FIRST DIVISION

[G.R. No. 47800. December 2, 1940.]

MAXIMO CALALANG, Petitioner, v. A. D. WILLIAMS, ET AL., Respondents.

Maximo Calalang in his own behalf.

Solicitor General Ozaeta and Assistant Solicitor General Amparo for respondents
Williams, Fragante and Bayan

City Fiscal Mabanag for the other respondents.

SYLLABUS

1. CONSTITUTIONAL LAW; CONSTITUTIONALITY OF COMMONWEALTH ACT No. 648;

DELEGATION OF LEGISLATIVE POWER; AUTHORITY OF DIRECTOR OF PUBLIC WORKS AND
SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS TO PROMULGATE RULES AND
REGULATIONS. The provisions of section 1 of Commonwealth Act No. 648 do not confer
legislative power upon the Director of Public Works and the Secretary of Public Works and
Communications. The authority therein conferred upon them and under which they
promulgated the rules and regulations now complained of is not to determine what public
policy demands but merely to carry out the legislative policy laid down by the National
Assembly in said Act, to wit, "to promote safe transit upon, and avoid obstructions on, roads
and streets designated as national roads by acts of the National Assembly or by executive
orders of the President of the Philippines" and to close them temporarily to any or all classes
of traffic "whenever the condition of the road or the traffic thereon makes such action
necessary or advisable in the public convenience and interest." The delegated power, if at
all, therefore, is not the determination of what the law shall be, but merely the
ascertainment of the facts and circumstances upon which the application of said law is to be
predicated. To promulgate rules and regulations on the use of national roads and to
determine when and how long a national road should be closed to traffic, in view of the
condition of the road or the traffic thereon and the requirements of public convenience and
interest, is an administrative function which cannot be directly discharged by the National
Assembly. It must depend on the discretion of some other government official to whom is
confided the duty of determining whether the proper occasion exists for executing the law.
But it cannot be said that the exercise of such discretion is the making of the law.

2. ID.; ID.; POLICE POWER; PERSONAL LIBERTY; GOVERNMENTAL AUTHORITY.

Commonwealth Act No. 548 was passed by the National Assembly in the exercise of the
paramount police power of the state. Said Act, by virtue of which the rules and regulations
complained of were promulgated, aims to promote safe transit upon and avoid obstructions
on national roads, in the interest and convenience of the public. In enacting said law,
therefore, the National Assembly was prompted by considerations of public convenience and
welfare. It was inspired by a desire to relieve congestion of traffic, which is, to say the least,
a menace to public safety. Public welfare, then, lies at the bottom of the enactment of said
law, and the state in order to promote the general welfare may interfere with personal
liberty, with property, and with business and occupations. Persons and property may be
subjected to all kinds of restraints and burdens, in order to secure the general comfort,
health, and prosperity of the state (U.S. v. Gomer Jesus, 31 Phil., 218). To this fundamental
aim of our Government the rights of the individual are subordinated. Liberty is a blessing
without which life is a misery, but liberty should not be made to prevail over authority
because then society will fall into anarchy. Neither should authority be made to prevail over
 liberty because then the individual will fall into slavery. The citizen should achieve the
required balance of liberty and authority in his mind through education and, personal
discipline, so that there may be established the resultant equilibrium, which means peace
and order and happiness for all. The moment greater authority is conferred upon the
government, logically so much is withdrawn from the residuum of liberty which resides in
the people. The paradox lies in the fact that the apparent curtailment of liberty is precisely
the very means of insuring its preservation.

3. ID.; ID.; SOCIAL JUSTICE. Social justice is "neither communism, nor despotism, nor
atomism, nor anarchy," but the humanization of laws and the equalization of social and
economic forces by the State so that justice in its rational and objectively secular conception
may at least be approximated. Social justice means the promotion of the welfare of all the
people, the adoption by the Government of measures calculated to insure economic stability
of all the competent elements of society, through the maintenance of a proper economic
and social equilibrium in the interrelations of the members of the community,
constitutionally, through the adoption of measures legally justifiable, or extra-
constitutionally, through the exercise of powers underlying the existence of all governments
on the time-honored principle of salus populi est suprema lex. Social justice, therefore,
must be founded on the recognition of the necessity of interdependence among divers and
diverse units of a society and of the protection that should be equally and evenly extended
to all groups as a combined force in our social and economic life, consistent with the
fundamental and paramount objective of the state of promoting the health, comfort, and
quiet of all persons, and of bringing about "the greatest good to the greatest number."

DECISION

LAUREL, J.:

Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila, brought
before this court this petition for a writ of prohibition against the respondents, A. D.
Williams, as Chairman of the National Traffic Commission; Vicente Fragante, as Director of
Public Works; Sergio Bayan, as Acting Secretary of Public Works and Communications;
Eulogio Rodriguez, as Mayor of the City of Manila; and Juan Dominguez, as Acting Chief of
Police of Manila.

It is alleged in the petition that the National Traffic Commission, in its resolution of July 17,
1940, resolved to recommend to the Director of Public Works and to the Secretary of Public
Works and Communications that animal-drawn vehicles be prohibited from passing along
Rosario Street extending from Plaza Calderon de la Barca to Dasmarias Street, from 7:30
a.m. to 12:30 p.m. and from 1:30 p.m. to 5:30 p.m.; and along Rizal Avenue extending
from the railroad crossing at Antipolo Street to Echague Street, from 7 a.m. to 11 p.m.,
from a period of one year from the date of the opening of the Colgante Bridge to traffic;
that the Chairman of the National Traffic Commission, on July 18, 1940 recommended to
the Director of Public Works the adoption of the measure proposed in the resolution
aforementioned, in pursuance of the provisions of Commonwealth Act No. 548 which
authorizes said Director of Public Works, with the approval of the Secretary of Public Works
and Communications, to promulgate rules and regulations to regulate and control the use of
and traffic on national roads; that on August 2, 1940, the Director of Public Works, in his
first indorsement to the Secretary of Public Works and Communications, recommended to
the latter the approval of the recommendation made by the Chairman of the National Traffic
Commission as aforesaid, with the modification that the closing of Rizal Avenue to traffic to
animal-drawn vehicles be limited to the portion thereof extending from the railroad crossing
at Antipolo Street to Azcarraga Street; that on August 10, 1940, the Secretary of Public
Works and Communications, in his second indorsement addressed to the Director of Public
Works, approved the recommendation of the latter that Rosario Street and Rizal Avenue be
closed to traffic of animal-drawn vehicles, between the points and during the hours as
above indicated, for a period of one year from the date of the opening of the Colgante
Bridge to traffic; that the Mayor of Manila and the Acting Chief of Police of Manila have
enforced and caused to be enforced the rules and regulations thus adopted; that as a
consequence of such enforcement, all animal-drawn vehicles are not allowed to pass and
pick up passengers in the places above-mentioned to the detriment not only of their owners
but of the riding public as well.

It is contended by the petitioner that Commonwealth Act No. 548 by which the Director of
Public Works, with the approval of the Secretary of Public Works and Communications, is
authorized to promulgate rules and regulations for the regulation and control of the use of
and traffic on national roads and streets is unconstitutional because it constitutes an undue
delegation of legislative power. This contention is untenable. As was observed by this court
in Rubi v. Provincial Board of Mindoro (39 Phil, 660, 700), "The rule has nowhere been
better stated than in the early Ohio case decided by Judge Ranney, and since followed in a
multitude of cases, namely: The true distinction therefore is between the delegation of
power to make the law, which necessarily involves a discretion as to what it shall be, and
conferring an authority or discretion as to its execution, to be exercised under and in
pursuance of the law. The first cannot be done; to the latter no valid objection can be
made. (Cincinnati, W. & Z. R. Co. v. Commrs. Clinton County, 1 Ohio St., 88.) Discretion,
as held by Chief Justice Marshall in Wayman v. Southard (10 Wheat., 1) may be committed
by the Legislature to an executive department or official. The Legislature may make
decisions of executive departments or subordinate officials thereof, to whom it has
committed the execution of certain acts, final on questions of fact. (U.S. v. Kinkead, 248
Fed., 141.) The growing tendency in the decisions is to give prominence to the necessity of
the case."cralaw virtua1aw library

Section 1 of Commonwealth Act No. 548 reads as follows:jgc:chanrobles.com.ph

"SECTION 1. To promote safe transit upon, and avoid obstructions on, roads and streets
designated as national roads by acts of the National Assembly or by executive orders of the
President of the Philippines, the Director of Public Works, with the approval of the Secretary
of Public Works and Communications, shall promulgate the necessary rules and regulations
to regulate and control the use of and traffic on such roads and streets. Such rules and
regulations, with the approval of the President, may contain provisions controlling or
regulating the construction of buildings or other structures within a reasonable distance
from along the national roads. Such roads may be temporarily closed to any or all classes of
traffic by the Director of Public Works and his duly authorized representatives whenever the
condition of the road or the traffic thereon makes such action necessary or advisable in the
public convenience and interest, or for a specified period, with the approval of the Secretary
of Public Works and Communications."cralaw virtua1aw library

The above provisions of law do not confer legislative power upon the Director of Public
Works and the Secretary of Public Works and Communications. The authority therein
conferred upon them and under which they promulgated the rules and regulations now
complained of is not to determine what public policy demands but merely to carry out the
legislative policy laid down by the National Assembly in said Act, to wit, "to promote safe
transit upon and avoid obstructions on, roads and streets designated as national roads by
acts of the National Assembly or by executive orders of the President of the Philippines" and
to close them temporarily to any or all classes of traffic "whenever the condition of the road
or the traffic makes such action necessary or advisable in the public convenience and
interest." The delegated power, if at all, therefore, is not the determination of what the law
shall be, but merely the ascertainment of the facts and circumstances upon which the
application of said law is to be predicated. To promulgate rules and regulations on the use
of national roads and to determine when and how long a national road should be closed to
traffic, in view of the condition of the road or the traffic thereon and the requirements of
public convenience and interest, is an administrative function which cannot be directly
discharged by the National Assembly. It must depend on the discretion of some other
government official to whom is confided the duty of determining whether the proper
occasion exists for executing the law. But it cannot be said that the exercise of such
discretion is the making of the law. As was said in Lockes Appeal (72 Pa. 491): "To assert
that a law is less than a law, because it is made to depend on a future event or act, is to rob
the Legislature of the power to act wisely for the public welfare whenever a law is passed
relating to a state of affairs not yet developed, or to things future and impossible to fully
know." The proper distinction the court said was this: "The Legislature cannot delegate its
power to make the law; but it can make a law to delegate a power to determine some fact
or state of things upon which the law makes, or intends to make, its own action depend. To
deny this would be to stop the wheels of government. There are many things upon which
wise and useful legislation must depend which cannot be known to the law-making power,
and, must, therefore, be a subject of inquiry and determination outside of the halls of
legislation." (Field v. Clark, 143 U. S. 649, 694; 36 L. Ed. 294.)

In the case of People v. Rosenthal and Osmea, G.R. Nos. 46076 and 46077, promulgated
June 12, 1939, and in Pangasinan Transportation v. The Public Service Commission, G.R.
No. 47065, promulgated June 26, 1940, this Court had occasion to observe that the
principle of separation of powers has been made to adapt itself to the complexities of
modern governments, giving rise to the adoption, within certain limits, of the principle of
"subordinate legislation," not only in the United States and England but in practically all
modern governments. Accordingly, with the growing complexity of modern life, the
multiplication of the subjects of governmental regulations, and the increased difficulty of
administering the laws, the rigidity of the theory of separation of governmental powers has,
to a large extent, been relaxed by permitting the delegation of greater powers by the
legislative and vesting a larger amount of discretion in administrative and executive
officials, not only in the execution of the laws, but also in the promulgation of certain rules
and regulations calculated to promote public interest.

The petitioner further contends that the rules and regulations promulgated by the
respondents pursuant to the provisions of Commonwealth Act No. 548 constitute an
unlawful interference with legitimate business or trade and abridge the right to personal
liberty and freedom of locomotion. Commonwealth Act No. 548 was passed by the National
Assembly in the exercise of the paramount police power of the state.

Said Act, by virtue of which the rules and regulations complained of were promulgated, aims
to promote safe transit upon and avoid obstructions on national roads, in the interest and
convenience of the public. In enacting said law, therefore, the National Assembly was
prompted by considerations of public convenience and welfare. It was inspired by a desire
to relieve congestion of traffic. which is, to say the least, a menace to public safety. Public
welfare, then, lies at the bottom of the enactment of said law, and the state in order to
promote the general welfare may interfere with personal liberty, with property, and with
business and occupations. Persons and property may be subjected to all kinds of restraints
and burdens, in order to secure the general comfort, health, and prosperity of the state
(U.S. v. Gomez Jesus, 31 Phil., 218). To this fundamental aim of our Government the rights
of the individual are subordinated. Liberty is a blessing without which life is a misery, but
liberty should not be made to prevail over authority because then society will fall into
anarchy. Neither should authority be made to prevail over liberty because then the
individual will fall into slavery. The citizen should achieve the required balance of liberty and
authority in his mind through education and personal discipline, so that there may be
established the resultant equilibrium, which means peace and order and happiness for all.
The moment greater authority is conferred upon the government, logically so much is
withdrawn from the residuum of liberty which resides in the people. The paradox lies in the
fact that the apparent curtailment of liberty is precisely the very means of insuring its
preservation.

The scope of police power keeps expanding as civilization advances. As was said in the case
of Dobbins v. Los Angeles (195 U.S. 223, 238; 49 L. ed. 169), "the right to exercise the
police power is a continuing one, and a business lawful today may in the future, because of
the changed situation, the growth of population or other causes, become a menace to the
public health and welfare, and be required to yield to the public good." And in People v.
Pomar (46 Phil., 440), it was observed that "advancing civilization is bringing within the
police power of the state today things which were not thought of as being within such power
yesterday. The development of civilization, the rapidly increasing population, the growth of
public opinion, with an increasing desire on the part of the masses and of the government
to look after and care for the interests of the individuals of the state, have brought within
the police power many questions for regulation which formerly were not so
considered."cralaw virtua1aw library

The petitioner finally avers that the rules and regulations complained of infringe upon the
constitutional precept regarding the promotion of social justice to insure the well-being and
economic security of all the people. The promotion of social justice, however, is to be
achieved not through a mistaken sympathy towards any given group. Social justice is
"neither communism, nor despotism, nor atomism, nor anarchy," but the humanization of
laws and the equalization of social and economic forces by the State so that justice in its
rational and objectively secular conception may at least be approximated. Social justice
means the promotion of the welfare of all the people, the adoption by the Government of
measures calculated to insure economic stability of all the competent elements of society,
through the maintenance of a proper economic and social equilibrium in the interrelations of
the members of the community, constitutionally, through the adoption of measures legally
justifiable, or extra-constitutionally, through the exercise of powers underlying the existence
of all governments on the time-honored principle of salus populi est suprema lex.

Social justice, therefore, must be founded on the recognition of the necessity of

interdependence among divers and diverse units of a society and of the protection that
should be equally and evenly extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and paramount objective of the state of
promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest
good to the greatest number."cralaw virtua1aw library

In view of the foregoing, the writ of prohibition prayed for is hereby denied, with costs
against the petitioner. So ordered.

Avancea, C.J., Imperial, Diaz. and Horrilleno. JJ. concur.

__

FIRST DIVISION

G.R. Nos. 168194 & 168603 December 13, 2005

SAN MIGUEL CORPORATION, Petitioner,

vs.
CAROLINE C. DEL ROSARIO, Respondent.

DECISION

YNARES-SANTIAGO, J.:

The instant consolidated petitions for review seek to set aside the (1) January 7, 2005 Decision of the
Third Division of the Court of Appeals in CA-G.R. SP No. 83725,1 affirming the December 30, 2003
Resolution2 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 036413-03, and
holding that respondent Caroline C. Del Rosario, was a regular employee of petitioner San Miguel
Corporation whose dismissal was valid but ineffectual for non-compliance with the requirement of one
month notice in termination due to redundancy; and the (2) February 23, 2005 Decision of the First
Division of the Court of Appeals in CA-G.R. SP No. 84081,3which reinstated the Labor Arbiters June 16,
2003 Judgment4 finding that respondent is an illegally dismissed regular employee of petitioner. Likewise
questioned are the June 16, 20055 and May 13, 20056 Resolutions of the Court of Appeals which denied
petitioners motions for reconsideration.

The facts show that on April 17, 2000, respondent was employed by petitioner as key account specialist.
On March 9, 2001, petitioner informed respondent that her probationary employment will be severed at
the close of the business hours of March 12, 2001.7 On March 13, 2001, respondent was refused entry to
petitioners premises.

On June 24, 2002, respondent filed a complaint against petitioner for illegal dismissal and
underpayment/non-payment of monetary benefits. Respondent alleged that petitioner feigned an excess
in manpower because after her dismissal, it hired new recruits, namely, Jerome Sanchez and Marilou
Marfil and re-employed two of her batch mates, Rosendo To and Ruel Rocha.8

On the other hand, petitioner claimed that respondent was a probationary employee whose services were
terminated as a result of the excess manpower that could no longer be accommodated by the company.
Respondent was allegedly employed on April 17, 2000 9 as a temporary reliever of Patrick Senen, an
account specialist, who met an accident. Anticipating an increase in sales volume, petitioner hired
respondent as an account specialist on a probationary status effective September 4, 2000 and was
assigned at petitioners Greater Manila Area-Key Accounts Group (GMA-KAG) Beer Sales Group.
However, petitioners expected business growth did not materialize, hence, it reorganized the GMA-KAG,
and created the Centralized Key Accounts Group. This restructuring led to an initial excess of 49 regular
employees, who were redeployed to other positions, including the one occupied by respondent. Her
employment was thus terminated effective March 12, 2001.10

On June 16, 2003, the Labor Arbiter rendered a decision declaring respondent a regular employee
because her employment exceeded six months and holding that she was illegally dismissed as there was
no authorized cause to terminate her employment. The Arbiter further ruled that petitioners failure to
rebut respondents claim that it hired additional employees after she was dismissed belie the companys
alleged redundancy. The dispositive portion thereof, reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal of complainant
as illegal and ordering her reinstatement with full backwages, moral and exemplary damages of
P50,000.00 plus 10% attorneys fees, computed thus:

Backwages:

2003-6-16

2001-3-17 = P9,000.00 x 27 mos. = P243,000.00

2-2-29

Holiday Pay:

P9,000.00/26 days = P346.15/day

=P346.15 x 20 days = P6,923.00

Service Incentive Leave

P346.15 x 10 days = 3,461.50

13th Month Pay

P9,000.00 x 27 mos./12 = P20,250.00

P273,634.00

SO ORDERED.11

On appeal by petitioner to the NLRC, the latter modified the decision of the Labor Arbiter holding that
respondent is a regular employee whose termination from employment was valid but ineffectual for
petitioners failure to comply with the 30-day notice to the employee and the Department of Labor and
Employment (DOLE), thus

WHEREFORE, premises considered, Respondents appeal is partly GRANTED. The portion of the Labor
Arbiters assailed Decision in the above-entitled case, finding Complainants dismissal illegal and ordering
her reinstatement, is SET ASIDE. It is hereby declared that Complainants dismissal from employment is
valid but ineffectual.

Respondent San Miguel Corporation is hereby ordered to pay Complainant separation pay equivalent to
her one-month pay per year of service reckoned from her first day of employment therewith on April 17,
2000 up to the date of this Resolution. Complainants award for full backwages shall be accordingly
adjusted to cover the period from the time she was ineffectually dismissed on March 13, 2001 up to the
date of this Resolution. As of October 17, 2003 Complainants award for separation pay and full
backwages already amount to P36,000.00 and P311,192.31, respectively.

Complainants award for unpaid service incentive leave pay and 13th month pay shall be reduced to
P1,514.42 and P7,875.00, respectively. Her award for attorneys fees shall likewise be accordingly
adjusted to ten percent (10%) of her total monetary award.

Complainants award for holiday pay and moral and exemplary damages is (sic) hereby deleted.
SO ORDERED.12

In a resolution dated February 20, 2004,13 the NLRC denied the motions for reconsideration filed by both
parties. Thereafter, petitioner and respondent filed separate petitions with the Court of Appeals.

In CA-G.R. SP No. 84081, the First Division of the Court of Appeals granted the respondents petition and
reinstated with modification the Labor Arbiters decision finding her to be an illegally dismissed regular
employee, but deleted the award for holiday pay for lack of basis. The appellate court noted that petitioner
gave no satisfactory explanation for the hiring of employees after respondents termination and the
absence of company criteria in determining who among the employees will be dismissed. The decretal
portion thereof, provides:

WHEREFORE, the petition is GRANTED. Accordingly, the assailed NLRC resolutions, dated December
30, 2003 and February 20, 2004, are hereby REVERSED and SET ASIDE. The June 16, 2003 Decision
of the Labor Arbiter is hereby REINSTATED with some MODIFICATION and should read as follows:

WHEREFORE, judgment is hereby rendered declaring the dismissal as illegal and ordering her
reinstatement with full backwages, moral and exemplary damages of P50,000.00 plus 10% attorneys
fees, computed thus:

Backwages:

2003-6-16

2001-3-17 = P 9,000.00 x 27 months = P 243,000.00

2-2-29

Service Incentive Leave

P 346.15 x 10 days = P 3,461.50

13th month Pay

P 9,000.00 x 27 mos./12 = P 20,250.00

P 266,711.00

SO ORDERED.14

In CA-G.R. SP No. 83725, the Third Division of the Court of Appeals dismissed the companys petition
and affirmed the decision of the NLRC, as follows:

WHEREFORE, in consideration of the foregoing, the instant petition is perforce dismissed. Accordingly,
the public respondent NLRCs assailed resolutions dated 30 December 2003 and 20 February 2004 are
hereby affirmed.

SO ORDERED.15

Hence, petitioner instituted these two separate petitions for review praying that the questioned decisions
and resolutions of the Court of Appeals in CA-G.R. SP No. 84081 and CA-G.R. SP No. 83725 be set
aside and that respondents complaint be dismissed. In a resolution dated August 8, 2005, 16 the Court
consolidated the petitions.

The issues for resolution are: (1) whether or not respondent is a regular employee of petitioner; and (2)
whether or not respondent was illegally dismissed; and (3) if so, whether or not respondent is entitled to
any monetary benefit.

The settled rule is that factual findings of quasi-judicial bodies like the NLRC, particularly when they
coincide with those of the Labor Arbiter are accorded respect and even finality.17 This applies with more
vigor to the factual issue of respondents employment status, because the Labor Arbiter, the NLRC and
the two Divisions of the Court of Appeals consistently held that respondent is a regular employee of
petitioner company. Indeed, the records show that their findings are supported by substantial evidence.

In termination cases, like the present controversy, the burden of proving the circumstances that would
justify the employees dismissal rests with the employer. 18 The best proof that petitioner should have
presented to prove the probationary status of respondent is her employment contract. None, having been
presented, the continuous employment of respondent as an account specialist for almost 11 months, from
April 17, 2000 to March 12, 2001, means that she was a regular employee and not a temporary reliever or
a probationary employee. The 2 Payroll Authorities19 offered by petitioner showing that respondent was
hired as a replacement, and later, as a probationary employee do not constitute substantial evidence. As
correctly found by the NLRC, none of these documents bear the conformity of respondent, and are
therefore, self-serving.

And while it is true that by way of exception, the period of probationary employment may exceed six
months when the parties so agree, such as when the same is established by company policy, or when it
is required by the nature of the work,20 none of these exceptional circumstance were proven in the
present case. Hence, respondent whose employment exceeded six months is undoubtedly a regular
employee of petitioner.

Moreover, even assuming that the employment of respondent from April 7, 2000 to September 3, 2000, is
only temporary, and that the reckoning period of her probationary employment is September 4,
2000,21 she should still be declared a regular employee because by the time she was dismissed on March
12, 2001, her alleged probationary employment already exceeded six months, i.e., six months and eight
days to be precise. Thus, in Cebu Royal Plant v. Deputy Minister of Labor,22 a worker was found to be a
regular employee notwithstanding the presentation by the employer of a Payroll Authority indicating that
said employee was hired on probation, since it was shown that he was terminated four days after the 6th
month of his purported probationary employment.

Neither will petitioners belated claim before the Court of Appeals that respondent became a probationary
employee starting October 1, 2000,23 work against respondent. As earlier stated, the payroll authorities
indicating that respondents probationary status became effective as of such date are of scant evidentiary
value since it does not show the conformity of respondent. At any rate, in the interpretation of
employment contracts, whether oral or written, all doubts must be resolved in favor of labor. 24 Hence, the
contract of employment in the instant case, which appears to be an oral agreement since no written form
was presented by petitioner, should be construed as one vesting respondent with a regular status and
security of tenure.

Having ruled that respondent is a regular employee, her termination from employment must be for a just
or authorized cause, otherwise, her dismissal would be illegal. Petitioner tried to justify the dismissal of
respondent under the authorized cause of redundancy. It thus argued in the alternative that even
assuming that respondent qualified for regular employment, her services still had to be terminated
because there are no more regular positions in the company. Undoubtedly, petitioner is invoking a
redundancy which allegedly resulted in the termination not only of the trainees, probationers but also of
some of its regular employees.
Redundancy, for purposes of the Labor Code, exists where the services of an employee are in excess of
what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, 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 overhiring of workers, decreased volume of business, or dropping of a
particular product line or service activity previously manufactured or undertaken by the enterprise. 25

In Asufrin, Jr. v. San Miguel Corporation,26 it was held that the determination that the employees services
are no longer necessary or sustainable and, therefore, properly terminable is an exercise of business
judgment of the employer. The wisdom or soundness of this judgment is not subject to discretionary
review of the Labor Arbiter and the NLRC, provided there is no violation of law and no showing that it was
prompted by an arbitrary or malicious act. In other words, it is not enough for a company to merely
declare that it has become overmanned. It must produce adequate proof of such redundancy to justify the
dismissal of the affected employees.

In Panlilio v. NLRC,27 it was held that the following evidence may be proffered to substantiate redundancy,
to wit:

the new staffing pattern, feasibility studies/proposal, on the viability of the newly created positions, job
description and the approval by the management of the restructuring.

In the case at bar, petitioner presented an affidavit of its Sales Manager and a memorandum of the
company both to the effect that there is a need to redeploy its regular employees and terminate the
employment of temporary employees, in view of an excess in manpower. These documents, however, do
not satisfy the requirement of substantial evidence that a reasonable mind might accept as adequate to
support a conclusion.28For one, the other signatories to the memorandum were not even identified. For
another, the said memorandum and affidavit are self-serving. These documents could have gained
greater weight had petitioner presented its old and new staffing pattern, the newly created and abolished
positions and the documents showing the target business, as well as the proof showing the failure to
attain the same.

Moreover, the lingering doubt as to the existence of redundancy or of petitioners so called "restructuring,
realignment or reorganization" which resulted in the dismissal of not only probationary employees but also
of regular employees,29 is highlighted by the non-presentation by petitioner of the required notice to the
DOLE and to the separated employees.30 If there was indeed a valid redundancy effected by petitioner,
these notices and the proof of payment of separation pay to the dismissed regular employees should
have been offered to establish that there was excess manpower in petitioners GMA-KAG caused by a
decline in the sales volume.

In balancing the interest between labor and capital, the prudent recourse in termination cases is to
safeguard the prized security of tenure of employees and to require employers to present the best
evidence obtainable, especially so because in most cases, the documents or proof needed to resolve the
validity of the termination, are in the possession of employers. A contrary ruling would encourage
employers to prevent the regularization of an employee by simply invoking a feigned or unsubstantiated
redundancy program.

Granting that petitioner was able to substantiate the validity of its reorganization or restructuring, it
nevertheless, failed to effect a fair and reasonable criterion in dismissing respondent. The criteria in
implementing a redundancy are: (a) less preferred status, e.g. temporary employee; (b) efficiency; and (c)
seniority.31

In dismissing respondent, petitioner averred that in choosing the employee to be retained and to be
placed in the limited available positions, it had to give priority to the regular employees, over petitioner
who is only a probationary employee. This is clear from the termination letter to respondent, viz:
There were recent developments and initiatives from Management which have direct implications to the
organization of GMA Sales, to wit:

1. The expected business growth for the year 2000 did not materialize despite the augmentation of our
Sales manpower, reconfiguration, and promotional initiatives undertaken during the year;

2. There is a need to re-align other SMBD Sales units in order to further enhance synergy in the sales
and distribution of SMC products;

3. The realignment of these units will result to excess manpower specifically in GMA Sales. Considering
that these employees are regular, Management will be constrained to redeploy them to other areas
within GMA Sales;

4. The existing temporary employees will have to be separated in order to give way to the
aforesaid redeployment.

In view of this Management direction, we regret to inform you that your probationary employment with the
Company will be severed at the close of business hours of March 12, 2001.

....32

It is evident from the foregoing that the criterion allegedly used by petitioner in reorganizing its sales unit
was the employment status of the employee. However, in the implementation thereof, petitioner
erroneously classified respondent as a probationary employee, resulting in the dismissal of the latter. The
instant case is no different from Asufrin, Jr. v. San Miguel Corporation, where the Court refused to give
credence to the redundancy invoked by the employer inasmuch as the company adopted no criterion in
dismissing the employee. Verily, the absence of criteria and the erroneous implementation of the criterion
selected, both render invalid the redundancy because both have the ultimate effect of illegally dismissing
an employee.

What further militated against the alleged redundancy advanced by petitioner is their failure to refute
respondents assertion that after her dismissal, it hired new recruits and re-employed two of her batch
mates. Other than the lame excuse that it is respondent who has the burden of proving the same, it
presented no proof to fortify its denial. Again, petitioner has in its possession the documents that would
disprove the fact of hiring new employees, but instead of presenting evidence to belie respondents
contentions, it refrained from doing so and conveniently passed the burden to respondent.

In sum, the Court finds that petitioner was not able to discharge the burden of proving that the dismissal
of respondent was valid.

Article 279 of the Labor Code, provides:

ARTICLE 279. Security of tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time of
his actual reinstatement. (Emphasis, supplied)

Considering that respondent was illegally dismissed, she is entitled not only to reinstatement but also to
payment of full backwages, computed from the time her compensation was actually withheld from her on
March 13, 2001, up to her actual reinstatement. As a regular employee of petitioner from the date of her
employment on April 17, 2000, she is likewise entitled to other benefits, i.e., service incentive leave pay
and 13th month pay computed from such date also up to her actual reinstatement.

Respondent is not, however, entitled to holiday pay because the records reveal that she is a monthly paid
regular employee. Under Section 2, Rule IV, Book III of the Omnibus Rules Implementing the Labor
Code, employees who are uniformly paid by the month, irrespective of the number of working days
therein, shall be presumed to be paid for all the days in the month whether worked or not. Hence, the
Court of Appeals correctly deleted said award.33

Anent attorneys fees, we held in San Miguel Corporation v. Aballa, et al.,34 that in actions for recovery of
wages or where an employee was forced to litigate and thus incurred expenses to protect his rights and
interests, a maximum of 10% of the total monetary award by way of attorneys fees is justifiable under
Article 111 of the Labor Code,35 Section 8, Rule VIII, Book III of its Implementing Rules,36 and paragraph
7, Article 2208 of the Civil Code.37 The award of attorneys fees is proper and there need not be any
showing that the employer acted maliciously or in bad faith when it withheld the wages. There need only
be a showing that the lawful wages were not paid accordingly, as in the instant controversy.

Finally, the Court cannot sustain the award of moral and exemplary damages in favor of respondent.
Moral and exemplary damages cannot be justified solely upon the premise that the employer dismissed
his employee without cause or due process. The termination must be attended with bad faith, or fraud, or
was oppressive to labor or done in a manner contrary to morals, good customs or public policy and, of
course, that social humiliation, wounded feelings, or grave anxiety resulted therefrom. Similarly,
exemplary damages are recoverable only when the dismissal was effected in a wanton, oppressive or
malevolent manner. To merit the award of these damages, additional facts must be pleaded and
proved.38 In the present case, respondent did not proffer substantial evidence that would overcome the
legal presumption of good faith on the part of petitioner. The award of moral and exemplary damages
should therefore be deleted.

WHEREFORE, the petitions are DENIED. The January 7, 2005 Decision and the June 16, 2005
Resolution of the Court of Appeals in CA-G.R. No. SP No. 83725 which affirmed the December 30, 2003
Resolution of the NLRC in NLRC NCR CA No. 036413-03 declaring that the dismissal of respondent
Caroline C. Del Rosario, a regular employee of petitioner, was valid but ineffectual; and the February 23,
2005 Decision and the May 13, 2005 Resolution and of the Court of Appeals in CA-G.R. No. SP No.
84081 which reinstated with modification the June 16, 2003 Decision of the Labor Arbiter in NLRC-NCR-
00-04495-2002, holding that respondent is an illegally dismissed regular employee of petitioner,
are AFFIRMED with MODIFICATIONS.

As MODIFIED, the employment status of respondent is declared regular, and her dismissal from
employment, illegal. Petitioner is ordered to immediately reinstate respondent as a regular employee to
her previous position, unless such position no longer exists, in which case she shall be given a
substantially equivalent position, without loss of seniority rights. Petitioner is further ordered to
pay respondent backwages, computed from the time her compensation was actually withheld on March
13, 2001, up to her actual reinstatement, plus service incentive leave, 13th month pay and attorneys fees
equivalent to 10% of the total monetary award. For this purpose, the case is ordered REMANDED to the
Labor Arbiter for the computation of the amounts due respondent.

SO ORDERED.

CONSUELO YNARES-SANTIAGO

Associate Justice

WE CONCUR:
 __
FIRST DIVISION

G.R. No. 162053 March 7, 2007

ST. LUKE'S MEDICAL CENTER EMPLOYEE'S ASSOCIATION-AFW (SLMCEA-AFW) AND MARIBEL

S. SANTOS, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND ST. LUKE'S MEDICAL CENTER,
INC.,Respondents.

DECISION

AZCUNA, J.:

Challenged in this petition for review on certiorari is the Decision1 of the Court of Appeals (CA) dated
January 29, 2004 in CA-G.R. SP No. 75732 affirming the decision2 dated August 23, 2002 rendered by
the National Labor Relations Commission (NLRC) in NLRC CA No. 026225-00.

The antecedent facts are as follows:

Petitioner Maribel S. Santos was hired as X-Ray Technician in the Radiology department of private
respondent St. Luke's Medical Center, Inc. (SLMC) on October 13, 1984. She is a graduate of Associate
in Radiologic Technology from The Family Clinic Incorporated School of Radiologic Technology.

On April 22, 1992, Congress passed and enacted Republic Act No. 7431 known as the "Radiologic
Technology Act of 1992." Said law requires that no person shall practice or offer to practice as a radiology
and/or x-ray technologist in the Philippines without having obtained the proper certificate of registration
from the Board of Radiologic Technology.

On September 12, 1995, the Assistant Executive Director-Ancillary Services and HR Director of private
respondent SLMC issued a final notice to all practitioners of Radiologic Technology to comply with the
requirement of Republic Act No. 7431 by December 31, 1995; otherwise, the unlicensed employee will be
transferred to an area which does not require a license to practice if a slot is available.

On March 4, 1997, the Director of the Institute of Radiology issued a final notice to petitioner Maribel S.
Santos requiring the latter to comply with Republic Act. No. 7431 by taking and passing the forthcoming
examination scheduled in June 1997; otherwise, private respondent SLMC may be compelled to retire her
from employment should there be no other position available where she may be absorbed.

On May 14, 1997, the Director of the Institute of Radiology, AED-Division of Ancillary Services issued a
memorandum to petitioner Maribel S. Santos directing the latter to submit her PRC Registration
form/Examination Permit per Memorandum dated March 4, 1997.

On March 13, 1998, the Director of the Institute of Radiology issued another memorandum to petitioner
Maribel S. Santos advising her that only a license can assure her of her continued employment at the
Institute of Radiology of the private respondent SLMC and that the latter is giving her the last chance to
take and pass the forthcoming board examination scheduled in June 1998; otherwise, private respondent
SLMC shall be constrained to take action which may include her separation from employment.

On November 23, 1998, the Director of the Institute of Radiology issued a notice to petitioner Maribel S.
Santos informing the latter that the management of private respondent SLMC has approved her
retirement in lieu of separation pay.
On November 26, 1998, the Personnel Manager of private respondent SLMC issued a "Notice of
Separation from the Company" to petitioner Maribel S. Santos effective December 30, 1998 in view of the
latter's refusal to accept private respondent SLMC's offer for early retirement. The notice also states that
while said private respondent exerted its efforts to transfer petitioner Maribel S. Santos to other position/s,
her qualifications do not fit with any of the present vacant positions in the hospital.

In a letter dated December 18, 1998, a certain Jack C. Lappay, President of the Philippine Association of
Radiologic Technologists, Inc., wrote Ms. Judith Betita, Personnel Manager of private respondent SLMC,
requesting the latter to give "due consideration" to the organization's three (3) regular members of his
organization (petitioner Maribel S. Santos included) "for not passing yet the Board of Examination for X-
ray Technology," "by giving them an assignment in any department of your hospital awaiting their chance
to pass the future Board Exam."

On January 6, 1999, the Personnel Manager of private respondent SLMC again issued a "Notice of
Separation from the Company" to petitioner Maribel S. Santos effective February 5, 1999 after the latter
failed to present/ submit her appeal for rechecking to the Professional Regulation Commission (PRC) of
the recent board examination which she took and failed.

On March 2, 1999, petitioner Maribel S. Santos filed a complaint against private respondent SLMC for
illegal dismissal and non-payment of salaries, allowances and other monetary benefits. She likewise
prayed for the award of moral and exemplary damages plus attorney's fees.

In the meantime, petitioner Alliance of Filipino Workers (AFW), through its President and Legal Counsel,
in a letter dated September 22, 1999 addressed to Ms. Rita Marasigan, Human Resources Director of
private respondent SLMC, requested the latter to accommodate petitioner Maribel S. Santos and assign
her to the vacant position of CSS Aide in the hospital arising from the death of an employee more than
two (2) months earlier.

In a letter dated September 24, 1999, Ms. Rita Marasigan replied thus:

Gentlemen:

Thank you for your letter of September 22, 1999 formally requesting to fill up the vacant regular position
of a CSS Aide in Ms. Maribel Santos' behalf.

The position is indeed vacant. Please refer to our Recruitment Policy for particulars especially on
minimum requirements of the job and the need to meet said requirements, as well as other pre-
employment requirements, in order to be considered for the vacant position. As a matter of fact, Ms.
Santos is welcome to apply for any vacant position on the condition that she possesses the necessary
qualifications.

As to the consensus referred to in your letter, may I correct you that the agreement is, regardless of the
vacant position Ms. Santos decides to apply, she must go through the usual application procedures. The
formal letter, I am afraid, will not suffice for purposes of recruitment processing. As you know, the
managers requesting to fill any vacancy has a say on the matter and correctly so. The manager's inputs
are necessarily factored into the standard recruitment procedures. Hence, the need to undergo the
prescribed steps.

Indeed we have gone through the mechanics to accommodate Ms. Santos' transfer while she was
employed with SLMC given the prescribed period. She was given 30 days from issuance of the notice of
termination to look for appropriate openings which incidentally she wittingly declined to utilize. She did
this knowing fully well that the consequences would be that her application beyond the 30-day period or
after the effective date of her termination from SLMC would be considered a re-application with loss of
seniority and shall be subjected to the pertinent application procedures.
Needless to mention, one of the 3 X-ray Technologists in similar circumstances as Ms. Santos at the time
successfully managed to get herself transferred to E.R. because she opted to apply for the appropriate
vacant position and qualified for it within the prescribed 30-day period. The other X-ray Technologist, on
the other hand, as you may recall, was eventually terminated not just for his failure to comply with the
licensure requirement of the law but for cause (refusal to serve a customer).

Why Ms. Santos opted to file a complaint before the Labor Courts and not to avail of the opportunity given
her, or assuming she was not qualified for any vacant position even if she tried to look for one within the
prescribed period, I simply cannot understand why she also refused the separation pay offered by
Management in an amount beyond the minimum required by law only to re-apply at SLMC, which option
would be available to her anyway even (if she) chose to accept the separation pay!

Well, here's hoping that our Union can timely influence our employees to choose their options well as it
has in the past.

(Signed)
RITA MARASIGAN

Subsequently, in a letter dated December 27, 1999, Ms. Judith Betita, Personnel Manager of private
respondent SLMC wrote Mr. Angelito Calderon, President of petitioner union as follows:

Dear Mr. Calderon:

This is with regard to the case of Ms. Maribel Santos. Please recall that last Oct. 8, 1999, Ms. Rita
Marasigan, HR Director, discussed with you and Mr. Greg Del Prado the terms regarding the re-hiring of
Ms. Maribel Santos. Ms. Marasigan offered Ms. Santos the position of Secretary at the Dietary
Department. In that meeting, Ms. Santos replied that she would think about the offer. To date, we still
have no definite reply from her. Again, during the conference held on Dec. 14, 1999, Atty. Martir promised
to talk to Ms. Santos, and inform us of her reply by Dec. 21, 1999. Again we failed to hear her reply
through him.

Please be informed that said position is in need of immediate staffing. The Dietary Department has
already been experiencing serious backlog of work due to the said vacancy. Please note that more than 2
months has passed since Ms. Marasigan offered this compromise. Management cannot afford to wait for
her decision while the operation of the said department suffers from vacancy.

Therefore, Management is giving Ms. Santos until the end of this month to give her decision. If we fail to
hear from her or from you as her representatives by that time, we will consider it as a waiver and we will
be forced to offer the position to other applicants so as not to jeopardize the Dietary Department's
operation.

For your immediate action.

(Signed)
JUDITH BETITA
Personnel Manager

On September 5, 2000, the Labor Arbiter came out with a Decision ordering private respondent SLMC to
pay petitioner Maribel S. Santos the amount of One Hundred Fifteen Thousand Five Hundred Pesos
(115,500.00) representing her separation pay. All other claims of petitioner were dismissed for lack of
merit.

Dissatisfied, petitioner Maribel S. Santos perfected an appeal with the public respondent NLRC.
On August 23, 2002, public respondent NLRC promulgated its Decision affirming the Decision of the
Labor Arbiter. It likewise denied the Motion for Reconsideration filed by petitioners in its Resolution
promulgated on December 27, 2002.

Petitioner thereafter filed a petition for certiorari with the CA which, as previously mentioned, affirmed the
decision of the NLRC.

Hence, this petition raising the following issues:

I. Whether the CA overlooked certain material facts and circumstances on petitioners' legal claim
in relation to the complaint for illegal dismissal.

II. Whether the CA committed grave abuse of discretion and erred in not resolving with clarity the
issues on the merit of petitioner's constitutional right of security of tenure. 3

For its part, private respondent St. Luke's Medical Center, Inc. (SLMC) argues in its comment4 that: 1) the
petition should be dismissed for failure of petitioners to file a motion for reconsideration; 2) the CA did not
commit grave abuse of discretion in upholding the NLRC and the Labor Arbiter's ruling that petitioner was
legally dismissed; 3) petitioner was legally and validly terminated in accordance with Republic Act Nos.
4226 and 7431; 4) private respondent's decision to terminate petitioner Santos was made in good faith
and was not the result of unfair discrimination; and 5) petitioner Santos' non-transfer to another position in
the SLMC was a valid exercise of management prerogative.

The petition lacks merit.

Generally, the Court has always accorded respect and finality to the findings of fact of the CA particularly
if they coincide with those of the Labor Arbiter and the NLRC and are supported by substantial
evidence.5 True this rule admits of certain exceptions as, for example, when the judgment is based on a
misapprehension of facts, or the findings of fact are not supported by the evidence on record 6 or are so
glaringly erroneous as to constitute grave abuse of discretion.7 None of these exceptions, however, has
been convincingly shown by petitioners to apply in the present case. Hence, the Court sees no reason to
disturb such findings of fact of the CA.

Ultimately, the issue raised by the parties boils down to whether petitioner Santos was illegally dismissed
by private respondent SLMC on the basis of her inability to secure a certificate of registration from the
Board of Radiologic Technology.

The requirement for a certificate of registration is set forth under R.A. No. 74318 thus:

Sec. 15. Requirement for the Practice of Radiologic Technology and X-ray Technology. - Unless exempt
from the examinations under Sections 16 and 17 hereof, no person shall practice or offer to practice as a
radiologic and/or x-ray technologist in the Philippines without having obtained the proper certificate of
registration from the Board.

It is significant to note that petitioners expressly concede that the sole cause for petitioner Santos'
separation from work is her failure to pass the board licensure exam for X-ray technicians, a precondition
for obtaining the certificate of registration from the Board. It is argued, though, that petitioner Santos'
failure to comply with the certification requirement did not constitute just cause for termination as it
violated her constitutional right to security of tenure. This contention is untenable.

While the right of workers to security of tenure is guaranteed by the Constitution, its exercise may be
reasonably regulated pursuant to the police power of the State to safeguard health, morals, peace,
education, order, safety, and the general welfare of the people. Consequently, persons who desire to
engage in the learned professions requiring scientific or technical knowledge may be required to take an
examination as a prerequisite to engaging in their chosen careers. 9 The most concrete example of this
would be in the field of medicine, the practice of which in all its branches has been closely regulated by
the State. It has long been recognized that the regulation of this field is a reasonable method of protecting
the health and safety of the public to protect the public from the potentially deadly effects of incompetence
and ignorance among those who would practice medicine.10 The same rationale applies in the regulation
of the practice of radiologic and x-ray technology. The clear and unmistakable intention of the legislature
in prescribing guidelines for persons seeking to practice in this field is embodied in Section 2 of the law:

Sec. 2. Statement of Policy. - It is the policy of the State to upgrade the practice of radiologic technology
in the Philippines for the purpose of protecting the public from the hazards posed by radiation as well as
to ensure safe and proper diagnosis, treatment and research through the application of machines and/or
equipment using radiation.11

In this regard, the Court quotes with approval the disquisition of public respondent NLRC in its decision
dated August 23, 2002:

The enactment of R.A. (Nos.) 7431 and 4226 are recognized as an exercise of the State's inherent police
power. It should be noted that the police power embraces the power to prescribe regulations to promote
the health, morals, educations, good order, safety or general welfare of the people. The state is justified in
prescribing the specific requirements for x-ray technicians and/or any other professions connected with
the health and safety of its citizens. Respondent-appellee being engaged in the hospital and health care
business, is a proper subject of the cited law; thus, having in mind the legal requirements of these laws,
the latter cannot close its eyes and [let] complainant-appellant's private interest override public interest.

Indeed, complainant-appellant cannot insist on her "sterling work performance without any derogatory
record" to make her qualify as an x-ray technician in the absence of a proper certificate of Registration
from the Board of Radiologic Technology which can only be obtained by passing the required
examination. The law is clear that the Certificate of Registration cannot be substituted by any other
requirement to allow a person to practice as a Radiologic Technologist and/or X-ray Technologist
(Technician).12

No malice or ill-will can be imputed upon private respondent as the separation of petitioner Santos was
undertaken by it conformably to an existing statute. It is undeniable that her continued employment
without the required Board certification exposed the hospital to possible sanctions and even to a
revocation of its license to operate. Certainly, private respondent could not be expected to retain
petitioner Santos despite the inimical threat posed by the latter to its business. This notwithstanding, the
records bear out the fact that petitioner Santos was given ample opportunity to qualify for the position and
was sufficiently warned that her failure to do so would result in her separation from work in the event
there were no other vacant positions to which she could be transferred. Despite these warnings, petitioner
Santos was still unable to comply and pass the required exam. To reiterate, the requirement for Board
certification was set by statute. Justice, fairness and due process demand that an employer should not be
penalized for situations where it had no participation or control. 13

It would be unreasonable to compel private respondent to wait until its license is cancelled and it is
materially injured before removing the cause of the impending evil. Neither can the courts step in to force
private respondent to reassign or transfer petitioner Santos under these circumstances. Petitioner Santos
is not in the position to demand that she be given a different work assignment when what necessitated
her transfer in the first place was her own fault or failing. The prerogative to determine the place or station
where an employee is best qualified to serve the interests of the company on the basis of the his or her
qualifications, training and performance belongs solely to the employer. 14 The Labor Code and its
implementing Rules do not vest in the Labor Arbiters nor in the different Divisions of the NLRC (nor in the
courts) managerial authority.15
While our laws endeavor to give life to the constitutional policy on social justice and the protection of
labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also
recognizes that management has rights which are also entitled to respect and enforcement in the interest
of fair play.16 Labor laws, to be sure, do not authorize interference with the employer's judgment in the
conduct of the latter's business. Private respondent is free to determine, using its own discretion and
business judgment, all elements of employment, "from hiring to firing" except in cases of unlawful
discrimination or those which may be provided by law. None of these exceptions is present in the instant
case.

The fact that another employee, who likewise failed to pass the required exam, was allowed by private
respondent to apply for and transfer to another position with the hospital does not constitute unlawful
discrimination. This was a valid exercise of management prerogative, petitioners not having alleged nor
proven that the reassigned employee did not qualify for the position where she was transferred. In the
past, the Court has ruled that an objection founded on the ground that one has better credentials over the
appointee is frowned upon so long as the latter possesses the minimum qualifications for the
position.17 Furthermore, the records show that Ms. Santos did not even seriously apply for another
position in the company.

WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioners.

SO ORDERED.

ADOLFO S. AZCUNA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chairperson
Chief Justice

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA

Associate Justice Asscociate Justice

CANCIO C. GARCIA

+____
EN BANC

G.R. No. 80609 August 23, 1988

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION and MARILYN ABUCAY, respondents.

Nicanor G. Nuevas for petitioner.

CRUZ, J.:
The only issue presented in the case at bar is the legality of the award of financial assistance to an
employee who had been dismissed for cause as found by the public respondent.

Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company, was accused by
two complainants of having demanded and received from them the total amount of P3,800.00 in
consideration of her promise to facilitate approval of their applications for telephone
installation. 1 Investigated and heard, she was found guilty as charged and accordingly separated from
the service.2 She went to the Ministry of Labor and Employment claiming she had been illegally removed.
After consideration of the evidence and arguments of the parties, the company was sustained and the
complaint was dismissed for lack of merit. Nevertheless, the dispositive portion of labor arbiter's decision
declared:

WHEREFORE, the instant complaint is dismissed for lack of merit.

Considering that Dr. Helen Bangayan and Mrs. Consolacion Martinez are not totally
blameless in the light of the fact that the deal happened outhide the premises of
respondent company and that their act of giving P3,800.00 without any receipt is
tantamount to corruption of public officers, complainant must be given one month pay for
every year of service as financial assistance. 3

Both the petitioner and the private respondent appealed to the National Labor Relations Board, which
upheld the said decision in toto and dismissed the appeals. 4 The private respondent took no further
action, thereby impliedly accepting the validity of her dismissal. The petitioner, however, is now before us
to question the affirmance of the above- quoted award as having been made with grave abuse of
discretion.

In its challenged resolution of September 22, 1987, the NLRC said:

... Anent the award of separation pay as financial assistance in complainant's favor, We
find the same to be equitable, taking into consideration her long years of service to the
company whereby she had undoubtedly contributed to the success of respondent. While
we do not in any way approve of complainants (private respondent) mal feasance, for
which she is to suffer the penalty of dismissal, it is for reasons of equity and compassion
that we resolve to uphold the award of financial assistance in her favor. 5

The position of the petitioner is simply stated: It is conceded that an employee illegally dismissed is
entitled to reinstatement and backwages as required by the labor laws. However, an employee dismissed
for cause is entitled to neither reinstatement nor backwages and is not allowed any relief at all because
his dismissal is in accordance with law. In the case of the private respondent, she has been awarded
financial assistance equivalent to ten months pay corresponding to her 10 year service in the company
despite her removal for cause. She is, therefore, in effect rewarded rather than punished for her
dishonesty, and without any legal authorization or justification. The award is made on the ground of equity
and compassion, which cannot be a substitute for law. Moreover, such award puts a premium on
dishonesty and encourages instead of deterring corruption.

For its part, the public respondent claims that the employee is sufficiently punished with her dismissal.
The grant of financial assistance is not intended as a reward for her offense but merely to help her for the
loss of her employment after working faithfully with the company for ten years. In support of this position,
the Solicitor General cites the cases of Firestone Tire and Rubber Company of the Philippines v.
Lariosa 6 and Soco v. Mercantile Corporation of Davao, 7 where the employees were dismissed for cause
but were nevertheless allowed separation pay on grounds of social and compassionate justice. As the
Court put it in the Firestone case:
 In view of the foregoing, We rule that Firestone had valid grounds to dispense with the
services of Lariosa and that the NLRC acted with grave abuse of discretion in ordering
his reinstatement. However, considering that Lariosa had worked with the company for
eleven years with no known previous bad record, the ends of social and compassionate
justice would be served if he is paid full separation pay but not reinstatement without
backwages by the NLRC.

In the said case, the employee was validly dismissed for theft but the NLRC nevertheless awarded him
full separation pay for his 11 years of service with the company. In Soco, the employee was also legally
separated for unauthorized use of a company vehicle and refusal to attend the grievance proceedings but
he was just the same granted one-half month separation pay for every year of his 18-year service.

Similar action was taken in Filipro, Inc. v. NLRC, 8 where the employee was validly dismissed for
preferring certain dealers in violation of company policy but was allowed separation pay for his 2 years of
service. In Metro Drug Corporation v. NLRC, 9 the employee was validly removed for loss of confidence
because of her failure to account for certain funds but she was awarded separation pay equivalent to one-
half month's salary for every year of her service of 15 years. In Engineering Equipment, Inc. v.
NLRC, 10 the dismissal of the employee was justified because he had instigated labor unrest among the
workers and had serious differences with them, among other grounds, but he was still granted three
months separation pay corresponding to his 3-year service. In New Frontier Mines, Inc. v. NLRC, 11 the
employee's 3- year service was held validly terminated for lack of confidence and abandonment of work
but he was nonetheless granted three months separation pay. And in San Miguel Corporation v. Deputy
Minister of Labor and Employment, et al ., 12 full separation pay for 6, 10, and 16 years service,
respectively, was also allowed three employees who had been dismissed after they were found guilty of
misappropriating company funds.

The rule embodied in the Labor Code is that a person dismissed for cause as defined therein is not
entitled to separation pay. 13 The cases above cited constitute the exception, based upon considerations
of equity. Equity has been defined as justice outside law, 14 being ethical rather than jural and belonging
to the sphere of morals than of law. 15 It is grounded on the precepts of conscience and not on any
sanction of positive law. 16 Hence, it cannot prevail against the expressed provision of the labor laws
allowing dismissal of employees for cause and without any provision for separation pay.

Strictly speaking, however, it is not correct to say that there is no express justification for the grant of
separation pay to lawfully dismissed employees other than the abstract consideration of equity. The
reason is that our Constitution is replete with positive commands for the promotion of social justice, and
particularly the protection of the rights of the workers. The enhancement of their welfare is one of the
primary concerns of the present charter. In fact, instead of confining itself to the general commitment to
the cause of labor in Article II on the Declaration of Principles of State Policies, the new Constitution
contains a separate article devoted to the promotion of social justice and human rights with a separate
sub- topic for labor. Article XIII expressly recognizes the vital role of labor, hand in hand with
management, in the advancement of the national economy and the welfare of the people in general. The
categorical mandates in the Constitution for the improvement of the lot of the workers are more than
sufficient basis to justify the award of separation pay in proper cases even if the dismissal be for cause.

The Court notes, however, that where the exception has been applied, the decisions have not been
consistent as to the justification for the grant of separation pay and the amount or rate of such award.
Thus, the employees dismissed for theft in the Firestone case and for animosities with fellow workers in
the Engineering Equipment case were both awarded separation pay notnvithstanding that the first cause
was certainly more serious than the second. No less curiously, the employee in the Soco case was
allowed only one-half month pay for every year of his 18 years of service, but in Filipro the award was two
months separation pay for 2 years service. In Firestone, the emplovee was allowed full separation pay
corresponding to his 11 years of service, but in Metro, the employee was granted only one-half month
separation pay for every year of her 15year service. It would seem then that length of service is not
necessarily a criterion for the grant of separation pay and neither apparently is the reason for the
dismissal.

The Court feels that distinctions are in order. We note that heretofore the separation pay, when it was
considered warranted, was required regardless of the nature or degree of the ground proved, be it mere
inefficiency or something graver like immorality or dishonesty. The benediction of compassion was made
to cover a multitude of sins, as it were, and to justify the helping hand to the validly dismissed employee
whatever the reason for his dismissal. This policy should be re-examined. It is time we rationalized the
exception, to make it fair to both labor and management, especially to labor.

There should be no question that where it comes to such valid but not iniquitous causes as failure to
comply with work standards, the grant of separation pay to the dismissed employee may be both just and
compassionate, particularly if he has worked for some time with the company. For example, a subordinate
who has irreconcilable policy or personal differences with his employer may be validly dismissed for
demonstrated loss of confidence, which is an allowable ground. A working mother who has to be
frequently absent because she has also to take care of her child may also be removed because of her
poor attendance, this being another authorized ground. It is not the employee's fault if he does not have
the necessary aptitude for his work but on the other hand the company cannot be required to maintain
him just the same at the expense of the efficiency of its operations. He too may be validly replaced. Under
these and similar circumstances, however, the award to the employee of separation pay would be
sustainable under the social justice policy even if the separation is for cause.

But where the cause of the separation is more serious than mere inefficiency, the generosity of the law
must be more discerning. There is no doubt it is compassionate to give separation pay to a salesman if
he is dismissed for his inability to fill his quota but surely he does not deserve such generosity if his
offense is misappropriation of the receipts of his sales. This is no longer mere incompetence but clear
dishonesty. A security guard found sleeping on the job is doubtless subject to dismissal but may be
allowed separation pay since his conduct, while inept, is not depraved. But if he was in fact not really
sleeping but sleeping with a prostitute during his tour of duty and in the company premises, the situation
is changed completely. This is not only inefficiency but immorality and the grant of separation pay would
be entirely unjustified.

We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker,
the employer may not be required to give the dismissed employee separation pay, or financial assistance,
or whatever other name it is called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than
punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal
only and that the separation pay has nothing to do with the wrong he has committed. Of course it has.
Indeed, if the employee who steals from the company is granted separation pay even as he is validly
dismissed, it is not unlikely that he will commit a similar offense in his next employment because he thinks
he can expect a like leniency if he is again found out. This kind of misplaced compassion is not going to
do labor in general any good as it will encourage the infiltration of its ranks by those who do not deserve
the protection and concern of the Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by
the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every humane society but only when the recipient is not a
rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any
more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice
may do so only if their hands are clean and their motives blameless and not simply because they happen
to be poor. This great policy of our Constitution is not meant for the protection of those who have proved
they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their
own character.

Applying the above considerations, we hold that the grant of separation pay in the case at bar is
unjustified. The private respondent has been dismissed for dishonesty, as found by the labor arbiter and
affirmed by the NLRC and as she herself has impliedly admitted. The fact that she has worked with the
PLDT for more than a decade, if it is to be considered at all, should be taken against her as it reflects a
regrettable lack of loyalty that she should have strengthened instead of betraying during all of her 10
years of service with the company. If regarded as a justification for moderating the penalty of dismissal, it
will actually become a prize for disloyalty, perverting the meaning of social justice and undermining the
efforts of labor to cleanse its ranks of all undesirables.

The Court also rules that the separation pay, if found due under the circumstances of each case, should
be computed at the rate of one month salary for every year of service, assuming the length of such
service is deemed material. This is without prejudice to the application of special agreements between the
employer and the employee stipulating a higher rate of computation and providing for more benefits to the
discharged employee. 17

WHEREFORE, the petition is GRANTED. The challenged resolution of September 22,1987, is

AFFIRMED in toto except for the grant of separation pay in the form of financial assistance, which is
hereby DISALLOWED. The temporary restraining order dated March 23, 1988, is LIFTED. It is so
ordered.

Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes and
Medialdea, JJ., concur.

___

G.R. No. 128845 June 1, 2000

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner,

vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and Employment;
HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of Labor and
Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of International
School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.

KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School,
mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their colleagues in
other schools is, of course, beside the point. The point is that employees should be given equal pay for
work of equal value. That is a principle long honored in this jurisdiction. That is a principle that rests on
fundamental notions of justice. That is the principle we uphold today.1wphi1.nt

Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732,
is a domestic educational institution established primarily for dependents of foreign diplomatic personnel
and other temporary residents.1 To enable the School to continue carrying out its educational program
and improve its standard of instruction, Section 2(c) of the same decree authorizes the School to employ
its own teaching and management personnel selected by it either locally or abroad, from Philippine or
other nationalities, such personnel being exempt from otherwise applicable laws and regulations
attending their employment, except laws that have been or will be enacted for the protection of
employees.

Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the
same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine whether a
faculty member should be classified as a foreign-hire or a local hire:

a. What is one's domicile?

b. Where is one's home economy?

c. To which country does one owe economic allegiance?

d. Was the individual hired abroad specifically to work in the School and was the School
responsible for bringing that individual to the Philippines? 2

Should the answer to any of these queries point to the Philippines, the faculty member is classified as a
local hire; otherwise, he or she is deemed a foreign-hire.

The School grants foreign-hires certain benefits not accorded local-hires.1avvphi1 These include housing,
transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a
salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor"
and (b) limited tenure. The School explains:

A foreign-hire would necessarily have to uproot himself from his home country, leave his family
and friends, and take the risk of deviating from a promising career path all for the purpose of
pursuing his profession as an educator, but this time in a foreign land. The new foreign hire is
faced with economic realities: decent abode for oneself and/or for one's family, effective means of
transportation, allowance for the education of one's children, adequate insurance against illness
and death, and of course the primary benefit of a basic salary/retirement compensation.

Because of a limited tenure, the foreign hire is confronted again with the same economic reality
after his term: that he will eventually and inevitably return to his home country where he will have
to confront the uncertainty of obtaining suitable employment after along period in a foreign land.

The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international
education.3

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective bargaining
representative of all faculty members"4 of the School, contested the difference in salary rates between
foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included in
the appropriate bargaining unit, eventually caused a deadlock between the parties.

On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a compromise prompted the Department of Labor and
Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues in
favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's
motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos
and that the grant of higher salaries to foreign-hires constitutes racial discrimination.

The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all,
with nationalities other than Filipino, who have been hired locally and classified as local hires.5 The Acting
Secretary of Labor found that these non-Filipino local-hires received the same benefits as the Filipino
local-hires.

The compensation package given to local-hires has been shown to apply to all, regardless of
race. Truth to tell, there are foreigners who have been hired locally and who are paid equally as
Filipino local hires.6

The Acting secretary upheld the point-of-hire classification for the distinction in salary rates:

The Principle "equal pay for equal work" does not find applications in the present case. The
international character of the School requires the hiring of foreign personnel to deal with different
nationalities and different cultures, among the student population.

We also take cognizance of the existence of a system of salaries and benefits accorded to foreign
hired personnel which system is universally recognized. We agree that certain amenities have to
be provided to these people in order to entice them to render their services in the Philippines and
in the process remain competitive in the international market.

Furthermore, we took note of the fact that foreign hires have limited contract of employment
unlike the local hires who enjoy security of tenure. To apply parity therefore, in wages and other
benefits would also require parity in other terms and conditions of employment which include the
employment which include the employment contract.

A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:

All members of the bargaining unit shall be compensated only in accordance with
Appendix C hereof provided that the Superintendent of the School has the discretion to
recruit and hire expatriate teachers from abroad, under terms and conditions that are
consistent with accepted international practice.

Appendix C of said CBA further provides:

The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS)
salary schedule. The 25% differential is reflective of the agreed value of system
displacement and contracted status of the OSRS as differentiated from the tenured status
of Locally Recruited Staff (LRS).

To our mind, these provisions demonstrate the parties' recognition of the difference in the status
of two types of employees, hence, the difference in their salaries.

The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an
established principle of constitutional law that the guarantee of equal protection of the laws is not
violated by legislation or private covenants based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and apply to all members of the same class.
Verily, there is a substantial distinction between foreign hires and local hires, the former enjoying
only a limited tenure, having no amenities of their own in the Philippines and have to be given a
good compensation package in order to attract them to join the teaching faculty of the School. 7
We cannot agree.

That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws
reflect the policy against these evils. The Constitution8 in the Article on Social Justice and Human Rights
exhorts Congress to "give highest priority to the enactment of measures that protect and enhance the
right of all people to human dignity, reduce social, economic, and political inequalities." The very broad
Article 19 of the Civil Code requires every person, "in the exercise of his rights and in the performance of
his duties, [to] act with justice, give everyone his due, and observe honesty and good faith.

International law, which springs from general principles of law,9 likewise proscribes discrimination.
General principles of law include principles of equity, 10 i.e., the general principles of fairness and justice,
based on the test of what is reasonable. 11 The Universal Declaration of Human Rights, 12 the International
Covenant on Economic, Social, and Cultural Rights, 13 the International Convention on the Elimination of
All Forms of Racial Discrimination, 14 the Convention against Discrimination in Education, 15 the
Convention (No. 111) Concerning Discrimination in Respect of Employment and Occupation 16 all
embody the general principle against discrimination, the very antithesis of fairness and justice. The
Philippines, through its Constitution, has incorporated this principle as part of its national laws.

In the workplace, where the relations between capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all the more reprehensible.

The Constitution 17 specifically provides that labor is entitled to "humane conditions of work." These
conditions are not restricted to the physical workplace the factory, the office or the field but include
as well the manner by which employers treat their employees.

The Constitution 18 also directs the State to promote "equality of employment opportunities for all."
Similarly, the Labor Code 19 provides that the State shall "ensure equal work opportunities regardless of
sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State, in
spite of its primordial obligation to promote and ensure equal employment opportunities, closes its eyes to
unequal and discriminatory terms and conditions of employment. 20

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes 21 the payment of lesser compensation to a female employee as against
a male employee for work of equal value. Article 248 declares it an unfair labor practice for an employer
to discriminate in regard to wages in order to encourage or discourage membership in any labor
organization.

Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof,
provides:

The States Parties to the present Covenant recognize the right of everyone to the enjoyment of
just and favourable conditions of work, which ensure, in particular:

a. Remuneration which provides all workers, as a minimum, with:

(i) Fair wages and equal remuneration for work of equal value without distinction
of any kind, in particular women being guaranteed conditions of work not inferior
to those enjoyed by men, with equal pay for equal work;

xxx xxx xxx

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of
"equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort and
responsibility, under similar conditions, should be paid similar salaries. 22 This rule applies to the School,
its "international character" notwithstanding.

The School contends that petitioner has not adduced evidence that local-hires perform work equal to that
of foreign-hires. 23 The Court finds this argument a little cavalier. If an employer accords employees the
same position and rank, the presumption is that these employees perform equal work. This presumption
is borne by logic and human experience. If the employer pays one employee less than the rest, it is not
for that employee to explain why he receives less or why the others receive more. That would be adding
insult to injury. The employer has discriminated against that employee; it is for the employer to explain
why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that foreign-
hires perform 25% more efficiently or effectively than the local-hires. Both groups have similar functions
and responsibilities, which they perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.

"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid at
regular intervals for the rendering of services." In Songco v. National Labor Relations Commission, 24 we
said that:

"salary" means a recompense or consideration made to a person for his pains or industry in
another man's business. Whether it be derived from "salarium," or more fancifully from "sal," the
pay of the Roman soldier, it carries with it the fundamental idea of compensation for services
rendered. (Emphasis supplied.)

While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and
they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor" and the
foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates. The
dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain
benefits accorded them which are not enjoyed by local-hires, such as housing, transportation, shipping
costs, taxes and home leave travel allowances.

The Constitution enjoins the State to "protect the rights of workers and promote their welfare," 25 "to afford
labor full protection." 26 The State, therefore, has the right and duty to regulate the relations between labor
and capital. 27 These relations are not merely contractual but are so impressed with public interest that
labor contracts, collective bargaining agreements included, must yield to the common good. 28 Should
such contracts contain stipulations that are contrary to public policy, courts will not hesitate to strike down
these stipulations.

In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no
reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of the
School of according higher salaries to foreign-hires contravenes public policy and, certainly, does not
deserve the sympathy of this Court.1avvphi1

We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.

A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the
entire body of employees, consistent with equity to the employer, indicate to be the best suited to serve
the reciprocal rights and duties of the parties under the collective bargaining provisions of the law." 29 The
factors in determining the appropriate collective bargaining unit are (1) the will of the employees (Globe
Doctrine); (2) affinity and unity of the employees' interest, such as substantial similarity of work and
duties, or similarity of compensation and working conditions (Substantial Mutual Interests Rule); (3) prior
collective bargaining history; and (4) similarity of employment status. 30 The basic test of an asserted
bargaining unit's acceptability is whether or not it is fundamentally the combination which will best assure
to all employees the exercise of their collective bargaining rights. 31

It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires
for purposes of collective bargaining. The collective bargaining history in the School also shows that
these groups were always treated separately. Foreign-hires have limited tenure; local-hires enjoy security
of tenure. Although foreign-hires perform similar functions under the same working conditions as the
local-hires, foreign-hires are accorded certain benefits not granted to local-hires. These benefits, such as
housing, transportation, shipping costs, taxes, and home leave travel allowance, are reasonably related to
their status as foreign-hires, and justify the exclusion of the former from the latter. To include foreign-hires
in a bargaining unit with local-hires would not assure either group the exercise of their respective
collective bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The
Orders of the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby
REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of according
foreign-hires higher salaries than local-hires.

SO ORDERED.

Puno and Pardo, JJ., concur.

__

G.R. No. 146650 January 13, 2003

DOLE PHILIPPINES, INC., petitioner,

vs.
PAWIS NG MAKABAYANG OBRERO (PAMAO-NFL), respondent.

CORONA, J.:

Before us is a petition for review filed under Rule 45 of the 1997 Rules of Civil Procedure, assailing the
January 9, 2001 resolution of the Court of Appeals which denied petitioners motion for reconsideration of
its September 22, 2000 decision1 which in turn upheld the Order issued by the voluntary arbitrator 2 dated
12 October 1998, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant.

Respondent is hereby directed to extend the "free meal" benefit as provided for in Article XVIII,
Section 3 of the collective bargaining agreement to those employees who have actually
performed overtime works even for exactly three (3) hours only.

SO ORDERED. 3

The core of the present controversy is the interpretation of the provision for "free meals" under Section 3
of Article XVIII of the 1996-2001 Collective Bargaining Agreement (CBA) between petitioner Dole
Philippines, Inc. and private respondent labor union PAMAO-NFL. Simply put, how many hours of
overtime work must a Dole employee render to be entitled to the free meal under Section 3 of Article XVIII
of the 1996-2001 CBA? Is it when he has rendered (a) exactly, or no less than, three hours of actual
overtime work or (b) more than three hours of actual overtime work?

The antecedents are as follows:

On February 22, 1996, a new five-year Collective Bargaining Agreement for the period starting February
1996 up to February 2001, was executed by petitioner Dole Philippines, Inc., and private respondent
Pawis Ng Makabayang Obrero-NFL (PAMAO-NFL). Among the provisions of the new CBA is the disputed
section on meal allowance under Section 3 of Article XVIII on Bonuses and Allowances, which reads:

Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of TEN
PESOS (P10.00) to all employees who render at least TWO (2) hours or more of actual overtime
work on a workday, and FREE MEALS, as presently practiced, not exceeding TWENTY FIVE
PESOS (P25.00) after THREE (3) hours of actual overtime work.4

Pursuant to the above provision of the CBA, some departments of Dole reverted to the previous practice
of granting free meals after exactly three hours of actual overtime work. However, other departments
continued the practice of granting free meals only after more than three hours of overtime work. Thus,
private respondent filed a complaint before the National Conciliation and Mediation Board alleging that
petitioner Dole refused to comply with the provisions of the 1996-2001 CBA because it granted free meals
only to those who rendered overtime work for more than three hours and not to those who rendered
exactly three hours overtime work.

The parties agreed to submit the dispute to voluntary arbitration. Thereafter, the voluntary arbitrator,
deciding in favor of the respondent, issued an order directing petitioner Dole to extend the "free meal"
benefit to those employees who actually did overtime work even for exactly three hours only.

Petitioner sought a reconsideration of the above order but the same was denied. Hence, petitioner
elevated the matter to the Court of Appeals by way of a petition for review on certiorari.

On September 22, 2000, the Court of Appeals rendered its decision upholding the assailed order.

Thus, the instant petition.

Petitioner Dole asserts that the phrase "after three hours of actual overtime work" should be interpreted to
mean after more than three hours of actual overtime work.

On the other hand, private respondent union and the voluntary arbitrator see it as meaning after exactly
three hours of actual overtime work.

The "meal allowance" provision in the 1996-2001 CBA is not new. It was also in the 1985-1988 CBA and
the 1990-1995 CBA. The 1990-1995 CBA provision on meal allowance was amended by the parties in
the 1993-1995 CBA Supplement. The clear changes in each CBA provision on meal allowance were in
the amount of the meal allowance and free meals, and the use of the words "after" and "after more than"
to qualify the amount of overtime work to be performed by an employee to entitle him to the free meal.

To arrive at a correct interpretation of the disputed provision of the CBA, a review of the pertinent section
of past CBAs is in order.

The CBA covering the period 21 September 1985 to 20 September 1988 provided:

Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of

FOUR (P4.00) PESOS to all employees who render at least TWO (2) hours or more of actual
 overtime work on a workday, and FREE MEALS, as presently practiced, after THREE (3) hours of
actual overtime work."5

The CBA for 14 January 1990 to 13 January 1995 likewise provided:

Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of

EIGHT PESOS (P8.00) to all employees who render at least TWO (2) hours or more of actual
overtime work on a workday, and FREE MEALS, as presently practiced, not exceeding SIXTEEN
PESOS (P16.00) after THREE (3) hours of actual overtime work."6

The provision above was later amended when the parties renegotiated the economic provisions of the
CBA pursuant to Article 253-A of the Labor Code. Section 3 of Article XVIII of the 14 January 1993 to 13
January 1995 Supplement to the 1990-1995 CBA reads:

Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL SUBSIDY of NINE
PESOS (P9.00) to all employees who render at least TWO (2) hours or more of actual overtime
work on a workday, and FREE MEALS, as presently practiced, not exceeding TWENTY ONE
PESOS (P21.00) after more than THREE (3) hours of actual overtime work (Section 3, as
amended)."7

We note that the phrase "more than" was neither in the 1985-1988 CBA nor in the original 1990-1995
CBA. It was inserted only in the 1993-1995 CBA Supplement. But said phrase is again absent in Section
3 of Article XVIII of the 1996-2001 CBA, which reverted to the phrase "after three (3) hours".

Petitioner asserts that the phrase "after three (3) hours of actual overtime work" does not mean after
exactly three hours of actual overtime work; it means after more than three hours of actual overtime work.
Petitioner insists that this has been the interpretation and practice of Dole for the past thirteen years.

Respondent, on the other hand, maintains that "after three (3) hours of actual overtime work" simply
means after rendering exactly, or no less than, three hours of actual overtime work.

The Court finds logic in private respondents interpretation.

The omission of the phrase "more than" between "after" and "three hours" in the present CBA spells a big
difference.

No amount of legal semantics can convince the Court that "after more than" means the same as "after".

Petitioner asserts that the "more than" in the 1993-1995 CBA Supplement was mere surplusage because,
regardless of the absence of said phrase in all the past CBAs, it had always been the policy of petitioner
corporation to give the meal allowance only after more than 3 hours of overtime work. However, if this
were true, why was it included only in the 1993-1995 CBA Supplement and the parties had to negotiate
its deletion in the 1996-2001 CBA?

Clearly then, the reversion to the wording of previous CBAs can only mean that the parties intended that
free meals be given to employees after exactly, or no less than, three hours of actual overtime work.

The disputed provision of the CBA is clear and unambiguous. The terms are explicit and the language of
the CBA is not susceptible to any other interpretation. Hence, the literal meaning of "free meals after three
(3) hours of overtime work" shall prevail, which is simply that an employee shall be entitled to a free meal
if he has rendered exactly, or no less than, three hours of overtime work, not "after more than" or "in
excess of" three hours overtime work.
Petitioner also invokes the well-entrenched principle of management prerogative that "the power to grant
benefits over and beyond the minimum standards of law, or the Labor Code for that matter, belongs to the
employer x x x". According to this principle, even if the law is solicitous of the welfare of the employees, it
must also protect the right of the employer to exercise what clearly are management
prerogatives.8 Petitioner claims that, being the employer, it has the right to determine whether it will grant
a "free meal" benefit to its employees and, if so, under what conditions. To see it otherwise would amount
to an impairment of its rights as an employer.

We do not think so.

The exercise of management prerogative is not unlimited. It is subject to the limitations found in law, a
collective bargaining agreement or the general principles of fair play and justice. 9 This situation
constitutes one of the limitations. The CBA is the norm of conduct between petitioner and private
respondent and compliance therewith is mandated by the express policy of the law. 10

Petitioner Dole cannot assail the voluntary arbitrators interpretation of the CBA for the supposed
impairment of its management prerogatives just because the same interpretation is contrary to its own.

WHEREFORE, petition is hereby denied.

SO ORDERED.

Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.

___

Republic of the Philippines

SUPREME COURT

SECOND DIVISION

G.R. No. 155059. April 29, 2005

AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION, Petitioner,

vs.
AMERICAN WIRE AND CABLE CO., INC. and THE COURT OF APPEALS, Respondents.

DECISION

CHICO-NAZARIO, J.:

Before Us is a special civil action for certiorari, assailing the Decision1 of the Special Eighth Division of the
Court of Appeals dated 06 March 2002. Said Decision upheld the Decision2 and Order3 of Voluntary
Arbitrator Angel A. Ancheta of the National Conciliation and Mediation Board (NCMB) dated 25
September 2001 and 05 November 2001, respectively, which declared the private respondent herein not
guilty of violating Article 100 of the Labor Code, as amended. Assailed likewise, is the Resolution 4 of the
Court of Appeals dated 12 July 2002, which denied the motion for reconsideration of the petitioner, for
lack of merit.

THE FACTS

The facts of this case are quite simple and not in dispute.
American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of wires and cables.
There are two unions in this company, the American Wire and Cable Monthly-Rated Employees Union
(Monthly-Rated Union) and the American Wire and Cable Daily-Rated Employees Union (Daily-Rated
Union).

On 16 February 2001, an original action was filed before the NCMB of the Department of Labor and
Employment (DOLE) by the two unions for voluntary arbitration. They alleged that the private respondent,
without valid cause, suddenly and unilaterally withdrew and denied certain benefits and entitlements
which they have long enjoyed. These are the following:

a. Service Award;

b. 35% premium pay of an employees basic pay for the work rendered during Holy Monday, Holy
Tuesday, Holy Wednesday, December 23, 26, 27, 28 and 29;

c. Christmas Party; and

d. Promotional Increase.

A promotional increase was asked by the petitioner for fifteen (15) of its members who were given or
assigned new job classifications. According to petitioner, the new job classifications were in the nature of
a promotion, necessitating the grant of an increase in the salaries of the said 15 members.

On 21 June 2001, a Submission Agreement was filed by the parties before the Office for Voluntary
Arbitration. Assigned as Voluntary Arbitrator was Angel A. Ancheta.

On 04 July 2001, the parties simultaneously filed their respective position papers with the Office of the
Voluntary Arbitrator, NCMB, and DOLE.

On 25 September 2001, a Decision5 was rendered by Voluntary Arbitrator Angel A. Ancheta in favor of the
private respondent. The dispositive portion of the said Decision is quoted hereunder:

WHEREFORE, with all the foregoing considerations, it is hereby declared that the Company is not guilty
of violating Article 100 of the Labor Code, as amended, or specifically for withdrawing the service award,
Christmas party and 35% premium for work rendered during Holy Week and Christmas season and for
not granting any promotional increase to the alleged fifteen (15) Daily-Rated Union Members in the
absence of a promotion. The Company however, is directed to grant the service award to deserving
employees in amounts and extent at its discretion, in consultation with the Unions on grounds of equity
and fairness.6

A motion for reconsideration was filed by both unions7 where they alleged that the Voluntary Arbitrator
manifestly erred in finding that the company did not violate Article 100 of the Labor Code, as amended,
when it unilaterally withdrew the subject benefits, and when no promotional increase was granted to the
affected employees.

On 05 November 2001, an Order8 was issued by Voluntary Arbitrator Angel A. Ancheta. Part of the Order
is quoted hereunder:

Considering that the issues raised in the instant case were meticulously evaluated and length[i]ly
discussed and explained based on the pleadings and documentary evidenc[e] adduced by the contending
parties, we find no cogent reason to change, modify, or disturb said decision.
WHEREFORE, let the instant MOTION[S] FOR RECONSIDERATION be, as they are hereby, denied for
lack of merit. Our decision dated 25 September 2001 is affirmed "en toto."9

An appeal under Rule 43 of the 1997 Rules on Civil Procedure was made by the Daily-Rated Union
before the Court of Appeals10 and docketed as CA-G.R. SP No. 68182. The petitioner averred that
Voluntary Arbitrator Angel A. Ancheta erred in finding that the company did not violate Article 100 of the
Labor Code, as amended, when the subject benefits were unilaterally withdrawn. Further, they assert, the
Voluntary Arbitrator erred in adopting the companys unaudited Revenues and Profitability Analysis for
the years 1996-2000 in justifying the latters withdrawal of the questioned benefits. 11

On 06 March 2002, a Decision in favor of herein respondent company was promulgated by the Special
Eighth Division of the Court of Appeals in CA-G.R. SP No. 68182. The decretal portion of the decision
reads:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and
accordingly DISMISSED, for lack of merit. The Decision of Voluntary Arbitrator Angel A. Ancheta dated
September 25, 2001 and his Order dated November 5, 2001 in VA Case No. AAA-10-6-4-2001 are
hereby AFFIRMED and UPHELD.12

A motion for reconsideration13 was filed by the petitioner, contending that the Court of Appeals
misappreciated the facts of the case, and that it committed serious error when it ruled that the unaudited
financial statement bears no importance in the instant case.

The Court of Appeals denied the motion in its Resolution dated 12 July 200214 because it did not present
any new matter which had not been considered in arriving at the decision. The dispositive portion of the
Resolution states:

WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.15

Dissatisfied with the court a quos ruling, petitioner instituted the instant special civil action
for certiorari,16 citing grave abuse of discretion amounting to lack of jurisdiction.

ASSIGNMENT OF ERRORS

The petitioner assigns as errors the following:

THE COURT OF APPEALS ERRED IN HOLDING THAT THE COMPANY DID NOT VIOLATE ARTICLE
100 OF THE LABOR CODE, AS AMENDED, WHEN IT UNILATERALLY WITHDREW THE BENEFITS
OF THE MEMBERS OF PETITIONER UNION, TO WIT: 1) 35% PREMIUM PAY; 2) CHRISTMAS PARTY
AND ITS INCIDENTAL BENEFITS; AND 3) SERVICE AWARD, WHICH IN TRUTH AND IN FACT SAID
BENEFITS/ENTITLEMENTS HAVE BEEN GIVEN THEM SINCE TIME IMMEMORIAL, AS A MATTER
OF LONG ESTABLISHED COMPANY PRACTICE, WITH THE FURTHER FACT THAT THE SAME NOT
BEING DEPENDENT ON PROFITS.

II

THE COURT OF APPEALS ERRED WHEN IT JUST ACCEPTED HOOK, LINE AND SINKER, THE
RESPONDENT COMPANYS SELF SERVING AND UNAUDITED REVENUES AND PROFITABILITY
ANALYSIS FOR THE YEARS 1996-2000 WHICH THEY SUBMITTED TO FALSELY JUSTIFY THEIR
UNLAWFUL ACT OF UNILATERALLY AND SUDDENLY WITHDRAWING OR DENYING FROM THE
PETITIONER THE SUBJECT BENEFITS/ENTITLEMENTS.
III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE YEARLY SERVICE AWARD IS NOT
DEPENDENT ON PROFIT BUT ON SERVICE AND THUS, CANNOT BE UNILATERALLY WITHDRAWN
BY RESPONDENT COMPANY.

ISSUE

Synthesized, the solitary issue that must be addressed by this Court is whether or not private respondent
is guilty of violating Article 100 of the Labor Code, as amended, when the benefits/entitlements given to
the members of petitioner union were withdrawn.

THE COURTS RULING

Before we address the sole issue presented in the instant case, it is best to first discuss a matter which
was raised by the private respondent in its Comment. The private respondent contends that this case
should have been dismissed outright because of petitioners error in the mode of appeal. According to it,
the petitioner should have elevated the instant case to this Court through a petition for review
on certiorari under Rule 45, and not through a special civil action for certiorari under Rule 65, of the 1997
Rules on Civil Procedure.17

Assuming arguendo that the mode of appeal taken by the petitioner is improper, there is no question that
the Supreme Court has the discretion to dismiss it if it is defective. However, sound policy dictates that it
is far better to dispose the case on the merits, rather than on technicality.18

The Supreme Court may brush aside the procedural barrier and take cognizance of the petition as it
raises an issue of paramount importance. The Court shall resolve the solitary issue on the merits for
future guidance of the bench and bar.19

With that out of the way, we shall now resolve whether or not the respondent company is guilty of
violating Article 100 of the Labor Code, as amended.

Article 100 of the Labor Code provides:

ART. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS. Nothing in this

Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits
being enjoyed at the time of promulgation of this Code.

The petitioner submits that the withdrawal of the private respondent of the 35% premium pay for selected
days during the Holy Week and Christmas season, the holding of the Christmas Party and its incidental
benefits, and the giving of service awards violated Article 100 of the Labor Code. The grant of these
benefits was a customary practice that can no longer be unilaterally withdrawn by private respondent
without the tacit consent of the petitioner. The benefits in question were given by the respondent to the
petitioner consistently, deliberately, and unconditionally since time immemorial. The benefits/entitlements
were not given to petitioner due to an error in interpretation, or a construction of a difficult question of law,
but simply, the grant has been a practice over a long period of time. As such, it cannot be withdrawn from
the petitioner at respondents whim and caprice, and without the consent of the former. The benefits given
by the respondent cannot be considered as a "bonus" as they are not founded on profit. Even assuming
that it can be treated as a "bonus," the grant of the same, by reason of its long and regular concession,
may be regarded as part of regular compensation.20
With respect to the fifteen (15) employees who are members of petitioner union that were given new job
classifications, it asserts that a promotional increase in their salaries was in order. Salary adjustment is a
must due to their promotion.21

On respondent companys Revenues and Profitability Analysis for the years 1996-2000, the petitioner
insists that since the former was unaudited, it should not have justified the companys sudden withdrawal
of the benefits/entitlements. The normal and/or legal method for establishing profit and loss of a company
is through a financial statement audited by an independent auditor. 22

The petitioner cites our ruling in the case of Saballa v. NLRC,23 where we held that financial statements
audited by independent auditors constitute the normal method of proof of the profit and loss performance
of the company. Our ruling in the case of Bogo-Medellin Sugarcane Planters Association, Inc., et al. v.
NLRC, et al.24was likewise invoked. In this case, we held:

The Court has previously ruled that financial statements audited by independent external auditors
constitute the normal method of proof of the profit and loss performance of a company.

On the matter of the withdrawal of the service award, the petitioner argues that it is the employees length
of service which is taken as a factor in the grant of this benefit, and not whether the company acquired
profit or not.25

In answer to all these, the respondent corporation avers that the grant of all subject benefits has not
ripened into practice that the employees concerned can claim a demandable right over them. The grant of
these benefits was conditional based upon the financial performance of the company and that
conditions/circumstances that existed before have indeed substantially changed thereby justifying the
discontinuance of said grants. The companys financial performance was affected by the recent political
turmoil and instability that led the entire nation to a bleeding economy. Hence, it only necessarily follows
that the companys financial situation at present is already very much different from where it was three or
four years ago.26

On the subject of the unaudited financial statement presented by the private respondent, the latter
contends that the cases cited by the petitioner indeed uniformly ruled that financial statements audited by
independent external auditors constitute the normal method of proof of the profit and loss performance of
a company. However, these cases do not require that the only legal method to ascertain profit and loss is
through an audited financial statement. The cases only provide that an audited financial statement is the
normal method.27

The respondent company likewise asseverates that the 15 members of petitioner union were not actually
promoted. There was only a realignment of positions.28

From the foregoing contentions, it appears that for the Court to resolve the issue presented, it is critical
that a determination must be first made on whether the benefits/entitlements are in the nature of a bonus
or not, and assuming they are so, whether they are demandable and enforceable obligations.

In the case of Producers Bank of the Philippines v. NLRC29 we have characterized what a bonus is, viz:

A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to
the success of the employers business and made possible the realization of profits. It is an act of
generosity granted by an enlightened employer to spur the employee to greater efforts for the success of
the business and realization of bigger profits. The granting of a bonus is a management prerogative,
something given in addition to what is ordinarily received by or strictly due the recipient. Thus, a bonus is
not a demandable and enforceable obligation, except when it is made part of the wage, salary or
compensation of the employee.
Based on the foregoing pronouncement, it is obvious that the benefits/entitlements subjects of the instant
case are all bonuses which were given by the private respondent out of its generosity and munificence.
The additional 35% premium pay for work done during selected days of the Holy Week and Christmas
season, the holding of Christmas parties with raffle, and the cash incentives given together with the
service awards are all in excess of what the law requires each employer to give its employees. Since they
are above what is strictly due to the members of petitioner-union, the granting of the same was a
management prerogative, which, whenever management sees necessary, may be withdrawn, unless they
have been made a part of the wage or salary or compensation of the employees.

The consequential question therefore that needs to be settled is if the subject benefits/entitlements, which
are bonuses, are demandable or not. Stated another way, can these bonuses be considered part of the
wage or salary or compensation making them enforceable obligations?

The Court does not believe so.

For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon
by the parties,30 or it must have had a fixed amount31 and had been a long and regular practice on the part
of the employer.32

The benefits/entitlements in question were never subjects of any express agreement between the parties.
They were never incorporated in the Collective Bargaining Agreement (CBA). As observed by the
Voluntary Arbitrator, the records reveal that these benefits/entitlements have not been subjects of any
express agreement between the union and the company, and have not yet been incorporated in the CBA.
In fact, the petitioner has not denied having made proposals with the private respondent for the service
award and the additional 35% premium pay to be made part of the CBA. 33

The Christmas parties and its incidental benefits, and the giving of cash incentive together with the
service award cannot be said to have fixed amounts. What is clear from the records is that over the years,
there had been a downtrend in the amount given as service award.34 There was also a downtrend with
respect to the holding of the Christmas parties in the sense that its location changed from paid venues to
one which was free of charge,35evidently to cut costs. Also, the grant of these two aforementioned
bonuses cannot be considered to have been the private respondents long and regular practice. To be
considered a "regular practice," the giving of the bonus should have been done over a long period of time,
and must be shown to have been consistent and deliberate.36The downtrend in the grant of these two
bonuses over the years demonstrates that there is nothing consistent about it. Further, as held by the
Court of Appeals:

Anent the Christmas party and raffle of prizes, We agree with the Voluntary Arbitrator that the same was
merely sponsored by the respondent corporation out of generosity and that the same is dependent on the
financial performance of the company for a particular year37

The additional 35% premium pay for work rendered during selected days of the Holy Week and
Christmas season cannot be held to have ripened into a company practice that the petitioner herein have
a right to demand. Aside from the general averment of the petitioner that this benefit had been granted by
the private respondent since time immemorial, there had been no evidence adduced that it had been a
regular practice. As propitiously observed by the Court of Appeals:

. . . [N]otwithstanding that the subject 35% premium pay was deliberately given and the same was in
excess of that provided by the law, the same however did not ripen into a company practice on account of
the fact that it was only granted for two (2) years and with the express reservation from respondent
corporations owner that it cannot continue to rant the same in view of the companys current financial
situation.38
To hold that an employer should be forced to distribute bonuses which it granted out of kindness is to
penalize him for his past generosity.39

Having thus ruled that the additional 35% premium pay for work rendered during selected days of the
Holy Week and Christmas season, the holding of Christmas parties with its incidental benefits, and the
grant of cash incentive together with the service award are all bonuses which are neither demandable nor
enforceable obligations of the private respondent, it is not necessary anymore to delve into the Revenues
and Profitability Analysis for the years 1996-2000 submitted by the private respondent.

On the alleged promotion of 15 members of the petitioner union that should warrant an increase in their
salaries, the factual finding of the Voluntary Arbitrator is revealing, viz:

Considering that the Union was unable to adduce proof that a promotion indeed occur[ed] with respect
to the 15 employees, the Daily Rated Unions claim for promotional increase likewise fall[s] there being no
promotion established under the records at hand.40

WHEREFORE, in view of all the foregoing, the assailed Decision and Resolution of the Court of Appeals
dated 06 March 2002 and 12 July 2002, respectively, which affirmed and upheld the decision of the
Voluntary Arbitrator, are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

Footnotes

1 Rollo,
pp. 216-222; Penned by Associate Justice Martin S. Villarama, Jr. with Associate Justices
Conchita Carpio-Morales and Mariano L. Del Castillo concurring.

2 Rollo, pp. 191-200.

3 Rollo, p. 214.

4 Rollo, p. 241.

5 Rollo, pp. 191-200.

6 Rollo, pp. 199-200.

7 Rollo, pp. 201-213.

8 Rollo, p. 214.

9 Id.

10 CA Rollo, pp. 2-30.

11 Ibid., pp. 10-11.

___

G.R. No. 156515 October 19, 2004

CHINA BANKING CORPORATION, petitioner,

vs.
MARIANO M. BORROMEO, respondent.

DECISION

CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari filed by China Banking Corporation seeking the
reversal of the Decision1 dated July 19, 2002 of the Court of Appeals in CA-G.R. SP No. 57365,
remanding to the Labor Arbiter for further hearings the complaint for payment of separation pay, mid-year
bonus, profit share and damages filed by respondent Mariano M. Borromeo against the petitioner Bank.
Likewise, sought to be reversed is the appellate courts Resolution dated January 6, 2003, denying the
petitioner Banks motion for reconsideration.

The factual antecedents of the case are as follows:

Respondent Mariano M. Borromeo joined the petitioner Bank on June 1, 1989 as Manager
assigned at the latters Regional Office in Cebu City. He then had the rank of Manager Level I.
Subsequently, the respondent was laterally transferred to Cagayan de Oro City as Branch
Manager of the petitioner Banks branch thereat.

For the years 1989 and 1990, the respondent received a "highly satisfactory" performance rating
and was given the corresponding profit sharing/p>erformance bonus. From 1991 up to 1995, he
consistently received a "very good" performance rating for each of the said years and again
received the corresponding profit sharing/p>erformance bonus. Moreover, in 1992, he was
promoted from Manager Level I to Manager Level II. In 1994, he was promoted to Senior
Manager Level I. Then again, in 1995, he was promoted to Senior Manager Level II. Finally, in
1996, with a "highly satisfactory" performance rating, the respondent was promoted to the
position of Assistant Vice-President, Branch Banking Group for the Mindanao area effective
October 16, 1996. Each promotion had the corresponding increase in the respondents salary as
well as in the benefits he received from the petitioner Bank.

However, prior to his last promotion and then unknown to the petitioner Bank, the respondent, without
authority from the Executive Committee or Board of Directors, approved several DAUD/BP
accommodations amounting to 2,441,375 in favor of Joel Maniwan, with Edmundo Ramos as surety.
DAUD/BP is the acronym for checks "Drawn Against Uncollected Deposits/Bills Purchased." Such
checks, which are not sufficiently funded by cash, are generally not honored by banks. Further, a
DAUD/BP accommodation is a credit accommodation granted to a few and select bank clients through
the withdrawal of uncollected or uncleared check deposits from their current account. Under the petitioner
Banks standard operating procedures, DAUD/BP accommodations may be granted only by a bank officer
upon express authority from its Executive Committee or Board of Directors.

As a result of the DAUD/BP accommodations in favor of Maniwan, a total of ten out-of-town checks (7
PCIB checks and 3 UCPB checks) of various dates amounting to 2,441,375 were returned unpaid from
September 20, 1996 to October 17, 1996. Each of the returned checks was stamped with the notation
"Payment Stopped/Account Closed."
On October 8, 1996, the respondent wrote a Memorandum to the petitioner Banks senior management
requesting for the grant of a 2.4 million loan to Maniwan. The memorandum stated that the loan was "to
regularize/liquidate subjects (referring to Maniwan) DAUD availments." It was only then that the petitioner
Bank came to know of the DAUD/BP accommodations in favor of Maniwan. The petitioner Bank further
learned that these DAUD/BP accommodations exceeded the limit granted to clients, were granted without
proper prior approval and already past due. Acting on this information, Samuel L. Chiong, the petitioner
Banks First Vice- President and Head-Visayas Mindanao Division, in his Memorandum dated November
19, 1996 for the respondent, sought clarification from the latter on the following matters:

1) When DAUD/BP accommodations were allowed, what efforts, if any, were made to establish
the identity and/or legitimacy of the alleged broker or drawers of the checks accommodated?

2) Did the branch follow and comply with operating procedure which require that all checks
accommodated for DAUD/BP should be previously verified with the drawee bank and history if
not outright balances determined if enough to cover the checks?

3) How did the accommodations reach 2,441,375.00 when our records indicate that the
borrowers B/p>-DAUD line is only for 500,000.00? When did the accommodations start
exceeding the limit of 500,000.00 and under whose authority?

4) When did the accommodated checks start bouncing?

5) What is the status of these checks now and what has the branch done so far to protect/ensure
collectibility of the returned checks?

6) What about client Joel Maniwan and surety Edmund Ramos, what steps have they done to pay
the checks returned?2

In reply thereto, the respondent, in his Letter dated December 5, 1996, answered the foregoing queries in
seriatim and explained, thus:

1. None

2. No

3. The accommodations reach 2.4 million upon the request of Mr. Edmund Ramos, surety, and
this request was subsequently approved by undersigned. The excess accommodations started in
July 96 without higher management approval.

4. Checks started bouncing on September 20, 1996.

5. Checks have remained unpaid. The branch sent demand letters to Messrs. Maniwan and
Ramos and referred the matter to our Legal Dept. for filing of appropriate legal action.

6. Mr. Maniwan, thru his lawyer, Atty. Oscar Musni has signified their intention to settle by Feb.
1997.

Justification for lapses committed (Item nos. 1 to 3).

The account was personally endorsed and referred to us by Mr. Edmund Ramos, Branch Manager of
Metrobank, Divisoria Br., Cagayan de Oro City. In fact, the CASA account was opened jointly as &/or
(Maniwan &/or Ramos). Mr. Ramos gave us his full assurance that the checks that we intend to purchase
are the same drawee that Metrobank has been purchasing for the past one (1) year already. He even
disclosed that these checks were verified by his own branch accountant and that Mr. Maniwans loan
account was being co-maked by Mr. Elbert Tan Yao Tin, son of Jose Tan Yao Tin of CIFC. To show his
sincerity, Mr. Ramos signed as surety for Mr. Maniwan for 2.5MM. Corollary to this, Mr. Ramos applied
for a loan with us mortgaging his house, lot and duplex with an estimated market value of 4.508MM. The
branch, therefore, is not totally negligent as officer to officer bank checking was done. In fact, it is also for
the very same reason that other banks granted DAUD to subject account and, likewise, the checks
returned unpaid, namely:

Solidbank 1.8 Million

Allied Bank .8
Far East Bank 2.0
MBTC 5.0

The attached letter of Mr. Ramos dated 19 Nov. 1996 will speak for itself. Further to this,
undersigned conferred with the acting BOH VSYap if these checks are legitimate 3rd party
checks.

On the other hand, Atty. Musni continues to insist that Mr. Maniwan was gypped by a broker in
the total amount of 10.00 Million.

Undersigned accepts full responsibility for committing an error in judgment, lapses in control and
abuse of discretion by relying solely on the word, assurance, surety and REM of Mr. Edmund
Ramos, a friend and a co-bank officer. I am now ready to face the consequence of my action.3

In another Letter dated April 8, 1997, the respondent notified Chiong of his intention to resign from the
petitioner Bank and apologized "for all the trouble I have caused because of the Maniwan case." 4 The
respondent, however, vehemently denied benefiting therefrom. In his Letter dated April 30, 1997, the
respondent formally tendered his irrevocable resignation effective May 31, 1997. 5

In the Memorandum dated May 23, 1997 addressed to the respondent, Nancy D. Yang, the petitioner
Banks Senior Vice-President and Head-Branch Banking Group, informed the former that his approval of
the DAUD/BP accommodations in favor of Maniwan without authority and/or approval of higher
management violated the petitioner Banks Code of Ethics. As such, he was directed to restitute the
amount of 1,507,736.79 representing 90% of the total loss of 1,675,263.10 incurred by the petitioner
Bank. However, in view of his resignation and considering the years of service in the petitioner Bank, the
management earmarked only 836,637.08 from the respondents total separation benefits or pay. The
memorandum addressed to the respondent stated:

After a careful review and evaluation of the facts surrounding the above case, the following have
been conclusively established:

1. The branch granted various BP/DAUD accommodations to clients Joel Maniwan/Edmundo

Ramos in excess of approved lines through the following out-of-town checks which were returned
for the reason "Payment Stopped/Account Closed":

1. PCIB Cebu Check No. 86256 251,816.00

2. PCIB Cebu Check No. 86261 235,880.00

3. PCIB Cebu Check No. 8215 241,443.00

 4. UCPB Tagbilaran Check No. 277,630.00

5. PCIB Bogo, Cebu Check No. 6117 267,418.00

6. UCPB Tagbilaran Check No. 216070 197,467.00

7. UCPB Tagbilaran Check No. 216073 263,920.00

8. PCIB Bogo, Cebu Check No. 6129 253,528.00

9. PCIB Bogo, Cebu Check No. 6122 198,615.00

10. PCIB Bogo, Cebu Check No. 6134 253,658.00

2. The foregoing checks were accommodated through your approval which was in excess of your
authority.

3. The branch failed to follow the fundamental and basic procedures in handling BP/DAUD
accommodations which made the accommodations basically flawed.

4. The accommodations were attended by lapses in control consisting of failure to report the
exception and failure to cover the account of Joel Maniwan with the required Credit Line
Agreement.

Since the foregoing were established by your own admissions in your letter explanation dated 5
December 1996, and the Audit Report and findings of the Region Head, Management finds your actions
in violation of the Banks Code of Ethics:

Table 6.2., no. 1: Compliance with Standard Operating Procedures

- "Infraction of Bank procedures in handling any bank transactions or work assignment

which results in a loss or probable loss."

Table 6.3., no. 6: Proper Conduct and Behavior -

"Willful misconduct in the performance of duty whether or not the bank suffers a loss,"
and/or

Table 6.5., no. 1: Work Responsibilities -

"Dereliction of duty whether or not the Bank suffers a loss," and/or

Table 6.6., no. 2: Authority and Subordination -

"Failure to carry out lawful orders or instructions of superiors."

Your approval of the accommodations in excess of your authority without prior authority and/or
approval from higher management is a violation of the above cited Rules.

In view of these, you are directed to restitute the amount of 1,507,736.79 representing 90% of
the total loss of 1,675,263.10 incurred by the Bank as your proportionate share. However, in
light of your voluntary separation from the Bank effective May 31, 1997, in view of the years of
service you have given to the Bank, management shall earmark and segregate only the amount
of 836,637.08 from your total separation benefits/p>ay. The Bank further directs you to fully
assist in the effort to collect from Joel Maniwan and Edmundo Ramos the sums due to the Bank. 6

In the Letter dated May 26, 1997 addressed to the respondent, Remedios Cruz, petitioner Banks
Vice-President of the Human Resources Division, again informed him that the management
would withhold the sum of 836,637.08 from his separation pay, mid-year bonus and profit
sharing. The amount withheld represented his proportionate share in the accountability vis--vis
the DAUD/BP accommodations in favor of Maniwan. The said amount would be released upon
recovery of the sums demanded from Maniwan in Civil Case No. 97174 filed against him by the
petitioner Bank with the Regional Trial Court in Cagayan de Oro City.

Consequently, the respondent, through counsel, made a demand on the petitioner Bank for the
payment of his separation pay and other benefits. The petitioner Bank maintained its position to
withhold the sum of 836,637.08. Thus, the respondent filed with the National Labor Relations
Commission (NLRC), Regional Arbitration Branch No. 10, in Cagayan de Oro City, the complaint
for payment of separation pay, mid-year bonus, profit share and damages against the petitioner
Bank.

The parties submitted their respective position papers to the Labor Arbiter. Thereafter, the
respondent filed a motion to set case for trial or hearing. Acting thereon, the Labor Arbiter, in the
Order dated January 29, 1999, denied the same stating that:

... This Branch views that if complainant finds the necessity to controvert the allegations
in the respondents pleadings, then he may file a supplemental position paper and
adduce thereto evidence and additional supporting documents, the soonest possible
time. All the evidence will be evaluated by the Branch to determine whether or not a
clarificatory hearing shall be conducted.7

On February 26, 1999, the Labor Arbiter issued another Order submitting the case for resolution
upon finding that he could judiciously pass on the merits without the necessity of further hearing.

On even date, the Labor Arbiter promulgated the Decision8 dismissing the respondents
complaint. According to the Labor Arbiter, the respondent, an officer of the petitioner Bank, had
committed a serious infraction when, in blatant violation of the banks standard operating
procedures and policies, he approved the DAUD/BP accommodations in favor of Maniwan
without authorization by senior management. Even the respondent himself had admitted this
breach in the letters that he wrote to the senior officers of the petitioner Bank.

The Labor Arbiter, likewise, made the finding that the respondent offered to assign or convey a
property that he owned to the petitioner Bank as well as proposed the withholding of the benefits
due him to answer for the losses that the petitioner Bank incurred on account of unauthorized
DAUD/BP accommodations. But even if the respondent had not given his consent, the Labor
Arbiter held that the petitioner Banks act of withholding the benefits due the respondent was
justified under its Code of Ethics. The respondent, as an officer of the petitioner Bank, was bound
by the provisions of the said Code.

Aggrieved, the respondent appealed to the National Labor Relations Commission. After the
parties had filed their respective memoranda, the NLRC, in the Decision dated October 20, 1999,
dismissed the appeal as it affirmed in toto the findings and conclusions of the Labor Arbiter. The
NLRC preliminarily ruled that the Labor Arbiter committed no grave abuse of discretion when he
decided the case on the basis of the position papers submitted by the parties. On the merits, the
NLRC, like the Labor Arbiter, gave credence to the petitioner Banks allegation that the
respondent offered to pledge his property to the bank and proposed the withholding of his
benefits in acknowledgment of the serious infraction he committed against the bank. Further, the
NLRC concurred with the Labor Arbiter that the petitioner Bank was justified in withholding the
benefits due the respondent. Being a responsible bank officer, the respondent ought to know that,
based on the petitioner Banks Code of Ethics, restitution may be imposed on erring employees
apart from any other penalty for acts resulting in loss or damage to the bank. The decretal portion
of the NLRC decision reads:

WHEREFORE, the decision of the Labor Arbiter is Affirmed. The appeal is Dismissed for
lack of merit.

SO ORDERED.9

The respondent moved for a reconsideration of the said decision but the NLRC, in the Resolution
of December 20, 1999, denied his motion.

The respondent then filed a petition for certiorari with the Court of Appeals alleging that the NLRC
committed grave abuse of discretion when it affirmed the findings and conclusions of the Labor
Arbiter. He vehemently denied having offered to pledge his property to the bank or proposed the
withholding of his separation pay and other benefits. Further, he argued that the petitioner Bank
deprived him of his right to due process because it unilaterally imposed the penalty of restitution
on him. The DAUD/BP accommodations in favor of Maniwan allegedly could not be considered
as a "loss" to the bank as the amounts may still be recovered. The respondent, likewise,
maintained that the Labor Arbiter should not have decided the case on the basis of the parties
position papers but should have conducted a full-blown hearing thereon.

On July 19, 2002, the CA rendered the Decision10 now being assailed by the petitioner Bank. The
CA found merit in the respondents contention that he was deprived of his right to due process by
the petitioner Bank as no administrative investigation was conducted by it prior to its act of
withholding the respondents separation pay and other benefits. The respondent was not
informed of any charge against him in connection with the Maniwan DAUD/BP accommodations
nor afforded the right to a hearing or to defend himself before the penalty of restitution was
imposed on him. This, according to the appellate court, was contrary not only to the fundamental
principle of due process but to the petitioner Banks Code of Ethics as well.

The CA further held that the Labor Arbiter, likewise, failed to afford the respondent due process
when it denied his motion to set case for trial or hearing. While the authority of the Labor Arbiter
to decide a case based on the parties position papers and documents is indubitable, the CA
opined that factual issues attendant to the case, including whether or not the respondent
proposed the withholding of his benefits or pledged the same to the petitioner Bank, necessitated
the conduct of a full-blown trial. The appellate court explained that:

Procedural due process, as must be remembered, has two main concerns, the
prevention of unjustified or mistaken deprivation and the promotion of participation and
dialogue by affected individuals in the decision-making process. Truly, the magnitude of
the case and the withholding of Borromeos property as well as the willingness of the
parties to conciliate, make a hearing imperative. As manifested by the bank, it did not
contest Borromeos motion for hearing or trial inasmuch as the bank itself wanted to fully
ventilate its side.11

Accordingly, the CA set aside the decision of the NLRC and ordered that the records of the case
be remanded to the Labor Arbiter for further hearings on the factual issues involved.

The petitioner Bank filed a motion for reconsideration of the said decision but the CA, in the
assailed Resolution of January 6, 2003, denied the same as it found no compelling ground to
warrant reconsideration.12 Hence, its recourse to this Court alleging that the assailed CA decision
is contrary to law and jurisprudence in that:

I.

THE FACTUAL FINDINGS OF THE LABOR ARBITER AS AFFIRMED BY THE

NATIONAL LABOR RELATIONS COMMISSION ARE SUPPORTED BY SUBSTANTIAL
EVIDENCE AND SHOULD HAVE BEEN ACCORDED RESPECT AND FINALITY BY
THE COURT OF APPEALS IN ACCORDANCE WITH GOVERNING JURISPRUDENCE.

II.

AT ALL TIMES, THE LABOR ARBITER ACTED IN ACCORDANCE WITH THE

REQUIREMENTS OF DUE PROCESS IN THE PROCEEDINGS A QUO.

III.

THERE WAS NO VIOLATION BY PETITIONER BANK OF RESPONDENTS RIGHT TO

DUE PROCESS AS NO ADMINISTRATIVE INVESTIGATION WAS NEEDED TO BE
CONDUCTED ON HIS ADMITTED MISCONDUCT.13

The petitioner Bank posits that the sole factual issue that remained in dispute was whether the
respondent pledged his benefits as guarantee for the losses the bank incurred resulting from the
unauthorized DAUD/BP accommodations in favor of Maniwan. On this issue, both the Labor
Arbiter and the NLRC found that the respondent had indeed pledged his benefits to the bank.
According to the petitioner Bank, this factual finding should have been accorded respect by the
CA as the same is supported by the evidence on record. By ordering the remand of the case to
the Labor Arbiter, the CA allegedly unjustifiably analyzed and weighed all over again the evidence
presented.

The petitioner Bank insists that the Labor Arbiter acted within his authority when he denied the
respondents motion to set case for hearing or trial and instead decided the case on the basis of
the position papers and evidence submitted by the parties. Due process simply demands an
opportunity to be heard and the respondent was not denied of this as he was even given the
opportunity to file a supplemental position paper and other supporting documents, but he did not
do so.

The petitioner Bank takes exception to the findings of the appellate court that the respondent was
not afforded the right to a hearing or to defend himself by the petitioner Bank as it did not conduct
an administrative investigation. The petitioner Bank points out that it was poised to conduct one
but was preempted by the respondents resignation. In any case, respondent himself in his Letter
dated December 5, 1996, in reply to the clarificatory queries of Chiong, admitted that the
DAUD/BP accommodations were granted "without higher management approval" and that he (the
respondent) "accepts full responsibility for committing an error of judgment, lapses in control and
abuse of discretion ..." Given the respondents admission, the holding of a formal investigation
was no longer necessary.

For his part, the respondent, in his Comment, maintains that the DAUD/BP accommodations in
favor of Maniwan were approved, albeit not expressly, by the senior management of the petitioner
Bank. He cites the regular reports he made to Chiong, his superior, regarding the DAUD/BP
transactions made by the branch, including that of Maniwan, and Chiong never called his
attention thereto nor stopped or reprimanded him therefor. These reports further showed that he
did not conceal these transactions to the management.
The respondent vehemently denies having offered the withholding of his benefits or pledged the
same to the petitioner Bank. The findings of the Labor Arbiter and the NLRC that what he did are
allegedly not supported by the evidence on record.

The respondent is of the view that restitution is not proper because the petitioner Bank has not,
as yet, incurred any actual loss as the amount owed by Maniwan may still be recovered from him.
In fact, the petitioner Bank had already instituted a civil case against Maniwan for the recovery of
the sum and the RTC rendered judgment in the petitioner Banks favor. The case is still pending
appeal. In any case, the respondent argues that the petitioner Bank could not properly impose the
accessory penalty of restitution on him without imposing the principal penalty of "Written
Reprimand/Suspension" as provided under its Code of Ethics. He, likewise, vigorously avers that,
in contravention of its own Code of Ethics, he was denied due process by the petitioner Bank as it
did not conduct any administrative investigation relative to the unauthorized DAUD/BP
accommodations. He was not informed in writing of any charge against him nor was he given the
opportunity to defend himself.

The petition is meritorious.

The Court shall first resolve the procedural issue raised in the petition, i.e., whether the CA erred
in remanding the case to the Labor Arbiter. The Court rules in the affirmative. It is settled that
administrative bodies like the NLRC, including the Labor Arbiter, are not bound by the technical
niceties of the law and procedure and the rules obtaining in courts of law. 14 Rules of evidence are
not strictly observed in proceedings before administrative bodies like the NLRC, where decisions
may be reached on the basis of position papers.15 The holding of a formal hearing or trial is
discretionary with the Labor Arbiter and is something that the parties cannot demand as a matter
of right.16 As a corollary, trial-type hearings are not even required as the cases may be decided
based on verified position papers, with supporting documents and their affidavits. 17

Hence, the Labor Arbiter acted well within his authority when he issued the Order dated February
26, 1999 submitting the case for resolution upon finding that he could judiciously pass on the
merits without the necessity of further hearing. On the other hand, the assailed CA decisions
directive requiring him to conduct further hearings constitutes undue interference with the Labor
Arbiters discretion. Moreover, to require the conduct of hearings would be to negate the rationale
and purpose of the summary nature of the proceedings mandated by the Rules and to make
mandatory the application of the technical rules of evidence.18 The appellate court, therefore,
committed reversible error in ordering the remand of the case to the Labor Arbiter for further
hearings.

Before delving on the merits of the case, it is well to remember that factual findings of the NLRC
affirming those of the Labor Arbiter, both bodies being deemed to have acquired expertise in
matters within their jurisdiction, when sufficiently supported by evidence on record, are accorded
respect, if not finality, and are considered binding on this Court. 19 As long as their decisions are
devoid of any arbitrariness in the process of their deduction from the evidence proffered by the
parties, all that is left is for the Court to stamp its affirmation.20

In this case, the factual findings of the Labor Arbiter and those of the NLRC concur on the
following material points: the respondent was a responsible officer of the petitioner Bank; by his
own admission, he granted DAUD/BP accommodations in excess of the authority given to him
and in violation of the banks standard operating procedures; the petitioner Banks Code of Ethics
provides that restitution/forfeiture of benefits may be imposed on the employees for, inter
alia, infraction of the banks standard operating procedures; and, the respondent resigned from
the petitioner Bank on May 31, 1998. These factual findings are amply supported by the evidence
on record.
 Indeed, it had been indubitably shown that the respondent admitted that he violated the petitioner
Banks standard operating procedures in granting the DAUD/BP accommodations in favor of
Maniwan without higher management approval. The respondents replies to the clarificatory
questions propounded to him by way of the Memorandum dated November 19, 1996 were
particularly significant. When the respondent was asked whether efforts were made to establish
the identity and/or legitimacy of the drawers of the checks before the DAUD/BP accommodations
were allowed,21 he replied in the negative.22 To the query "did the branch follow and comply with
operating procedure which require that all checks accommodated for DAUD/BP should be
previously verified with the drawee bank and history, if not outright balances, determined if
enough to cover the checks?"23 again, the respondent answered "no."24 When asked under
whose authority the excess DAUD/BP accommodations were granted, 25 the respondent expressly
stated that they were "approved by undersigned (referring to himself)" and that the excess
accommodation was granted "without higher management approval." 26 More telling, however, is
the respondents statement that he "accepts full responsibility for committing an error in judgment,
lapses in control and abuse of discretion by relying solely on the word, assurance, surety and
REM of Mr. Edmundo Ramos."27 The respondent added that he was "ready to face the
consequence of [his] action."28

The foregoing sufficiently establish that the respondent, by his own admissions, had violated the
petitioner Banks standard operating procedures. Among others, the petitioner Banks Code of
Ethics provides:

Table 6.2 COMPLIANCE WITH STANDARD OPERATING PROCEDURES

PENALTIES
VIOLATIONS
1st 2nd 3rd 4th
1. Infraction of Written Suspension/ Dismissal* Dismissal*
Bank procedures Reprimand/
in handling any Suspension*
Bank transaction
or work
assignment
which results in a
loss or probable
loss

* With restitution, if warranted.

Further, the said Code states that:

7.2.5. Restitution/Forfeiture of Benefits

Restitution may be imposed independently or together with any other penalty in case of loss or damage to
the property of the Bank, its employees, clients or other parties doing business with the Bank. The Bank
may recover the amount involved by means of salary deduction or whatever legal means that will prompt
offenders to pay the amount involved. But restitution shall in no way mitigate the penalties attached to the
violation or infraction.

Forfeiture of benefits/p>rivileges may also be effected in cases where infractions or violations were
incurred in connection with or arising from the application/availment thereof.
It is well recognized that company policies and regulations are, unless shown to be grossly oppressive or
contrary to law, generally binding and valid on the parties and must be complied with until finally revised
or amended unilaterally or preferably through negotiation or by competent authority. 29 Moreover,
management has the prerogative to discipline its employees and to impose appropriate penalties on
erring workers pursuant to company rules and regulations. 30 With more reason should these truisms
apply to the respondent, who, by reason of his position, was required to act judiciously and to exercise his
authority in harmony with company policies.31

Contrary to the respondents contention that the petitioner Bank could not properly impose the accessory
penalty of restitution on him without imposing the principal penalty of "Written Reprimand/Suspension,"
the latters Code of Ethics expressly sanctions the imposition of restitution/forfeiture of benefits apart from
or independent of the other penalties. Obviously, in view of his voluntary separation from the petitioner
Bank, the imposition of the penalty of reprimand or suspension would be futile. The petitioner Bank was
left with no other recourse but to impose the ancillary penalty of restitution. It was certainly within the
petitioner Banks prerogative to impose on the respondent what it considered the appropriate penalty
under the circumstances pursuant to its company rules and regulations.

Anent the issue that the respondents right to due process was violated by the petitioner Bank since no
administrative investigation was conducted prior to the withholding of his separation benefits, the Court
rules that, under the circumstances obtaining in this case, no formal administrative investigation was
necessary. Due process simply demands an opportunity to be heard and this opportunity was not denied
the respondent.32

Prior to the respondents resignation, he was furnished with the Memorandum 33 dated November 19,
1996 in which several clarificatory questions were propounded to him regarding the DAUD/BP
accommodations in favor of Maniwan. Among others, the respondent was asked whether the banks
standard operating procedures were complied with and under whose authority the accommodations were
granted. From the tenor thereof, it could be reasonably gleaned that the said memorandum constituted
notice of the charge against the respondent.

Replying to the queries, the respondent, in his Letter34 dated December 5, 1996, admitted, inter alia, that
he approved the DAUD/BP accommodations in favor of Maniwan and the amount in excess of the credit
limit of 500,000 was approved by him without higher management approval. The respondent, likewise,
admitted non-compliance with the banks standard operating procedures, specifically, that which required
that all checks accommodated for DAUD/BP be previously verified with the drawee bank and history, if
not outright balances determined if enough to cover the checks. In the same letter, the respondent
expressed that he "accepts full responsibility for committing an error in judgment, lapses in control and
abuse of discretion" and that he is "ready to face the consequence of his action."

Contrary to his protestations, the respondent was given the opportunity to be heard and considering his
admissions, it became unnecessary to hold any formal investigation. 35 More particularly, it became
unnecessary for the petitioner Bank to conduct an investigation on whether the respondent had
committed an "[I]nfraction of Bank procedures in handling any Bank transaction or work assignment which
results in a loss or probable loss" because the respondent already admitted the same. All that was
needed was to inform him of the findings of the management36 and this was done by way of the
Memorandum37 dated May 23, 1997 addressed to the respondent. His claim of denial of due process
must perforce fail.

Significantly, the respondent is not wholly deprived of his separation benefits. As the Labor Arbiter
stressed in his decision, "the separation benefits due the complainant (the respondent herein) were
merely withheld."38 The NLRC made the same conclusion and was even more explicit as it opined that
the respondent "is entitled to the benefits he claimed in pursuance to the Collective Bargaining
Agreement but, in the meantime, such benefits shall be deposited with the bank by way of
pledge."39 Even the petitioner Bank itself gives "the assurance that as soon as the Bank has satisfied a
judgment in Civil Case No. 97174, the earmarked portion of his benefits will be released without delay."40
It bears stressing that the respondent was not just a rank and file employee. At the time of his resignation,
he was the Assistant Vice- President, Branch Banking Group for the Mindanao area of the petitioner
Bank. His position carried authority for the exercise of independent judgment and discretion,
characteristic of sensitive posts in corporate hierarchy. 41 As such, he was, as earlier intimated, required to
act judiciously and to exercise his authority in harmony with company policies.42

On the other hand, the petitioner Banks business is essentially imbued with public interest and owes
great fidelity to the public it deals with.43 It is expected to exercise the highest degree of diligence in the
selection and supervision of their employees.44 As a corollary, and like all other business enterprises, its
prerogative to discipline its employees and to impose appropriate penalties on erring workers pursuant to
company rules and regulations must be respected.45 The law, in protecting the rights of labor, authorized
neither oppression nor self-destruction of an employer company which itself is possessed of rights that
must be entitled to recognition and respect.46

WHEREFORE, the petition is GRANTED. The Decision dated July 19, 2002 of the Court of Appeals and
its Resolution dated January 6, 2003 in CA-G.R. SP No. 57365 are REVERSED AND SET ASIDE. The
Resolution dated October 20, 1999 of the NLRC, affirming the Decision dated February 26, 1999 of the
Labor Arbiter, is REINSTATED.

SO ORDERED.

___

FIRST DIVISION

G.R. No. 160827 June 18, 2014

NETLINK COMPUTER INCORPORATED, Petitioner,

vs.
ERIC DELMO, Respondent.

DECISION

BERSAMIN, J.:

In the absence of a written agreement between the employer and the employee that sales commissions
shall be paid in a foreign currency, the latter has the right to be paid in such foreign currency once the
same has become an established practice of the former. The rate of exchange at the time of payment, not
the rate of exchange at the time of the sales, controls.

Antecedents

On November 3, 1991, Netlink Computer, Inc. Products and Services (Netlink) hired Eric S. Delmo
(Delmo) as account manager tasked to canvass and source clients and convince them to purchase the
products and services of Netlink. Delmo worked in the field most of the time. He and his fellow account
managers were not required to accomplish time cards to record their personal presence in the office of
Netlink.1 He was able to generate sales worth 35,000,000.00, more or less, from which he earned
commissions amounting to 993,558.89 and US$7,588.30. He then requested payment of his
commissions, but Netlink refused and only gave him partial cash advances chargeable to his
commissions. Later on, Netlink began to nitpick and fault find, like stressing his supposed absences and
tardiness. In order to force him to resign, Netlink issued several memoranda detailing his supposed
infractions of the companys attendance policy. Despite the memoranda, Delmo continued to generate
huge sales for Netlink.2
On November 28, 1996, Delmo was shocked when he was refused entry into the company premises by
the security guard pursuant to a memorandum to that effect. His personal belongings were still inside the
company premises and he sought their return to him. This incident prompted Delmo to file a complaint for
illegal dismissal.3

In its answer to Delmos complaint,Netlink countered that there were guidelines regarding company
working time and its utilization and how the employees time would be recorded. Allegedly, all personnel
were required to use the bundy clock to punch in and out in the morning, and in and out in the afternoon.
Excepted from the rules were the company officers, and the authorized personnel in the field project
assignments. Netlink claimed that it would be losing on the business transactions closed by Delmo due to
the high costs of equipment, and in fact his biggest client had not yet paid. Netlink pointed out that Delmo
had becomevery lax in his obligations, with the other account managers eventually having outperformed
him. Netlink asserted that warning, reprimand, and suspension memoranda were given to employees who
violated company rules and regulations, but such actions were considered as a necessary management
tool to instill discipline.4

Ruling of the Labor Arbiter

On September 23, 1998, the Labor Arbiter ruled against Netlink and in favor of Delmo, to wit:

WHEREFORE, judgment is hereby rendered declaring complainant as illegally and unjustly dismissed
and respondents are ordered to reinstate complainant to his former position without loss of seniority rights
with full backwages and other benefits and respondents are hereby ordered to pay complainant as
follows:

161,000.00 - Backwages, basic pay and allowances from Nov. 1996 to Sept. 1998

15,000.00 - 13th month pay for 1996 to 1998

993,558.89 - unpaid commissions

1,169,558.89 - Total

plus US$7,588.30 - unpaid commissions

plus 10% attorneys fees

The reinstatement aspect is immediately executory even pending appeal. In case reinstatement is no
longer feasible, complainant shall be paid separation pay of one-month pay for every year of service. All
other claims are hereby dismissed.

SO ORDERED.5

Decision of the NLRC

On appeal, the National Labor Relations Commission (NLRC) modified the decision of the Labor Arbiter
by setting aside the backwages and reinstatement decreed by the Labor Arbiter due to the existence of
valid and just causes for the termination of Delmos employment, to wit: WHEREFORE, premises
considered, the decision of the Labor Arbiter a quo is hereby SET ASIDEand a new one ENTERED,
ordering the respondents-appellantsto pay the following:

1. TWO THOUSAND PESOS (2,000.00) as indemnity for failure to observe procedural due
process;
 2. Unpaid commission in the amount of 993,558.89;

3. US$7,588.30 as unpaid commission;

4. 15,000.00 representing the 13th month pay for 1996, 1997, and 1998;

5. 10% attorneys fees of the total amount awarded.

SO ORDERED.6

The NLRC denied the motion for reconsideration, after which Netlink filed a petition for certiorariin the CA.

Judgment of the CA

On May 9, 2003, the CA promulgated its assailed decision upholding the NLRCs ruling subject to
modifications,7 viz:

In the present case, since the payment of the commission is made to depend on the future and uncertain
event which is the payment of the accounts by the persons who have transacted business with the
petitioner, without payment by the former to the latter, the obligation to pay the commission has not yet
arisen.

The evidence on record shows that the ALCATEL, private respondents biggest client has not paid fully
the amount it owes to the petitioner as of March 10, 1998. (Rollo, pp. 101, 397, 398) The obligation
therefore, on the part of the petitioner to pay the private respondent for his commission for the said
unpaid account has not yet arisen. Thus it is a grave abuse of discretion on the part of the public
respondent to make petitioner liable to the private respondent for the payment of the said commission,
when it is clear on the record, as We have discussed above, that the obligation therefor has not yet
arisen.

Perusal of the records, likewise, show that petitioner failed to refute by evidence that the private
respondent is not entitled to the 993, 558.89 commission. Petitioner however claimed that since the
amounts out of which the commission will be taken has not yet been paid fully, petitioner must, likewise,
not be made liable for the said commission. However, public respondent committed grave abuse of
discretion when it disregard the evidence on record which is not disputed by the private respondent that
out of the total commissions of the private respondent, petitioner has paid the petitioner in the amount of
216,799.45 in the form of advance payment. (Rollo, p. 12)

In view of the foregoing discussions, therefore, the advance payment made by the petitioner in favorof the
private respondent in the amount of 216, 799.45 must be deducted to the 993, 558.89 unpaid
commission of the private respondent. The difference amounting to 776, 779.44 must likewise be
deducted to the amount of 4, 066.19 which represents the amount which the petitioner had admitted as
the net commission payable to private respondent. The difference thereof amounting to 772, 713.25
shall represent the unpaid commission which shall be payable to the private respondent by the petitioner
upon payment of the accounts out of which such commission shall be taken.

We, likewise, agree with the petitioner that the private respondent is not entitled to 13th month pay in the
years 1997 and 1998. The order of the public respondent making the petitioner liable to the private
respondent for the 13th month pay of the latter in the years 1997 and 1998 is contrary to its findings that
there are valid and just cause for the termination of the private respondent from employment, although
private respondent was not given his right to due process. (Rollo, pp. 32-33) The rule applicable in the
present case is the decision of the Supreme Court in the case of Sebuguero vs National Labor Relations
Commission [248 SCRA 532, 547 (1995)] where it was ruled that "where the dismissal of an employee is
in fact for a just and valid cause and is so proven to be but he is not accorded his right to due process,i.e.,
he was not furnished the twin requirements of notice and the opportunityto be heard, the dismissal shall
be upheld but the employer must be sanctioned for non-compliance with the requirements of or for
failureto observe due process." Hence, petitioner should not be made to pay the 13th month pay to
private respondent whose employment was terminated for cause but without due process in 1996.

xxxx

Thus, private respondent is entitled only to a 13th month pay computed pro-rata from January 1996 to
November 1996 which as properly computed by the petitioner amounts to 4, 584.00. (Rollo, p. 11)

With respect to the other arguments of the petitioner, this Court is not persuaded. Petitioner failed to
refute by evidence that private respondent is not entitled to the commissions payable in US dollars.
Neither is there any reason for us to agree with the petitioner that the computation of these commissions
must be based on the value of [the] Peso in relation to a Dollar at the time of sale. As properly observed
by the Labor Arbiter a quo, viz: "Likewise the devaluation of the peso cannot be used as a shield against
the complainant because that should have been the lookout of the respondent company in providing for
such a clause that in case of devaluation, the price agreed upon should be at the exchange rate when the
contract of sale had been consummated. For the lack of foresight and inefficiency of the respondent
company and as regards its contracts or agreements with its clientele, the complainant should not be
made to suffer." (Labor Arbiter Ricardo Olairez Decision, September 23, 1998, pp. 11-12, Rollo,pp. 328-
329) In this regardtherefore, We uphold the well settled rule that "the findings of facts of the NLRC,
particularly where the NLRC and the Labor Arbiter are in agreement, are deemed binding and conclusive
upon the Court." (Permex, Inc. vs National Labor Relations Commission, 323 SCRA 121, 126).

xxxx

WHEREFORE, premises considered, the assailed Resolutions are hereby AFFIRMED with
MODIFICATION, ordering the petitioner to pay the private respondent the following:

1. TWO-THOUSAND PESOS (2,000.00) as indemnity for failure to observe procedural due

process;

2. 4,066.19 representing the unpaid commissions that have accrued in favor of the private
respondent;

3. 776,779.44 payable to the private respondent upon payment of the accounts out of which the
said amount will be taken;

4. 4,584.00 representing the unpaid 13th month pay of the private respondent;

5. US$7,588.30 as unpaid commission;

6. 10% attorneys fees of the total amount awarded excluding the amount contained in the No.3 of
this Order.

SO ORDERED.

Issues

Hence, this appeal.

Netlink submits that the CA committed a palpable and reversible error of law in not holding that the
applicable exchange rate for computing the US dollar commissions of Delmo should be the rates
prevailing at the time when the sales were actually generated, not the rates prevailing at the time of the
payment; and in awarding attorneys fees.

In his comment,8 Delmo counters that because he had earned in US dollars it was only fair that his
commissions be paid in US dollars; that Netlink should not be allowed to flip-flop after it had paid
commissions in US dollar on the sales generated by its sales agents on US-dollar denominated
transactions; and that attorneys fees were warranted because of the unanimous finding that there was
violation of procedural due process.

In its reply,9 Netlink maintains that the commissions of Delmo should be based on sales generated,
actually paid by and collected from the customers; that commissions must be paid on the basis of the
conversion of the US dollar to the Philippine peso at the time of sale; and that no cogent and justifiable
reason existed for the award of attorneys fees.

To be considered for resolution are,therefore, the following, namely: (1) whether or not the payment of the
commissions should be in US dollars; and (2) whether or not the award ofattorneys fees was warranted.

Ruling of the Court

The appeal lacks merit.

As a general rule, all obligations shall be paid in Philippine currency. However, the contracting parties
may stipulate that foreign currencies may be used for settling obligations. This is pursuant to Republic Act
No. 8183,10 which provides as follows:

Section 1. All monetary obligations shall be settled in the Philippine currency which is legal tender in the
Philippines. However, the parties may agree that the obligation ortransaction shall be settled in any other
currency at the time of payment.

We remarked in C.F. Sharp & Co. v. Northwest Airlines, Inc.11 that the repeal of Republic Act No. 529 had
the effect of removing the prohibition on the stipulation of currency other than Philippine currency, such
that obligations or transactions could already be paid in the currency agreed upon by the parties.
However, both Republic Act No. 529 and Republic Act No. 8183 did not stipulate the applicable rate of
exchange for the conversion of foreign currency-incurred obligations to their peso equivalent. It follows,
therefore, that the jurisprudence established under Republic Act No. 529 with regard to the rate of
conversion remains applicable. In C.F. Sharp, the Court cited Asia World Recruitment,Inc. v. NLRC, 12 to
the effect that the real value of the foreign exchange-incurred obligation up to the date of itspayment
should be preserved.

There was no written contract between Netlink and Delmo stipulating that the latters commissions would
be paid in US dollars.1wphi1 The absence of the contractual stipulation notwithstanding, Netlink was still
liable to pay Delmo in US dollars because the practice of paying its sales agents in US dollars for their US
dollar-denominatedsales had become a company policy. This was impliedly admitted by Netlink when it
did not refute the allegation that the commissions earned by Delmo and its other sales agents had been
paid in US dollars. Instead of denying the allegation, Netlink only sought a declaration that the US dollar
commissions be paid using the exchange rate at the time of sale. The principle of non-diminution of
benefits, which has been incorporated in Article 10013 of the Labor Code, forbade Netlink from unilaterally
reducing, diminishing, discontinuing or eliminating the practice. Verily, the phrase "supplements, or other
employee benefits" in Article 100 is construed to mean the compensation and privileges received by an
employee aside from regular salaries or wages.
With regard to the length of timethe company practice should have been observed to constitute a
voluntary employer practice that cannot be unilaterally reduced, diminished, discontinued or eliminated by
the employer, we find that jurisprudence has not laid down any rule requiring a specific mmimum number
of years. In Davao Fruits Corporation v. Associated Labor Unions,14 the company practice lasted for six
years. In Davao Integrated Port Stevedoring Services v. Abarquez, 15 the employer, for three years and
nine months, approved the commutation to cash of the unenjoyed portion of the sick leave with pay
benefits of its intermittent workers. In Tiangco v. Leogardo, Jr.,16 the employer carried on the practice of
giving a fixed monthly emergency allowance from November 1976 to February 1980, or three years and
four months. In Sevilla Trading Company v. Semana, 17 the employer kept the practice of including non-
basic benefits such as paid leaves for unused sick leave and vacation in the computation of their 13th-
month pay for at least two years.

With the payment of US dollar commissions having ripened into a company practice, there is no way that
the commissions due to Delmo were to be paid in US dollars or their equivalent in Philippine currency
determined at the time of the sales. To rule otherwise would be to cause an unjust diminution of the
commissions due and owing to Delmo.

Finally, we affirm the following justification of the CA in granting attorney's fees to Delmo, viz: The award
of attorney's fees must, likewise, be upheld in line of (sic) the decision of the Supreme Court in the case
of Consolidated Rural Bank (Cagayan Valley), Inc. vs. National Labor Relations Commission, 301 SCRA
223, 235, where it was held that "in actions for recovery of wages or where an employee was forced to
litigate and thus incur expenses to protect her rights and interests, even if not so claimed, an award of
attorney's fees equivalent to ten percent (10%) of the total award is legally and morally justifiable. There is
no doubt that in the present case, the private respondent has incurred expenses for the protection and
enforcement of his right to his commissions.18

WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision
promulgated on May 9, 2003; and ORDERS the petitioner to pay the costs of suit.

SO ORDERED

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice

TERESITA J. LEONARDO-DE