rights and other privileges,
and to pay them full backwages, inclusive of allowances and
other monetary benefits computed from the time of their
separation up to the time of their actual reinstatement,
provided that with respect to those who had received their
respective separation pay, the amounts of payments shall be
deducted from their backwages. Where reinstatement is no
longer feasible because the positions previously held no
longer exist, respondent Corporation shall pay backwages
plus, in lieu of reinstatement, separation pay equal to one (1)
month pay for every year of service;
3. ORDERING Philippine Airlines, Inc. to pay attorneys fees
equivalent to ten percent (10%) of the total monetary award.
Costs against respondent PAL.
SO ORDERED.

This is a Petition seeking review of the resolutions, dated

March 30, 1994 and August 26, 1994, of the National Labor
Relations Commission (NLRC) which reversed the decision of
the Labor Arbiter and dismissed petitioner Ruben Serrano's
complaint for illegal dismissal and denied his motion for
reconsideration. The facts are as follows:
Petitioner was hired by private respondent Isetann
Department Store as a security checker to apprehend
shoplifters and prevent pilferage of merchandise. 1 Initially
hired on October 4, 1984 on contractual basis, petitioner
eventually became a regular employee on April 4, 1985. In
1988, he became head of the Security Checkers Section of
private respondent.2
Sometime in 1991, as a cost-cutting measure, private
respondent decided to phase out its entire security section
and engage the services of an independent security agency.
For this reason, it wrote petitioner the following
memorandum:3
October 11, 1991
MR. RUBEN SERRANO
PRESENT
Dear Mr. Seranno,
G.R. No. 117040

January 27, 2000

RUBEN
SERRANO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
ISETANN DEPARTMENT STORE, respondents.
MENDOZA, J.:

In view of the retrenchment program of the company, we

hereby reiterate our verbal notice to you of your termination
as Security Section Head effective October 11, 1991.
Please secure your clearance from this office.
Very truly yours,
[Sgd.]
TERESITA
A.
Human Resources Division Manager

VILLANUEVA

The loss of his employment prompted petitioner to file a

complaint on December 3, 1991 for illegal dismissal, illegal
layoff, unfair labor practice, underpayment of wages, and
nonpayment of salary and overtime pay. 4
The parties were required to submit their position papers, on
the basis of which the Labor Arbiter defined the issues as
follows:5
Whether or not there is a valid ground for the dismissal of the
complainant.
Whether or not complainant is entitled to his monetary
claims for underpayment of wages, nonpayment of salaries,
13th month pay for 1991 and overtime pay.
Whether or not Respondent is guilty of unfair labor practice.
Thereafter, the case was heard. On April 30, 1993, the Labor
Arbiter rendered a decision finding petitioner to have been
illegally dismissed. He ruled that private respondent failed to
establish that it had retrenched its security section to prevent
or minimize losses to its business; that private respondent
failed to accord due process to petitioner; that private
respondent failed to use reasonable standards in selecting
employees whose employment would be terminated; that
private respondent had not shown that petitioner and other
employees in the security section were so inefficient so as to
justify their replacement by a security agency, or that "costsaving devices [such as] secret video cameras (to monitor
and prevent shoplifting) and secret code tags on the
merchandise" could not have been employed; instead, the
day after petitioner's dismissal, private respondent employed
a safety and security supervisor with duties and functions
similar to those of petitioner.1wphi1.nt
Accordingly, the Labor Arbiter ordered: 6

WHEREFORE, above
hereby decreed:

premises

considered,

judgment

is

(a) Finding the dismissal of the complainant to be illegal and

concomitantly, Respondent is ordered to pay complainant full
backwages without qualification or deduction in the amount
of P74,740.00 from the time of his dismissal until
reinstatement. (computed till promulgation only) based on
his monthly salary of P4,040.00/month at the time of his
termination but limited to (3) three years;
(b) Ordering the Respondent to immediately reinstate the
complainant to his former position as security section head or
to a reasonably equivalent supervisorial position in charges
of security without loss of seniority rights, privileges and
benefits. This order is immediately executory even pending
appeal;
(c) Ordering the Respondent to pay complainant unpaid
wages in the amount of P2,020.73 and proportionate 13th
month pay in the amount of P3,198.30;
(d) Ordering the Respondent to pay complainant the amount
of P7,995.91, representing 10% attorney's fees based on the
total judgment award of P79,959.12.
All other claims of the complainant whether monetary or
otherwise is hereby dismissed for lack of merit.
SO ORDERED.
Private respondent appealed to the NLRC which, in its
resolution of March 30, 1994; reversed the decision of the
Labor Arbiter and ordered petitioner to be given separation
pay equivalent to one month pay for every year of service,
unpaid salary, and proportionate 13th month pay. Petitioner
filed a motion for reconsideration, but his motion was denied.

The NLRC held that the phase-out of private respondent's

security section and the hiring of an independent security
agency constituted an exercise by private respondent of "[a]
legitimate business decision whose wisdom we do not intend
to inquire into and for which we cannot substitute our
judgment"; that the distinction made by the Labor Arbiter
between "retrenchment" and the employment of cost-saving
devices" under Art. 283 of the Labor Code was insignificant
because the company official who wrote the dismissal letter
apparently used the term "retrenchment" in its "plain and
ordinary sense: to layoff or remove from one's job, regardless
of the reason therefor"; that the rule of "reasonable criteria"
in the selection of the employees to be retrenched did not
apply because all positions in the security section had been
abolished; and that the appointment of a safety and security
supervisor referred to by petitioner to prove bad faith on
private respondent's part was of no moment because the
position had long been in existence and was separate from
petitioner's position as head of the Security Checkers
Section.
Hence this petition. Petitioner raises the following issue:
IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY
THE PRIVATE RESPONDENT TO REPLACE ITS CURRENT
SECURITY SECTION A VALID GROUND FOR THE DISMISSAL OF
THE EMPLOYEES CLASSED UNDER THE LATTER? 7
Petitioner contends that abolition of private respondent's
Security Checkers Section and the employment of an
independent security agency do not fall under any of the
authorized causes for dismissal under Art. 283 of the Labor
Code.
Petitioner Laid Off for Cause
Petitioner's contention has no merit. Art. 283 provides:

Closure of establishment and reduction of personnel. The

employer may also terminate the employment of any
employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operations of the establishment or undertaking
unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the,
workers and the Department of Labor and Employment at
least one (1) month before the intended date thereof. In case
of termination due to the installation of labor-saving devices
or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least one (1) month pay
or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent
losses and in cases of closure or cessation of operations of
establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be
equivalent to at least one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be
considered as one (1) whole year.
In De Ocampo v. National Labor Relations Commission,8 this
Court upheld the termination of employment of three
mechanics in a transportation company and their
replacement by a company rendering maintenance and
repair services. It held:
In contracting the services of Gemac Machineries, as part of
the company's cost-saving program, the services rendered by
the mechanics became redundant and superfluous, and
therefore properly terminable. The company merely
exercised its business judgment or management prerogative.
And in the absence of any proof that the management
abused its discretion or acted in a malicious or arbitrary
manner, the court will not interfere with the exercise of such
prerogative.9

In Asian Alcohol Corporation v. National Labor Relations

Commission,10 the Court likewise upheld the termination of
employment of water pump tenders and their replacement
by independent contractors. It ruled that an employer's good
faith in implementing a redundancy program is not
necessarily put in doubt by the availment of the services of
an independent contractor to replace the services of the
terminated employees to promote economy and efficiency.
Indeed, as we pointed out in another case, the
"[management of a company] cannot be denied the faculty
of promoting efficiency and attaining economy by a study of
what units are essential for its operation. To it belongs the
ultimate determination of whether services should be
performed by its personnel or contracted to outside
agencies . . . [While there] should be mutual consultation,
eventually deference is to be paid to what management
decides."11 Consequently, absent proof that management
acted in a malicious or arbitrary manner, the Court will not
interfere with the exercise of judgment by an employer. 12
In the case at bar, we have only the bare assertion of
petitioner that, in abolishing the security section, private
respondent's real purpose was to avoid payment to the
security checkers of the wage increases provided in the
collective bargaining agreement approved in 1990. 13 Such an
assertion is not sufficient basis for concluding that the
termination of petitioner's employment was not a bona fide
decision of management to obtain reasonable return from its
investment, which is a right guaranteed to employers under
the Constitution.14 Indeed, that the phase-out of the security
section constituted a "legitimate business decision" is a
factual finding of an administrative agency which must be
accorded respect and even finality by this Court since
nothing can be found in the record which fairly detracts from
such finding.15

Accordingly, we hold that the termination of petitioner's

services was for an authorized cause, i.e., redundancy.
Hence, pursuant to Art. 283 of the Labor Code, petitioner
should be given separation pay at the rate of one month pay
for every year of service.
Sanctions for Violations of the Notice Requirement
Art. 283 also provides that to terminate the employment of
an employee for any of the authorized causes the employer
must serve "a written notice on the workers and the
Department of Labor and Employment at least one (1) month
before the intended date thereof." In the case at bar,
petitioner was given a notice of termination on October 11,
1991. On the same day, his services were terminated. He
was thus denied his right to be given written notice before
the termination of his employment, and the question is the
appropriate sanction for the violation of petitioner's right.
To be sure, this is not the first time this question has arisen.
In Subuguero v. NLRC,16 workers in a garment factory were
temporarily laid off due to the cancellation of orders and a
garment embargo. The Labor Arbiter found that the workers
had been illegally dismissed and ordered the company to pay
separation pay and backwages. The NLRC, on the other hand,
found that this was a case of retrenchment due to business
losses and ordered the payment of separation pay without
backwages. This Court sustained the NLRC's finding.
However, as the company did not comply with the 30-day
written notice in Art. 283 of the Labor Code, the Court
ordered the employer to pay the workers P2,000.00 each as
indemnity.
The decision followed the ruling in several cases involving
dismissals which, although based on any of the just causes
under Art. 282,17 were effected without notice and hearing to
the employee as required by the implementing rules. 18 As
this Court said: "It is now settled that where the dismissal of

one employee is in fact for a just and valid cause and is so

proven to be but he is not accorded his right to due
process, i.e., he was not furnished the twin requirements of
notice and opportunity to be heard, the dismissal shall be
upheld but the employer must be sanctioned for noncompliance with the requirements of, or for failure to
observe, due process."19
The rule reversed a long standing policy theretofore followed
that even though the dismissal is based on a just cause or
the termination of employment is for an authorized cause,
the dismissal or termination is illegal if effected without
notice to the employee. The shift in doctrine took place in
1989 in Wenphil Corp. v. NLRC.20 In announcing the change,
this Court said:21
The Court holds that the policy of ordering the reinstatement
to the service of an employee without loss of seniority and
the payment of his wages during the period of his separation
until his actual reinstatement but not exceeding three (3)
years without qualification or deduction, when it appears he
was not afforded due process, although his dismissal was
found to be for just and authorized cause in an appropriate
proceeding in the Ministry of Labor and Employment, should
be re-examined. It will be highly prejudicial to the interests of
the employer to impose on him the services of an employee
who has been shown to be guilty of the charges that
warranted his dismissal from employment. Indeed, it will
demoralize the rank and file if the undeserving, if not
undesirable, remains in the service.
xxx

xxx

xxx

However, the petitioner must nevertheless be held to

account for failure to extend to private respondent his right
to an investigation before causing his dismissal. The rule is
explicit as above discussed. The dismissal of an employee
must be for just or authorized cause and after due process.

Petitioner committed an infraction of the second

requirement. Thus, it must be imposed a sanction for its
failure to give a formal notice and conduct an investigation
as required by law before dismissing petitioner from
employment. Considering the circumstances of this case
petitioner must indemnify the private respondent the amount
of P1,000.00. The measure of this award depends on the
facts of each case and the gravity of the omission committed
by the employer.
The fines imposed for violations of the notice requirement
have varied from P1,000.0022 to P2,000.0023 to P5,000.0024 to
P10,000.00.25
Need for Reexamining the Wenphil Doctrine
Today, we once again consider the question of appropriate
sanctions for violations of the notice experience during the
last decade or so with the Wenphil doctrine. The number of
cases involving dismissals without the requisite notice to the
employee, although effected for just or authorized causes,
suggest that the imposition of fine for violation of the notice
requirement has not been effective in deterring violations of
the notice requirement. Justice Panganiban finds the
monetary sanctions "too insignificant, too niggardly, and
sometimes even too late." On the other hand, Justice Puno
says there has in effect been fostered a policy of "dismiss
now; pay later" which moneyed employers find more
convenient to comply with than the requirement to serve a
30-day written notice (in the case of termination of
employment for an authorized cause under Arts. 283-284) or
to give notice and hearing (in the case of dismissals for just
causes under Art. 282).
For this reason, they regard any dismissal or layoff without
the requisite notice to be null and void even though there are
just or authorized cause for such dismissal or layoff.

Consequently, in their view, the employee concerned should

be reinstated and paid backwages.
Validity of Petitioner's Layoff Not Affected by Lack of Notice
We agree with our esteemed colleagues, Justices Puno and
Panganiban, that we should rethink the sanction of fine for an
employer's disregard of the notice requirement. We do not
agree, however, that disregard of this requirement by an
employer renders the dismissal or termination of
employment null and void. Such a stance is actually a
reversion to the discredited pre-Wenphil rule of ordering an
employee to be reinstated and paid backwages when it is
shown that he has not been given notice and hearing
although his dismissal or layoff is later found to be for a just
or authorized cause. Such rule was abandoned in Wenphil
because it is really unjust to require an employer to keep in
his service one who is guilty, for example, of an attempt on
the life of the employer or the latter's family, or when the
employer is precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the
employee's right to notice before he is dismissed or laid off,
at the same time acknowledges the right of the employer to
dismiss for any of the just causes enumerated in Art. 282 or
to terminate employment for any of the authorized causes
mentioned in Arts. 283-284. If the Wenphil rule imposing a
fine on an employer who is found to have dismissed an
employee for cause without prior notice is deemed
ineffective in deterring employer violations of the notice
requirement, the remedy is not to declare the dismissal void
if there are just or valid grounds for such dismissal or if the
termination is for an authorized cause. That would be to
uphold the right of the employee but deny the right of the
employer to dismiss for cause. Rather, the remedy is to order
the payment to the employee of full backwages from the
time of his dismissal until the court finds that the dismissal

was for a just cause. But, otherwise, his dismissal must be

upheld and he should not be reinstated. This is because his
dismissal is ineffectual.
For the same reason, if an employee is laid off for any of the
causes in Arts. 283-284, i.e., installation of a labor-saving
device, but the employer did not give him and the DOLE a
30-day written notice of termination in advance, then the
termination of his employment should be considered
ineffectual and he should be paid backwages. However, the
termination of his employment should not be considered void
but he should simply be paid separation pay as provided in
Art. 283 in addition to backwages.
Justice Puno argues that an employer's failure to comply with
the notice requirement constitutes a denial of the employee's
right to due process. Prescinding from this premise, he
quotes the statement of Chief Justice Concepcion Vda. de
Cuaycong v. Vda. de Sengbengco 26 that "acts of Congress, as
well as of the Executive, can deny due process only under
the pain of nullity, and judicial proceedings suffering from the
same flaw are subject to the same sanction, any statutory
provision to the contrary notwithstanding." Justice Puno
concludes that the dismissal of an employee without notice
and hearing, even if for a just cause, as provided in Art. 282,
or for an authorized cause, as provided in Arts. 283-284, is a
nullity. Hence, even if just or authorized cause exist, the
employee should be reinstated with full back pay. On the
other hand, Justice Panganiban quotes from the statement
in People v. Bocar27 that "[w]here the denial of the
fundamental right of due process is apparent, a decision
rendered in disregard of that right is void for lack of
jurisdiction."
Violation of Notice Requirement Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer,
however, to the denial of due process by the State, which is

not the case here. There are three reasons why, on the other
hand, violation by the employer of the notice requirement
cannot be considered a denial of due process resulting in the
nullity of the employee's dismissal or layoff.
The first is that the Due Process Clause of the Constitution is
a limitation on governmental powers. It does not apply to the
exercise of private power, such as the termination of
employment under the Labor Code. This is plain from the text
of Art. III, 1 of the Constitution, viz.: "No person shall be
deprived of life, liberty, or property without due process of
law. . . ." The reason is simple: Only the State has authority to
take the life, liberty, or property of the individual. The
purpose of the Due Process Clause is to ensure that the
exercise of this power is consistent with what are considered
civilized methods.
The second reason is that notice and hearing are required
under the Due Process Clause before the power of organized
society are brought to bear upon the individual. This is
obviously not the case of termination of employment under
Art. 283. Here the employee is not faced with an aspect of
the adversary system. The purpose for requiring a 30-day
written notice before an employee is laid off is not to afford
him an opportunity to be heard on any charge against him,
for there is none. The purpose rather is to give him time to
prepare for the eventual loss of his job and the DOLE an
opportunity to determine whether economic causes do exist
justifying the termination of his employment.
Even in cases of dismissal under Art. 282, the purpose for the
requirement of notice and hearing is not to comply with Due
Process Clause of the Constitution. The time for notice and
hearing is at the trial stage. Then that is the time we speak of
notice and hearing as the essence of procedural due process.
Thus, compliance by the employer with the notice
requirement before he dismisses an employee does not

foreclose the right of the latter to question the legality of his

dismissal. As Art. 277(b) provides, "Any decision taken by the
employer shall be without prejudice to the right of the worker
to contest the validity or legality of his dismissal by filing a
complaint with the regional branch of the National Labor
Relations Commission."
Indeed, to contend that the notice requirement in the Labor
Code is an aspect of due process is to overlook the fact that
Art. 283 had its origin in Art. 302 of the Spanish Code of
Commerce of 1882 which gave either party to the employeremployee relationship the right to terminate their
relationship by giving notice to the other one month in
advance. In lieu of notice, an employee could be laid off by
paying him a mesada equivalent to his salary for one
month.28 This provision was repealed by Art. 2270 of the Civil
Code, which took effect on August 30, 1950. But on June 12,
1954, R.A. No. 1052, otherwise known as the Termination Pay
Law, was enacted reviving the mesada. On June 21, 1957,
the law was amended by R.A. No. 1787 providing for the
giving of advance notice or the payment of compensation at
the rate of one-half month for every year of service. 29
The Termination Pay Law was held not to be a substantive
law but a regulatory measure, the purpose of which was to
give the employer the opportunity to find a replacement or
substitute, and the employee the equal opportunity to look
for another job or source of employment. Where the
termination of employment was for a just cause, no notice
was required to be given to the, employee. 30 It was only on
September 4, 1981 that notice was required to be given even
where the dismissal or termination of an employee was for
cause. This was made in the rules issued by the then Minister
of Labor and Employment to implement B.P. Blg. 130 which
amended the Labor Code. And it was still much later when
the notice requirement was embodied in the law with the
amendment of Art. 277(b) by R.A. No. 6715 on March 2,

1989. It cannot be that the former regime denied due

process to the employee. Otherwise, there should now
likewise be a rule that, in case an employee leaves his job
without cause and without prior notice to his employer, his
act should be void instead of simply making him liable for
damages.
The third reason why the notice requirement under Art. 283
can not be considered a requirement of the Due Process
Clause is that the employer cannot really be expected to be
entirely an impartial judge of his own cause. This is also the
case in termination of employment for a just cause under Art.
282 (i.e., serious misconduct or willful disobedience by the
employee of the lawful orders of the employer, gross and
habitual neglect of duties, fraud or willful breach of trust of
the employer, commission of crime against the employer or
the latter's
immediate family or duly authorized
representatives, or other analogous cases).
Justice Puno disputes this. He says that "statistics in the
DOLE will prove that many cases have been won by
employees before the grievance committees manned by
impartial judges of the company." The grievance machinery
is, however, different because it is established by agreement
of the employer and the employees and composed of
representatives from both sides. That is why, in Batangas
Laguna Tayabas Bus Co. v. Court of Appeals,31 which Justice
Puno cites, it was held that "Since the right of [an employee]
to his labor is in itself a property and that the labor
agreement between him and [his employer] is the law
between the parties, his summary and arbitrary dismissal
amounted to deprivation of his property without due process
of law." But here we are dealing with dismissals and layoffs
by employers alone, without the intervention of any
grievance machinery. Accordingly in Montemayor v. Araneta
University Foundation,32 although a professor was dismissed
without a hearing by his university, his dismissal for having

made homosexual advances on a student was sustained, it

appearing that in the NLRC, the employee was fully heard in
his defense.
Lack of Notice Only Makes Termination Ineffectual
Not all notice requirements are requirements of due process.
Some are simply part of a procedure to be followed before a
right granted to a party can be exercised. Others are simply
an application of the Justinian precept, embodied in the Civil
Code,33 to act with justice, give everyone his due, and
observe honesty and good faith toward one's fellowmen.
Such is the notice requirement in Arts. 282-283. The
consequence of the failure either of the employer or the
employee to live up to this precept is to make him liable in
damages, not to render his act (dismissal or resignation, as
the case may be) void. The measure of damages is the
amount of wages the employee should have received were it
not for the termination of his employment without prior
notice. If warranted, nominal and moral damages may also
be awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor
Code, the employer's failure to comply with the notice
requirement does not constitute a denial of due process but a
mere failure to observe a procedure for the termination of
employment which makes the termination of employment
merely ineffectual. It is similar to the failure to observe the
provisions of Art. 1592, in relation to Art. 1191, of the Civil
Code34 in rescinding a contract for the sale of immovable
property. Under these provisions, while the power of a party
to rescind a contract is implied in reciprocal obligations,
nonetheless, in cases involving the sale of immovable
property, the vendor cannot exercise this power even though
the vendee defaults in the payment of the price, except by
bringing an action in court or giving notice of rescission by
means of a notarial demand.35 Consequently, a notice of

rescission given in the letter of an attorney has no legal

effect, and the vendee can make payment even after the due
date since no valid notice of rescission has been given. 36

That would be a misapplication of this noble phrase originally

from Professor Thomas Reed Powell of the Harvard Law
School.

Indeed, under the Labor Code, only the absence of a just

cause for the termination of employment can make the
dismissal of an employee illegal. This is clear from Art. 279
which provides:

Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,39 in

support of his view that an illegal dismissal results not only
from want of legal cause but also from the failure to observe
"due process." The Pepsi-Cola case actually involved a
dismissal for an alleged loss of trust and confidence which, as
found by the Court, was not proven. The dismissal was,
therefore, illegal, not because there was a denial of due
process, but because the dismissal was without cause. The
statement that the failure of management to comply with the
notice requirement "taints the dismissal with illegality" was
merely a dictum thrown in as additional grounds for holding
the dismissal to be illegal.

Security of Tenure. In cases of regular employment, the

employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employee who is unjustly dismissedfrom work shall be
entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of his actual
reinstatement.37
Thus, only if the termination of employment is not for any of
the causes provided by law is it illegal and, therefore, the
employee should be reinstated and paid backwages. To
contend, as Justices Puno and Panganiban do, that even if the
termination is for a just or authorized cause the employee
concerned should be reinstated and paid backwages would
be to amend Art. 279 by adding another ground for
considering a dismissal illegal. What is more, it would ignore
the fact that under Art. 285, if it is the employee who fails to
give a written notice to the employer that he is leaving the
service of the latter, at least one month in advance, his
failure to comply with the legal requirement does not result
in making his resignation void but only in making him liable
for damages.38 This disparity in legal treatment, which would
result from the adoption of the theory of the minority cannot
simply be explained by invoking resident Ramon Magsaysay's
motto that "he who has less in life should have more in law."

Given the nature of the violation, therefore, the appropriate

sanction for the failure to give notice is the payment of
backwages for the period when the employee is considered
not to have been effectively dismissed or his employment
terminated. The sanction is not the payment alone of
nominal damages as Justice Vitug contends.
Unjust Results of Considering Dismissals/Layoffs Without
Prior Notice As Illegal
The refusal to look beyond the validity of the initial action
taken by the employer to terminate employment either for an
authorized or just cause can result in an injustice to the
employer. For not giving notice and hearing before dismissing
an employee, who is otherwise guilty of, say, theft, or even of
an attempt against the life of the employer, an employer will
be forced to keep in his employ such guilty employee. This is
unjust.
It is true the Constitution regards labor as "a primary social
economic force."40 But so does it declare that it "recognizes

the indispensable role of the private sector, encourages

private enterprise, and provides incentives to needed
investment."41 The Constitution bids the State to "afford full
protection to labor."42 But it is equally true that "the law, in
protecting the right's of the laborer, authorizes neither
oppression nor self-destruction of the employer." 43 And it is
oppression to compel the employer to continue in
employment one who is guilty or to force the employer to
remain in operation when it is not economically in his interest
to do so.
In sum, we hold that if in proceedings for reinstatement
under Art. 283, it is shown that the termination of
employment was due to an authorized cause, then the
employee concerned should not be ordered reinstated even
though there is failure to comply with the 30-day notice
requirement. Instead, he must be granted separation pay in
accordance with Art. 283, to wit:
In case of termination due to the installation of labor-saving
devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one month for every year of service,
whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A
fraction of at least six months shall be considered one (1)
whole year.
If the employee's separation is without cause, instead of
being given separation pay, he should be reinstated. In either
case, whether he is reinstated or only granted separation
pay, he should be paid full backwages if he has been laid off
without written notice at least 30 days in advance.

On the other hand, with respect to dismissals for cause under

Art. 282, if it is shown that the employee was dismissed for
any of the just causes mentioned in said Art. 282, then, in
accordance with that article, he should not be reinstated.
However, he must be paid backwages from the time his
employment was terminated until it is determined that the
termination of employment is for a just cause because the
failure to hear him before he is dismissed renders the
termination of his employment without legal effect.
WHEREFORE, the petition is GRANTED and the resolution of
the National Labor Relations Commission is MODIFIED by
ordering private respondent Isetann Department Store, Inc.
to pay petitioner separation pay equivalent to one (1) month
pay for every year of service, his unpaid salary, and his
proportionate 13th month pay and, in addition, full
backwages from the time his employment was terminated on
October 11, 1991 up to the time the decision herein becomes
final. For this purpose, this case is REMANDED to the Labor
Arbiter for computation of the separation pay, backwages,
and other monetary awards to petitioner.
SO ORDERED.

G.R. No. 158693

November 17, 2004

JENNY
M.
AGABON
and
VIRGILIO
C.
AGABON, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC),
RIVIERA HOME IMPROVEMENTS, INC. and VICENTE
ANGELES, respondents.

DECISION

YNARES-SANTIAGO, J.:
This petition for review seeks to reverse the decision 1 of the
Court of Appeals dated January 23, 2003, in CA-G.R. SP No.
63017, modifying the decision of National Labor Relations
Commission (NLRC) in NLRC-NCR Case No. 023442-00.
Private respondent Riviera Home Improvements, Inc. is
engaged in the business of selling and installing ornamental
and construction materials. It employed petitioners Virgilio
Agabon and Jenny Agabon as gypsum board and cornice
installers on January 2, 19922 until February 23, 1999 when
they were dismissed for abandonment of work.

Petitioners then filed a complaint for illegal dismissal and

payment of money claims3 and on December 28, 1999, the
Labor Arbiter rendered a decision declaring the dismissals
illegal and ordered private respondent to pay the monetary
claims. The dispositive portion of the decision states:
WHEREFORE, premises considered, We find the termination
of the complainants illegal. Accordingly, respondent is hereby
ordered to pay them their backwages up to November 29,
1999 in the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay
of one (1) month for every year of service from date of hiring
up to November 29, 1999.
Respondent is further ordered to pay the complainants their
holiday pay and service incentive leave pay for the years
1996, 1997 and 1998 as well as their premium pay for
holidays and rest days and Virgilio Agabon's 13th month pay
differential amounting to TWO THOUSAND ONE HUNDRED
FIFTY (P2,150.00) Pesos, or the aggregate amount of ONE
HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY
EIGHT & 93/100 (P121,678.93) Pesos for Jenny Agabon, and
ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED
TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio
Agabon, as per attached computation of Julieta C. Nicolas,
OIC, Research and Computation Unit, NCR.
SO ORDERED.

On appeal, the NLRC reversed the Labor Arbiter because it

found that the petitioners had abandoned their work, and
were not entitled to backwages and separation pay. The
other money claims awarded by the Labor Arbiter were also
denied for lack of evidence.5

Upon denial of their motion for reconsideration, petitioners

filed a petition for certiorari with the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the
petitioners was not illegal because they had abandoned their
employment but ordered the payment of money claims. The
dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations
Commission is REVERSED only insofar as it dismissed
petitioner's money claims. Private respondents are ordered to
pay petitioners holiday pay for four (4) regular holidays in
1996, 1997, and 1998, as well as their service incentive
leave pay for said years, and to pay the balance of petitioner
Virgilio Agabon's 13th month pay for 1998 in the amount of
P2,150.00.
SO ORDERED.6
Hence, this petition for review on the sole issue of whether
petitioners were illegally dismissed.7
Petitioners assert that they were dismissed because the
private respondent refused to give them assignments unless
they agreed to work on a "pakyaw" basis when they reported
for duty on February 23, 1999. They did not agree on this
arrangement because it would mean losing benefits as Social
Security System (SSS) members. Petitioners also claim that
private respondent did not comply with the twin
requirements of notice and hearing.8
Private respondent, on the other hand, maintained that
petitioners were not dismissed but had abandoned their
work.9 In fact, private respondent sent two letters to the last
known addresses of the petitioners advising them to report
for work. Private respondent's manager even talked to
petitioner Virgilio Agabon by telephone sometime in June
1999 to tell him about the new assignment at Pacific Plaza

Towers involving 40,000 square meters of cornice installation

work. However, petitioners did not report for work because
they had subcontracted to perform installation work for
another company. Petitioners also demanded for an increase
in their wage to P280.00 per day. When this was not granted,
petitioners stopped reporting for work and filed the illegal
dismissal case.10
It is well-settled that findings of fact of quasi-judicial agencies
like the NLRC are accorded not only respect but even finality
if the findings are supported by substantial evidence. This is
especially so when such findings were affirmed by the Court
of Appeals.11 However, if the factual findings of the NLRC and
the Labor Arbiter are conflicting, as in this case, the
reviewing court may delve into the records and examine for
itself the questioned findings.12
Accordingly, the Court of Appeals, after a careful review of
the facts, ruled that petitioners' dismissal was for a just
cause. They had abandoned their employment and were
already working for another employer.
To dismiss an employee, the law requires not only the
existence of a just and valid cause but also enjoins the
employer to give the employee the opportunity to be heard
and to defend himself.13 Article 282 of the Labor Code
enumerates the just causes for termination by the employer:
(a) serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or the latter's
representative in connection with the employee's work; (b)
gross and habitual neglect by the employee of his duties; (c)
fraud or willful breach by the employee of the trust reposed
in him by his employer or his duly authorized representative;
(d) commission of a crime or offense by the employee
against the person of his employer or any immediate
member of his family or his duly authorized representative;
and (e) other causes analogous to the foregoing.

Abandonment is the deliberate and unjustified refusal of an

employee to resume his employment. 14 It is a form of neglect
of duty, hence, a just cause for termination of employment
by the employer.15 For a valid finding of abandonment, these
two factors should be present: (1) the failure to report for
work or absence without valid or justifiable reason; and (2) a
clear intention to sever employer-employee relationship, with
the second as the more determinative factor which is
manifested by overt acts from which it may be deduced that
the employees has no more intention to work. The intent to
discontinue the employment must be shown by clear proof
that it was deliberate and unjustified.16
In February 1999, petitioners were frequently absent having
subcontracted for an installation work for another company.
Subcontracting for another company clearly showed the
intention to sever the employer-employee relationship with
private respondent. This was not the first time they did this.
In January 1996, they did not report for work because they
were working for another company. Private respondent at
that time warned petitioners that they would be dismissed if
this happened again. Petitioners disregarded the warning and
exhibited a clear intention to sever their employer-employee
relationship. The record of an employee is a relevant
consideration in determining the penalty that should be
meted out to him.17
In Sandoval Shipyard v. Clave,18 we held that an employee
who deliberately absented from work without leave or
permission from his employer, for the purpose of looking for
a job elsewhere, is considered to have abandoned his job. We
should apply that rule with more reason here where
petitioners were absent because they were already working
in another company.
The law imposes many obligations on the employer such as
providing just compensation to workers, observance of the

procedural requirements of notice and hearing in the

termination of employment. On the other hand, the law also
recognizes the right of the employer to expect from its
workers not only good performance, adequate work and
diligence, but also good conduct 19 and loyalty. The employer
may not be compelled to continue to employ such persons
whose continuance in the service will patently be inimical to
his interests.20
After establishing that the terminations were for a just and
valid cause, we now determine if the procedures for dismissal
were observed.
The procedure for terminating an employee is found in Book
VI, Rule I, Section 2(d) of the Omnibus Rules Implementing
the Labor Code:
Standards of due process: requirements of notice. In all
cases of termination of employment, the following standards
of due process shall be substantially observed:
I. For termination of employment based on just causes as
defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the
ground or grounds for termination, and giving to said
employee reasonable opportunity within which to explain his
side;
(b) A hearing or conference during which the employee
concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge,
present his evidence or rebut the evidence presented against
him; and
(c) A written notice of termination served on the employee
indicating that upon due consideration of all the
circumstances, grounds have been established to justify his
termination.

In case of termination, the foregoing notices shall be served

on the employee's last known address.
Dismissals based on just causes contemplate acts or
omissions attributable to the employee while dismissals
based on authorized causes involve grounds under the Labor
Code which allow the employer to terminate employees. A
termination for an authorized cause requires payment of
separation pay. When the termination of employment is
declared illegal, reinstatement and full backwages are
mandated under Article 279. If reinstatement is no longer
possible where the dismissal was unjust, separation pay may
be granted.
Procedurally, (1) if the dismissal is based on a just cause
under Article 282, the employer must give the employee two
written notices and a hearing or opportunity to be heard if
requested by the employee before terminating the
employment: a notice specifying the grounds for which
dismissal is sought a hearing or an opportunity to be heard
and after hearing or opportunity to be heard, a notice of the
decision to dismiss; and (2) if the dismissal is based on
authorized causes under Articles 283 and 284, the employer
must give the employee and the Department of Labor and
Employment written notices 30 days prior to the effectivity of
his separation.
From the foregoing rules four possible situations may be
derived: (1) the dismissal is for a just cause under Article 282
of the Labor Code, for an authorized cause under Article 283,
or for health reasons under Article 284, and due process was
observed; (2) the dismissal is without just or authorized
cause but due process was observed; (3) the dismissal is
without just or authorized cause and there was no due
process; and (4) the dismissal is for just or authorized cause
but due process was not observed.

In the first situation, the dismissal is undoubtedly valid and

the employer will not suffer any liability.
In the second and third situations where the dismissals are
illegal, Article 279 mandates that the employee is entitled to
reinstatement without loss of seniority rights and other
privileges and full backwages, inclusive of allowances, and
other benefits or their monetary equivalent computed from
the time the compensation was not paid up to the time of
actual reinstatement.
In the fourth situation, the dismissal should be upheld. While
the procedural infirmity cannot be cured, it should not
invalidate the dismissal. However, the employer should be
held liable for non-compliance with the procedural
requirements of due process.
The present case squarely falls under the fourth situation.
The dismissal should be upheld because it was established
that the petitioners abandoned their jobs to work for another
company. Private respondent, however, did not follow the
notice requirements and instead argued that sending notices
to the last known addresses would have been useless
because they did not reside there anymore. Unfortunately for
the private respondent, this is not a valid excuse because the
law mandates the twin notice requirements to the
employee's last known address. 21 Thus, it should be
held liable for non-compliance with the procedural
requirements of due process.
A review and re-examination of the relevant legal principles
is appropriate and timely to clarify the various rulings on
employment termination in the light of Serrano v. National
Labor Relations Commission.22
Prior to 1989, the rule was that a dismissal or termination is
illegal if the employee was not given any notice. In the 1989
case of Wenphil Corp. v. National Labor Relations

Commission,23 we reversed this long-standing rule and held

that the dismissed employee, although not given any notice
and hearing, was not entitled to reinstatement and
backwages because the dismissal was for grave misconduct
and insubordination, a just ground for termination under
Article 282. The employee had a violent temper and caused
trouble during office hours, defying superiors who tried to
pacify him. We concluded that reinstating the employee and
awarding backwages "may encourage him to do even worse
and will render a mockery of the rules of discipline that
employees are required to observe."24 We further held that:
Under the circumstances, the dismissal of the private
respondent for just cause should be maintained. He has no
right to return to his former employment.
However, the petitioner must nevertheless be held to
account for failure to extend to private respondent his right
to an investigation before causing his dismissal. The rule is
explicit as above discussed. The dismissal of an employee
must be for just or authorized cause and after due process.
Petitioner committed an infraction of the second
requirement. Thus, it must be imposed a sanction for its
failure to give a formal notice and conduct an investigation
as required by law before dismissing petitioner from
employment. Considering the circumstances of this case
petitioner must indemnify the private respondent the amount
of P1,000.00. The measure of this award depends on the
facts of each case and the gravity of the omission committed
by the employer.25
The rule thus evolved: where the employer had a valid
reason to dismiss an employee but did not follow the due
process requirement, the dismissal may be upheld but the
employer will be penalized to pay an indemnity to the
employee. This became known as the Wenphil or Belated
Due Process Rule.

On January 27, 2000, in Serrano, the rule on the extent of the

sanction was changed. We held that the violation by the
employer of the notice requirement in termination for just or
authorized causes was not a denial of due process that will
nullify the termination. However, the dismissal is ineffectual
and the employer must pay full backwages from the time of
termination until it is judicially declared that the dismissal
was for a just or authorized cause.
The rationale for the re-examination of the Wenphil doctrine
in Serrano was the significant number of cases involving
dismissals without requisite notices. We concluded that the
imposition of penalty by way of damages for violation of the
notice requirement was not serving as a deterrent. Hence, we
now required payment of full backwages from the time of
dismissal until the time the Court finds the dismissal was for
a just or authorized cause.
Serrano was confronting the practice of employers
"dismiss now and pay later" by imposing full backwages.

to

We believe, however, that the ruling in Serrano did not

consider the full meaning of Article 279 of the Labor Code
which states:
ART. 279. Security of Tenure. In cases of regular
employment, the employer shall not terminate the services
of an employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his
compensation was withheld from him up to the time of his
actual reinstatement.
This means that the termination is illegal only if it is not for
any of the justified or authorized causes provided by law.

Payment of backwages and other benefits, including

reinstatement, is justified only if the employee was unjustly
dismissed.
The fact that the Serrano ruling can cause unfairness and
injustice which elicited strong dissent has prompted us to
revisit the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of
the Constitution embodies a system of rights based on moral
principles so deeply imbedded in the traditions and feelings
of our people as to be deemed fundamental to a civilized
society as conceived by our entire history. Due process is that
which comports with the deepest notions of what is fair and
right and just.26 It is a constitutional restraint on the
legislative as well as on the executive and judicial powers of
the government provided by the Bill of Rights.
Due process under the Labor Code, like Constitutional due
process, has two aspects: substantive, i.e., the valid and
authorized causes of employment termination under the
Labor Code; and procedural, i.e., the manner of dismissal.
Procedural due process requirements for dismissal are found
in the Implementing Rules of P.D. 442, as amended,
otherwise known as the Labor Code of the Philippines in Book
VI, Rule I, Sec. 2, as amended by Department Order Nos. 9
and 10.27 Breaches of these due process requirements violate
the Labor Code. Therefore statutory due process should be
differentiated from failure to comply with constitutional due
process.
Constitutional due process protects the individual from the
government and assures him of his rights in criminal, civil or
administrative
proceedings;
while statutory
due
process found in the Labor Code and Implementing Rules
protects employees from being unjustly terminated without
just cause after notice and hearing.

In Sebuguero v. National Labor Relations Commission,28 the

dismissal was for a just and valid cause but the employee
was not accorded due process. The dismissal was upheld by
the Court but the employer was sanctioned. The sanction
should be in the nature of indemnification or penalty, and
depends on the facts of each case and the gravity of the
omission committed by the employer.
In Nath v. National Labor Relations Commission,29 it was ruled
that even if the employee was not given due process, the
failure did not operate to eradicate the just causes for
dismissal. The dismissal being for just cause,albeit without
due process, did not entitle the employee to reinstatement,
backwages, damages and attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG
Marine Services, Inc. v. National Labor Relations
Commission,30 which opinion he reiterated in Serrano, stated:
C. Where there is just cause for dismissal but due process
has not been properly observed by an employer, it would not
be right to order either the reinstatement of the dismissed
employee or the payment of backwages to him. In failing,
however, to comply with the procedure prescribed by law in
terminating the services of the employee, the employer must
be deemed to have opted or, in any case, should be made
liable, for the payment of separation pay. It might be pointed
out that the notice to be given and the hearing to be
conducted generally constitute the two-part due process
requirement of law to be accorded to the employee by the
employer. Nevertheless, peculiar circumstances might obtain
in certain situations where to undertake the above steps
would be no more than a useless formality and where,
accordingly, it would not be imprudent to apply the res ipsa
loquitur rule and award, in lieu of separation pay, nominal
damages to the employee. x x x.31

After carefully analyzing the consequences of the divergent

doctrines in the law on employment termination, we believe
that in cases involving dismissals for cause but without
observance of the twin requirements of notice and hearing,
the better rule is to abandon the Serrano doctrine and to
follow Wenphil by holding that the dismissal was for just
cause but imposing sanctions on the employer. Such
sanctions, however, must be stiffer than that imposed
in Wenphil. By doing so, this Court would be able to achieve
a fair result by dispensing justice not just to employees, but
to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for
valid or authorized causes but not complying with statutory
due process may have far-reaching consequences.
This would encourage frivolous suits, where even the most
notorious violators of company policy are rewarded by
invoking due process. This also creates absurd situations
where there is a just or authorized cause for dismissal but a
procedural infirmity invalidates the termination. Let us take
for example a case where the employee is caught stealing or
threatens the lives of his co-employees or has become a
criminal, who has fled and cannot be found, or where serious
business losses demand that operations be ceased in less
than a month. Invalidating the dismissal would not serve
public interest. It could also discourage investments that can
generate employment in the local economy.
The constitutional policy to provide full protection to labor is
not meant to be a sword to oppress employers. The
commitment of this Court to the cause of labor does not
prevent us from sustaining the employer when it is in the
right, as in this case. 32 Certainly, an employer should not be
compelled to pay employees for work not actually performed
and in fact abandoned.

The employer should not be compelled to continue

employing a person who is admittedly guilty of misfeasance
or malfeasance and whose continued employment is patently
inimical to the employer. The law protecting the rights of the
laborer authorizes neither oppression nor self-destruction of
the employer.33
It must be stressed that in the present case, the petitioners
committed a grave offense, i.e., abandonment, which, if the
requirements of due process were complied with, would
undoubtedly result in a valid dismissal.
An employee who is clearly guilty of conduct violative of
Article 282 should not be protected by the Social Justice
Clause of the Constitution. Social justice, as the term
suggests, should be used only to correct an injustice. As the
eminent Justice Jose P. Laurel observed, social justice must be
founded on the recognition of the necessity of
interdependence among diverse units of a society and of the
protection that should be equally and evenly extended to all
groups as a combined force in our social and economic life,
consistent with the fundamental and paramount objective of
the state of promoting the health, comfort, and quiet of all
persons, and of bringing about "the greatest good to the
greatest number."34
This is not to say that the Court was wrong when it ruled the
way it did in Wenphil, Serrano and related cases. Social
justice is not based on rigid formulas set in stone. It has to
allow for changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a
balanced approach to labor-management relations and
dispense justice with an even hand in every case:
We have repeatedly stressed that social justice or any
justice for that matter is for the deserving, whether he be a
millionaire in his mansion or a pauper in his hovel. It is true

that, in case of reasonable doubt, we are to tilt the balance in

favor of the poor to whom the Constitution fittingly extends
its sympathy and compassion. But never is it justified to give
preference to the poor simply because they are poor, or
reject the rich simply because they are rich, for justice must
always be served for the poor and the rich alike, according to
the mandate of the law.35
Justice in every case should only be for the deserving party. It
should not be presumed that every case of illegal dismissal
would automatically be decided in favor of labor, as
management has rights that should be fully respected and
enforced by this Court. As interdependent and indispensable
partners in nation-building, labor and management need
each other to foster productivity and economic growth;
hence, the need to weigh and balance the rights and welfare
of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case,
the lack of statutory due process should not nullify the
dismissal, or render it illegal, or ineffectual. However, the
employer should indemnify the employee for the violation of
his statutory rights, as ruled in Reta v. National Labor
Relations Commission.36 The indemnity to be imposed should
be stiffer to discourage the abhorrent practice of "dismiss
now, pay later," which we sought to deter in
the Serrano ruling. The sanction should be in the nature of
indemnification or penalty and should depend on the facts of
each case, taking into special consideration the gravity of the
due process violation of the employer.
Under the Civil Code, nominal damages is adjudicated in
order that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or recognized,
and not for the purpose of indemnifying the plaintiff for any
loss suffered by him.37

As enunciated by this Court in Viernes v. National Labor

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

payment, the general rule is that the burden rests on the

employer to prove payment, rather than on the employee to
prove non-payment. The reason for the rule is that the
pertinent personnel files, payrolls, records, remittances and
other similar documents which will show that overtime,
differentials, service incentive leave and other claims of
workers have been paid are not in the possession of the
worker but in the custody and absolute control of the
employer.41
In the case at bar, if private respondent indeed paid
petitioners' holiday pay and service incentive leave pay, it
could have easily presented documentary proofs of such
monetary benefits to disprove the claims of the petitioners.
But it did not, except with respect to the 13th month pay
wherein it presented cash vouchers showing payments of the
benefit in the years disputed.42 Allegations by private
respondent that it does not operate during holidays and that
it allows its employees 10 days leave with pay, other than
being self-serving, do not constitute proof of payment.
Consequently,
it
failed
to
discharge
the onus
probandi thereby making it liable for such claims to the
petitioners.

We affirm the ruling of the appellate court on petitioners'

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

Anent the deduction of SSS loan and the value of the shoes
from petitioner Virgilio Agabon's 13th month pay, we find the
same to be unauthorized. The evident intention of
Presidential Decree No. 851 is to grant an additional
income in the form of the 13th month pay to employees not
already receiving the same 43 so as "to further protect the
level of real wages from the ravages of world-wide
inflation."44 Clearly, as additional income, the 13th month pay
is included in the definition of wage under Article 97(f) of the
Labor Code, to wit:

As a general rule, one who pleads payment has the burden of

proving it. Even where the employee must allege non-

(f) "Wage" paid to any employee shall mean the

remuneration or earnings, however designated, capable of

Private respondent claims that the Court of Appeals erred in

holding that it failed to pay petitioners' holiday pay, service
incentive leave pay and 13th month pay.
We are not persuaded.

being expressed in terms of money whether fixed or

ascertained on a time, task, piece , or commission basis, or
other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and
reasonable value, as determined by the Secretary of Labor,
of board, lodging, or other facilities customarily furnished by
the employer to the employee"
from which an employer is prohibited under Article 113 45 of
the same Code from making any deductions without the
employee's knowledge and consent. In the instant case,
private respondent failed to show that the deduction of the
SSS loan and the value of the shoes from petitioner Virgilio
Agabon's 13th month pay was authorized by the latter. The
lack of authority to deduct is further bolstered by the fact
that petitioner Virgilio Agabon included the same as one of
his money claims against private respondent.
The Court of Appeals properly reinstated the monetary claims
awarded by the Labor Arbiter ordering the private respondent
to pay each of the petitioners holiday pay for four regular
holidays from 1996 to 1998, in the amount of P6,520.00,
service incentive leave pay for the same period in the
amount of P3,255.00 and the balance of Virgilio Agabon's
thirteenth month pay for 1998 in the amount of P2,150.00.
WHEREFORE, in view of the foregoing, the petition
is DENIED. The decision of the Court of Appeals dated
January 23, 2003, in CA-G.R. SP No. 63017, finding that
petitioners' Jenny and Virgilio Agabon abandoned their work,
and ordering private respondent to pay each of the
petitioners holiday pay for four regular holidays from 1996 to
1998, in the amount of P6,520.00, service incentive leave
pay for the same period in the amount of P3,255.00 and the
balance of Virgilio Agabon's thirteenth month pay for 1998 in

the
amount
of
P2,150.00
isAFFIRMED with
the MODIFICATION that private respondent Riviera Home
Improvements, Inc. is furtherORDERED to pay each of the
petitioners the amount of P30,000.00 as nominal damages
for non-compliance with statutory due process.
No costs.
SO ORDERED.
Davide, Jr., C.J., Puno, Panganiban, Quisumbing, SandovalGutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales,
Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia,
JJ., concur.

SEPARATE OPINION
TINGA, J:
I concur in the result, the final disposition of the petition
being correct. There is no denying the importance of the
Court's ruling today, which should be considered as definitive
as to the effect of the failure to render the notice and hearing
required under the Labor Code when an employee is being
dismissed for just causes, as defined under the same law.
The Court emphatically reaffirms the rule that dismissals for
just cause are not invalidated due to the failure of the
employer to observe the proper notice and hearing
requirements under the Labor Code. At the same time,
The Decision likewise establishes that the Civil Code
provisions on damages serve as the proper framework for the
appropriate relief to the employee dismissed for just cause if
the notice-hearing requirement is not met. Serrano v.
NLRC,1 insofar as it is controlling in dismissals for
unauthorized causes, is no longer the controlling precedent.
Any and all previous rulings and statements of the Court

inconsistent
with
these
deemed inoperative.

determinations

are

now

My views on the questions raised in this petition are

comprehensive, if I may so in all modesty. I offer this opinion
to discuss the reasoning behind my conclusions, pertaining
as they do to questions of fundamental importance.
Prologue
The factual backdrop of the present Petition for Review is not
novel. Petitioners claim that they were illegally dismissed by
the respondents, who allege in turn that petitioners had
actually abandoned their employment. There is little difficulty
in upholding the findings of the NRLC and the Court of
Appeals that petitioners are guilty of abandonment, one of
the just causes for termination under the Labor Code. Yet, the
records also show that the employer was remiss in not giving
the notice required by the Labor Code; hence, the resultant
controversy as to the legal effect of such failure vis--vis the
warranted dismissal.
Ostensibly, the matter has been settled by our decision
in Serrano2, wherein the Court ruled that the failure to
properly observe the notice requirement did not render the
dismissal, whether for just or authorized causes, null and
void, for such violation was not a denial of the constitutional
right to due process, and that the measure of appropriate
damages in such cases ought to be the amount of wages the
employee should have received were it not for the
termination of his employment without prior notice. 3 Still, the
Court has, for good reason, opted to reexamine the socalled Serrano doctrine through the present petition
Antecedent Facts
Respondent Riviera Home Improvements, Inc (Riviera Home)
is engaged in the manufacture and installation of gypsum

board and cornice. In January of 1992, the Agabons were

hired in January of 1992 as cornice installers by Riviera
Home. According to their personnel file with Riviera Home,
the Agabon given address was 3RDS Tailoring, E. Rodriguez
Ave., Moonwalk Subdivision, P-II Paraaque City, Metro
Manila.4
It is not disputed that sometime around February 1999, the
Agabons stopped rendering services for Riviera Home. The
Agabons allege that beginning on 23 February 1999, they
stopped receiving assignments from Riviera Home. 5 When
they demanded an explanation, the manager of Riviera
Homes, Marivic Ventura, informed them that they would be
hired again, but on a "pakyaw" (piece-work) basis. When the
Agabons spurned this proposal, Riviera Homes refused to
continue their employment under the original terms and
agreement.6 Taking affront, the Agabons filed a complaint for
illegal dismissal with the National Labor Relations
Commission ("NLRC").
Riviera Homes adverts to a different version of events
leading to the filing of the complaint for illegal dismissal. It
alleged that in the early quarter of 1999, the Agabons
stopped reporting for work with Riviera. Two separate letters
dated 10 March 1999, were sent to the Agabons at the
address indicated in their personnel file. In these notices, the
Agabons
were
directed
to
report
for
work
7
immediately. However,
these
notices
were
returned
unserved with the notation "RTS Moved." Then, in June of
1999, Virgilio Agabon informed Riviera Homes by telephone
that he and Jenny Agabon were ready to return to work for
Riviera Homes, on the condition that their wages be first
adjusted. On 18 June 1999, the Agabons went to Riviera
Homes, and in a meeting with management, requested a
wage increase of up to Two Hundred Eighty Pesos (P280.00) a
day. When no affirmative response was offered by Riviera

Homes, the Agabons initiated the complaint before the

NLRC.8
In their Position Paper, the Agabons likewise alleged that
they were required to work even on holidays and rest days,
but were never paid the legal holiday pay or the premium
pay for holiday or rest day. They also asserted that they were
denied Service Incentive Leave pay, and that Virgilio Agabon
was not given his thirteenth (13th) month pay for the year
1998.9
After due deliberation, Labor Arbiter Daisy G. CautonBarcelona rendered a Decision dated 28 December 1999,
finding the termination of the Agabons illegal, and ordering
Riviera Homes to pay backwages in the sum of Fifty Six
Thousand Two Hundred Thirty One Pesos and Ninety Three
Centavos (P56,231.93) each. The Labor Arbiter likewise
ordered, in lieu of reinstatement, the payment of separation
pay of one (1) month pay for every year of service from date
of hiring up to 29 November 1999, as well as the payment of
holiday pay, service incentive leave pay, and premium pay
for holiday and restday, plus thirteenth (13th) month
differential to Virgilio Agabon.10
In so ruling, the Labor Arbiter declared that Riviera Homes
was unable to satisfactorily refute the Agabons' claim that
they were no longer given work to do after 23 February 1999
and that their rehiring was only on "pakyaw" basis. The Labor
Arbiter also held that Riviera Homes failed to comply with the
notice requirement, noting that Riviera Homes well knew of
the change of address of the Agabons, considering that the
identification cards it issued stated a different address from
that on the personnel file.11 The Labor Arbiter asserted the
principle that in all termination cases, strict compliance by
the employer with the demands of procedural and
substantive due process is a condition sine qua non for the
same to be declared valid.12

On appeal, the NLRC Second Division set aside the Labor

Arbiter's Decision and ordered the dismissal of the complaint
for lack of merit.13 The NLRC held that the Agabons were not
able to refute the assertion that for the payroll period ending
on 15 February 1999, Virgilio and Jenny Agabon worked for
only two and one-half (2) and three (3) days, respectively. It
disputed the earlier finding that Riviera Homes had known of
the change in address, noting that the address indicated in
the
identification cards was not the Agabons, but that of the
persons who should be notified in case of emergency
concerning the employee.14 Thus, proper service of the notice
was deemed to have been accomplished. Further, the notices
evinced good reason to believe that the Agabons had not
been dismissed, but had instead abandoned their jobs by
refusing to report for work.
In support of its conclusion that the Agabons had abandoned
their work, the NLRC also observed that the Agabons did not
seek reinstatement, but only separation pay. While the choice
of relief was premised by the Agabons on their purported
strained relations with Riviera Homes, the NLRC pointed out
that such claim was amply belied by the fact that the
Agabons had actually sought a conference with Riviera
Homes in June of 1999. The NLRC likewise found that the
failure of the Labor Arbiter to justify the award of extraneous
money claims, such as holiday and service incentive leave
pay, confirmed that there was no proof to justify such claims.
A Petition for Certiorari was promptly filed with the Court of
Appeals by the Agabons, imputing grave abuse of discretion
on the part of the NLRC in dismissing their complaint for
illegal dismissal. In a Decision15 dated 23 January 2003, the
Court of Appeals affirmed the finding that the Agabons had
abandoned their employment. It noted that the two elements
constituting abandonment had been established, to wit: the

failure to report for work or absence without valid justifiable

reason, and; a clear intention to sever the employeremployee relationship. The intent to sever the employeremployee relationship was buttressed by the Agabon's choice
to seek not reinstatement, but separation pay. The Court of
Appeals likewise found that the service of the notices were
valid, as the Agabons did not notify Riviera Homes of their
change of address, and thus the failure to return to work
despite notice amounted to abandonment of work.
However, the Court of Appeals reversed the NLRC as regards
the denial of the claims for holiday pay, service incentive
leave pay, and the balance of Virgilio Agabon's thirteenth
(13th) month pay. It ruled that the failure to adduce proof in
support thereof was not fatal and that the burden of proving
that such benefits had already been paid rested on Riviera
Homes.16 Given that Riviera Homes failed to present proof of
payment to the Agabons of their holiday pay and service
incentive leave pay for the years 1996, 1997 and 1998, the
Court of Appeals chose to believe that such benefits had not
actually been received by the employees. It also ruled that
the apparent deductions made by Riviera Homes on the
thirteenth (13th) month pay of Virgilio Agabon violated
Section 10 of the Rules and Regulations Implementing
Presidential Decree No. 851.17 Accordingly, Riviera Homes
was ordered to pay the Agabons holiday for four (4) regular
holidays in 1996, 1997 and 1998, as well as their service
incentive leave pay for said years, and the balance of Virgilio
Agabon's thirteenth (13th) month pay for 1998 in the amount
of Two Thousand One Hundred Fifty Pesos (P2,150.00). 18
In their Petition for Review, the Agabons claim that they had
been illegally dismissed, reasserting their version of events,
thus: (1) that they had not been given new assignments
since 23 February 1999; (2) that they were told that they
would only be re-hired on a "pakyaw" basis, and; (3) that
Riviera Homes had knowingly sent the notices to their old

address despite its knowledge of their change of address as

indicated in the identification cards. 19Further, the Agabons
note that only one notice was sent to each of them, in
violation of the rule that the employer must furnish two
written notices before termination the first to apprise the
employee of the cause for which dismissal is sought, and the
second to notify the employee of the decision of
dismissal.20 The Agabons likewise maintain that they did not
seek reinstatement owing to the strained relations between
them and Riviera Homes.
The Agabons present to this Court only one issue, i.e.:
whether or not they were illegally dismissed from their
employment.21 There are several dimensions though to this
issue which warrant full consideration.
The Abandonment Dimension
Review of Factual Finding of Abandonment
As the Decision points out, abandonment is characterized by
the failure to report for work or absence without valid or
justifiable reason, and a clear intention to sever the
employer-employee relationship. The question of whether or
not an employee has abandoned employment is essentially a
factual issue.22 The NLRC and the Court of Appeals, both
appropriate triers of fact, concluded that the Agabons had
actually abandoned their employment, thus there is little
need for deep inquiry into the correctness of this factual
finding. There is no doubt that the Agabons stopped
reporting for work sometime in February of 1999. And there
is no evidence to support their assertion that such absence
was due to the deliberate failure of Riviera Homes to give
them work. There is also the fact, as noted by the NLRC and
the Court of Appeals, that the Agabons did not pray for
reinstatement, but only for separation

pay and money claims.23 This failure indicates their

disinterest
in
maintaining
the
employer-employee
relationship and their unabated avowed intent to sever it.
Their excuse that strained relations between them and
Riviera Homes rendered reinstatement no longer feasible was
hardly given credence by the NLRC and the Court of
Appeals.24
The contrary conclusion arrived at by the Labor Arbiter as
regards abandonment is of little bearing to the case. All that
the Labor Arbiter said on that point was that Riviera Homes
was not able to refute the Agabons' claim that they were
terminated on 23 February 1999.25 The Labor Arbiter did not
explain why or how such finding was reachhy or how such
finding was reachhe Agabons was more credible than that of
Riviera Homes'. Being bereft of reasoning, the conclusion
deserves scant consideration.
Compliance with Notice Requirement
At the same time, both the NLRC and the Court of Appeals
failed to consider the apparent fact that the rules governing
notice of termination were not complied with by Riviera
Homes. Section 2, Book V, Rule XXIII of the Omnibus Rules
Implementing the Labor Code (Implementing Rules)
specifically provides that for termination of employment
based on just causes as defined in Article 282, there must be:
(1) written notice served on the employee specifying the
grounds for termination and giving employee reasonable
opportunity to explain his/her side; (2) a hearing or
conference wherein the employee, with the assistance of
counsel if so desired, is given opportunity to respond to the
charge, present his evidence or rebut evidence presented
against him/her; and (3) written notice of termination served
on the employee indicating that upon due consideration of all
the circumstances, grounds have been established to justify
termination.

At the same time, Section 2, Book V, Rule XXIII of the

Implementing Rules does not require strict compliance with
the above procedure, but only that the same be
"substantially observed."
Riviera Homes maintains that the letters it sent on 10 March
1999 to the Agabons sufficiently complied with the notice
rule. These identically worded letters noted that the Agabons
had stopped working without permission that they failed to
return for work despite having been repeatedly told to report
to the office and resume their employment. 26 The letters
ended with an invitation to the Agabons to report back to the
office and return to work.27
The apparent purpose of these letters was to advise the
Agabons that they were welcome to return back to work, and
not to notify them of the grounds of termination. Still,
considering that only substantial compliance with the notice
requirement is required, I am prepared to say that the letters
sufficiently conform to the first notice required under the
Implementing Rules. The purpose of the first notice is to duly
inform the employee that a particular transgression is being
considered against him or her, and that an opportunity is
being offered for him or her to respond to the charges. The
letters served the purpose of informing the Agabons of the
pending matters beclouding their employment, and
extending them the opportunity to clear the air.
Contrary to the Agabons' claim, the letter-notice was
correctly sent to the employee's last known address, in
compliance with the Implementing Rules. There is no dispute
that these letters were not actually received by the Agabons,
as they had apparently moved out of the address indicated
therein. Still, the letters were sent to what Riviera Homes
knew to be the Agabons' last known address, as indicated in
their personnel file. The Agabons insist that Riviera Homes
had known of the change of address, offering as proof their

company IDs which purportedly print out their correct new

address. Yet, as pointed out by the NLRC and the Court of
Appeals, the addresses indicated in the IDs are not the
Agabons, but that of the person who is to be notified in case
on emergency involve either or both of the Agabons.
The actual violation of the notice requirement by Riviera
Homes lies in its failure to serve on the Agabons the second
notice which should inform them of termination. As
the Decision notes, Riviera Homes' argument that sending
the second notice was useless due to the change of address
is inutile, since the Implementing Rules plainly require that
the notice of termination should be served at the employee's
last known address.
The importance of sending the notice of termination should
not be trivialized. The termination letter serves as indubitable
proof of loss of employment, and its receipt compels the
employee to evaluate his or her next options. Without such
notice, the employee may be left uncertain of his fate; thus,
its service is mandated by the Implementing Rules. Noncompliance with the notice rule, as evident in this case,
contravenes the Implementing Rules. But does the
violation serve to invalidate the Agabons' dismissal
for just cause?
The So-Called Constitutional Law Dimension
Justices Puno and Panganiban opine that the Agabons should
be reinstated as a consequence of the violation of the notice
requirement. I respectfully disagree, for the reasons
expounded below.
Constitutional
Of
Due
Process
and
the
Requirement in Labor Termination Cases

Considerations
Notice-Hearing

Justice Puno proposes that the failure to render due notice

and hearing prior to dismissal for just cause constitutes a
violation of the constitutional right to due process. This view,
as acknowledged by Justice Puno himself, runs contrary to
the Court's pronouncement in Serrano v. NLRC28 that the
absence of due notice and hearing prior to dismissal, if for
just cause, violates statutory due process.
The ponencia of
Justice
Vicente
V.
Mendoza
in Serrano provides this cogent overview of the history of the
doctrine:
Indeed, to contend that the notice requirement in the Labor
Code is an aspect of due process is to overlook the fact that
Art. 283 had its origin in Art. 302 of the Spanish Code of
Commerce of 1882 which gave either party to the employeremployee relationship the right to terminate their
relationship by giving notice to the other one month in
advance. In lieu of notice, an employee could be laid off by
paying him a mesadaequivalent to his salary for one month.
This provision was repealed by Art. 2270 of the Civil Code,
which took effect on August 30, 1950. But on June 12, 1954,
R.A. No. 1052, otherwise known as the Termination Pay Law,
was enacted reviving the mesada. On June 21, 1957, the law
was amended by R.A. No. 1787 providing for the giving of
advance notice for every year of service. 29
Under Section 1 of the Termination Pay Law, an employer
could dismiss an employee without just cause by serving
written notice on the employee at least one month in
advance or one-half month for every year of service of the
employee, whichever was longer. 30 Failure to serve such
written notice entitled the employee to compensation
equivalent to his salaries or wages corresponding to the
required period of notice from the date of termination of his
employment.

However, there was no similar written notice requirement

under the Termination Pay Law if the dismissal of the
employee was for just cause. The Court, speaking through
Justice JBL Reyes, ruled in Phil. Refining Co. v. Garcia:31

B.P. Blg. 130 which amended the Labor Code. And it was still
much later when the notice requirement was embodied in the
law with the amendment of Art. 277(b) by R.A. No. 6715 on
March 2, 1989.35

[Republic] Act 1052, as amended by Republic Act 1787,

impliedly recognizes the right of the employer to dismiss his
employees (hired without definite period) whether for just
case, as therein defined or enumerated, or without it. If
there be just cause, the employer is not required to
serve any notice of discharge nor to disburse
termination pay to the employee. xxx32

It cannot be denied though that the thinking that absence of

notice or hearing prior to termination constituted a
constitutional violation has gained a jurisprudential foothold
with the Court. Justice Puno, in his Dissenting Opinion, cites
several cases in support of this theory, beginning
with Batangas Laguna Tayabas Bus Co. v. Court of
Appeals36 wherein we held that "the failure of petitioner to
give the private respondent the benefit of a hearing before
he was dismissed constitutes an infringement on his
constitutional right to due process of law. 37

Clearly, the Court, prior to the enactment of the Labor Code,

was ill-receptive to the notion that termination for just cause
without notice or hearing violated the constitutional right to
due process. Nonetheless, the Court recognized an award of
damages as the appropriate remedy. In Galsim v. PNB,33 the
Court held:
Of course, the employer's prerogative to dismiss employees
hired without a definite period may be with or without cause.
But if the manner in which such right is exercised is abusive,
the employer stands to answer to the dismissed employee
for damages.34
The Termination Pay Law was among the repealed laws with
the enactment of the Labor Code in 1974. Significantly, the
Labor Code, in its inception, did not require notice or hearing
before an employer could terminate an employee for just
cause. As Justice Mendoza explained:
Where the termination of employment was for a just cause,
no notice was required to be given to the employee. It was
only on September 4, 1981 that notice was required to be
given even where the dismissal or termination of an
employee was for cause. This was made in the rules issued
by the then Minister of Labor and Employment to implement

Still, this theory has been refuted, pellucidly and effectively

to my mind, by Justice Mendoza's disquisition inSerrano,
thus:
xxx There are three reasons why, on the other hand, violation
by the employer of the notice requirement cannot be
considered a denial of due process resulting in the nullity of
the employee's dismissal or layoff.
The first is that the Due Process Clause of the Constitution is
a limitation on governmental powers. It does not apply to the
exercise of private power, such as the termination of
employment under the Labor Code. This is plain from the text
of Art. III, 1 of the Constitution, viz.: "No person shall be
deprived of life, liberty, or property without due process of
law. . . ." The reason is simple: Only the State has authority to
take the life, liberty, or property of the individual. The
purpose of the Due Process Clause is to ensure that the
exercise of this power is consistent with what are considered
civilized methods.

The second reason is that notice and hearing are required

under the Due Process Clause before the power of organized
society are brought to bear upon the individual. This is
obviously not the case of termination of employment under
Art. 283. Here the employee is not faced with an aspect of
the adversary system. The purpose for requiring a 30-day
written notice before an employee is laid off is not to afford
him an opportunity to be heard on any charge against him,
for there is none. The purpose rather is to give him time to
prepare for the eventual loss of his job and the DOLE an
opportunity to determine whether economic causes do exist
justifying the termination of his employment.
xxx
The third reason why the notice requirement under Art. 283
can not be considered a requirement of the Due Process
Clause is that the employer cannot really be expected to be
entirely an impartial judge of his own cause. This is also the
case in termination of employment for a just cause under Art.
282 (i.e., serious misconduct or willful disobedience by the
employee of the lawful orders of the employer, gross and
habitual neglect of duties, fraud or willful breach of trust of
the employer, commission of crime against the employer or
the latter's
immediate family or duly authorized
representatives, or other analogous cases). 38
The Court in the landmark case of People v. Marti39 clarified
the proper dimensions of the Bill of Rights.
That the Bill of Rights embodied in the Constitution is not
meant to be invoked against acts of private individuals finds
support in the deliberations of the Constitutional
Commission. True, the liberties guaranteed by the
fundamental law of the land must always be subject to
protection. But protection against whom? Commissioner
Bernas in his sponsorship speech in the Bill of Rights answers
the query which he himself posed, as follows:

"First, the general reflections. The protection of fundamental

liberties in the essence of constitutional democracy.
Protection against whom? Protection against the state. The
Bill of Rights governs the relationship between the individual
and the state. Its concern is not the relation between
individuals, between a private individual and other
individuals. What the Bill of Rights does is to declare some
forbidden zones in the private sphere inaccessible to any
power holder." (Sponsorship Speech of Commissioner Bernas;
Record of the Constitutional Commission, Vol. 1, p. 674; July
17,1986; Italics supplied)40
I do not doubt that requiring notice and hearing prior to
termination for just cause is an admirable sentiment borne
out of basic equity and fairness. Still, it is not a constitutional
requirement that can impose itself on the relations of private
persons and entities. Simply put, the Bill of Rights affords
protection against possible State oppression against its
citizens, but not against an unjust or repressive conduct by a
private party towards another.
Justice Puno characterizes the notion that constitutional due
process limits government action alone as "pass,"and
adverts to nouvelle vague theories which assert that private
conduct may be restrained by constitutional due process. His
dissent alludes to the American experience making
references to the post-Civil War/pre-World War II era when the
US Supreme Court seemed overly solicitous to the rights of
big business over those of the workers.
Theories, no matter how entrancing, remain theoretical
unless adopted by legislation, or more controversially, by
judicial opinion. There were a few decisions of the US
Supreme Court that, ostensibly, imposed on private persons
the values of the constitutional guarantees. However, in
deciding the cases, the American High Court found it
necessary to link the actors to adequate elements of the

"State" since the Fourteenth Amendment plainly begins with

the words "No State shall"41
More crucially to the American experience, it had become
necessary to pass legislation in order to compel private
persons to observe constitutional values. While the equal
protection clause was deemed sufficient by the Warren Court
to bar racial segregation in public facilities, it necessitated
enactment of the Civil Rights Acts of 1964 to prohibit
segregation as enforced by private persons within their
property. In this jurisdiction, I have trust in the statutory
regime that governs the correction of private wrongs. There
are thousands of statutes, some penal or regulatory in
nature, that are the source of actionable claims against
private persons. There is even no stopping the State, through
the legislative cauldron, from compelling private individuals,
under pain of legal sanction, into observing the norms
ordained in the Bill of Rights.
Justice Panganiban's Separate Opinion asserts that corporate
behemoths and even individuals may now be sources of
abuses and threats to human rights and liberties. 42 The
concern is not unfounded, but appropriate remedies exist
within our statutes, and so resort to the constitutional trump
card is not necessary. Even if we were to engage the premise,
the proper juristic exercise should be to examine whether an
employer has taken the attributes of the State so that it
could be compelled by the Constitution to observe the
proscriptions of the Bill of Rights. But the strained analogy
simply does not square since the attributes of an employer
are starkly incongruous with those of the State. Employers
plainly do not possess the awesome powers and the
tremendous resources which the State has at its command.
The differences between the State and employers are not
merely literal, but extend to their very essences. Unlike the
State, the raison d'etre of employers in business is to

accumulate profits. Perhaps the State and the employer are

similarly capacitated to inflict injury or discomfort on persons
under their control, but the same power is also possessed by
a school principal, hospital administrator, or a religious
leader, among many others. Indeed, the scope and reach of
authority of an employer pales in comparison with that of the
State. There is no basis to conclude that an employer, or
even the employer class, may be deemed a de facto state
and on that premise, compelled to observe the Bill of Rights.
There is simply no nexus in their functions, distaff as they
are, that renders it necessary to accord the same
jurisprudential treatment.
It may be so, as alluded in the dissent of Justice Puno, that a
conservative court system overly solicitous to the concerns of
business may consciously gut away at rights or privileges
owing to the labor sector. This certainly happened before in
the United States in the early part of the twentieth century,
when the progressive labor legislation such as that enacted
during President Roosevelt's New Deal regime most of
them addressing problems of labor were struck down by
an arch-conservative Court.43 The preferred rationale then
was to enshrine within the constitutional order business
prerogatives, rendering them superior to the express
legislative intent. Curiously, following its judicial philosophy
at the time the U. S. Supreme Court made due process
guarantee towards employers prevail over the police power
to defeat the cause of labor. 44
Of course, this Court should not be insensate to the means
and methods by which the entrenched powerful class may
maneuver the socio-political system to ensure selfpreservation. However, the remedy to rightward judicial bias
is not leftward judicial bias. The more proper judicial attitude
is to give due respect to legislative prerogatives, regardless
of the ideological sauce they are dipped in.

While the Bill of Rights maintains a position of primacy in the

constitutional hierarchy,45 it has scope and limitations that
must be respected and asserted by the Court, even though
they may at times serve somewhat bitter ends. The
dissenting opinions are palpably distressed at the effect of
the Decision, which will undoubtedly provoke those
reflexively sympathetic to the labor class. But haphazard
legal theory cannot be used to justify the obverse result. The
adoption of the dissenting views would give rise to all sorts of
absurd constitutional claims. An excommunicated Catholic
might demand his/her reinstatement into the good graces of
the Church and into communion on the ground that
excommunication was violative of the constitutional right to
due process. A celebrity contracted to endorse Pepsi Cola
might sue in court to void a stipulation that prevents him/her
from singing the praises of Coca Cola once in a while, on the
ground that such stipulation violates the constitutional right
to free speech. An employee might sue to prevent the
employer from reading outgoing e-mail sent through the
company server using the company e-mail address, on the
ground that the constitutional right to privacy of
communication would be breached.
The above concerns do not in anyway serve to trivialize the
interests of labor. But we must avoid overarching
declarations in order to justify an end result beneficial to
labor. I dread the doctrinal acceptance of the notion that the
Bill of Rights, on its own, affords protection and sanctuary not
just from the acts of State but also from the conduct of
private persons. Natural and juridical persons would hesitate
to interact for fear that a misstep could lead to their being
charged in court as a constitutional violator. Private
institutions that thrive on their exclusivity, such as churches
or cliquish groups, could be forced to renege on their
traditional tenets, including vows of secrecy and the like, if
deemed by the Court as inconsistent with the Bill of Rights.
Indeed, that fundamental right of all private persons to be let

alone would be forever diminished because of a questionable

notion that contravenes with centuries of political thought.
It is not difficult to be enraptured by novel legal ideas. Their
characterization is susceptible to the same marketing traps
that hook consumers to new products. With the help of
unique wrapping, a catchy label, and testimonials from
professed experts from exotic lands, a malodorous idea may
gain wide acceptance, even among those self-possessed with
their own heightened senses of perception. Yet before we join
the mad rush in order to proclaim a theory as "brilliant," a
rigorous test must first be employed to determine whether it
complements or contradicts our own system of laws and
juristic thought. Without such analysis, we run the risk of
abnegating the doctrines we have fostered for decades and
the protections they may have implanted into our way of life.
Should the Court adopt the view that the Bill of Rights may
be invoked to invalidate actions by private entities against
private individuals, the Court would open the floodgates to,
and the docket would be swamped with, litigations of the
scurrilous sort. Just as patriotism is the last refuge of
scoundrels, the broad constitutional claim is the final resort
of the desperate litigant.
Constitutional Protection of Labor
The provisions of the 1987 Constitution affirm the primacy of
labor and advocate a multi-faceted state policy that affords,
among others, full protection to labor. Section 18, Article II
thereof provides:
The State affirms labor as a primary social economic force. It
shall protect the rights of workers and promote their welfare.
Further, Section 3, Article XIII states:

The State shall afford full protection to labor, local and

overseas, organized and unorganized, and promote full
employment and equal employment opportunities for all.
It shall guarantee the rights of all workers to selforganization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security to
tenure, humane conditions of work, and a living wage. They
shall also participate in policy and decision-making 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 and the preferential use of
voluntary modes in settling disputes, including conciliation,
and shall enforce their mutual compliance therewith to foster
industrial peace.
The State shall regulate the relations 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 constitutional enshrinement of the guarantee of full
protection of labor is not novel to the 1987 Constitution.
Section 6, Article XIV of the 1935 Constitution reads:
The State shall afford protection to labor, especially to
working women, and minors, and shall regulate the relations
between the landowner and tenant, and between labor and
capital in industry and in agriculture. The State may provide
for compulsory arbitration.
Similarly, among the principles and state policies declared in
the 1973 Constitution, is that provided in Section 9, Article II
thereof:

The State shall afford full protection to labor, promote full

employment and equality in employment, ensure equal work
opportunities regardless of sex, race or creed, and regulate
the relations between workers and employers. The State shall
assure the rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane
conditions of work. The State may provide for compulsory
arbitration.
On the other hand, prior to the 1973 Constitution, the right to
security of tenure could only be found in legislative
enactments and their respective implementing rules and
regulations. It was only in the 1973 Constitution that security
of tenure was elevated as a constitutional right. The
development of the concept of security of tenure as a
constitutionally recognized right was discussed by this Court
in BPI Credit Corporation v. NLRC,46 to wit:
The enthronement of the worker's right to security or tenure
in our fundamental law was not achieved overnight. For all its
liberality towards labor, our 1935 Constitution did not elevate
the right as a constitutional right. For a long time, the
worker's security of tenure had only the protective mantle of
statutes and their interpretative rules and regulations. It was
as uncertain protection that sometimes yielded to the
political permutations of the times. It took labor nearly four
decades of sweat and tears to persuade our people thru their
leaders, to exalt the worker's right to security of tenure as a
sacrosanct constitutional right. It was Article II, section 2 [9]
of our 1973 Constitution that declared as a policy that the
State shall assure the right of worker's to security tenure. The
1987 Constitution is even more solicitous of the welfare of
labor. Section 3 of its Article XIII mandates that the State
shall afford full protection to labor and declares that all
workers shall be entitled to security of tenure. Among the
enunciated State policies are the

promotion of social justice and a just and dynamic social

order. In contrast, the prerogative of management to dismiss
a worker, as an aspect of property right, has never been
endowed with a constitutional status.
The unequivocal constitutional declaration that all workers
shall be entitled to security of tenure spurred our lawmakers
to strengthen the protective walls around this hard earned
right. The right was protected from undue infringement both
by our substantive and procedural laws. Thus, the causes for
dismissing employees were more defined and restricted; on
the other hand, the procedure of termination was also more
clearly delineated. These substantive and procedural laws
must be strictly complied with before a worker can be
dismissed from his employment.47
It is quite apparent that the constitutional protection of labor
was entrenched more than eight decades ago, yet such did
not prevent this Court in the past from affirming dismissals
for just cause without valid notice. Nor was there any
pretense made that this constitutional maxim afforded a
laborer a positive right against dismissal for just cause on the
ground of lack of valid prior notice. As demonstrated earlier,
it was only after the enactment of the Labor Code that the
doctrine relied upon by the dissenting opinions became en
vogue. This point highlights my position that the violation of
the notice requirement has statutory moorings, not
constitutional.
It should be also noted that the 1987 Constitution also
recognizes the principle of shared responsibility between
workers and employers, and the right of enterprise to
reasonable returns, expansion, and growth. Whatever
perceived imbalance there might have been under previous
incarnations of the provision have been obviated by Section
3, Article XIII.

In the case of Manila Prince Hotel v. GSIS,48 we affirmed the

presumption that all constitutional provisions are selfexecuting. We reasoned that to declare otherwise would
result in the pernicious situation wherein by mere inaction
and disregard by the legislature, constitutional mandates
would be rendered ineffectual. Thus, we held:
As against constitutions of the past, modern constitutions
have been generally ed upon a different principle and have
often become in effect extensive codes of laws intended to
operate directly upon the people in a manner similar to that
of statutory enactments, and the function of constitutional
conventions has evolved into one more like that of a
legislative body. Hence, unless it is expressly provided that a
legislative act is necessary to enforce a constitutional
mandate, the presumption now is that all provisions of the
constitution are self-executing. If the constitutional provisions
are treated as requiring legislation instead of self-executing,
the legislature would have the power to ignore and
practically nullify the mandate of the fundamental law. This
can be cataclysmic. That is why the prevailing view is, as it
has always been, that
. . . in case of doubt, the Constitution should be considered
self-executing rather than non-self-executing. . . . Unless the
contrary is clearly intended, the provisions of the Constitution
should be considered self-executing, as a contrary rule would
give the legislature discretion to determine when, or
whether, they shall be effective. These provisions would be
subordinated to the will of the lawmaking body, which could
make them entirely meaningless by simply refusing to pass
the needed implementing statute. 49
In further discussing self-executing provisions, this Court
stated that:
In self-executing constitutional provisions, the legislature may
still enact legislation to facilitate the exercise of powers

directly granted by the constitution, further the operation of

such a provision, prescribe a practice to be used for its
enforcement, provide a convenient remedy for the protection
of the rights secured or the determination thereof, or place
reasonable safeguards around the exercise of the right. The
mere fact that legislation may supplement and add to or
prescribe a penalty for the violation of a self-executing
constitutional provision does not render such a provision
ineffective in the absence of such legislation. The omission
from a constitution of any express provision for a remedy for
enforcing a right or liability is not necessarily an indication
that it was not intended to be self-executing. The rule is that
a self-executing provision of the constitution does not
necessarily exhaust legislative power on the subject, but any
legislation must be in harmony with the constitution, further
the exercise of constitutional right and make it more
available. Subsequent legislation however does not
necessarily mean that the subject constitutional provision is
not, by itself, fully enforceable.50
Thus, the constitutional mandates of protection to labor and
security of tenure may be deemed as self-executing in the
sense that these are automatically acknowledged and
observed without need for any enabling legislation. However,
to declare that the constitutional provisions are enough to
guarantee the full exercise of the rights embodied therein,
and the realization of ideals therein expressed, would be
impractical, if not unrealistic. The espousal of such view
presents the dangerous tendency of being overbroad and
exaggerated. The guarantees of "full protection to labor" and
"security of tenure", when examined in isolation, are facially
unqualified, and the broadest interpretation possible
suggests a blanket shield in favor of labor against any form of
removal regardless of circumstance. This interpretation
implies an unimpeachable right to continued employment-a
utopian notion, doubtless-but still hardly within the
contemplation of the framers. Subsequent legislation is still

needed to define the parameters of these guaranteed rights

to ensure the protection and promotion, not only the rights of
the labor sector, but of the employers' as well. Without
specific and pertinent legislation, judicial bodies will be at a
loss, formulating their own conclusion to approximate at least
the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its
own, be a source of a positive enforceable right to stave off
the dismissal of an employee for just cause owing to the
failure to serve proper notice or hearing. As manifested by
several framers of the 1987 Constitution, the provisions on
social justice require legislative enactments for their
enforceability. This is reflected in the record of debates on
the social justice provisions of the Constitution:
MS. [FELICITAS S.] AQUINO: We appreciate the concern of the
Commissioner. But this Committee [on Social Justice] has
actually become the forum already of a lot of specific
grievances
and
specific
demands,
such
that
understandably, we may have been, at one time or
another, dangerously treading into the functions of
legislation. Our only plea to the Commission is to focus our
perspective on the matter of social justice and its rightful
place in the Constitution. What we envision here is a
mandate specific enough that would give impetus for
statutory implementation. We would caution ourselves
in terms of the judicious exercise of self-censorship
against treading into the functions of legislation.
(emphasis supplied)51
xxx
[FLORENZ D.] REGALADO: I notice that the 1935 Constitution
had only one section on social justice; the same is true with
the 1973 Constitution. But they seem to have stood us in
good stead; and I am a little surprised why, despite that

attempt
at
self-censorship,
there
are
certain
provisions here which are properly for legislation.52
xxx

the membership of the legislature, if they do not get

organized. It is, in fact, a recognition of the principle that
unless a citizenry is organized and mobilized to pursue its
ends peacefully, then it cannot really participate effectively. 54

BISHOP [TEODORO S.] BACANI: [I] think the distinction that

was given during the presentation of the provisions on the
Bill of Rights by Commissioner Bernas is very apropos
here. He spoke of self-executing rights which belong
properly to the Bill of Rights, and then he spoke of a
new body of rights which are more of claims and that
these have come about largely through the works of
social philosophers and then the teaching of the
Popes. They focus on the common good and hence, it
is not as easy to pinpoint precisely these rights nor
the situs of the rights. And yet, they exist in relation to the
common good.53

There is no pretense on the part of the framers that the

provisions on Social Justice, particularly Section 3 of Article
XIII, are self-executory. Still, considering the rule that
provisions should be deemed self-executing if enforceable
without further legislative action, an examination of Section 3
of Article XIII is warranted to determine whether it is
complete in itself as a definitive law, or if it needs future
legislation for completion and enforcement. 55Particularly, we
should inquire whether or not the provision voids the
dismissal of a laborer for just cause if no valid notice or
hearing is attendant.

xxx

Constitutional Commissioner Fr. Joaquin G. Bernas makes a

significant comment on Section 3, Article XIII of the 1987
Constitution:

MS. [MINDA LUZ M.] QUESADA: I think the nitty-gritty of

this kind of collaboration will be left to legislation but
the important thing now is the conservation, utilization or
maximization of the very limited resources. xxx
[RICARDO J.] ROMULO: The other problem is that, by and
large, government services are inefficient. So, this is a
problem all by itself. On Section 19, where the report says
that people's organizations as a principal means of
empowering the people to pursue and protect through
peaceful means, I do not suppose that the Committee
would like to either preempt or exclude the
legislature, because the concept of a representative
and democratic system really is that the legislature is
normally the principal means.
[EDMUNDO G.] GARCIA: That is correct. In fact, people
cannot even dream of influencing the composition or

The [cluster] of rights guaranteed in the second paragraph

are the right "to security of tenure, humane conditions of
work, and a living wage." Again, although these have been
set apart by a period (.) from the next sentence and are
therefore not modified by the final phrase "as may be
provided by law," it is not the intention to place these
beyond the reach of valid laws. xxx (emphasis supplied)56
At present, the Labor Code is the primary mechanism to
carry out the Constitution's directives. This is clear from
Article 357 under Chapter 1 thereof which essentially restates
the policy on the protection of labor as worded in the 1973
Constitution, which was in force at the time of enactment of
the Labor Code. It crystallizes the fundamental law's policies
on labor, defines the parameters of the rights granted to
labor such as the right to security of tenure, and prescribes
the standards for the enforcement of such rights in concrete

terms. While not infallible, the measures provided therein

tend to ensure the achievement of the constitutional aims.
The necessity for laws concretizing the constitutional
principles on the protection of labor is evident in the reliance
placed upon such laws by the Court in resolving the issue of
the validity of a worker's dismissal. In cases where that was
the issue confronting the Court, it consistently recognized the
constitutional right to security of tenure and employed the
standards laid down by prevailing laws in determining
whether such right was violated.58 The Court's reference to
laws other than the Constitution in resolving the issue of
dismissal is an implicit acknowledgment that the right to
security of tenure, while recognized in the Constitution,
cannot be implemented uniformly absent a law prescribing
concrete standards for its enforcement.
As discussed earlier, the validity of an employee's dismissal
in previous cases was examined by the Court in accordance
with the standards laid down by Congress in the Termination
Pay Law, and subsequently, the Labor Code and the
amendments thereto. At present, the validity of an
employee's dismissal is weighed against the standards laid
down in Article 279, as well as Article 282 in relation to
Article 277(b) of the Labor Code, for a dismissal for just
cause, and Article 283 for a dismissal for an authorized
cause.
The Effect of Statutory Violation
Of Notice and Hearing
There is no doubt that the dismissal of an employee even for
just cause, without prior notice or hearing, violates the Labor
Code. However, does such violation necessarily void the
dismissal?

Before I proceed with my discussion on dismissals for just

causes, a brief comment regarding dismissals for authorized
cause under Article 283 of the Labor Code. While the
justiciable question in Serrano pertained to a dismissal for
unauthorized cause, the ruling therein was crafted as
definitive
to
dismissals
for
just
cause.
Happily,
the Decision today does not adopt the same unwise tack. It
should be recognized that dismissals for just cause and
dismissals for authorized cause are governed by different
provisions, entail divergent requisites, and animated by
distinct rationales. The language of Article 283 expressly
effects the termination for authorized cause to the service of
written notice on the workers and the Ministry of Labor at
least one (1) month before the intended date of termination.
This constitutes an eminent difference than dismissals for
just cause, wherein the causal relation between the notice
and the dismissal is not expressly stipulated. The
circumstances distinguishing just and authorized causes are
too markedly different to be subjected to the same rules and
reasoning in interpretation.
Since the present petition is limited to a question arising from
a dismissal for just cause, there is no reason for making any
pronouncement
regarding
authorized
causes.
Such
declaration would be merely obiter, since they are neither the
law of the case nor dispositive of the present petition. When
the question becomes justiciable before this Court, we will be
confronted with an appropriate factual milieu on which we
can render a more judicious disposition of this admittedly
important question.
B. Dismissal for Just Cause
There is no express provision in the Labor Code that voids a
dismissal for just cause on the ground that there was no
notice or hearing. Under Section 279, the employer is
precluded from dismissing an employee except for a just

cause as provided in Section 282, or an authorized cause

under Sections 283 and 284. Based on reading Section 279
alone, the existence of just cause by itself is sufficient to
validate the termination.
Just cause is defined by Article 282, which unlike Article 283,
does not condition the termination on the service of written
notices. Still, the dissenting opinions propound that even if
there is just cause, a termination may be invalidated due to
the absence of notice or hearing. This view is anchored
mainly on constitutional moorings, the basis of which I had
argued against earlier. For determination now is whether
there is statutory basis under the Labor Code to void a
dismissal for just cause due to the absence of notice or
hearing.
As pointed out by Justice Mendoza in Serrano, it was only in
1989 that the Labor Code was amended to enshrine into
statute the twin requirements of notice and hearing. 59 Such
requirements are found in Article 277 of the Labor Code,
under the heading "Miscellaneous Provisions." Prior to the
amendment, the notice-hearing requirement was found
under the implementing rules issued by the then Minister of
Labor in 1981. The present-day implementing rules likewise
mandate that the standards of due process, including the
requirement of written notice and hearing, "be substantially
observed."60
Indubitably, the failure to substantially comply with the
standards of due process, including the notice and hearing
requirement, may give rise to an actionable claim against the
employer. Under Article 288, penalties may arise from
violations of any provision of the Labor Code. The Secretary
of Labor likewise enjoys broad powers to inquire into existing
relations between employers and employees. Systematic
violations by management of the statutory right to due

process would fall under the broad grant of power to the

Secretary of Labor to investigate under Article 273.
However, the remedy of reinstatement despite termination
for just cause is simply not authorized by the Labor Code.
Neither the Labor Code nor its implementing rules states that
a termination for just cause is voided because the
requirement of notice and hearing was not observed. This is
not simply an inadvertent semantic failure, but a conscious
effort to protect the prerogatives of the employer to dismiss
an employee for just cause. Notably, despite the several
pronouncements by this Court in the past equating the
notice-hearing requirement in labor cases to a constitutional
maxim, neither the legislature nor the executive has adopted
the same tack, even gutting the protection to provide that
substantial compliance with due process suffices.
The
Labor
Code
significantly
eroded
management
prerogatives in the hiring and firing of employees. Whereas
employees could be dismissed even without just cause under
the Termination Pay Law 61, the Labor Code affords workers
broad security of tenure. Still, the law recognizes the right of
the employer to terminate for just cause. The just causes
enumerated under the Labor Code serious misconduct or
willful disobedience, gross and habitual neglect, fraud or
willful breach of trust, commission of a crime by the
employee against the employer, and other analogous causes
are characterized by the harmful behavior of an employee
against the business or the person of the employer.
These just causes for termination are not negated by the
absence of notice or hearing. An employee who tries to kill
the employer cannot be magically absolved of trespasses just
because the employer forgot to serve due notice. Or a less
extreme example, the gross and habitual neglect of an
employee will not be improved upon just because the
employer failed to conduct a hearing prior to termination.

In fact, the practical purpose of requiring notice and hearing

is to afford the employee the opportunity to dispute the
contention that there was just cause in the dismissal. Yet it
must be understood if a dismissed employee is
deprived of the right to notice and hearing, and thus
denied the opportunity to present countervailing
evidence that disputes the finding of just cause,
reinstatement will be valid not because the notice and
hearing requirement was not observed, but because
there was no just cause in the dismissal. The
opportunity to dispute the finding of the just cause is readily
available before the Labor Arbiter, and the subsequent levels
of appellate review. Again, as held in Serrano:
Even in cases of dismissal under Art. 282, the purpose for the
requirement of notice and hearing is not to comply with the
Due Process Clause of the Constitution. The time for notice
and hearing is at the trial stage. Then that is the time we
speak of notice and hearing as the essence of procedural due
process. Thus, compliance by the employer with the notice
requirement before he dismisses an employee does not
foreclose the right of the latter to question the legality of his
dismissal. As Art. 277(b) provides, "Any decision taken by the
employer shall be without prejudice to the right of the worker
to contest the validity or legality of his dismissal by filing a
complaint with the regional branch of the National Labor
Relations Commission.62
The Labor Code presents no textually demonstrable
commitment to invalidate a dismissal for just cause due to
the absence of notice or hearing. This is not surprising, as
such remedy will not restore the employer or employee into
equity. Absent a showing of integral causation, the mutual
infliction of wrongs does not negate either injury, but instead
enforces two independent rights of relief.
The Damages' Dimensions

Award for Damages Must Have Statutory Basis

The Court has grappled with the problem of what should be
the proper remedial relief of an employee dismissed with just
cause, but not afforded either notice or hearing. In a long line
of cases, beginning with Wenphil Corp. v. NLRC63 and up
until Serrano in 2000, the Court had deemed an
indemnification award as sufficient to answer for the violation
by the employer against the employee. However, the
doctrine was modified in Serrano.
I disagree with Serrano insofar as it held that employees
terminated for just cause are to be paid backwages from the
time employment was terminated "until it is determined that
the termination is for just cause because the failure to hear
him before he is dismissed renders the termination of his
employment without legal effect."64 Article 279 of the Labor
Code clearly authorizes the payment of backwages only if an
employee is unjustly dismissed. A dismissal for just cause is
obviously antithetical to an unjust dismissal. An award for
backwages is not clearly warranted by the law.
The Impropriety of Award for Separation Pay
The formula of one month's pay for every year served does
have statutory basis. It is found though in the Labor Code
though, not the Civil Code. Even then, such computation is
made for separation pay under the Labor Code. But
separation pay is not an appropriate as a remedy in this
case, or in any case wherein an employee is terminated for
just cause. As Justice Vitug noted in his separate opinion
in Serrano, an employee whose employment is terminated
for a just cause is not entitled to the payment of separation
benefits.65 Separation pay is traditionally a monetary award
paid as an alternative to reinstatement which can no longer
be effected in view of the long passage of time or because of
the realities of the situation.66 However, under Section 7, Rule
1, Book VI of the Omnibus Rules Implementing the Labor

Code, "[t]he separation from work of an employee for a just

cause does not entitle him to the termination pay provided in
the Code."67 Neither does the Labor Code itself provide
instances wherein separation pay is warranted for dismissals
with just cause. Separation pay is warranted only for
dismissals for authorized causes, as enumerated in Article
283 and 284 of the Labor Code.

equity or social justice can be invoked as basis for the award.

However, this sort of arbitrariness, indeterminacy and judicial
usurpation of legislative prerogatives is precisely the source
of my discontent. Social justice should be the aspiration of all
that we do, yet I think it the more mature attitude to consider
that it ebbs and flows within our statutes, rather than view it
as an independent source of funding.

The Impropriety of Equity Awards

Article 288 of the Labor Code as a Source of Liability

Admittedly, the Court has in the past authorized the award of

separation pay for duly terminated employees as a measure
of social justice, provided that the employee is not guilty of
serious misconduct reflecting on moral character. 68 This
doctrine is inapplicable in this case, as the Agabons are guilty
of abandonment, which is the deliberate and unjustified
refusal of an employee to resume his employment.
Abandonment is tantamount to serious misconduct, as it
constitutes a willful breach of the employer-employee
relationship without cause.

Another putative source of liability for failure to render the

notice requirement is Article 288 of the Labor Code, which
states:

The award of separation pay as a measure of social justice

has no statutory basis, but clearly emanates from the Court's
so-called "equity jurisdiction." The Court's equity jurisdiction
as a basis for award, no matter what form it may take, is
likewise unwarranted in this case. Easy resort to equity
should be avoided, as it should yield to positive rules which
pre-empt and prevail over such persuasions. 69 Abstract as the
concept is, it does not admit to definite and objective
standards.
I consider the pronouncement regarding the proper monetary
awards in such cases as Wenphil Corp. v. NLRC,70Reta,71 and
to a degree, even Serrano as premised in part on equity. This
decision is premised in part due to the absence of cited
statutory basis for these awards. In these cases, the Court
deemed an indemnity award proper without exactly saying
where in statute could such award be derived at. Perhaps,

Article 288 states:

Penalties. Except as otherwise provided in this Code, or
unless the acts complained of hinges on a question of
interpretation or implementation of ambiguous provisions of
an existing collective bargaining agreement, any violation of
the provisions of this Code declared to be unlawful or penal
in nature shall be punished with a fine of not less than One
Thousand Pesos (P1,000.00) nor more than Ten Thousand
Pesos (P10,000.00), or imprisonment of not less than three
months nor more than three years, or both such fine and
imprisonment at the discretion of the court.
It is apparent from the provision that the penalty arises due
to contraventions of the provisions of the Labor Code. It is
also clear that the provision comes into play regardless of
who the violator may be. Either the employer or the
employee may be penalized, or perhaps even officials tasked
with implementing the Labor Code.
However, it is apparent that Article 288 is a penal provision;
hence, the prescription for penalties such as fine and
imprisonment. The Article is also explicit that the imposition
of fine or imprisonment is at the "discretion of the court."

Thus, the proceedings under the provision is penal in

character. The criminal case has to be instituted before the
proper courts, and the Labor Code violation subject thereof
duly proven in an adversarial proceeding. Hence, Article 288
cannot apply in this case and serve as basis to impose a
penalty on Riviera Homes.
I also maintain that under Article 288 the penalty should be
paid to the State, and not to the person or persons who may
have suffered injury as a result of the violation. A penalty is a
sum of money which the law requires to be paid by way of
punishment for doing some act which is prohibited or for not
doing some act which is required to be done. 72 A penalty
should be distinguished from damages which is the pecuniary
compensation or indemnity to a person who has suffered
loss, detriment, or injury, whether to his person, property, or
rights, on account of the unlawful act or omission or
negligence of another. Article 288 clearly serves as a punitive
fine, rather than a compensatory measure, since the
provision penalizes an act that violates the Labor Code even
if such act does not cause actual injury to any private person.
Independent of the employee's interests protected by the
Labor Code is the interest of the State in seeing to it that its
regulatory laws are complied with. Article 288 is intended to
satiate the latter interest. Nothing in the language of Article
288 indicates an intention to compensate or remunerate a
private person for injury he may have sustained.
It should be noted though that in Serrano, the Court observed
that since the promulgation of Wenphil Corp. v. NLRC73 in
1989, "fines imposed for violations of the notice requirement
have varied from P1,000.00 to P2,000.00 to P5,000.00
to P10,000.00."74 Interestingly, this range is the same range
of the penalties imposed by Article 288. These "fines"
adverted to in Serrano were paid to the dismissed employee.
The use of the term "fines," as well as the terminology

employed a few other cases, 75 may have left an erroneous

impression that the award implemented beginning
with Wenphil was based on Article 288 of the Labor Code.
Yet, an examination of Wenphilreveals that what the Court
actually awarded to the employee was an "indemnity",
dependent on the facts of each case and the gravity of the
omission committed by the employer. There is no mention
in Wenphil of Article 288 of the Labor Code, or indeed, of any
statutory basis for the award.
The Proper Basis: Employer's Liability under the Civil Code
As earlier stated, Wenphil allowed the payment of indemnity
to the employee dismissed for just cause is dependent on the
facts of each case and the gravity of the omission committed
by the employer. However, I considered Wenphil flawed
insofar as it is silent as to the statutory basis for the
indemnity award. This failure, to my mind, renders it unwise
for to reinstate the Wenphil rule, and foster the impression
that it is the judicial business to invent awards for damages
without clear statutory basis.
The proper legal basis for holding the employer liable
for monetary damages to the employee dismissed for
just cause is the Civil Code. The award of damages
should be measured against the loss or injury sufered
by the employee by reason of the employer's violation
or, in case of nominal damages, the right vindicated
by the award. This is the proper paradigm authorized
by our law, and designed to obtain the fairest possible
relief.
Under Section 217(4) of the Labor Code, the Labor Arbiter
has jurisdiction over claims for actual, moral, exemplary and
other forms of damages arising from the employer-employee
relations. It is thus the duty of Labor Arbiters to adjudicate
claims for damages, and they should disabuse themselves of
any inhibitions if it does appear that an award for damages is

warranted. As triers of facts in a specialized field, they should

attune themselves to the particular conditions or problems
attendant to employer-employee relationships, and thus be in
the best possible position as to the nature and amount of
damages that may be warranted in this case.
The damages referred under Section 217(4) of the Labor
Code are those available under the Civil Code. It is but proper
that the Civil Code serve as the basis for the indemnity, it
being the law that regulates the private relations of the
members of civil society, determining their respective rights
and obligations with reference to persons, things, and civil
acts.76 No matter how impressed with the public interest the
relationship between a private employer and employee is, it
still is ultimately a relationship between private individuals.
Notably, even though the Labor Code could very well have
provided set rules for damages arising from the employeremployee relationship, referral was instead made to the
concept of damages as enumerated and defined under the
Civil Code.
Given the long controversy that has dogged this present
issue regarding dismissals for just cause, it is wise to lay
down standards that would guide the proper award of
damages under the Civil Code in cases wherein the employer
failed to comply with statutory due process in dismissals for
just cause.
First. I believe that it can be maintained as a general rule,
that failure to comply with the statutory requirement of
notice automatically gives rise to nominal damages, at the
very least, even if the dismissal was sustained for just cause.
Nominal damages are adjudicated in order that a right of a
plaintiff which has been violated or invaded by another may
be vindicated or recognized without having to indemnify the
plaintiff for any loss suffered by him. 77 Nominal damages may
likewise be awarded in every obligation arising from law,

contracts, quasi-contracts, acts or omissions punished by

law, and quasi-delicts, or where any property right has been
invaded.
Clearly, the bare act of failing to observe the notice
requirement gives rise to nominal damages assessable
against the employer and due the employee. The Labor Code
indubitably entitles the employee to notice even if dismissal
is for just cause, even if there is no apparent intent to void
such dismissals deficiently implemented. It has also been
held that one's employment, profession, trade, or calling is a
"property right" and the wrongful interference therewith
gives rise to an actionable wrong.78
In Better Buildings, Inc. v. NLRC,79 the Court ruled that the
while the termination therein was for just and valid cause,
the manner of termination was done in complete disregard of
the necessary procedural safeguards. 80 The Court found
nominal damages as the proper form of award, as it was
purposed to vindicate the right to procedural due process
violated by the employer.81 A similar holding was maintained
in Iran v. NLRC82 and Malaya Shipping v. NLRC.83 The doctrine
has express statutory basis, duly recognizes the existence of
the right to notice, and vindicates the violation of such right.
It is sound, logical, and should be adopted as a general rule.
The assessment of nominal damages is left to the discretion
of the court,84 or in labor cases, of the Labor Arbiter and the
successive appellate levels. The authority to nominate
standards governing the award of nominal damages has
clearly been delegated to the judicial branch, and it will serve
good purpose for this Court to provide such guidelines.
Considering that the affected right is a property right, there is
justification in basing the amount of nominal damages on the
particular characteristics attaching to the claimant's
employment. Factors such as length of service, positions
held, and received salary may be considered to obtain the

proper measure of nominal damages. After all, the degree by

which a property right should be vindicated is affected by the
estimable value of such right.
At the same time, it should be recognized that nominal
damages are not meant to be compensatory, and should not
be computed through a formula based on actual losses.
Consequently, nominal damages usually limited in pecuniary
value.85 This fact should be impressed upon the prospective
claimant, especially one who is contemplating seeking
actual/compensatory damages.
Second. Actual or compensatory damages are not available
as a matter of right to an employee dismissed for just cause
but denied statutory due process. They must be based on
clear factual and legal bases,86 and correspond to such
pecuniary loss suffered by the employee as duly
proven.87 Evidently, there is less degree of discretion to
award actual or compensatory damages.
I recognize some inherent difficulties in establishing actual
damages in cases for terminations validated for just cause.
The dismissed employee retains no right to continued
employment from the moment just cause for termination
exists, and such time most likely would have arrived even
before the employer is liable to send the first notice. As a
result, an award of backwages disguised as actual damages
would almost never be justified if the employee was
dismissed for just cause. The possible exception would be if it
can be proven the ground for just cause came into being only
after the dismissed employee had stopped receiving wages
from the employer.
Yet it is not impossible to establish a case for actual damages
if dismissal was for just cause. Particularly actionable, for
example, is if the notices are not served on the employee,
thus hampering his/her opportunities to obtain new
employment. For as long as it can be demonstrated that the

failure of the employer to observe procedural due process

mandated by the Labor Code is the proximate cause of
pecuniary loss or injury to the dismissed employee, then
actual or compensatory damages may be awarded.
Third. If there is a finding of pecuniary loss arising from the
employer violation, but the amount cannot be proved with
certainty, then temperate or moderate damages are
available under Article 2224 of the Civil Code. Again,
sufficient discretion is afforded to the adjudicator as regards
the proper award, and the award must be reasonable under
the circumstances. 88 Temperate or nominal damages may yet
prove to be a plausible remedy, especially when common
sense dictates that pecuniary loss was suffered, but
incapable of precise definition.
Fourth. Moral and exemplary damages may also be awarded
in the appropriate circumstances. As pointed out by
the Decision, moral damages are recoverable where the
dismissal of the employee was attended by bad faith, fraud,
or was done in a manner contrary to morals, good customs or
public policy, or the employer committed an act oppressive
to labor.89 Exemplary damages may avail if the dismissal was
effected in a wanton, oppressive or malevolent manner.
Appropriate Award of Damages to the Agabons
The records indicate no proof exists to justify the award of
actual or compensatory damages, as it has not been
established that the failure to serve the second notice on the
Agabons was the proximate cause to any loss or injury. In
fact, there is not even any showing that such violation
caused any sort of injury or discomfort to the Agabons. Nor
do they assert such causal relation. Thus, the only
appropriate award of damages is nominal damages.
Considering the circumstances, I agree that an award of
Fifteen Thousand Pesos (P15,000.00) each for the Agabons is
sufficient.

All premises considered, I VOTE to:

(1) DENY the PETITION for lack of merit, and AFFIRM
the Decision of the Court of Appeals dated 23 January 2003,
with the MODIFICATION that in addition, Riviera Homes be
ORDERED to pay the petitioners the sum of Fifteen Thousand
Pesos (P15,000.00) each, as nominal damages.
(2) HOLD that henceforth, dismissals for just cause may not
be invalidated due to the failure to observe the due process
requirements under the Labor Code, and that the only
indemnity award available to the employee dismissed for just
cause are damages under the Civil Code as duly proven. Any
and all previous rulings and statements of the Court
inconsistent with this holding are now deemed INOPERATIVE.
DANTE O. TINGA
Associate Justice

DOMINGO ASIA, FRANCISCO BAYUGA, ARTHUR M.

ORIBELLO, BUENAVENTURA DE GUZMAN, JR., ROBERT
A. ORDOO, BERNARD V. JULARBAL, IGNACIO C.
ALINGBAS and LEODEL N. SORIANO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD
DIVISION), and BENGUET ELECTRIC COOPERATIVE, INC.
(BENECO) respondents.
AUSTRIA-MARTINEZ, J.:
Before us is a petition for certiorari seeking to annul the
decision promulgated by the National Labor Relations
Commission (NLRC) on July 2, 1992 in NLRC CA No. L-00038492,1 and its resolution dated September 24, 1992 denying
petitioners motion for reconsideration.
The factual background of this case, as summarized by the
Labor Arbiter, is as follows:
Fifteen (15) in all, these are consolidated cases for illegal
dismissal, underpayment of wages and claim for indemnity
pay against a common respondent, the Benguet Electric
Cooperative, Inc., (BENECO for short) represented by its
Acting General Manager, Gerardo P. Versoza.
Complainants services as meter readers were contracted for
hardly a months duration, or from October 8 to 31, 1990.
Their employment contracts, couched in identical terms,
read:

G.R. No. 108405

April 4, 2003

JAIME D. VIERNES, CARLOS R. GARCIA, BERNARD

BUSTILLO, DANILO C. BALANAG, FERDINAND DELLA,
EDWARD
A.
ABELLERA,
ALEXANDER
ABANAG,

You are hereby appointed as METER READER (APPRENTICE)

under BENECO-NEA Management with compensation at the
rate of SIXTY-SIX PESOS AND SEVENTY-FIVE CENTAVOS
(P66.75) per day from October 08 to 31, 1990.
x x x. (Annex B, Complainants Joint Position Paper)

The said term notwithstanding, the complainants were

allowed to work beyond October 31, 1990, or until January 2,
1991. On January 3, 1991, they were each served their
identical notices of termination dated December 29, 1990.
The same read:

indemnity for its failure to give complainants the 30-day

notice mandated under Article 283 of the Labor Code; or, at
the option of the complainants, to pay each financial
assistance in the amount of P5,000.00 and the P2,590.50
above-mentioned.

Please be informed that effective at the close of office hours

of December 31, 1990, your services with the BENECO will be
terminated. Your termination has nothing to do with your
performance. Rather, it is because we have to retrench on
personnel as we are already overstaffed.

2. Respondent is also ordered:

x x x. (Annex C, CJPP)
On the same date, the complainants filed separate
complaints for illegal dismissal. And following the
amendment of said complaints, they submitted their joint
position paper on April 4, 1991. Respondent filed its position
paper on April 2, 1991.
It is the contention of the complainants that they were not
apprentices but regular employees whose services were
illegally and unjustly terminated in a manner that was
whimsical and capricious. On the other hand, the respondent
invokes Article 283 of the Labor Code in defense of the
questioned dismissal.2
On October 18, 1991, the Labor Arbiter rendered a decision,
the dispositive portion of which reads as follows:

A. To pay complainants
underpayment of their wages:

the

amount

representing

a) Jaime Viernes, Carlos Garcia, Danilo Balanag, Edward

Abellera, Francisco Bayuga, Arthur Oribello, Buenaventura de
Guzman, Jr., Robert Ordoo, Bernard Jularbal and Leodel
Soriano, P1,994.25 each;
b) Bernard Bustillo and Domingo Asia, P1,838.50 each; and
c) Ferdinand Della, Alexander Abanag and Ignacio Alingbas,
P1,816.25 each.
B. To extend to complainant Jaime Viernes an appointment as
regular employee for the position of meter reader, the job he
held prior to his termination, and to pay him P2,590.50 as
indemnity, plus the underpayment of his wages as above
stated.
C. To pay P7,000.00 as and for attorneys fees.
No damages.

WHEREFORE, judgment is hereby rendered:

SO ORDERED.3

1. Dismissing the complaints for illegal dismissal filed by the

complainants for lack of merit. However in view of the offer
of the respondent to enter into another temporary
employment contract with the complainants, the respondent
is directed to so extend such contract to each complainant,
with the exception of Jaime Viernes, and to pay each the
amount of P2,590.50, which represents a months salary, as

Aggrieved by the Labor Arbiters decision, the complainants

and the respondent filed their respective appeals to the
NLRC.
On July 2, 1992, the NLRC modified its judgment, to wit:

WHEREFORE, premises considered, judgment is hereby

rendered modifying the appealed decision by declaring
complainants dismissal illegal, thus ordering their
reinstatement to their former position as meter readers or to
any equivalent position with payment of backwages limited
to one year and deleting the award of indemnity and
attorneys fees. The award of underpayment of wages is
hereby AFFIRMED.
SO ORDERED.4
On August 27, 1992, complainants filed a Motion for
Clarification and Partial Reconsideration. 5 On September 24,
1992, the NLRC issued a resolution denying the
complainants motion for reconsideration. 6
Hence, complainants filed herein petition.
Private respondent BENECO filed its Comment; the Office of
the Solicitor General (OSG) filed a Manifestation and Motion
in Lieu of Comment; public respondent NLRC filed its own
Comment; and petitioners filed their Manifestation and
Motion In Lieu of Consolidated Reply. Public respondent NLRC,
herein petitioners, and private respondent filed their
respective memoranda, and the OSG, its Manifestation in
1994.
Pursuant to our ruling in Rural Bank of Alaminos Employees
Union vs. NLRC,7 to wit:
in the decision in the case of St. Martin Funeral Homes vs.
National Labor Relations Commission, G.R. No. 130866,
promulgated on September 16, 1998, this Court pronounced
that petitions for certiorari relating to NLRC decisions must
be filed directly with the Court of Appeals, and labor cases
pending before this Court should be referred to the appellate
court for proper disposition. However, in cases where the
Memoranda of both parties have been filed with this Court

prior to the promulgation of the St. Martin decision, the Court

generally opts to take the case itself for its final disposition. 8
and considering that the parties have filed their respective
memoranda as of 1994, we opt to resolve the issues raised in
the present petition.
The parties raised the following issues:
1. Whether the respondent NLRC committed grave abuse of
discretion in ordering the reinstatement of petitioners to their
former position as meter readers on probationary status in
spite of its finding that they are regular employees under
Article 280 of the Labor Code.
2. Whether the respondent NLRC committed grave abuse of
discretion in limiting the backwages of petitioners to one
year only in spite of its finding that they were illegally
dismissed, which is contrary to the mandate of full
backwages until actual reinstatement but not to exceed three
years.
3. Whether the respondent NLRC committed grave abuse of
discretion in deleting the award of indemnity pay which had
become final because it was not appealed and in deleting the
award of attorneys fees because of the absence of a trialtype hearing.
4. Whether the mandate of immediately executory on the
reinstatement aspect even pending appeal as provided in the
decision of Labor Arbiters equally applies in the decision of
the National Labor Relations Commission even pending
appeal, by means of a motion for reconsideration of the order
reinstating a dismissed employee or pending appeal because
the case is elevated on certiorari before the Supreme Court. 9
We find the petition partly meritorious.

As to the first issue: We sustain petitioners claim that they

should be reinstated to their former position as meter
readers, not on a probationary status, but as regular
employees.
Reinstatement means restoration to a state or condition from
which one had been removed or separated. 10 In case of
probationary employment, Article 281 of the Labor Code
requires the employer to make known to his employee at the
time of the latters engagement of the reasonable standards
under which he may qualify as a regular employee.
A review of the records shows that petitioners have never
been probationary employees. There is nothing in the letter
of appointment, to indicate that their employment as meter
readers was on a probationary basis. It was not shown that
petitioners were informed by the private respondent, at the
time of the latters employment, of the reasonable standards
under which they could qualify as regular employees.
Instead, petitioners were initially engaged to perform their
job for a limited duration, their employment being fixed for a
definite period, from October 8 to 31, 1990.
Private respondents reliance on the case of Brent School,
Inc. vs. Zamora,11 wherein we held as follows:
Accordingly, and since the entire purpose behind the
development of legislation culminating in the present Article
280 of the Labor Code clearly appears to have been, as
already observed, to prevent circumvention of the
employees right to be secure in his tenure, the clause in said
article indiscriminately and completely ruling out all written
or oral agreements conflicting with the concept of regular
employment as defined therein should be construed to refer
to the substantive evil that the Code itself has singled out:
agreements entered into precisely to circumvent security of
tenure. It should have no application to instances where a
fixed period of employment was agreed upon knowingly and

voluntarily by the parties, without any force, duress or

improper pressure being brought to bear upon the employee
and absent any other circumstances vitiating his consent, or
where it satisfactorily appears that the employer and
employee dealt with each other on more or less equal terms
with no moral dominance whatever being exercised by the
former over the latter.12
is misplaced.
The principle we have enunciated in Brent applies only with
respect to fixed term employments. While it is true that
petitioners were initially employed on a fixed term basis as
their employment contracts were only for October 8 to 31,
1990, after October 31, 1990, they were allowed to continue
working in the same capacity as meter readers without the
benefit of a new contract or agreement or without the term
of their employment being fixed anew. After October 31,
1990, the employment of petitioners is no longer on a fixed
term basis. The complexion of the employment relationship
of petitioners and private respondent is thereby totally
changed. Petitioners have attained the status of regular
employees.
Under Article 280 of the Labor Code, a regular employee is
one who is engaged to perform activities which are necessary
or desirable in the usual business or trade of the employer, or
a casual employee who has rendered at least one year of
service, whether continuous or broken, with respect to the
activity in which he is employed.
In De Leon vs. NLRC,13 and Abasolo vs. NLRC,14 we laid down
the test in determining regular employment, to wit:
The primary standard, therefore, of determining regular
employment is the reasonable connection between the
particular activity performed by the employee in relation to
the usual trade or business of the employer. The test is

whether the former is usually necessary or desirable in the

usual business or trade of the employer. The connection can
be determined by considering the nature of the work
performed and its relation to the scheme of the particular
business or trade in its entirety. Also if the employee has
been performing the job for at least a year, even if the
performance is not continuous and merely intermittent, the
law deems repeated and continuing need for its performance
as sufficient evidence of the necessity if not indispensability
of that activity to the business. Hence, the employment is
considered regular, but only with respect to such activity and
while such activity exists.15
Clearly therefrom, there are two separate instances whereby
it can be determined that an employment is regular: (1) The
particular activity performed by the employee is necessary or
desirable in the usual business or trade of the employer; or
(2) if the employee has been performing the job for at least a
year.
Herein petitioners fall under the first category. They were
engaged to perform activities that are necessary to the usual
business of private respondent. We agree with the labor
arbiters pronouncement that the job of a meter reader is
necessary to the business of private respondent because
unless a meter reader records the electric consumption of
the subscribing public, there could not be a valid basis for
billing the customers of private respondent. The fact that the
petitioners were allowed to continue working after the
expiration of their employment contract is evidence of the
necessity and desirability of their service to private
respondents business. In addition, during the preliminary
hearing of the case on February 4, 1991, private respondent
even offered to enter into another temporary employment
contract with petitioners. This only proves private
respondents need for the services of herein petitioners. With
the continuation of their employment beyond the original

term, petitioners have become full-fledged regular

employees. The fact alone that petitioners have rendered
service for a period of less than six months does not make
their employment status as probationary.
Since petitioners are already regular employees at the time
of their illegal dismissal from employment, they are entitled
to be reinstated to their former position as regular
employees, not merely probationary.
As to the second issue, Article 279 of the Labor Code, as
amended by R.A. No. 6715, which took effect on March 21,
1989, provides that an illegally dismissed employee is
entitled to full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the
time of his actual reinstatement. Since petitioners were
employed on October 8, 1990, the amended provisions of
Article 279 of the Labor Code shall apply to the present case.
Hence, it was patently erroneous, tantamount to grave abuse
of discretion on the part of the public respondent in limiting
to one year the backwages awarded to petitioners.
With respect to the third issue, an employer becomes liable
to pay indemnity to an employee who has been dismissed if,
in effecting such dismissal, the employer fails to comply with
the requirements of due process. 16 The indemnity is in the
form of nominal damages intended not to penalize the
employer but to vindicate or recognize the employees right
to procedural due process which was violated by the
employer.17 Under Article 2221 of the Civil Code, nominal
damages are adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the defendant, may
be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.
We do not agree with the ruling of the NLRC that indemnity is
incompatible with the award of backwages. These two

awards are based on different considerations. Backwages are

granted on grounds of equity to workers for earnings lost due
to their illegal dismissal from work. 18 On the other hand, the
award of indemnity, as we have earlier held, is meant to
vindicate or recognize the right of an employee to due
process which has been violated by the employer.
In the present case, the private respondent, in effecting the
dismissal of petitioners from their employment, failed to
comply with the provisions of Article 283 of the Labor Code
which requires an employer to serve a notice of dismissal
upon the employees sought to be terminated and to the
Department of Labor, at least one month before the intended
date of termination. Petitioners were served notice on
January 3, 1991 terminating their services, effective
December 29, 1990, or retroactively, in contravention of
Article 283. This renders the private respondent liable to pay
indemnity to petitioners.
Thus, we find that the NLRC committed grave abuse of
discretion in deleting the award of indemnity. In Del Val vs.
NLRC,19 we held that the award of indemnity ranges from
P1,000.00 to P10,000.00 depending on the particular
circumstances of each case. In the present case, the amount
of indemnity awarded by the labor arbiter is P2,590.50, which
is equivalent to petitioners one-month salary. We find no
cogent reason to modify said award, for being just and
reasonable.
As to the award of attorneys fees, the same is justified by
the provisions of Article 111 of the Labor Code, to wit:
Art. 111. Attorneys fees (a) In cases of unlawful
withholding of wages the culpable party may be assessed
attorneys fees equivalent to ten percent of the amount of
wages recovered.

(b) It shall be unlawful for any person to demand or accept,

in any judicial or administrative proceedings for the recovery
of the wages, attorneys fees which exceed ten percent of the
amount of wages recovered.
As to the last issue, Article 223 of the Labor Code is plain and
clear that the decision of the NLRC shall be final and
executory after ten (10) calendar days from receipt thereof
by the parties. In addition, Section 2(b), Rule VIII of the New
Rules of Procedure of the NLRC provides that "should there
be a motion for reconsideration entertained pursuant to
Section 14, Rule VII of these Rules, the decision shall be
executory after ten calendar days from receipt of the
resolution on such motion."
We find nothing inconsistent or contradictory between Article
223 of the Labor Code and Section 2(b), Rule VIII, of the NLRC
Rules of Procedure. The aforecited provision of the NLRC
Rules of Procedure merely provides for situations where a
motion for reconsideration is filed. Since the Rules allow the
filing of a motion for reconsideration of a decision of the
NLRC, it simply follows that the ten-day period provided
under Article 223 of the Labor Code should be reckoned from
the date of receipt by the parties of the resolution on such
motion. In the case at bar, petitioners received the resolution
of the NLRC denying their motion for reconsideration on
October 22, 1992. Hence, it is on November 2, 1992 that the
questioned decision became executory.
WHEREFORE, the petition is partially GRANTED. The decision
of the National Labor Relations Commission dated July 2,
1992 is MODIFIED. Private respondent Benguet Electric
Cooperative, Inc. (BENECO) is hereby ordered to reinstate
petitioners to their former or substantially equivalent position
as regular employees, without loss of seniority rights and
other privileges appurtenant thereto, with full backwages
from the time of their dismissal until they are actually

reinstated. The amount of P2,590.50 awarded by the labor

arbiter as indemnity to petitioners is REINSTATED. Private
respondent is also ordered to pay attorneys fees in the
amount of ten percent (10%) of the total monetary award
due to the petitioners. In all other respects the assailed
decision and resolution are AFFIRMED.
Costs against private respondent BENECO.
SO ORDERED.

G.R. No. 149629

October 4, 2004

ALAN
D.
GUSTILO, Petitioner,
vs.
WYETH PHILIPPINES, INC., FILEMON VERZANO, JR.,
AURELIO MERCADO and EDGAR EPILEPSIA,respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
At bar is a petition for review on certiorari under Rule 45 of
the 1997 Rules of Civil Procedure, as amended, assailing the
Decision1 dated January 24, 2001 and Resolution 2 dated
August 10, 2001 rendered by the Court of Appeals in CA-G.R.
SP No. 57545, entitled "Wyeth Phils., Inc. and/or Filemon
Verzano, Jr., Aurelio Mercado and Edgar Epilepsia vs. National
Labor Relations Commission (Fourth Division) and Alan
Gustilo."
The facts as borne by the records are:

On November 7, 1990, Alan D. Gustilo, petitioner, was

employed by Wyeth Philippines, Inc., respondent company,
as a pharmaceutical territory manager. Eventually, he was
placed in charge of its various branches in Metro Bacolod City
and Negros Occidental. To ensure a profitable sale of its
pharmaceutical products, he performed various functions,
such as visiting hospitals, pharmacies, drugstores and
physicians concerned; preparing and submitting his predated itinerary; and submitting periodic reports of his daily
call visits, monthly itinerary, and weekly locator and incurred
expenses.
Petitioners employment records show that respondent
company, on various dates, reprimanded and suspended him
for habitually neglecting to submit his periodic reports. On
November 28, 1994, respondent company sent petitioner a
notice reprimanding him for submitting late his weekly
expense report. Again, on July 5, 1995, he was late in
submitting the same report, prompting respondent company
to suspend him for five (5) days. Still, petitioner repeatedly
incurred delay in submitting his daily call reports dated
October 16-20, 1995, October 23-27, 1995, November 6-10,
1995, and November 13-17, 1995. He did not submit his daily
call reports for the period from November 20 to 24, 1995. As
a consequence, respondent company sent petitioner another
notice suspending him for fifteen (15) days or from January 2
to 22, 1996.
Meantime, respondent company, after integrating its
pharmaceutical products with Lederle, a sister company,
conducted a nationwide on-the-job training of sales
personnel. With this development, petitioner was assigned in
charge
of promoting four (4) Lederle pharmaceutical
products.
Subsequently, petitioner submitted to respondent company a
plan of action dated February 6, 1996 where he committed to

make an average of 18 daily calls to physicians; submit

promptly all periodic reports; and ensure 95% territory
program performance for every cycle.
However, petitioner failed to achieve the above objectives,
prompting respondent company to send him two (2) separate
notices dated February 20, 1996 and April 10, 1996, charging
him with willful violation of company rules and regulations
and directing him to submit a written explanation.

jointly and severally, complainant ALAN D. GUSTILO, the

following:
1.
Backwages P 676,162.
.
64
2.
Separation
.

pay 106,890.0
0

In his explanation, petitioner stated that he was overworked

and an object of reprisal by his immediate supervisor.

3.
Car
reimbursement
68,000.00
.

On May 22, 1996, upon recommendation of a Review Panel,

respondent company terminated the services of petitioner.

4.
Moral
damages
25,000.00
.

Aggrieved, petitioner, on June 21, 1996, filed with the

Regional Arbitration Branch No. VI at Bacolod City a
complaint
against
respondent
company
for
illegal
suspension, illegal dismissal and payment of allowances,
other monetary benefits, damages and attorneys fees,
docketed as RAB Case No. 06-10267-96. Impleaded also as
party respondents were Filemon Verzano, Jr., petitioners
immediate supervisor, and Aurelio Mercado and Edgar
Epilepsia, corporate officers of respondent company.
On March 5, 1998, the Labor Arbiter rendered a Decision
holding that petitioner was illegally dismissed from
employment and ordering respondents company and
Verzano, jointly and severally, to pay him P991,157.90
representing
his
backwages,
separation
pay,
car
reimbursement, damages and attorneys fees. The
dispositive portion of the Decision reads:
"WHEREFORE, premises considered, judgment is hereby
rendered against respondent company WYETH PHILS., INC.
and respondent FILEMON VERZANO, JR., ordering them to pay

5. Exemplary
.
6.
Attorneys
.

damages

fees

25,000.00

90,105.26

Grand
Total P 991,157.
.
90
Respondents are further directed to deposit the total amount
of NINE HUNDRED NINETY ONE THOUSAND ONE HUNDRED
FIFTY SEVEN PESOS and 90/100 (P991,157.90) with the
Cashier, this Arbitration Branch, within ten (10) days from
receipt hereof, for proper disposition.
SO ORDERED."
Respondents then appealed to the National Labor Relations
Commission (NLRC), Fourth Division at Cebu City.

On August 13, 1999, the NLRC (Fourth Division) promulgated

a Decision affirming with modification the Labor Arbiters
Decision in the sense that respondent company is ordered to
reinstate petitioner, or in lieu of reinstatement, to pay his
separation benefits, thus:
"WHEREFORE, premises considered, the appeal filed by
complainant is GRANTED and that of respondents is DENIED.
The Decision of Labor Arbiter Reynaldo J. Gulmatico dated
March 5, 1998 is MODIFIED, to wit:
Respondents are ordered:
1. To reinstate complainant Alan Gustilo to his former position
without loss of seniority rights and other privileges and to
pay his full backwages, inclusive of allowances and other
benefits, or their monetary equivalent computed from the
time his compensation was withheld from him up to the time
of his actual reinstatement. If reinstatement is no longer
feasible, complainant may opt to receive his separation pay
equivalent to at least one month salary for every year of
service, in lieu of reinstatement.
2. To refund, jointly and severally, complainant in the amount
of P4,190.00; and

On January 24, 2001, the Appellate Court rendered a Decision

reversing the NLRCs Decision and dismissing petitioners
complaint for illegal dismissal, but awarding him separation
pay considering the mitigating "factors" of length of service,
the loyalty awards he received, and respondent Verzanos
"grudge" against him.
The Court of Appeals held:
"Respondent Gustilo cannot deny the numerous violations of
company rules during his employment with Wyeth. Gustilos
201 file reveal the following:
1. On February 2, 1993, he was suspended for falsifying,
tampering and/or altering the gasoline receipt (Annex 12,
Wyeths Position Paper, Rollo, p. 142).
2. On June 28, 1993, he was warned for false reporting of his
trade outlet calls (Annex 13, Wyeths Position Paper, Rollo,
p. 143).
3. On September 8, 1993, he was guilty of unauthorized
availment of sick leaves, emergency leaves, vacation leaves
and unauthorized absences (Annex 14, Wyeths Position
Paper, Rollo, p. 144).

SO ORDERED."

4. On November 28, 1994, he was cited for his repeated

delay in submitting his expense reports (Annex 4, Wyeths
Position Paper, Rollo, p. 132).

Respondents filed their motion for reconsideration but was

denied by the NLRC in a Resolution dated December 28,
1999.

5. On July 10, 1995, he was cited for failure to submit his

expense report on time (Annex 5, Wyeths Position Paper,
Rollo, p. 133).

As a consequence, respondents filed with the Court of

Appeals a petition for certiorari with prayer for issuance of a
temporary restraining order and a writ of preliminary
injunction.

6. On September 26, 1995, he was charged with breach of

the rule on submission of required reports (Annex 8,
Wyeths Position Paper, Rollo, p. 136).

3. To pay 10% of the total monetary award as attorneys fees.

7. On November 28, 1995, he was again cited for

unauthorized absence on October 19, 1995 and other
violations of company rules as contained in a letter of the
same date (Annex 9, Wyeths Position Paper, Rollo, p. 137).
From 1993 up to 1995, respondent has repeatedly
guaranteed not to repeat transgressing company rules under
pain of termination, but to no avail (Letter dated January 16,
1993; Rollo, p. 141; Internal Memo dated February 1, 1993;
Rollo, p. 142; Internal Memo dated July 11, 1995; Rollo, p.
134; Plan of Action dated February 6, 1996; Rollo, p. 147). It
has become clear that respondent Gustilo is a habitual
ofender whose numerous contraventions of company
rules has left Wyeth with no choice but to terminate
him based on Article 282 of the Labor Code, gross and
habitual neglect by the employee of his duties, being
a valid cause for termination.
While dismissal is proper, the Court however considers
the length of service of respondent Gustilo with
Wyeth, the loyalty awards he received and the grudge
of petitioner Verzano, Jr. as mitigating factors. The
Court is inclined to reinstate respondent Gustilo to his
former position without backwages and other
benefits. However in view of the strained relationship
between respondent Gustilo and petitioner Verzano,
Jr., the Court rules to award separation pay to
respondent Gustilo in the amount of P106,890.00.
In view of our finding that there are valid causes for
dismissal, it follows that the award for payment of
backwages, damages and attorneys fees has to be recalled
for want of basis.
Being uncontested, the refund of car expenses in the amount
of P4,190.00
to
respondent
Gustilo
and
payment
of P68,000.00 representing the difference between the KIA

car, the supposed car and the NISSAN LEC have to be

maintained.
In view of our finding that there was a valid dismissal,
petitioners Aurello Mercado and Edgar Epilepsia, as a
consequence, cannot be held personally liable to respondent
Gustilo. Even assuming ex grati argumentithat termination is
illegal, corporate officers like petitioners Mercado and
Epilepsia are mere agents of Wyeth and acts done in good
faith and in representation or on behalf of said company and
within the scope of their authority cannot give rise to any
liability on their part as said acts are considered corporate
acts.
xxx
WHEREFORE, the subject Decision and Resolution,
promulgated on August 13, 1999 and December 28, 1999,
respectively, by respondent National Labor Relations
Commission are SET ASIDE and REVERSED and a new
judgment is rendered, as follows:
1. The Complaint for illegal dismissal against petitioners
Wyeth Philippines, Inc., Aurelio Mercado and Edgar Epilepsia
is dismissed for lack of merit;
2. Petitioner Wyeth Philippines, Inc. is ordered to pay
respondent Alan Gustilo P106,890.00 as separation pay;
3. Wyeth Philippines, Inc. is ordered to pay respondent
Gustilo P68,000.00 representing the difference between the
prices of the supposed car, KIA and the NISSAN LEC,
and P4,190.00 equivalent to the cost of one piece of tire,
headlight and tire wrench.
SO ORDERED."

On February 16, 2001, petitioner filed a motion for

reconsideration, but was denied by the Appellate Court in a
Resolution dated August 10, 2001.

intentional disobedience thereof, as a general rule, justifies

rescission of the contract of service and the preemptory
dismissal of the employee."

Hence, this petition for review on certiorari.

Records show the various violations of respondent companys

rules and regulations committed by petitioner. His dismissal
from the service is, therefore, in order. Indeed, in Piedad vs.
Lanao del Norte Electric Cooperative, Inc.,5we ruled that a
series of irregularities when put together may constitute
serious misconduct, which under Article 282 of the Labor
Code, as amended,6 is a just cause for dismissal.

Petitioner, in the present petition, contends that he was

illegally dismissed from the service by respondent company.
Hence, he should be reinstated and paid his full backwages
and other benefits and privileges.
In Philippine Journalists, Inc. vs. Mosqueda,3 we reiterated the
well-established rule that "findings of fact by the Court of
Appeals are conclusive on the parties and are not reviewable
by this Court. x x x. The rationale behind this doctrine is that
review of the findings of fact by the Court of Appeals is not a
function that the Supreme Court normally undertakes."
Here, the Court of Appeals unequivocally ruled that "Gustilo
(herein petitioner) is a habitual
ofender
whose
numerous contraventions of company rules has left
Wyeth (herein respondent) with no choice but to terminate
his services x x x."
Evidently, there is no cogent reason why we should not
accord deference and finality to the Appellate Courts factual
findings which are supported by substantial evidence as
shown by the records.
In Family Planning Organization of the Philippines, Inc. vs.
NLRC,4 we held:
"It is the employer's prerogative to prescribe reasonable rules
and regulations necessary or proper for the conduct of its
business or concern, to provide certain disciplinary measures
to implement said rules and to assure that the same be
complied with. At the same time, it is one of the fundamental
duties of the employee to yield obedience to all reasonable
rules, orders, and instructions of the employer, and willful or

But the Court of Appeals still awarded him separation pay

of P106,890.00 by reason of several mitigating factors
mentioned in its assailed Decision. The issue for our
determination now is whether he is entitled to such an
award.
The rule embodied in the Omnibus Rules Implementing the
Labor Code is that a person dismissed for cause as defined
therein is not entitled to separation pay. 7 However, in PLDT
vs. NLRC and Abucay,8 we held:
"x x x henceforth, separation pay shall be allowed as a
measure of social justice only in those instances
where the employee is validly dismissed for causes
other than serious misconduct or those reflecting on
his moral character. Where the reason for the valid
dismissal is, x x x an offense involving moral turpitude x x x,
the employer may not be required to give the dismissed
employee separation pay, or financial assistance, or
whatever other name it is called, on the ground of social
justice."
Similarly, in Telefunken Semiconductors Employees UnionFFW vs. Court of Appeals,9 we ruled:

"The same view holds with respect to the award of financial

assistance or separation pay. The assumption for granting
financial assistance or separation pay, which is, that there is
an illegally dismissed employee and that illegally dismissed
employee would otherwise have been entitled to
reinstatement, is not present in the case at bench. Here, the
striking workers have been validly dismissed Where the
employees dismissal was for a just cause, it would be
neither fair nor just to allow the employee to recover
something he has not earned or could not have earned. This
being so, there can be no award of backwages, for it must be
pointed out that while backwages are granted on the basis of
equity for earnings which a worker or employee has lost due
to his illegal dismissal, where private respondents dismissal
is for just cause, as in the case herein, there is no factual or
legal basis to order the payment of backwages; otherwise,
private respondent would be unjustly enriching herself at the
expense of petitioners. (Cathedral School of Technology vs.
National Labor Relations Commission, 214 SCRA 551).
Consequently, granting financial assistance to the strikers is
clearly a specious inconsistency (supra). We are of course
aware that financial assistance may be allowed as a
measure of social justice in exceptional circumstances
and as an equitable concession. We are likewise
mindful that financial assistance is allowed only in
those instances where the employee is validly
dismissed for causes other than serious misconduct or
those reflecting on his moral character (Zenco Sales,
Inc. vs. National Labor Relations Commission, 234 SCRA 689).
x x x."
In the case at bar, we find no exceptional circumstances to
warrant the grant of financial assistance or separation pay to
petitioner. It bears stressing that petitioner did not only
violate company disciplinary rules and regulations. As
found by the Court of Appeals, he falsified his
employment application form by not stating therein

that he is the nephew of Mr. Danao, respondent

Wyeths Nutritional Territory Manager. Also, on February
2, 1993, he was suspended for falsifying a gasoline
receipt. On June 28, 1993, he was warned for submitting
a false report of his trade outlet calls. On September 8,
1993, he was found guilty of unauthorized availment of
sick,
vacation
and
emergency
leaves.
These
infractions manifest his slack of moral principle. In
simple term, he is dishonest.
Neither can petitioner find reliance on the policy of social
justice. As aptly held by this Court in the same case
ofPhilippine Long Distance Telephone vs. NLRC and
Abucay,10 "[T]hose who invoke social justice may do so only if
their hands are clean and their motives blameless x x x."
Here, petitioner failed to measure up to such requirement.
In sum, we find that petitioner was legally dismissed from
employment and is, therefore, not entitled to reinstatement
or an award of separation pay or other benefits.
Unfortunately, respondent company did not interpose an
appeal to this Court. Hence, no affirmative relief can be
extended to it. A party in a case who did not appeal is not
entitled to any affirmative relief.11 Thus, respondent company
has to comply with the Appellate Courts mandate to grant
petitioner his separation pay.
WHEREFORE,
petitioner.
SO ORDERED.

the

petition

is DENIED. Costs

against

Respondents Darwin Pacot, Robert Parohinog, David Bisnar,

Marlon Domingo, Rhoel Lescano and Jonathan Cagabcab
were earlier hired by petitioner JAKA Foods Processing
Corporation (JAKA, for short) until the latter terminated their
employment on August 29, 1997 because the corporation
was "in dire financial straits". It is not disputed, however, that
the termination was effected without JAKA complying with the
requirement under Article 283 of the Labor Code regarding
the service of a written notice upon the employees and the
Department of Labor and Employment at least one (1) month
before the intended date of termination.
G.R. No. 151378. March 28, 2005
JAKA FOOD PROCESSING CORPORATION, Petitioners,
vs.
DARWIN PACOT, ROBERT PAROHINOG, DAVID BISNAR,
MARLON DOMINGO, RHOEL LESCANO and JONATHAN
CAGABCAB, Respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this appeal by way of a
petition for review on certiorari under rule 45 of the Rules of
Court are the following issuances of the Court of Appeals in
CA-G.R. SP. No. 59847, to wit:
1. Decision dated 16 November 2001,1 reversing and
setting aside an earlier decision of the National Labor
Relations Commission (NLRC); and
2. Resolution dated 8 January 2002, 2 denying petitioners
motion for reconsideration.
The material facts may be briefly stated, as follows:

In time, respondents separately filed with the regional

Arbitration Branch of the National Labor Relations
Commission (NLRC) complaints for illegal dismissal,
underpayment of wages and nonpayment of service
incentive leave and 13th month pay against JAKA and its HRD
Manager, Rosana Castelo.
After due proceedings, the Labor Arbiter rendered a
decision3 declaring the termination illegal and ordering JAKA
and its HRD Manager to reinstate respondents with full
backwages, and separation pay if reinstatement is not
possible. More specifically the decision dispositively reads:
WHEREFORE, judgment is hereby rendered declaring as
illegal the termination of complainants and ordering
respondents to reinstate them to their positions with full
backwages which as of July 30, 1998 have already amounted
to P339,768.00. Respondents are also ordered to pay
complainants the amount of P2,775.00 representing the
unpaid service incentive leave pay of Parohinog, Lescano and
Cagabcab an the amount of P19,239.96 as payment for 1997
13th month pay as alluded in the above computation.
If complainants could not be reinstated, respondents are
ordered to pay them separation pay equivalent to one month
salary for very (sic) year of service.

SO ORDERED.
Therefrom, JAKA went on appeal to the NLRC, which, in a
decision dated August 30, 1999,4 affirmed in toto that of the
Labor Arbiter.

13th month pay and, in addition, full backwages from the

time their employment was terminated on August 29, 1997
up to the time the Decision herein becomes final.
SO ORDERED.

JAKA filed a motion for reconsideration. Acting thereon, the

NLRC came out with another decision dated January 28,
2000,5 this time modifying its earlier decision, thus:

This time, JAKA moved for a reconsideration but its motion

was denied by the appellate court in its resolution of January
8, 2002.

WHEREFORE, premises considered, the instant motion for

reconsideration is hereby GRANTED and the challenged
decision of this Commission [dated] 30 August 1999 and the
decision of the Labor Arbiter xxx are hereby modified by
reversing an setting aside the awards of backwages, service
incentive leave pay. Each of the complainants-appellees shall
be entitled to a separation pay equivalent to one month. In
addition, respondents-appellants is (sic) ordered to pay each
of the complainants-appellees the sum of P2,000.00 as
indemnification for its failure to observe due process in
effecting the retrenchment.

Hence, JAKAs present recourse,

consideration, the following issues:

SO ORDERED.
Their motion for reconsideration having been denied by the
NLRC in its resolution of April 28, 2000,6 respondents went to
the Court of Appeals via a petition for certiorari, thereat
docketed as CA-G.R. SP No. 59847.
As stated at the outset hereof, the Court of Appeals, in a
decision dated November 16, 2000, applying the doctrine laid
down by this Court in Serrano vs. NLRC,7 reversed and set
aside the NLRCs decision of January 28, 2000, thus:
WHEREFORE, the decision dated January 28, 2000 of the
National Labor Relations Commission is REVERSEDand SET
ASIDE and another one entered ordering respondent JAKA
Foods Processing Corporation to pay petitioners separation
pay equivalent to one (1) month salary, the proportionate

submitting,

for

our

"I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY

AWARDED FULL BACKWAGES TO RESPONDENTS.
II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY
AWARDED SEPARATION PAY TO RESPONDENTS".
As we see it, there is only one question that requires
resolution, i.e. what are the legal implications of a situation
where an employee is dismissed for cause but such dismissal
was effected without the employers compliance with the
notice requirement under the Labor Code.
This, certainly, is not a case of first impression. In the very
recent case of Agabon vs. NLRC,8 we had the opportunity to
resolve a similar question. Therein, we found that the
employees committed a grave offense, i.e.,abandonment,
which is a form of a neglect of duty which, in turn, is one of
the just causes enumerated under Article 282 of the Labor
Code. In said case, we upheld the validity of the dismissal
despite non-compliance with the notice requirement of the
Labor Code. However, we required the employer to pay the
dismissed
employees
the
amount
of
P30,000.00,
representing nominal damages for non-compliance with
statutory due process, thus:

"Where the dismissal is for a just cause, as in the instant

case, the lack of statutory due process should not nullify the
dismissal, or render it illegal, or ineffectual. However, the
employer should indemnify the employee for the violation of
his statutory rights, as ruled in Reta vs. National Labor
Relations Commission. The indemnity to be imposed should
be stiffer to discourage the abhorrent practice of dismiss
now, pay later, which we sought to deter in
the Serrano ruling. The sanction should be in the nature of
indemnification or penalty and should depend on the facts of
each case, taking into special consideration the gravity of the
due process violation of the employer.
xxx xxx xxx
The violation of petitioners right to statutory due process by
the private respondent warrants the payment of indemnity in
the form of nominal damages. The amount of such damages
is addressed to the sound discretion of the court, taking into
account the relevant circumstances. Considering the
prevailing circumstances in the case at bar, we deem
it proper to fix it at P30,000.00. We believe this form of
damages would serve to deter employers from future
violations of the statutory due process rights of employees.
At the very least, it provides a vindication or recognition of
this fundamental right granted to the latter under the Labor
Code and its Implementing Rules," (Emphasis supplied).
The difference between Agabon and the instant case is that
in the former, the dismissal was based on a just cause under
Article 282 of the Labor Code while in the present case,
respondents were dismissed due to retrenchment, which is
one of the authorized causes under Article 283 of the same
Code.
At this point, we note that there are divergent implications of
a dismissal for just cause under Article 282, on one hand, and

a dismissal for authorized cause under Article 283, on the

other.
A dismissal for just cause under Article 282 implies that the
employee concerned has committed, or is guilty of, some
violation against the employer, i.e. the employee has
committed some serious misconduct, is guilty of some fraud
against the employer, or, as in Agabon, he has neglected his
duties. Thus, it can be said that the employee himself
initiated the dismissal process.
On another breath, a dismissal for an authorized
cause under Article 283 does not necessarily imply
delinquency or culpability on the part of the employee.
Instead, the dismissal process is initiated by the employers
exercise of his management prerogative, i.e. when the
employer opts to install labor saving devices, when he
decides to cease business operations or when, as in this
case, he undertakes to implement a retrenchment program.
The clear-cut distinction between a dismissal for just cause
under Article 282 and a dismissal for authorized cause under
Article 283 is further reinforced by the fact that in the first,
payment of separation pay, as a rule, is not required, while in
the second, the law requires payment of separation pay. 9
For these reasons, there ought to be a difference in
treatment when the ground for dismissal is one of the just
causes under Article 282, and when based on one of the
authorized causes under Article 283.
Accordingly, it is wise to hold that: (1) if the dismissal is
based on a just cause under Article 282 but the employer
failed to comply with the notice requirement, the sanction to
be imposed upon him should be tempered because the
dismissal process was, in effect, initiated by an act imputable
to the employee; and (2) if the dismissal is based on an
authorized cause under Article 283 but the employer failed to

comply with the notice requirement, the sanction should

be stiffer because the dismissal process was initiated by the
employers exercise of his management prerogative.
The records before us reveal that, indeed, JAKA was suffering
from serious business losses at the time it terminated
respondents employment. As aptly found by the NLRC:
"A careful study of the evidence presented by the
respondent-appellant corporation shows that the audited
Financial Statement of the corporation for the periods 1996,
1997 and 1998 were submitted by the respondent-appellant
corporation, The Statement of Income and Deficit found in
the Audited Financial Statement of the respondent-appellant
corporation clearly shows the following in 1996, the deficit of
the respondent-appellant corporation was P188,218,419.00
or 94.11% of the stockholders [sic] equity which amounts to
P200,000,000.00. In 1997 when the retrenchment program of
respondent-appellant corporation was undertaken, the deficit
ballooned to P247,222,569.00 or 123.61% of the
stockholders equity, thus a capital deficiency or impairment
of equity ensued. In 1998, the deficit grew to
P355,794,897.00 or 177% of the stockholders equity. From
1996 to 1997, the deficit grew by more that (sic) 31% while
in 1998 the deficit grew by more than 47%.
The Statement of Income and Deficit of the respondentappellant corporation to prove its alleged losses was
prepared by an independent auditor, SGV & Co. It
convincingly
showed
that
the
respondent-appellant
corporation was in dire financial straits, which the
complainants-appellees failed to dispute. The losses incurred
by the respondent-appellant corporation are clearly
substantial and sufficiently proven with clear and satisfactory
evidence. Losses incurred were adequately shown with
respondent-appellants audited financial statement. Having
established the loss incurred by the respondent-appellant

corporation, it necessarily necessarily (sic) follows that the

ground in support of retrenchment existed at the time the
complainants-appellees were terminated. We cannot
therefore sustain the findings of the Labor Arbiter that the
alleged losses of the respondent-appellant was [sic] not well
substantiated by substantial proofs. It is therefore logical for
the corporation to implement a retrenchment program to
prevent further losses."10
Noteworthy it is, moreover, to state that herein respondents
did not assail the foregoing finding of the NLRC which,
incidentally, was also affirmed by the Court of Appeals.
It is, therefore, established that there was ground for
respondents dismissal, i.e., retrenchment, which is one of
the authorized causes enumerated under Article 283 of the
Labor Code. Likewise, it is established that JAKA failed to
comply with the notice requirement under the same Article.
Considering the factual circumstances in the instant case and
the above ratiocination, we, therefore, deem it proper to fix
the indemnity at P50,000.00.
We likewise find the Court of Appeals to have been in error
when it ordered JAKA to pay respondents separation pay
equivalent to one (1) month salary for every year of service.
This is because in Reahs Corporation vs. NLRC,11 we made
the following declaration:
"The rule, therefore, is that in all cases of business closure or
cessation of operation or undertaking of the employer, the
affected employee is entitled to separation pay. This is
consistent with the state policy of treating labor as a primary
social economic force, affording full protection to its rights as
well as its welfare. The exception is when the closure of
business or cessation of operations is due to serious
business losses or financial reverses; duly proved, in
which case, the right of afected employees to

separation pay is
(Emphasis supplied)

lost

for

obvious

reasons. xxx".

WHEREFORE, the instant petition is GRANTED. Accordingly,

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