Cases - Labor Code - 4

G.R. No.
144664
March 15, 2004
ASIAN TRANSMISSION CORPORATION, petitioner,

vs.
The Hon. COURT OF APPEALS, Thirteenth Division, HON. FROILAN M. BACUNGAN as
Voluntary Arbitrator, KISHIN A. LALWANI, Union, Union representative to the Panel
Arbitrators; BISIG NG ASIAN TRANSMISSION LABOR UNION (BATLU); HON.
BIENVENIDO T. LAGUESMA in his capacity as Secretary of Labor and Employment; and
DIRECTOR CHITA G. CILINDRO in her capacity as Director of Bureau of Working Conditions,
respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner, Asian Transmission Corporation, seeks via petition for certiorari under Rule 65 of the 1995
Rules of Civil Procedure the nullification of the March 28, 2000 Decision1 of the Court of Appeals
denying its petition to annul 1) the March 11, 1993 "Explanatory Bulletin"2 of the Department of Labor
and Employment (DOLE) entitled "Workers Entitlement to Holiday Pay on April 9, 1993, Araw ng
Kagitingan and Good Friday", which bulletin the DOLE reproduced on January 23, 1998, 2) the July 31,
1998 Decision3 of the Panel of Voluntary Arbitrators ruling that the said explanatory bulletin applied as
well to April 9, 1998, and 3) the September 18, 19984 Resolution of the Panel of Voluntary Arbitration
denying its Motion for Reconsideration.
The following facts, as found by the Court of Appeals, are undisputed:
The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano B. Trajano,
issued an Explanatory Bulletin dated March 11, 1993 wherein it clarified, inter alia, that employees are
entitled to 200% of their basic wage on April 9, 1993, whether unworked, which[,] apart from being Good
Friday [and, therefore, a legal holiday], is also Araw ng Kagitingan [which is also a legal holiday]. The
bulletin reads:
"On the correct payment of holiday compensation on April 9, 1993 which apart from being Good Friday
is also Araw ng Kagitingan, i.e., two regular holidays falling on the same day, this Department is of the
view that the covered employees are entitled to at least two hundred percent (200%) of their basic wage
even if said holiday is unworked. The first 100% represents the payment of holiday pay on April 9, 1993
as Good Friday and the second 100% is the payment of holiday pay for the same date as Araw ng
Kagitingan.
Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy Thursday and
Araw ng Kagitingan x x x x
Despite the explanatory bulletin, petitioner [Asian Transmission Corporation] opted to pay its daily paid
employees only 100% of their basic pay on April 9, 1998. Respondent Bisig ng Asian Transmission
Labor Union (BATLU) protested.
In accordance with Step 6 of the grievance procedure of the Collective Bargaining Agreement (CBA)
existing between petitioner and BATLU, the controversy was submitted for voluntary arbitration. x x x x
On July 31, 1998, the Office of the Voluntary Arbitrator rendered a decision directing petitioner to pay its
covered employees "200% and not just 100% of their regular daily wages for the unworked April 9, 1998
which covers two regular holidays, namely, Araw ng Kagitignan and Maundy Thursday." (Emphasis and
underscoring supplied)
Subject of interpretation in the case at bar is Article 94 of the Labor Code which reads:
ART. 94. Right to holiday pay. - (a) Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such employee shall be
paid a compensation equivalent to twice his regular rate; and
(c) As used in this Article, "holiday" includes: New Years Day, Maundy Thursday, Good Friday,
the ninth of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of
November, the twenty-fifth and thirtieth of December and the day designated by law for holding a
general election,
which was amended by Executive Order No. 203 issued on June 30, 1987, such that the regular holidays
are now:
1. New Years Day January 1
2. Maundy Thursday Movable Date
3. Good Friday Movable Date
4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)
5. Labor Day May 1
6. Independence Day June 12
7. National Heroes Day Last Sunday of August
8. Bonifacio Day November 30
9. Christmas Day December 25
10. Rizal Day December 30
In deciding in favor of the Bisig ng Asian Transmission Labor Union (BATLU), the Voluntary Arbitrator
held that Article 94 of the Labor Code provides for holiday pay for every regular holiday, the computation
of which is determined by a legal formula which is not changed by the fact that there are two holidays
falling on one day, like on April 9, 1998 when it was Araw ng Kagitingan and at the same time was
Maundy Thursday; and that that the law, as amended, enumerates ten regular holidays for every year
should not be interpreted as authorizing a reduction to nine the number of paid regular holidays "just
because April 9 (Araw ng Kagitingan) in certain years, like 1993 and 1998, is also Holy Friday or
Maundy Thursday."
In the assailed decision, the Court of Appeals upheld the findings of the Voluntary Arbitrator, holding
that the Collective Bargaining Agreement (CBA) between petitioner and BATLU, the law governing the
relations between them, clearly recognizes their intent to consider Araw ng Kagitingan and Maundy
Thursday, on whatever date they may fall in any calendar year, as paid legal holidays during the
effectivity of the CBA and that "[t]here is no condition, qualification or exception for any variance from
the clear intent that all holidays shall be compensated."5
The Court of Appeals further held that "in the absence of an explicit provision in law which provides for
[a] reduction of holiday pay if two holidays happen to fall on the same day, any doubt in the interpretation
and implementation of the Labor Code provisions on holiday pay must be resolved in favor of labor."
By the present petition, petitioners raise the following issues:
I
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE
OF DISCRETION IN ERRONEOUSLY INTERPRETING THE TERMS OF THE COLLECTIVE
BARGAINING AGREEMENT BETWEEN THE PARTIES AND SUBSTITUTING ITS OWN
JUDGMENT IN PLACE OF THE AGREEMENTS MADE BY THE PARTIES THEMSELVES
II
OF DISCRETION IN HOLDING THAT ANY DOUBTS ABOUT THE VALIDITY OF THE POLICIES
ENUNCIATED IN THE EXPLANATORY BULLETIN WAS LAID TO REST BY THE REISSUANCE
OF THE SAID EXPLANATORY BULLETIN
III
OF DISCRETION IN UPHOLDING THE VALIDITY OF THE EXPLANATORY BULLETIN EVEN
WHILE ADMITTING THAT THE SAID BULLEITN WAS NOT AN EXAMPLE OF A JUDICIAL,
QUASI-JUDICIAL, OR ONE OF THE RULES AND REGULATIONS THAT [Department of Labor and
Employment] DOLE MAY PROMULGATE
IV
WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND
EMPLOYMENT (DOLE) BY ISSUING EXPLANATORY BULLETIN DATED MARCH 11, 1993, IN
THE GUISE OF PROVIDING GUIDELINES ON ART. 94 OF THE LABOR CODE, COMMITTED
GRAVE ABUSE OF DISCRETION, AS IT LEGISLATED AND INTERPRETED LEGAL
PROVISIONS IN SUCH A MANNER AS TO CREATE OBLIGATIONS WHERE NONE ARE
INTENDED BY THE LAW
V
OF DISCRETION IN SUSTAINING THE SECRETARY OF THE DEPARTMENT OF LABOR IN
REITERATING ITS EXPLANATORY BULLETIN DATED MARCH 11, 1993 AND IN ORDERING
THAT THE SAME POLICY OBTAINED FOR APRIL 9, 1998 DESPITE THE RULINGS OF THE
SUPREME COURT TO THE CONTRARY
VI
WHETHER OR NOT RESPONDENTS ACTS WILL DEPRIVE PETITIONER OF PROPERTY
WITHOUT DUE PROCESS BY THE "EXPLANATORY BULLETIN" AS WELL AS EQUAL
PROTECTION OF LAWS
The petition is devoid of merit.
At the outset, it bears noting that instead of assailing the Court of Appeals Decision by petition for review
on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner lodged the present petition
for certiorari under Rule 65.
[S]ince the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged errors
committed by it in the exercise of its jurisdiction would be errors of judgment which are reviewable by
timely appeal and not by a special civil action of certiorari. If the aggrieved party fails to do so within the
reglementary period, and the decision accordingly becomes final and executory, he cannot avail himself
of the writ of certiorari, his predicament being the effect of his deliberate inaction.
The appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45 and not
a special civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65, respectively, of the
1997 Rules of Civil Procedure. Rule 45 is clear that the decisions, final orders or resolutions of the Court
of Appeals in any case, i.e., regardless of the nature of the action or proceeding involved, may be
appealed to this Court by filing a petition for review, which would be but a continuation of the appellate
process over the original case. Under Rule 45 the reglementary period to appeal is fifteen (15) days from
notice of judgment or denial of motion for reconsideration.
xxx
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show that he has
no plain, speedy and adequate remedy in the ordinary course of law against its perceived grievance. A
remedy is considered "plain, speedy and adequate" if it will promptly relieve the petitioner from the
injurious effects of the judgment and the acts of the lower court or agency. In this case, appeal was not
only available but also a speedy and adequate remedy.6
The records of the case show that following petitioners receipt on August 18, 2000 of a copy of the
August 10, 2000 Resolution of the Court of Appeals denying its Motion for Reconsideration, it filed the
present petition for certiorari on September 15, 2000, at which time the Court of Appeals decision had
become final and executory, the 15-day period to appeal it under Rule 45 having expired.
Technicality aside, this Court finds no ground to disturb the assailed decision.
Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the State shall
afford protection to labor.7 Its purpose is not merely "to prevent diminution of the monthly income of the
workers on account of work interruptions. In other words, although the worker is forced to take a rest, he
earns what he should earn, that is, his holiday pay."8 It is also intended to enable the worker to participate
in the national celebrations held during the days identified as with great historical and cultural
significance.
Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last Sunday of
August), Bonifacio Day (November 30) and Rizal Day (December 30) were declared national holidays to
afford Filipinos with a recurring opportunity to commemorate the heroism of the Filipino people, promote
national identity, and deepen the spirit of patriotism. Labor Day (May 1) is a day traditionally reserved to
celebrate the contributions of the working class to the development of the nation, while the religious
holidays designated in Executive Order No. 203 allow the worker to celebrate his faith with his family.
As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the enjoyment of ten paid
regular holidays.9 The provision is mandatory,10 regardless of whether an employee is paid on a monthly
or daily basis.11 Unlike a bonus, which is a management prerogative,12 holiday pay is a statutory benefit
demandable under the law. Since a worker is entitled to the enjoyment of ten paid regular holidays, the
fact that two holidays fall on the same date should not operate to reduce to nine the ten holiday pay
benefits a worker is entitled to receive.
It is elementary, under the rules of statutory construction, that when the language of the law is clear and
unequivocal, the law must be taken to mean exactly what it says.13 In the case at bar, there is nothing in
the law which provides or indicates that the entitlement to ten days of holiday pay shall be reduced to nine
when two holidays fall on the same day.
Petitioners assertion that Wellington v. Trajano14 has "overruled" the DOLE March 11, 1993 Explanatory
Bulletin does not lie. In Wellington, the issue was whether monthly-paid employees are entitled to an
additional days pay if a holiday falls on a Sunday. This Court, in answering the issue in the negative,
observed that in fixing the monthly salary of its employees, Wellington took into account "every working
day of the year including the holidays specified by law and excluding only Sunday." In the instant case,
the issue is whether daily-paid employees are entitled to be paid for two regular holidays which fall on
the same day.15
In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and interpretation of
its provisions, including its implementing rules and regulations, shall be resolved in favor of labor. For
the working mans welfare should be the primordial and paramount consideration.16
Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor Code provides that
"Nothing in the law or the rules shall justify an employer in withdrawing or reducing any benefits,
supplements or payments for unworked regular holidays as provided in existing individual or collective
agreement or employer practice or policy."17
From the pertinent provisions of the CBA entered into by the parties, petitioner had obligated itself to pay
for the legal holidays as required by law. Thus, the 1997-1998 CBA incorporates the following provision:
ARTICLE XIV
PAID LEGAL HOLIDAYS
The following legal holidays shall be paid by the COMPANY as required by law:
1. New Years Day (January 1st)
2. Holy Thursday (moveable)
3. Good Friday (moveable)
4. Araw ng Kagitingan (April 9th)
5. Labor Day (May 1st)
6. Independence Day (June 12th)
7. Bonifacio Day [November 30]
8. Christmas Day (December 25th)
9. Rizal Day (December 30th)
10. General Election designated by law, if declared public non-working holiday
11. National Heroes Day (Last Sunday of August)
Only an employee who works on the day immediately preceding or after a regular holiday shall be
entitled to the holiday pay.
A paid legal holiday occurring during the scheduled vacation leave will result in holiday payment in
addition to normal vacation pay but will not entitle the employee to another vacation leave.
Under similar circumstances, the COMPANY will give a days wage for November 1st and December
31st whenever declared a holiday. When required to work on said days, the employee will be paid
according to Art. VI, Sec. 3B hereof.18
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.
[G.R. No. 146775. January 30, 2002.]

SAN MIGUEL CORPORATION, Petitioner, v. THE HONORABLE COURT OF APPEALSFORMER THIRTEENTH DIVISION, HON. UNDERSECRETARY JOSE M. ESPAOL, JR.,
Hon. CRESENCIANO B. TRAJANO, and HON. REGIONAL DIRECTOR ALLAN M.
MACARAYA, Respondents.
DECISION
KAPUNAN, J.:
Assailed in the petition before us are the decision, promulgated on 08 May 2000, and the resolution,
promulgated on 18 October 2000, of the Court of Appeals in CA-G.R. SP-53269.
The facts of the case are as follows:chanrob1es virtual 1aw library
On 17 October 1992, the Department of Labor and Employment (DOLE), Iligan District Office,
conducted a routine inspection in the premises of San Miguel Corporation (SMC) in Sta. Filomena, Iligan
City. In the course of the inspection, it was discovered that there was underpayment by SMC of regular
Muslim holiday pay to its employees. DOLE sent a copy of the inspection result to SMC and it was
received by and explained to its personnel officer Elena dela Puerta. 1 SMC contested the findings and
DOLE conducted summary hearings on 19 November 1992, 28 May 1993 and 4 and 5 October 1993.
Still, SMC failed to submit proof that it was paying regular Muslim holiday pay to its employees. Hence,
Alan M. Macaraya, Director IV of DOLE Iligan District Office issued a compliance order, dated 17
December 1993, directing SMC to consider Muslim holidays as regular holidays and to pay both its
Muslim and non-Muslim employees holiday pay within thirty (30) days from the receipt of the order.
SMC appealed to the DOLE main office in Manila but its appeal was dismissed for having been filed late.
The dismissal of the appeal for late filing was later on reconsidered in the order of 17 July 1998 after it
was found that the appeal was filed within the reglementary period. However, the appeal was still
dismissed for lack of merit and the order of Director Macaraya was affirmed.chanrob1es virtua1 1aw
1ibrary
SMC went to this Court for relief via a petition for certiorari, which this Court referred to the Court of
Appeals pursuant to St. Martin Funeral Homes v. NLRC. 2
The appellate court, in the now questioned decision, promulgated on 08 May 2000, ruled, as
follows:chanrob1es virtual 1aw library
WHEREFORE, the Order dated December 17, 1993 of Director Macaraya and Order dated July 17, 1998
of Undersecretary Espaol, Jr. is hereby MODIFIED with regards the payment of Muslim holiday pay
from 200% to 150% of the employees basic salary. Let this case be remanded to the Regional Director
for the proper computation of the said holiday pay.
SO ORDERED. 3
Its motion for reconsideration having been denied for lack of merit, SMC filed a petition for certiorari
before this Court, alleging that:chanrob1es virtual 1aw library
PUBLIC RESPONDENTS SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF

DISCRETION WHEN THEY GRANTED MUSLIM HOLIDAY PAY TO NON-MUSLIM
EMPLOYEES OF SMC-ILICOCO AND ORDERING SMC TO PAY THE SAME RETROACTIVE
FOR ONE (1) YEAR FROM THE DATE OF THE PROMULGATION OF THE COMPLIANCE
ORDER ISSUED ON DECEMBER 17, 1993, IT BEING CONTRARY TO THE PROVISIONS,
INTENT AND PURPOSE OF P.D. 1083 AND PREVAILING JURISPRUDENCE.
THE ISSUANCE OF THE COMPLIANCE ORDER WAS TAINTED WITH GRAVE ABUSE OF
DISCRETION IN THAT SAN MIGUEL CORPORATION WAS NOT ACCORDED DUE PROCESS
OF LAW; HENCE, THE ASSAILED COMPLIANCE ORDER AND ALL SUBSEQUENT ORDERS,
DECISION AND RESOLUTION OF PUBLIC RESPONDENTS WERE ALL ISSUED WITH GRAVE
ABUSE OF DISCRETION AND ARE VOID AB INITIO.
THE HON. COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT
DECLARED THAT REGIONAL DIRECTOR MACARAYA, UNDERSECRETARY TRAJANO AND
UNDERSECRETARY ESPAOL, JR., WHO ALL LIKEWISE ACTED WITH GRAVE ABUSE OF
DISCRETION AND WITHOUT OR IN EXCESS OF THEIR JURISDICTION, HAVE JURISDICTION
IN ISSUING THE ASSAILED COMPLIANCE ORDER AND SUBSEQUENT ORDERS, WHEN IN
FACT THEY HAVE NO JURISDICTION OR HAS LOST JURISDICTION OVER THE HEREIN
LABOR STANDARD CASE. 4
At the outset, petitioner came to this Court via a petition for certiorari under Rule 65 instead of an appeal
under Rule 45 of the 1997 Rules of Civil Procedure. In National Irrigation Administration v. Court of
Appeals, 5 the Court declared:chanrob1es virtual 1aw library
. . . (S)ince the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged errors
committed by it in the exercise of its jurisdiction would be errors of judgment which are reviewable by
timely appeal and not by a special civil action of certiorari. If the aggrieved party fails to do so within the
reglementary period, and the decision accordingly becomes final and executory, he cannot avail himself
of the writ of certiorari, his predicament being the effect of his deliberate inaction.
The appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45 and not
a special civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65, respectively, of the
1997 Rules of Civil Procedure. Rule 45 is clear that decisions, final orders or resolutions of the Court of
Appeals in any case, i.e., regardless of the nature of the action or proceeding involved, may be appealed
to this Court by filing a petition for review, which would be but a continuation of the appellate process
over the original case. Under Rule 45 the reglementary period to appeal is fifteen (15) days from notice of
judgment or denial of motion for reconsideration.
x
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show that he has
no plain, speedy and adequate remedy in the ordinary course of law against its perceived grievance. A
remedy is considered "plain, speedy and adequate" if it will promptly relieve the petitioner from the
injurious effects of the judgment and the acts of the lower court or agency. In this case, appeal was not
only available but also a speedy and adequate remedy. 6
Well-settled is the rule that certiorari cannot be availed of as a substitute for a lost appeal. 7 For failure of
petitioner to file a timely appeal, the questioned decision of the Court of Appeals had already become
final and executory.
In any event, the Court finds no reason to reverse the decision of the Court of Appeals.
Muslim holidays are provided under Articles 169 and 170, Title I, Book V, of Presidential Decree No.
1083, 8 otherwise known as the Code of Muslim Personal Laws, which states:chanrob1es virtual 1aw
library
Art. 169. Official Muslim holidays. The following are hereby recognized as legal Muslim
holidays:chanrob1es virtual 1aw library
(a) Amun Jadd (New Year), which falls on the first day of the first lunar month of Muharram;
(b) Maulid-un-Nab (Birthday of the Prophet Muhammad), which falls on the twelfth day of the third
lunar month of Rabi-ul-Awwal,
(c) Lailatul Isr Wal Mirj (Nocturnal Journey and Ascension of the Prophet Muhammad), which falls on
the twenty-seventh day of the seventh lunar month of Rajab:chanrob1es virtual 1aw library
(d) d-ul-Fitr (Hari Raya Puasa), which falls on the first day of the tenth lunar month of Shawwal,
commemorating the end of the fasting season; and
(e) d-ul-Adh (Hari Raya Haji),which falls on the tenth day of the twelfth lunar month of Dhl-Hijja.
Art. 170. Provinces and cities where officially observed. (1) Muslim holidays shall be officially
observed in the Provinces of Basilan, Lanao del Norte, Lanao del Sur, Maguindanao, North Cotabato,
Iligan, Marawi, Pagadian, and Zamboanga and in such other Muslim provinces and cities as may hereafter
be created;
(2) Upon proclamation by the President of the Philippines, Muslim holidays may also be officially
observed in other provinces and cities
The foregoing provisions should be read in conjunction with Article 94 of the Labor Code, which
provides:chanrob1es virtual 1aw library
Art. 94. Right to holiday pay.
(a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate;
x
Petitioner asserts that Article 3(3) of Presidential Decree No. 1083 provides that" (t)he provisions of this
Code shall be applicable only to Muslims . . . However, there should be no distinction between Muslims
and non-Muslims as regards payment of benefits for Muslim holidays. The Court of Appeals did not err
in sustaining Undersecretary Espaol who stated:chanrob1es virtual 1aw library
Assuming arguendo that the respondents position is correct, then by the same token, Muslims throughout
the Philippines are also not entitled to holiday pays on Christian holidays declared by law as regular
holidays. We must remind the respondent-appellant that wages and other emoluments granted by law to
the working man are determined on the basis of the criteria laid down by laws and certainly not on the
basis of the workers faith or religion.
At any rate, Article 3(3) of Presidential Decree No. 1083 also declares that." . . nothing herein shall be
construed to operate to the prejudice of a non-Muslim."cralaw virtua1aw library
In addition, the 1999 Handbook on Workers Statutory Benefits, approved by then DOLE Secretary
Bienvenido E. Laguesma on 14 December 1999 categorically stated:chanrob1es virtual 1aw library
Considering that all private corporations, offices, agencies, and entities or establishments operating within
the designated Muslim provinces and cities are required to observe Muslim holidays, both Muslim and
Christians working within the Muslim areas may not report for work on the days designated by law as
Muslim holidays. 9
On the question regarding the jurisdiction of the Regional Director Allan M. Macaraya, Article 128,
Section B of the Labor Code, as amended by Republic Act No. 7730, provides:jgc:chanrobles.com.ph
"Article 128. Visitorial and enforcement power.
x
(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary, and in cases where
the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue compliance orders to give effect to the labor
standards provisions of this Code and other labor legislation based on the findings of labor employment
and enforcement officers or industrial safety engineers made in the course of the inspection. The
Secretary or his duly authorized representative shall issue writs of execution to the appropriate authority
for the enforcement of their orders, except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by documentary proofs which were not
considered in the course of inspection.
x
In the case before us, Regional Director Macaraya acted as the duly authorized representative of the
Secretary of Labor and Employment and it was within his power to issue the compliance order to SMC.
In addition, the Court agrees with the Solicitor General that the petitioner did not deny that it was not
paying Muslim holiday pay to its non-Muslim employees. Indeed, petitioner merely contends that its nonMuslim employees are not entitled to Muslim holiday pay. Hence, the issue could be resolved even
without documentary proofs. In any case, there was no indication that Regional Director Macaraya failed
to consider any documentary proof presented by SMC in the course of the inspection.
Anent the allegation that petitioner was not accorded due process, we sustain the Court of Appeals in
finding that SMC was furnished a copy of the inspection order and it was received by and explained to its
Personnel Officer. Further, a series of summary hearings were conducted by DOLE on 19 November
1992, 28 May 1993 and 4 and 5 October 1993. Thus, SMC could not claim that it was not given an
opportunity to defend itself.
Finally, as regards the allegation that the issue on Muslim holiday pay was already resolved in NLRC CA
No. M-000915-92 (Napoleon E. Fernan v. San Miguel Corporation Beer Division and Leopoldo
Zaldarriaga), 10 the Court notes that the case was primarily for illegal dismissal and the claim for benefits
was only incidental to the main case. In that case, the NLRC Cagayan de Oro City declared, in
passing:chanrob1es virtual 1aw library
We also deny the claims for Muslim holiday pay for lack of factual and legal basis. Muslim holidays are
legally observed within the area of jurisdiction of the present Autonomous Region for Muslim Mindanao
(ARMM), particularly in the provinces of Maguindanao, Lanao del Sur, Sulu and Tawi-Tawi. It is only
upon Presidential Proclamation that Muslim holidays may be officially observed outside the Autonomous
Region and generally extends to Muslims to enable them the observe said holidays." 11
The decision has no consequence to issues before us, and as aptly declared by Undersecretary Espaol, it
"can never be a benchmark nor a guideline to the present case . . ." 12
WHEREFORE, in view of the foregoing, the petition is DISMISSED.
SO ORDERED.
[G.R. No. 105892. January 28, 1998.]

LEIDEN FERNANDEZ, BRENDA GADIANO, GLORIA ADRIANO, EMELIA
NEGAPATAN, JESUS TOMONGHA, ELEONOR QUIANOLA, ASTERIA CAMPO,
FLORIDA VILLACERAN FLORIDA TALLEDO, MARILYN LIM and JOSEPH
CANONIGO, Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION,
FOURTH DIVISION; MARGUERITE 1 LHUILLIER AND/OR AGENCIA CEBUANAH. LHUILLIER, Respondents.
DECISION
PANGANIBAN, J.:
Is failure to attend hearings before the labor arbiter a waiver of the right to present evidence? Are
moral damages included in the computation of "monetary award" for purposes of determining the
amount of the appeal bond? Is there a limit to the amount of service incentive leave pay and
backwages that may be awarded to an illegally dismissed employee?
The Case
These are the main questions raised in this petition for certiorari under Rule 65 of the Rules of
Court assailing the March 11, 1992 Decision 2 of Respondent National Labor Relations
Commission (NLRC), 3 the dispositive portion of which reads: 4
"WHEREFORE, premises considered, the appealed decision is hereby declared VACATED and
the entire records of these cases are hereby ordered remanded to the Regional Arbitration Branch
VII for further proceedings."
chanroblesvirtual|awlibrary
This petition also challenges the NLRCs May 29, 1992 Resolution denying the motion for
reconsideration.
The decision 5 vacated by the NLRC and penned by Labor Arbiter Gabino A. Velasquez, Jr.
disposed as follows: 6
"WHEREFORE, judgment is hereby rendered in favor of the complainants and against the
Respondent. The respondent is hereby ordered:
chanrob1es v irtual 1aw library
1. To reinstate the complainants to their respective position [sic] at the Agencia Cebuana with
full backwages without qualification; if reinstatement is not feasible, for one reason or another,
to pay to the complainants their respective separation pay, service incentive leave pay with full
backwages without qualification computed hereunder as follows:
chanrob1es virtual 1aw library
1. LEIDEN FERNANDEZ:
a) Separation Pay for 6 years P8,640.00
b) Service Incentive Leave (6 yrs.) 3,322.50
c) Backwages for one year only 34,560.00
TOTAL P46,522.50
2. GLORIA ADRIANO:
a) Separation pay for 17 years P28,560.00
b) Service incentive leave (17 yrs.) 10,986.25
c) Backwages for one year 40,320.00
TOTAL P79,866.25
3. EMELIA NEGAPATAN:
a) Separation pay for 24 yrs. P35,760.00
b) Service incentive leave (24 yrs.) 13,752.00
TOTAL P85,272.00
4. JESUS P. TOMONGHA:
b) Service Incentive leave 19,478.25
TOTAL P106,973.25
5. ELEONOR QUIANOLA:
b) Service Incentive Leave 8,022.00
TOTAL P64,642.00
6. ASTERIA CAMPO:
TOTAL P62,160.25
7. FLORIDA VILLACERAN:
b) Service Incentive leave (17 yrs.) 9,677.25
TOTAL P70,357.25
8. FLORIDA TALLEDO:
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chanrob1es virtual 1aw libr ary

TOTAL P74,607.00
9. BRENDA GADIANO:
TOTAL P63,313.25
10. MARILYN LIM:
b) Service Incentive for 7 yrs. 4,980.50
TOTAL P62,330.00
11. JOSEPH CANONIGO:
a) Separation Pay for 2 years P2,700.00
c) Backwages for 1 year 32,400.00
TOTAL P36,138.50
2) To pay to all complainants the amount of P100,000.00 for moral damages and the amount of
another P100,000.00 for exemplary damages, plus the amount of P98,018.25 as attorneys fees
representing 10% of the total award and the amount of P30,000.00 for litigation expenses.
The totality of the award amounting to P1,078,200.55 must be deposited with this Office ten (10)
days from receipt of this decision for further disposition. However, the payment of backwages
will be computed as of the actual date of payment provided it will not exceed a period of three
years."
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The factual milieu of this case is recited by the solicitor general in his Comment dated December
21, 1992 as follows: 7
"1. The instant case stemmed from a consolidated complaint against private respondents Agencia
Cebuana-H. Lhuillier and/or Margueritte Lhuillier (Lhuillier) for illegal dismissal (Rec., pp. 5658). The Agencia Cebuana is a sole proprietorship operated by Margueritte Lhuillier.
2. Two (2) Position Papers were filed by petitioners, one by Leiden E. Fernandez, Gloria B.
Adriano, Emilia A. Negapatan, Jesus P. Tomongha, Eleonor A. Quinanola, Asteria C, Ocampo
[sic], Florida Villaceran, Florida B. Tallado [sic] and Brenda A. Gadiano (Rec., pp. 79-88) and
the other by Marilyn E. Lim and Joseph Canonigo (Exhibit C-4).
3. In their Position Papers, petitioners alleged that they were employed by Lhuillier, as follows:
library
Name Position Date of Latest Date of

Employment Salary/Month Dismissal
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1. Leiden E. Cashier Dec. 3, 1984 P2,880.00 July 19, 1990

Fernandez
2. Gloria B. Appraiser July 10, 1973 3,360.00 July 19, 1990
Adriano
3. Emilia A. Sales Girl March 9, 1966 2,980.00 July 19, 1990
Negapatan
4. Jesus P. Office Clerk July 1957 3,070.00 July 19, 1990
Tomongha
5. Eleonor A. Office Clerk Dec. 8, 1976 2,980.00 July 21, 1990
Quianola
6. Asteria C. Clerk May 27, 1977 2,960.00 July 19, 1990
Campo
7. Florida Sales Clerk March 8, 1973 2,960.00 July 19, 1990
Villaceran
8. Florida B. Pawnshop Writer June 19, 1972 3,050,00 July 19, 1990
Talledo
9. Brenda A. Pawnshop Teller March 7, 1977 3,015,00 July 19, 1990
Gadiano
10. Marilyn E. Branch Manager June 1984 3,700.00 Feb. 16, 1990
Lim
11. Joseph M. Record Keeper June 1988 2,700.00 July 14, 1990
Canonigo
Petitioners Fernandez, Adriano, Negapatan, Tomongha, Quianola, Campo, Villaceran, Talledo,
and Gadiano further alleged that prior to and during early July 1990, they demanded from
Margueritte Lhuillier an increase in their salaries since her business was making good and that
she was evading payment of taxes by making false entries in her records of account; that
Lhuillier became angry and threatened them that something would happen to their employment if
they would report her to the BIR; that shortly thereafter, Lhuillier suspected them of stealing
jewelry from the pawnshop; that on July 19, 1990, Lhuillier verbally informed them not to report
for work as their employment had been terminated; that from July 20, 1990 they did not report
for work; and on July 23, 1990, they filed the instant complaint (Rec., pp. 79-88).
On their part, petitioners Lim and Caonigo alleged that in early January 1990 and in June 1990,
respectively, they demanded increases in their salaries since they noted that Lhuillier had a very
lucrative business besides evading tax payments by making false entries in her records of
account; that they also informed her that they intended to join the Associated Labor Union
(ALU), which made Lhuillier angry, causing her to threaten them that should they report her to
the BIR and join the ALU something would happen to their employment; that Lhuillier advised
them to tender their resignations as they were reportedly responsible for some anomalies at the
Agencia Cebuana-H Lhuillier; that Lhuillier assured them that they will be given separation pay;
that they asked Lhuillier that they be allowed to confront the persons who reported to her about
their supposed involvement in the alleged anomalies but she ignored it and told them to tender
their respective resignations effective February 16, 1990 (for Lim) and July 14, 1990 (for
Canonigo); and that they were not given separation pay (Decision, pp. 6-8; Rec., pp. 256-258).
5. In her Position Paper, Lhuillier, represented initially by Atty. Malcolm V. Seno, alleged that:
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a) In the case of Marilyn Lim, on January 13, 1990, she was informed that an investigation will
be conducted by Lhuillier because of the report received by Flora Go, also an employee of
Lhuillier, that Lim sold to a company consumer her own jewelry, in violation of the company
house rules; on January 22, 1990, a Notice of Intended Termination was served upon her
requiring her to submit a written explanation within 48 hours from receipt; Lim did not submit a
written explanation but actively participated in the investigation where she admitted having
committed the violation complained of; in view of her admission of guilt, the company lawyer
recommended to the management her demotion and transfer without reduction of salary; after
Lims receipt of a copy of the investigation report, she sent through her lawyer a letter signifying
her intention to resign and her willingness to execute a promissory note for her indebtedness; the
company gave Lim a draft of the promissory note which was never returned by her; on February
24, 1990 she tendered an irrevocable letter of resignation, hence, she was not terminated; and
because of the malicious and false complaint filed by Lim, the company was compelled to file a
counter-complaint for Perjury against her before the Office of the City Prosecutor of Cebu City
(Rec., pp. 92-93; 97).
b) In the case of Jesus Tomongha, he was found to have stolen rematado jewelries worth
P70,670.00 sometime in March 1990; instead of attending the investigation scheduled for this
offense, he abandoned his job although his application for leave of absence was not approved;
Lhuillier asked the company lawyer to talk with Tomongha for him to return to work so that he
could pay his pecuniary liability out of his salary; Lhuillier made it a pre-condition for his return
to work that he executes a promissory note for his indebtedness; on April 10, 1990, he executed a
promissory note and was allowed to return to work; on July 20, 1990, he and the other
petitioners, abandoned their employment; he was not dismissed but he was allowed to return to
work and was only made to execute a promissory note when the company found out sometime in
March 1990 that he had stolen "rematado" jewelries worth P70,670.00 (Rec., pp. 97-101).
c) In the Case of the other petitioners, on July 19, 1990, Gloria Adriano was found by Flora Go
to have overdeclared the weights and values of certain items of jewelry pawned to the company,
as a result of which, upon investigation, the pawnshop was found to have lost the amount of
P174,850.00; a letter dated July 19, 1990 was served upon Adriano to explain within 72 hours
why she should not be terminated; on July 20, 1990, Gloria Adriano, Florida Villaceran, Emilia
Negapatan, Brenda Gadiano, Leiden Fernandez, Jesus Tomongha, Asteria Campo and Florida
Talledo did not report for work although no requests for leave of absence were filed by them,
which absence violated company rules; on July 21, 1990, the said employees did not report for
work;
another employee, Eleonor Quianola, also did not report for work although she died not file a
request for leave of absence; on July 23, 1990 the said nine (9) employees did not report for
work; because of this unusual incident, the management decided to make an inventory of the
transactions in Agencia Cebuana and the rematado diamond-studded jewelry; the inventory
showed that the pawnshop incurred a considerable loss as a result of the anomalous overpricing
of pawned items and the employees immediately responsible were Gloria Adriano, Florida
Talledo and Leiden Fernandez, being the appraiser, writer and payer, respectively; the inventory
also showed that of the rematado diamond-studded jewelries, items worth P1,592,200.00 were
lost for which Florida Villaceran and Emilia Negapatan were directly responsible, being the
employees entrusted with their safekeeping; a case of Estafa was filed on July 24, 1990 before
the Office of the City Prosecutor of Cebu City against Gloria Adriano, Florida Talledo, Leiden
Fernandez, Asteria Campo, Brenda Gadiano, Florida Villaceran, Emilia Negapatan, and Jesus
Tomongha and three (3) other unknown persons; a case of Theft was filed on August 16, 1990
with the Office of the City Prosecutor of Cebu City against Florida Villaceran and Emilia
Negapatan; when Lhuillier left for Hongkong on July 19, 1990, she did not terminate the
employment of Gloria Adriano nor was she advised not to report for work, although a letter was
served upon her requiring her to explain within 72 hours why she should not be terminated from
her employment; when Lhuillier arrived from Hongkong, she caused to be served upon the eight
(8) petitioners who joined Adriano, letters dated July 25, 1990 requiring them to explain the
sudden abandonment of their posts; petitioners, except Lim, instead of giving an explanation,
claimed that their employment(s) were terminated on July 19, 1990; Lhuillier was prevented
from pursuing any action in respect of the illegal abandonment of their work by the nine (9)
petitioners because she was served with summons in the instant case; petitioners did not report
for work and voluntarily abandoned their work on July 19, 1990 in order to dramatize their
sympathy for Gloria Adriano, and they were not dismissed from their employment; their demand
for an award of damages and attorneys fees was unwarranted; petitioners had no cause of action
against Lhuillier because they were not terminated from employment; and Quianola could not
have been terminated from employment on July 21, 1990 because Lhuillier was in Hongkong at
that time (Rec., pp. 96-108).
6. Trial on the merits ensued and hearings were scheduled on July 5, 8, and 12, 1991.
7. The hearing scheduled on July 5, 1991 was, however, postponed by agreement of the parties
as shown in the minutes of the proceedings on July 8, 1991:
REMARKS
This case was scheduled for the cross-examination of the last witnesses (sic), Marilyn Lim, who
is one of the complainants of this (sic) consolidated cases.
The scheduled dates was (sic) July 5, 8, and 12, 1991 which dates were for the crossexamination
(sic) of Marilyn Lim and for the respondents to present their evidence.
The July 5, 1991 (sic) was postponed upon agreement [sic] of the parties and counsels and that it
was aggreed (sic) the repondents (sic) counsel will cross examine Marilyn Lim on July 8, 1991
and for the respondents to present their evidence on July 12, 1991. In as much (sic) as the
respondents and their counsel failed to appear today to cross-examine Marilyn Lim, we moved
that the respondent be declared having waived their rights (sic) to cross-examine Marilyn Lim.
(Rec., p. 176).
8. On July 8, 1991, counsel for petitioners filed Complainants Formal Offer of Evidence (Rec.,
pp. 182-187).
9. At the hearing scheduled on July 12, 1991, Atty. Seno and Lhuillier failed to appear. Thus,
counsel for petitioners submitted the instant case for resolution (Re C., p. 181).
10. On July 18, 1991, a Ruling was issued by Labor Arbiter Velasquez, admitting
complainants exhibits (Rec., pp. 189-190).
11. On July 30, 1991, counsel for petitioners filed an Urgent Motion For Early Decision (Rec.,
pp. 191-193).
12. On August 6, 1991, Atty. Seno filed a Comment to the Offer of Exhibits With CounterManifestation stating that:
The failure of undersigned to appear on the date of hearing was for the reason that his car
bogged down, as in fact he called up the Office of the Hearing Officer. While his absence may be
considered a waiver to cross-examine the witness, it cannot be taken to mean forfeiture of the
right to present admissible evidence against the complainant witness. (Rec., pp. 195-197)
13. On August 9, 1991, Atty. Seno filed his Comment on Complainants Urgent Motion For
Early Decision praying that Lhuillier be given a period of ten (10) days from August 9, 1991
within which to submit additional affidavits and thereafter to consider the cases submitted for
resolution (Rec., pp. 199- 200).
14. On August 15, 1991, petitioners filed a Counter-Comment On Respondents Comment of
[sic] Motion For Early Decision alleging that under Rule VII, Section 10 (c) of the Revised
Rules of Court of the NLRC which reads:
c) In case of unjustified non-appearance by the respondent during her/his turn to present

evidence, despite due notice, the case shall be considered submitted for decision on the basis of
the evidence so far presented.
the non-appearance of Lhuillier or its counsel on the scheduled dates of hearing on July 8 and 12,
1991, was clearly unjustified (Rec., pp. 202-205).
15. On October 14, 1991, Atty. Seno filed a Motion Reiterating The Request For Submission Of
Additional Affidavits therein alleging that Lhuilliers previous motion to present additional
affidavits had not been acted upon; and that he had not received an order considering the instant
case submitted for resolution. With the motion, Lhuillier submitted the affidavits of additional
witnesses, praying that said supplemental affidavits be admitted and presentation of additional
evidence be allowed (Rec., pp. 207-209).
16. On October 16, 1991, petitioners filed an Opposition On [sic] Respondents Request For
Submission Of Additional Affidavits And Urgent Motion To Release Decision, alleging that
counsel for Lhuillier was given ample opportunity to present his evidence; that by his failure to
appear at the scheduled hearings without any reason or prior motion for postponement, he was
deemed to have waived his right to present evidence; and that about the later part of August
1991, upon learning that Labor Arbiter Velasquez would be transferred to NLRC, Tacloban, they
(petitioners) inquired about the status of the instant case and they were informed by Labor
Arbiter Velasquez that a Decision was already rendered (Rec., pp. 203-205)."
On August 30, 1991, the labor arbiter rendered a decision in favor of petitioners. On appeal,
Respondent NLRC vacated the labor arbiters order and remanded the case for further
proceedings. It subsequently denied the motion for reconsideration.
Respondent NLRCs Ruling
Ruled the NLRC: 8
"In resolving this issue [of due process], it is necessary to go over the pertinent provisions of the
1990 NLRC Rules of Procedure, more particularly Sec. 11, Rule V.
Rule V Proceedings Before the Labor Arbiters:
chanro b1es virtual 1aw library
Section 11. Non-appearance of Parties at Conference/Hearings. (a) Two (2) successive

absences at a conference/hearing by the complainant or petitioner, who was duly notified thereof
may be sufficient cause to dismiss the case without prejudice. Where proper justification,
however, is shown by proper motion to warrant the re-opening of the case, the Labor Arbiter
shall call a second hearing and continue the proceedings until the case is finally decided.
Dismissal of the case for the second time due to the unjustified non-appearance of the
complainant or petitioner who was duly notified thereof shall be with prejudice.
b) In case of two (2) successive non-appearances by the respondent, despite due notice, during
the complainants presentation of evidence, the complainant shall be allowed to present evidence
ex-parte, subject to cross-examination by the respondent, where proper, at the next hearing.
Upon completion of such presentation of evidence for the complainant, another notice of hearing
for the reception of the respondents evidence shall be issued, with a warning that failure of the
respondent to appear shall be construed as submission by him of the case for resolution without
presenting his evidence.
c) In case of two (2) successive unjustified non-appearances by the respondent during his turn to
present evidence, despite due notice, the case shall be considered submitted for decision on the
basis of the evidence so far presented.
The established fact is that July 8 and 12, 1991 were the scheduled dates for the crossexamination of Marilyn Lim, last witness for the complainants and the start of respondents
presentation of evidence. It is also not disputed that respondent and counsel failed to appear at
the July 8 hearing. A scrutiny of the minutes of the July 8, 1991 hearing would however reveal
that date was alloted [sic] purposely for the cross-examination of Marilyn Lim and that
respondents presentation of evidence would start on July 12, 1991, (page 176 records)
Technically, the Labor Arbiter was correct in ruling that respondent had waived her right to
cross-examine complainant Marilyn Lim when she failed to appear on July 8, 1991. But
definitely, it was error for him to consider the case submitted for decision when respondent failed
to appear on July 12, 1991. The above-cited rules are clear and explicit. It takes two successive
and unjustified non-appearance on the part of respondent before he or she can be considered to
have waived his/her right to present evidence and thereafter to consider the case submitted for
decision on the basis of the evidence thus far presented. Respondents absence on July 12, 1991
was but her first since, as pointed out, it was on that day that she was supposed to start presenting
her evidence. What the Labor Arbiter should have done was to set another date for the reception
of respondents evidence. If she still failed to appear, his reliance on Sec. 11 (c), Rule V of the
New Rules of Procedure of the NLRC would have been justified and this Commission would not
hesitate to uphold him on that respect. As it is, the questioned ruling was, indeed, premature to
say the least. While concern for the less privileged workers and speeding [sic] the disposition of
labor cases are highly commendable, those considerations should not run roughshod over wellestablished principles of due process.
It may be argued that the evidence sought to be introduced by respondent are contained in the
additional affidavits which now form part of the records, hence this Commission can now decide
this appeal on the merits. It is with more reason that this case should be remanded not only to
allow respondent to formally present her evidence, but also to allow complainants to crossexamine and confront their accusers." (Emphasis supplied.)
Not satisfied, petitioners filed the present petition before us under Rule 65 of the Rules of Court.
9
The Issues
Petitioners submit to this Court the following issues: 10

"A
The Honorable Commission has committed serious reversible error amounting to a grave abuse
of discretion and in excess of jurisdiction in finding that the private respondent was not afforded
due process by the hearing labor arbiter, particularly the reception of private respondents
evidence.
B
of discretion and in excess of jurisdiction in finding that the declaration by the hearing labor
arbiter submitting these cases for decision on July 12, 1991 was not in accordance with Rule V
Section II of the 1990 New Rules of Procedure of the NLRC (attached hereto as annex C).
C
of discretion and in excess of jurisdiction in giving importance to private respondents additional

alleged affidavits which were filed only on October 14, 1991 (attached hereto as annex G-1),
by way of attaching the same in private respondents motion reiterating request for submission of
additional affidavits (attached hereto as annex G), long after the hearing labor arbiter rendered
a decision on August 30, 1992 (attached hereto as annex E), contrary to the private
respondents prayer and commitment (attached hereto as annex F-1).
D
of discretion, in substance and in law, in not modifying the appealed decision of the hearing
labor arbiter (attached hereto as annex E) with respect to the accuracy of the monetary awards
pursuant to the pertinent provisions of the Labor Code, its implementing rules and regulations
and pursuant particularly to the celebrated case of Roche (Philippines), et als. [sic] v. NLRC, et
als., [sic] G.R. No. 83335, October 12, 1989.
E
The Honorable Commission has no jurisdiction to entertain private respondents two appeals."
Put differently but more plainly, the issues in this case are as follows:
1. Did the NLRC acquire jurisdiction over the appeal notwithstanding the alleged insufficiency
of the appeal bond?
2. Were private respondents deprived of due process of law by the labor arbiter?
3. Were petitioners illegally dismissed?
4. Assuming petitioners were illegally dismissed, was the computation of the backwages, service
incentive leave pay and damages valid and correct?
The Courts Ruling
The petition is meritorious. We hold that the private respondents were not denied due process of
law by the labor arbiter; and that nine of the petitioners were illegally dismissed, but that
Petitioners Lim and Canonigo were not.
First Issue : Insufficiency of Appeal Bond
Petitioners contend that Respondent NLRC did not acquire jurisdiction over the appeal of private
respondents because the appeal bond was insufficient. Although the total monetary award in their
favor was P1,078,200.55, private respondents posted a cash bond in the amount of P752,183.00
only. In computing the monetary award for the purpose of posting an appeal bond, private
respondents relied on Rule VI, Section 6 of the 1990 New Rules of Procedure of the NLRC and
excluded the award for damages, litigation expenses and attorneys fees. Petitioners argue
however that the said rule cannot prevail over Article 223 of the Labor Code, which does not
provide for such exclusion.
We agree with private respondents. Article 223 of the Labor Code provides:
x
In case of a judgment involving a monetary award, an appeal by the employer may be perfected
only upon the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Commission in the amount equivalent to the monetary award in the judgment
appealed from.
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee,
insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending
appeal. The employee shall either be admitted back to work under the same terms and conditions
prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated
in the payroll. The posting of a bond by the employer shall not stay the execution for
reinstatement provided therein. . . ." (Emphasis supplied.)
On the other hand, Rule VI, Section 6 of the 1990 NLRC New Rules of Procedure, 11 invoked
by private respondent, provides:
jgc:chanrobles.com.ph
"Section 6. Bond. In case of the decision of a Labor Arbiter involves a monetary award, an
appeal by the employer shall be perfected only upon the posting of a cash or surety bond issued
by a reputable bonding company duly accredited by the Commission or the Supreme Court in an
amount equivalent to the monetary award.
The Commission may, in meritorious cases and upon Motion of the Appellant, reduce the
amount of the bond. However, an appeal is deemed perfected upon the posting of the bond
equivalent to the monetary award exclusive of moral and exemplary damages as well as
attorneys fees.
Nothing herein however, shall be construed as extending the period of appeal." (Emphasis
supplied.)
There is no conflict between the two provisions. Article 223 lays down the requirement that an
appeal bond should be filed. The implementing rule, on the other hand, explains how the appeal
bond shall be computed. The rule explicitly excludes moral and exemplary damages and
attorneys fees from the computation of the appeal bond. This exclusion has been recognized by
the Court in a number of cases. Hence, in Erectors v. NLRC, 12 the Court nullified an NLRC
order requiring the posting of an appeal bond which, among others, "even included in the
computation the award of P400,000.00 for moral and exemplary damages." Indeed, the said
implementing rule is a contemporaneous construction of Article 223 by the NLRC pursuant to
the mandate of the Labor Code; hence, it is accorded great respect by this Court. 13
In line with the desired objective of our labor laws to resolve controversies on their merits, the
Court has held that the filing of a bond in appeals involving monetary awards should be given
liberal construction. 14 The rule requiring the employer to post a cash or surety bond to perfect
his appeal assures the workers that they will receive the money judgment awarded to them upon
the dismissal of the employers appeal. It also discourages employers from using an appeal to
delay or even evade their obligation to satisfy the just and lawful claims of their employees. 15
Hence, deducting from the total monetary award of P1,078,200.55 the amount of P200,000.00
for moral and exemplary damages, P98,018.25 for attorneys fees and P30,000.00 for litigation
expenses, the amount of the bond should be P750,182.55. Thus, the appeal bond actually posted
in the amount of P752,183 is even more than the amount of appeal bond that may be required
from private respondents under Respondent NLRCs rules.
Second Issue : No Denial of Due Process
The NLRC ruled that private respondents were denied due process because the labor arbiter
deemed the case submitted for resolution when they failed to attend the hearings on July 8 and
12, 1991. Under the NLRC Rules of Procedure, a case may be deemed submitted for decision on
the basis of the evidence thus far adduced in the event respondent incurs two successive absences
"during his turn to present evidence." While the hearing on July 12, 1991 was for the
presentation of herein private respondents evidence, the NLRC found that the hearing on July 8,
1991 was scheduled for the cross-examination of petitioners witness. Since the absences were
not made during respondents "turn to present evidence," public respondent remanded the case to
the labor arbiter for "further proceedings."
Petitioners dispute the NLRC ruling, contending that the parties in this case were able to submit
their respective position papers together with supporting affidavits and other documents. They
stress that private respondents failure to attend the hearings on July 8 and 12, 1991, without any
justification or motion for postponement, warranted the submission of the case for decision
pursuant to Section 11, Rule V of the 1990 New Rules of Procedure of the NLRC. They insist
that the hearing on July 8, 1991 was scheduled to afford private respondents not only an
opportunity "to cross-examine petitioners last witness, Marilyn Lim, [but also] to start the
presentation of their evidence . . . "16
On the other hand, private respondents argue that the labor arbiter erred in considering the
absence of their counsel during the hearings scheduled on July 8 and July 12, 1991 as waiver not
only of the right to cross-examine but of the right to present evidence. They further contend that
the labor arbiter released his decision notwithstanding the pendency of three unresolved motions.
17 These circumstances clearly show that they were not afforded due process of law. 18
To make a clear ruling, we again cite Rule V, Section 11 of the 1990 Rules of Procedure of
Respondent NLRC, which provides:
"Section 11. Non-appearance of Parties at Conference/Hearings. (a) Two (2) successive

absences at a conference/hearing by the complainant or petitioner, who was duly notified thereof,
may be sufficient cause to dismiss the case without prejudice. Where proper justification,
however, is shown by proper motion to warrant the re-opening of the case, the Labor Arbiter
shall call a second hearing and continue the proceedings until the case is finally decided.
Dismissal of the case of the second time due to the unjustified non-appearance of the
complainant or petitioner who was duly notified thereof shall be with prejudice.
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(b) In case of two (2) successive non-appearances by the respondent, despite due notice, during
the complainants presentation of evidence, the complainant shall be allowed to present evidence
ex parte, subject to cross-examination by the respondent, where proper, at the next hearing. Upon
completion of such presentation of evidence for the complainant, another notice of hearing for
the reception of the respondents evidence shall be issued, with a warning that failure of the
respondent to appear shall be construed as submission by him of the case for resolution without
presenting his evidence.
(c) In case of two (2) successive unjustified non-appearances by the respondent during his turn to
present evidence, despite due notice, the case shall be considered submitted for decision on the
basis of the evidence so far presented." (Emphasis supplied).
It is undisputed that private respondents counsel failed to attend the hearings on the two
aforementioned dates. Moreover, the labor arbiter 19 and the NLRC held that the hearing on July
8, 1991 was only for the cross-examination of herein petitioners witness, while that on July 12,
1991 was for the reception of private respondents evidence. This notwithstanding, we hold that
the NLRC committed grave abuse of discretion in remanding the case to the labor arbiter.
Private respondents were able to file their respective position papers and the documents in
support thereof, and all these were duly considered by the labor arbiter. 20 Indeed, the
requirements of due process are satisfied where the parties are given the opportunity to submit
position papers. 21 In any event, Respondent NLRC and the labor arbiter are authorized under
the Labor Code to decide a case on the basis of the position papers and documents submitted. 22
The holding of an adversarial trial depends on the discretion of the labor arbiter, and the parties
cannot demand it as a matter of right. In other words, the filing of position papers and supporting
documents fulfilled the requirements of due process. 23 Therefore, there was no denial of this
right because private respondents were given the opportunity to present their side. 24
Moreover, it should be noted that private respondents did not dispute the order of the labor
arbiter submitting the case for decision immediately after its issuance. Likewise, they failed to
present additional evidence on the date they themselves specified. It was only on August 6, 1991
that private respondents counsel, in his Comments to the Offer of Exhibits 25 with countermanifestation, explained his failure to appear at the hearing on July 8, 1991. His explanation,
quoted below, is not compelling. 26
"The failure of the undersigned to appear on the date of hearing was for the reason that his car
bogged down, as in fact he called up the Office of the Hearing Officer. While his absence may be
considered a waiver to cross-examine the witness, it cannot be taken to mean forfeiture of the
right to present admissible evidence against the complainant-witness."
Three days later on August 9, 1991, private respondents moved that they be given a "period of
ten days from August 9, 1991" or until August 19, 1991 within which to submit additional
affidavits, "after which, the cases will be deemed submitted for resolution on the basis of
complainants evidence and respondents position paper and the additional affidavits." 27
Counsel, however, failed to submit the supposed evidence on said date. On October 14, 1991,
private respondents filed a Motion Reiterating the Request for Submission of Additional
Affidavits. 28 Again, private respondents did not submit the said documents.
As earlier noted, the essence of due process is simply an opportunity to be heard, to explain
ones side, or to seek a reconsideration of the action or ruling complained of. In the case at bar,
private respondents were given ample opportunity to do just that but they failed, for unknown
reasons, to avail themselves of such opportunity. They themselves moved that they be allowed to
present additional affidavits on August 19, 1991, but they never did; no valid reason was given
for their failure to do so. Their contention that the labor arbiter failed to rule on their motion
deserves scant consideration. It is axiomatic in fact, it is plainly commonsensical that when
a counsel asks for an extension of time within which to file a pleading, he must be ready with
that pleading on the date specified in his motion, even absent a resolution or order disposing of
his motion.
We cannot remand the instant case to the labor arbiter for further proceedings. Respondent
NLRC, on the basis of the evidence on record, could have resolved the dispute. To remand it to
the labor arbiter is to delay needlessly the disposition of this case, which has been pending since
July 23, 1990. It becomes our duty under the circumstances to determine the validity of the
allegations of the parties. Remanding the case to the labor arbiter will just frustrate speedy justice
and, in any event, would be a futile exercise, as in all probability the case would end up with this
Court. We shall thus rule on the substantial claims of the parties.
Third Issue : Petitioners Were Illegally Dismissed
Private respondents controvert the claim of illegal dismissal by maintaining that petitioners
abandoned their employment. They aver that on July 19, 1990, Petitioner Gloria Adriano,
pawnshop appraiser, over-declared the weights and values of pawned pieces of jewelry, which
allegedly caused a loss of at least P174,850. In a letter dated July 19, 1990, they required
Petitioner Adriano to explain within 72 hours why her employment should not be terminated. On
July 20, 1990, however, Petitioner Adriano together with Petitioners Asteria Campo, Leiden
Fernandez, Brenda Gadiano, Emilia Negapatan, Eleonor Quianola, Jesus Tomongha, Florida
Talledo and Florida Villaceran allegedly did not report for work without any excuse. Thus,
private respondents concluded that petitioners abandoned their employment. They also state that
they intended to pursue legal action against the said petitioners for "illegal abandonment." But
before they could do so, they received summons requiring them to respond to the complaints of
illegal dismissal filed by the said nine petitioners. 29
On the other hand, petitioners maintain that on July 19, 1990, Private Respondent Marguerite
Lhuillier, the pawnshop owner, told them not to report for work because their employment had
been terminated. Thus, they did not report for work the following day; July 20, 1990. On July 23,
1990, they filed their respective complaints before the Regional Arbitration Board of Respondent
NLRC.
In view of the conflicting claims of the parties, we examined the records of this case and found
that private respondents did not abandon their employment; rather, they were illegally dismissed.
To succeed in pleading abandonment as a valid ground for dismissal, the employer must prove
(1) the intention of an employee to abandon his or her employment and (2) an overt act from
which such intention may be inferred; i.e., the employee showed no desire to resume his work.
30 Mere absence is not sufficient. The employer must prove a deliberate and unjustified refusal
of the employee to resume his employment without any intention of returning. 31 Private
respondents failed to discharge this burden. The claim of abandonment was inconsistent with the
immediate filing of petitioners complaint for illegal dismissal and prayer for reinstatement. For
how can an inference be made that an employee had no intention of returning to work, when he
filed a complaint for illegal dismissal praying for reinstatement three days after the alleged
abandonment? 32 Moreover, considering that petitioners had been with Pawnshop Lhuillier for
several years ranging from six (6) years to thirty three (33) years it is unlikely that they
would simply leave their employment. Clearly, there is no cogent basis for private respondents
theory that said petitioners abandoned their work. In this light, we sustain the finding of the labor
arbiter that said petitioners were illegally dismissed, with neither just cause nor due process.
Petitioners Lim and Canonigo Resigned
The foregoing holding cannot apply to Petitioners Marilyn Lim and Joseph Canonigo, however.
Lim claims that Private Respondent Lhuillier forced her to resign, but at the same time assured
her of separation pay. 33 On February 5, 1990, prior to Lims letter of resignation dated February
24, 1990, 34 her lawyer proposed the following to Private Respondent Lhuillier: 35
"1. That our client Ms. Marilyn Lim be given immediately a clearance upon resignation from
your good company and payment of separation pay at the rate of one month per year of service;
and
2. That our client is willing to execute a promissory note on her indebtedness, and will pay upon
the same terms prevailing before her resignation. Our clients ability to settle her indebtedness
should be given kind consideration by your company considering that her eventual resignation
will render her jobless for a while. Besides, per Investigation Report No. 2, Series of 1990,
conducted by your Resident Counsel, Atty. Malcolm V. Seno, our client has impressed your
Resident Counsel as a person of much valor and great determination when she immediately
admitted her guilt.
3. That the various checks she endorsed to your company be returned to our client, so that she
could file a case against the issuers or drawers of the same, be it criminal or civil in nature."
(Emphasis supplied).
Petitioner Lims testimony 36 that she has never been informed of any wrongdoing until her
termination is belied by her assertions in the aforequoted letter. Her admission of the offense
charged shows that she was not coerced to resign. Besides, the fact that her complaint for illegal
dismissal was filed long after her resignation on February 24, 1990 suggests that it was a mere
afterthought.
On the other hand, Petitioner Canonigo contends that he was forced to sign his letter of
resignation dated July 14, 1990, because Private Respondent Lhuillier received reports from
other employees that he was responsible for some anomalies in the pawnshop. He also stated that
he resigned because he was assured of separation pay. 37 Like Petitioner Lim, he did not
immediately file a complaint for illegal dismissal, doing so only on July 23, 1990. From the
foregoing facts, we see no cogent basis for holding that he was forced to resign. On the contrary,
we find that he voluntarily tendered his resignation on the assurance of separation pay. Clearly,
Petitioner Canonigo, like Lim, was not dismissed; rather, he resigned voluntarily.
Fourth Issue : Service Incentive Leave Pay and Damages
In his decision, the labor arbiter granted varying amounts of service incentive leave pay to the
petitioners based on the length of their tenure; i.e, the shortest was six years and the longest was
thirty-three years. While recommending that the labor arbiters decision be reinstated
substantially, the solicitor general recommended that the award of service incentive leave be
limited to three years. This is based on Article 291 of the Labor Code which provides:
"ART. 291. Money Claims. All money claims arising from employer-employee relations
accruing during the effectivity of this Code shall be filed within three (3) years from the time the
cause of action accrued; otherwise they shall be forever barred.
x
Petitioners counter that Article 291 "speaks clearly on the prescription of filing [an] action upon
monetary claims within three (3) years from the time the cause of action accrued, but it is not a
prescription of a period of time for the computation of monetary claims." 38
The clear policy of the Labor Code is to grant service incentive leave pay to workers in all
establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing
Rules and Regulations 39 provides that" [e]very employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days with pay." Service
incentive leave is a right which accrues to every employee who has served "within 12 months,
whether continuous or broken reckoned from the date the employee started working, including
authorized absences and paid regular holidays unless the working days in the establishment as a
matter of practice or policy, or that provided in the employment contracts, is less than 12 months,
in which case said period shall be considered as one year." 40 It is also "commutable to its
money equivalent if not used or exhausted at the end of the year." 41 In other words, an
employee who has served for one year is entitled to it. He may use it as leave days or he may
collect its monetary value. To limit the award to three years, as the solicitor general
recommends; is to unduly restrict such right. The law indeed does not prohibit its commutation.
Moreover, the solicitor generals recommendation is contrary to the ruling of the Court in
Bustamante Et. Al. v. NLRC Et. Al., 42 lifting the three-year restriction on the amount of
backwages and other allowances that may be awarded an illegally dismissed employee, thus:
"Therefore, in accordance with R.A. No. 6715, petitioners are entitled to their 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 reinstatement."
(Emphasis supplied.)
Since a service incentive leave is clearly demandable after one year of service whether
continuous or broken or its equivalent period, and it is one of the "benefits" which would have
accrued if an employee was not otherwise illegally dismissed, it is fair and legal that its
computation should be up to the date of reinstatement as provided under Section 279 of the
Labor Code, as amended, which reads:
"ART. 279. Security of Tenure. 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 is withheld from him up to the time of his actual
reinstatement." (Emphasis supplied).
However, the Implementing Rules clearly state that entitlement to "benefit provided under this
Rule shall start December 16, 1975, the date the amendatory provision of the [Labor] Code took
effect." 43 Hence, Petitioners, except Lim and Canonigo, should be entitled to service incentive
leave pay from December 16, 1975 up to their actual reinstatement.
Petitioners, citing Roche Philippines Et. Al. v. NLRC Et. Al., 44 further contend that the award
of damages in the case at bar should be increased, for "there are eleven (11)
complainants/petitioners whose long years of employment was illegally, oppressively and
wantonly terminated by the private Respondent." 45
We disagree. Determination of the amount of moral damages and attorneys fees is best left to
the discretion of the labor arbiter. 46 Moral damages are recoverable where the dismissal of the
employee was attended by bad faith or fraud, or it constituted an act oppressive to labor, or it was
done in a manner contrary to morals, good customs or public policy. 47 In the case before us,
records show that petitioners dismissals were done oppressively and in bad faith, for they were
just summarily dismissed without even the benefit of notice and hearing. The well-settled rule is
that the employer shall be sanctioned for noncompliance with the requirements of, or for failure
to observe, due process in dismissing its employees. 48 Petitioners were likewise subjected to
unnecessary embarrassment or humiliation because of the filing of the criminal charge of
qualified theft, which was later dismissed 49 by the investigating prosecutor. 50 It follows then
that the award of attorneys fees is likewise proper, for the "defendants act or omission has
compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest."
51
Full Backwages for Dismissals
Effected After March 21, 1989
Having determined that petitioners, except Lim and Canonigo, were illegally dismissed, we next
resolve the question of whether Respondent NLRC gravely abused its discretion in ordering the
reinstatement of dismissed employees and the payment to them of full backwages; or, if
reinstatement was no longer feasible, whether the grant to them of separation pay plus
backwages was correct. In several cases, 52 this Court has held that illegally dismissed
employees are entitled to reinstatement and full backwages. If reinstatement is not possible, the
employees are entitled to separation pay and full backwages. Accordingly, the award to
petitioners of backwages for three years should be modified in accordance with Article 279 53 of
the Labor Code, as amended by R.A. 6715, by giving them full backwages without conditions
and limitations, the dismissals having occurred after the effectivity of the amendatory law on
March 21, 1989. 54 Thus, the Court held in Bustamante: 55
"The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more benefits to
workers than was previously given them under the Mercury Drug rule or the "deduction of
earnings elsewhere" rule. Thus, a closer adherence to the legislative policy behind Rep. Act No.
6715 points to "full backwages" as meaning exactly that, i.e., without deducting from backwages
the earnings derived elsewhere by the concerned employee during the period of his illegal
dismissal."
chanrobles virtual lawlibrary
WHEREFORE, the petition is hereby GRANTED and the assailed Decision and Resolution are
REVERSED and SET ASIDE. The labor arbiters decision is REINSTATED with
MODIFICATIONS, such that the award of separation pay is deleted and the service incentive
leave pay is computed from December 16, 1975 up to petitioners actual reinstatement. Full
backwages, including the accrued thirteenth month pay, are also awarded to the nine petitioners
Leiden Fernandez, Brenda Gadiano, Gloria Adriano, Emelia Negapatan, Jesus Tomongha,
Eleonor Quianola, Asteria Campo, Florida Villaceran and Florida Talledo from the date of
their illegal dismissal to the time of their actual reinstatement. Petitioners Lim and Canonigo,
whom we find to have voluntarily resigned, are not entitled to any benefit.
SO ORDERED.
JPL MARKETING G.R. No. 151966

PROMOTIONS,
Petitioner, Present:
PUNO, J.,
Chairman,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
COURT OF APPEALS, NATIONAL CHICO-NAZARIO, JJ.
LABOR RELATIONS COMMISSION,
NOEL GONZALES, RAMON ABESA
III and FAUSTINO ANINIPOT,
Respondents. Promulgated:
July 8, 2005
x-------------------------------------------------------------------x
DECISION
TINGA, J.:
This is a petition for review of the Decision[1] of the Court of Appeals in CA-G.R. SP No. 62631 dated
03 October 2001 and its Resolution[2] dated 25 January 2002 denying petitioners Motion for
Reconsideration, affirming the Resolution of the National Labor Relations Commission (NLRC), Second
Division, dated 27 July 2000, awarding separation pay, service incentive leave pay, and 13th month pay to
private respondents.
JPL Marketing and Promotions (hereinafter referred to as JPL) is a domestic corporation engaged in the
business of recruitment and placement of workers. On the other hand, private respondents Noel Gonzales,
Ramon Abesa III and Faustino Aninipot were employed by JPL as merchandisers on separate dates and
assigned at different establishments in Naga City and Daet, Camarines Norte as attendants to the display
of California Marketing Corporation (CMC), one of petitioners clients.
On 13 August 1996, JPL notified private respondents that CMC would stop its direct merchandising
activity in the Bicol Region, Isabela, and Cagayan Valley effective 15 August 1996.[3] They were
advised to wait for further notice as they would be transferred to other clients. However, on 17 October
1996,[4] private respondents Abesa and Gonzales filed before the National Labor Relations Commission
Regional Arbitration Branch (NLRC) Sub V complaints for illegal dismissal, praying for separation pay,
13th month pay, service incentive leave pay and payment for moral damages.[5] Aninipot filed a similar
case thereafter.
After the submission of pertinent pleadings by all of the parties and after some clarificatory hearings, the
complaints were consolidated and submitted for resolution. Executive Labor Arbiter Gelacio L. Rivera,
Jr. dismissed the complaints for lack of merit.[6] The Labor Arbiter found that Gonzales and Abesa
applied with and were employed by the store where they were originally assigned by JPL even before the
lapse of the six (6)-month period given by law to JPL to provide private respondents a new assignment.
Thus, they may be considered to have unilaterally severed their relation with JPL, and cannot charge JPL
with illegal dismissal.[7] The Labor Arbiter held that it was incumbent upon private respondents to wait
until they were reassigned by JPL, and if after six months they were not reassigned, they can file an action
for separation pay but not for illegal dismissal.[8] The claims for 13th month pay and service incentive
leave pay was also denied since private respondents were paid way above the applicable minimum wage
during their employment.[9]
Private respondents appealed to the NLRC. In its Resolution,[10] the Second Division of the NLRC
agreed with the Labor Arbiters finding that when private respondents filed their complaints, the six-month
period had not yet expired, and that CMCs decision to stop its operations in the areas was beyond the
control of JPL, thus, they were not illegally dismissed. However, it found that despite JPLs effort to look
for clients to which private respondents may be reassigned it was unable to do so, and hence they are
entitled to separation pay.[11] Setting aside the Labor Arbiters decision, the NLRC ordered the payment
of:
1. Separation pay, based on their last salary rate and counted from the first day of their
employment with the respondent JPL up to the finality of this judgment;
2. Service Incentive Leave pay, and 13th month pay, computed as in No.1 hereof.[12]
Aggrieved, JPL filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of
Appeals, imputing grave abuse of discretion on the part of the NLRC. It claimed that private respondents
are not by law entitled to separation pay, service incentive leave pay and 13th month pay.
The Court of Appeals dismissed the petition and affirmed in toto the NLRC resolution. While conceding
that there was no illegal dismissal, it justified the award of separation pay on the grounds of equity and
social justice.[13] The Court of Appeals rejected JPLs argument that the difference in the amounts of
private respondents salaries and the minimum wage in the region should be considered as payment for
their service incentive leave and 13th month pay.[14] Notwithstanding the absence of a contractual
agreement on the grant of 13th month pay, compliance with the same is mandatory under the law.
Moreover, JPL failed to show that it was exempt from paying service incentive leave pay. JPL filed a
motion for reconsideration of the said resolution, but the same was denied on 25 January 2002.[15]
In the instant petition for review, JPL claims that the Court of Appeals committed reversible error in
rendering the assailed Decision and Resolution.[16] The instant case does not fall under any of the
instances where separation pay is due, to wit: installation of labor-saving devices, redundancy,
retrenchment or closing or cessation of business operation,[17] or disease of an employee whose
continued employment is prejudicial to him or co-employees,[18] or illegal dismissal of an employee but
reinstatement is no longer feasible.[19] Meanwhile, an employee who voluntarily resigns is not entitled to
separation unless stipulated in the employment contract, or the collective bargaining agreement, or is
sanctioned by established practice or policy of the employer.[20] It argues that private respondents good
record and length of service, as well as the social justice precept, are not enough to warrant the award of
separation pay. Gonzales and Aninipot were employed by JPL for more than four (4) years, while Abesa
rendered his services for more than two (2) years, hence, JPL claims that such short period could not have
shown their worth to JPL so as to reward them with payment of separation pay.[21]
In addition, even assuming arguendo that private respondents are entitled to the benefits awarded, the
computation thereof should only be from their first day of employment with JPL up to 15 August 1996,
the date of termination of CMCs contract, and not up to the finality of the 27 July 2000 resolution of the
NLRC.[22] To compute separation pay, 13th month pay, and service incentive leave pay up to 27 July
2000 would negate the findings of both the Court of Appeals and the NLRC that private respondents were
not unlawfully terminated.[23] Additionally, it would be erroneous to compute service incentive leave
pay from the first day of their employment up to the finality of the NLRC resolution since an employee
has to render at least one (1) year of service before he is entitled to the same. Thus, service incentive leave
pay should be counted from the second year of service.[24]
On the other hand, private respondents maintain that they are entitled to the benefits being claimed as per
the ruling of this Court in Serrano v. NLRC, et al.[25] They claim that their dismissal, while not illegal,
was tainted with bad faith.[26] They allege that they were deprived of due process because the notice of
termination was sent to them only two (2) days before the actual termination.[27] Likewise, the most that
JPL offered to them by way of settlement was the payment of separation pay of seven (7) days for every
year of service.[28]
Replying to private respondents allegations, JPL disagrees that the notice it sent to them was a notice of
actual termination. The said memo merely notified them of the end of merchandising for CMC, and that
they will be transferred to other clients.[29] Moreover, JPL is not bound to observe the thirty (30)-day
notice rule as there was no dismissal to speak of. JPL counters that it was private respondents who acted
in bad faith when they sought employment with another establishment, without even the courtesy of
informing JPL that they were leaving for good, much less tender their resignation.[30] In addition, the
offer of seven (7) days per year of service as separation pay was merely an act of magnanimity on its part,
even if private respondents are not entitled to a single centavo of separation pay.[31]
The case thus presents two major issues, to wit: whether or not private respondents are entitled to
separation pay, 13th month pay and service incentive leave pay, and granting that they are so entitled,
what should be the reckoning point for computing said awards.
Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of
dismissals due to any of these reasons: (a) installation of labor saving devices; (b) redundancy; (c)
retrenchment; (d) cessation of the employer's business; and (e) when the employee is suffering from a
disease and his continued employment is prohibited by law or is prejudicial to his health and to the health
of his co-employees. However, separation pay shall be allowed as a measure of social justice in those
cases where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character, but only when he was illegally dismissed.[32] In addition, Sec. 4(b),
Rule I, Book VI of the Implementing Rules to Implement the Labor Code provides for the payment of
separation pay to an employee entitled to reinstatement but the establishment where he is to be reinstated
has closed or has ceased operations or his present position no longer exists at the time of reinstatement for
reasons not attributable to the employer.
The common denominator of the instances where payment of separation pay is warranted is that the
employee was dismissed by the employer.[33] In the instant case, there was no dismissal to speak of.
Private respondents were simply not dismissed at all, whether legally or illegally. What they received
from JPL was not a notice of termination of employment, but a memo informing them of the termination
of CMCs contract with JPL. More importantly, they were advised that they were to be reassigned. At that
time, there was no severance of employment to speak of.
Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months, wherein an employee/employees are placed on the
so-called floating status. When that floating status of an employee lasts for more than six months, he may
be considered to have been illegally dismissed from the service. Thus, he is entitled to the corresponding
benefits for his separation, and this would apply to suspension either of the entire business or of a specific
component thereof.[34]
As clearly borne out by the records of this case, private respondents sought employment from other
establishments even before the expiration of the six (6)-month period provided by law. As they admitted
in their comment, all three of them applied for and were employed by another establishment after they
received the notice from JPL.[35] JPL did not terminate their employment; they themselves severed their
relations with JPL. Thus, they are not entitled to separation pay.
The Court is not inclined in this case to award separation pay even on the ground of compassionate
justice. The Court of Appeals relied on the cases[36] wherein the Court awarded separation pay to legally
dismissed employees on the grounds of equity and social consideration. Said cases involved employees
who were actually dismissed by their employers, whether for cause or not. Clearly, the principle applies
only when the employee is dismissed by the employer, which is not the case in this instance. In seeking
and obtaining employment elsewhere, private respondents effectively terminated their employment with
JPL.
In addition, the doctrine enunciated in the case of Serrano[37] cited by private respondents has already
been abandoned by our ruling in Agabon v. National Labor Relations Commission.[38] There we ruled
that an employer is liable to pay indemnity in the form of nominal damages to a dismissed employee if, in
effecting such dismissal, the employer failed to comply with the requirements of due process. However,
private respondents are not entitled to the payment of damages considering that there was no violation of
due process in this case. JPLs memo dated 13 August 1996 to private respondents is not a notice of
termination, but a mere note informing private respondents of the termination of CMCs contract and their
re-assignment to other clients. The thirty (30)-day notice rule does not apply.
Nonetheless, JPL cannot escape the payment of 13th month pay and service incentive leave pay to private
respondents. Said benefits are mandated by law and should be given to employees as a matter of right.
Presidential Decree No. 851, as amended, requires an employer to pay its rank and file employees a 13 th
month pay not later than 24 December of every year. However, employers not paying their employees a
13th month pay or its equivalent are not covered by said law.[39] The term its equivalent was defined by
the laws implementing guidelines as including Christmas bonus, mid-year bonus, cash bonuses and other
payment amounting to not less than 1/12 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.[40]
On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave
benefit of five (5) days with pay, enjoyed by an employee who has rendered at least one year of service.
Unless specifically excepted, all establishments are required to grant service incentive leave to their
employees. The term at least one year of service shall mean service within twelve (12) months, whether
continuous or broken reckoned from the date the employee started working.[41] The Court has held in
several instances that service incentive leave is clearly demandable after one year of service.[42]
Admittedly, private respondents were not given their 13th month pay and service incentive leave pay
while they were under the employ of JPL. Instead, JPL provided salaries which were over and above the
minimum wage. The Court rules that the difference between the minimum wage and the actual salary
received by private respondents cannot be deemed as their 13th month pay and service incentive leave pay
as such difference is not equivalent to or of the same import as the said benefits contemplated by law.
Thus, as properly held by the Court of Appeals and by the NLRC, private respondents are entitled to the
13th month pay and service incentive leave pay.
However, the Court disagrees with the Court of Appeals ruling that the 13th month pay and service
incentive leave pay should be computed from the start of employment up to the finality of the NLRC
resolution. While computation for the 13th month pay should properly begin from the first day of
employment, the service incentive leave pay should start a year after commencement of service, for it is
only then that the employee is entitled to said benefit. On the other hand, the computation for both
benefits should only be up to 15 August 1996, or the last day that private respondents worked for JPL. To
extend the period to the date of finality of the NLRC resolution would negate the absence of illegal
dismissal, or to be more precise, the want of dismissal in this case. Besides, it would be unfair to require
JPL to pay private respondents the said benefits beyond 15 August 1996 when they did not render any
service to JPL beyond that date. These benefits are given by law on the basis of the service actually
rendered by the employee, and in the particular case of the service incentive leave, is granted as a
motivation for the employee to stay longer with the employer. There is no cause for granting said
incentive to one who has already terminated his relationship with the employer.
The law in protecting the rights of the employees authorizes neither oppression nor selfdestruction of the employer. It should be made clear that when the law tilts the scale of justice in favor of
labor, it is but recognition of the inherent economic inequality between labor and management. The intent
is to balance the scale of justice; to put the two parties on relatively equal positions. There may be cases
where the circumstances warrant favoring labor over the interests of management but never should the
scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be
denied to none).[43]
WHEREFORE, the petition is GRANTED IN PART. The Decision and Resolution of the Court
of Appeals in CA-G.R. SP No. 62631 are hereby MODIFIED. The award of separation pay is deleted.
Petitioner is ordered to pay private respondents their 13th month pay commencing from the date of
employment up to 15 August 1996, as well as service incentive leave pay from the second year of
employment up to 15 August 1996. No pronouncement as to costs.
SO ORDERED.
ACE NAVIGATION CO., INC. and/or CONNING SHIPPING LTD., petitioners, vs. COURT OF
APPEALS (THIRTEENTH DIVISION), NATIONAL LABOR RELATIONS
COMMISSION (FIRST DIVISION) and ORLANDO ALONSAGAY, respondents.
DECISION
PUNO, J.:
This is a petition for review of the resolutions1[1] of the Court of Appeals2[2] that dismissed the petition
for certiorari filed by petitioners and which denied their motion for reconsideration, respectively.
First, the facts.
In June 1994, Ace Navigation Co., Inc. (Ace Nav) recruited private respondent Orlando Alonsagay to
work as a bartender on board the vessel M/V "Orient Express" owned by its principal, Conning Shipping
Ltd. (Conning). Under their POEA approved contract of employment, Orlando shall receive a monthly
basic salary of four hundred fifty U.S. dollars (U.S. $450.00), flat rate, including overtime pay for 12
hours of work daily plus tips of two U.S. dollars (U.S. $2.00) per passenger per day. He, was also entitled
to 2.5 days of vacation leave with pay each month. The contract was to last for one (1) year.
Petitioners alleged that on June 13, 1994, Orlando was deployed and boarded M/V "Orient Express" at the
seaport of Hong Kong. After the expiration of the contract on June 13, 1995, Orlando returned to the
Philippines and demanded from Ace Nav his vacation leave pay. Ace Nav did not pay him immediately.
It told him that he should have been paid prior to his disembarkation and repatriation to the Philippines.
Moreover, Conning did not remit any amount for his vacation leave pay. Ace Nav, however, promised to
verify the matter and asked Orlando to return after a few days. Orlando never returned.
On November 25, 1995, Orlando filed a complaint3[3] before the labor arbiter for vacation leave pay of
four hundred fifty U.S. dollars (U.S. $450.00) and unpaid tips amounting to thirty six, thousand U.S.
dollars (U.S. $36,000.00).4[4] On November 15, 1996, Labor Arbiter Felipe P. Pati ordered Ace Nav and
Conning to pay jointly and severally Orlando his vacation leave pay of US$450.00. The claim for tips of
Orlando was dismissed for lack of merit.5[5]
Orlando appealed6[6] to the National Labor Relations Commission (NLRC) on February 3, 1997. In a
decision7[7] promulgated on November 26, 1997, the NLRC ordered Ace Nav and Conning to pay the
unpaid tips of Orlando which amounted to US$36,000.00 in addition to his vacation leave pay. Ace Nav
and Conning filed a motion for reconsideration on February 2, 1998 which was denied on May 20,
1999.8[8]
On July 2, 1999, Ace Nav and Conning filed a petition for certiorari before the Court of Appeals to annul
the decision of the NLRC. On July 28, 1999, the Court of Appeals promulgated a three-page
resolution9[9] dismissing the petition. Their motion for reconsideration filed on September 8, 1999 was
denied on October 8, 1999. Hence this appeal.
In assailing the dismissal of their petition on technical grounds, petitioners argued that the Court of
Appeals erred in rigidly and technically applying Section 13, Rule 1310[10] and Section 1, Rule 6511[11]
of the 1997 Rules of Civil Procedure.12[12] They also contend that the respondent court erred in ruling
that they are the ones liable to pay tips to Orlando. They point out that if tips will be considered as part of
the salary of Orlando, it will make him the highest paid employee on M/V "Orient Express." The ship
captain, the highest ranking officer, receives U.S.$3,000.00 per month without tips. Orlando, who is a
bartender, will receive U.S.$3,450.00 per month. Allegedly, this will compel foreign ship owners to desist
from hiring Filipino bartenders. It will create an unfavorable precedent detrimental to the future
recruitment, hiring and deployment of Filipino overseas workers specially in service oriented businesses.
It will also be a case of double compensation that will unjustly enrich Orlando at the expense of
petitioners. They also stress that Orlando never complained that they should pay him the said tips.
Respondent filed a two-page comment to the petition adopting the resolution of the Court of Appeals
dated July 28, 1999.
We find merit in the petition.
Rules of procedure are used to help secure and not override substantial justice.13[13] Even the Rules of
Court mandates a liberal construction in order to promote their objective of securing a just, speedy and
inexpensive disposition of every action and proceeding.14[14] Since rules of procedure are mere tools
designed to facilitate the attainment of justice, their strict and rigid application which would result in
technicalities that tend to frustrate rather than promote substantial justice must always be avoided.15[15]
Thus, the dismissal of an appeal on purely technical ground is frowned upon especially if it will result to
unfairness.
We apply these sound rules in the case at bar. Petitioners' petition for certiorari before the Court of
Appeals contained the certified true copy of the NLRC's decision dated November 26, 1997,16[16] its
order dated May 2, 199917[17] and the sworn certification of non-forum shopping.18[18] Petitioners also
explained that their counsel executed an affidavit of proof of service and explanation in the afternoon of
July 1, 1999. However, he forgot to attach it when he filed their petition the following day because of the
volume and pressure of work and lack of office personnel. However, the Registry Receipt,19[19] which is
the proof of mailing to Orlando's counsel, issued by the Central Post Office was attached on the original
petition they filed with the respondent court. It was also stamped20[20] by the NLRC which is proof of
receipt of the petition by the latter. The affidavit of service, which was originally omitted, was attached on
their motion for reconsideration.21[21] Significantly, it was dated July 1, 1999. In view of the
surrounding circumstances, the subsequent filing of the affidavit of service may be considered as
substantial compliance with the rules.
We now come to the merits of the case. The issue is whether petitioners are liable to pay the tips to
Orlando.
The word [tip] has several meanings, with origins more or less obscure, connected with "tap" and with
"top." In the sense of a sum of money given for good service, other languages are more specific, e.g., Fr.
pourboire, for drink. It is suggested that [the word] is formed from the practice, in early 18th c. London
coffeehouses, of having a box in which persons in a hurry would drop a small coin, to gain immediate
attention. The box was labelled To Insure Promptness; then just with the initials T.I.P.22[22]
It is more frequently used to indicate additional compensation, and in this sense "tip" is defined as
meaning a gratuity; a gift; a present; a fee; money given, as to a servant to secure better or more prompt
service. A tip may range from pure gift out of benevolence or friendship, to a compensation for a service
measured by its supposed value but not fixed by an agreement, although usually the word is applied to
what is paid to a servant in addition to the regular compensation for his service in order to secure better
service or in recognition of it. It has been said that a tip denotes a voluntary act, but it also has been said
that from the very beginning of the practice of tipping it was evident that, whether considered from the
standpoint of the giver or the recipient, a tip lacked the essential element of a gift, namely, the free
bestowing of a gratuity without a consideration, and that, despite its apparent voluntariness, there is an
element of compulsion in tipping.23[23]
Tipping is done to get the attention and secure the immediate services of a waiter, porter or others for
their services. Since a tip is considered a pure gift out of benevolence or friendship, it can not be
demanded from the customer. Whether or not tips will be given is dependent on the will and generosity of
the giver. Although a customer may give a tip as a consideration for services rendered, its value still
depends on the giver. They are given in addition to the compensation by the employer. A gratuity given
by an employer in order to inspire the employee to exert more effort in his work is more appropriately
called a bonus.
The NLRC and the Court of Appeals held that petitioners were liable to pay tips to Orlando because of
the contract of employment. Thus:
"The contract of employment entered into by and between the complainant and Ace Navigation Co., Inc.
(p. 82, Record) clearly provides xxx:
'That the employee shall be employed on board under the following terms and conditions:
1.1 Duration of Contract: (12 months) 10 months remaining duration of contract
1.2 Position: Bartender
1.3 Basic Monthly Salary: U.S.$450.00 Flat rate including overtime pay for
1.4 Hours of Work: 12 hrs. work daily.
1.5 Overtime: Plus tips of U.S.$2.00 per passenger per day.

1.6 Vacation Leave with Pay: 2.5 days/mo.' (record, p. 82)
"The record of this case shows that the respondent, in the Contract of Employment xxx undertook to pay
to complainant 'tips of U.S.$2.00 per passenger per day.' Yet, there is no showing that the said
undertaking was complied with by the respondents.
"It was thus a serious error on the part of the Labor Arbiter to rule that the tips were already paid, much
less to rule that said tips were directly paid to the crew of M/V "ORIENT PRINCESS." With Article 4 of
the Labor Code reminding us that doubts should be resolved in favor of labor, we all the more find it
compelling to rule that the complainant is still entitled to the contractually covenanted sum of
US$36,000.00. xxx."
We disagree. The contract of employment between petitioners and Orlando is categorical that the monthly
salary of Orlando is US$450.00 flat rate. This already included his overtime pay which is integrated in
his 12 hours of work. The words "plus tips of US$2.00 per passenger per day" were written at the line for
overtime. Since payment for overtime was included in the monthly salary of Orlando, the supposed tips
mentioned in the contract should be deemed included thereat.
The actuations of Orlando during his employment also show that he was aware his monthly salary is only
US$450.00, no more no less. He did not raise any complaint about the non-payment of his tips during the
entire duration of his employment. After the expiration of his contract, he demanded payment only of his
vacation leave pay. He did not immediately seek the payment of tips. He only asked for the payment of
tips when he filed this case before the labor arbiter. This shows that the alleged non-payment of tips was a
mere afterthought to bloat up his claim. The records of the case do not show that Orlando was deprived of
any monthly salary. It will now be unjust to impose a burden on the employer who performed the contract
in good faith.
Furthermore, it is presumed that the parties were aware of the plain, ordinary and common meaning of the
word "tip." As a bartender, Orlando can not feign ignorance on the practice of tipping and that tips are
normally paid by customers and not by the employer.
It is also absurd that petitioners intended to give Orlando a salary higher than that of the ship captain. As
petitioners point out, the captain of M/V "Orient Princess" receives US$3,000.00 per month while
Orlando will receive US$3,450.00 per month if the tip of US$2.00 per passenger per day will be given in
addition to his US$450.00 monthly salary. It will be against common sense for an employer to give a
lower ranked employee a higher compensation than an employee who holds the highest position in an
enterprise.
However, Orlando should be paid his vacation leave pay. Petitioners denied this liability by raising the
defense that the usual practice is that vacation leave pay is given before repatriation. But as the labor
arbiter correctly observed, petitioners did not present any evidence to prove that they already paid the
amount. The burden of proving payment was not discharged by the petitioners.
IN VIEW WHEREOF, the resolutions of the Court of Appeals in CA G.R. SP No. 53508 are reversed
and set aside. The decision of the labor arbiter ordering petitioners to pay jointly and severally the unpaid
vacation leave pay of private respondent, Orlando Alonsagay, in the amount of US$450.00 and
dismissing his other claim for lack of merit is reinstated.
SO ORDERED.
G.R. No. 123880 February 23, 1999

MARANAW HOTELS AND RESORT CORPORATION, (Owner of Century Park Sheraton
Manila), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and EDDIE DAMALERIO, respondents.
PURISIMA, J.:
This special civil action for certiorari under Rule 65 of the Revised Rules of Court seeks to annul and set
aside the Decision, dated September 18, 1995, of the National Labor Relations Commission (NLRC) 1,
and the Order 2, dated January 30, 1996, denying petitioner's motion for reconsideration in NLRC-NCRCA No. 005642-93, on the ground of lack or excess of jurisdiction or grave abuse of discretion.
On April 2, 1992, Eddie Damalerio (Damalerio), a room attendant of the Century Park Sheraton Hotel,
operated by Maranaw Hotel and Resort Corporation, was seen by hotel guest Jamie Glaser (Glaser) with
left hand inside the latter's suitcase. Confronted with what he was doing, Damalerio explained that he was
trying to tidy up the room. Not satisfied with the explanation of Damalerio, Glaser lodged a written
complaint before William D. Despuig, shift-in-charge of security of the hotel. Glaser also reported that
Damalerio had previously asked from him souvenirs, cassettes, and other giveaways. The complaint was
later brought by Despuig to the attention of Major Eddie Buluran, chief of Security of the hotel.
On April 3, 1992, Damalerio was given a Disciplinary Action Notice (DAN). The next day, an
administrative hearing was conducted on the matter. Among those present at the hearing were: 1) Lourdes
Ricardo (room attendant), 2) Angelito Torres (floor supervisor), 3) Major Eddie Buluran (chief of
security), 4) Susan Dino (Personnel representative), 5) Alfredo San Gabriel (senior floor supervisor) and
6) Ben Hur Amador (union representative).
Taking the witness stand on his own behalf, Damalerio denied the accusation against him, theorizing that
when he found the room of Glaser in disarray, and was about to make the bed, he noticed some
belongings, such as socks and T-shirts of the said hotel guest scattered around, so much so that he thought
of placing the some in his luggage. While doing so, Glaser arrived. When asked by the latter if something
was wrong, he (Damalerio) said "I'm just cleaning your room," and Glaser remarked, "Good work," and
then, the two of them chatted about Glaser's concert at the Araneta Coliseum.
On April 13, 1992, Damalerio received a memorandum 3 issued by Alfredo San Gabriel, Sr., Floor
Supervisor, bearing the approval of Nicolas R. Kirit, Executive Housekeeper, stating that he (Damalerio)
was found to have committed qualified theft in violation of House Rule No. 1, Section 3 of Hotel Rules
and Regulations. The same memorandum served as a notice of termination of his employment.
On May 19, 1992, Damalerio filed with the Labor Arbiter a Complaint for illegal dismissal against the
petitioner.
On August 20, 1993, after the parties had sent in their position papers, Labor Arbiter Ceferina J. Diosana
decided the case; disposing, thus:
WHEREFORE, judgment is hereby rendered finding the dismissal of complainant to be
illegal and ordering the respondents to reinstate him to his former or equivalent position
without loss of seniority rights and with backwages from April 15, 1992 when he was
preventively suspended up to actual reinstatement and other benefits, including but not
limited to his share in the charges and or tips which he failed to receive, and all other
CBA benefits that have accrued since his dismissal.
SO ORDERED.
From the aforesaid Labor Arbiter's disposition, the petitioner appealed to the NLRC, which modified the
appealed decision by giving petitioner the option of paying Damalerio a separation pay equivalent to one
(1) month pay for every year of service, instead of reinstating him.
On November 22, 1995, petitioner interposed a motion for reconsideration but to no avail. NLRC denied
the same on January 30, 1996.
Undaunted, petitioner has come to this Court via the present petition; posing the questions:
1. WHETHER OR NOT RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN HOLDING THAT
PETITIONER FAILED TO ADDUCE CONCLUSIVE EVIDENCE IN SUPPORT OF
ITS VERSION OF THE INCIDENT, CONSIDERING THE FACT THAT THE
EVIDENCE ON RECORD INELUCTABLY SHOWS THAT PRIVATE
RESPONDENT WAS CAUGHT IN FLAGRANTE DELICTO; and
2. WHETHER OR NOT RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN NOT REVERSING
THAT PORTION OF THE DECISION OF THE LABOR ARBITER ORDERING
HEREIN PETITIONER TO PAY PRIVATE RESPONDENT HIS SHARE IN THE
SERVICE CHARGE WHICH WAS COLLECTED DURING THE TIME HE WAS
NOT WORKING IN THE HOTEL.
The petition is barren of merit.
Petitioner's theory that Damalerio was caught committing qualified theft in flagrante delicto is anemic of
evidentiary support. Records disclose petitioner's failure to substantiate such imputation against him.
During the investigation presided over by the Labor Arbiter, Damalerio narrated a plausible and
satisfactory explanation for his behavior complained of. According to him, he was then cleaning the hotel
room of Glaser, and while in the process of placing inside the luggage the personal belongings of Glaser
scattered near the bed, the latter entered the room. Glaser did not bother to testify as all his things were
intact.
Although it was not completely proper for Damalerio to be touching the things of a hotel guest while
cleaning the hotel rooms, personal belongings of hotel guests being off-limits to roomboys, under the
attendant facts and circumstances, we believe that the dismissal of Damalerio was unwarranted. To be
sure, the investigation held by the hotel security people did not unearth enough evidence of culpability. It
bears repeating that subject hotel guest lost nothing. Albeit petitioner may have reasons to doubt the
honesty and trustworthiness of Damalerio, as a result of what happened, absent sufficient proof of guilt,
he (Damalerio), who is a rank-and-file employee, cannot be legally dismissed. 4 Unsubstantiated
suspicions and baseless conclusions by employers are not legal justification for dismissing employees.
The burden of proving the existence of a valid and authorized cause of termination is on the employer. 5
Any doubt should be resolved in favor of the employee, in keeping with the principle of social justice
enshrined in the Constitution. 6
All things studiedly considered and viewed in proper perspective, the dismissal of Damalerio, under the
premises, cannot be countenanced.
As regards the share of Damalerio in the service charges collected during the period of his preventive
suspension, the same form part of his earnings, and his dismissal having been adjudged to be illegal, he is
entitled not only to full backwages but also to other benefits, including a just share in the service charges,
to be computed from the start of his preventive suspension until his reinstatement.
However, mindful of the animosity and strained relations between the parties, emanating from this
litigation, we uphold the ruling a quo that in lieu of reinstatement, separation pay may be given to the
private respondent, at the rate of one (1) month pay for every year of service. Should petitioner opt in
favor of separation pay, the private respondent shall no longer be entitled to share in the service charges
collected during his preventive suspension.
WHEREFORE, the petition is hereby DISMISSED and the Court affirms the questioned Decision of the
National Labor Relations Commission, to be implemented according to law and this disposition. No
pronouncement as to costs.
SO ORDERED.
[G.R. NO. 149013 : August 31, 2006]

HOUSE OF SARA LEE, Petitioner, v. CYNTHIA F. REY, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before this Court is a Petition for Certiorari under Rule 45 seeking to reverse and set aside the Decision1
dated August 25, 2000 of the Court of Appeals (CA) in CA-G.R. SP No. 51653 which affirmed the
Decision dated October 29, 1998 of the National Labor Relations Commission (NLRC); and the CA
Resolution2 dated July 4, 2001 which denied the petitioner's3 Motion for Reconsideration.
The case originated from a Complaint for illegal dismissal instituted on September 24, 1996 by the
respondent against the petitioner before the NLRC Arbitration Branch No. 10 in Cagayan de Oro City.
The Complaint prayed for reinstatement with full backwages without loss of seniority rights, payment of
13th, 14th and 15th month pay, and the award of moral damages and attorney's fees.
The essential facts:
The House of Sara Lee (petitioner) is engaged in the direct selling of a variety of product lines for men
and women, including cosmetics, intimate apparels, perfumes, ready to wear clothes and other novelty
items, through its various outlets nationwide. In the pursuit of its business, the petitioner engages and
contracts with dealers to sell the aforementioned merchandise. These dealers, known either as
"Independent Business Managers" (IBMs) or "Independent Group Supervisors" (IGSs), depending on
whether they sell individually or through their own group, would obtain at discounted rates the
merchandise from the petitioner on credit and then sell the same products to their own customers at fixed
prices also determined by the petitioner. In turn, the dealers are paid "Services Fees," or sales
commissions, the amount of which depends on the volume and value of their sales. Under existing
company policy, the dealers must remit to the petitioner the proceeds of their sales within a designated
credit period, which would either be 38 days for IGSs or 52 days for IBMs, counted from the day the said
dealers acquired the merchandise from the petitioner. To discourage late remittances, the petitioner
imposes a "Credit Administration Charge," or simply, a penalty charge, on the value of the unremitted
payment. Additionally, if the dealer concerned has overdue payments or is said to be in "default," he or
she cannot purchase additional products from the petitioner. The dealers under this system earn income
through a profit margin between the discounted purchase price they pay on credit to the petitioner and the
fixed selling price their customers will have to pay. On top of this margin, the dealer is given the Service
Fee, a sales commission, based on the volume of sales generated by him or her. Due to the sheer volume
of sales generated by all of its outlets, the petitioner has found the need to strictly monitor the 38 - or 52day "rolling due date" of each of its IBMs and IGSs through the employment of "Credit Administration
Supervisors" (CAS) for each branch. The primary duty of the CAS is to strictly monitor each of these
deadlines, to supervise the credit and collection of payments and outstanding accounts due to the
petitioner from its independent dealers and various customers, and to screen prospective IBMs. To
discharge these responsibilities, the CAS is provided with a computer equipped with control systems
through which data is readily generated. Under this organizational setup, the CAS is under the direct and
immediate supervision of the Branch Operations Manager (BOM).
Cynthia Rey (respondent), at the time of her dismissal from employment, or on June 25, 1996, held the
position of Credit Administration Supervisor or CAS at the Cagayan de Oro City branch of the petitioner.
Respondent was first employed by the petitioner in July 16, 1993 as an Accounts Receivable Clerk at its
Caloocan City branch. In November 1993, respondent was transferred to the Cagayan de Oro City branch
retaining the same position. In January 1994, respondent was elevated to the position of CAS. At that
time, the Branch Operations Manager or BOM of the Cagayan de Oro City branch was a certain Mr.
Jeremiah Villagracia. In March 1995, respondent was temporarily assigned to the Butuan City branch.
Sometime in June 1995, while respondent was still working in Butuan City, she allegedly instructed the
Accounts Receivable Clerk of the Cagayan de Oro outlet, a certain Ms. Magi Caroline Mendoza, to
change the credit term of one of the IBMs of the petitioner, a certain Ms. Mariam Rey-Petilla, who
happens to be respondent's sister-in-law, from the 52-day limit to an "unauthorized" term of 60 days. The
respondent made the instruction, the petitioner avers, just before the computer data for the computation of
the Service Fee accruing to Ms. Rey-Petilla was about to be generated. Ms. Mendoza then reported this
allegedly unauthorized act of respondent to her Branch Operations Manager, Mr. Villagracia. Acting on
the report, as the petitioner alleges, BOM Villagracia discreetly verified the records and discovered that it
was not only the 52-day credit term of IBM Rey-Petilla that had been extended by the respondent, but
there were several other IBMs whose credit terms had been similarly extended beyond the periods
allowed by company policy. BOM Villagracia then summoned the respondent and required her to explain
the unauthorized credit extensions. The petitioner alleges that during that confrontation, respondent
admitted her infractions and begged the BOM not to elevate or disclose the matter further to higher
authorities. In a letter dated June 22, 1995, Villagracia formally reported the matter to higher
management, stating that respondent, "in tears and remorse" and confiding "her sincerest apology,"
personally admitted that the credit terms of certain IBMs were adjusted in the computer for purposes of
computing the Service Fees.4 On June 24, 1995, Villagracia formally served a "show-cause" letter to
respondent and placed her on "indefinite suspension" effective on the same day.5 On June 27, 1995,
respondent submitted her explanation denying the accusations made against her and stated that the
"discrepancies" in the service fees may have been the result of deadlines falling on holidays, after
"reconsiderations" had been requested by the IBM concerned and with the full knowledge of and approval
by BOM Villagracia as part of his campaign to increase collections.6 Additionally, in the same letterresponse, respondent vehemently denied that she waived her right to explain as well as any admission she
allegedly made before Villagracia, and she pointed to the latter as the author of the "discrepancies."7
As a consequence of the discovery of the foregoing alleged "anomalous practice" of extending the credit
terms of certain IBMs, management undertook an audit of the Cagayan de Oro City and Butuan City
branches. During the process, the petitioner alleges, respondent was interviewed by the auditors before
whom she again openly admitted her infractions. Upon being furnished a copy of the Auditor's Report,
portions of which read:
xxx
OBJECTIVE OF THE AUDIT UNDERTAKEN
This activity has been conducted to establish facts that would determine whether Ms. Cynthia Rey did
change the credit terms or not for whatever reason resulting in the company's payments of undue service
fees.
AUDIT FINDINGS
We conducted examination of Service Fee Report for 15 selected IBMs with the largest service fee payouts from November 1993 up to April 1995 for Cagayan de Oro Branch and from February 1995 to
March 1995 for Butuan Service Center. Set forth are the results of this activity:
CAGAYAN DE ORO BRANCH

FINDING
In all 15 samples, credit terms were changed by then CAS Cynthia Rey beyond 52 days to as high as 90
days as evidenced by the IBM Credit Terms Exception Report . . . . The exception report revealed that the
CAS with User ID "credit1" often changes/increases the credit terms of several IBMs, since February
1994, usually a day before or during SF cut-off dates (20th, 21st, 22nd, or 23rd of the month) and would
return it to original credit terms after completion of SF print-outs. Total SF discrepancy for the 15
samples as a result of credit term adjustment amounts to P 211K x x x x
It is apparent that credit term adjustments resulted in payment of significant amount of undue service fees.
Such fraudulent practice clearly favors the interest of the IBMs to the detriment of the company. This
constitutes conflict of interest and should be dealt with accordingly.
xxx
FINDING
Ms. Cynthia Rey was on maternity leave from March 07, 1994 up to May 30, 1994 during which time no
changing of credit term was recorded by the parameter 23.8.2. This simply means that no credit term
adjustment was made during the period Ms. Rey was on leave. Again, this confirms that without Ms. Rey
around, nobody ever changed/adjusted the credit terms beyond 52 days.
xxx
BUTUAN SERVICE CENTER
FINDING
On a concurrent capacity as OIC and CAS of Butuan Service Center starting sometime February 1995,
Ms. Cynthia Rey changed the credit terms of IBMs as shown in the IBM Credit Terms Exception Report .
. . . Total discrepancies for February and March 1995 Service Fees as a result of the credit term
adjustments amounts to P3,716.44 . . . . Analysis showed that credit terms used by Cynthia for each of the
IBMs/IBMC/IGSs ranged from 55 to 90 days x x x x
Surprised with the Exception Reports, Ms. Rey admitted having done the credit term adjustments at
Butuan. Her statements therefore showed inconsistencies as she previously denied this allegation.
However, she cited no clear reasons for such malpractice.
Recommendation
Materiality of the amount involved is not the issue at hand. Her admission to the auditor of the violation
committed does not absolve her from being meted disciplinary actions as determined by management. We
would like to emphasize that any leniency on this case might have far reaching implications to the branch
operations and the company as a whole.
x x x.8
Petitioner, on July 29, 1995, directed respondent again to explain, but in more detail, the alleged
"anomalies" uncovered by the audit. After requesting more time to review the report and submit her
comment, on July 31, 1995, respondent requested instead that a formal investigation be conducted in the
presence of her lawyer.9 In the meantime, respondent's suspension was lifted, but without prejudice to the
outcome of the administrative investigation.10 On September 7, 1995, the petitioner conducted a formal
hearing which was attended by respondent and her counsel of record.11 Subsequently, respondent and her
counsel affixed their respective signatures on the transcripts of the hearing.12
Meanwhile, on April 15, 1996, BOM Villagracia resigned. Upon his resignation, respondent managed the
Cagayan de Oro branch for three months pending the appointment of a new BOM.
On the basis of the hearing, the alleged voluntary admissions of respondent, and the findings of the
auditor's report, the petitioner, on June 25, 1996, formally dismissed the respondent for breach of trust
and confidence.13
On September 24, 1996, as stated above, respondent filed her Complaint for illegal dismissal, backwages
and damages, with the Labor Arbiter. On April 30, 1998, the Labor Arbiter rendered a decision in favor of
the respondent, the dispositive portion of which states:
WHEREFORE, in view of all the foregoing, judgment is hereby entered ordering [petitioner] House of
Sara Lee to immediately pay [respondent] Cynthia F. Rey the sum of P177,052.05 as full backwages from
July 1, 1996 up to the date of this decision; 13th month pay in the sum of P18,666.67 and separation pay
in the sum of P40,000.00 and likewise to pay the sum of P23,571.72 equivalent to 10% of the aggregate
monetary award as attorney's fees.
The rest of the claims are dismissed for lack of merit.
SO ORDERED.14
To the Labor Arbiter, the question to be resolved is whether the petitioner validly terminated respondent's
employment on the ground of loss of trust and confidence. In declaring the termination illegal, the Labor
Arbiter held that the petitioner, as employer, failed to discharge its burden of proof in showing that the
dismissal was for a just or authorized cause; that, in particular, the petitioner failed to establish that
respondent was the very person who allegedly manipulated the credit terms of certain IBMs through the
computer terminals, since other employees had access to the same; that respondent's alleged admissions
before Villagracia, her BOM, and M.D. Sabayle, the company auditor, are based on self-serving evidence;
that the petitioner failed to substantiate the loss of P211,000.00 which it imputed to the respondent; that
the petitioner failed to show that it apprised its employees of the terms of the company policy which
respondent allegedly violated, or, in other words, that respondent was not fully informed of the possible
sanctions for such acts; that reinstatement would be impractical under the circumstances since the
relations of the parties were already strained, hence, the award of full backwages and separation pay is
justified; that petitioner failed to refute the claim for 13th month pay, hence, as a statutory relief,
respondent should be awarded the same; and that the claims for 14th and 15th month pay as well as moral
and exemplary damages should be denied for having no legal basis.
Aggrieved, the petitioner appealed to the NLRC. On October 29, 1998, the NLRC rendered its Decision
dismissing the appeal. In affirming the Decision of the Labor Arbiter, the NLRC additionally held that if
indeed benefits accrued to the IBMs by virtue of the credit term extensions, it was BOM Villagracia who
benefited from this scheme which he himself adopted; that the auditor's report showed that the scheme
had been a "long standing practice" of the branch office of the petitioner; that after Villagracia resigned,
respondent was left to manage the Cagayan de Oro branch which, at that time, registered the highest
growth rate and for which reason respondent earned a commendation from the petitioner; and that the loss
of trust and confidence advanced by the petitioner is negated by the fact that respondent, after
Villagracia's resignation, was allowed to manage the Cagayan de Oro City branch and by the fact that she
was commended for her good performance.
The petitioner appealed to the CA under Rule 65. On August 25, 2000, the CA dismissed the Petition on
the sole ground that factual issues are not proper subjects for a special civil action of certiorari .
The petitioner is now before this Court under Rule 45, assigning the following errors:
I.
IN DISMISSING THE PETITION FOR CERTIORARI ASSAILING THE RESOLUTIONS OF THE
NATIONAL LABOR RELATIONS COMMISSION IN THE LABOR CASE BELOW ON THE
GROUND THAT FACTUAL ISSUES ARE NOT THE PROPER SUBJECT OF CERTIORARI, THE
COURT OF APPEALS HAS IN EFFECT DECIDED A QUESTION OF SUBSTANCE NOT IN
ACCORD WITH LAW AND JURISPRUDENCE.
II.
IN DOING SO, THE COURT OF APPEALS DEVIATED FROM ESTABLISHED DOCTRINES LONG
SETTLED BY CONSISTENT JURISPRUDENCE ENUNCIATED BY THIS HONORABLE COURT.15
We grant the petition.
As a preliminary matter, we shall resolve the procedural concern raised by the respondent. She maintains
that no grave abuse of discretion was committed by the NLRC. This is incorrect.
In the recent case of Manila Memorial Park Cemetery, Inc. v. Panado,16 we held that where the NLRC or
the labor arbiter acted capriciously and whimsically in total disregard of evidence material to or even
decisive of the controversy, the extraordinary writ of certiorari will lie.17 While as a general rule, the
factual findings of administrative agencies are not subject to review by this Court, it is equally established
that we will not uphold erroneous conclusions which are contrary to the evidence, because the agency a
quo, for that reason, would be guilty of a grave abuse of discretion. Nor is this Court bound by
conclusions which are not supported by substantial evidence.18 The substantial evidence rule does not
authorize any finding just as long as there is any evidence to support it. It does not excuse administrative
agencies from considering contrary evidence which fairly detracts from the evidence supporting a
finding.19
In this case, the NLRC and the CA consistently ignored the following facts established in the record:
a) respondent, during the formal hearing on September 7, 1995, in the presence of her counsel, clearly
admitted in several instances that, beginning June 1994, she herself actually extended, on a monthly basis,
the credit terms of certain IBMs from the company-fixed 52 days to as high as 90 days;20
b) as Credit Administration Supervisor, she knew the appropriate credit terms (38 days for IGSs and 52
days for IBMs) under the company guidelines and which would serve as the bases for the computation of
the correct Service Fees or sales commissions;21
c) she was fully aware of the financial implications whenever she would extend the credit terms, in that
all late remittances by the IBMs concerned would be considered in the computation of their Service Fees
which would not otherwise be due to them under company guidelines;22
d) the computation of the Service Fees, on many occasions, had been finalized, processed, and printed
out;23
e) she changed the credit terms in the Cagayan de Oro branch under the alleged "blanket approval" of
BOM Villagracia;24
f) she changed the credit terms in the Cagayan de Oro branch since it was a "standard practice" in
Caloocan City where she had been previously assigned;25
g) during her stint in the Butuan City branch, she admitted that there had been no such "blanket approval,"
but she nonetheless kept changing the credit terms because, according to her, this had become "standard
practice" in the Cagayan de Oro branch as well;26
h) in several instances, she acted on her own accord and without the requisite authority in extending the
credit terms, since there were no specific nor direct instructions from Villagracia to change those terms;27
i) she even assisted Mr. Villagracia and Ms. Mendoza in the process of changing the credit terms since
they were ignorant of the procedure;28
j) she would change the credit terms whenever the IBMs concerned would ask for "reconsideration;"29
and finally,
k) her statements suffered notable inconsistencies, oscillating between denying or not remembering the
alleged act and categorically admitting having done them.30
The consideration of the foregoing facts, as disclosed in the record, justifies a different conclusion.
Although numerous exceptions to the general rule have been fairly established in case law, it must be
stressed that the meticulous constitution of the factual findings are functions that principally lie with the
NLRC and the CA as well as the other tribunals that may come under the review power of the Supreme
Court. It is a strict judicial policy to hand down an incisive ruling in the first instance in order to relieve
this Court from exercising its extraordinary powers of excavating the facts, so that the Court may
thoroughly devote its energies to the disposition of questions of law, and only questions of law, under the
extent of Rule 45.
Contrary to the findings of the NLRC and the CA, the Court holds that respondent was dismissed for a
just cause.
Law31 and jurisprudence have long recognized the right of employers to dismiss employees by reason of
loss of trust and confidence.32 More so, in the case of supervisors or personnel occupying positions of
responsibility, loss of trust justifies termination.33 Loss of confidence as a just cause for dismissal is
premised on the fact that an employee concerned holds a position of trust and confidence. This situation
applies where a person is entrusted with confidence on delicate matters, such as the custody, handling, or
care and protection of the employer's property. But, in order to constitute a just cause for dismissal, the
act complained of must be "work-related," such that the employee concerned is unfit to continue working
for the employer.34
The degree of proof required in labor cases is not as stringent as in other types of cases.35 It must be
noted, however, that recent decisions of this Court have distinguished the treatment of managerial
employees from that of rank-and-file personnel in the application of the doctrine of loss of trust and
confidence.36 With respect to rank-and-file personnel, loss of trust and confidence as ground for valid
dismissal requires proof of involvement in the alleged events in question, and that mere uncorroborated
assertions and accusations by the employer will not be sufficient. But as to a managerial employee, the
mere existence of a basis for believing that such employee has breached the trust of his employer would
suffice for his dismissal. Hence, in the case of managerial employees, proof beyond reasonable doubt is
not required; it is sufficient that there is some basis for the loss of confidence, as when the employer has
reasonable ground to believe that the employee concerned is responsible for the purported misconduct,
and the nature of his participation therein renders him unworthy of the trust and confidence demanded by
his position.37
In the present case, the respondent is not an ordinary rank-and-file employee. The nature of her work
requires a substantial amount of trust and confidence on the part of the employer. Being the Credit
Administration Supervisor of the Cagayan de Oro and Butuan City branches of the petitioner, respondent
occupied a highly sensitive and critical position and may thus be dismissed on the ground of loss of trust
and confidence. The duties of the respondent included the strict monitoring of the 38 - or 52-day "rolling
due date" of each of its IBMs and IGSs, as well as the supervision of the credit and collection of payments
and outstanding accounts due to the petitioner from its dealers. More importantly, respondent has a direct
hand in the preparation and computation of the Service Fees or sales commissions accruing to each
dealer. The computation of these commissions depends on whether the dealer concerned was able to remit
the sales proceeds within the 38-day or 52-day rolling deadline.
Clearly, respondent's position involves a high degree of responsibility requiring trust and confidence. The
position carried with it the duty to observe proper company procedures in the fulfillment of her job, as it
relates closely to the financial interests of the company. Respondent's unauthorized extensions of the
credit periods of the dealers are prejudicial to the interest of the petitioner and bear serious financial
implications: First, the dealer concerned is allowed to withhold remittances to the company for his or her
credit purchases beyond the expiration of the 38 - or 52-day rolling deadline; second, the Credit
Administration Charges or interest penalties are not imposed on the erring dealer; third, the dealer
concerned is allowed to purchase goods on credit despite the fact that he or she has not remitted payment,
which is against company policy; and fourth, undue Service Fees were unknowingly paid by the company
to certain IBMs. Moreover, respondent was not guilty of one-time unauthorized extension of the credit
terms, but of repeated acts over the course of several months. Her bare, unsubstantiated and
uncorroborated denial of her participation in the anomalies does not prove her innocence nor disprove her
alleged guilt,38 especially considering that she would vacillate between admitting and denying the
charges. On the contrary, such denial or failure to rebut the serious accusations hurled against her militate
against her innocence and strengthen the adverse averments of the petitioner.39 The requirement that there
must be some basis or reasonable ground to believe that the employee is responsible for the misconduct
was sufficiently met in this case.
The NLRC and the CA held that there were other co-employees who had access to the same computer
terminals, hence, it cannot be pinpointed who was responsible. Even if this is true, as respondent argues,
this point is not material. It must be stressed that the respondent was the Credit Administration
Supervisor, one tasked to directly supervise each and every collectible due to the petitioner. Recently, this
Court has held that even if the employee had no actual and direct participation in the alleged anomalies,
his failure to detect any anomaly that would normally fall within the scope of his work reflects his
ineffectiveness and amounts to gross negligence and incompetence, which are, likewise, justifiable
grounds for his dismissal; and that it is not necessary to prove the employee's direct participation in the
irregularity, for what is material is that his actuations were more than sufficient to sow in his employer the
seed of mistrust and loss of confidence.40 The records show that respondent, by her very own admission,
actually participated in the foregoing irregularities. Although the petitioner could not directly and wholly
attribute the monetary loss of P211,000.00 linked to the 15 samples as reflected in the Auditor's Report, to
the actuations of the respondent, it is conceded in all quarters that the repeated and unauthorized
extensions of the credit terms no doubt have serious financial implications that affect the company as a
whole. Whether the petitioner was financially prejudiced is immaterial.41 What matters is not the amount
involved, rather, it is the fraudulent scheme in which the respondent was involved, and which constitutes
a clear betrayal of trust and confidence. In fact, there are indications that these acts had been done before,
and probably would have continued had it not been discovered.42
The Court is not impressed with respondent's claim that Villagracia, her BOM at that time, "cleverly
pinned her down" as the culprit; that he deleted from the computer files all the credit extensions that took
place; and that he "created a scenario" for a graceful exit. There is nothing in the record that would
substantiate these bare allegations. Nor can the Court accept respondent's assertion that she was never
apprised of the company policies with respect to the allowable credit terms. As Credit Administration
Supervisor, the respondent cannot feign ignorance of the irregularity as she was sufficiently aware that the
credit extensions she made were beyond acceptable limits. By her very own admission, and in the
presence of her counsel, she was fully aware of the company-fixed rolling due dates for the dealers and
that their commissions were to be determined by their timely remittances of the sales proceeds. In other
words, respondent was aware of the financial implications of her extension of the credit terms, especially
the outcome where the consideration of late remittances, after the extension, would unduly inflate the
sales commissions. It is also an established fact that the petitioner, to ensure the correct computation of
the commissions, installed internal control systems in the computer terminals and that respondent,
through "practice" and "experience," acquired the proficiency and computer literacy as to be able to
override these control systems in order to make the changes43 in clear deviation from company policy.
But the respondent, quoting the agencies a quo, insists that her extensions of the credit terms of certain
dealers were predicated on a "long standing policy" in the Cagayan de Oro branch, and that this
"arrangement" had the "blessings of the manager." She did not prove these allegations. While case law
provides that where a violation of company policy or breach of company rules and regulations was found
to have been tolerated by management, then the same could not serve as a basis for termination,44 in this
case respondent failed to show that her extensions of the credit terms were condoned by management. Her
BOM, Mr. Villagracia, categorically denied that he had given her the requisite and direct authority to
change the credit terms. When the respondent, while in Butuan City, instructed Ms. Mendoza, the
Accounts Receivable Clerk of the Cagayan de Oro outlet, to change the credit terms of IBM Mariam ReyPetilla, respondent's sister-in-law,45 to an unauthorized term of 60 days, she reported this instruction to
Villagracia who, in turn, verified the records and reported his findings to higher management. Villagracia
even reprimanded Ms. Mendoza for carrying out respondent's instructions.46 As a consequence, higher
management immediately undertook an audit of the Cagayan de Oro and Butuan City branches where the
respondent had been assigned. And, as a consequence, an Auditor's Report was issued, expressly finding
the respondent guilty of violating company policy. Respondent was again directed by the higher
authorities to explain, in more detail, the anomalies uncovered by the audit. The foregoing activities
negate the suggestion that management tolerated respondent's unauthorized extension of credit terms.
Despite the marked inconsistencies of her statements during the formal investigation, respondent only
offered the following explanation: because of the alleged "standard practice" in the Caloocan City branch
where she worked as an Accounts Receivable Clerk, she assumed that the extensions can be done in the
Cagayan de Oro City branch and where she allegedly procured the "blanket approval" of BOM
Villagracia; and that, since this "standard practice" had allegedly taken root in Cagayan de Oro City
(mainly owing to her activities), she assumed that the same can be carried over to the Butuan City branch,
even without any "blanket approval" of her BOM. These declarations, self-serving as they are, taken
together, are also not demonstrative of any acquiescence on the part of management. Even if the Court
were to accept her allegation that Villagracia deleted the pertinent files and destroyed evidence otherwise
favorable to her, she must at least show how such evidence, if hypothetically produced, would constitute
an adequate defense against the charge of carrying out unauthorized acts. At any rate, even if the Court
finds credible her accusation that Villagracia "cleverly pinned her down" as the culprit, she will not be
exonerated for that reason alone, since it is established that she directly and actively participated in the
acts which amounted to violations of company policy. Certainly the prerogative lies with the company to
hold Villagracia accountable, if indeed he was: the option to discipline lies with the employer. But since
Villagracia was not made a party in this proceeding, further discussion on the point is useless.
Respondent argues that the loss of trust and confidence as Credit Administration Supervisor had been
effectively negated by the fact that she was made to occupy the position of Branch Operations Manager
for three months immediately after Villagracia resigned. This act of the petitioner, respondent reasons, is
an express recognition of her capability and integrity or trustworthiness as an employee.47 To support this
contention, she adduces several cash advance slips which she signed as BOM as evidence of her
appointment.48 Even in light of this "promotion," it must be noted that at the time she occupied this
position, which the petitioner asserts was done in an acting capacity only, the investigation over the
anomalies committed by respondent had been pending. The Memorandum dated August 21, 1995
reinstating respondent and granting her request to conduct a formal investigation with the presence of
counsel expressly stated that the reinstatement is "without prejudice" to "a reinvestigation" of her case. 49
Pending the final outcome of the investigation, respondent, as with all persons, has in her favor the
presumption of innocence, and for this reason she may even be entitled to a promotion in due course. But
after due investigation and marshalling of facts, after the employer forms a moral conviction that indeed
the employee breached its trust and confidence, and despite such promotion, the employer may then
proceed to dismiss the erring employee.
As stated, the rules on termination of employment and the penalties for infractions, insofar as fiduciary
employees are concerned, are not necessarily the same as those applicable to the termination of
employment of ordinary employees. Employers, generally, are allowed a wider latitude of discretion in
terminating the employment of managerial personnel or those of similar rank performing functions which
by their nature require the employer's trust and confidence, than in the case of ordinary rank-and-file
employees.50 There can be no doubt that the respondent's continuance in the sensitive fiduciary position of
Credit Administration Supervisor would be patently inimical to the interests of the petitioner. It would be
oppressive and unjust to order the petitioner to take her back, for the law, in protecting the rights of the
employee, authorizes neither oppression nor self-destruction of the employer.51
The award of 13th month pay must be deleted. Respondent is not a rank-and-file employee and is,
therefore, not entitled to thirteenth-month pay.52
However, the NLRC and the CA are correct in refusing to award 14th and 15th month pay as well as the
"monthly salary increase of 10 percent per year for two years based on her latest salary rate." The
respondent must show that these benefits are due to her as a matter of right.53 The rule in these cases is,
she who alleges, not she who denies, must prove. Mere allegations by the respondent do not suffice in the
absence of proof supporting the same.54 With respect to salary increases in particular, the respondent must
likewise show that she has a vested right to the same, such that her salary increases can be made a
component in the computation of backwages. What is evident is that salary increases are a mere
expectancy. They are by nature volatile and dependent on numerous variables, including the company's
fiscal situation, the employee's future performance on the job, or the employee's continued stay in a
position.55 In short, absent any proof, there is no vested right to salary increases.56
The claims for moral and exemplary damages, as correctly held by the NLRC and the CA, should be
denied for having no basis in fact and law.57 The award of attorney's fees should likewise be deleted for
the same reason.58
And last, the Court is constrained to delete the award of separation pay. Well-settled is the rule that
separation pay shall be allowed only in those instances where the employee is validly dismissed for
causes other than serious misconduct or those reflecting on her moral character.59 Inasmuch as the reason
for which the respondent was validly separated involves her integrity, which is required for the position of
Credit Administration Supervisor, she is not worthy of compassion as to deserve separation pay for her
length of service.60
WHEREFORE, the petition is GRANTED. The challenged Decision and Resolution of the Court of
Appeals are hereby SET ASIDE and a new one entered DECLARING respondent's dismissal valid. The
complaint of respondent is DISMISSED.
No pronouncement as to costs.
SO ORDERED.
PETROLEUM SHIPPING LIMITED (formerly ESSO INTERNATIONAL SHIPPING

(BAHAMAS) CO., LTD.) and TRANS-GLOBAL MARITIME AGENCY, INC., Petitioners, v.
NATIONAL LABOR RELATIONS COMMISSION and FLORELLO W. TANCHICO,
Respondents.
DECISION
CARPIO, J.:
The Case
Before the Court is a Petition for Review 1 assailing the 25 January 2001 Decision2 and 7 May 2001
Resolution3 of the Court of Appeals in CA-G.R. SP No. 54756.
The Antecedent Facts
On 6 March 1978, Esso International Shipping (Bahamas) Co., Ltd., ("Esso") through Trans-Global
Maritime Agency, Inc. ("Trans-Global") hired Florello W. Tanchico ("Tanchico") as First Assistant
Engineer. In 1981, Tanchico became Chief Engineer. On 13 October 1992, Tanchico returned to the
Philippines for a two-month vacation after completing his eight-month deployment.
On 8 December 1992, Tanchico underwent the required standard medical examination prior to boarding
the vessel. The medical examination revealed that Tanchico was suffering from "Ischemic Heart Disease,
Hypertensive Cardio-Muscular Disease and Diabetes Mellitus." Tanchico took medications for two
months and a subsequent stress test showed a negative result. However, Esso no longer deployed
Tanchico. Instead, Esso offered to pay him benefits under the Career Employment Incentive Plan.
Tanchico accepted the offer.
On 26 April 1993, Tanchico filed a complaint against Esso, Trans-Global and Malayan Insurance Co.,
Inc. ("Malayan") before the Philippine Overseas Employment Administration (POEA) for illegal
dismissal with claims for backwages, separation pay, disability and medical benefits and 13th month pay.
In view of the enactment of Republic Act No. 8042 ("RA 8042")4 transferring to the National Labor
Relations Commission (NLRC) the jurisdiction over money claims of overseas workers, the case was
indorsed to the Arbitration Branch of the National Capital Region. In a Decision5 dated 16 October 1996,
Labor Arbiter Jose G. De Vera ("Labor Arbiter De Vera") dismissed the complaint for lack of merit.
Tanchico appealed to the NLRC.
The Ruling of the NLRC
In its Resolution6 of 3 September 1998, the NLRC affirmed the Decision of Labor Arbiter De Vera.
Tanchico filed a motion for reconsideration. In a Resolution7 promulgated on 29 March 1999, the NLRC
reconsidered its 3 September 1998 Resolution, as follows:
On the claim of illegal dismissal, the same is unavailing as complainant had been declared as one with
partial permanent disability. Thus, he should be entitled to disability benefit of 18 days for every year of
credited service of fourteen (14) years less the amount he already received under the Company's
Disability Plan.
On the claim of 13th month pay, the respondent Agency not falling under the enumerated exempted
employers under P.D. 851 and in the absence of any proof that respondent is already paying its employees
a 13th month pay or more in a calendar year, perforce, respondent agency should pay complainant his
monthly pay computed at [sic] the actual month [sic] worked, which is 8 months.
Since complainant was forced to litigate his case, he is hereby awarded 10% of the total award as
attorney's fees.
SO ORDERED.8
Esso and Trans-Global moved for the reconsideration of the 29 March 1999 Resolution.9 In its 27 July
1999 Resolution,10 the NLRC denied their motion.
Esso, now using the name Petroleum Shipping Limited ("Petroleum Shipping"), and Trans-Global
(collectively referred to as "petitioners") filed a petition for certiorari before the Court of Appeals
assailing the 29 March 1999 and 27 July 1999 Resolutions of the NLRC.
The Ruling of the Court of Appeals
In its Decision promulgated on 25 January 2001, the Court of Appeals affirmed in toto the 29 March 1999
Resolution of the NLRC.
The Court of Appeals ruled that Tanchico was a regular employee of Petroleum Shipping. The Court of
Appeals held that petitioners are not exempt from the coverage of Presidential Decree No. 851, as
amended ("PD 851")11 which mandates the payment of 13th month pay to all employees. The Court of
Appeals further ruled that Tanchico is entitled to disability benefits based on his 14 years of tenure with
petitioners. The Court of Appeals stated that the employer-employee relationship subsisted even during
the period of Tanchico's vacation. The Court of Appeals noted that petitioners were aware of Tanchico's
medical history yet they still deployed him for 14 years. Finally, the Court of Appeals sustained the award
of attorney's fees.
Petitioners moved for the reconsideration of the Decision. In its 7 May 2001 Resolution, the Court of
Appeals modified its Decision by deducting Tanchico's vacation from his length of service. Thus:
WHEREFORE, our decision is hereby MODIFIED. The petitioners are ordered to pay to the private
respondent the following: (1) disability wages equivalent to 18 days per year multiplied by 10 years less
any amount already received under the company's disability plan; prorated 13th month pay corresponding
to eight (8) months of actual work; and attorney's fee equivalent to 10% of the total award.
SO ORDERED.12
Petitioners went to this Court for relief on the following grounds:
I. The Court of Appeals decided a question of substance not in accord with law, applicable decision of
this Court and International Maritime Law when it ruled that private respondent, a seafarer, was a regular
employee;
II. The Court of Appeals decided a question of substance not in accord with law when it held that the
private respondent was entitled to greater disability benefit than he was [sic];
III. The Court of Appeals decided a question of substance not heretofore determined by this Court when it
ruled that private respondent was entitled to 13th month pay although it was not provided for in the
contract of employment between petitioners and private respondent; andcralawlibrary
IV. The Court of Appeals decided a question of substance not in accord with law when it awarded private
respondent attorney's fees despite the Labor Arbiter's and the public respondent's, albeit initially,
dismissal of the complaint.13
The Issues
The issues are as follows:
1. Whether Tanchico is a regular employee of petitioners; andcralawlibrary
2. Whether Tanchico is entitled to 13th month pay, disability benefits and attorney's fees.
The Ruling of This Court
The petition is partly meritorious.
Seafarers are Contractual Employees
The issue on whether seafarers are regular employees is already a settled matter.
In Ravago v. Esso Eastern Marine, Ltd.,14 the Court traced its ruling in a number of cases that seafarers
are contractual, not regular, employees. Thus, in Brent School, Inc. v. Zamora,15 the Court cited overseas
employment contract as an example of contracts where the concept of regular employment does not
apply, whatever the nature of the engagement and despite the provisions of Article 280 of the Labor
Code. In Coyoca v. NLRC,16 the Court held that the agency is liable for payment of a seaman's medical
and disability benefits in the event that the principal fails or refuses to pay the benefits or wages due the
seaman although the seaman may not be a regular employee of the agency.
The Court squarely passed upon the issue in Millares v. NLRC17 where one of the issues raised was
whether seafarers are regular or contractual employees whose employment are terminated everytime their
contracts of employment expire. The Court explained:
[I]t is clear that seafarers are considered contractual employees. They can not be considered as regular
employees under Article 280 of the Labor Code. Their employment is governed by the contracts they sign
everytime they are rehired and their employment is terminated when the contract expires. Their
employment is contractually fixed for a certain period of time. They fall under the exception of Article
280 whose employment has been fixed for a specific project or undertaking the completion or termination
of which has been determined at the time of 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. We need not
depart from the rulings of the Court in the two aforementioned cases which indeed constitute stare decisis
with respect to the employment status of seafarers.
Petitioners insist that they should be considered regular employees, since they have rendered services
which are usually necessary and desirable to the business of their employer, and that they have rendered
more than twenty (20) years of service. While this may be true, the Brent case has, however, held that
there are certain forms of employment which also require the performance of usual and desirable
functions and which exceed one year but do not necessarily attain regular employment status under
Article 280. Overseas workers including seafarers fall under this type of employment which are governed
by the mutual agreements of the parties.
In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are governed by the Rules
and Regulations of the POEA. The Standard Employment Contract governing the employment of All
Filipino Seamen on Board Ocean-Going Vessels of the POEA, particularly in Part I, Sec. C specifically
provides that the contract of seamen shall be for a fixed period. And in no case should the contract of
seamen be longer than 12 months. It reads:
Section C. Duration of Contract
The period of employment shall be for a fixed period but in no case to exceed 12 months and shall be
stated in the Crew Contract. Any extension of the Contract period shall be subject to the mutual consent
of the parties.
Moreover, it is an accepted maritime industry practice that employment of seafarers are for a fixed period
only. Constrained by the nature of their employment which is quite peculiar and unique in itself, it is for
the mutual interest of both the seafarer and the employer why the employment status must be contractual
only or for a certain period of time. Seafarers spend most of their time at sea and understandably, they can
not stay for a long and an indefinite period of time at sea. Limited access to shore society during the
employment will have an adverse impact on the seafarer. The national, cultural and lingual diversity
among the crew during the COE is a reality that necessitates the limitation of its period.
Petitioners make much of the fact that they have been continually re-hired or their contracts renewed
before the contracts expired (which has admittedly been going on for twenty (20) years). By such
circumstance they claim to have acquired regular status with all the rights and benefits appurtenant to it.
Such contention is untenable. Undeniably, this circumstance of continuous re-hiring was dictated by
practical considerations that experienced crew members are more preferred. Petitioners were only given
priority or preference because of their experience and qualifications but this does not detract the fact that
herein petitioners are contractual employees. They can not be considered regular employees. x x x18
The Court reiterated the Millares ruling in Gu-Miro v. Adorable19 where it held that a radio officer on
board a vessel cannot be considered as a regular employee notwithstanding that the work he performs is
necessary and desirable in the business of the company.
Thus, in the present case, the Court of Appeals erred in ruling that Tanchico was a regular employee of
Petroleum Shipping.
On 13th Month Pay
The Court of Appeals premised its grant of 13th month pay on its ruling that Tanchico was a regular
employee. The Court of Appeals also ruled that petitioners are not exempt from the coverage of PD 851
which requires all employers to pay their employees a 13th month pay.
We do not agree with the Court of Appeals. Again, Tanchico was a contractual, not a regular, employee.
Further, PD 851 does not apply to seafarers. The WHEREAS clauses of PD 851 provides:
WHEREAS, it is necessary to further protect the level of real wages from ravages of world-wide
inflation;
WHEREAS, there has been no increase in the legal minimum wage rates since 1970;
WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of
the working masses so they may properly celebrate Christmas and New Year.
PD 851 contemplates the situation of land-based workers, and not of seafarers who generally earn more
than domestic land-based workers.
Tanchico's employment is governed by his Contract of Enlistment ("Contract").20 The Contract has been
approved by the POEA in accordance with Title I, Book One of the Labor Code and the POEA Rules
Governing Employment.21 The coverage of the Contract includes Compensation, Overtime, Sundays and
Holidays, Vacations, Living Allowance, Sickness, Injury and Death, Transportation and Travel Expense,
Subsistence and Living Quarters. It does not provide for the payment of 13th month pay. The Contract of
Employment,22 which is the standard employment contract of the POEA, likewise does not provide for the
payment of 13th month pay.
In Coyoca v. NLRC which involves a claim for separation pay, this Court held:
Furthermore, petitioner's contract did not provide for separation benefits. In this connection, it is
important to note that neither does POEA standard employment contract for Filipino seamen provide for
such benefits.
As a Filipino seaman, petitioner is governed by the Rules and Regulations Governing Overseas
Employment and the said Rules do not provide for separation or termination pay. x x x23
Hence, in the absence of any provision in his Contract governing the payment of 13th month pay,
Tanchico is not entitled to the benefit.
On Disability Benefits
Petitioners allege that Tanchico's Contract ended on 13 October 1992 when he returned to Manila. They
allege that the vacation period is not part of the period of employment.
We cannot accept petitioners' contention.
The duration of the Contract was for eight months. The Contract also provides:
Article V
VACATIONS
Vacation days shall be earned at the rate of seven and one-half days (7.5) days for each thirty (30) days of
continuous service, calculated from date of departure from Manila and until date of return to Manila.
Vacation begins on the day following arrival in Manila.
Every effort will be made to grant earned vacations promptly after eight (8) months of service; however,
the COMPANY shall have the right to advance or delay vacations to coincide with vessel repairs, for
operational reasons or due to personal requirements. SEAFARER shall receive vacation compensation for
each thirty (30) days of continuous service in accordance with the rates listed in Addendum No. 1,
Column (12), to be paid in Manila. Amounts shall be pro-rated according to the ranks/ratings and period
of time in which the SEAFARER served. For period of less than thirty (30) days service, vacations and
compensation shall be reduced proportionately.
Time off for illness, injury, vacation, leave of absence or stand-by shall not be considered service under
the provisions of this Article.
It is the COMPANY's intention that each SEAFARER enjoy his full vacation period. Because of urgent
fleet needs, however, it occasionally may be necessary to recall a SEAFARER early from vacation. 24
Since Tanchico received compensation during his vacation, the Contract did not terminate on the day he
returned to Manila. The Contract remained in force during Tanchico's vacation period.
However, the Court of Appeals erred when it ruled that Tanchico is entitled to disability benefits of 18
days for every year of service. The Court of Appeals ruled that Tanchico's employment was continuous
and that his tenure with petitioners was for 14 years. Again, the Court of Appeals assumed that Tanchico
was a regular employee. The Court of Appeals failed to consider that Tanchico's employment terminated
with the end of each contract.
The Contract provides:
Article VIII
SICKNESS-INJURY/DEATH
A. The COMPANY shall provide, during the period of the Contract, Insurance coverage for the
SEAFARER against loss of life, permanent disability, temporary disability, injury, occupational illness,
hospital and medical expense in such amounts as the COMPANY shall determine but not lower than what
the COMPANY would have to pay under the Philippine Overseas Employment Administration's
requirements or the vessel's flag state requirements (whichever is higher).
B. If SEAFARER is removed from a vessel for medical treatment he shall be entitled to receive a
disability benefit equal to his monthly wage rate (or pro-rata thereof) from date of disembarkation until
date of rejoining his vessel, assignment to another vessel or until date of repatriation to Manila if still
disabled. Medical, surgical, hospital, or clinical treatment shall be recommended by a doctor approved by
the COMPANY and SEAFARER must follow all medical advices. SEAFARER will not be entitled to
disability benefit payments for disability resulting from his own misconduct, negligence, unlawful acts,
altercations, vice, etc.
C. After disembarkation from a vessel, the SEAFARER is entitled to one hundred percent (100%) of his
wages until he is declared fit or the degree of permanent disability has been assessed by the COMPANY's
physician for a maximum period of 120 days commencing on date of such disembarkation. Upon the
expiration of such 120 days and if the SEAFARER is still disabled, the SEAFARER shall be paid his
wages equivalent to 18 days for every year of credited service.
In special instances and at the discretion of the COMPANY, the maximum number of days of
COMPANY benefits may be extended beyond 120 days for a SEAFARER with over 80 months credited
COMPANY service, or in such other case as may be determined by the COMPANY.
Upon expiration of COMPANY benefits and if still disabled, the following amounts shall be paid up to
maximum of 365 days, inclusive of the period of the above benefits.
All Ranks ................................................ US $10 per day
D. If disability should occur while SEAFARER is on vacation, he must, within 3 days from date
thereof, notify the COMPANY's Agent in the Philippines in order that the latter shall be able to
certify as to his condition. Certification of disability required for payment of any disability benefits
must be approved by a doctor appointed by the COMPANY and SEAFARER must be disabled
seven (7) days or more to be eligible to benefits and sick leave status, COMPANY benefits shall be
limited to a maximum of 18 days.
Benefits under the COMPANY Disability Plan shall be made only to the extent and in such amounts as
are equal to the differential between any payments which may be due SEAFARER under COMPANY's
obligation as set forth in the 1st paragraph of this Article VIII and 90 percent of SEAFARER's last wage
rate.
E. In case of death at sea or at a foreign port, the tradition of the sea and requirements of the laws of such
foreign port will be observed. If practical, every effort will be made on the part of the COMPANY to
return the remains of a deceased SEAFARER to Manila at COMPANY expense.
F. The SEAFARER acknowledges that even without signed receipts, any wage payments made to him for
a period during which he is entitled to benefits under any law by reason of death, temporary or permanent
disability, shall be deemed an advance payment of compensation benefits due to him under such law, but
only to the extent of benefits due for the period of disability during which wages are paid.
Wages, as set forth in Addendum No. 1, Column (1), shall be the basis for any calculation of benefits due
SEAFARER under this Article VIII.25 (Emphasis supplied)cralawlibrary
Indications that Tanchico was suffering from ischemia were detected on 8 December 1992 during
Tanchico's vacation period. Thus, petitioners paid him disability benefits for 18 days in accordance with
the Contract. Tanchico cannot claim that he only acquired the illness during his last deployment since the
Medical Report26 he submitted to the NLRC showed that he has been hypertensive since 1983 and
diabetic since 1987. In the absence of concrete proof that Tanchico acquired his disability during
his last deployment and not during his vacation, he is only entitled to disability benefits for 18 days.
Petitioners claim that they already paid Tanchico his disability benefits for 18 days but he refused to sign
the receipt.27 Tanchico alleged that he was only paid under the Career Employment Incentive Plan.28 This
is a factual matter which this Court cannot resolve. This matter has to be remanded to the Labor Arbiter
for resolution.
WHEREFORE, we GRANT the petition. We REVERSE and SET ASIDE the 25 January 2001
Decision and 7 May 2001 Resolution of the Court of Appeals in CA-G.R. SP No. 54756. We
REINSTATE the 16 October 1996 Decision of Labor Arbiter Jose G. De Vera dismissing the complaint
for illegal dismissal and the claims for backwages, separation pay and 13th month pay. We REMAND
the case to the Labor Arbiter to determine if Florello Tanchico has been paid his disability benefits for 18
days in accordance with his Contract of Enlistment. If no payment has been made, the Labor Arbiter is
DIRECTED to determine the amount Tanchico is entitled.
SO ORDERED.
DANILO ESCARIO,
PANFILO AGAO,
ARSENIO AMADOR,
ELMER COLICO,
ROMANO DELUMEN, DOMINADOR
AGUILO, OLYMPIO GOLOSINO,
RICARDO LABAN,
LORETO MORATA,
ROBERTO TIGUE,
GILBERT VIBAR,
THOMAS MANCILLA, JR., NESTOR
LASTIMOSO,
JIMMY MIRABALLES,
JAILE OLISA, ISIDRO SANCHEZ,
ANTONIO SARCIA, OSCAR
CONTRERAS, ROMEO ZAMORA,
MARIANO GAGAL, ROBERTO
MARTIZANO, DOMINGO
SANTILLICES, ARIEL ESCARIO,
HEIRS OF FELIX LUCIANO, AND
MALAYANG SAMAHAN NG MGA
MANGGAGAWA SA BALANCED
FOODS,
Petitioners,
G.R. No. 160302
Present:
CARPIO MORALES, Chairperson

PERALTA,*
BERSAMIN,
VILLARAMA, JR., and
SERENO, JJ.
Promulgated:
September 27, 2010
-versus NATIONAL LABOR RELATIONS

COMMISSION (THIRD DIVISION),
PINAKAMASARAP CORPORATION,
DR. SY LIAN TIN, AND DOMINGO TAN,
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION
BERSAMIN, J.:
Conformably with the long honored principle of a fair days wage for a fair days labor,
employees dismissed for joining an illegal strike are not entitled to backwages for the period of the strike
even if they are reinstated by virtue of their being merely members of the striking union who did not
commit any illegal act during the strike.
We apply this principle in resolving this appeal via a petition for review on certiorari of the
decision dated August 18, 2003 of the Court of Appeals (CA),24[1] affirming the decision dated
November 29, 2001 rendered by the National Labor Relations Commission (NLRC) directing their
reinstatement of the petitioners to their former positions without backwages, or, in lieu of reinstatement,
the payment of separation pay equivalent to one-half month per year of service.25[2]
Antecedents
The petitioners were among the regular employees of respondent Pinakamasarap Corporation
(PINA), a corporation engaged in manufacturing and selling food seasoning. They were members of
petitioner Malayang Samahan ng mga Manggagawa sa Balanced Foods (Union).
At 8:30 in the morning of March 13, 1993, all the officers and some 200 members of the Union
walked out of PINAs premises and proceeded to the barangay office to show support for Juanito Caete, an
officer of the Union charged with oral defamation by Aurora Manor, PINAs personnel manager, and
Yolanda Fabella, Manors secretary.26[3] It appears that the proceedings in the barangay resulted in a
settlement, and the officers and members of the Union all returned to work thereafter.
As a result of the walkout, PINA preventively suspended all officers of the Union because of the
March 13, 1993 incident. PINA terminated the officers of the Union after a month.
On April 14, 1993, PINA filed a complaint for unfair labor practice (ULP) and damages. The
complaint was assigned to then Labor Arbiter Raul Aquino, who ruled in his decision dated July 13, 1994
that the March 13, 1993 incident was an illegal walkout constituting ULP; and that all the Unions officers,
except Caete, had thereby lost their employment.27[4]
On April 28, 1993, the Union filed a notice of strike, claiming that PINA was guilty of union
busting through the constructive dismissal of its officers.28[5] On May 9, 1993, the Union held a strike
vote, at which a majority of 190 members of the Union voted to strike.29[6] The strike was held in the
afternoon of June 15, 1993.30[7]
PINA retaliated by charging the petitioners with ULP and abandonment of work, stating that they
had violated provisions on strike of the collective bargaining agreement (CBA), such as: (a) sabotage by
the insertion of foreign matter in the bottling of company products; (b) decreased production output by
slowdown; (c) serious misconduct, and willful disobedience and insubordination to the orders of the
Management and its representatives; (d) disruption of the work place by invading the premises and
perpetrating commotion and disorder, and by causing fear and apprehension; (e) abandonment of work
since June 28, 1993 despite notices to return to work individually sent to them; and (f) picketing within
the company premises on June 15, 1993 that effectively barred with the use of threat and intimidation the
ingress and egress of PINAs officials, employees, suppliers, and customers. 31[8]
On September 30, 1994, the Third Division of the National Labor Relations Commission (NLRC)
issued a temporary restraining order (TRO), enjoining the Unions officers and members to cease and
desist from barricading and obstructing the entrance to and exit from PINAs premises, to refrain from
committing any and all forms of violence, and to remove all forms of obstructions such as streamers,
placards, or human barricade.32[9]
On November 29, 1994, the NLRC granted the writ of preliminary injunction.33[10]
On August 18, 1998, Labor Arbiter Jose G. de Vera (LA) rendered a decision, to wit:
WHEREFORE, all the foregoing premises being considered, judgment is hereby
rendered declaring the subject strike to be illegal.
The complainants prayer for decertification of the respondent union being outside
of the jurisdiction of this Arbitration Branch may not be given due course.
And finally, the claims for moral and exemplary damages for want of factual basis
are dismissed.
SO ORDERED.34[11]
On appeal, the NLRC sustained the finding that the strike was illegal, but reversed the LAs ruling
that there was abandonment, viz:
However, we disagree with the conclusion that respondents union members should
be considered to have abandoned their employment.
Under Article 264 of the Labor Code, as amended, the union officers who
knowingly participate in the illegal strike may be declared to have lost their employment
status. However, mere participation of a union member in the illegal strike does not mean
loss of employment status unless he participates in the commission of illegal acts during
the strike. While it is true that complainant thru individual memorandum directed the
respondents to return to work (pp. 1031-1112, Records) there is no showing that
respondents deliberately refused to return to work. A worker who joins a strike does so
precisely to assert or improve the terms and conditions of his work. If his purpose is to
abandon his work, he would not go to the trouble of joining a strike (BLTB v. NLRC, 212
SCRA 794).
WHEREFORE, premises considered, the Decision appealed from is hereby
MODIFIED in that complainant company is directed to reinstate respondents named in
the complaint to their former positions but without backwages. In the event that
reinstatement is not feasible complainant company is directed to pay respondents
separation pay at one (1/2) half month per year of service.
SO ORDERED.35[12]
Following the denial of their motion for reconsideration, the petitioners assailed the NLRCs
decision through a petition for certiorari in the Court of Appeals (CA), claiming that the NLRC gravely
abused its discretion in not awarding backwages pursuant to Article 279 of the Labor Code, and in not
declaring their strike as a good faith strike.
On August 18, 2003, the CA affirmed the NLRC.36[13] In denying the petitioners claim for full
backwages, the CA applied the third paragraph of Article 264(a) instead of Article 279 of the Labor
Code, explaining that the only instance under Article 264 when a dismissed employee would be reinstated
with full backwages was when he was dismissed by reason of an illegal lockout; that Article 264 was
silent on the award of backwages to employees participating in a lawful strike; and that a reinstatement
with full backwages would be granted only when the dismissal of the petitioners was not done in
accordance with Article 282 (dismissals with just causes) and Article 283 (dismissals with authorized
causes) of the Labor Code.
The CA disposed thus:37[14]
WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit
and the assailed 29 November 2001 Decision of respondent Commission in NLRC NRC
CA No. 009701-95 is hereby AFFIRMED in toto. No costs.
SO ORDERED.38[15]
On October 13, 2003, the CA denied the petitioners motion for reconsideration.39[16]
Hence, this appeal via petition for review on certiorari.
Issue
The petitioners posit that they are entitled to full backwages from the date of dismissal until the
date of actual reinstatement due to their not being found to have abandoned their jobs. They insist that the
CA decided the question in a manner contrary to law and jurisprudence.
Ruling
We sustain the CA, but modify the decision on the amount of the backwages in order to accord
with equity and jurisprudence.
I
Third Paragraph of Article 264 (a),
Labor Code, is Applicable

The petitioners contend that they are entitled to full backwages by virtue of their reinstatement,
and submit that applicable to their situation is Article 279, not the third paragraph of Article 264(a), both
of the Labor Code.
We do not agree with the petitioners.
Article 279 provides:
Article 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.
By its use of the phrase unjustly dismissed, Article 279 refers to a dismissal that is unjustly done,
that is, the employer dismisses the employee without observing due process, either substantive or
procedural. Substantive due process requires the attendance of any of the just or authorized causes for
terminating an employee as provided under Article 278 (termination by employer), or Article 283 (closure
of establishment and reduction of personnel), or Article 284 (disease as ground for termination), all of the
Labor Code; while procedural due process demands compliance with the twin-notice requirement.40[17]
In contrast, the third paragraph of Article 264(a) states:
Art. 264. Prohibited activities. (a) xxx
Any worker whose employment has been terminated as a consequence of an
unlawful lockout shall be entitled to reinstatement with full backwages. 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.
xxx
Contemplating two causes for the dismissal of an employee, that is: (a) unlawful lockout; and (b)
participation in an illegal strike, the third paragraph of Article 264(a) authorizes the award of full
backwages only when the termination of employment is a consequence of an unlawful lockout. On the
consequences of an illegal strike, the provision distinguishes between a union officer and a union member
participating in an illegal strike. A union officer who knowingly participates in an illegal strike is deemed
to have lost his employment status, but a union member who is merely instigated or induced to participate
in the illegal strike is more benignly treated. Part of the explanation for the benign consideration for the
union member is the policy of reinstating rank-and-file workers who are misled into supporting illegal
strikes, absent any finding that such workers committed illegal acts during the period of the illegal
strikes.41[18]
The petitioners were terminated for joining a strike that was later declared to be illegal. The
NLRC ordered their reinstatement or, in lieu of reinstatement, the payment of their separation pay,
because they were mere rank-and-file workers whom the Unions officers had misled into joining the
illegal strike. They were not unjustly dismissed from work. Based on the text and intent of the two
aforequoted provisions of the Labor Code, therefore, it is plain that Article 264(a) is the applicable one.
II
Petitioners not entitled to backwages
despite their reinstatement:
A fair days wage for a fair days labor
The petitioners argue that the finding of no abandonment equated to a finding of illegal dismissal
in their favor. Hence, they were entitled to full backwages.
The petitioners argument cannot be sustained.
The petitioners participation in the illegal strike was precisely what prompted PINA to file a
complaint to declare them, as striking employees, to have lost their employment status. However, the
NLRC ultimately ordered their reinstatement after finding that they had not abandoned their work by
joining the illegal strike. They were thus entitled only to reinstatement, regardless of whether or not the
strike was the consequence of the employers ULP,42[19] considering that a strike was not a renunciation
of the employment relation.43[20]
As a general rule, backwages are granted to indemnify a dismissed employee for his loss of
earnings during the whole period that he is out of his job. Considering that an illegally dismissed
employee is not deemed to have left his employment, he is entitled to all the rights and privileges that
accrue to him from the employment.44[21] The grant of backwages to him is in furtherance and
effectuation of the public objectives of the Labor Code, and is in the nature of a command to the
employer to make a public reparation for his illegal dismissal of the employee in violation of the Labor
Code.45[22]
That backwages are not granted to employees participating in an illegal strike simply accords
with the reality that they do not render work for the employer during the period of the illegal strike.46[23]
According to G&S Transport Corporation v. Infante:47[24]
With respect to backwages, the principle of a fair days wage for a fair days 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. xxx In Philippine Marine
Officers 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. (emphasis supplied)
The petitioners herein do not deny their participation in the June 15, 1993 strike. As such, they
did not suffer any loss of earnings during their absence from work. Their reinstatement sans backwages is
in order, to conform to the policy of a fair days wage for a fair days labor.
Under the principle of a fair days wage for a fair days labor, the petitioners were not entitled to
the wages during the period of the strike (even if the strike might be legal), because they performed no
work during the strike. Verily, it was neither fair nor just that the dismissed employees should litigate
against their employer on the latters time.48[25] Thus, the Court deleted the award of backwages and held
that the striking workers were entitled only to reinstatement in Philippine Diamond Hotel and Resort, Inc.
(Manila Diamond Hotel) v. Manila Diamond Hotel Employees Union,49[26] considering that the striking
employees did not render work for the employer during the strike.
III
Appropriate Amount for Separation Pay
Is One Month per Year of Service
The petitioners were ordered reinstated because they were union members merely instigated or
induced to participate in the illegal strike. By joining the strike, they did not renounce their employment
relation with PINA but remained as its employees.
The absence from an order of reinstatement of an alternative relief should the employer or a
supervening event not within the control of the employee prevent reinstatement negates the very purpose
of the order. The judgment favorable to the employee is thereby reduced to a mere paper victory, for it is
all too easy for the employer to simply refuse to have the employee back. To safeguard the spirit of social
justice that the Court has advocated in favor of the working man, therefore, the right to reinstatement is to
be considered renounced or waived only when the employee unjustifiably or unreasonably refuses to
return to work upon being so ordered or after the employer has offered to reinstate him.50[27]
However, separation pay is made an alternative relief in lieu of reinstatement in certain
circumstances, like: (a) when reinstatement can no longer be effected in view of the passage of a long
period of time or because of the realities of the situation; (b) reinstatement is inimical to the employers
interest; (c) reinstatement is no longer feasible; (d) reinstatement does not serve the best interests of the
parties involved; (e) the employer is prejudiced by the workers continued employment; (f) facts that make
execution unjust or inequitable have supervened; or (g) strained relations between the employer and
employee.51[28]
Here, PINA manifested that the reinstatement of the petitioners would not be feasible because: (a)
it would inflict disruption and oppression upon the employer; (b) petitioners [had] stayed away for more
than 15 years; (c) its machines had depreciated and had been replaced with newer, better ones; and (d) it
now sold goods through independent distributors, thereby abolishing the positions related to sales and
distribution.52[29]
Under the circumstances, the grant of separation pay in lieu of reinstatement of the petitioners
was proper. It is not disputable that the grant of separation pay or some other financial assistance to an
employee is based on equity, which has been defined as justice outside law, or as being ethical rather than
jural and as belonging to the sphere of morals than of law.53[30] This Court has granted separation pay as
a measure of social justice even when an employee has been validly dismissed, as long as the dismissal
has not been due to serious misconduct or reflective of personal integrity or morality.54[31]
What is the appropriate amount for separation pay?
In G & S Transport,55[32] the Court awarded separation pay equivalent to one month salary per
year of service considering that 17 years had passed from the time when the striking employees were
refused reinstatement. In Association of Independent Unions in the Philippines v. NLRC,56[33] the Court
allowed separation pay equivalent to one month salary per year of service considering that eight years had
elapsed since the employees had staged their illegal strike.
Here, we note that this case has dragged for almost 17 years from the time of the illegal strike.
Bearing in mind PINAs manifestation that the positions that the petitioners used to hold had ceased to
exist for various reasons, we hold that separation pay equivalent to one month per year of service in lieu
of reinstatement fully aligns with the aforecited rulings of the Court on the matter.
WHEREFORE, we affirm the decision dated August 18, 2003 of the Court of Appeals, subject
to the modification to the effect that in lieu of reinstatement the petitioners are granted backwages
equivalent of one month for every year of service.
SO ORDERED.

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G.R. No.

March 15, 2004

ASIAN TRANSMISSION CORPORATION, petitioner,

[G.R. No. 146775. January 30, 2002.]

PUBLIC RESPONDENTS SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF

[G.R. No. 105892. January 28, 1998.]

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Name Position Date of Latest Date of

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1. Leiden E. Cashier Dec. 3, 1984 P2,880.00 July 19, 1990

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c) In case of unjustified non-appearance by the respondent during her/his turn to present

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Section 11. Non-appearance of Parties at Conference/Hearings. (a) Two (2) successive

Petitioners submit to this Court the following issues: 10

of discretion and in excess of jurisdiction in giving importance to private respondents additional

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"Section 11. Non-appearance of Parties at Conference/Hearings. (a) Two (2) successive

JPL MARKETING G.R. No. 151966

1.5 Overtime: Plus tips of U.S.$2.00 per passenger per day.

G.R. No. 123880 February 23, 1999

[G.R. NO. 149013 : August 31, 2006]

CAGAYAN DE ORO BRANCH

PETROLEUM SHIPPING LIMITED (formerly ESSO INTERNATIONAL SHIPPING

G.R. No. 160302

CARPIO MORALES, Chairperson

September 27, 2010

-versus NATIONAL LABOR RELATIONS

Labor Code, is Applicable

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