G.R. No. 195155 further notification.
further notification.9 He was the only one among several teachers transferred to the college department
DIVINE WORD COLLEGE OF LAOAG, Petitioner, vs. SHIRLEY B. MINA, as heir-substitute of
the late DELFIN A. MINA, Respondent.
DECISION
REYES, J.:
Assailed in this petition for review 1 under Rule 45 of the Rules of Court is the Decision 2 dated July 19,
2010 and Resolution3 dated January 13, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 107749
declaring respondent Delfin A. Mina (Mina) to have been constructively dismissed by petitioner Divine
Word College of Laoag (DWCL) and awarding him backwages, damages and attorney's fees.
Antecedent Facts
DWCL is a non-stock educational institution offering catholic education to the public. It is run by the
Society of Divine Word (SVD), a congregation of Catholic priests that maintains several other member
educational institutions throughout the country.4
On July 1, 1969, the Society of Divine Word Educational Association (DWEA) established a Retirement
Plan to provide retirement benefits for qualified employees of DWEAs member institutions, offices and
congregations.5The DWEA Retirement Plan6 contains a clause about the portability of benefits, to wit:
When a member who resigns or is separated from employment from one Participating Employer and who
is employed by another Participating Employer, the member will carry the credit he earned under his
former Participating Employer to his new Employer and the length of service in both will be taken into
consideration in determining his total years of continuous service on the following conditions:
a. The transfer is approved by both the Participating Employer whose service he is leaving and
the new Participating Employer;
b. The Retirement Board is notified of the transfer; and
c. The member is employed by another Participating Employer on the next working day after his
resignation.7
Mina was first employed in 1971 as a high school teacher, and later on a high school principal, at the
Academy of St. Joseph (ASJ), a school run by the SVD. On June 1, 1979, he transferred to DWCL and
was accorded a permanent status after a year of probationary status. 8 He was subsequently transferred in
2002 to DWCLs college department as an Associate Professor III. Thereafter, on June 1, 2003, Mina was
assigned as the College Laboratory Custodian of the School of Nursing and was divested of his teaching
load, effective June 1, 2003 until May 31, 2004, subject to automatic termination and without need for any
who was divested of teaching load.10
In early June 2004, Mina was offered early retirement by Professor Noreen dela Rosa, Officer-in-Charge
of DWCLs School of Nursing. He initially declined the offer because of his familys dependence on him
for support. He later received a Memorandum11 dated July 27, 2004 from the Office of the Dean
enumerating specific acts of gross or habitual negligence, insubordination, and reporting for work under
the influence of alcohol. He answered the allegations against him; 12 sensing, however, that it was
pointless to continue employment with DWCL, he requested that his retirement date be adjusted to
September 2004 to enable him to avail of the 25-year benefits. He also requested for the inclusion of his
eight years of service in ASJ, to make his total years of service to 33 years pursuant to the portability
clause of the retirement plan, which was denied by DWCL. Instead, he was paid 275,513.10 as
retirement pay.13 It was made to appear that his services were terminated by reason of redundancy to avoid
any tax implications. Mina was also made to sign a deed of waiver and quitclaim 14 stating that he no
longer has any claim against DWCL with respect to any matter arising from his employment in the
school.15
On September 21, 2004, he filed a case for illegal dismissal and recovery of separation pay and other
monetary claims.16 Pending resolution of his case, Mina passed away on June 18, 2005. 17
Ruling of the Labor Arbiter
On August 26, 2005, the Labor Arbiter (LA) rendered its Decision, 18 ruling that the actuation of DWCL is
not constitutive of constructive dismissal. The LA ratiocinated, however, that the computation of Minas
retirement pay based on redundancy is illegal; hence, it was modified, and the number of years he worked
for ASJ was added to the years he worked for DWCL thus making his creditable number of years of
service to 33 years. According to the LA, his length of service in both institutions will be taken into
consideration in determining his total years of continuous service since the DWEA Retirement Plan has a
provision on portability, which allows a member to carry the earned credit for his number of years of
service from his former participating employer to his new employer. Moreover, the LA held that there is
no showing that Mina ceased to be a member of the plan when he left the ASJ as there was not a day that
he was separated from any school that is the member of the plan. The LAs computation of Minas
retirement benefits is as follows:
Monthly salary: P13,006.23
Date hired: June 1971
Years in service: 33 years
Birth day: 24 December 1950
Monthly pay/26.22 x 22.2 x 33 years x 100%
P13,006.23/26.23 x 22.2 [x] 33 years x 100% = P363,400.29
Less: Severance benefits received: = P275,513.10
 Deficiency = P 87,887.1919
The LA disposed thus:
IN VIEW THEREOF, judgment is hereby rendered with the following dispositions:
1. Finding that [Mina] was underpaid in his retirement benefits pursuant to the DWEA
Retirement Plan. Consequently, [DWCL] must pay the deficiency in his retirement benefits in the
amount of P87,887.19.
2. Finding that the respondents were harsh on him. Consequently, the DWCL must be adjudged
to pay him P50,000 as moral damages and P50,000 as exemplary damages.
3. That his claims for additional separation pay for his future services are denied.
DWCL sought reconsideration of the NLRC decision but it was denied in a Resolution 26 dated November
28, 2008.
DWCL thus filed a petition for certiorari before the CA, seeking to reverse and set aside the NLRC
decision and resolution.27 DWCL primarily asserted that the NLRC committed grave abuse of discretion in
holding that Mina was constructively dismissed from work, in holding DWCL liable for moral and
exemplary damages, and in ordering the payment of separation pay as well as retirement pay computed up
to the age of 60.28
Ruling of the CA
On July 19, 2010, the CA rendered the assailed Decision, denying the petition but modifying the award. It
sustained the NLRCs ruling that Mina was indeed constructively dismissed from work. The CA also held
that Mina is entitled to receive backwages, to be computed from the time of hiring on June 1, 1979 until
the time of his death on June 18, 2005, as he was constructively dismissed from work, as follows:

4. [DWCL] must pay [Mina] 10% of the total award as attorneys fees for his having been forced Monthly Salary Php 13, 006.2
to litigate to protect his rights as an employee. x 26 (1 June 1979 - 18 June 2005)
Backwages Php 338,161.9829
SO ORDERED.20
The dispositive portion of the CA decision provided:
Both DWCL and Mina appealed to the National Labor Relations Commission (NLRC), with DWCL
mainly questioning the LAs decision making Minas creditable years of service 33 years, and awarding
moral and exemplary damages.21 WHEREFORE, the petition is DENIED, granting to [Mina] substituted by his heirs in addition to the full
retirement benefits at Php275,513.10, the following:
Ruling of the NLRC
1. backwages in the amount of Php 338,161.98;
The NLRC ruled that Mina was constructively dismissed when he was appointed as College Laboratory
Custodian and divested of his teaching load without any justification. 22 It also ruled that Mina was not 2. moral and exemplary damages at Php50,000.00; and
deemed to have waived all his claims against DWCL as quitclaims cannot bar employees from demanding
benefits to which they are legally entitled. 23 The NLRC, however, disregarded Minas eight years of 3. attorneys fees at ten percent (10%) of the amount due herein.
service in ASJ in the computation of his retirement pay because of his failure to show compliance with the
portability provision.24 The dispositive portion of the NLRC SO ORDERED.30

Decision dated July 10, 2008 provided: DWCLs motion for reconsideration was denied by the CA in its Resolution 31 dated January 13, 2011.

WHEREFORE, We grant in partly [sic] the appeals of both [Mina] and [DWCL]. The decision dated Hence, the present petition, anchored on the following grounds:
August 26, 200[5] is hereby modified to delete the order adding the length of service rendered by [Mina]
to the [ASJ] in the computation of the latters retirement pay from the former. Accordingly, [DWCL] is I.
held liable to pay [Mina] full backwages and separation pay, in lieu of reinstatement and to his full
compulsory retirement pay, less the amount already received by him representing his optional
retirement. The Honorable [CA] erred in upholding [NLRCs] findings that [Mina] was constructively dismissed.

SO ORDERED.25 (Emphasis ours) II.

The Honorable [CA] erred in holding [DWCL] liable for moral and exemplary damages and attorneys
fees.
III.
Even assuming, without admitting that [Mina] was constructively dismissed, the Honorable [CA] erred in
ordering the payment of his backwages "computed from the time of hiring, 1 June 1979 until the time of
his death 18 June 2005."
IV.
Even assuming, without admitting, that [Mina] was constructively dismissed, the Honorable [CA] has no
legal basis in awarding him full retirement benefits since it invalidated Minas retirement for which the
retirement benefits were given to him.32
Ruling of the Court
In a petition for review on certiorari under Rule 45, only questions of law may be raised. The raison
dtre is that the Court is not a trier of facts. 33 The rule, however, admits of certain exceptions, such as
when the factual findings of the LA differ from those of the NLRC, as in the instant case, which opens the
door to a review by this Court.34
The Constitution35 and the Labor Code36 mandate that employees be accorded security of tenure. The right
of employees to security of tenure, however, does not give the employees vested rights to their positions to
the extent of depriving management of its prerogative to change their assignments or to transfer them. 37 In
cases of transfer of an employee, the employer is charged with the burden of proving that its conduct and
action are for valid and legitimate grounds such as genuine business necessity and that the transfer is not
unreasonable, inconvenient or prejudicial to the employee. 38 If the employer cannot overcome this burden
of proof, the employees transfer shall be tantamount to unlawful constructive dismissal. 39
Constructive dismissal is a dismissal in disguise. 40 There is cessation of work in constructive dismissal
because "continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a
demotion in rank or a diminution in pay and other benefits." 41 To be considered as such, an act must be a
display of utter discrimination or insensibility on the part of the employer so intense that it becomes
unbearable for the employee to continue with his employment. 42 The law recognizes and resolves this
situation in favor of employees in order to protect their rights and interests from the coercive acts of the
employer.43
In this case, Minas transfer clearly amounted to a constructive dismissal. For almost 22 years, he was a
high school teacher enjoying a permanent status in DWCLs high school department. In 2002, he was
appointed as an associate professor at the college department but shortly thereafter, or on June 1, 2003, he
was appointed as a college laboratory custodian, which is a clear relegation from his previous position.
Not only that. He was also divested of his teaching load. His appointment even became contractual in
nature and was subject to automatic termination after one year "without any further notification." 44 Aside
from this, Mina was the only one among the high school teachers transferred to the college department
who was divested of teaching load. More importantly, DWCL failed to show any reason for Minas
transfer and that it was not unreasonable, inconvenient, or prejudicial to him. 45
Also, the CA correctly ruled that Minas appointment as laboratory custodian was a demotion. There is
demotion when an employee occupying a highly technical position requiring the use of ones mental
faculty is transferred to another position, where the employee performed mere mechanical work virtually
a transfer from a position of dignity to a servile or menial job. The assessment whether Minas transfer
amounted to a demotion must be done in relation to his previous position, that is, from an associate college
professor, he was made a keeper and inventory-taker of laboratory materials. Clearly, Minas new duties as
laboratory custodian were merely perfunctory and a far cry from his previous teaching job, which involved
the use of his mental faculties. And while there was no proof adduced showing that his salaries and
benefits were diminished, there was clearly a demotion in rank. As was stated in Blue Dairy Corporation
v. NLRC,46 "[i]t was virtually a transfer from a position of dignity to a servile or menial job." 47
Given the finding of constructive dismissal, Mina, therefore, is entitled to reinstatement without loss of
seniority rights, and payment of backwages computed from the time compensation was withheld up to the
date of actual reinstatement.48 The Court notes that aside from full compulsory retirement pay, the NLRC
awarded full backwages and separation pay, in lieu of reinstatement. 49 The CA, however, computed the
amount to be awarded as backwages from the time of Minas hiring on June 1, 1979 until the time of his
death on June 18, 2005, apparently interchanging backwages and separation pay. 50 Aside from this, the CA
omitted to include a separate award of separation pay.
The Court has repeatedly stressed that the basis for the payment of backwages is different from that of the
award of separation pay. "The basis for computing separation pay is usually the length of the employees
past service, while that for backwages is the actual period when the employee was unlawfully
prevented from working."51Thus, the Court explained in Bani Rural Bank, Inc. v. De Guzman52 that:
[U]nder Article 279 of the Labor Code and as held in a catena of cases, an employee who is dismissed
without just cause and without due process is entitled to backwages and reinstatement or payment of
separation pay in lieu thereof:
xxxx
The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of
seniority rights, and payment of backwages computed from the time compensation was withheld up to the
date of actual reinstatement. Where reinstatement is no longer viable as an option, separation pay
equivalent to one (1) month salary for every year of service should be awarded as an alternative. The
payment of separation pay is in addition to payment of backwages. 53 (Emphasis and underscoring deleted,
and italics ours)
Thus, the computation of Minas backwages should be from the time he was constructively dismissed on
June 1, 2003.
Aside from the foregoing, the CA should have also awarded separation pay since reinstatement is no
longer viable due to Minas death in 2005. As stated before, the award of separation pay is distinct from
the award of backwages. The award of separation pay is also distinct from the grant of retirement benefits.
These benefits are not mutually exclusive as "[r]etirement benefits are a form of reward for an employees
loyalty and service to an employer and are earned under existing laws, [Collective Bargaining
Agreements], employment contracts and company policies." 54 Separation pay, on the other hand, is that
amount which an employee receives at the time of his severance from employment, designed to provide
the employee with the wherewithal during the period that he is looking for another employment. 55 In the
computation of separation pay, the Court stresses that it should not go beyond the date an employee
was deemed to have been actually separated from employment, or beyond the date when
reinstatement was rendered impossible.56 The period for the computation of separation pay Mina is
entitled to shall therefore begin to run from June 1, 1979, when he was transferred to DWCL from ASJ,
until his death on June 18, 2005, or for a period of 26 years.

The award of damages was also justified given the CA and NLRCs finding that DWCL acted in a manner
wherein Mina was not treated with utmost good faith. The intention of the school to erase him out of
employment is too apparent. 57 The Court upholds the CAs finding that when DWCLs act of
unceremoniously demoting and giving Mina contractual employment for one year and citing him for
numerous violations of school regulations when he rejected the schools offer to voluntarily retire is
constitutive of bad faith.58

Lastly, the Court affirms the NLRCs findings that the eight years of service rendered by Mina in ASJ shall
not be included in the computation of his retirement benefits.1wphi1 No adequate proof is shown that he
has complied with the portability clause of the DWEA Retirement Plan. The employee has the burden of
proof to show compliance with the requirements set forth in retirement plans, being in the nature of
privileges granted to employees. Failure to overcome the burden of proof would necessarily result in the
employees disqualification to receive the benefits.

WHEREFORE, the Decision dated July 19, 2010 and Resolution dated January 13, 2011 of the Court of
Appeals in CA-G.R. SP No. 107749 are MODIFIED in that, in addition to the award of attorneys fees,
and moral and exemplary damages, petitioner Divine Word College of Laoag is ORDERED to pay
Shirley B. Mina, as heir-substitute of the late Delfin Mina, the following:

(1) backwages, to be computed from June 1, 2003 until June 18, 2005, or 13,006.23 x 24
(months) = 312,149.52; and

(2) separation pay, to be computed from June 1, 1979 until June 18, 2005, or 13,006.23 x 26
(years) = 338,161.98.

The monetary awards granted shall earn legal interest at the rate of six percent (6%) per annum from the
date of the finality of this Decision until fully paid.

SO ORDERED.

SECOND DIVISION
September 9, 2015 G.R. No. 202090
ICT MARKETING SERVICES, INC. (now known as SYKES MARKETING SERVICES,
INC.), Petitioner, vs. MARIPHIL L. SALES, Respondent.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari 1 assails: 1) the Januruy 10, 2012 Decision 2 of the Court of Appeals
(CA) in CA-G.R. SP No. 109860 nullifying and setting aside the February 16, 2009 3 and May 20,
20094 Resolutions of the National Labor Relations Commission (NLRC) in NLRC LAC CN. 07-002404-
08(7)/(8) and reinstating with modification the April 30, 2008 Decision 5 of the Labor Arbiter in NLRC-
NCR Case No. 10-11004-07; and 2) the CA's May 28, 2012 Resolution 6 denying petitioner's Motion for
Reconsideration7 of the herein Assailed Decision.
Factual Antecedents
Petitioner ICT Marketing Services, Inc. (ICT) now known as Sykes Marketing Services, Inc. is a duly
registered domestic corporation engaged in the business of providing outsourced customer relations
management and business process outsourcing solutions to various clients in government and in the
financial services, insurance, telecommunications, health care, information technology, media, energy, and
hospitality industries.
On February 22, 2006, petitioner hired respondent Mariphil L. Sales as its Customer Service
Representative (CSR) or Telephone Service Representative (TSR), and assigned her to its Capital One
account. On August 21, 2006, respondent became a regular employee, and her monthly base salary was
increased to P16,350.00 and she was given monthly transportation and meal allowances.
On February 21, 2007, respondent was assigned to the Washington Mutual account, where she was
awarded with a certificate for being the "Top Converter/Seller (Second Place)" for the month of April
2007.8
On July 3, 2007, respondent wrote to Glen Odom (Odom) petitioners Vice President complaining
about supposed irregularities in the handling of funds entrusted to petitioner by Washington Mutual which
were intended for distribution to outstanding Washington Mutual CSRs and TSRs as prizes and incentives.
However, no action appears to have been taken on her complaint.
Respondent was then transferred to the Bank of America account on July 30, 2007. Without prior notice to
respondent, petitioner scheduled her for training from July 30 to August 6, 2007 on the very same day of
her transfer. On the third day of training (August 1), respondent was unable to attend. When she reported
for training the next day, respondent was informed that she could not be certified to handle calls for Bank
of America due to her failure to complete the training. From then on, respondent was placed on "floating
status" and was not given any work assignment.
In a September 28, 2007 letter 9 to petitioners Human Resource (HR) Manager, respondent tendered her
resignation from work, effective upon receipt of the letter. Respondent wrote:
I was forced to resign due to the reason that my employment was made on "floating status" effective
August 4, 2007 and up to present (almost two months)
I havent receive [sic] any notice from you or the HR department to report for work despite my repeated
follow-up [with] your office thru telephone and mobile phone text messages. Hence, I consider your
inaction to my follow-up as an indirect termination of my work with ICT.
The reason I was placed [on] floating status is that, I was absent during the third day of my training with
Bank of America, the account to which I was transferred from Washington Mutual (WaMu). However, my
absence during such period was justified by the fact that I was sick and I need [sic] to undergo a medical
check-up on that date.
Furthermore, I see my transfer from WaMu Account to Bank of America and the continued floating status
of my work was prompted by the fact that I lodged a complaint against managers/supervisors assigned in
WaMu account regarding irregularities in the handling of funds given by ICT clients which were supposed
to be distributed as prizes to TSRs assigned with WaMu. After the filing of the said complaint, through
your office, I was transferred to another account (Bank of America) for no apparent reason. I was not even
included in the original list of those who were supposed to be transferred because my performance record
with WaMu is satisfactory as proven by the fact that I was even awarded with a certificate as "top
converter (seller)" for the month of April and was supposed to be included again in the top three highest
converter[s] for the month of May, but unfortunately irregularities were committed, that is why I filed the
aforementioned complaint [with] your office.
On August 1, 2007, a few days after my transfer [to] Bank of America, my coach, angelo [sic], informed
me that I will be having a training on that same day with Bank of America which is really unexpected. I
was not given a notice in advance about the training. My coach informed me only three hours before the
said training. Later on during my training with Bank of America I was [placed on floating status]
indefinitely due to a single absence even though I am a regular employee having worked in ICT for almost
two years. Another instance [of] discrimination [sic] and bad faith on the part of ICT management is that,
all my fellow agents who were [placed on floating status] for the same reason were all ordered to return to
work except me [sic]. Moreover, ICT is continuously hiring TSRs which only shows that there are still
accounts open or work available in ICT. However despite the availability of work, I was still on floating
status.
Based on the aforementioned facts and circumstance[s], it is very clear that the harassment, pressure, and
indefinite floating of my employment with ICT are retaliatory acts perpetrated by the company because of
my complaint/ request for investigation on the irregularities being committed by certain company officials.
Thus, I can no longer bear the above-mentioned abuses and discrimination committed against me by ICT
management. Therefore, I have no option but to sever my relationship with the company, as my continued
floating status had already prejudiced me emotionally and financially.10
Ruling of the Labor Arbiter x x x [T]here was no x x x evidence x x x that complainants transfer was due to the request of a client.
Further, if complainant was indeed remised of [sic] her duties due to her punctuality and attendance
On October 2, 2007, respondent filed a complaint for constructive dismissal against petitioner and Odom problem of committing twelve (12) absences alone incurred in July 2007 [sic], why was there no
before the NLRC NCR, Quezon City, docketed as NLRC-NCR Case No. 10-11004-07. disciplinary action taken against her like reprimand or warning[?]

In her Position Paper,11 Reply,12 Rejoinder,13 and Surrejoinder,14 respondent claimed that for complaining xxxx
about the supposed irregularities in the Washington Mutual account, petitioner discriminated against her
and unduly punished her. Although she was not included in the original list of CSRs/TSRs for program And its effect, complainant is entitled to her claim of separation pay, moral and exemplary damages of
transfer, she was transferred to another account, and then placed on "floating status," which is tantamount P50,000.00 pesos [sic] including an award of attorneys fees.
to suspending her indefinitely without due process, despite her satisfactory performance. Respondent
averred that petitioners claim of multiple absences is not true, because not once was she penalized WHEREFORE, premises considered, judgment is rendered ordering the respondents to pay complainant
therefor, assuming such charge is true. Respondent also alleged that her one-day absence during the of [sic] one month pay per year of service as separation pay in the total amount of P32,700.00, P50,000.00
training for the Bank of America program cannot justify her being placed on a "floating status" because moral and exemplary damages plus 10% of the award as attorneys fees, hereunder computed:
the "no-absence during training" requirement cited by petitioner using her employment contract 15 and the
"New Hire Training Bay"16 as bases applies only to new hires on probationary status, and not to
regularized employees. In any case, the "New Hire Training Bay" used by petitioner was for the Capital I Separation Pay
One program. She also pointed out that during her indefinite suspension or "floating status," petitioner 2/21/06 8/4/07 = 2 yrs.
continued to hire new CSRs, as shown by its newspaper advertisements during the period. 17Finally, she P16,350.00 x 2 yrs. = P32,700.00
asserted that her resignation was not voluntary, but was forced upon her by petitioner as a result of its II Damages P50,000.00
unlawful acts. Thus, respondent prayed for the recovery of backwages, separation pay, P100,000.00
combined moral and exemplary damages, and attorneys fees equivalent to 10 per cent (10%) of the total P82,700.00
award.
P8,270.00
10% Attorneys Fees
In its Position Paper,18 Reply,19 Rejoinder,20 and Surrejoinder,21 petitioner prayed for the dismissal of the P90,970.00
complaint, arguing that respondent was transferred from the Washington Mutual account as an exercise of
management initiative or prerogative, and due to infractions 22 committed by her, as well as attendance and
punctuality issues that arose. It claimed that respondent could not be certified for the Bank of America SO ORDERED.24
account for failing to complete the training. It maintained that respondent was placed on standby status
only, and not suspended or constructively dismissed. In fact, she was directed to report to its HR Ruling of the National Labor Relations Commission
department, but she did not do so. It also insisted that respondent resigned voluntarily. It denied
committing any act of discrimination or any other act which rendered respondents employment Petitioner appealed before the NLRC arguing that the Labor Arbiter erred in ruling that respondent was
impossible, unreasonable or unlikely. Finally, it claimed that prior notice of her transfer to the Bank of constructively dismissed. It also argued that Odom was not personally liable as he was merely acting in
America account was made through an electronic mail message sent to her; and that respondent has no good faith and within his authority as corporate officer.
cause of action since she resigned voluntarily, and thus could not have been illegally dismissed.
Respondent likewise interposed an appeal 25 arguing that the award of backwages should be computed from
On April 30, 2008, the Labor Arbiter rendered a Decision 23 finding complainant to have been the date of her dismissal until finality of the Labor Arbiters Decision; and that the proportionate share of
constructively dismissed and awarding separation pay, moral and exemplary damages, and attorneys fees her 13th month pay should be paid to her as well.
to respondent. The Labor Arbiter held:
On February 16, 2009, the NLRC issued a Resolution,26 declaring as follows:
x x x Complainant was indeed constructively dismissed from her employment and she quitted [sic]
because her continued employment thereat is rendered impossible, unreasonable or unlikely.
We reverse.
Complainants resignation was sparked by her transfer of assignment and eventual placing her [sic] by the
respondent company of [sic] a "on floating" status. Upon an examination of the pleadings on file, We find that in the past the complainant had been
transferred from one program to another without any objection on her part. Insofar as the instant case is
concerned, it appears that the complainant, aside from having been given a warning for wrong disposition
of a call, had been absent or usually late in reporting for work, constraining the respondent ICT to transfer
her to another program/account. Required of the complainant was for her to undergo Product Training for
the program from July 30 to August 6, 2007, and the records indicate that she attended only two (2) days
of training on July 30 and 31, 2007, did not report on August 1, 2007 and again reported for training on
August 2, 2007. It was then that ICTs Operations Subject Matter Expert, Ms. Suzette Lualhati, informed
the complainant that she cannot be certified for the program because she failed to complete the number of
training days, and there was a need for her to report to Human Resources for further instructions. As the
complainant did not report to Human Resources, and due to her derogatory record, the respondent
company could not find another program where the complainant could be transferred.
From what has been narrated above, We come to the conclusion that the respondent company cannot be
faulted for placing the complainant on "floating status." And there does not appear to be any ill will or bad
faith that can be attributed to the respondent.
Finally, it is well to emphasize that the complainant tendered her resignation on October 1, 2007. There is
no evidence that the complainant has presented that would indicate that duress or force has been exerted
on her.
All told, We are of the opinion that the findings of the Labor Arbiter are in stark contrast to the evidence
on record.
WHEREFORE, in view of the foregoing, the decision appealed from is hereby reversed and set aside.
Addordingly [sic], a new one is entered dismissing the complaint for lack of merit.
SO ORDERED.27
Respondent filed a Motion for Reconsideration, 28 but in a May 20, 2009 Resolution, 29 the motion was
denied.
Ruling of the Court of Appeals
In a Petition for Certiorari30 filed with the CA and docketed as CA-G.R. SP No. 109860, respondent sought
a reversal of the February 16, 2009 and May 20, 2009 Resolutions of the NLRC.
Petitioner filed its Comment,31 to which respondent interposed a Reply.32
On January 10, 2012, the CA issued the assailed Decision containing the following pronouncement:
This Court finds the petition meritorious.
While it is true that management has the prerogative to transfer employees, the exercise of such right
should not be motivated by discrimination, made in bad faith, or effected as a form of punishment or
demotion without sufficient cause. When the transfer is unreasonable, unlikely, inconvenient, impossible,
or prejudicial to the employee, it already amounts to constructive dismissal. In constructive dismissal, the
employer has the burden of proving that the transfer and demotion of an employee are for just and valid
grounds, such as genuine business necessity. Should the employer fail to overcome this burden of proof,
the employees transfer shall be tantamount to unlawful constructive dismissal.
In the case at bench, private respondent corporation failed to discharge this burden of proof considering
the circumstances surrounding the petitioners July 2007 transfer to another account. Prior to her
reassignment, petitioners annual performance merited increase in her salary effective February 2007 and
was also awarded a certificate of achievement for performing well in April 2007. Her transfer was also
abrupt as there was no written transfer agreement informing her of the same and its requirements unlike
her previous transfer from Capital One to Washington Mutual account. It is therefore difficult to see the
reasonableness, urgency, or genuine business necessity to transfer petitioner to a new account. While it
may be true that petitioner has attendance and punctuality issues, her over-all performance as a CSR/TSR
cannot be said to be below par given the annual merit increase and the certificate of achievement awarded
to her. If indeed, private respondent corporation had trouble transferring the petitioner to another post
because of her derogatory record, the corporation could just have dismissed her for cause.
After petitioners unjustified transfer, she was informed by private respondent corporation that she could
not be "certified" or allowed to handle calls for the new account because of her absence during training.
She was later placed on a floating status and was not given another post.
The Court considers placing the petitioner on a floating status as another unjustified action of the private
respondent corporation prejudicial to petitioner as employee. In this case, except for private respondent
corporations bare assertion that petitioner no longer reported to the human resources department as
instructed, no proof was offered to prove that petitioner intended to sever the employer-employee
relationship. Private respondent corporation also offered no credible explanation why it failed to provide a
new assignment to petitioner. Its assertion that it is petitioners derogatory record which made it difficult
for the corporation to transfer her to another account despite its efforts is not sufficient to discharge the
burden of proving that there are no posts or no accounts available or willing to accept her.
In Nationwide Security and Allied Services, Inc. vs. Valderama, 33 the Supreme Court declared that due to
the grim economic consequences to the employee of being placed on a floating status, the employer should
bear the burden of proving that there are no posts available to which the employee temporarily out of work
can be assigned.
These acts by the private respondent corporation, of transferring petitioner to another account without
sufficient cause and proper notice and its subsequent failure to provide a new post for her for two months
without credible explanation, constitute unjustified actions prejudicial to the petitioner as an employee,
making it unbearable for her to continue employment.
Thus, petitioner opted to resign, albeit involuntarily. The involuntariness of her resignation is evident in
her letter which states categorically:
"I was forced to resign due to the reason that my employment was made on floating status effective
August 4, 2007 and up to the present (almost two months) I havent receive [sic] any notice from you or
the HR department to report for work despite my repeated follow-up to your office thru telephone and
mobile phone text messages.1avvphi1Hence, I consider your inaction to my follow-up as an indirect Petitioner filed a Motion for Reconsideration, but the same was denied in a May 28, 2012 Resolution.
termination of my work with ICT." Hence, the present Petition.

Further, petitioner immediately filed a complaint for illegal dismissal. Resignation, it has been held, is In a November 11, 2013 Resolution,35 this Court resolved to give due course to the Petition.
inconsistent with the filing of a complaint. Thus, private respondent corporations mere assertion that
petitioner voluntarily resigned without offering convincing evidence to prove it, is not sufficient to
discharge the burden of proving such assertion. It is worthy to note that the fact of filing a resignation Issues
letter alone does not shift the burden of proof and it is still incumbent upon the employer to prove that the
employee voluntarily resigned. Petitioner submits that

Therefore, we believe and so hold that petitioner was constructively dismissed from employment. A.
Constructive dismissal exists when the resignation on the part of the employee was involuntary due to the
harsh, hostile and unfavorable conditions set by the employer. The test for constructive dismissal is
whether a reasonable person in the employees position would feel compelled to give up his employment THE COURT OF APPEALS ERRED WHEN IT HELD THAT RESPONDENTS TRANSFER WAS
under the prevailing circumstances. With the decision of the private respondent corporation to transfer and UNJUSTIFIED NOTWITHSTANDING EVIDENCE TO SHOW THAT RESPONDENT WAS NOT
to thereafter placed [sic] her on floating status, petitioner felt that she was being discriminated and this DEMOTED AND WAS EVEN GIVEN THE SAME RANK AND PAY.
perception compelled her to resign. It is clear from her resignation letter that petitioner felt oppressed by
the situation created by the private respondent corporation, and this forced her to surrender her position. B.

Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of THE COURT OF APPEALS ERRED WHEN IT HELD THAT RESPONDENTS PLACEMENT UNDER
allowances, and to his other benefits or their monetary equivalent computed from the time his FLOATING STATUS WAS TANTAMOUNT TO CONSTRUCTIVE DISMISSAL AS THIS IS
compensation was withheld from him up to the time of his actual reinstatement. CONTRARY TO NUMEROUS DECISIONS OF THE HONORABLE COURT.

As petitioner did not pray for reinstatement but only sought payment of money claims, the labor arbiter is C.
correct in awarding separation pay equivalent to one month pay for every year of service. We also do not
find any cogent reason to disturb the award of damages and attorneys fees since we have found bad faith
THE COURT OF APPEALS ERRED WHEN IT REINSTATED LABOR ARBITER MACAMS
on the part of the private respondent corporation to abruptly [sic] transfer and place the petitioner on
floating status. Individual respondent Glen Odom is however, exonerated from any liability as there was DECISION DATED 30 APRIL 2008 WHICH DECLARED THAT RESPONDENT WAS
no clear finding that he acted with malice or bad faith. Backwages and other monetary benefits must also CONSTRUCTIVELY DISMISSED, NOTWITHSTANDING EVIDENCE THAT CLEARLY SHOWS
be included in compliance with the above-mentioned provision of labor law which shall be reckoned from THAT RESPONDENT VOLUNTARILY RESIGNED.
the time her constructive dismissal took effect until the finality of this decision.
D.
WHEREFORE, premises considered, the Resolutions dated February 16, 2009 and May 20, 2009
respectively, issued by the public respondent National Labor Relations Commission (NLRC) in NLRC CA
THE COURT OF APPEALS ERRED IN AWARDING RESPONDENT SEPARATION PAY,
No. 07-002404-08 are REVERSED and SET ASIDE. The decision of the Labor Arbiter dated April 30,
2008 is REINSTATED with MODIFICATION that the petitioner Mariphil L. Sales, be awarded BACKWAGES, MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES. 36
backwages and other monetary benefits from the date of her constructive dismissal up to the finality of this
Decision. Petitioners Arguments

SO ORDERED.3 Praying that the assailed CA dispositions be set aside and that the NLRCs February 16, 2009 and May 20,
2009 Resolutions be reinstated instead, petitioner maintains in the Petition and Reply 37 that respondents
transfer to another account was done as a valid exercise of management prerogative, which allows it to
regulate all aspects of employment. Her transfer was done in good faith, and without diminution in rank
and salary. It contends that respondent knew very well that any CSR/TSR may be transferred to another
program/account anytime for business reasons; in fact, respondent herself was transferred from Capital
One to Washington Mutual, and she did not complain. Moreover, she knew as well that "schedule
adherence" or attendance/punctuality is one of the "metrics" or standards by which the performance of a
CSR is measured, and that she failed to comply in this regard. It claims that the decision to place her on
"floating status" instead of dismissing her was an accommodation and should not be treated as an illegal or
unjustified act; that being on "floating status" is not tantamount to constructive dismissal, and the failure to
place or transfer respondent to another account was due to her derogatory record, and not petitioners bad
faith or inaction. It insists that the placing of an employee on "floating status" for up to six months is
allowed in the event of a bona fide suspension of the operations or undertaking of a business. 38 In any
event, respondents voluntary resignation prior to the expiration of the allowable six-month "floating
status" period cannot constitute constructive dismissal, and her immediate filing of the labor case
thereafter is thus premature. Finally, petitioner posits that since there is no illegal dismissal but rather a
voluntary relinquishment of respondents post, then there is no basis for the pecuniary awards in her favor.
Respondents Arguments
In her Comment39 praying for dismissal of the Petition and the corresponding affirmance of the assailed
dispositions, respondent insists that she was illegally dismissed. She reiterates that her transfer to the Bank
of America account was an undue penalty for her complaining about supposed anomalies in the
Washington Mutual account. She avers that the documentary evidence of her supposed unauthorized
absences were manufactured to support petitioners false allegations and mislead this Court into believing
that she was delinquent at work.
She argues that assuming that these absences were true, then they should have merited her dismissal for
cause yet the fact is she was not dismissed nor punished for these supposed absences. She asserts that
petitioners claim that she was transferred on the recommendation of a client is untrue and self-serving,
and is unjustified since the client has no authority to order or recommend her transfer. She maintains that
her being placed on "floating status" was illegal, since a) there is no evidence to prove her alleged
"attendance and punctuality issues," and b) there was no bona fide suspension of petitioners business or
undertaking for a period not exceeding six months, as prescribed under Article 286 of the Labor
Code,40 which would justify the suspension of her employment for up to six months. As enunciated in the
Philippine Industrial Security Agency Corp. v. Dapiton 41case which petitioner itself cited, Article 286
applies only when there is a bona fide suspension of the employers operation or undertaking for a period
not exceeding six months, due to dire exigencies of the business that compel the employer to suspend the
employment of its workers. Respondent points out that petitioner continued with its business, and worse, it
in fact continued to hire new CSRs/TSRs during the period of respondents suspension from work. In fine,
respondent alleges that she was constructively dismissed and forced to resign, rather than continue to
subject herself to petitioners discrimination, insensibility, harassment, and disdain; and that for such
illegal acts, she is entitled to indemnity from petitioner.
Our Ruling
The Court denies the Petition.
Respondents Transfer
Under the doctrine of management prerogative, every employer has the inherent right to regulate,
according to his own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, the time, place and manner of work, work supervision, transfer of
employees, lay-off of workers, and discipline, dismissal, and recall of employees. The only limitations to
the exercise of this prerogative are those imposed by labor laws and the principles of equity and
substantial justice.
While the law imposes many obligations upon the employer, nonetheless, it also protects the employers
right to expect from its employees not only good performance, adequate work, and diligence, but also
good conduct and loyalty. In fact, the Labor Code does not excuse employees from complying with valid
company policies and reasonable regulations for their governance and guidance.
Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a transfer is a
movement from one position to another of equivalent rank, level or salary without break in the service or a
lateral movement from one position to another of equivalent rank or salary; (b) the employer has the
inherent right to transfer or reassign an employee for legitimate business purposes; (c) a transfer becomes
unlawful where it is motivated by discrimination or bad faith or is effected as a form of punishment or is a
demotion without sufficient cause; (d) the employer must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee.42
While the prerogative to transfer respondent to another account belonged to petitioner, it wielded the same
unfairly. The evidence suggests that at the time respondent was transferred from the Washington Mutual
account to the Bank of America program, petitioner was hiring additional CSRs/TSRs. 43 This simply
means that if it was then hiring new CSRs/TSRs, then there should be no need to transfer respondent to the
Bank of America program; it could simply train new hires for that program. Transferring respondent an
experienced employee who was already familiar with the Washington Mutual account, and who even
proved to be outstanding in handling the same to another account means additional expenses for
petitioner: it would have to train respondent for the Bank of America account, and train a new hire to take
her place in the Washington Mutual account. This does not make sense; quite the contrary, it is impractical
and entails more expense on petitioners part. If respondent already knew her work at the Washington
Mutual account very well, then it is contrary to experience and logic to transfer her to another account
which she is not familiar with, there to start from scratch; this could have been properly relegated to a new
hire.
There can be no truth to petitioners claim either that respondents transfer was made upon request of the
client. If she was performing outstanding work and bringing in good business for the client, there is no
reason indeed it is beyond experience and logic to conclude that the client would seek her transfer.
Such a claim could only be fabricated. Truly, Experience which is the life of the law as well as logic
and common sense militates against the petitioners cause.44
Moreover, as the appellate court correctly observed, even if respondent had attendance and punctuality
issues, her overall performance as a CSR/TSR was certainly far from mediocre; on the contrary, she
proved to be a top performer. And if it were true that respondent suddenly became lax by way of
attendance in July 2007, it is not entirely her fault. This may be attributed to petitioners failure to properly
address her grievances relative to the supposed irregularities in the handling of funds entrusted to
petitioner by Washington Mutual which were intended for distribution to outstanding Washington Mutual
CSRs and TSRs as prizes and incentives. She wrote petitioner about her complaint on July 3, 2007;
however, no explanation was forthcoming from petitioner, and it was only during these proceedings or
after a case had already been filed that petitioner belatedly and for no other useful purpose attempted to
address her concerns. This may have caused a bit of disillusionment on the part of respondent, which led
her to miss work for a few days in July 2007. Her grievance should have been addressed by petitioner;
after all, they were serious accusations, and have a bearing on the CSRs/TSRs overall performance in the
Washington Mutual account.
Respondents work as a CSR which is essentially that of a call center agent is not easy. For one, she
was made to work the graveyard shift that is, from late at night or midnight until dawn or early morning.
This certainly takes a toll on anyones physical health. Indeed, call center agents are subjected to
conditions that adversely affect their physical, mental and emotional health; exposed to extreme stress and
pressure at work by having to address the customers needs and insure their satisfaction, while
simultaneously being conscious of the need to insure efficiency at work by improving productivity and a
high level of service; subjected to excessive control and strict surveillance by management; exposed to
verbal abuse from customers; suffer social alienation precisely because they work the graveyard shift
while family and friends are at rest, they are working, and when they are at rest, family and friends are up
and about; and they work at a quick-paced environment and under difficult circumstances owing to
progressive demands and ambitious quotas/targets set by management. To top it all, they are not exactly
well-paid for the work they have to do and the conditions they have to endure. Respondents written query
about the prizes and incentives is not exactly baseless and frivolous; the least petitioner could have done
was to timely address it, if it cared about its employees welfare. By failing to address respondents
concerns, petitioner exhibited an indifference and lack of concern for its employees qualities that are
diametrically antithetical to the spirit of the labor laws, which aim to protect the welfare of the
workingman and foster harmonious relations between capital and labor. By its actions, petitioner betrayed
the manner it treats its employees.
Thus, the only conceivable reason why petitioner transferred respondent to another account is the fact that
she openly and bravely complained about the supposed anomalies in the Washington Mutual account; it is
not her "derogatory record" or her "attendance and punctuality issues", which are insignificant and thus
irrelevant to her overall performance in the Washington Mutual account. And, as earlier stated,
respondents "attendance and punctuality issues" were attributable to petitioners indifference, inaction,
and lack of sensitivity in failing to timely address respondents complaint. It should share the blame for
respondents resultant delinquencies.
Thus, in causing respondents transfer, petitioner clearly acted in bad faith and with discrimination,
insensibility and disdain; the transfer was effected as a form of punishment for her raising a valid
grievance related to her work.
Furthermore, said transfer was obviously unreasonable, not to mention contrary to experience, logic, and
good business sense. This being the case, the transfer amounted to constructive dismissal.
The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion,
bearing in mind the basic elements of justice and fair play. Having the right should not be confused with
the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid
himself of an undesirable worker. In particular, the employer must be able to show that the transfer is not
unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden
of proof, the employees transfer shall be tantamount to constructive dismissal, which has been defined as
a quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer
involving a demotion in rank and diminution in pay.
Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an
employer has become so unbearable to the employee leaving him with no option but to forego with his
continued employment.45(Emphasis and underscoring supplied)
The instant case can be compared to the situation in Veterans Security Agency, Inc. v. Gonzalvo,
Jr.,46 where the employee concerned a security guard who was brave enough to complain about his
employers failure to remit its employees Social Security System premiums was "tossed around" and
finally placed on floating status for no valid reason. Taking the poor employees side, this Court declared:
True, it is the inherent prerogative of an employer to transfer and reassign its employees to meet the
requirements of its business. Be that as it may, the prerogative of the management to transfer its employees
must be exercised without grave abuse of discretion. The exercise of the prerogative should not defeat an
employees right to security of tenure. The employers privilege to transfer its employees to different
workstations cannot be used as a subterfuge to rid itself of an undesirable worker.
Here, riled by respondents consecutive filing of complaint against it for nonpayment of SSS
contributions, VSAI had been tossing respondent to different stations thereafter. From his assignment at
University of Santo Tomas for almost a year, he was assigned at the OWWA main [o]ffice in Pasig where
he served for more than three years. After three years at the OWWA main office, he was transferred to the
OWWA Pasay City parking lot knowing that the security services will end forthwith. VSAI even
concocted the reason that he had to be assigned somewhere because his spouse was already a lady guard
assigned at the OWWA main office. Inasmuch as respondent was single at that time, this was obviously a
mere facade to [get] rid of respondent who was no longer in VSAIs good graces.
The only logical conclusion from the foregoing discussion is that the VSAI constructively dismissed the
respondent. This ruling is in rhyme with the findings of the Court of Appeals and the NLRC. Dismissal is
the ultimate penalty that can be meted to an employee. Inasmuch as petitioners failed to adduce clear and
convincing evidence to support the legality of respondents dismissal, the latter is entitled to reinstatement
and back wages as a necessary consequence. However, reinstatement is no longer feasible in this case
because of the palpable strained relations, thus, separation pay is awarded in lieu of reinstatement.
xxxx
Indeed, the Court ought to deny this petition lest the wheels of justice for aggrieved workingmen grind to a
halt. We ought to abate the culture of employers bestowing security of tenure to employees, not on the
basis of the latters performance on the job, but on their ability to toe the line set by their employer and
endure in silence the flagrant incursion of their rights, zealously protected by our labor laws and by the
Constitution, no less.47(Emphasis and underscoring supplied)
Respondents Floating Status
In placing respondent on "floating status," petitioner further acted arbitrarily and unfairly, making life
unbearable for her. In so doing, it treated respondent as if she were a new hire; it improperly disregarded
her experience, status, performance, and achievements in the company; and most importantly, respondent
was illegally deprived of her salary and other emoluments. For her single absence during training for the
Bank of America account, she was refused certification, and as a result, she was placed on floating status
and her salary was withheld. Clearly, this was an act of discrimination and unfairness considering that she
was not an inexperienced new hire, but a promising and award-winning employee who was more than
eager to succeed within the company. This conclusion is not totally baseless, and is rooted in her
outstanding performance at the Washington Mutual account and her complaint regarding the incentives,
which only proves her zeal, positive work attitude, and drive to achieve financial success through hard
work. But instead of rewarding her, petitioner unduly punished her; instead of inspiring her, petitioner
dashed her hopes and dreams; in return for her industry, idealism, positive outlook and fervor, petitioner
left her with a legacy of, and awful examples in, office politicking, intrigue, and internecine schemes.
In effect, respondents transfer to the Bank of America account was not only unreasonable, unfair,
inconvenient, and prejudicial to her; it was effectively a demotion in rank and diminution of her salaries,
privileges and other benefits. She was unfairly treated as a new hire, and eventually her salaries, privileges
and other benefits were withheld when petitioner refused to certify her and instead placed her on floating
status. Far from being an "accommodation" as petitioner repeatedly insists, respondent became the victim
of a series of illegal punitive measures inflicted upon her by the former.
Besides, as correctly argued by respondent, there is no basis to place her on "floating status" in the first
place since petitioner continued to hire new CSRs/TSRs during the period, as shown by its paid
advertisements and placements in leading newspapers seeking to hire new CSRs/TSRs and other
employees.48 True enough, the placing of an employee on "floating status" presupposes, among others, that
there is less work than there are employees; 49 but if petitioner continued to hire new CSRs/TSRs, then
surely there is a surplus of work available for its existing employees: there is no need at all to place
respondent on floating status. If any, respondent with her experience, knowledge, familiarity with the
workings of the company, and achievements should be the first to be given work or posted with new
clients/accounts, and not new hires who have no experience working for petitioner or who have no related
experience at all. Once more, experience, common sense, and logic go against the position of petitioner.
The CA could not be more correct in its pronouncement that placing an employee on floating status
presents dire consequences for him or her, occasioned by the withholding of wages and benefits while he
or she is not reinstated. To restate what the appellate court cited, "[d]ue to the grim economic
consequences to the employee, the employer should bear the burden of proving that there are no posts
available to which the employee temporarily out of work can be assigned." 50 However, petitioner has
failed miserably in this regard.
Resignation
While this Court agrees with the appellate courts observation that respondents resignation was
involuntary as it became unbearable for her to continue with her employment, expounding on the issue at
length is unnecessary.
Because she is deemed constructively dismissed from the time of her illegal transfer, her subsequent
resignation became unnecessary and irrelevant. There was no longer any position to relinquish at the time
of her resignation.
Pecuniary Awards
With the foregoing pronouncements, an award of indemnity in favor of respondent should be forthcoming.
In case of constructive dismissal, the employee is entitled to full backwages, inclusive of allowances, and
other benefits or their monetary equivalent, as well as separation pay in lieu of reinstatement. The readily
determinable amounts, as computed by the Labor Arbiter and correspondingly reviewed and corrected by
the appellate court, should be accorded finality and deemed binding on this Court.
Settled is the rule that 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
up to the time of actual reinstatement. If reinstatement is not possible, however, the award of separation
pay is proper.
Backwages and reinstatement are separate and distinct reliefs given to an illegally dismissed employee in SO ORDERED.
order to alleviate the economic damage brought about by the employees dismissal. "Reinstatement is a
restoration to a state from which one has been removed or separated" while "the payment of backwages is
a form of relief that restores the income that was lost by reason of the unlawful dismissal." Therefore, the
award of one does not bar the other.

In the case of Aliling v. Feliciano, citing Golden Ace Builders v. Talde, the Court explained:

Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two
reliefs provided are separate and distinct. In instances where reinstatement is no longer feasible because of
strained relations between the employee and the employer, separation pay is granted. In effect, an illegally
dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no
longer viable, and backwages.

The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of
seniority rights, and payment of backwages computed from the time compensation was withheld up to the
date of actual reinstatement. Where reinstatement is no longer viable as an option, separation pay
equivalent to one (1) month salary for every year of service should be awarded as an alternative. The
payment of separation pay is in addition to payment of backwages. 51

WHEREFORE, the Petition is DENIED. The assailed January 10, 2012 Decision and May 28, 2012
Resolution of the Court of Appeals in CA-G.R. SP No. 109860 are AFFIRMED, with MODIFICATIONS,
in that petitioner ICT Marketing Services, Inc., now known as Sykes Marketing Services, Inc., is ordered
to PAY respondent Mariphil L. Sales the following:

1) Backwages and all other benefits from July 30, 2007 until finality of this Decision;

2) Separation pay equivalent to one (1) month salary for every year of service;

3) Moral and exemplary damages in the amount of P50,000.00; G.R. No. 185100 July 9, 2014

4) Attorney's fees equivalent to ten percent (10%) of the total monetary award; and
5) Interest of twelve per cent (12%) per annum of the total monetary awards, computed from July
30, 2007 up to June 30, 2013, and thereafter, six percent (6%) per annum from July 1, 2013 until
their full satisfaction.
The appropriate Computation Division of the National Labor Relations Commission is hereby ordered to
COMPUTE and UPDATE the award as herein determined WITII DISPATCH.
GIRLY G. ICO, Petitioner, vs. SYSTEMS TECHNOLOGY INSTITUTE, INC., MONICO V.
JACOB and PETER K. FERNANDEZ, Respondents.
DECISION
DEL CASTILLO, J.:
When another employee is soon after appointed to a position which the employer claims has been
abolished, while the employee who had to vacate the same is transferred against her will to a position
which does not e:x.ist in the corporate structure, there is evidently a case of illegal constructive dismissal.
Before us is a Petition for Review on Certiorari1 questioning the October 27, 2008 Decision2 of the Court
of Appeals (CA) which dismissed the petition in CA-G.R. SP No. 104437, entitled "Girly G. Jco,
Petitioner, versus National Labor Relations Commission (First Division), Systems Technology Institute,
Inc., Monico V. Jacob and Peter K Femandez, Respondents."
Factual Antecedents
Respondent Systems Technology Institute, Inc. (STI) is an educational institution duly incorporated,
organized, and existing under Philippine laws. Respondents Monico V. Jacob (Jacob) and Peter K.
Fernandez (Fernandez) are STI officers, the former being the President and Chief Executive Officer (CEO)
and the latter Senior Vice-President.
STI offers pre-school, elementary, secondary and tertiary education, as well as post-graduate courses either
through franchisees or STI wholly-owned schools. 3
Petitioner Girly G. Ico,a masteral degree holder with doctorate units earned, 4 was hired as Faculty Member
by STI College Makati (Inc.), which operates STI College-Makati (STI-Makati). STI College Makati
(Inc.) is a wholly-owned subsidiary of STI.5
At STI, petitioner servedunder contract from June1997 to March 1998. In April 1998, she was recalled to
STIs Makati Central Office orHeadquarters (STIHQ) and promoted to the position of Dean of STI
College-Paraaque (STIParaaque). In November1999, she was again recalled to STI-HQ and STI
appointed her as Full-Time Assistant Professor I reporting directly to STIs Academic Services Division
(ASD).
In June 2000, petitioner was promoted to the position of Dean under ASD, and assigned to STI College-
Guadalupe (STI-Guadalupe), where she served as Dean from June 5, 2000 up to October 28, 2002. 6
Meanwhile, petitioners position as Deanwas reclassified from "Job Grade 4" to "Job Grade Manager
B"with a monthly salary of P37,483.58 effective April 1, 2002, 7 up from the P27,000.00salary petitioner
was then receiving.
After petitioners stint as Dean of STI-Guadalupe, she was promoted to the position of Chief Operating
Officer (COO) of STI-Makati, under the same position classification and salary level of "Job Grade
Manager B". She concurrently served as STI-Makati School Administrator.8
Sometime in July 2003,or during petitioners stint as COO and School Administrator of STI-Makati, a
Plan of Merger9 was executed between STI and STI College Makati (Inc.), whereby the latter would be
absorbed by STI. The merger was approved by the Securities and Exchange Commission on November 12,
2003. STI College Makati (Inc.) thus ceased to exist, and STI-Makati was placed under STIs Education
Management Division (EMD).10
In a March 12, 2004 Memorandum, 11 STI "[i]n line with the recently approved organizational structure
effective August 1, 2003"12 updated petitioners appointment as COO, "Job Grade Manager B" witha
gross monthly salary of P37,483.58. She was re-appointed as COO of STI-Makati, under the supervision
of the AcademicServices Group of the EMD and reporting directly to the Head thereof, herein respondent
Fernandez. However,petitioner was not given the salary commensurate to her position as COO, which by
this time appeared to be pegged at P120,000.00.13 It likewise appears that she was not given benefits and
privileges which holdersof equivalent positions were entitled to, such as a car plan. 14
Two months after confirming petitioners appointment as STI-Makati COO, another Memorandum 15 dated
May 18, 2004 was issued by STI Human Resources Division Head, Yolanda Briones (Briones), signed and
approved by STI Senior Vice-President for Corporate Services Division Jeanette B. Fabul (Fabul), and
noted by respondent Jacob
a) Cancelling, effective May 20, 2004, petitioners COO assignment at STI-Makati, citing
managements decision to undertake an "organizational restructuring" in line with the merger of
STI and STI-Makati;
b) Ordering petitioner to report to STI-HQ on May 20, 2004 and to turn over her work to one
Victoria Luz (Luz), who shall function as STI-Makatis School Administrator; and
c) Appointing petitioner, effective May 20, 2004, as STIs Compliance Manager with the same
"Job Grade Manager B" rank and salarylevel, reporting directly to SchoolCompliance Group
Head Armand Paraiso (Paraiso).
According to STI, the "organizational re-structuring" was undertaken "in order to streamline operations. In
the process, the positions of Chief Executive Officer and Chief Operating Officer of STI Makati were
abolished."16
On May 18, 2004, Fernandez summoned petitioner to his office, where the following conversation which
appears to have been recorded by petitioner with the knowledge and consent of Fernandez took place:
F: (Fernandez) Im sure you know already why you are here.
P: (Petitioner) No, sir. Nanalo ba tayo sa Winners Circle
F: Girly, lets stop this. You will be pulled out [from] STI CollegeMakati[.] x x x [T]urn over toVicky Luz
everything tomorrow.
P: Sir? What have I done? May I know what is the reason of (sic) an immediate transfer and a short period
of turn-over?
F: I dont trust you anymore. Ive beenhearing too many things from [sic] you and as your CEO, you dont
submit to me FSP monthly. Me high school student ka na inenroll para lang makasali sa basketball.
P: Sir, thats not true.
F: Would you like me to call Liezel? ([H]e stood up and called Ms. Liezel Diego)
P: Yes, sir.
F: Liezel, how many times did STI College-Makati submitted [sic] to you the FSP?
L: (Liezel Diego) Sir, sa akin po 2 beses peromeron pa po ke Ervie.
Tanong ko lang po ke Ervie kung ilan sa kanya.
P: Sir, can I have one minute to call STI College-Makati to fax the data of the receiving copies of the FSP?
F: Irrelevant! I dont have time.
P: Sir, you will please put that in writing[. It] is a very strong accusation you are making and I think I
should defend myself.
F: No way! You cannot get anything from me. Why? Sothat when I will provide such then you will go
toLabor? (in a shouting manner)
P: Sir, what is this all about? Please tell me the real score. I am honest to you and I believe I am
performing well. Is this what I deserve?
F: Dont talk to me about honesty (again said in a shouting manner and fuming mad). Girly, dont push me
to the limit! Dont let me do things that you will regret later. Dont be like Chito (Salazar, the former STI
President) who have [sic] left STI without proving to everybody whether [sic] he have [sic] done wrong or
not. I dont want that to happen to you!
P: Sir, can I have one minute to go outside. I can no longer bear this?
(begging with both hands [together] as a sign of surrender)
F: No! (still shouting) I dont have time. Heres the letter from HR[.] I want you to sign this.
P: Sir, Im sorry but I will not sign. I think it should be HR who will give this to me.
F: You want me to call HR? You wantme to call Atty. Pascua? You want me to call people outside [to]
witness that you refused to sign? (still shouting) I dont care if you have a tape recorder there with you.
After all, that will not be a [sic] valid evidence in court.
xxxx
F: Ok. Dont make me loose [sic] my temper again (with a soft voice already). You just sign this (giving to
me the [May 18, 2004 Memorandum]). Dont go to Bohol anymore. If ever you will win in the Winners
Circle, you can get the tripjust like what happened to Redger (Agudo, the former COO of STI College-
Makati).
P: Sir, what will be the consequence if I will not sign this?
F: I will file a case against you. What do you call this? (pausing for a little while then uttered the word)
Disobedience!
P: Ok, sir, but please I want to know what exactly my violation is (while signing the paper). Now that we
will be parting ways, I am still hoping that you can tell [sic] the violationsthat I made, if there is any.
F: You can have it after 2-3 weeks time. Besides, we are not parting ways (with a sarcastic smile). I am
still your boss in Audit. Audit and Compliance is still under my supervision.
P: Thank you, sir. (I went out in [sic] his room still trembling) 17
Incidentally, by this time, petitioner had garnered the following awards and distinctions:
1) Silver Awardee, 2004 STI Winners Circle Awards, 17thSTI Leaders Convention;
2) STI Academic Winners Circle Award as Dean of STI-Guadalupe given at the 2002 STI
Leaders Convention;
3) Academic Head of the Year for 2002, as Dean of STI-Guadalupe; and
4) 2001 STI Winners Circle, as Academic Head, STI-Guadalupe.18
On May 20, 2004, petitioner reported toher new office at STIs School Compliance Group, only to find out
that all members ofthe department had gone to Baguio City for a planning session. Petitioner, who was not
apprised of the official trip, was thus left behind. That same day, an official communication 19 was
disseminated throughout STI, announcing Jacobs appointment as the new STI President and CEO,
Fernandez as the new COO of STI-Makati,and Luz as the new STI-Makati School Administrator;
however, petitioners appointment as Compliance Manager was left out.
In a May 24, 2004 letter 20 to Jacob, petitioner took exception to the incidents of May 18 and 20, 2004,
claiming that she became the victim of a series of discriminatory acts and objecting to the manner by
which she was transferred, asserting that she was illegally demoted and that her name was tarnished as a
result of the demotion and transfer. Jacob replied through a June 7, 2004 letter 21 advising petitioner that
her letter was forwarded to Fernandez for comment.
Prior to that, on May 25, 2004, during the 17th STI Leaders Convention held in Panglao, Bohol,
petitioners achievement as a Silver Awardee for the 2004 STI Winners Circle Awards was announced, but
she did notattend, claiming that she was too embarrassed to attend owing to the events leading to her
transfer, which to her was a demotion. 22 STI withheld petitioners prize a South Korea trip termed
"Travel Incentive Award" for the Winners Circle for STI fiscal year 2003-2004 "pending the final result
of the investigations being conducted" by STI relative to irregularities and violations of company policies
allegedly committed by petitioner.23
It appears that from May 28, 2004 up to June 10, 2004, STIs Corporate Auditor/Audit Advisory Group
conducted anaudit of STI-Makati covering the whole period of petitioners stint as COO/School
Administrator therein. In a report (Audit Report) later submitted to Fernandez, the auditors claim to have
discovered irregularities, specifically
1. Appointment papers of STI-Makati employees did not have the written approval of Fernandez
inhis capacity as CEO;
2. There were instances where employees became regular after only an abbreviated probationary
period, and in some cases,the employees did not undergo probation;
3. Petitioner failed to fully liquidate cash advances amounting to P60,000.00, relative tothe
purchase of books;
4. There was a lack of internal controlsin regard to cost of planning sessions, liquidation reports,
journal entries, use of petty cash fund, and inventory; and
5. Petitioner and other employees falsified school records in order to enable high school players
to play for STI-Makatis volleyball team.24
25
In a June 17, 2004 Memorandum to Jacob, Fernandez cited the above Audit Report and recommended
that an investigation committee be formed to investigate petitioner for grave abuse of authority,
falsification, gross dishonesty, maligning and causing intrigues, commission of acts tending tocast
negativity upon his person (Fernandez), and other charges. Fernandez recommended that petitioner be
placed under preventive suspension pending investigation. Meanwhile, with respect to petitioners May
24, 2004 letter, it appears that Fernandez did not submit a comment or answer thereto.
Jacob approved Fernandezs recommendations, and on June 21, 2004, a Memorandum 26 was issued
placing petitioner under preventive suspension and banning her entry to any of STIs premiseseffective
June 22, 2004 up to July 16, 2004, citing "(an) Audit investigation being conducted relative to the
offenses" for which petitioner was charged, namely:
I. FACULTY MANUAL
a) Making malicious, obscene or libelous statements about the person of any member of the
academic community.
b) Threatening, intimidating, coercingor harassing another person within the school premises.
c) Commission of acts inimicalto students [sic] interest.
II. STI-HO POLICY MANUAL
A. Class 3
1. Making false or malicious statements against another employee.
2. Causing intrigues tending to cast insult, dishonor and discredit to another employee.
3. Reading or gaining access to files,records, memos, correspondence and other
classified documents of the company.
[B] Class 4
1. Concealing errors of omission or commission, thus negatively prejudice [sic] the
interest of the company.
[C] Class 5
1. Falsifying timekeeping reports and records, drawing salary/allowance, in any form,
or money by virtue of falsified timekeeping report of records, vouchers, receipts and
the like.
2. Giving false and untruthful statements of [sic] concealing material facts in an
investigation conducted byan authorized representative of the company.
3. Misappropriating or withholding company funds.
4. All acts of dishonesty, which cause [sic] tend to cause prejudice to the company.27
On June 24, 2004, petitioner received another Memorandum 28 from Briones dated June 23, 2004, this time
stating that charges havealready been filed against her allegedly "based on the Audit Findings", yet
makingreference to the June 21, 2004 Memorandum and without informing petitioner of the particulars of
the charges or the results of the audit. Nor was a copy of the said audit findings attached to the
memorandum.
In a June 28, 2004 demand letter29 addressed to Jacob,petitioner protested anew her alleged maltreatment,
claiming illegal constructive dismissal and demanding immediate reinstatement to her COO position and
the payment of actual and other damages, under pain of suit.
In a June 30, 2004 letter, petitioner was notified of a hearing scheduled for July 2, 2004 and required to
submit her written explanation to the charges. It appears, however, that petitioner did not receive the said
letter.30 On even date, petitioner filed with the National Labor Relations Commission (NLRC) a labor case
against herein respondents, Fabul and Briones. Docketed as NLRC NCR Case No. 00-06-07767-04, the
Complaint31 alleged illegal constructive dismissal and illegal suspension, withclaims for regularization as
well as for underpayment of salaries, holiday pay, service incentive leave, 13th -month pay, moral and
exemplary damages, and attorneys fees.
In a July 12, 2004 Memorandum32 to petitioner, STI lifted petitioners suspension and ordered her to return
towork on July 13, 2004, with full salary from the time of her suspension.
In a July 13, 2004 electronic mail message 33 sent by STIs Reuel Virtucio (Virtucio) to petitioner, the latter
was invited to a July 19, 2004 "meeting with the committee formed to act on the complaint filed against
(petitioner) by (Fernandez)."34 The committee was composed ofSTIs officers, namely Amiel Sangalang
(Sangalang); Flerdeliza Catalina Domingo (Domingo); and Virtucio.
On July 19, 2004, during the supposed scheduled meeting with the committee, petitioner was furnished
with several documents; however, no copy of the formal complaint or written chargewas given to her.The
meeting was adjourned without the committee setting another meeting for the submission of petitioners
answer; nor was a hearing set for the presentation of the parties evidence. 35
Thereafter, petitioner wenton sanctioned leave of absence. After the lapse of her approved leave, she
reported for workseveral times. After August 9, 2004, however, she no longer reported for work.
On August 17, 2004, STI issued another Memorandum 36 to petitioner, informing her that her South Korea
travelincentive award was being withheld, as the investigation covering her alleged involvement in
irregularities and violations of company policies was still pending.
In a January 13, 2005 letter cumnotice of termination signed by Jacob, petitioner was dismissed from STI
effective January 11, 2005.37
The Labor Arbiter Decision
In her Position Paper,38 petitioner claimed that during her stint as COO of STI-Makati and up to her
transfer and appointment as Compliance Manager, she was discriminated against and unfairly treated by
respondents; that she was denied a) the salary corresponding to the COO position in the amount
of P100,000.00 P120,000.00, b) her prizes as Winners Circle awardee, aswell as c) her benefits such as
a car plan and honorarium of P8,500.00 monthly.She likewise contended that her removal as STI-Makati
COO and transfer to the School Compliance Group as Compliance Manager was illegal and constituted a
demotion amounting to constructive dismissal, as she was not given prior notice of the transfer; forced to
give her written conformity thereto; placed in an embarrassing situation thereafter; and never given any
task or work while she held such position. She added that the alleged reorganization which caused her
removal as STI-Makati COO was a sham, calculated to ease her out inthe guise of a restructuring; that she
was illegally placed under suspension for alleged offenses which respondents could not substantiate and
which she was not informedabout; that she was not accorded due process during the conduct of the
purported investigation; and that as a consequence of the discrimination and unfair treatment she received
from respondents, she suffered untold injury. Petitioner thus pleaded:
WHEREFORE, complainant respectfully prays that, after due proceedings, judgment be rendered ordering
respondents, jointly and severally, as follows:
1. To reinstate complainant to her former position as COO without loss to [sic] her seniority
rights with backwages and other benefits, such the [sic] monthly P8,500.00 honorarium, among
others, to be paid until fully reinstated with the necessary adjustments to equal the salary and
benefits now being received by her replacement, respondent Peter K. Fernandez.
2. To pay complainant the unpaid salaryand benefits differential due her as COO computed from
November 5, 2002 to equal the salary and benefits of respondent Peter K. Fernandez, plus the
legal rate of interest thereon from the same date until fully paid.
3. To pay the money equivalent, plus the legal rate [sic] interest thereon until fully paid, of
complainants awards as a Silver Awardee in its STI 17th Winners Circle, consisting of the tripto
Panglao, Bohol from May 25 to 27, 2004 and Korea from September 21 to 24, 2004.
4. To pay complainant the unpaid Holiday Pay duly adjusted as above [sic] and with legal
interest thereon until fully paid.
5. To pay complainant the proportionate 13th [-]month pay for the current year with legal
interestthereon until fully paid.
6. To pay complainant moral damages in [sic] sum of P3 Million and exemplary damages in the
amount of P2 Million, including attorneys fees, and expenses of litigation.
Complainant prays for such other reliefs just and equitable in the premises. 39
In their Position Paper,40 the respondents in NLRC NCR Case No. 00-06-07767-04 claimed that petitioner
was removed as STI-Makati COO pursuant to a reorganization aimed atstreamlining STIs operations after
the merger; as a result, the positions of STI-Makati CEO and COO were abolished. They argued that
petitioner was merely "laterally transferred" to the School Compliance Group as Compliance Manager,
and was not demoted in rank; nor did she suffer a diminution in her salary and benefits, as the positions of
STI-Makati COO and Compliance Manager are equivalent in rank under the STI structure, that is, they
both fall under "Job Grade Manager B". They added that petitioner committed anomalies and
irregularities, as stated above, which became the subject of an Audit Report. 41 They asserted that the
abolition of a position in STI is a recognized prerogative of management which may not be interfered with
absent malice or bad faith, and more so when done pursuant to a valid corporate restructuring; the
abolition of the CEO, COO, Treasurer, Corporate Secretary, and Director positions in STI-Makati was
pursued as a matterof course because with the merger, STI-Makati ceased to exist as it was absorbed by
STI, and consequently these positions became unnecessary. Petitioners transfer was justified as an
exercise of STIs prerogative and right to transfer its employees when called for, and was done reasonably,
without malice or bad faith, and without unnecessarily inconveniencing petitioner.
Respondents added that petitioners suspension was vital for the protection of sensitive data and to ensure
the smooth conduct of the investigation, and in order that she may not gain access to sensitive information
which, if divulged to government agenciessuch as the Commission on Higher Education (CHED), would
result in the denial/withholding of permits to STI. 42 On petitioners claim for regularization, respondents
claimed that this was unnecessary since petitioner was already a regular employee of STI. Regarding
petitioners money claims, respondents argued that petitioner could not be entitled to them, as she received
all her salaries, benefits and entitlementsduring her stint with STI. Finally, respondents contended that
petitioner was not entitled to damages and attorneys fees, since she was not illegally dismissed and, in
carrying out her transfer, they did not act with malice, bad faith, orin a wanton and oppressive manner.
In her Reply43 to respondents Position Paper, petitioner noted that while STI and STI College Makati
(Inc.) merged, there was in fact no restructuring that took place which required her transfer and demotion;
onthe contrary, the merger created 29 additional vacant positions in STI. Petitioner added that no prior
announcement of the restructuring of STI-Makati was made, which thus renders such reorganization of
questionable integrity; instead, the merger was utilized as a tool to ease her out, through the bogus
reorganization. She contended that Fernandez had prejudged her case even before an investigation into the
alleged anomalies could be conducted. Petitioner likewise notedthat even her appointment as Compliance
Manager was a sham, because no such vacant position existed within the School Compliance Group, as
the only two Compliance Manager positions were then occupied by Eddie Musico (Musico) and Reynaldo
Gozum (Gozum);44 the only other vacant positions in that department were those for lower level
Compliance Officers. In effect, petitioner was in fact made a mere ComplianceOfficer, which meant that
she was effectively demoted. Petitioner claimed as well that her demotion was highlighted by the fact that
while she had a masteral degreeand doctorate units, all the others within the School Compliance Group
including her superior, Paraiso were mere bachelors degree holders.
Finally, petitioner maintained that the multiple charges lodged against her were without basis, and
respondents failed to prove them byadequate evidence.
45
On the other hand, respondents maintained in their Reply (to Complainants Position Paper) that as to
salary and benefits, petitioner was not discriminated against, and was merely given a compensation
package commensurate to her rank as "Job Grade Manager B", taking into consideration her length of
service at STI.Her salary was thus at par with those of other STI employees of equivalent rank and similar
durations ofemployment. They added that honoraria are not given to its employees,as well as to those who
are deployed to company-owned schools such as STI-Makati. Respondents asserted further that the
reorganization was not a ruse to ease petitioner out; it was necessary as a means toward streamlining STIs
operations. Fernandez characterized petitioners account of their conversation as inaccurate. 46 Respondents
likewise debunked petitioners claims that she was discriminated against while she held the position of
Compliance Manager, saying that this claim was specious and exaggerated. They added that even though
Fernandez was later appointed COO of STI-Makati after petitioner was appointed Compliance Manager,
his work assuch STI-Makati COO was limited to performance of oversight functions, which functions he
already performs as SeniorVice-President of the Education Management Division of STI. With regard to
the July 19, 2004 meeting, respondents argued that nothing was achieved during said meeting owing to
petitioners and her counsels "quarrelsome attitude" and insistence thatshe be furnished the written
charges against her as well as the supporting evidenceor documents, which would have been unnecessary
if she only cooperated during said meeting and answered the charges against her. They underscored the
fact that during said meeting, petitioner was furnished with a copy of the charges against her, including all
other documents, particularlythe Audit Findings.
On March 31, 2006, LaborArbiter Renaldo O. Hernandez issued a Decision 47 in NLRC Case No. 00-06-
07767-04, decreeing as follows:
WHEREFORE, premises considered, judgment is hereby finding [sic] complainant to have been illegally
constructively and in bad faith dismissed by respondents in her legally acquired status as regular employee
thus, ORDERING respondents SYSTEMS TECHNOLOGY INSTITUTE, INC. and/or MONICO V.
JACOB, PETER K. FERNANDEZ in solido:
1) To reinstate her to her former position, without loss of seniority rights and benefits,
allowances, which reinstatement aspect, actual or in the payroll, is immediately executory, even
pending appeal.
2) To pay complainants full back wages, which should legally start from date of her illegal
constructive dismissal/illegal demotion on 05/18/2004, but reckoned from date of the illegal
suspension when she was physically prevented/ barred from working on 06/22/2004, based on
her gross monthly salary P37,483.58, 15 days Vacation Leave/yearand 15 days Sick Leave/year,
13th [-] month pay, and other benefits accruingto her in her regular position as COO until
actually reinstated, which as of date amounts to:
Basic P37,483.58 x 21 months = P787,155.18
13th[-]month pay 1/12 thereof = 65,596.26
VL 15 days/yr P1,249.45 x 15 x 1.75 years = 32,798.13
SL 15 days/yr P1,249.45 x 15 x 1.75 years = 32,798.13
Total F/B as of date = P918,347.70
3) To pay her moral and exemplary damages in the combined amount of P1,000,000.00.
4) To pay her the monetary equivalentof the awards due her as her being proclaimed as a Silver
Awardee of US$630.00 for the Korean travel from 09/21-24/2004, and the round trip ticket
US$350.00, hotel accommodation and expenses to be paid, viz. 1. PhilippineTravel
Tax P1,620.00, NAIA Terminal Fee P550.00, Visa Processing Fee P500.00, War Risk Tax
US$12.00, Seoul Tax US$15.00, Ticket Insurance US$3.00, Travel Insurance P420.00, Tour
Guide and Drivers Tip US$4.00/day.
5) To pay her 10% of the entire computable award herein as attorneys fees.
SO ORDERED.48
The Labor Arbiter found that petitioner was illegally dismissed, and respondents were guilty of malice and
bad faith in the handling of her case. He held that petitioners transfer which STI claimed was the result
of STIs restructuring was irregular, because at the time of such transfer, the reorganization and
restructuring of STI-Makati had already been effected; STIs March 12, 2004 Memorandum topetitioner
which confirmed and renewed her appointment as STI-Makati COO was precisely issued as a
consequence of the merger and reorganization,which took place as early as November 2003. STIs claim
that petitioners lateral transferwas necessary is thus contrived.
In addition, the Labor Arbiter declared that even as petitioner was appointed to the position of Compliance
Manager, such position did not actually exist in STIs new corporate structure; under the Compliance
Group, which was headed by Paraiso, there were only two Compliance Manager positions which were at
the time occupied by Musico and Gozum, and the only other vacant positions in the Compliance Group
were for Compliance Officers. In effect, petitioner was appointed to the position of a mere Compliance
Officer, which was lower in rank.
The Labor Arbiter held further that during the process of her illegal transfer, petitioner was harassed,
humiliated, and oppressed, thus:
1. On May 18, 2004, she was subjected to threats and intimidation by Fernandez, the latter
bullying and forcing her toreceive the May 18, 2004 Memorandum while petitioner was inside
his office;
2. On the day she reported to her new position as Compliance Manager, the whole
ComplianceGroup team left for a three-day out-of-town planning session, without respondents
informing her or including her in the official event as she should be;
3. On May 20, 2004, an official written announcement was made regarding Jacobs appointment
as new STI President and CEO, Fernandez as new STI-Makati COO, and Luz as new STI-Makati
School Administrator. Adding insult to injury, petitioners appointment as Compliance Manager
was intentionally left out;
4. Petitioner, given her illustrious career in STI having risen from the ranks as a faculty
member, to full-time professor, to Dean, and finally to the position of STI-Makati COO, and
having achieved multiple awards and distinctions was thereafter treated "as a non-entity" by
respondents.
The Labor Arbiter added that the purported audit and investigation of petitioners alleged irregularities was
a sham, as the same was conducted without official sanction from STI and without petitioners knowledge;
it was founded on hearsay evidence and based on charges known only to Fernandez; it was conducted
merely to conceal respondents shabby treatment of petitioner, and without apprising petitioner of the
writtenformal charges against her.
Finally, respondents wereadjudged guilty of malice, bad faith, acts oppressive to labor and contrary to
morals, good customs and public policy, which caused upon petitioner suffering and humiliation which
entitles her to an award of moral and exemplary damages, as well as attorneys fees.
Ruling of the National LaborRelations Commission
Respondents interposed an appeal with the NLRC, docketed as NLRC NCR Case No. 050756-06.In an
October 31, 2007 Decision,49 the NLRC decreed, thus:
WHEREFORE, the [D]ecision appealed from is VACATED and SET ASIDE and a new one entered
dismissingthe complaint for lack of merit.
SO ORDERED.50
In reversing the Labor Arbiters Decision and finding that there was no illegal constructive dismissal,the
NLRC held that any action taken by STI after the merger can be reasonably concluded as one of the valid
consequences thereof; the regulation of manpower is a management prerogative enjoyed by STI, and it
was free to regulate according to its own discretion and judgment all aspects of petitioners employment.
Inthis light, and since no concrete evidence was presented by petitioner to show that respondents acted
with maliceor bad faith, the NLRC held that it may not be said that the abolition of the position of STI-
Makati COO was done to unduly ease her out of STI.
The NLRC added that while it may be conceded that a heated argument between petitioner and Fernandez
took place during their May 18, 2004 meeting, the charged emotional outbreaks were nonetheless
occasioned by extraneous matters injected during such meeting, and consequently, Fernandez may not be
faulted for insisting that petitioner receive the May 18, 2004 Memorandum ordering petitioners transfer.
Moreover, the NLRC declared that petitioners preventive suspension was not done irregularly, as it was
based on charges leveled against her and made pursuant to an administrativeinvestigation then being
conducted; likewise, it held that the pending investigation justified the withholding ofpetitioners Korea
travel incentive award.
Finally, the NLRC noted that petitioners failure to report for work after August 9, 2004 should betaken
against her, and on this note it would be unfair to hold respondents liable for illegal constructive dismissal.
Petitioner moved for reconsideration,but in a March 28, 2008 Resolution, 51 the NLRC denied the same.
Ruling of the Court of Appeals
Petitioner went up to the CA via certiorari. On October 27, 2008, the CA issued the assailedDecision,
decreeing as follows:
WHEREFORE, premises considered, the Petition is DENIED for lack of merit. Costs against petitioner.
SO ORDERED.52
According to the CA, the NLRC was correct in finding that as a result of the November 2003 merger of
STI and STI-Makati, petitioners transfer to her new position as Compliance Manager became necessary,
as the position of STIMakati COO which petitioner then held was abolished as a result of a
reorganization that was implemented pursuant to the merger. It noted further that the March 12, 2004
confirmation53 of petitioners appointment as STI-Makati COO was done pursuant to an August 2003
reorganization or one that was implemented priorto the November 2003merger; thus, petitioners
transfer and appointment as Compliance Manager days later,per the May 18, 2004 Memorandum, may not
be said to be irregular, as it was made in accordance with a newreorganization or restructuring program
implemented in accordance with the November 2003 merger.
The CA held further that petitionerstransfer was made pursuant to the valid exercise of STIs prerogative
toabolish certain positions and transfer/ reassign its employees, for valid reasons and in accordance with
the requirements of its business. Since petitioners transferwas not attended by malice or bad faith, as it
was shown to be necessary following the merger and abolition of the position that she held, and was done
without diminution in rank, salary and benefits, there could be no cause of action against respondents for
illegal dismissal.
The appellate court did not give credence to petitioners allegations of discrimination and
harassmenteither, as it found them to be self-serving and unsubstantiated. Regarding her suspension, the
CA affirmed the NLRCs view that the same was not irregularly imposed; the withholding of her travel
award was justified as well.
Issues
Petitioner now submits the following issues for the Courts resolution:
I
Petitioner insists that her suspension was illegal, as her new employment as Compliance Manager did not
put her in a position where she would have access to sensitive STI records;thus, she was never a serious
threat to such extent that respondents believed she was. Besides, the investigation into allegations of
irregularities committed by her, which was the cause for her suspension as well, was a sham for violating
her rightsto a hearing and due process. Respondents Arguments
In their Comment,56 respondents maintain that the merger of STI and STIMakati required the abolition of
the Chairman, President/CEO, COO, Treasurer and Corporate Secretary positions in STI-Makati; likewise,
it became necessary to effect a reorganization of STIs corporate structure inorder to streamline its
operations. Petitioners transfer was in line with such merger and reorganization; no bad faith may thus be
inferred from their actions, which were carried out legally and pursuant to STIs rights, prerogatives, and
needs at the time.
Respondents argue further that petitioners transfer did not amount to a demotion in rank, as the positions
of COO and Compliance Manager are of equal importance; in fact, the functions of Compliance Manager
are much broader in scope as they involve the conduct of operations and academic audits of allof STIs
schools, and not just STI-Makati. As to salaryand benefits, petitioner as Compliance Manager is given the
same salary and benefits which she received at the time she was STI-Makati COO.

THE COURT OF APPEALS ERRED IN DEVIATING FROM THE 18 MAY 2004 EMPLOYMENT
Respondents add that, ascorrectly held by the NLRC and CA, petitioner was never subjected to harassment
UPDATE CLEARLY ADMITTING AN INVALID ABOLITION OF PETITIONERS POSITION WITH
and humiliation, thus:
STISAPPOINTMENT OF HER REPLACEMENT AND RENAMING HER OFFICE AS "SCHOOL
ADMINISTRATOR".
1. Petitioner was not excluded from the Compliance Groups planning session held in Baguio
City. At the timeof petitioners transfer, Briones was not aware of the scheduled Baguio trip, and
II
thus petitioner was not duly informed thereof. Thus, her inability to attend the official event may
not be blamed on respondents;
AS THERE WAS NO VALID ABOLITION OF PETITIONERS POSITION AS COO, THE COURT OF
APPEALS ERRED IN FRAMING A CASE OF VALID LATERAL TRANSFER INSTEAD OF
2. Petitioner was assigned ample work at the Compliance Group, contrary to her claims that she
CONSTRUCTIVE DISMISSAL DONE IN BAD FAITH.54
virtually did nothing in her new position;

Petitioners Arguments
3. It is not true that petitioner was not given her own room as Compliance Manager in order to
humiliate her. She could not begiven a room simply on account of office space constraints.
In a nutshell, petitioner argues in her Petition and Reply 55 that her appointment as Compliance Manager is
illegal, because the abolition of the STIMakati COO position and the creation of the position of
On petitioners suspension, respondents reiterate that petitioners threats to divulge sensitive information
Compliance Manager were contrived and fabricated. She adds that her appointment to the position of
and jeopardize STIs then pending permit applications justified the taking of drastic measures to insure
Compliance Manager was in fact a demotion: she was relegated to a position where she did not have any
that company records are kept intact and free from access; the preventive suspension of petitioner thus
staff to supervise; her work became merely mechanical in nature; she became a mere Compliance Officer
became necessary. Moreover, an audit investigation was then being conducted on alleged irregularities
reporting to the Compliance Group Head; and her work was severely limited.
committed by petitioner; preventive suspension as a preliminary step in the investigation is thus
authorized.
Petitioner adds that contrary to the CAs pronouncement, she was subjected to harassment and
discrimination, humiliated and became the victim of STIs fraudulent scheme to illegally oust her from her
Our Ruling
position as STI-Makati COO. She cites: 1) the May 18, 2004 incident, noting the treatment accorded her
by Fernandez and the manner by which she was allegedly forced to receive the Memorandum of even
date; 2)the investigation into alleged irregularities, which she characterized as sham; 3) her preventive The Petition is granted.
suspension, which she claims was illegal for being based on non-existent charges; and 4) the withholding
of her travel award.
As a rule, this Court is not a trier of facts, and thus the findings of fact of the NLRC and CA are final and
conclusive and will not be reviewed on appeal. However, there are well-recognized exceptions to the rule,
such as when its judgment is based on a misapprehension of facts or relevant facts not disputed by the
parties were overlooked which, if properly considered, would justify a different conclusion. Petitioners
case falls under these exceptions.
Both the NLRC and CA found thatpetitioner was not constructively dismissed, for the following reasons:
1. Petitioners position as STI-Makati COO was abolished as a necessary result of the merger of
STI and STI-Makati,and the restructuring of STI aimed at streamlining its operations;
2. Petitioner was merely "laterally transferred" to the Compliance Group as Compliance
Manager, with no diminution in rank, salary and benefits; and
3. The reorganization of STI was done in good faith and in the exercise of the management
prerogative. In the same manner, petitioners transfer was a) made in the exercise of the
management prerogative to transfer employees when necessary; b) done in good faith; and c)not
unreasonable, inconvenient or prejudicial to her interests.
It appears, however, that the position of STI-Makati COO was actually never abolished. As a matter of
fact, soon after petitioner was removed from the position, Fernandez was appointed to take her place as
STI-Makati COO; his appointment was even publicly announced via an official communication
disseminated company-wide. This thus belies respondents claim thatthe position of STI-Makati COO
became unnecessary and was thus abolished. Respondents may argue, as they did in their Reply 57 to
petitioners Position Paper, that Fernandezs appointment as STI-Makati COO replacing petitioner was
merely for oversight purposes. Whatever the reason could be for Fernandezs appointment as STI-Makati
COO, the fact still remains that such position continued to exist.
Next, petitioners appointment as Compliance Manager appears to be contrived as well. At the time of
petitioners appointment, the only two Compliance Manager positions within STIs compliance
department the School Compliance Group were already filled up as they were then occupiedby Musico
and Gozum.58 None of them has been dismissed or resigned. Nor could petitioner have been appointed
head ofthe department, as Paraiso was very much in charge thereof, as its ComplianceGroup Head. The
only positionswithin the department that were at the time vacant were those of Compliance Officers,
which are of lower rank. In other words,petitioner could not have been validly appointed as Compliance
Manager, a position within STI that was then very much occupied; if ever, petitioner took the position of a
mereCompliance Officer, the only vacant position within the department.
Thirdly, even though it isclaimed that from May 28, 2004 up to June 10, 2004, STIs Corporate
Auditor/Audit Advisory Group conducted an audit of STIMakati covering the whole period of petitioners
stint as COO/School Administrator, it appears that even prior to such audit, petitioners superior
Fernandez had already prejudged her case. The May 18, 2004 conversation between petitioner and
Fernandez inside the latters office is quite revealing.
The May 18 conversation between petitioner and Fernandez, taken in conjunction with the Courts
findings that the position of STI-Makati COO was never abolished and that petitioners appointment as
Compliance Manager was contrived, confirms the view that petitioner was not transferred to the School
Compliance Group as a matter of necessity, but as punishment for her perceived irregularities. In effect,
petitioner was demoted and relegated to a position of insignificance within STI, there to suffer for what
her employer alleged were transgressions committed by her. To all intents and purposes, petitioner was
punished even before she could be tried.
Fernandezs declarations during the May 18 conversation undoubtedly provide the true motive behind
petitioners removal as STI-Makati COO:
a. After "hearing too many things" about petitioner, Fernandez simply lost confidence in her
meaning that Fernandez had made up his mind about petitioner after hearing rumors about her; b.
Fernandez accused petitioner of specific violations, without the benefit of accurate information
and without giving her the opportunity to refute the accusations;
c. Fernandez has no time to listen to petitioners explanations, despite her pleas to be heard;
d. Fernandez refused to provide petitioner with the evidence or other basis for his accusations, in
spite of petitioners request for him to put the same in writing;
e. Fernandez has prejudged petitioner, and intimated to her that she was dishonest, even before
she could be heard; and
f. Fernandez threatened petitioner, that if she pushed him further, she would suffer the fate of a
former employee who was separated fromSTI without the benefit of clearing his name. In other
words, she could find herself without a job at STI even before her innocence or guilt could be
established.
From the May 18 conversation alone, it can be seen that petitioners fate in STI was a foregone
conclusion. She was threatened to accept her fate or else she would find herself without work, either
through dismissal or forced resignation. Evidently, she became the subject of an illegal constructive
dismissal in the guise of a transfer.
The supposed audit conducted from May 28, 2004 up to June 10, 2004 by STIs Corporate Auditor/Audit
Advisory Group was a mere afterthought, as it was apparent that as early as May 18, 2004, petitioner has
been found guilty of whatever transgressions she was being charged with, founded or unfounded. The
same is true with respect to her preventive suspension; it was imposed with malice and bad faith, and
calculated to harass her further, if not trick her into believing that respondents were properly addressing
her case. Needless to say, all proceedings and actions taken in regard to petitioners employment and case,
beginning on May 18, 2004, were all but a farce, done or carried out in bad faith, with the objective of
harassing and humiliating her, all in the fervent hope that she would fold up and quit.
Constructive dismissal exists where there is cessation of work because continued employment is rendered
impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a diminution in pay and
other benefits. Aptly called a dismissal in disguise or anact amounting to dismissal but made to appear as
if it were not, constructive dismissal may, likewise, exist if an act of clear discrimination, insensibility, or
disdain by an employer becomes so unbearable on the part of the employee that it could foreclose any
choice by him except to forego his continued employment. In cases of a transfer of an employee, the rule
is settled that the employer is charged with the burden of proving that its conduct and action are for valid
and legitimate grounds such as genuine business necessity and that the transfer is not unreasonable,
inconvenient or prejudicial to the employee. If the employer cannot overcome this burden of proof, the
employees transfer shall be tantamount to unlawful constructive dismissal. 59
There is no doubt that petitioner was subjected to indignities and humiliated by the respondents. As
correctly observed by the Labor Arbiter, she was bullied, threatened, shouted at, and treated insolently by
Fernandez on May 18, 2004 inside the latters own office. She was shamedwhen, on her very first day at
the School Compliance Group, all of the employees of the department have gone on an official out-of-
town event without her and, as a result,she was left alone at the office for several days. Respondents did
not even have the courtesy to offer her the opportunity to catch up with the group sothat she could makeit
to the event, even if belatedly. Then again, on May 20, 2004, STI made an official companywide
announcement of Jacobs appointment as new STI President and CEO, Fernandez as new STI-Makati
COO, and Luz asnew STI-Makati School Administrator, but petitioners appointment as new Compliance
Manager was inconsiderately excluded. Respondents made her go through the rigors of a contrived
investigation, causing her to incur unnecessary legal expenses as a result of her hiring the services of
counsel. Her well-deserved awards and distinctions were unduly withheld in the guise of continuing
investigation which obviously was taking too long to conclude; investigation began formally on May 28,
2004 (start of audit), yet by August 17 (date of memorandum informing petitioner of the withholding of
Korea travel award), the investigation was still allegedly ongoing. She was deprived of the privilege to
attend company events where she would have received her well-deserved awards with pride and honor,
and her colleagues would have been inspired by her in return. Certainly, respondents made sure that
petitioner suffered a humiliating fate and consigned to oblivion.
Indeed, petitioner could not be faulted for taking an indefinite leave of absence, and for altogether failing
to report for work after August 9, 2004. Human nature dictates that petitioner should refuse to subject
herself to further embarrassment and indignitiesfrom the respondents and her colleagues. All told,
petitioner was deemed constructively dismissed as of May 18, 2004. Finally, since the position of STI-
Makati COO was never abolished, it follows that petitioner should bereinstated to the very same position,
and there to receive exactly what Fernandez gets by way of salaries, benefits, privileges and emoluments,
without diminution in amount and extent. Petitioner, multi-awarded, deserving and loyal, is entitled to
what Fernandez receives, and is deemed merely to take over the office from him; moreover, the position of
Chief Operations Officer is not merely an ordinary managerial position, asit is a senior managerial office.
In turn, Fernandez or anyone who currently occupies the position of STIMakati COO must vacatethe
office and hand over the same to petitioner.
It is correct for petitioner to have included among the reliefs prayed for in her Complaint that she be paid
the salary, benefits and privileges being enjoyed by Fernandez currently. The Court, in granting said relief,
deems it only fair that she should be entitled to what Fernandez is receiving. Not only that the position
requires greater expertise in many areas,or that it involves great responsibility, or that petitioner deserves it
from the point of view of her qualifications and experience; but it would be to prevent another form of
oppressive practice, where an employee is appointed toa senior management position, there to enjoy only
the prestige or title, but not the benefitscommensurate with the work and responsibility assumed. It would
likewise prevent a situation where, as in this case, an employer obliged by law or the courts to reinstate
an "unwanted" employee holding a senior management position is given an opportunity to retaliate by
limiting the employees salary, privileges and benefits to a certain level low or high, so long as it is
within the managerial range that is however 1) not commensurate with the work and responsibility
assumed by the employee, or 2) discriminatory, or 3) indicative of a tendency to favor only one or some
employees.
Nonetheless, the Court failsto discern any bad faithor negligence on the part of respondent Jacob. The
principal character that figures prominently in this case is Fernandez; he alone relentlessly caused
petitioners hardships and suffering. He alone is guilty of persecuting petitioner. Indeed, some of his
actions were without sanction of STI itself, and were committedoutside of the authority given to him by
the school; they bordered on the personal, rather than official. His superior, Jacob, may have been, for the
most part, clueless of what Fernandez was doing to petitioner. After all, Fernandez was the Head of the
Academic Services Group of the EMD, and petitioner directly reported to him at the time; his position
enabled him to pursue a course of action with petitioner that Jacob was largely unaware of.
A corporation, as a juridical entity, may act only through its directors, officers and employees. Obligations
incurred as a result of the directors and officers acts as corporate agents, are nottheir personal liability but
the direct responsibility of the corporation they represent. As a rule, they are only solidarily liable with the
corporation for the illegal termination of servicesof employees if they acted with malice or bad faith.
To hold a director or officer personally liable for corporate obligations, two requisites must concur: (1) it
must be alleged in the complaint that the director or officer assented to patently unlawful acts of the
corporation or that the officer was guilty of gross negligence or bad faith; and (2) there must be proof that
the officer acted in bad faith.60
WHEREFORE, the Petition is GRANTED. The October 27, 2008 Decision of the Court of Appeals in
CA-G.R. SP No. 104437 is ANNULLED andSET ASIDE. The March 31, 2006 Decision ofLabor Arbiter
Renaldo O. Hernandez in NLRCCase No. 00-06-07767-04 is hereby REINSTATED, WITH
MODIFICATIONS, in that:
1. Respondent Systems Technology Institute, Inc., is ordered to REINSTATEpetitioner Girly G.
Ico to the position of STI-Makati College Chief Operating Officer and pay her the exact salary,
benefits, privileges, and emoluments which respondent Peter K. Fernandez is receiving, but not
less than what petitioner was receiving at the time of her illegal constructive dismissal on May
18, 2004;
2. Respondent Monico V. Jacob is ABSOLVED of any liability;
3. Respondent Peter K. Fernandez is ordered to VACATEthe said office of STI-Makati Chief
Operating Officer and turn over the same to petitioner;
4. The award of backwages shall earn LEGAL INTERESTat the rate of six per cent(6%) per
annumfrom the date of the petitioners illegal dismissal until fully paid; 61
 5. Finally, the appropriate Computation Division of the NLRC is hereby ordered to COMPUTE 2011 of the National Labor Relations Commission's (NLRC) Fifth Division, which declared that Arlo C.
AND UPDATEthe award as herein established WITH DISPATCH. Cortes (Cortes) and Dave Somido (Somido) (respondents) were illegally dismissed from employment by
Echo. Edward N. Enriquez (Enriquez), Leonora K. Benedicto (Benedicto) and Atty. Gina Wenceslao (Atty.
SO ORDERED. Wenceslao) used to be Echo's General Manager, Operations and Human Resources Officer, and External
Counsel, respectively (Echo and the three officers are to be referred collectively as the petitioners). The
CA and NLRC's rulings reversed the Decision 5of Labor Arbiter (LA) Renaldo O. Hernandez (Hernandez),
who found the respondents' termination from service as valid.
THIRD DIVISION
Antecedents

Echo is a provider of warehousing management and delivery services.

King 8 Commercial Corporation (King 8), Echo's predecessor, initially employed Cortes on September 17,
2002, and Somido, on October 12, 2004. Echo thereafter absorbed the respondents as employees on April
1, 2005. In 2008, Somido was made a Warehouse Checker, while Cortes, a Forklift Operator.6

In January of 2009, the respondents and their co-workers formed Obrero Pilipino-Echo 2000 Commercial
Chapter (Union). Cortes was elected as Vice-President while Somido became an active member. The
respondents claimed that the Union's President, Secretary and one of the board members were
subsequently harassed, discriminated and eventually terminated from employment by Echo. 7

In May of 2009, Echo received information about shortages in peso value arising from the movement of
products to and from its warehouse. After an immediate audit, Echo suspected that there was a conspiracy
among the employees in the warehouse. Since an uninterrupted investigation was necessary, Echo, in the
exercise of its management prerogative, decided to re-assign the staff. The respondents were among those
January 11, 2016 G.R. No. 214092 affected.8

ECHO 2000 COMMERCIAL CORPORATION, EDWARD N. ENRIQUEZ, LEONORA K. On July 7, 2009, Enriquez issued a memorandum informing the respondents of their transfer to the
BENEDICTO and ATTY. GINA WENCESLAO, Petitioners, Delivery Section, which was within the premises of Echo's warehouse. The transfer would entail no
vs. change in ranks, status and salaries.9
OBRERO FILIPINO-ECHO 2000 CHAPTER-CLO, ARLO C. CORTES and DAVE
SOMIDO, Respondents. On July 14, 2009, Somido wrote Echo a letter 10 indicating his refusal to be promoted as a "Delivery
Supervisor." He explained that he was already happy as a Warehouse Checker. Further, he was not ready to
DECISION be a Delivery Supervisor since the position was sensitive and required more expertise and training, which
he did not have.
REYES, J.:
Cortes similarly declined Echo's offer of promotion claiming that he was contented in his post then as a
1
Before the Court is the petition for review on certiorari filed by Echo 2000 Commercial Corporation Forklift Operator. He also alleged that he would be more productive as an employee if he remained in his
(Echo) to assail the Decision 2 rendered on September 24, 2013 and Resolution 3 issued on March 28, 2014 post. He also lacked prior supervisory experience.11
by the Court of Appeals (CA) in CA-G.R. SP No. 121393. The CA affirmed the Decision 4 dated April 15,
On July 16, 2009, Enriquez, sans consent of the respondents, informed the latter of their
assignments/designations, effective July 17, 2009, as Delivery Supervisors with the following duties: (a)
act as delivery dispatchers of booked and planned deliveries for the day; (b) ensure the early loading of
goods to the delivery trucks to avoid late take-offs; (c) man delivery teams for the trucks; (d) check the
operational and cleanliness conditions of the trucks; (e) attend to delivery concerns of account specialists
of their outlets; and (f) call the attention of other warehouse personnel and report the same to the Human
Resources Department regarding absences/tardiness, incomplete uniforms, appearances, refusal to accept
delivery trips and other matters affecting warehouse productivity.12
Echo alleged that the respondents did not perform the new duties assigned to them. Hence, they were each
issued a memorandum, dated July 16, 2009, requiring them to explain in writing their failure to abide with
the new assignments.13
The Proceedings Before the NLRC
The respondents filed an appeal assailing LA Hernandez's ruling. The dispositive portion of the NLRC's
Decision dated April 15, 2011 is quoted below:
WHEREFORE, premises considered, the appeal is GRANTED. The appealed decision of the [LA] dated
April 20, 2010 is REVERSED and SET ASIDE and a new one is entered declaring [the petitioners]
guilty of unfair labor practice and illegal dismissal of the [respondents]. [The petitioners] are ordered to
immediately reinstate [the respondents] to their previous positions without loss of seniority rights and
other privileges/benefits and to pay [the respondents] the following:
1. full backwages from the time of their dismissal up to their actual reinstatement;

On July 18, 2009, Echo clarified through a memo that the respondents were designated as "Delivery 2. the sum of P20,000.00 as moral damages[;]
Coordinators" and not "Supervisors."14
3. the sum of P20,000.00 as exemplary damages; and ten [percent (10%)] of the monetary award
Thereafter, successive memoranda were issued by Echo to the respondents, who refused to acknowledge as attorney's fees.
receipt and comply with the directives therein. The Memoranda 15 dated July 20, 2009 suspended them
without pay for five days for their alleged insubordination. The Memoranda 16 dated August 8, 2009 All other monetary claims are dismissed for lack of substantiation.
informed them of their termination from employment, effective August 15, 2009, by reason of their
repeated refusal to acknowledge receipt of Echo's memoranda and flagrant defiance to assume the duties
SO ORDERED.23
of Delivery Coordinators.

The Proceedings Before the LA
On August 17, 2009, the respondents filed before the NLRC a complaint against Echo for unfair labor
practice, illegal dismissal, illegal suspension, illegal deductions and payment of money claims, damages
and attorney's fees.17 The respondents claimed that they were offered promotions, which were mere ploys
to remove them as rank-and-file employees, and oust them as Union members. 18
In sustaining the respondents' arguments, the NLRC explained that at the time of the farmer's dismissal,
they had been employed by Echo for several years since 2002 and 2004, respectively. There were no prior
untoward incidents. However, things changed when the Union was formed. When the two did not agree to
be transferred, they were terminated for insubordination, a mere ploy to lend a semblance of legality to a
pre-conceived management strategy.24
The NLRC denied the petitioners' motion for reconsideration. 25

The petitioners, on the other hand, insisted that the respondents were merely transferred, and not
The Proceedings Before the CA
promoted. Further, the respondents arrogantly refused to comply with Enriquez's directives. Their
insubordination constituted just cause to terminate them from employment. 19
The petitioners thereafter filed a Petition for Certiorari.26 In the herein assailed Decision dated September
24, 2013, the CA affirmed in toto the NLRC's ruling citing the following as grounds:
On April 20, 2010, LA Hernandez dismissed the respondents' complaint for reasons stated below: (a) the
claims of union-busting, harassment and discrimination were not supported by evidence; 20 (b) no
A transfer is a movement from one position to another which is of equivalent rank, level or salary, without
promotions occurred as the duties of the Delivery Supervisors/Coordinators were merely reportorial in
break in service. Promotion, on the other hand, is the advancement from one position to another with an
nature and not indicative of any authority to hire, fire or change the status of other employees; 21 and (c)
increase in duties and responsibilities as authorized by law, and usually accompanied by an increase in
Echo properly exercised its management prerogative to order the transfer, and this was done without
salary.
intended changes in the ranks, salaries, status or places of assignment of the respondents. 22
x x x There is no doubt that said position of Delivery Supervisor/Coordinator entails great duties and
responsibilities of overseeing ECHO's business and involves discretionary powers. x x x What is important
is the change in the nature of work which resulted in an upgrade of their work condition and increase of
duties and responsibilities which constitute promotion and not a mere transfer.
A transfer that results in promotion cannot be done without the employee's consent since there is no law
that compels an employee to accept a promotion for the reason that a promotion is in the nature of a gift or
reward, which a person has a right to refuse. When [the respondents] refused to accept their promotion as
Delivery Supervisors/Coordinators, they were exercising a right and they cannot be punished for it. He
who uses his own legal right injures no one. Thus, [the respondents'] refusal to be promoted was not a
valid cause for their dismissal.
Anent the award of moral damages, exemplary damages and attorney's fees, We agree with the NLRC that
[the respondents] are entitled to the same.
xxxx
x x x We agree with the NLRC that the dismissal of [the respondents] was tainted with bad faith as they
were dismissed by ECHO for refusing to accept their promotion as Delivery Supervisor[s]/Coordinator[s].
x x x The NLRC also found that ECHO's act of transferring [the respondents] from Forklift Operator and
Warehouse Checker x x x to Delivery Supervisors/Coordinators was aimed to remove them among the
rank-and-file employees which amounts to union interference. Without the leadership of Cortes, as Vice-
President, and Somido, as an active member, the union would be severely weakened, especially since most
of its officers were already terminated by ECHO. xx x.27 (Citations omitted)
The petitioners filed a motion for reconsideration, which the CA denied through the Resolution 28 dated
March 28, 2014.1wphi1
Issues
Unperturbed, the petitioners are now before the Court raising the issues of whether or not:
(1) the respondents were illegally suspended and terminated, hence, entitled to payment of their
money claims, damages and attorney's fees;
(2) Echo and its officers are guilty of unfair labor practice; and
(3) Echo's officers, who are sued as nominal parties, should be held liable to pay the respondents
their money claims.29
In support thereof, the petitioners claim that the respondents' refusal to comply with the management's
transfer order constitutes just cause to terminate the latter from employment. Echo also points out that
before it closed shop on July 6, 2011, the Union continued existing despite the respondents' dismissal from
service. Hence, there is no factual basis in the NLRC and CA's ruling that the respondents' termination is
intertwined with union-busting.30
The petitioners further argue that the respondents failed to establish by substantial evidence that Echo's
officers, namely, Enriquez, Benedicto and Atty. Wenceslao, acted with malice. Thus, they cannot be held
liable as well.31
Corollarily, the dismissal being valid, there is no ground to grant the respondents' prayer for reinstatement
and payment of money claims and damages.32
In their Comment,33 the respondents reiterate that their transfer/promotion was conceived to pave the way
for their eventual termination from employment. Moreover, even before the respondents could convey
their acceptance or refusal to the transfer/promotion, they were promptly replaced by newly-hired
contractual employees.
Ruling of the Court
The Court partially grants the instant petition.
The first two issues, being interrelated, shall be discussed jointly.
The offer of transfer is, in legal contemplation, a promotion, which the respondents validly refused.
Such refusal cannot be the basis for the respondents' dismissal from service. The finding of unfair
labor practice and the award of moral and exemplary damages do not however follow solely by
reason of the dismissal.
Article 212(13) of the Labor Code distinguishes from each other as follows the concepts of managerial,
supervisory and rank-and-file employees:
"Managerial employee" is one who is vested with the powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in the interest of the employer, effectively recommend
such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but
requires the use of independent judgment. All employees not falling within any of the above definitions
are considered rank-and-file employees for purposes of this Book. (Italics ours)
As to the extent of management prerogative to transfer/promote employees, and the differences between
transfer on one hand, and promotion, on the other, Coca-Cola Bottlers Philippines, Inc. v. Del Villar 34 is
instructive, viz:
[L]abor laws discourage interference in employers' judgment concerning the conduct of their business.
In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign
employees from one office or area of operation to another - provided there is no demotion in rank or
diminution of salary, benefits, and other privileges; and the action is not motivated by discrimination,
made in bad faith, or effected as a form of punishment or demotion without sufficient cause. xx x.
x x x In the case of Blue Dairy Corporation v. National Labor Relations Commission, we described in
more detail the limitations on the right of management to transfer employees:
x x x [I]t cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In
particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or
prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries,
privileges and other benefits. xxx.
xxxx
A transfer is a movement from one position to another which is of equivalent rank, level or salary, without
break in service. Promotion, on the other hand, is the advancement from one position to another with an
increase in duties and responsibilities as authorized by law, and usually accompanied by an increase in
salary. Conversely, demotion involves a situation where an employee is relegated to a subordinate or less
important position constituting a reduction to a lower grade or rank, with a corresponding decrease in
duties and responsibilities, and usually accompanied by a decrease in salary. 35 (Citations omitted and
emphasis and underscoring ours)
For promotion to occur, there must be an advancement from one position to another or an upward vertical
movement of the employee's rank or position. Any increase in salary should only be considered incidental
but never determinative of whether or not a promotion is bestowed upon an employee. 36
An employee is not bound to accept a promotion, which is in the nature of a gift or reward. Refusal to be
promoted is a valid exercise of a right. 37 Such exercise cannot be considered in law as insubordination, or
willful disobedience of a lawful order of the employer, hence, it cannot be the basis of an employee's
dismissal from service.38
In the case at bench, a Warehouse Checker and a Forklift Operator are rank-and-file employees. On the
other hand, the job of a Delivery Supervisor/Coordinator requires the exercise of discretion and judgment
from time to time. Specifically, a Delivery Supervisor/Coordinator assigns teams to man the trucks,
oversees the loading of goods, checks the conditions of the trucks, coordinates with account specialists in
the outlets regarding their delivery concerns, and supervises other personnel about their performance in the
warehouse. A Delivery Supervisor/Coordinator's duties and responsibilities are apparently not of the same
weight as those of a Warehouse Checker or Forklift Operator. Hence, despite the fact that no salary
increases were effected, the assumption of the post of a Delivery Supervisor/Coordinator should be
considered a promotion. The respondents' refusal to accept the same was therefore valid.
Notwithstanding the illegality of the respondents' dismissal, the Court finds no sufficient basis to award
moral and exemplary damages.
A dismissal may be contrary to law but by itself alone, it does not establish bad faith to entitle the
dismissed employee to moral damages. The award of moral and exemplary damages cannot be justified
solely upon the premise that the employer dismissed his employee without just or authorized cause. 39
In the instant case, the right not to accept an offered promotion pertained to each of the respondents.
However, they exhibited disrespectful behavior by their repeated refusal to receive the memoranda issued
by Echo and by their continued presence in their respective areas without any work output. 40 The Court
thus finds that although the respondents' dismissal from service for just cause was unwarranted, there is
likewise no basis for the award of moral and exemplary damages in their favor. Echo expectedly imposed
disciplinary penalties upon the respondents for the latter's intransigence. Albeit the Court is not convinced
of the character and extent of the measures taken by Echo, bad faith cannot be inferred solely from the
said impositions.
Anent the NLRC and CA's conclusion that Echo committed unfair labor practice, the Court disagrees.
Unfair labor practices violate the constitutional right of workers and employees to self-organization, are
inimical to the legitimate interests of both labor and management, including their right to bargain
collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt
industrial peace and hinder the promotion of healthy and stable labor-management relations. 41
The respondents allege that their transfer/promotion was intended to deprive the Union of leadership and
membership. They claim that other officers were already dismissed. The foregoing, however, lacks
substantiation. Unfair labor practice is a serious charge, and the respondents failed to show that the
petitioners conclusively interfered with, restrained, or coerced employees in the exercise of their right to
self-organization.
Enriquez, Benedicto and Atty. Wenceslao cannot be held personally liable for the respondents'
money claims.
Lambert Pawnbrokers and Jewelry Corporation, et al. v. Binamira 42 expounds on the liabilities of
corporate officers to illegally dismissed employees. The Court declared:
As a general rule, only the employer-corporation, partnership or association or any other entity, and not its
officers, which may be held liable for illegal dismissal of employees or for other wrongful acts. This is as
it should be because a corporation is a juridical entity with legal personality separate and distinct from
those acting for and in its behalf and, in general, from the people comprising it. A corporation, as a
juridical entity, may act only through its directors, officers and employees. Obligations incurred as a result
of the directors' and officers' acts as corporate agents, are not their personal liability but the direct
responsibility of the corporation they represent. It is settled that in the absence of malice and bad faith, a
stockholder or an officer of a corporation cannot be made personally liable for corporate liabilities. They
are only solidarily liable with the corporation for the illegal termination of services of employees if they
acted with malice or bad faith. In Philippine American Life and General Insurance v. Gramaje, bad faith is
defined as a state of mind affirmatively operating with furtive design or with some motive of self-interest
or ill will or for ulterior purpose. It implies a conscious and intentional design to do a wrongful act for a
dishonest purpose or moral obliquity.43 (Citations omitted and underlining ours)
In the instant petition, the respondents failed to specify and sufficiently prove the alleged acts of Enriquez,
Benedicto and Atty. Wenceslao from which malice or bad faith can be concluded. Hence, there is no
reason to invoke the exception to the general rule on non-liability of corporate officers.
In lieu of actual reinstatement, the respondents are entitled to separation pay.
"In cases of illegal dismissal, the accepted doctrine is that separation pay is available in lieu of
reinstatement when the latter recourse is no longer practical or in the best interest of the parties." 44
The Court notes that the respondents were terminated from service on August 15, 2009, or more than six
years ago. Their reinstatement will not be practical and to the best interest of the parties. The Court thus
finds more prudence in awarding separation pay to the respondents equivalent to one (1) month pay for
every year of service, with a fraction of at least six (6) months considered as one (1) whole year, from the
time of their illegal dismissal up to the finality of this Decision.
An annual interest of six percent (6%) is imposed on the monetary award.
In accordance with Nacar v. Gallery Frames,45 the Court now imposes an interest on the monetary awards
at the rate of six percent (6%) per annum from the date of finality of this Decision until full payment
WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 121393, dated September 24, 2013 and March 28, 2014, respectively,
are MODIFIED.
The petitioner, Echo 2000 Commercial Corporation, is hereby declared guilty of illegal dismissal. In
addition to the National Labor Relations Commission's award of attorney's fees, Echo 2000 Commercial
Corporation is likewise ORDERED to pay the respondents, Arlo C. Cortes and Dave Somido, the
following:
(a) separation pay in lieu of actual reinstatement equivalent to one (1) month pay for every year
of service, with a fraction of at least six (6) months considered as one (1) whole year from the
time of the dismissal up to the finality of this Decision;
(b) full backwages from the time of the illegal dismissal up to the finality of this Decision; and
(c) interest on all monetary awards at the rate of 6% per annum from the finality of this Decision
until full payment.
The amounts awarded as moral and exemplary damages by the National Labor Relations Commission to
Arlo C. Cortes and Dave Somido are however deleted for lack of basis.
The case is REMANDED to the Labor Arbiter, who is hereby DIRECTED to COMPUTE the monetary
benefits awarded in accordance with this Decision.
SO ORDERED.
G.R. No. 178021 January 25, 2012
REPUBLIC OF THE PHILIPPINES, represented by the CIVIL SERVICE
COMMISSION, Petitioner, vs. MINERVA M.P. PACHEO, Respondent.
DECISION
MENDOZA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court filed by
petitioner Republic of the Philippines, represented by the Office of the Solicitor General (OSG), which
assails the February 22, 2007 Decision 1 and the May 15, 2007 Resolution 2 of the Court of Appeals (CA) in
CA-G.R. SP No. 93781. The CA reversed the November 21, 2005 Resolution of the Civil Service
Commission (CSC) declaring the re-assignment of respondent Minerva M.P. Pacheos (Pacheo) not
valid and ordering her reinstatement to her original station but without backwages under the principle of
"no work, no pay."
The Facts
Pacheo was a Revenue Attorney IV, Assistant Chief of the Legal Division of the Bureau of Internal
Revenue (BIR)in Revenue Region No. 7 (RR7), Quezon City.
3
On May 7, 2002, the BIR issued Revenue Travel Assignment Order (RTAO) No. 25-2002, ordering the
reassignment of Pacheo as Assistant Chief, Legal Division from RR7 in Quezon City to RR4 in San
Fernando, Pampanga. The BIR cited exigencies of the revenue service as basis for the issuance of the said
RTAO.
Pacheo questioned the reassignment through her Letter dated May 9, 2002 4 addressed to Rene G. Banez,
then Commissioner of Internal Revenue (CIR). She complained that the transfer would mean economic
dislocation since she would have to spend P 200.00 on daily travel expenses or approximately P 4,000.00
a month. It would also mean physical burden on her part as she would be compelled to wake up early in
the morning for her daily travel from Quezon City to San Fernando, Pampanga, and to return home late at
night from San Fernando, Pampanga to Quezon City. She was of the view that that her reassignment was
merely intended to harass and force her out of the BIR in the guise of exigencies of the revenue service. In
sum, she considered her transfer from Quezon City to Pampanga as amounting to a constructive dismissal.
Due to the then inaction of the BIR, Pacheo filed a complaint 5 dated May 30, 2002, before the CSC-
National Capital Region (CSC-NCR), praying for the nullification of RTAO No. 25-2002. In its July 22,
2002 Order,6 the CSC-NCR treated Pacheos Complaint as an appeal and dismissed the same, without
prejudice, for failure to comply with Sections 73 and 74 of Rule V(b) of the Uniform Rules on
Administrative Cases in the Civil Service.7
In its Letter-reply8 dated September 13, 2002, the BIR, through its Deputy Commissioner for Legal and
Inspection Group, Edmundo P. Guevara (Guevara), denied Pacheos protest for lack of merit. It contended
that her reassignment could not be considered constructive dismissal as she maintained her position as
Revenue Attorney IV and was designated as Assistant Chief of Legal Division. It emphasized that her
appointment to the position of Revenue Attorney IV was without a specific station. Consequently, she
could properly be reassigned from one organizational unit to another within the BIR. Lastly, she could not
validly claim a vested right to any specific station, or a violation of her right to security of tenure.
Not in conformity with the ruling of the BIR, Pacheo appealed her case before the CSC.
On November 21, 2005, the CSC issued Resolution No. 051697 9 granting Pacheos appeal, the dispositive
portion of which reads:
WHEREFORE, the instant appeal of Minerva M.P. Pacheo is hereby GRANTED. The Bureau of Internal
Revenue Revenue Travel Assignment Order No. 25-2002 dated May 7, 2002, on the reassignment of
Pacheo to the Legal Division Revenue Region No. 4 San Fernanado, Pampanga, is hereby declared NOT
VALID. ACCORDINGLY, Pacheo should now be recalled to her original station. This Commission,
however rules and so holds that the withholding by the BIR of Pacheos salary for the period she did not
report to work is justified.
The CSCRO No. III is directed to monitor the implementation of this Resolution.
In granting Pacheos appeal, the CSC explained:
On the second issue, this Commission finds merit in appellants contention that her reassignment in not
valid.
Of pertinent application thereto is Rule III, Section 6 of CSC Memorandum Circular No. 40, series of
1998, dated December 14, 1998, which provides:
Section 6. Other Personnel Movements. The following personnel movements which will not require
issuance of an appointment shall nevertheless require an office order by duly authorized official.
a. Reassignment Movement of an employee from one organizational unit to another in the same
department or agency which does not involve reduction in rank, status or salary. If reassignment is done
without consent of the employee being reassigned it shall be allowed for a maximum period of one year.
Reassignment is presumed to be regular and made in the interest of public service unless proven otherwise
or it constitutes constructive dismissal.
No assignment shall be undertaken if done indiscriminately or whimsically because the law is not intended
as a convenient shield for the appointing/ disciplining authority to harass or oppress a subordinate on the
pretext of advancing and promoting public interest.
Reassignment of small salaried employee is not permissible if it causes significant financial dislocation.
Although reassignment is a management prerogative, the same must be done in the exigency of the service
without diminution in rank, status and salary on the part of the officer or employee being temporarily
reassigned. Reassignment of small salaried employees, however is not allowed if it will cause significant
financial dislocation to the employee reassigned. Otherwise the Commission will have to intervene.
The primary purpose of emphasizing small salaried employees in the foregoing rule is to protect the
rank and file employees from possible abuse by the management in the guise of transfer/reassignment.
The Supreme Court in Alzate v. Mabutas, (51 O.G. 2452) ruled:
x x x [T]he protection against invalid transfer is especially needed by lower ranking employees. The
Court emphasized this need when it ruled that officials in the unclassified service, presidential appointees,
men in the government set up occupy positions in the higher echelon should be entitled to security of
tenure, unquestionablea lesser sol[ci]itude cannot be meant for the little men, that great mass of Common
underprivileged employees-thousand there are of them in the lower bracket, who generally are without
connections and who pin their hopes of advancement on the merit system instituted by our civil service
law.
In other words, in order to be embraced in the term small-salaried employees, the latter must belong to
the rank and file; and, his/her salary would be significantly reduced by virtue of the
transfer/reassignment. Rank and file was categorized as those occupying the position of Division Chief
and below, pursuant to CSC Resolution No. 1, series of 1991, dated January 28, 1991.
The facts established on record show that Pacheo belongs to the rank and file receiving an average
monthly salary of Twenty Thousand Pesos (P 20,000.00) under the salary standardization law and a
monthly take home pay of Fourteen Thousand Pesos (P 14,000.00). She has to spend around Four
Thousand Pesos (P 4,000.00) a month for her transportation expenses as a consequence of her
reassignment, roughly twenty eight percent (28%) of her monthly take home pay. Clearly, Pacheos salary
shall be significantly reduced as a result of her reassignment.
In ANORE, Ma. Theresa F., this Commission ruled:
Anore, a lowly salaried employee, was reassigned to an isolated island 15 kilometers away from her
original place of assignment. She has to travel by boat with only one trip a day to report to her new place
of assignment in an office without any facilities, except its bare structure. Worst, the municipality did not
provide her with transportation allowance. She was forced to be separated from her family, look for a
boarding house where she can stay while in the island and spend for her board and lodging. The
circumstances surrounding Anores reassignment is exactly the kind of reassignment that is being frowned
upon by law.
This Commission, however, rules and so holds that the withholding by the BIR of her salaries is justified
as she is not entitled thereto since she is deemed not to have performed any actual work in the government
on the principle of no work no pay.
Accordingly, Pacheo should now be reinstated to her original station without any right to claim back salary
as she did not report to work either at her new place of assignment or at her original station. 10 [Emphases
in the original]
Still not satisfied, Pacheo moved for reconsideration. She argued that the CSC erred in not finding that she
was constructively dismissed and, therefore, entitled to back salary.
On March 7, 2006, the CSC issued Resolution No. 060397 11 denying Pacheos motion for reconsideration.
Undaunted, Pacheo sought recourse before the CA via a petition for review.
In its February 22, 2007 Decision, the CA reversed the CSC Resolution and ruled in favor of Pacheo,
the fallo of which states:
WHEREFORE, the petition is GRANTED. Resolution nos. 051697 and 060397 dated November 21, 2005
and March 7, 2006, respectively, of the Civil Service Commission are REVERSED and SET ASIDE. A
new judgment is hereby entered finding petitioner to have been constructively dismissed and ordering her
immediate reinstatement with full backwages and benefits.
SO ORDERED.12
In setting aside CSC Resolution Nos. 051697 and 060397, the CA held that:
While this Court agrees that petitioners reassignment was not valid considering that a diminution in
salary is enough to invalidate such reassignment, We cannot agree that the latter has not been
constructively dismissed as a result thereof.
It is well to remember that constructive dismissal does not always involve forthright dismissal or
diminution in rank, compensation, benefits and privileges. For an act of clear discrimination, insensibility,
or disdain by an employer may become so unbearable on the part of the employee that it could foreclose
any choice by him except to forgo his continued employment.
The management prerogative to transfer personnel must be exercised without grave abuse of discretion
and putting to mind the basic elements of justice and fair play. The employer must be able to show that the
transfer is not unreasonable, inconvenient, or prejudicial to the employee.
In this case, petitioners reassignment will result in the reduction of her salary, not to mention the physical
burden that she would suffer in waking up early in the morning to travel daily from Quezon City to San
Fernando, Pampanga and in coming home late at night.
Clearly, the insensibility of the employer is deducible from the foregoing circumstances and petitioner
may have no other choice but to forego her continued employment.
Moreover, it would be inconsistent to hold that the reassignment was not valid due to the significant
reduction in petitioners salary and then rule that there is no constructive dismissal just because said
reduction in salary will not render petitioner penniless if she will report to her new place of assignment. It
must be noted that there is constructive dismissal when the reassignment of an employee involves a
diminution in pay.
Having determined that petitioner has been constructively dismissed as a result of her reassignment, We
shall resolve whether or not she is entitled to backwages.
In denying petitioners claim for backwages, the CSC held:
This Commission, however, rules and so holds that the withholding by the BIR of her salaries is justified
as she is not entitled thereto since she is deemed not to have performed any actual work in the government
on the principle of no work no pay.
Accordingly, Pacheo should now be reinstated to her original station without any right to claim back salary
as she did not report for work either at her new place of assignment or at her original station."
Pacheo, while belonging to the rank-and-file employees, is holding a responsible position as an Assistant
Division Chief, who could not just abandon her duties merely because she protested her re-assignment and
filed an appeal afterwards.
We do not agree.
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, dismissed or suspended. The "No work,
no pay" principle contemplates a "no work" situation where the employees voluntarily absent themselves.
In this case, petitioner was forced to forego her continued employment and did not just abandon her duties.
In fact, she lost no time in protesting her reassignment as a form of constructive dismissal. It is settled that
the filing of a complaint for illegal dismissal is inconsistent with a charge of abandonment. The filing of
the complaint is proof enough of his desire to return to work, thus negating any suggestion of
abandonment.
Neither do we agree with the OSG when it opined that:
No one in the Civil Service should be allowed to decide on whether she is going to accept or not any work
dictated upon by the exigency of the service. One should consider that public office is a public trust and
that the act of respondent CIR enjoys the presumption of regularity. To uphold the failure of respondent to
heed the RTAO would result in chaos. Every employee would put his or her vested interest or personal
opinion over and above the smooth functioning of the bureaucracy.
Security of tenure is a right of paramount value as recognized and guaranteed under Sec. 3, Art. XIII of the
1987 Constitution.
The State shall afford full protection to labor, xxx and promote full employment and equality of
employment opportunities for all. It shall guarantee the rights of all workers to xxx security of tenure xxx
Such constitutional right should not be denied on mere speculation of any similar unclear and nebulous
basis.
In Garcia, et al. v. Lejano, et al., the Supreme Court rejected the OSGs opinion that when the transfer is
motivated solely by the interest of the service of such act cannot be considered violative of the
Constitution, thus:
"We do not agree to this view. While temporary transfers or assignments may be made of the personnel of
a bureau or department without first obtaining the consent of the employee concerned within the scope of
Section 79 (D) of the Administrative Code which party provides that The Department Head also may,
from time to time, in the interest of the service, change the distribution among the several Bureaus and
offices of his Department of the employees or subordinates authorized by law, such cannot be undertaken
when the transfer of the employee is with a view to his removal. Such cannot be done without the consent
of the employee. And if the transfer is resorted to as a scheme to lure the employee away from his
permanent position, such attitude is improper as it would in effect result in a circumvention of the
prohibition which safeguards the tenure of office of those who are in the civil service. It is not without
reason that this Court made the following observation:
To permit circumvention of the constitutional prohibition in question by allowing removal from office
without lawful cause, in the form or guise of transfers from one office to another, or from one province to
another, without the consent of the transferee, would blast the hopes of these young civil service officials
and career men and women, destroy their security and tenure of office and make for a subservient,
discontented and inefficient civil service force that sways with every political wind that blows and plays
up to whatever political party is in the saddle. That would be far from what the framers of our Constitution
contemplated and desired. Neither would that be our concept of a free and efficient Government force,
possessed of self-respect and reasonable ambition."
Clearly, the principle of "no work, no pay" does not apply in this case. As held in Neeland v. Villanueva,
Jr:
"We also cannot deny back salaries and other economic benefits on the ground that respondent Clerk of
Court did not work. For the principle of "no work, no pay" does not apply when the employee himself was
forced out of job. Xxx Indeed, it is not always true that back salaries are paid only when work is done.
Xxx For another, the poor employee could offer no work since he was forced out of work. Thus, to always
require complete exoneration or performance of work would ultimately leave the dismissal
uncompensated no matter how grossly disproportionate the penalty was. Clearly, it does not serve justice
to simply restore the dismissed employee to his position and deny him his claim for back salaries and
other economic benefits on these grounds. We would otherwise be serving justice in halves."
An illegally dismissed government employee who is later ordered reinstated is entitled to back wages and
other monetary benefits from the time of his illegal dismissal up to his reinstatement. This is only fair and
sensible because an employee who is reinstated after having been illegally dismissed is considered as not
having left his office and should be given a comparable compensation at the time of his reinstatement.
When a government official or employee in the classified civil service had been illegally dismissed, and
his reinstatement had later been ordered, for all legal purposes he is considered as not having left his
office, so that he is entitled to all the rights and privileges that accrue to him by virtue of the office that he
held.13
The CSC moved for reconsideration but its motion was denied by the CA in its May 15, 2007 Resolution.
Hence, this petition.
THE ISSUES
WHETHER OR NOT THE ASSAILED DECISION IS LEGALLY CORRECT IN DECLARING
THAT RESPONDENT WAS CONSTRUCTIVELY DISMISED AND ENTITLED TO BACK
WAGES, NOTWITHSTANDING RESPONDENTS REFUSAL TO COMPLY WITH BIR
RTAO No. 25-2002 WHICH IS IMMEDIATELY EXECUTORY PURSUANT TO SECTION 24
(F) OF P.D. 807.
WHETHER OR NOT RESPONDENT SUFFERED A DIMINUTION IN HER SALARY IN
RELATION TO SECTION 6, RULE III OF CSC MEMORANDUM CIRCULAR No. 40,
SERIES OF 1998, DATED DECEMBER 14, 1998, AS A RESULT OF THE ISSUANCE [OF]
BIR RTAO No. 25-2002 ORDERING HER REASSIGNMENT FROM BIR RR No. 7 IN
QUEZON CITY TO BIR RR No. 4 IN SAN FERNANDO, PAMPANGA.14
In her Memorandum,15 Pacheo asserts that RTAO No. 25-2002, on the pretense of the exigencies of the
revenue service, was solely meant to harass her and force her to resign. As a result of her invalid
reassignment, she was constructively dismissed and, therefore, entitled to her back salaries and monetary
benefits from the time of her illegal dismissal up to her reinstatement.
In its own Memorandum,16 the CSC, through the OSG, argues that constructive dismissal is not applicable
in this case because it was Pacheo herself who adamantly refused to report for work either in her original
station or new place of assignment in clear violation of Section 24 (f) of Presidential Decree (PD) No.
807.17 Citing jurisprudence,18 the CSC avers that the RTAO is immediately executory, unless otherwise
ordered by the CSC. Therefore, Pacheo should have first reported to her new place of assignment and then
appealed her case to the CSC if she indeed believed that there was no justification for her reassignment.
Since Pacheo did not report for work at all, she is not entitled to backwages following the principle of "no
work, no pay."
THE COURTS RULING
The petition fails to persuade.
It appears undisputed that the reassignment of Pacheo was not valid. In its memorandum, the OSG initially
argues for the validity of RTAO No. 25-2002 authorizing Pacheos reassignment from Quezon City to San
Fernando, Pampanga. Later, however, it specifically prays for the reinstatement of CSC Resolution Nos.
051697 and 060397, which categorically declared RTAO No. 25-2002 as not valid. In seeking such relief,
the OSG has effectively accepted the finding of the CSC, as affirmed by the CA, that Pacheos
reassignment was indeed invalid. Since the issue of Pacheos reassignment is already settled, the Court
finds it futile to pass upon the same at this point.
The question that remains to be resolved is whether or not Pacheos assignment constitutes constructive
dismissal and, thus, entitling her to reinstatement and backwages. Was Pacheo constructively dismissed by
reason of her reassignment?
The Court agrees with the CA on this point.
While a temporary transfer or assignment of personnel is permissible even without the employee's prior
consent, it cannot be done when the transfer is a preliminary step toward his removal, or a scheme to lure
him away from his permanent position, or when it is designed to indirectly terminate his service, or force
his resignation. Such a transfer would in effect circumvent the provision which safeguards the tenure of
office of those who are in the Civil Service.19
Significantly, Section 6, Rule III of CSC Memorandum Circular No. 40, series of 1998, defines
constructive dismissal as a situation when an employee quits his work because of the agency heads
unreasonable, humiliating, or demeaning actuations which render continued work impossible. Hence, the
employee is deemed to have been illegally dismissed. This may occur although there is no diminution or
reduction of salary of the employee. It may be a transfer from one position of dignity to a more servile or
menial job.
The CSC, through the OSG, contends that the deliberate refusal of Pacheo to report for work either in her
original station in Quezon City or her new place of assignment in San Fernando, Pampanga negates her
claim of constructive dismissal in the present case being in violation of Section 24 (f) of P.D. 807 [now
Executive Order (EO) 292, Book V, Title 1, Subtitle A, Chapter 5, Section 26 (6)]. 20 It further argues that
the subject RTAO was immediately executory, unless otherwise ordered by the CSC. It was, therefore,
incumbent on Pacheo to have reported to her new place of assignment and then appealed her case to the
CSC if she indeed believed that there was no justification for her reassignment.
Anent the first argument of CSC, the Court cannot sustain the proposition. It was legally impossible for
Pacheo to report to her original place of assignment in Quezon City considering that the subject RTAO No.
25-2002 also reassigned Amado Rey B. Pagarigan (Pagarigan) as Assistant Chief, Legal Division, from
RR4, San Fernando, Pampanga to RR7, Quezon City, the very same position Pacheo formerly held. The
reassignment of Pagarigan to the same position palpably created an impediment to Pacheos return to her
original station.
The Court finds Itself unable to agree to CSCs argument that the subject RTAO was immediately
executory. The Court deems it necessary to distinguish between a detail and reassignment, as they are
governed by different rules.
A detail is defined and governed by Executive Order 292, Book V, Title 1, Subtitle A, Chapter 5, Section
26 (6), thus:
(6) Detail. A detail is the movement of an employee from one agency to another without the issuance of an
appointment and shall be allowed, only for a limited period in the case of employees occupying
professional, technical and scientific positions. If the employee believes that there is no justification for
the detail, he may appeal his case to the Commission. Pending appeal, the decision to detail the employee
shall be executory unless otherwise ordered by the Commission. [Underscoring supplied]
On the other hand, a reassignment is defined and governed by E.O. 292, Book V, Title 1, Subtitle A,
Chapter 5, Section 26 (7), thus:
(7) Reassignment.An employee may be reassigned from one organizational unit to another in the same
agency; Provided, That such reassignment shall not involve a reduction in rank, status or salaries.
[Underscoring supplied]
The principal distinctions between a detail and reassignment lie in the place where the employee is to be
moved and in its effectivity pending appeal with the CSC. Based on the definition, a detail requires a
movement from one agency to another while a reassignment requires a movement within the same agency.
Moreover, pending appeal with the CSC, an order to detail is immediately executory, whereas a
reassignment order does not become immediately effective.1wphi1
In the case at bench, the lateral movement of Pacheo as Assistant Chief, Legal Division from Quezon City
to San Fernando, Pampanga within the same agency is undeniably a reassignment. The OSG posits that
she should have first reported to her new place of assignment and then subsequently question her
reassignment. It is clear, however, from E.O. 292, Book V, Title 1, Subtitle A, Chapter 5, Section 26 (7)
that there is no such duty to first report to the new place of assignment prior to questioning an alleged
invalid reassignment imposed upon an employee. Pacheo was well within her right not to report
immediately to RR4, San Fernando, Pampanga, and to question her reassignment.
Reassignments involving a reduction in rank, status or salary violate an employees security of tenure,
which is assured by the Constitution, the Administrative Code of 1987, and the Omnibus Civil Service
Rules and Regulations. Security of tenure covers not only employees removed without cause, but also
cases of unconsented transfers and reassignments, which are tantamount to illegal/constructive removal. 21
The Court is not unaware that the BIR is authorized to assign or reassign internal revenue officers and
employees as the exigencies of service may require. This authority of the BIR, however, should be
prudently exercised in accordance with existing civil service rules.
Having ruled that Pacheo was constructively dismissed, is she entitled to reinstatement and back wages?
The Court agrees with the CA that she is entitled to reinstatement, but finds Itself unable to sustain the
ruling that she is entitled to full back wages and benefits. It is a settled jurisprudence 22 that an illegally
dismissed civil service employee is entitled to back salaries but limited only to a maximum period of five
(5) years, and not full back salaries from his illegal dismissal up to his reinstatement.
WHEREFORE, the petition is DENIED. The assailed February 22, 2007 Decision and May 15, 2007
Resolution of the Court of Appeals, in CA-G.R. SP No. 93781, are
hereby AFFIRMED with MODIFICATION that respondent Minerva M.P. Pacheo is hereby ordered
reinstated without loss of seniority rights but is only entitled to the payment of back salaries corresponding
to five (5) years from the date of her invalid reassignment on May 7, 2002. SO ORDERED.
G.R. No. 208451, February 03, 2016
MANILA MEMORIAL PARK CEMETERY, INC., Petitioner, v. EZARD D. LLUZ, NORMAN
CORRAL, ERWIN FUGABAN, VALDIMAR BALISI, EMILIO FABON, JOHN MARK
APLICADOR, MICHAEL CURIOSO, JUNLIN ESPARES, GAVINO FARINAS, AND WARD
TRADING AND SERVICES, Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari1 assailing the Decision2 dated 21 January 2013 and the
Resolution3 dated 17 July 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 119237.
The Facts
On 23 February 2006, petitioner Manila Memorial Park Cemetery, Inc. (Manila Memorial) entered into a
Contract of Services with respondent Ward Trading and Services (Ward Trading). The Contract of Services
provided that Ward Trading, as an independent contractor, will render interment and exhumation services
and other related work to Manila Memorial in order to supplement operations at Manila Memorial Park,
Paranaque City.
Among those assigned by Ward Trading to perform services at the Manila Memorial Park were 4. Valdimar Balisi - P20,310.33
respondents Ezard Lluz, Norman Corral, Erwm Fugaban, Valdimar Balisi, Emilio Fabon, John Mark
Aplicador, Michael Curioso, Junlin Espares, and Gavino Farinas (respondents). They worked six days a 5. Emilio Fabon - P43,982.79
week for eight hours daily and were paid P250 per day.
6. John Mark
P43,982.79
4
On 26 June 2007, respondents filed a Complaint for reg ularization and Collective Bargaining Agreement Aplicador -
benefits against Manila Memorial; Enrique B. Lagdameo, Manila Memorial's Executive Vice-President 7. Michael Curioso - P43,982.79
and Director in Charge for Overall Operations, and Ward Trading. On 6 August 2007, respondents filed an
amended complaint to include illegal dismissal, underpayment of 13th month pay, and payment of 8. Ju[n]lin Espares - P43,982.79
attorney's fees.
9. Gavino Farinas - P43,982.79
Respondents alleged that they asked Manila Memorial to consider them as regular workers within the 9
SO ORDERED. chanroblesvirtuallawlibrary
appropriate bargaining unit established in the collective bargaining agreement by Manila Memorial and its Manila Memorial filed a Motion for Reconsideration which was denied in a Resolution 10 dated 31 January
union, the Manila Memorial Park Free Workers Union (MMP Union). Manila Memorial refused the 2011.
request since respondents were employed by Ward Trading, an independent labor contractor. Thereafter,
respondents joined the MMP Union. The MMP Union, on behalf of respondents, sought their Thereafter, Manila Memorial filed an appeal with the CA. In a Decision dated 21 January 2013, the CA
regularization which Manila Memorial again declined. Respondents then filed the complaint. affirmed the ruling of the NLRC. The CA found the existence of an employer-employee relationship
Subsequently, respondents were dismissed by Manila Memorial. Thus, respondents amended the between Manila Memorial and respondents. The dispositive portion of the Decision states:.
complaint to include the prayer for their reinstatement and payment of back wages. WHEREFORE, in view of the foregoing, the instant Petition for Certiorari is DENIED. The Decision,
dated September 30, 2010 and the Resolution, dated January 31, 2011, rendered by the National Labor
Meanwhile, Manila Memorial sought the dismissal of the complaint for lack of jurisdiction since there was Relations Commission (NLRC) in NLRC LAC No. 06-001267-10 are AFFIRMED.
no employer-employee relationship. Manila Memorial argued that respondents were the employees of
Ward Trading. SO ORDERED.11chanroblesvirtuallawlibrary
Manila Memorial then filed a Motion for Reconsideration which was denied by the CA in a Resolution
In a Decision5 dated 29 March 2010, the Labor Arbiter dismissed the complaint for failing to prove the dated 17 July 2013.
existence of an employer-employee relationship. The dispositive portion of the Decision states:.
WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-entitled case for Hence, the instant petition.chanRoblesvirtualLawlibrary
complainants' lack of employer-employee relationship with respondent Manila Memorial Park Cemetery,
Inc. The Issue

SO ORDERED.6chanroblesvirtuallawlibrary The main issue for our resolution is whether or not an employer-employee relationship exists between
Respondents appealed7 to the NLRC. In a Decision8 dated 30 September 2010, the NLRC reversed the Manila Memorial and respondents for the latter to be entitled to their claim for wages and other
Labor Arbiter's findings. The NLRC ruled that Ward Trading was a labor-only contractor and an agent of benefits.chanRoblesvirtualLawlibrary
Manila Memorial. The dispositive portion of the Decision states:.
WHEREFORE, premises considered, complainants' appeal is GRANTED. The assailed Decision of Labor The Court's Ruling
Arbiter Geobel A. Bartolabac dated March 29, 2010 is MODIFIED. It is hereby declared that
complainants were regular employees of respondent Manila Memorial Park Cemetery, Inc. and entitled to The petition lacks merit.
the benefits provided for under the CBA between the latter and the Manila Memorial Park Free Workers
Union. Manila Memorial contends that Ward Trading has total assets in excess of P1.4 million, according to Ward
Trading's financial statements for the year 2006, proving that it has sufficient capitalization to qualify as a
Respondent Manila Memorial Park Cemetery, Inc. is ordered to pay wage differentials to complainants as legitimate independent contractor. Manila Memorial insists that nowhere is it provided in the Contract of
follows:. Services that Manila Memorial controls the manner and means by which respondents accomplish the
1. Ezard D. Lluz - P43,982.79 results of their work. Manila Memorial states that the company only wants its contractors and the latter's
employees to abide by company rules and regulations.
2. Norman Corral - P29,765.67
3. Erwin Fugaban - P28,634.67 Respondents, on the other hand, assert that they are regular employees of Manila Memorial since Ward
Trading cannot qualify as an independent contractor but should be treated as a mere labor-only contractor.
Respondents state that (1) there is enough proof that Ward Trading does not have substantial capital,
investment, tools and the like; (2) the workers recruited and placed by the alleged contractors performed
activities that were related to Manila Memorial's business; and (3) Ward Trading does not exercise the
right to control the performance of the work of the contractual employees.
As a general rule, factual findings of the CA are binding upon this Court. One exception to this rule is
when the factual findings of the former are contrary to those of the trial court, or the lower administrative
body, as the case may be. This Court is obliged to resolve an issue of fact due to the conflicting findings of
the Labor Arbiter on one hand, and the NLRC and the CA on the other.
In order to determine whether there exists an employer-employee relationship between Manila Memorial
and respondents, relevant provisions of the labor law and rules must first be reviewed. Article 106 of the
Labor Code states:.
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person
for the performance of the former's work, the employees of the contractor and of the latter's subcontractor,
if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only contracting and job contracting as
well as differentiations within these types of contracting and determine who among the parties involved
shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of
any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises,
among others, and the workers recruited and placed by such person are performing activities which
are directly related to the principal business of such employer. In such cases, the person or
intermediary shall be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him. (Emphasis
supplied)
Sections 3, 5 and 7 of Department Order No. 18-0212 distinguish between legitimate and labor-only
contracting and assume the existence of an employer-employee relationship if found to be engaged in
labor-only contracting. The provisions state:.
xxxx
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a
trilateral relationship under which there is a contract for a specific job, work or service between the
principal and the contractor or subcontractor, and a contract of employment between the contractor or
subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal
which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor
which has the capacity to independently undertake the performance of the job, work or service, and the
contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service.
xxxx
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal,
and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the performance of the work of the contractual
employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor
Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used by
the contractor or subcontractor in the performance or completion of the job, work or service contracted
out.
The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner and
means to be used in reaching that end.
xxxx
Section 7. Existence of an employer-employee relationship. - The contractor or subcontractor shall be
considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor
Code and other social legislation. The principal, however, shall be solidarity liable with the contractor in
the event of any violation of any provision of the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the following cases as
declared by a competent authority:.
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions)
hereof. (Emphasis supplied)
It is clear from these provisions that contracting arrangements for the performance of specific jobs or
services under the law and its implementing rules are allowed. However, contracting must be made to a
legitimate and independent job contractor since labor rules expressly prohibit labor-only contracting.
Labor-only contracting exists when the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal and any of the following elements are present:
1) The contractor or subcontractor does not have substantial capital or investment which relates to the
 job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main business
of the principal; or
2) The contractor does not exercise the right to control the performance of the work of the contractual
employee.13
In the present case, Manila Memorial entered into a Contract of Services with Ward Trading, a single
proprietorship owned by Emmanuel Mayor Ward with business address in Las Pias City on 23 February
2006. In the Contract of Services, it was provided that Ward Trading, as the contractor, had adequate
workers and substantial capital or investment in the form of tools, equipment, machinery, work premises
and other materials which were necessary in the conduct of its business.
However, a closer look at the Contract of Services reveals that Ward Trading does not have substantial
capital or investment in the form of tools, equipment, machinery, work premises and other materials since
it is Manila Memorial which owns the equipment used in the performance of work needed for interment
and exhumation services. The pertinent provision in the Contract of Services which shows that Manila
Memorial owns the equipment states:.
The COMPANY shall [sell] to the contractor the COMPANY owned equipment in the amount of ONE
MILLION FOUR HUNDRED THOUSAND PESOS ONLY (Php 1,400,000.00) payable in two (2) years
or a monthly payment of FIFTY EIGHT THOUSAND THREE HUNDRED THIRTY FIVE PESOS
ONLY (Php 58,335.00) to be deducted from the CONTRACTOR'S billing. 14chanroblesvirtuallawlibrary
Just by looking at the provision, it seems that the sale was a regular business transaction between two
parties. However, Manila Memorial did not present any evidence to show that the sale actually pushed
through or that payments were made by Ward Trading to prove an ordinary arms length transaction. We
agree with the NLRC in its findings:.
While the above-cited provision of the Contract of Service implies that respondent MMPCI would sell
subject equipment to Ward at some future time, the former failed to present any contract of sale as proof
that, indeed, it actually sold said equipment to Ward. Likewise, respondent MMPCI failed to present any
"CONTRACTOR'S billing" wherein the purported monthly installment of P58,335.00 had been deducted,
to prove that Ward truly paid the same as they fell due. In a contract to sell, title is retained by the vendor
until full payment of the price.
Moreover, the Contract of Service provides that:.
"5. The COMPANY reserves the right to rent all or any of the CONTRACTOR'S equipment in the event
the COMPANY requires the use of said equipment, x x x."
This provision is clear proof that Ward does not have an absolute right to use or enjoy subject equipment,
considering that its right to do so is subject to respondent MMPCI's use thereof at any time the latter
requires it. Such provision is contrary to Article 428 of the Civil Code, which provides that "The owner
has the right to enjoy and dispose of a thing, without other limitation than those established by law." It is
plain to see that Ward is not the owner of the equipment worth P1,400,000.00 that is being actually and
directly used in the performance of the services contracted out.
Further, the Service Contract states that:.
"For its part, the COMPANY agrees to provide the following:
a) Area to store CONTRACTOR'S equipment and materials
b) Office space for CONTRACTOR'S staff and personnel"
This provision is clear proof that even the work premises actually and directly used by Ward in the
performance of the services contracted out is owned by respondent MMPCI. 15chanroblesvirtuallawlibrary
Also, the difference in the value of the equipment in the total amount of P1,400,000.00 can be glaringly
seen in Ward Trading's financial statements for the year 2006 when compared to its 2005 financial
statements. It is significant to note that these financial statements were submitted by Manila Memorial
without any certification that these financial statements were actually audited by an independent certified
public accountant. Ward Trading's Balance Sheet16 as of 31 December 2005 showed that it had assets in
the amount of P441,178.50 and property and equipment with a net book value of P86,026.50 totaling
P534,705. A year later, Ward Trading's Balance Sheet17 ending in 31 December 2006 showed that it had
assets in the amount of P57,084.70 and property and equipment with a net book value of Pl,426,468
totaling P1,491,052.70. Ward Trading, in its Income Statements 18for the years 2005 and 2006, only earned
a net income of P53,800 in the year ending 2005 and P68,141.50 in 2006. Obviously, Ward Trading could
not have raised a substantial capital of P1,400,000.00 from its income alone without the inclusion of the
equipment owned and allegedly sold by Manila Memorial to Ward Trading after they signed the Contract
of Services on 23 February 2006.
Further, the records show that Manila Memorial and Enrique B. Lagdameo admitted that respondents
performed various interment services at its Sucat, Paranaque branch which were directly related to Manila
Memorial's business of developing, selling and maintaining memorial parks and interment functions.
Manila Memorial even retained the right to control the performance of the work of the employees
concerned. As correctly observed by the CA:.
A perusal of the Service Contract would reveal that respondent Ward is still subject to petitioner's control
as it specifically provides that although Ward shall be in charge of the supervision over individual
respondents, the exercise of its supervisory function is heavily dependent upon the needs of petitioner
Memorial Park, particularly:.
"It is also agreed that:
a) The CONTRACTOR'S supervisor will conduct a regular inspection of grave sites/areas being dug to
ensure compliance with the COMPANY'S interment schedules and other related ceremonies.
b) The CONTRACTOR will provide enough manpower during peak interment days including Sundays
and Holidays.
c) The CONTRACTOR shall schedule off-days for its workers in coordination with the COMPANY'S
schedule of interment operation.
d) The CONTRACTOR shall be responsible for any damage done to lawn/s and/or structure/s resulting
from its operation, which must be restored to its/their original condition without delay and at the expense
of CONTRACTOR."
The contract further provides that petitioner has the option to take over the functions of Ward's personnel
if it finds any part or aspect of the work or service provided to be unsatisfactory, thus:.
"6.1 It is hereby expressly agreed and understood that, at any time during the effectivity of this
CONTRACT and its sole determination, the COMPANY may take over the performance of any of the
functions mentioned in Paragraph I above, in any of the following cases:chanRoblesvirtualLawlibrary
xxx
c. If the COMPANY finds the performance of the CONTRACTOR in any part or aspect of the grave
digging works or other services provided by it to be unsatisfactory."
It is obvious that the aforementioned provision leaves respondent Ward at the mercy of petitioner
Memorial Park as the contract states that the latter may take over if it finds any part of the services to be
below its expectations, including the manner of its performance. x x x. 19chanroblesvirtuallawlibrary

The NLRC also found that Ward Trading's business documents fell short of sound business practices. The
relevant portion in the NLRC's Decision states:.
It is also worth noting that while Ward has a Certificate of Business Name Registration issued by the
Department of Trade and Industry on October 24, 2003 and valid up to October 24, 2008, the same
expressly states that it is not a license to engage in any kind of business, and that it is valid only at the
place indicated therein, which is Las Pias City. Hence, the same is not valid in Paranaque City, where
Ward assigned complainants to perform interment services it contracted with respondent MMPCI. It is
also noted that the Permit, which was issued to Ward by the Office of the Mayor of Las Pias City on
October 28, 2003, was valid only up to December 31, 2003. Likewise, the Sanitary Permit to Operate,
which was issued to Ward by the Office of the City Health Officer of the Las Pias City Health Office on
October 28, 2003, expired on December 31, 2003. While respondents MMPCI and Lagdameo were able to
present copies of the above-mentioned documents, they failed to present any proof that Ward is duly
registered as [a] contractor with the Department of Labor and Employment. 20chanroblesvirtuallawlibrary
Section 11 of Department Order No. 18-02, which mandates registration of contractors or subcontractors
with the DOLE, states:.
Section 11. Registration of Contractors or Subcontractors. - Consistent with authority of the Secretary of
Labor and Employment to restrict or prohibit the contracting out of labor through appropriate regulations,
a registration system to govern contracting arrangements and to be implemented by the Regional Office is G.R. Nos. 173254-55 & 173263
hereby established.
DIAMOND FARMS, INC., Petitioner,
The Registration of contractors and subcontractors shall be necessary for purposes of establishing an vs.
effective labor market information and monitoring. SOUTHERN PHILIPPINES FEDERATION OF LABOR (SPFL)-WORKERS SOLIDARITY OF
DARBMUPCO/DIAMOND-SPFL, DIAMOND FARMS AGRARIAN REFORM BENEFICIARIES
Failure to register shall give rise to the presumption that the contractor is engaged in labor-only
contracting. MULTI-PURPOSE COOPERATIVE (DARBMUPCO), VOLTER LOPEZ, RUEL ROMERO,
For failing to register as a contractor, a presumption arises that one is engaged in labor-only contracting PATRICIO CAPRECHO, REY DIMACALI, ELESIO EMANEL, VICTOR SINGSON, NILDA
unless the contractor overcomes the burden of proving that it has substantial capital, investment, tools and DIMACALI, PREMITIVO* DIAZ, RUDY VISTAL, ROGER MONTERO, JOSISIMO GOMEZ
the like.21chanroblesvirtuallawlibrary and MANUEL MOSQUERA, Respondents.

In this case, however, Manila Memorial failed to adduce evidence to prove that Ward Trading had any
DECISION
substantial capital, investment or assets to perform the work contracted for. Thus, the presumption that
Ward Trading is a labor-only contractor stands. Consequently, Manila Memorial is deemed the employer
of respondents. As regular employees of Manila Memorial, respondents are entitled to their claims for JARDELEZA, J.:
wages and other benefits as awarded by the NLRC and affirmed by the CA.
We resolve in this Petition for Review 1 under Rule 45 of the Rules of Court, the issue of who among
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21 January 2013 and the
Diamond Farms, Inc. ("DFI"), Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative
Resolution dated 17 July 2013 of the Court of Appeals in CA-G.R. SP No. 119237.
("DARBMUPCO") and the individual contractors 2 ("respondent-contractors") is the employer of the 400
employees ("respondent-workers").

DFI challenges the March 31, 2006 Decision 3 and May 30, 2006 Resolution4 of the Court Appeals, Special
Twenty-Second Division, Cagayan De Oro City for being contrary to law and jurisprudence. The Decision
dismissed DFIs Petition for Certiorari in C.A.-G.R. SP Nos. 53806 and 61607 and granted
DARBMUPCOs Petition for Certiorari in C.A.-G.R. SP No. 59958. It declared DFI as the statutory
employer of the respondent-workers.
The Facts
DFI owns an 800-hectare banana plantation ("original plantation") in Alejal, Carmen, Davao. 5 Pursuant to
Republic Act No. 6657 or the Comprehensive Agrarian Reform Law of 1988 ("CARL"), commercial
farms shall be subject to compulsory acquisition and distribution, 6 thus the original plantation was covered
by the law. However, the Department of Agrarian Reform ("DAR") granted DFI a deferment privilege to
continue agricultural operations until 1998.7 Due to adverse marketing problems and observance of the so-
called "lay-follow" or the resting of a parcel of land for a certain period of time after exhaustive
utilization, DFI closed some areas of operation in the original plantation and laid off its employees. 8 These
employees petitioned the DAR for the cancellation of DFIs deferment privilege alleging that DFI already
abandoned its area of operations.9 The DAR Regional Director recalled DFIs deferment privilege
resulting in the original plantations automatic compulsory acquisition and distribution under the
CARL.10 DFI filed a motion for reconsideration which was denied. It then appealed to the DAR
Secretary.11
In the meantime, to minimize losses, DFI offered to give up its rights and interest over the original
plantation in favor of the government by way of a Voluntary Offer to Sell. 12 The DAR accepted DFIs offer
to sell the original plantation. However, out of the total 800 hectares, the DAR only approved the
disposition of 689.88 hectares. Hence, the original plantation was split into two: 689.88 hectares were sold
to the government ("awarded plantation") and the remaining 200 hectares, more or less, were retained by
DFI ("managed area").13 The managed area is subject to the outcome of the appeal on the cancellation of
the deferment privilege before the DAR Secretary.
On January 1, 1996, the awarded plantation was turned over to qualified agrarian reform beneficiaries
("ARBs") under the CARL. These ARBs are the same farmers who were working in the original
plantation. They subsequently organized themselves into a multi-purpose cooperative named
"DARBMUPCO," which is one of the respondents in this case.14
On March 27, 1996, DARBMUPCO entered into a Banana Production and Purchase Agreement
("BPPA")15 with DFI.16 Under the BPPA, DARBMUPCO and its members as owners of the awarded
plantation, agreed to grow and cultivate only high grade quality exportable bananas to be sold exclusively
to DFI.17 The BPPA is effective for 10 years.18
On April 20, 1996, DARBMUPCO and DFI executed a "Supplemental to Memorandum Agreement"
("SMA").19 The SMA stated that DFI shall take care of the labor cost arising from the packaging operation,
cable maintenance, irrigation pump and irrigation maintenance that the workers of DARBMUPCO shall
conduct for DFIs account under the BPPA.20
From the start, DARBMUPCO was hampered by lack of manpower to undertake the agricultural operation
under the BPPA because some of its members were not willing to work. 21 Hence, to assist DARBMUPCO
in meeting its production obligations under the BPPA, DFI engaged the services of the respondent-
contractors, who in turn recruited the respondent-workers.22
The engagement of the respondent-workers, as will be seen below, started a series of labor disputes among
DARBMUPCO, DFI and the respondent-contractors.
C.A. G.R. SP No. 53806
On February 10, 1997, respondent Southern Philippines Federation of Labor ("SPFL")a legitimate labor
organization with a local chapter in the awarded plantationfiled a petition for certification election in the
Office of the Med-Arbiter in Davao City.23 SPFL filed the petition on behalf of some 400 workers (the
respondent-workers in this petition) "jointly employed by DFI and DARBMUPCO" working in the
awarded plantation.
DARBMUPCO and DFI denied that they are the employers of the respondent-workers. They claimed,
instead, that the respondent-workers are the employees of the respondent-contractors. 24
In an Order dated May 14, 1997, 25 the Med-Arbiter granted the petition for certification election. It
directed the conduct of certification election and declared that DARBMUPCO was the employer of the
respondent-workers. The Order stated that "whether the said workers/employees were hired by
independent contractors is of no moment. What is material is that they were hired purposely to work on
the 689.88 hectares banana plantation [the awarded plantation] now owned and operated by
DARBMUPCO."26
DARBMUPCO appealed to the Secretary of Labor and Employment ("SOLE"). In a Resolution dated
February 18, 1999,27 the SOLE modified the decision of the Med-Arbiter. The SOLE held that DFI,
through its manager and personnel, supervised and directed the performance of the work of the
respondentcontractors. The SOLE thus declared DFI as the employer of the respondent-workers. 28
DFI filed a motion for reconsideration which the SOLE denied in a Resolution dated May 4, 1999. 29
On June 11, 1999, DFI elevated the case to the Court of Appeals ("CA") via a Petition
for Certiorari30 under Rule 65 of the Rules of Court. The case was raffled to the CAs former Twelfth
Division and was docketed as C.A.-G.R. SP No. 53806.
C.A.-G.R. SP. No. 59958
Meanwhile, on June 20, 199731 and September 15, 1997,32 SPFL, together with more than 300 workers,
filed a case for underpayment of wages, non-payment of 13th month pay and service incentive leave pay
and attorneys fees against DFI, DARBMUPCO and the respondent-contractors before the National Labor
Relations Commission ("NLRC") in Davao City. DARBMUPCO averred that it is not the employer of
respondent-workers; neither is DFI. It asserted that the money claims should be directed against the true
employerthe respondent-contractors.33
In a Decision dated January 22, 1999, 34 the Labor Arbiter ("LA") held that the respondent-contractors are
"labor-only contractors." The LA gave credence to the affidavits of the other contractors 35 of DFI (who are
not party-respondents in this petition) asserting that DFI engaged their services, and supervised and paid
their laborers. The affidavits also stated that the contractors had no dealings with DARBMUPCO, except
that their work is done in the awarded plantation.36
The LA held that, under the law, DFI is deemed as the statutory employer of all the respondent-
workers.37 The LA dismissed the case against DARBMUPCO and the respondent-contractors. 38
DFI appealed to the NLRC. In a Resolution dated May 24, 1999, 39 the NLRC Fifth Division modified the
Decision of the LA and declared that DARBMUPCO and DFI are the statutory employers of the workers
rendering services in the awarded plantation and the managed area, respectively. 40 It adjudged DFI and
DARBMUPCO as solidarily liable with the respondent-contractors for the monetary claims of the
workers, in proportion to their net planted area.41
DARBMUPCO filed a motion for reconsideration which was denied. 42 It filed a second motion for
reconsideration in the NLRC, which was also denied for lack of merit and for being barred under the
NLRC Rules of Procedure.43Hence, DARBMUPCO elevated the case to the CA by way of a Petition
for Certiorari.44 The case was docketed as C.A.-G.R. SP. No. 59958.
The former Eleventh Division of the CA consolidated C.A. G.R. SP. No. 59958 and C.A.-G.R. SP No.
53806 in a Resolution dated January 27, 2001.45
C.A.-G.R. SP No. 61607
Pursuant to the May 4, 1999 Resolution of the SOLE approving the conduct of certification election, the
Department of Labor and Employment ("DOLE") conducted a certification election on October 1,
1999.46 On even date, DFI filed an election protest 47 before the Med-Arbiter arguing that the certification
election was premature due to the pendency of a petition for certiorari before the CA assailing the
February 18, 1999 and May 4, 1999 Resolutions of the SOLE (previously discussed in C.A.-G.R. SP No.
53806).
In an Order dated December 15, 1999, 48 the Med-Arbiter denied DFIs election protest, and certified
SPFL-Workers Solidarity of DARBMUPCO/DIAMOND-SPFL ("WSD-SPFL") as the exclusive
bargaining representative of the respondent-workers. DFI filed a Motion for Reconsideration 49 which the
Med-Arbiter treated as an appeal, and which the latter elevated to the SOLE.
In a Resolution dated July 18, 2000, 50 the SOLE dismissed the appeal. The Resolution stated that the May
4, 1999 Resolution directing the conduct of certification election is already final and executory on June 4,
1999. It pointed out that the filing of the petition for certiorari before the CA assailing the February 18,
1999 and May 4, 1999 Resolutions does not stay the conduct of the certification election because the CA
did not issue a restraining order.51 DFI filed a Motion for Reconsideration but the motion was denied. 52
On October 27, 2000, DFI filed a Petition for Certiorari53 before the CA, docketed as C.A.-G.R. SP No.
61607.
In a Resolution dated August 2, 2005, 54 the CA Twenty-Third Division consolidated C.A.-G.R. SP No.
61607 with C.A.-G.R. SP. No. 59958 and C.A. G.R. SP No. 53806.
The Assailed CA Decision and Resolution
The CA was confronted with two issues:55
(1) "Whether DFI or DARBMUPCO is the statutory employer of the [respondent-workers] in
these petitions; and
(2) Whether or not a certification election may be conducted pending the resolution of the
petition for certiorari filed before this Court, the main issue of which is the identity of the
employer of the [respondent-workers] in these petitions."
On the first issue, the CA agreed with the ruling of the SOLE 56 that DFI is the statutory employer of the
respondent-workers. It noted that the DFI hired the respondent-contractors, who in turn procured their own
men to work in the land owned by DARBMUPCO. Further, DFI admitted that the respondent-contractors
worked under the direction and supervision of DFIs managers and personnel. DFI also paid for the
respondent-contractors services.57 The CA said that the fact that the respondent-workers worked in the
land owned by DARBMUPCO is immaterial. "Ownership of the land is not one of the four (4) elements
generally considered to establish employer-employee relationship." 58
The CA also ruled that DFI is the true employer of the respondent-workers because the respondent-
contractors are not independent contractors. 59 The CA stressed that in its pleadings before the Med-Arbiter,
the SOLE, and the CA, DFI revealed that DARBMUPCO lacks manpower to fulfill the production
requirements under the BPPA. This impelled DFI to hire contractors to supply labor enabling
DARBMUPCO to meet its quota. The CA observed that while the various agencies involved in the
consolidated petitions sometimes differ as to who the statutory employer of the respondent-workers is,
they are uniform in finding that the respondent-contractors are labor-only contractors. 60
On the second issue, the CA reiterated the ruling of the SOLE 61 that absent an injunction from the CA, the
pendency of a petition for certiorari does not stay the holding of the certification election. 62 The
challenged Resolution of the SOLE is already final and executory as evidenced by an Entry of Judgment
dated July 14, 1999; hence, the merits of the case can no longer be reviewed. 63
The CA thus held in its Decision dated March 31, 2006:
WHEREFORE, premises considered, this Court hereby ORDERS:
(1) the DISMISSAL of the petitions in C.A.-G.R. SP No. 53806 and C.A.-G.R. SP No. 61607;
and
(2) the GRANTING of the petition in C.A.-G.R. SP No. 59958 and the SETTING ASIDE of the
assailed resolutions of the NLRC dated 24 May 1999, 30 July 1999 and 26 June 2000,
respectively.
SO ORDERED.64
DFI filed a Motion for Reconsideration of the CA Decision which was denied in a Resolution dated May
30, 2006.65
DFI is now before us by way of Petition for Review on Certiorari praying that DARBMUPCO be
declared the true employer of the respondent-workers.
66
DARBMUPCO filed a Comment maintaining that under the control test, DFI is the true employer of the
respondent-workers.
Respondent-contractors filed a Verified Explanation and Memorandum 67 asserting that they were labor-
only contractors; hence, they are merely agents of the true employer of the respondent-workers.
SPFL did not file any comment or memorandum on behalf of the respondent-workers. 68
The Issue
The issue before this Court is who among DFI, DARBMUPCO and the respondent-contractors is the
employer of the respondent-workers.
Our Ruling
We deny the petition.
This case involves job contracting, a labor arrangement expressly allowed by law. Contracting or
subcontracting is an arrangement whereby a principal (or employer) agrees to put out or farm out with a
contractor or subcontractor the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job, work or service is to be performed or
completed within or outside the premises of the principal. 69 It involves a trilateral relationship among the
principal or employer, the contractor or subcontractor, and the workers engaged by the contractor or
subcontractor.70
Article 106 of the Labor Code of the Philippines 71 (Labor Code) explains the relations which may arise
between an employer, a contractor, and the contractors employees, 72 thus:
ART. 106. Contractor or subcontracting. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only contracting and job contracting as
well as differentiations within these types of contracting and determine who among the parties involved
shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of
any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him.
The Omnibus Rules Implementing the Labor Code 73 distinguishes between permissible job contracting (or
independent contractorship) and labor-only contracting. Job contracting is permissible under the Code if
the following conditions are met:
(a) The contractor carries on an independent business and undertakes the contract work on his
own account under his own responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and
(b) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his
business.74
In contrast, job contracting shall be deemed as labor-only contracting, an arrangement prohibited by law, if
a person who undertakes to supply workers to an employer:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries,
work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities which are directly
related to the principal business or operations of the employer in which workers are habitually
employed.75
As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor overcomes
the burden of proving that it has the substantial capital, investment, tools and the like. 76
Based on the conditions for permissible job contracting, we rule that respondent-contractors are
labor-only contractors.
There is no evidence showing that respondent-contractors are independent contractors. The respondent-
contractors, DFI, and DARBMUPCO did not offer any proof that respondent-contractors were not
engaged in labor-only contracting. In this regard, we cite our ruling in Caro v. Rilloraza,77 thus:
"In regard to the first assignment of error, the defendant company pretends to show through Venancio
Nasol's own testimony that he was an independent contractor who undertook to construct a railway line
between Maropadlusan and Mantalisay, but as far as the record shows, Nasol did not testify that the
defendant company had no control over him as to the manner or methods he employed in pursuing his
work. On the contrary, he stated that he was not bonded, and that he only depended upon the Manila
Railroad for money to be paid to his laborers. As stated by counsel for the plaintiffs, the word
independent contractor means 'one who exercises independent employment and contracts to do a piece of
work according to his own methods and without being subject to control of his employer except as to
result of the work.' Furthermore, if the employer claims that the workmen is an independent contractor, for
whose acts he is not responsible, the burden is on him to show his independence.
Tested by these definitions and by the fact that the defendant has presented practically no evidence to
determine whether Venancio Nasol was in reality an independent contractor or not, we are inclined to
think that he is nothing but an intermediary between the defendant and certain laborers. It is indeed
difficult to find that Nasol is an independent contractor; a person who possesses no capital or money
of his own to pay his obligations to them, who files no bond to answer for any fulfillment of his contract
with his employer and specially subject to the control and supervision of his employer, falls short of the
requisites or conditions necessary for the common and independent contractor." 78 (Citations omitted;
emphasis supplied.)
To support its argument that respondent-contractors are the employers of respondent-workers, and not
merely labor-only contractors, DFI should have presented proof showing that respondent-contractors carry
on an independent business and have sufficient capitalization. The record, however, is bereft of showing of
even an attempt on the part of DFI to substantiate its argument.
DFI cannot cite the May 24, 1999 Resolution of the NLRC as basis that respondent-contractors are
independent contractors. Nowhere in the NLRC Resolution does it say that the respondent-contractors are
independent contractors. On the contrary, the NLRC declared that "it was not clearly established on record
that said [respondent-]contractors are independent, xxx." 79
Further, respondent-contractors admit, and even insist that they are engaged in labor-only contracting. As
will be seen below, respondent-contractors made the admissions and declarations on two
occasions: first was in their Formal Appearance of Counsel and Motion for Exclusion of Individual Party-
Respondents filed before the LA; and second was in their Verified Explanation and Memorandum filed
before this Court.
Before the LA, respondent-contractors categorically stated that they are "labor-only" contractors who have
been engaged by DFI and DARBMUPCO. 80 They admitted that they do not have substantial capital or
investment in the form of tools, equipment, machineries, work premises and other materials, and they
recruited workers to perform activities directly related to the principal operations of their employer.81
Before this Court, respondents-contractors again admitted that they are labor-only contractors. They
narrated that:
1. Herein respondents, Voltaire Lopez, Jr., et al., were commissioned and contracted by
petitioner, Diamond Farms, Inc. (DFI) to recruit farm workers, who are the complaining
[respondent-workers] (as represented by Southern Philippines Federation of Labor (SPFL)
in this appeal by certiorari), in order to perform specific farm activities, such as pruning,
 deleafing, fertilizer application, bud inject, stem spray, drainage, bagging, etc., on banana
plantation lands awarded to private respondent, Diamond Farms Agrarian Reform Beneficiaries
Multi-Purpose Cooperative (DARBMUPCO) and on banana planted lands owned and managed
by petitioner, DFI.
2. All farm tools, implements and equipment necessary to performance of such farm activities
were supplied by petitioner DFI to respondents Voltaire Lopez, Jr., et. al. as well as to
respondents-SPFL, et. al. Herein respondents Voltaire Lopez, Jr. et. al. had no adequate
capital to acquire or purchase such tools, implements, equipment, etc.
3. Herein respondents Voltaire Lopez, Jr., et. al. As well as respondents-SPFL, et. al. were
being directly supervised, controlled and managed by petitioner DFI farm managers and
supervisors, specifically on work assignments and performance targets. DFI managers and
supervisors, at their sole discretion and prerogative, could directly hire and terminate any or all
of the respondents-SPFL, et. al., including any or all of the herein respondents Voltaire Lopez,
Jr., et. al.
4. Attendance/Time sheets of respondents-SPFL, et. al. were being prepared by herein
respondents Voltaire Lopez, Jr., et. al., and correspondingly submitted to petitioner DFI. Payment
of wages to respondents-SPFL, et. al. were being paid for by petitioner DFI thru herein
respondents Voltaire Lopez, [Jr.], et. al. The latter were also receiving their wages/salaries from
petitioner DFI for monitoring/leading/recruiting the respondents-SPFL, et. al.
5. No monies were being paid directly by private respondent DARBMUPCO to respondents-
SPFL, et al., nor to herein respondents Voltaire Lopez, [Jr.], et. al. Nor did respondent
DARBMUPCO directly intervene much less supervise any or all of [the] respondents-SPFL, et.
al. including herein respondents Voltaire Lopez, Jr., et. al. 82 (Emphasis supplied.)
The foregoing admissions are legally binding on respondent-contractors. 83 Judicial admissions made by
parties in the pleadings, or in the course of the trial or other proceedings in the same case are conclusive
and so does not require further evidence to prove them. 84 Here, the respondent-contractors voluntarily
pleaded that they are labor-only contractors; hence, these admissions bind them.
A finding that a contractor is a labor-only contractor is equivalent to a declaration that there is an
employer-employee relationship between the principal, and the workers of the labor-only contractor; the
labor-only contractor is deemed only as the agent of the principal. 85 Thus, in this case, respondent-
contractors are the labor-only contractors and either DFI or DARBMUPCO is their principal.
We hold that DFI is the principal.
Under Article 106 of the Labor Code, a principal or employer refers to the person who enters into an
agreement with a job contractor, either for the performance of a specified work or for the supply of
manpower.86 In this regard, we quote with approval the findings of the CA, to wit:
The records show that it is DFI which hired the individual [respondent-contractors] who in turn
hired their own men to work in the 689.88 hectares land of DARBMUPCO as well as in the managed
area of the plantation. DFI admits [that] these [respondent-contractors] worked under the direction and
supervision of the DFI managers and personnel. DFI paid the [respondent-contractors] for the services
rendered in the plantation and the [respondent-contractors] in turn pay their workers after they
[respondent-contractors] received payment from DFI. xxx DARBMUPCO did not have anything to do
with the hiring, supervision and payment of the wages of the workers-respondents thru the contractors-
respondents. xxx87 (Emphasis supplied.)
DFI does not deny that it engaged the services of the respondent-contractors. It does not dispute the claims
of respondent-contractors that they sent their billing to DFI for payment; and that DFIs managers and
personnel are in close consultation with the respondent-contractors. 88
DFI cannot argue that DARBMUPCO is the principal of the respondent-contractors because it
(DARBMUPCO) owns the awarded plantation where respondent-contractors and respondent-workers
were working;89 and therefore DARBMUPCO is the ultimate beneficiary of the employment of the
respondent-workers.90
That DARBMUPCO owns the awarded plantation where the respondent-contractors and respondent-
workers were working is immaterial. This does not change the situation of the parties. As correctly found
by the CA, DFI, as the principal, hired the respondent-contractors and the latter, in turn, engaged the
services of the respondent-workers.91 This was also the unanimous finding of the SOLE, 92 the LA,93 and
the NLRC.94 Factual findings of the NLRC, when they coincide with the LA and affirmed by the CA are
accorded with great weight and respect and even finality by this Court. 95
Alilin v. Petron Corporation96 is applicable. In that case, this Court ruled that the presence of the power of
control on the part of the principal over the workers of the contractor, under the facts, prove the employer-
employee relationship between the former and the latter, thus:
[A] finding that a contractor is a labor-only contractor is equivalent to declaring that there is an
employer-employee relationship between the principal and the employees of the supposed contractor." In
this case, the employer-employee relationship between Petron and petitioners becomes all the more
apparent due to the presence of the power of control on the part of the former over the latter.
It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals that:
This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-
employee relationship between the parties.1wphi1 The four elements of an employment relationship are:
(a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the power to control the employees conduct.
Of these four elements, it is the power to control which is the most crucial and most determinative
factor, so important, in fact, that, the other elements may even be disregarded.
Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid by
them do not detract from the conclusion that there exists an employer-employee relationship between the
parties due to Petrons power of control over the petitioners. One manifestation of the power of control is
the power to transfer employees from one work assignment to another. Here, Petron could order
petitioners to do work outside of their regular "maintenance/utility" job. Also, petitioners were required to
report for work everyday at the bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and
wear proper uniform and safety helmets as prescribed by the safety and security measures being
implemented within the bulk plant. All these imply control. In an industry where safety is of paramount
concern, control and supervision over sensitive operations, such as those performed by the petitioners, are
inevitable if not at all necessary. Indeed, Petron deals with commodities that are highly volatile and
flammable which, if mishandled or not properly attended to, may cause serious injuries and damage to
property and the environment. Naturally, supervision by Petron is essential in every aspect of its product
handling in order not to compromise the integrity, quality and safety of the products that it distributes to
the consuming public.97 (Citations omitted; emphasis supplied)
That DFI is the employer of the respondent-workers is bolstered by the CAs finding that DFI exercises
control over the respondent-workers.98 DFI, through its manager and supervisors provides for the work
assignments and performance targets of the respondent-workers. The managers and supervisors also have
the power to directly hire and terminate the respondent-workers. 99 Evidently, DFI wields control over the
respondent-workers.
Neither can DFI argue that it is only the purchaser of the bananas produced in the awarded plantation
under the BPPA,100 and that under the terms of the BPPA, no employer-employee relationship exists
between DFI and the respondent-workers,101 to wit:
UNDERTAKING OF THE FIRST PARTY
xxx
3. THE FIRST PARTY [DARBMUPCO] shall be responsible for the proper conduct, safety, benefits and
general welfare of its members working in the plantation and specifically render free and harmless the
SECOND PARTY [DFI] of any expense, liability or claims arising therefrom. It is clearly recognized by
the FIRST PARTY that its members and other personnel utilized in the performance of its function
under this agreement are not employees of the SECOND PARTY.102 (Emphasis supplied)
In labor-only contracting, it is the law which creates an employer-employee relationship between the
principal and the workers of the labor-only contractor.103
Inasmuch as it is the law that forms the employment ties, the stipulation in the BPPA that respondent-
workers are not employees of DFI is not controlling, as the proven facts show otherwise. The law prevails
over the stipulations of the parties. Thus, in Tabas v. California Manufacturing Co., Inc.,104 we held that:
The existence of an employer-employees relation is a question of law and being such, it cannot be
made the subject of agreement.1wphi1 Hence, the fact that the manpower supply agreement between
Livi and California had specifically designated the former as the petitioners' employer and had absolved
the latter from any liability as an employer, will not erase either party's obligations as an employer, if an
employer-employee relation otherwise exists between the workers and either firm. xxx 105 (Emphasis
supplied.)
Clearly, DFI is the true employer of the respondent-workers; respondent-contractors are only agents of
DFI. Under Article 106 of the Labor Code, DFI shall be solidarily liable with the respondent-contractors
for the rightful claims of the respondent-workers, to the same manner and extent as if the latter are directly
employed by DFI.106
WHEREFORE, the petition is DENIED for lack of merit. The March 31, 2006 Decision and the May 30,
2006 Resolution of the Court of Appeals in C.A.-G.R. SP Nos. 53806, 61607 and 59958 are
hereby AFFIRMED.
SO ORDERED.
THIRD DIVISION
G.R. No. 171664 March 6, 2013
BANKARD, INC., Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION- FIRST
DIVISION, PAULO BUENCONSEJO,BANKARD EMPLOYEES UNION-AWATU, Respondents.
DECISION
MENDOZA, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to review, reverse and set
aside the October 20, 2005 Decision 1 and the February 21, 2006 Resolution 2 of the Court of Appeals
{CA), in CA-G.R. SP No. 68303, which affirmed the May 31, 2001 Resolution 3 and the September 24,
2001 Order4 of the National Labor Relations Commission (NLRC) in Certified Cases No. 000-185-00 and
000-191-00.
The Facts
On June 26, 2000, respondent Bankard Employees Union-AWATU (Union) filed before the National
Conciliation and Mediation Board (NCMB) its first Notice of Strike (NOS), docketed as NS-06-225-
00,5 alleging commission of unfair labor practices by petitioner Bankard, Inc. (Bankard), to wit: 1) job
contractualization; 2) outsourcing/contracting-out jobs; 3) manpower rationalizing program; and 4)
discrimination.
On July 3, 2000, the initial conference was held where the Union clarified the issues cited in the NOS. On
July 5, 2000, the Union held its strike vote balloting where the members voted in favor of a strike. On July
10, 2000, Bankard asked the Office of the Secretary of Labor to assume jurisdiction over the labor dispute
or to certify the same to the NLRC for compulsory arbitration. On July 12, 2000, Secretary Bienvenido
Laguesma (Labor Secretary) of the Department of Labor and Employment (DOLE) issued the order
certifying the labor dispute to the NLRC.6
On July 25, 2000, the Union declared a CBA bargaining deadlock. The following day, the Union filed its
second NOS, docketed as NS-07-265-00, 7 alleging bargaining in bad faith on the part of Bankard. Bankard
then again asked the Office of the Secretary of Labor to assume jurisdiction, which was granted. Thus, the
Order, dated August 9, 2000, certifying the labor dispute to the NLRC, was issued. 8
The Union, despite the two certification orders issued by the Labor Secretary enjoining them from
conducting a strike or lockout and from committing any act that would exacerbate the situation, went on
strike on August 11, 2000.9
During the conciliatory conferences, the parties failed to amicably settle their dispute. Consequently, they
were asked to submit their respective position papers. Both agreed to the following issues:
1. Whether job contractualization or outsourcing or contracting-out is an unfair labor practice on
the part of the management.
2. Whether there was bad faith on the part of the management when it bargained with the
Union.10
As regards the first issue, it was Bankards position that job contractualization or outsourcing or
contracting-out of jobs was a legitimate exercise of management prerogative and did not constitute unfair
labor practice. It had to implement new policies and programs, one of which was the Manpower
Rationalization Program (MRP) in December 1999, to further enhance its efficiency and be more
competitive in the credit card industry. The MRP was an invitation to the employees to tender their
voluntary resignation, with entitlement to separation pay equivalent to at least two (2) months salary for
every year of service. Those eligible under the companys retirement plan would still receive additional
pay. Thereafter, majority of the Phone Center and the Service Fulfilment Division availed of the MRP.
Thus, Bankard contracted an independent agency to handle its call center needs. 11
As to the second issue, Bankard denied that there was bad faith on its part in bargaining with the Union. It
came up with counter-offers to the Unions proposals, but the latters demands were far beyond what
management could give. Nonetheless, Bankard continued to negotiate in good faith until the Memorandum
of Agreement (MOA) re-negotiating the provisions of the 1997-2002, Collective Bargaining Agreement
(CBA) was entered into between Bankard and the Union. The CBA was overwhelmingly ratified by the
Union members. For said reason, Bankard contended that the issue of bad faith in bargaining had become
moot and academic.12
On the other hand, the Union alleged that contractualization started in Bankard in 1995 in the Records
Communications Management Division, particularly in the mailing unit, which was composed of two (2)
employees and fourteen (14) messengers. They were hired as contractual workers to perform the functions
of the regular employees who had earlier resigned and availed of the MRP.13 According to the Union, there
were other departments in Bankard utilizing messengers to perform work load considered for regular
employees, like the Marketing Department, Voice Authorizational Department, Computer Services
Department, and Records Retention Department. The Union contended that the number of regular
employees had been reduced substantially through the management scheme of freeze-hiring policy on
positions vacated by regular employees on the basis of cost-cutting measures and the introduction of a
more drastic formula of streamlining its regular employees through the MRP.14
With regard to the second issue, the Union averred that Bankards proposals were way below their
demands, showing that the management had no intention of reaching an agreement. It was a scheme
calculated to force the Union to declare a bargaining deadlock.15
On May 31, 2001, the NLRC issued its Resolution 16 declaring that the management committed acts
considered as unfair labor practice (ULP) under Article 248(c) of the Labor Code. It ruled that:
The act of management of reducing its number of employees thru application of the Manpower
Rationalization Program and subsequently contracting the same to other contractual employees defeats the
purpose or reason for streamlining the employees. The ultimate effect is to reduce the number of union
members and increasing the number of contractual employees who could never be members of the union
for lack of qualification. Consequently, the union was effectively restrained in their movements as a union
on their rights to self-organization. Management had successfully limited and prevented the growth of the
Union and the acts are clear violation of the provisions of the Labor Code and could be considered as
Unfair Labor Practice in the light of the provisions of Article 248 paragraph (c) of the Labor Code. 17
The NLRC, however, agreed with Bankard that the issue of bargaining in bad faith was rendered moot and
academic by virtue of the finalization and signing of the CBA between the management and the Union. 18
Unsatisfied, both parties filed their respective motions for partial reconsideration.1wphi1 Bankard
assailed the NLRC's finding of acts of ULP on its part. The Union, on the other hand, assailed the NLRC
ruling on the issue of bad faith bargaining.
19
On September 24, 2001, the NLRC issued the Order denying both parties' motions for lack of merit.
On December 28, 2001, Bankard filed a petition for certiorari under Rule 65 with the CA arguing that the
NLRC gravely abused its discretion amounting to lack or excess of jurisdiction when:
1. It issued the Resolution, dated May 31, 2001, particularly in finding that Bankard committed
acts of unfair labor practice; and,
2. It issued the Order dated September 24, 2001 denying Bankard's partial motion for
reconsideration.20
The Union filed two (2) comments, dated January 22, 2002, through its NCR Director, Cornelio Santiago,
and another, dated February 6, 2002, through its President, Paulo Buenconsejo, both praying for the
dismissal of the petition and insisting that Bankard's resort to contractualization or outsourcing of
contracts constituted ULP. It further alleged that Bankard committed ULP when it conducted CBA
negotiations in bad faith with the Union.
Ruling of the Court of Appeals
The CA dismissed the petition, finding that the NLRC ruling was supported by substantial evidence.
The CA agreed with Bankard that job contracting, outsourcing and/or contracting out of jobs did not per se
constitute ULP, especially when made in good faith and for valid purposes. Despite Bankard's claim of
good faith in resorting to job contractualization for purposes of cost-efficient operations and its non-
interference with the employees' right to self-organization, the CA agreed with the NLRC that Bankard's
acts impaired the employees right to self-organization and should be struck down as illegal and invalid
pursuant to Article 248(c)21 of the Labor Code. The CA thus, ruled in this wise:
We cannot agree more with public respondent. Incontrovertible is the fact that petitioner's acts, particularly
its promotion of the program enticing employees to tender their voluntary resignation in exchange for
financial packages, resulted to a union dramatically reduced in numbers. Coupled with the management's
policy of "freeze-hiring" of regular employees and contracting out jobs to contractual workers, petitioner
was able to limit and prevent the growth of the Union, an act that clearly constituted unfair labor
practice.22
In its assailed decision, the CA affirmed the May 31, 2001 Resolution and the September 24, 2001 Order
of the NLRC.
Aggrieved, Bankard filed a motion for reconsideration. The CA subsequently denied it for being a mere
repetition of the grounds previously raised. Hence, the present petition bringing up this lone issue:
THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER BANKARD, INC.
COMMITTED ACTS OF UNFAIR LABOR PRACTICE WHEN IT DISMISSED THE PETITION FOR
CERTIORARI AND DENIED THE MOTION FOR RECONSIDERATION FILED BY PETITIONER. 23
Ruling of the Court
The Court finds merit in the petition.
Well-settled is the rule that "factual findings of labor officials, who are deemed to have acquired expertise
in matters within their jurisdiction, are generally accorded not only respect but even finality by the courts
when supported by substantial evidence." 24 Furthermore, the factual findings of the NLRC, when affirmed
by the CA, are generally conclusive on this Court. 25 When the petitioner, however, persuasively alleges
that there is insufficient or insubstantial evidence on record to support the factual findings of the tribunal
or court a quo, then the Court, exceptionally, may review factual issues raised in a petition under Rule 45
in the exercise of its discretionary appellate jurisdiction.26
This case involves determination of whether or not Bankard committed acts considered as ULP. The
underlying concept of ULP is found in Article 247 of the Labor Code, to wit:
Article 247. Concept of unfair labor practice and procedure for prosecution thereof. -- Unfair labor
practices violate the constitutional right of workers and employees to self-organization, are inimical to the
legitimate interests of both labor and management, including their right to bargain collectively and
otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt industrial peace
and hinder the promotion of healthy and stable labor-management relations. x x x
The Court has ruled that the prohibited acts considered as ULP relate to the workers right to self-
organization and to the observance of a CBA. It refers to "acts that violate the workers right to
organize."27 Without that element, the acts, even if unfair, are not ULP.28 Thus, an employer may only be
held liable for unfair labor practice if it can be shown that his acts affect in whatever manner the right of
his employees to self-organize.29
In this case, the Union claims that Bankard, in implementing its MRP which eventually reduced the
number of employees, clearly violated Article 248(c) of the Labor Code which states that:
Art. 248. Unfair labor practices of employers. It shall be unlawful for an employer to commit any of the
following unfair labor practice:
xxxx
(c) To contract out services or functions being performed by union members when such will interfere with,
restrain or coerce employees in the exercise of their rights to self-organization;
xxxx
Because of said reduction, Bankard subsequently contracted out the jobs held by former employees to
other contractual employees. The Union specifically alleges that there were other departments in Bankard,
Inc. which utilized messengers to perform work load considered for regular employees like the Marketing
Department, Voice Authorizational Department, Computer Services Department, and Records Retention
Department.30 As a result, the number of union members was reduced, and the number of contractual
employees, who were never eligible for union membership for lack of qualification, increased.
The general principle is that the one who makes an allegation has the burden of proving it. 1avvphi1 While
there are exceptions to this general rule, in ULP cases, the alleging party has the burden of proving the
ULP;31 and in order to show that the employer committed ULP under the Labor Code, substantial evidence
is required to support the claim. 32 Such principle finds justification in the fact that ULP is punishable with
both civil and/or criminal sanctions.33
Aside from the bare allegations of the Union, nothing in the records strongly proves that Bankard intended
its program, the MRP, as a tool to drastically and deliberately reduce union membership. Contrary to the
findings and conclusions of both the NLRC and the CA, there was no proof that the program was meant to
encourage the employees to disassociate themselves from the Union or to restrain them from joining any
union or organization. There was no showing that it was intentionally implemented to stunt the growth of
the Union or that Bankard discriminated, or in any way singled out the union members who had availed of
the retirement package under the MRP. True, the program might have affected the number of union
membership because of the employees voluntary resignation and availment of the package, but it does not
necessarily follow that Bankard indeed purposely sought such result. It must be recalled that the MRP was
implemented as a valid cost-cutting measure, well within the ambit of the so-called management
prerogatives. Bankard contracted an independent agency to meet business exigencies. In the absence of
any showing that Bankard was motivated by ill will, bad faith or malice, or that it was aimed at interfering
with its employees right to self-organize, it cannot be said to have committed an act of unfair labor
practice.34
"Substantial evidence is more than a mere scintilla of evidence. It means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, even if other minds equally reasonable
might conceivably opine otherwise." 35 Unfortunately, the Union, which had the burden of adducing
substantial evidence to support its allegations of ULP, failed to discharge such burden. 36
The employers right to conduct the affairs of its business, according to its own discretion and judgment, is
well-recognized.37 Management has a wide latitude to conduct its own affairs in accordance with the
necessities of its business.38 As the Court once said:
The Court has always respected a company's exercise of its prerogative to devise means to improve its
operations. Thus, we have held that management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, supervision and transfer of
employees, working methods, time, place and manner of work.
This is so because the law on unfair labor practices is not intended to deprive employers of their
fundamental right to prescribe and enforce such rules as they honestly believe to be necessary to the
proper, productive and profitable operation of their business.39
Contracting out of services is an exercise of business judgment or management prerogative. Absent any
proof that management acted in a malicious or arbitrary manner, the Court will not interfere with the
exercise of judgment by an employer.40Furthermore, bear in mind that ULP is punishable with both civil
and/or criminal sanctions.41 As such, the party so alleging must necessarily prove it by substantial
evidence. The Union, as earlier noted, failed to do this. Bankard merely validly exercised its management
prerogative. Not shown to have acted maliciously or arbitrarily, no act of ULP can be imputed against it.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No.
68303, dated October 20, 2005, and its Resolution, dated February 21, 2006, are REVERSED and SET
ASIDE. Petitioner Bankard, Inc. is hereby declared as not having committed any act constituting Unfair
Labor Practice under Article 248 of the Labor Code.
SO ORDERED.
 Petitioners were former regular employees of respondent Jardine Pacific Finance, Inc. (formerly MB
Finance) (Jardine). The petitioners were also officers and members of MB Finance Employees
Association-FFW Chapter (the Union), a legitimate labor union and the sole exclusive bargaining agent of
the employees of Jardine. The table below shows the petitioners previously occupied positions, as well as
their total length of service with Jardine before their dismissal from employment.

Petitioner Position Number of

Years of
Service
Eugene S. Arabit Field Collector 20 years
Edgardo C. Sadsad Field Collector 3 years
Lowell C. Funtanoz Field Collector 7 years
Gerardo F. Punzalan Field Collector 16 years
Freddie M. Mendoza Field Collector 20 years
Emilio B. Belen Senior Credit Investigator/Field 18 years
SECOND DIVISION Collector- San Pablo Branch

G.R. No. 181719 April 21, 2014 Violeta C. Diumano Senior Accounting 19 years
Clerk/Documentation Clerk-San Pablo
Branch
EUGENE S. ARABIT, EDGARDO C. SADSAD, LOWELL C. FUNTANOZ, GERARDO F.
PUNZALAN, FREDDIE M. MENDOZA, EMILIO B. BELEN, VIOLETA C. DIUMANO and MB
FINANCE EMPLOYEES ASSOCIATION FFW CHAPTER (FEDERATION OF FREE On the claim of financial losses, Jardine decided to reorganize and implement a redundancy program
WORKERS), Petitioners, among its employees. The petitioners were among those affected by the redundancy program. Jardine
vs. thereafter hired contractual employees to undertake the functions these employees used to perform.
JARDINE PACIFIC FINANCE, INC. (FORMERLY MB FINANCE), Respondent.
The Union filed a notice of strike with the National Conciliation and Mediation Board (NCMB),
DECISION questioning the termination of employment of the petitioners who were also union officers. The Union
alleged unfair labor practice on the part of Jardine, as well as discrimination in the dismissal of its officers
BRION, J.: and members.

We resolve in this petition for review on certiorari 1 the challenge to the March 23, 2007 decision 2 and the
February 11, 2008 resolution3 of the Court of Appeals (CA) in CA G.R. SP No. 91952. These assailed CA
rulings annulled and set aside the December 1, 2004 decision 4 and the July 21, 2005 resolution 5 of the
National Labor Relations Commission (NLRC) in NLRC NCR CA No. 029753-01 (NLRC NCR Case No.
06-06112-99). The NLRC rulings, in turn, fully affirmed the September 29, 2000 decision 6 of Labor
Arbiter (LA) Jovencio LL Mayor, Jr. The LA's decision ordered the petitioners Eugene S. Arabit, Edgardo
C. Sadsad, Lowell C. Funtanoz, Gerardo F. Punzalan, Freddie M. Mendoza, Emilio B. Belen and Violeta
C. Diumanos reinstatement to their former positions without loss of seniority rights and the payment of
full backwages, computed from the time of their dismissal on May 30, 1999.
Factual Antecedents
Negotiations ensued between the Union and Jardine under the auspices of the NCMB, and both parties
eventually reached an amicable settlement. In the settlement, the petitioners accepted their redundancy pay
without prejudice to their right to question the legality of their dismissal with the NLRC. Jardine paid the
petitioners a separation package composed of their severance pay, plus their grossed up transportation
allowance.7
On June 1, 1999, the petitioners and the Union filed a complaint against Jardine with the NLRC for illegal
dismissal and unfair labor practice.
The Labor Arbitration Rulings
Before the LA, the parties decided to limit the issues to two, namely: (a) whether the separation of the
petitioners was valid or not; and (b) whether Jardine committed an unfair labor practice against the Union.
The petitioners alleged before the LA that their dismissal was illegal and was tainted with bad faith as their
positions were not superfluous. They argued that if their positions had really been redundant, then Jardine
should have not hired contractual workers to replace them. 8
The petitioners also argued that Jardine was guilty of unfair labor practice for contracting out services that
the petitioners previously held. Unfair labor practice took place under Article 248 of the Labor Code as the
petitioners were union officers.9
The petitioners likewise claimed that Jardines act of hiring contractual employees as replacements was a
restraint on the Unions right to self-organization. The petitioners also pointed out that they were Union
officers and panel members in the scheduled collective bargaining agreement (CBA) negotiations between
Jardine and the Union. The petitioners particularly found the company action objectionable as their
employment was terminated when their CBA negotiations were about to commence. 10
Jardine argued in its defense that the company had been incurring substantial business losses from 1996 to
1998. According to Jardine, its audited financial statements reflect that for 1996, it suffered a net loss
of P5,538,960.00; for 1997,11 a net loss in the amount of P57,274,018.00;12 and a net loss
of P95,529,527.00 for 1998.13
Because of these serious business losses, Jardine asserted that it had to lay-off some of its employees and
reorganize its ranks to eliminate positions that were in excess of what its business required. 14
Jardine, however, admitted that it hired contractual employees to replace petitioners in their previous
posts. Jardine reasoned out that no bad faith took place since the hiring of contractual employees was a
valid exercise of its management prerogative. 15 Jardine argued that the distinction between redundancy and
retrenchment is not material; an employer resorts to retrenchment or redundancy for the same reason,
namely the economics of business.16 Since Jardine successfully established that it incurred serious business
losses, then termination of employment of the petitioners was valid for all intents and purposes. 17
In reply to the petitioners allegation of unfair labor practice, Jardine argued that had it intended to commit
union busting, then it should not have merely dismissed the seven petitioners; it should have also
dismissed other employees who were union officers and members. 18 According to Jardine, the termination
of the petitioners services did not interfere with the Union and its remaining members right to self-
organization since Jardine continuously dealt with the Union and recognized it as the sole and exclusive
bargaining representative of its rank-and-file employees. 19
The LA ruled in the petitioners favor. In its decision 20 dated September 29, 2000, the LA held that the
hiring of contractual employees to replace the petitioners directly contradicts the concept of redundancy
which involves the trimming down of the workforce because a task is being carried out by too many
people.21 The LA explained that the companys action was a circumvention of the right of the petitioners to
security of tenure.22
The LA further held that it was not enough for Jardine to simply focus on its losses. According to the LA,
it was error for Jardine to simply lump together the seven petitioners as employees whose positions have
become redundant without explaining why their respective positions became superfluous in relation to the
other positions and employees of the company.23
On the petitioners allegation of unfair labor practice, the LA held that not enough evidence was presented
to prove the claim against Jardine.
Both parties appealed the LAs decision to the NLRC. In its decision 24 dated December 1, 2004, the NLRC
dismissed the appeals and affirmed the LAs decision in its entirety.25
Jardine moved for the reconsideration of the NLRCs decision, which motion the NLRC also denied in its
resolution26 of July 21, 2005. Jardine thereafter sought recourse with the CA via a petition for certiorari
under Rule 65.27
The CAs Ruling
In its decision28 dated March 23, 2007, the CA reversed the LAs and the NLRCs rulings, and granted
Jardines petition for certiorari.
The CA found that Jardines act of hiring contractual employees in replacement of the petitioners does not
run counter to the argument that their positions are already superfluous. 29 According to the CA, the hiring
of contractual employees is a management prerogative that Jardine has the right to exercise. 30 In the
absence of any showing of malice or arbitrariness on the part of Jardine in implementing its redundancy
program, the courts must not interfere with the companys exercise of a bona fide management
decision.31 The CA cited for this purpose the case of De Ocampo v. National Labor Relations
Commission32 which explains:
The reduction of the number of workers in a company made necessary by the introduction of the services
of Gemac Machineries in the maintenance and repair of its industrial machinery is justified. There can be
no question as to the right of the company to contract the services of Gemac Machineries to replace the
services rendered by the terminated mechanics with a view to effecting more economic and efficient
methods of production.
In the same case, We ruled that "(t)he characterization of (petitioners) services as no longer necessary or
sustainable, and therefore properly terminable, was an exercise of business judgment on the part of
(private respondent) company. The wisdom or soundness of such characterization or decision was not
subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as
violation of law or merely arbitrary and malicious action is not shown" (ibid, p. 673).
In contracting the services of Gemac Machineries, as part of the company's cost-saving program, the
services rendered by the mechanics became redundant and superfluous, and therefore properly terminable.
The company merely exercised its business judgment or management prerogative. And in the absence of
any proof that the management abused its discretion or acted in a malicious or arbitrary manner, the court
will not interfere with the exercise of such prerogative.33
The CA further held that Jardine successfully established that for the years 1996 to 1998, the company
incurred serious losses.34 The appellate court also observed that the reduction in the number of workers,
made necessary by the introduction of the services of an independent contractor, is justified when
undertaken to implement more economic and efficient methods of production. 35
These justifications led to the CAs ruling which annulled and set aside the December 1, 2004 decision and
the July 21, 2005 resolution of the NLRC and to its own ruling that the petitioners had not been illegally
dismissed.
The CA denied the petitioners subsequent motion for reconsideration. The petitioners are now before this
Court on a petition for review on certiorari under Rule 45 of the Rules of Court.
The Petition
In their petition, the petitioners maintain that the CA gravely abused its discretion and that its ruling is not
in conformity with the law and jurisprudence.
The petitioners argue that there is a difference between financial loss and decline of earnings. They posit
that what Jardine actually experienced was a decline in capital and not substantial financial losses for the
years 1996 to 1998.36
The petitioners also assert that Jardine did not take any remedial measure before it implemented its
redundancy program. It simply hastily terminated the petitioners from the service. 37 In support of this
argument, the petitioners cited the case of Golden Thread Knitting Industries, Inc. v. NLRC 38 where the
Court laid down guidelines to be considered in selecting employees who would be dismissed from the
service in case of redundancy.39 The petitioners contend that the records show that Jardine did not lay
down any basis or criteria in choosing the petitioners for inclusion in the program. 40
According to the petitioners, they are all regular employees whose years of service range from three (3) to
twenty (20) years. Since Jardine immediately terminated their services without evaluating their
performance in relation with those of the other employees and without considering other relevant factors,
then Jardines decision was arbitrary and in disregard of the guidelines set by this Court in Golden
Thread.41
Finally, the petitioners also reiterate the findings of the LA and of the NLRC that Jardines act of hiring
contractual employees as their replacements is contrary to Jardines claim that there was
redundancy.42 They also contend that the hiring of new employees negates Jardines argument that it was
suffering from substantial losses. 43Based on these premises, the petitioners posit that the CA erred in
annulling and setting aside the NLRCs decision, and pray instead for its reinstatement.
The Courts Ruling
We resolve to GRANT the petition.
Procedural consideration: the nature
of a Rule 45 petition
We emphasize at the outset that the current petition was brought under Rule 45 of the Rules of Court. As a
rule, only questions of law may be raised on appeal under this remedy. 44 This is in contrast with a petition
for certiorari brought under Rule 65 where the review centers on the jurisdictional errors the lower court or
tribunal may have committed.45
We thus limit our review to errors of law which the CA might have committed. A question of law arises
when there is doubt as to what the law is on a certain state of facts, while there is a question of fact when
the doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law, the same must
not involve an examination of the probative value of the evidence presented by the litigants or any of
them.46
"In ruling for legal correctness, we have to view the CA decision in the same context that the petition for
certiorari it ruled upon was presented to it; we have to examine the CA decision from the prism of whether
it correctly determined the presence or absence of grave abuse of discretion in the NLRC decision before
it, not on the basis of whether the NLRC decision on the merits of the case was correct. In other words, we
have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it. This is the approach that should be basic in a Rule 45 review of a CA ruling
in a labor case. In question form, the question to ask is: Did the CA correctly determine whether the NLRC
committed grave abuse of discretion in ruling on the case?"47
In this context, the primary question we confront is: did the CA correctly rule that the NLRC committed
grave abuse of discretion when it found that Jardine validly terminated the petitioners employment
because of redundancy?
Redundancy in contrast with retrenchment
Jardine, in its petition for certiorari with the CA, posited that the distinction between redundancy and
retrenchment is not material.48 It contended that employers resort to these causes of dismissal for purely
economic considerations.49 Jardine further argued that the immateriality of the distinction between these
two just causes for dismissal is shown by the fact that redundancy and retrenchment are found and lumped
together in just one single provision of the Labor Code (Article 283 thereof).
We cannot accept Jardines shallow understanding of the concepts of redundancy and retrenchment in
determining the validity of the severance of an employer-employee relationship. The fact that they are
found together in just one provision does not necessarily give rise to the conclusion that the difference
between them is immaterial. This Court has already ruled before that retrenchment and redundancy are
two different concepts; they are not synonymous; thus, they should not be used interchangeably. 50 The
clear distinction between these two concepts was discussed in Andrada, et al., v. NLRC, 51 citing the case of
Sebuguero v. NLRC,52 where this Court clarified:
Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the
actual requirements of the enterprise. A position is redundant where it is superfluous, and superfluity of a
position or positions may be the outcome of a number of factors, such as over hiring of workers, decreased
volume of business, or dropping of a particular product line or service activity previously manufactured or
undertaken by the enterprise.
Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the termination of
employment initiated by the employer through no fault of the employees and without prejudice to the
latter, resorted to by management during periods of business recession, industrial depression, or seasonal
fluctuations, or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant for
a new production program or the introduction of new methods or more efficient machinery, or of
automation. Simply put, it is an act of the employer of dismissing employees because of losses in the
operation of a business, lack of work, and considerable reduction on the volume of his business, a right
consistently recognized and affirmed by this Court.
These rulings appropriately clarify that redundancy does not need to be always triggered by a decline in
the business. Primarily, employers resort to redundancy when the functions of an employee have already
become superfluous or in excess of what the business requires. Thus, even if a business is doing well, an
employer can still validly dismiss an employee from the service due to redundancy if that employees
position has already become in excess of what the employers enterprise requires.
From this perspective, it is illogical for Jardine to terminate the petitioners employment and replace them
with contractual employees. The replacement effectively belies Jardines claim that the petitioners
positions were abolished due to superfluity. Redundancy could have been justified if the functions of the
petitioners were transferred to other existing employees of the company.
To dismiss the petitioners and hire new contractual employees as replacements necessarily give rise to the
sound conclusion that the petitioners services have not really become in excess of what Jardines business
requires. To replace the petitioners who were all regular employees with contractual ones would amount to
a violation of their right to security of tenure. For this, we affirm the NLRCs ruling, citing the LAs
decision, when it ruled:
In the case at bench, respondents did not dispute that after laying-off complainants herein, they engaged
the services of an agency to perform the tasks use (sic) to be done by complainants. This is [in direct]
contradiction to the concept of redundancy which precisely requires the trimming down of the [workforce]
because a task is being carried out by just too many people. The subsequent contracting out to an agency
the functions or duties that used to be the domain of individual complainants herein is a circumvention of
their constitutional rights to security of tenure, and therefore illegal. 53
Guidelines in implementing redundancy
We recognize that management has the prerogative to characterize an employees services as no longer
necessary or sustainable, and therefore properly terminable.54
The CA also correctly cited De Ocampo, et al., v. NLRC 55 when it discussed that Jardines decision to hire
contractual employees as replacements is a management prerogative which the company has the right to
undertake to implement a more economic and efficient operation of its business. 56
In De Ocampo, this Court held that, in the absence of proof that the management abused its discretion or
acted in a malicious or arbitrary manner in replacing dismissed employees with contractual ones, judicial
intervention should not be made in the companys exercise of its management prerogative. 57
The employers exercise of its management prerogative, however, is not an unbridled right that cannot be
subjected to this Courts scrutiny. The exercise of management prerogative is subject to the caveat that it
should not performed in violation of any law and that it is not tainted by any arbitrary or malicious motive
on the part of the employer.58
This Court, in several cases, sufficiently explained that the employer must follow certain guidelines to
dismiss employees due to redundancy. These guidelines aim to ensure that the dismissal is not
implemented arbitrarily and is not tainted with bad faith against the dismissed employees.
In Golden Thread Knitting Industries, Inc. v. NLRC, 59 this Court laid down the principle that the employer
must use fair and reasonable criteria in the selection of employees who will be dismissed from
employment due to redundancy. Such fair and reasonable criteria may include the following, but are not
limited to: (a) less preferred status (e.g. temporary employee); (b) efficiency; and (c) seniority. The
presence of these criteria used by the employer shows good faith on its part and is evidence that the
implementation of redundancy was painstakingly done by the employer in order to properly justify the
termination from the service of its employees. 60
As the petitioners pointed out, the records are bereft of indications that Jardine employed clear criteria
when it decided who among its employees, who held similar positions as the petitioners, should be
removed from their posts because of redundancy. Jardine never bothered to explain how and why the
petitioners were the ones dismissed. Jardines acts became more suspect given that the petitioners were all
union officers and some of them were panel members in the scheduled CBA negotiations between Jardine
and the Union.
Aside from the guidelines for the selection of employees who will be terminated, the Court, in Asian
Alcohol Corp. v. NLRC,61 also laid down guidelines for redundancy to be characterized as validly
undertaken by the employer. The Court ruled:
For the implementation of a redundancy program to be valid, the employer must comply with the
following requisites: (1) written notice served on both the employees and the Department of Labor and
Employment at least one month prior to the intended date of retrenchment; (2) payment of separation pay
equivalent to at least one month pay or at least one month pay for every year of service, whichever is
higher; (3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in
ascertaining what positions are to be declared redundant and accordingly abolished. 62
Admittedly, Jardine complied with guidelines 1 and 2 of the guidelines in Asian Alcohol. Jardine informed
the Department of Labor and Employment of the petitioners separation from the service due to
redundancy on April 30, 1999, one month before their terminations effectivity. Also, the petitioners were
given their individual separation packages, composed of their severance pay, plus their grossed up
transportation allowance.
Guidelines 3 and 4 of Asian Alcohol, however, are different matters. These last two guidelines are
interrelated to ensure good faith in abolishing redundant positions; the employer must clearly show that it
used fair and reasonable criteria in ascertaining what positions are to be declared redundant.
In this cited case, the employer took pains to discuss and elaborate on the reasons why the position of the
private respondent was the one chosen by the employer to be abolished. We quote the Courts ruling:
In 1992, the lease contract, which also provided for a right of way leading to the site of the wells, was
terminated. Also, the water from the wells had become salty due to extensive prawn farming nearby and
could no longer be used by Asian Alcohol for its purpose.1awp++i1 The wells had to be closed and
needless to say, the services of Carias, Martinez and Sendon had to be terminated on the twin grounds of
redundancy and retrenchment.
xxxx
Private respondent Amacio was among the ten (10) mechanics who manned the machine shop at the plant
site. At their current production level, the new management found that it was more cost efficient to
maintain only nine (9) mechanics. In choosing whom to separate among the ten (10) mechanics, the
management examined employment records and reports to determine the least efficient among them. It
was private respondent Amacio who appeared the least efficient because of his poor health condition. 63
Jardine never undertook what the employer in Asian Alcohol did.1wphi1 Jardine was never able to
explain in any of its pleadings why the petitioners positions were redundant. It never even attempted to
discuss the attendant facts and circumstances that led to the conclusion that the petitioners positions had
become superfluous and unnecessary to Jardines business requirements. Thus, we can only speculate on
what actually happened.
As the LA correctly found, Jardine lumped together the seven petitioners into one group whose positions
had become redundant. This move was despite the fact that not all of them occupied the same positions
and performed the same functions.64 Under the circumstances of the case, Jardines move was thus illegal.
We affirm the LAs ruling that fair play and good faith require that where one employee will be chosen
over the others, the employer must be able to clearly explain the merit of the choice it has taken. 65
To sum up, based on the guidelines set by the Court in the cases of Golden Thread and Asian Alcohol, we
find that at two levels, Jardine failed to set the required fair and reasonable criteria in the termination of
the petitioners employment, leading to the conclusion that the termination from the service was arbitrary
and in bad faith.
The first level, based on Asian Alcohol, is broader as the case recognized distinctions on a per position
basis. At this level, Jardine failed to explain why among all of the existing positions in its organization,
Jardine chose the petitioners posts as the ones which have already become redundant and
terminable.1wphi1
The second level, derived from Golden Thread, is more specific. Here the distinction narrows down to the
particular employees occupying the same positions which were already declared to be redundant. At this
level, Jardines lapse is shown by its failure to explain why among all of its employees whose positions
were determined to be redundant, the petitioners were the ones selected to be dismissed from the service.
Notably, the LA and the NLRC also arrived at the same conclusion that the redundancy program was not
valid because Jardine hired contractual employees as replacements, thus, contradicting underlying reasons
of redundancy. The CA significantly chose to disregard these coherent labor findings without fully
justifying its move. At the very least, this was an indicator that something was wrong somewhere in these
dismissals. It was clear legal error for the CA to recognize grave abuse of discretion when none occurred.
WHEREFORE, we hereby GRANT the petition. We REVERSE the decision dated March 23, 2007 and
the resolution dated February 11, 2008 of the Court of Appeals in CA G.R. SP No. 91952, and uphold the
decision dated December 1, 2004 and the resolution dated July 21, 2005 of the National Labor Relations
Commission which affirmed in its entirety the September 29, 2000 decision of the Labor Arbiter.
SO ORDERED.