Republic of the Philippines Vega alleged there that his proposal "[had] been accepted by the methods analyst
"[had] been accepted by the methods analyst and implemented by the
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 80774 May 31, 1988
SAN MIGUEL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and RUSTICO VEGA, respondents.
Siguion Reyna, Montecillo & Ongsiako Law Offices for petitioner.
The Solicitor General for public respondent.
FELICIANO, J.:
In line with an Innovation Program sponsored by petitioner San Miguel Corporation ("Corporation;" "SMC")
and under which management undertook to grant cash awards to "all SMC employees ... except [ED-HO staff,
Division Managers and higher-ranked personnel" who submit to the Corporation Ideas and suggestions found
to be beneficial to the Corporation, private respondent Rustico Vega submitted on 23 September 1980 an
innovation proposal. Mr. Vega's proposal was entitled "Modified Grande Pasteurization Process," and was
supposed to eliminate certain alleged defects in the quality and taste of the product "San Miguel
Beer Grande:"
Title of Proposal
Modified Grande Pasteurization Process
Present Condition or Procedure
At the early stage of beer grande production, several cases of beer grande full goods
were received by MB as returned beer fulls (RBF). The RBF's were found to have
sediments and their contents were hazy. These effects are usually caused by
underpasteurization time and the pasteurzation units for beer grande were almost
similar to those of the steinie.
Proposed lnnovation (Attach necessary information)
In order to minimize if not elienate underpasteurization of beer grande, reduce the
speed of the beer grande pasteurizer thereby, increasing the pasteurization time and
the pasteurization acts for grande beer. In this way, the self-life (sic) of beer grande will
also be increased. 1
Mr. Vega at that time had been in the employ of petitioner Corporation for thirteen (1 3) years and was then
holding the position of "mechanic in the Bottling Department of the SMC Plant Brewery situated in Tipolo,
Mandaue City.
Petitioner Corporation, however, did not find the aforequoted proposal acceptable and consequently refused
Mr. Vega's subsequent demands for a cash award under the Innovation Program. On 22 February 1983., a
Complaint 2 (docketed as Case No. RAB-VII-0170-83) was filed against petitioner Corporation with Regional
Arbitration Branch No. VII (Cebu City) of the then.", Ministry of Labor and Employment. Frivate respondent
Corporation [in] October 1980," and that the same "ultimately and finally solved the problem of the Corporation
in the production of Beer Grande." Private respondent thus claimed entitlement to a cash prize of P60,000.00
(the maximum award per proposal offered under the Innovation Program) and attorney's fees.
In an Answer With Counterclaim and Position Paper, 3 petitioner Corporation alleged that private respondent
had no cause of action. It denied ever having approved or adopted Mr. Vega's proposal as part of the
Corporation's brewing procedure in the production of San Miguel Beer Grande. Among other things, petitioner
stated that Mr. Vega's proposal was tumed down by the company "for lack of originality" and that the same,
"even if implemented [could not] achieve the desired result." Petitioner further alleged that the Labor Arbiter
had no jurisdiction, Mr. Vega having improperly bypassed the grievance machinery procedure prescribed
under a then existing collective bargaining agreement between management and employees, and available
administrative remedies provided under the rules of the Innovation Program. A counterclaim for moral and
exemplary damages, attorney's fees, and litigation expenses closed out petitioner's pleading.
In an Order 4 dated 30 April 1986, the Labor Arbiter, noting that the money claim of complainant Vega in this
case is "not a necessary incident of his employment" and that said claim is not among those mentioned in
Article 217 of the Labor Code, dismissed the complaint for lack of jurisdiction. However, in a gesture of
"compassion and to show the government's concern for the workingman," the Labor Arbiter also directed
petitioner to pay Mr. Vega the sum of P2,000.00 as "financial assistance."
The Labor Arbiter's order was subsequently appealed by both parties, private respondent Vega assailing the
dismissal of his complaint for lack of jurisdiction and petitioner Corporation questioning the propriety of the
award of "financial assistance" to Mr. Vega. Acting on the appeals, the public respondent National Labor
Relations Commission, on 4 September 1987, rendered a Decision, 5 the dispositive portion of which reads:
WHEREFORE, the appealed Order is hereby set aside and another udgment entered,
order the respondent to pay the complainant the amount of P60,000.00 as explained
above.
SO ORDERED.
In the present Petition for certiorari filed on 4 December 1987, petitioner Corporation, invoking Article 217 of
the Labor Code, seeks to annul the Decision of public respondent Commission in Case No. RAB-VII-01 70-83
upon the ground that the Labor Arbiter and the Commission have no jurisdiction over the subject matter of the
case.
The jurisdiction of Labor Arbiters and the National Labor Relations Commission is outlined in Article 217 of the
Labor Code, as last amended by Batas Pambansa Blg. 227 which took effect on 1 June 1982:
ART. 217. Jurisdiction of Labor Arbiters and the commission. (a) The Labor Arbiters
shall have theoriginal and exclusive jurisdiction to hear and decide within thirty (30)
working days after submission of the case by the parties for decision, the following
cases involving are workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of work
and other terms and conditions of employment;
3. All money claims of workers, including those based on non-
payment or underpayment of wages, overtime compensation,
separation pay and other benefits provided by law or
appropriate agreement, except claims for employees'
compensation, social security, medicare and maternity benefits;
4. Cases involving household services; and
 5. Cases arising from any violation of Article 265 of this; Code,
including questions involving the legality of strikes and lockouts.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided
by Labor Arbiters. (Emphasis supplied)
While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose that the entire
universe of money claims that might be asserted by workers against their employers has been absorbed into
the original and exclusive jurisdiction of Labor Arbiters. In the first place, paragraph 3 should be read not in
isolation from but rather within the context formed by paragraph 1 related to unfair labor practices), paragraph
2 (relating to claims concerning terms and conditions of employment), paragraph 4 (claims relating to
household services, a particular species of employer-employee relations), and paragraph 5 (relating to certain
activities prohibited to employees or to employers).<re||an1w> It is evident that there is a unifying element
which runs through paragraphs 1 to 5 and that is, that they all refer to cases or disputes arising out of or in
connection with an employer-employee relationship. This is, in other words, a situation where the rule of
noscitur a sociis may be usefully invoked in clarifying the scope of paragraph 3, and any other paragraph of
Article 217 of the Labor Code, as amended. We reach the above conclusion from an examination of the terms
themselves of Article 217, as last amended by B.P. Blg. 227, and even though earlier versions of Article 217 of
the Labor Code expressly brought within the jurisdiction of the Labor Arbiters and the NLRC "cases arising
from employer employee relations," 6 which clause was not expressly carried over, in printer's ink, in Article
217 as it exists today. For it cannot be presumed that money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and which would therefore fall within the general
jurisdiction of the regular courts of justice, were intended by the legislative authority to be taken away from the
jurisdiction of the courts and lodged with Labor Arbiters on an exclusive basis. The Court, therefore, believes
and so holds that the money claims of workers" referred to in paragraph 3 of Article 217 embraces money
claims which arise out of or in connection with the employer-employee relationship, or some aspect or incident
of such relationship. Put a little differently, that money claims of workers which now fall within the original and
exclusive jurisdiction of Labor Arbiters are those money claims which have some reasonable causal
connection with the employer-employee relationship.
Applying the foregoing reading to the present case, we note that petitioner's Innovation Program is an
employee incentive scheme offered and open only to employees of petitioner Corporation, more specifically to
employees below the rank of manager. Without the existing employer-employee relationship between the
parties here, there would have been no occasion to consider the petitioner's Innovation Program or the
submission by Mr. Vega of his proposal concerning beer grande; without that relationship, private respondent
Vega's suit against petitioner Corporation would never have arisen. The money claim of private respondent
Vega in this case, therefore, arose out of or in connection with his employment relationship with petitioner.
The next issue that must logically be confronted is whether the fact that the money claim of private respondent
Vega arose out of or in connection with his employment relation" with petitioner Corporation, is enough to
bring such money claim within the original and exclusive jurisdiction of Labor Arbiters.
In Molave Motor Sales, Inc. v. Laron, 7 the petitioner was a corporation engaged in the sale and repair of
motor vehicles, while private respondent was the sales Manager of petitioner. Petitioner had sued private
respondent for non-payment of accounts which had arisen from private respondent's own purchases of
vehicles and parts, repair jobs on cars personally owned by him, and cash advances from the corporation. At
the pre-trial in the lower court, private respondent raised the question of lack of jurisdiction of the court, stating
that because petitioner's complaint arose out of the employer-employee relationship, it fell outside the
jurisdiction of the court and consequently should be dismissed. Respondent Judge did dismiss the case,
holding that the sum of money and damages sued for by the employer arose from the employer-employee
relationship and, hence, fell within the jurisdiction of the Labor Arbiter and the NLRC. In reversing the order of
dismissal and requiring respondent Judge to take cognizance of the case below, this Court, speaking through
Mme. Justice Melencio-Herrera, said:
Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under paragraph
5 of Article 217 of the Labor Code had jurisdiction over" all other cases arising from
employer-employee relation, unless, expressly excluded by this Code." Even then, the
principle followed by this Court was that, although a controversy is between an
employer and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is
not involved. In Medina vs. Castro-Bartolome, 11 SCRA 597, 604, in negating
jurisdiction of the Labor Arbiter, although the parties were an employer and two
employees, Mr. Justice Abad Santos stated:
The pivotal question to Our mind is whether or not the Labor
Code has any relevance to the reliefs sought by the plaintiffs.
For if the Labor Code has no relevance, any discussion
concerning the statutes amending it and whether or not they
have retroactive effect is unnecessary.
It is obvious from the complaint that the plaintiffs have not
alleged any unfair labor practice. Theirs is a simple action for
damages for tortious acts allegedly committed by the
defendants. Such being the case, the governing statute is the
Civil Code and not the Labor Code. It results that the orders
under review are based on a wrong premise.
And in Singapore Airlines Limited v. Pao, 122 SCRA 671, 677, the following was said:
Stated differently, petitioner seeks protection under the civil
laws and claims no benefits under the Labor Code. The primary
relief sought is for liquidated damages for breach of a
contractual obligation. The other items demanded are not labor
benefits demanded by workers generally taken cognizance of in
labor disputes, such as payment of wages, overtime
compensation or separation pay. The items claimed are the
natural consequences flowing from breach of an obligation,
intrinsically a civil dispute.
In the case below, PLAINTIFF had sued for monies loaned to DEFENDANT, the cost
of repair jobs made on his personal cars, and for the purchase price of vehicles and
parts sold to him. Those accounts have no relevance to the Labor Code. The cause of
action was one under the civil laws, and it does not breach any provision of the Labor
Code or the contract of employment of DEFENDANT. Hence the civil courts, not the
Labor Arbiters and the NLRC should have jurisdiction.8
It seems worth noting that Medina v. Castro-Bartolome, referred to in the above excerpt, involved a claim for
damages by two (2) employees against the employer company and the General Manager thereof, arising from
the use of slanderous language on the occasion when the General Manager fired the two (2) employees (the
Plant General Manager and the Plant Comptroller). The Court treated the claim for damages as "a simple
action for damages for tortious acts" allegedly committed by private respondents, clearly if impliedly
suggesting that the claim for damages did not necessarily arise out of or in connection with the employer-
employee relationship.Singapore Airlines Limited v. Pao, also cited in Molave, involved a claim for liquidated
damages not by a worker but by the employer company, unlike Medina. The important principle that runs
through these three (3) cases is that where the claim to the principal relief sought 9 is to be resolved not by
reference to the Labor Code or other labor relations statute or a collective bargaining agreement but by the
general civil law, the jurisdiction over the dispute belongs to the regular courts of justice and not to the Labor
Arbiter and the NLRC. In such situations, resolution of the dispute requires expertise, not in labor
management relations nor in wage structures and other terms and conditions of employment, but rather in the
application of the general civil law. Clearly, such claims fall outside the area of competence or expertise
ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for granting jurisdiction over such claims
to these agencies disappears.
Applying the foregoing to the instant case, the Court notes that the SMC Innovation Program was essentially
an invitation from petitioner Corporation to its employees to submit innovation proposals, and that petitioner
Corporation undertook to grant cash awards to employees who accept such invitation and whose innovation
suggestions, in the judgment of the Corporation's officials, satisfied the standards and requirements of the
Innovation Program 10 and which, therefore, could be translated into some substantial benefit to the
Corporation. Such undertaking, though unilateral in origin, could nonetheless ripen into an enforceable
contractual (facio ut des) 11obligation on the part of petitioner Corporation under certain circumstances. Thus,
whether or not an enforceable contract, albeit implied arid innominate, had arisen between petitioner
Corporation and private respondent Vega in the circumstances of this case, and if so, whether or not it had
been breached, are preeminently legal questions, questions not to be resolved by referring to labor legislation
and having nothing to do with wages or other terms and conditions of employment, but rather having recourse
to our law on contracts.
WEREFORE, the Petition for certiorari is GRANTED. The decision dated 4 September 1987 of public Republic of the Philippines
respondent National Labor Relations Commission is SET ASIDE and the complaint in Case No. RAB-VII- SUPREME COURT
0170-83 is hereby DISMISSED, without prejudice to the right of private respondent Vega to file a suit before Manila
the proper court, if he so desires. No pronouncement as to costs.

FIRST DIVISION
SO ORDERED.

G.R. No. 89621 September 24, 1991

PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC., represented by its Plant General Manager
ANTHONY B. SIAN, ELEAZAR LIMBAB, IRENEO BALTAZAR & JORGE HERAYA, petitioners,
vs.
HON. LOLITA O. GAL-LANG, SALVADOR NOVILLA, ALEJANDRO OLIVA, WILFREDO CABAAS &
FULGENCIO LEGO, respondents.

Aurelio D. Menzon for petitioners.

Mario P. Nicolasora co-counsel for petitioners.

Papiano L. Santo for private respondents.

CRUZ, J.:p

The question now before us has been categorically resolved in earlier decisions of the Court that a little more
diligent research would have disclosed to the petitioners. On the basis of those cases and the facts now
before us, the petition must be denied.

The private respondents were employees of the petitioner who were suspected of complicity in the irregular
disposition of empty Pepsi Cola bottles. On July 16, 1987, the petitioners filed a criminal complaint for theft
against them but this was later withdrawn and substituted with a criminal complaint for falsification of private
documents. On November 26, 1987, after a preliminary investigation conducted by the Municipal Trial Court of
Tanauan, Leyte, the complaint was dismissed. The dismissal was affirmed on April 8, 1988, by the Office of
the Provincial Prosecutor.

Meantime, allegedly after an administrative investigation, the private respondents were dismissed by the
petitioner company on November 23, 1987. As a result, they lodged a complaint for illegal dismissal with the
Regional Arbitration Branch of the NLRC in Tacloban City on December 1, 1987, and decisions manded
reinstatement with damages. In addition, they instituted in the Regional Trial Court of Leyte, on April 4, 1988, a
separate civil complaint against the petitioners for damages arising from what they claimed to be their
malicious prosecution.

The petitioners moved to dismiss the civil complaint on the ground that the trial court had no jurisdiction over
the case because it involved employee-employer relations that were exclusively cognizable by the labor
arbiter. The motion was granted on February 6, 1989. On July 6, 1989, however, the respondent judge, acting
on the motion for reconsideration, reinstated the complaint, saying it was "distinct from the labor case for
damages now pending before the labor courts." The petitioners then came to this Court for relief.

The petitioners invoke Article 217 of the Labor Code and a number of decisions of this Court to support their
position that the private respondents civil complaint for damages falls under the jurisdiction of the labor arbiter.
They particularly cite the case of Getz Corporation v. Court of Appeals, 1 where it was held that a court of first
instance had no jurisdiction over the complaint filed by a dismissed employee "for unpaid salary and other
employment benefits, termination pay and moral and exemplary damages."

We hold at the outset that the case is not in point because what was involved there was a claim arising from
the alleged illegal dismissal of an employee, who chose to complain to the regular court and not to the labor
arbiter. Obviously, the claim arose from employee-employer relations and so came under Article 217 of the
Labor Code which then provided as follows:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor Arbiters
shall have the original and exclusive jurisdiction to hear and decide within thirty (30)
working days after submission of the case by the parties for decision, the following
cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of work and other terms and
conditions of employment;
3. All money claims of workers, including those based on non-payment or
underpayment of wages, overtime compensation, separation pay and other benefits
provided by law or appropriate agreement, except claims for employees'
compensation, social security, medicare and maternity benefits;
4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of this Code, including questions
involving the legality of strikes and lockouts.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided
by labor Arbiters. 2
It must be stressed that not every controversy involving workers and their employers can be resolved only by
the labor arbiters. This will be so only if there is a "reasonable causal connection" between the claim asserted
and employee-employer relations to put the case under the provisions of Article 217. Absent such a link, the
complaint will be cognizable by the regular courts of justice in the exercise of their civil and criminal
jurisdiction.
In Medina v. Castro-Bartolome, 3 two employees filed in the Court of First Instance of Rizal a civil complaint for
damages against their employer for slanderous remarks made against them by the company president. On the
order dismissing the case because it came under the jurisdiction of the labor arbiters, Justice Vicente Abad
Santos said for the Court:
It is obvious from the complaint that the plaintiffs have not alleged any unfair labor
practice. Theirs is a simple action for damages for tortious acts allegedly committed by
the defendants. Such being the case, the governing statute is the Civil Code and not
the Labor Code. It results that the orders under review are based on a wrong premise.
In Singapore Airlines Ltd. v. Pao, 4 where the plaintiff was suing for damages for alleged violation by the
defendant of an "Agreement for a Course of Conversion Training at the Expense of Singapore Airlines
Limited," the jurisdiction of the Court of First Instance of Rizal over the case was questioned. The Court, citing
the earlier case of Quisaba v. Sta. Ines Melale Veneer and Plywood, Inc., 5 declared through Justice Herrera:
Stated differently, petitioner seeks protection under the civil laws and claims no
benefits under the Labor Code. The primary relief sought is for liquidated damages for
breach of a contractual obligation. The other items demanded are not labor benefits
demanded by workers generally taken cognizance of in labor disputes, such as
payment of wages, overtime compensation or separation pay. The items claimed are
the natural consequences flowing from breach of an obligation, intrinsically a civil
dispute.
In Molave Sales, Inc. v. Laron, 6 the same Justice held for the Court that the claim of the plaintiff against its
sales manager for payment of certain accounts pertaining to his purchase of vehicles and automotive parts,
repairs of such vehicles, and cash advances from the corporation was properly cognizable by the Regional
Trial Court of Dagupan City and not the labor arbiter, because "although a controversy is between an
employer and an employee, the Labor Arbiters have nojurisdiction if the Labor Code is not involved."
The latest ruling on this issue is found in San Miguel Corporation v. NLRC, 7 where the above cases are cited
and the changes in Article 217 are recounted. That case involved a claim of an employee for a P60,000.00
prize for a proposal made by him which he alleged had been accepted and implemented by the defendant
corporation in the processing of one of its beer products. The claim was filed with the labor arbiter, who
dismissed it for lack of jurisdiction but was reversed by the NLRC on appeal. In setting aside the appealed
decision and dismissing the complaint, the Court observed through Justice Feliciano:
It is the character of the principal relief sought that appears essential, in this
connection. Where such principal relief is to be granted under labor legislation or a
collective bargaining agreement, the case should fall within the jurisdiction of the Labor
Arbiter and the NLRC, even though a claim for damages might be asserted as an
incident to such claim.
xxx xxx xxx
Where the claim to the principal relief sought is to be resolved not by reference to the
Labor Code or other labor relations statute or a collective bargaining agreement but by
the general civil law, the jurisdiction over the dispute belongs to the regular courts of
justice and not to the Labor Arbiter and the NLRC. In such situations, resolution of the
dispute requires expertise, not in labor management relations nor in wage structures
and other terms and conditions of employment, but rather in the application of the
general civil law. Clearly, such claims fall outside the area of competence or expertise
ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for granting
jurisdiction over such claims to these agencies disappears.
xxx xxx xxx
While paragraph 3 above refers to "all money claims of workers," it is not necessary to
suppose that the entire universe of money claims that might be asserted by workers
against their employers has been absorbed into the original and exclusive jurisdiction
of Labor Arbiters.
xxx xxx xxx
For it cannot be presumed that money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and which would therefore fall
within the general jurisdiction of the regular courts of justice, were intended by the
legislative authority to be taken away from the jurisdiction of the courts and lodged with
Labor Arbiters on an exclusive basis. The Court, therefore, believes and so holds that
the 'money claims of workers" referred to in paragraph 3 of Article 217 embraces
money claims which arise out of or in connection with the employer- employee
relationship, or some aspect or incident of such relationship. Put a little differently, that
money claims of workers which now fall within the original and exclusive jurisdiction of
Labor Arbiters are those money claims which have some reasonable causal
connection with the employer-employee relationship (Ibid.).
The case now before the Court involves a complaint for damages for malicious prosecution which was filed
with the Regional Trial Court of Leyte by the employees of the defendant company. It does not appear that
there is a "reasonable causal connection" between the complaint and the relations of the parties as employer
and employees. The complaint did not arise from such relations and in fact could have arisen independently of
an employment relationship between the parties. No such relationship or any unfair labor practice is asserted.
What the employees are alleging is that the petitioners acted with bad faith when they filed the criminal
complaint which the Municipal Trial Court said was intended "to harass the poor employees" and the dismissal
of which was affirmed by the Provincial Prosecutor "for lack of evidence to establish even a slightest
probability that all the respondents herein have committed the crime imputed against them." This is a matter
which the labor arbiter has no competence to resolve as the applicable law is not the Labor Code but the Republic of the Philippines
Revised Penal Code. SUPREME COURT
Manila

"Talents differ, all is well and wisely put," so observed the philosopher-poet. 8 So it must be in the case we
here decide. SECOND DIVISION

WHEREFORE, the order dated July 6, 1989, is AFFIRMED and the petition DENIED, with costs against the G.R. No. L-59825 September 11, 1982
petitioner.

ERNESTO MEDINA and JOSE G. ONG, petitioners,

SO ORDERED. vs.
HON. FLORELIANA CASTRO-BARTOLOME in her capacity as Presiding Judge of the Court of First Instance
Cf Rizal, Branch XV, Makati, Metro Manila, COSME DE ABOITIZ and PEPSI-COLA BOTTLING COMPANY
OF THE PHILIPPINES, INC., respondents.

ABAD SANTOS, J.:

Civil Case No. 33150 of the Court of First Instance of Rizal Branch XV, was filed in May, 1979, by Ernesto
Medina and Jose G. Ong against Cosme de Aboitiz and Pepsi-Cola Bottling Co. of the Philippines, Inc.
Medina was the former Plant General Manager and Ong was the former Plant Comptroller of the company.
Among the averments in the complaint are the following:

3. That on or about 1:00 o'clock in the afternoon of December 20, 1977, defendant
Cosme de Aboitiz, acting in his capacity as President and Chief Executive Officer of
the defendant Pepsi-Cola Bottling Company of the Philippines, Inc., went to the Pepsi-
Cola Plant in Muntinlupa, Metro Manila, and without any provocation, shouted and
maliciously humiliated the plaintiffs with the use of the following slanderous language
and other words of similar import uttered in the presence of the plaintiffs' subordinate
employees, thus-

GOD DAMN IT. YOU FUCKED ME UP ... YOU SHUT UP! FUCK YOU! YOU ARE
BOTH SHIT TO ME! YOU ARE FIRED (referring to Ernesto Medina). YOU TOO ARE
FIRED! '(referring to Jose Ong )

4. That on January 9, 1978, the herein plaintiffs filed a joint criminal complaint for oral
defamation against the defendant Cosme de Aboitiz duly supported with respective
affidavits and corroborated by the affidavits of two (2) witnesses: Isagani Hernandez
and Jose Ganseco II, but after conducting a preliminary investigation, Hon. Jose B.
Castillo, dismissed the complaint allegedly because the expression "Fuck you and
"You are both shit to me" were uttered not to slander but to express anger and
displeasure;

5. That on February 8, 1978, plaintiffs filed a Petition for Review with the office of the
Secretary of Justice (now Ministry of Justice) and on June 13, 1978, the Deputy
Minister of Justice, Catalino Macaraig, Jr., issued a resolution sustaining the plaintiff's
complaint, reversing the resolution of the Provincial Fiscal and directing him to file
against defendant Cosme de Aboitiz an information for Grave Slander. ... ;

6. That the employment records of plaintiffs show their track performance and
impeccable qualifications, not to mention their long years of service to the Company
which undoubtedly caused their promotion to the two highest positions in Muntinlupa
Plant having about 700 employees under them with Ernesto Medina as the Plant
General Manager receiving a monthly salary of P6,600.00 excluding other perquisites
accorded only to top executives and having under his direct supervision other
professionals like himself, including the plaintiff Jose G. Ong, who was the Plant
Comptroller with a basic monthly salary of P4,855.00;
 7. That far from taking these matters into consideration, the defendant corporation, 4. P5,000.00 as litigation expenses;
acting through its President, Cosme de Aboitiz, dismissed and slandered the plaintiffs
in the presence of their subordinate employees although this could have been done in
private; 5. P10,000.00 and P200.00 per appearance as and for attorney's fees; and

8. That the defendants have evidently enjoyed the act of dismissing the plaintiffs and 6. Costs of this suit.
such dismissal was planned to make it as humiliating as possible because instead of
allowing a lesser official like the Regional Vice President to take whatever action was
Plaintiffs also pray for such further reliefs and remedies as may be in keeping with
necessary under the circumstances, Cosme de Aboitiz himself went to the Muntinlupa
justice and equity.
Plant in order to publicly upbraid and dismiss the plaintiffs;

On June 4, 1979, a motion to dismiss the complaint on the ground of lack of jurisdiction
9. That the defendants dismissed the plaintiffs because of an alleged delay in the use
was filed by the defendants. The trial court denied the motion on September 6, 1979, in
of promotional crowns when such delay was true with respect to the other Plants,
an order which reads as follows:
which is therefore demonstrative of the fact that Cosme de Aboitiz did not really have a
strong reason for publicly humiliating the plaintiffs by dismissing them on the spot;
Up for resolution by the Court is the defendants' Motion to Dismiss dated June 4, 1979,
which is basically anchored on whether or not this Court has jurisdiction over the
10. That the defendants were moved by evil motives and an anti-social attitude in
instant petition.
dismissing the plaintiffs because the dismissal was effected on the very day that
plaintiffs were awarded rings of loyalty to the Company, five days before Christmas
and on the day when the employees' Christmas party was held in the Muntinlupa Plant, The complaint alleges that the plaintiffs' dismissal was without any provocation and
so that when plaintiffs went home that day and found their wives and children already that defendant Aboitiz shouted and maliciously humiliated plaintiffs and used the words
dressed up for the party, they didn't know what to do and so they cried unashamedly; quoted in paragraph 3 thereof. The plaintiffs further allege that they were receiving
salaries of P6,600.00 and P4,855.00 a month. So the complaint for civil damages is
clearly not based on an employer-employee relationship but on the manner of plaintiffs'
xxx xxx xxx
dismissal and the effects flowing therefrom. (Jovito N. Quisaba vs, Sta. Ines-Melale
Veneer & Plywood Co., Inc., et al., No. L-38088, Aug. 30,1974.)
20. That because of the anti-social manner by which the plaintiffs were dismissed from
their employment and the embarrassment and degradation they experience in the
This case was filed on May 10, 1979. The amendatory decree, P.D. 1367, which took
hands of the defendants, the plaintiffs have suffered and will continue to suffer
effect on May 1, 1978 and which provides that Regional Directors shall not indorse and
wounded feelings, sleepless nights, mental torture, besmirched reputation and other
Labor Arbiters shall not entertain claims for moral or other forms of damages, now
similar injuries, for which the sum of P150,000.00 for each plaintiff, or the total amount.
expressly confers jurisdiction on the courts in these cases, specifically under the
of P300,000.00 should be awarded as moral damages;
plaintiff's causes of action.

21. That the defendants have demonstrated their lack of concern for the rights and
dignity of the Filipino worker and their callous disregard of Philippine labor and social
legislation, and to prevent other persons from following the footsteps of defendants, the
amount of P50,000.00 for each plaintiff, or the total sum of P100,000.00, should be
awarded as exemplary damages;
22. That plaintiffs likewise expect to spend no less than P5,000.00 as litigation
expenses and were constrained to secure the services of counsel for the protection
and enforcement of their rights for which they agreed to pay the sum of P10,000.00
and P200.00 per appearance as and for attorney's fees.
The complaint contains the following:
Because of the letter dated January 4, 1978 and the statement of plaintiff Medina that
his receipt of the amount from defendant company was done "under strong protest," it
cannot be said that the demands set forth in the complaint have been paid, waived or
other extinguished. In fact, in defendants' Motion to Dismiss, it is stated that 'in the
absence of a showing that there was fraud, duress or violence attending said
transactions, such Release and Quitclaim Deeds are valid and binding contracts
between them, which in effect admits that plaintiffs can prove fraud, violence, duress or
violence. Hence a cause of action for plaintiffs exist.
It is noticed that the defamatory remarks standing alone per se had been made the
sole cause under the first cause of action, but it is alleged in connection with the
manner in which the plaintiffs had been dismissed, and whether the statute of
limitations would apply or not would be a matter of evidence.

PRAYER
IT has been alreadly settled by jurisprudence that mere asking for reinstatement does
not remove from the CFI jurisdiction over the damages. The case must involve unfair
WHEREFORE, in view of all the foregoing. it is most respectfully that after proper labor practices to bring it within the jurisdiction of the CIR (now NLRC).
notice and hearing, judgment be rendered for the plaintiffs and against the defendants
ordering them, jointly and solidarily, to pay the plaintiffs the sums of:
WHEREFORE, the defendants' Motion to Dismiss dated June 4, 1979 is hereby
denied.
1. Unrealized income in such sum as will be established during the trial;

The defendants are hereby directed to interpose their answer within ten (10) days from
2. P300,000.00 as moral damages; receipt hereof.

3. P100,000.00 by way of exemplary damages:

While the trial was underway, the defendants filed a second motion to dismiss the complaint dated January IN DISMISSING FOR LACK OF JURISDICTION CIVIL CASE NO. 33150 THEREBY
23, 1981, because of amendments to the Labor Code immediately prior thereto. Acting on the motion, the trial VIOLATING THE CONSTITUTIONAL RIGHTS OF THE PETITIONERS NOTABLY
court issued on May 23, 1981, the following order: THEIR RIGHT TO DUE PROCESS.

Up for resolution by the Court is the defendants' Motion to Dismiss dated January 23, The pivotal question to Our mind is whether or not the Labor Code has any relevance to the reliefs sought by
1981, on grounds not existing when the first Motion to Dismiss dated June 4, 1979 was the plaintiffs. For if the Labor Code has no relevance, any discussion concerning the statutes amending it and
interposed. The ground relied upon is the promulgation of P.D. No. 1691 amending Art. whether or not they have retroactive effect is unnecessary.
217 of the Labor Code of the Philippines and Batasan Pambansa Bldg. 70 which took
effect on May 1, 1980, amending Art. 248 of the Labor Code.
It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs is a simple
action for damages for tortious acts allegedly committed by the defendants. Such being the case, the
The Court agrees with defendants that the complaint alleges unfair labor practices governing statute is the Civil Code and not the Labor Code. It results that the orders under review are based
which under Art. 217 of the Labor Code, as amended by P.D. 1691, has vested original on a wrong premise.
and exclusive jurisdiction to Labor Arbiters, and Art. 248, thereof ... "which may include
claims for damages and other affirmative reliefs." Under the amendment, therefore,
jurisdiction over employee-employer relations and claims of workers have been WHEREFORE, the petition is granted; the respondent judge is hereby ordered to reinstate Civil Case No.
removed from the Courts of First Instance. If it is argued that this case did not arise 33150 and render a decision on the merits. Costs against the private respondents.
from employer-employee relation, but it cannot be denied that this case would not have
arisen if the plaintiffs had not been employees of defendant Pepsi-Cola. Even the
SO ORDERED.
alleged defamatory remarks made by defendant Cosme de Aboitiz were said to
plaintiffs in the course of their employment, and the latter were dismissed from such
employment. Hence, the case arose from such employer-employee relationship which
under the new Presidential Decree 1691 are under the exclusive, original jurisdiction of
the labor arbiters. The ruling of this Court with respect to the defendants' first motion to
dismiss, therefore, no longer holds as the positive law has been subsequently issued
and being a curative law, can be applied retroactively (Garcia v. Martinez, et al., L-
47629, May 28, 1979; 90 SCRA 331-333).

It will also logically follow that plaintiffs can reinterpose the same complaint with the
Ministry of Labor.

WHEREFORE, let this case be, as it is hereby ordered, dismissed, without

pronouncement as to costs.

A motion to reconsider the above order was filed on July 7, 1981, but it was only on February 8, 1982, or after
a lapse of around seven (7) months when the motion was denied.

Plaintiffs have filed the instant petition pursuant to R. A. No. 5440 alleging that the respondent court
committed the following errors:

IN DIVESTING ITSELF OF ITS JURISDICTION TO HEAR AND DECIDE CIVIL CASE

NO. 33150 DESPITE THE FACT THAT JURISDICTION HAD ALREADY ATTACHED
WHICH WAS NOT OUSTED BY THE SUBSEQUENT ENACTMENT OF
PRESIDENTIAL DECREE 1691;

IN HOLDING THAT PRESIDENTIAL DECREE 1691 SHOULD BE GIVEN A

RETROSPECTIVE EFFECT WHEN PRESIDENTIAL DECREE 1367 WHICH WAS IN
FORCE WHEN CIVIL CASE NO. 33150 WAS FILED AND TRIAL THEREOF HAD
COMMENCED, WAS NEVER EXPRESSLY REPEALED BY PRESIDENTIAL
DECREE 1691, AND IF EVER THERE WAS AN IMPLIED REPEAL, THE SAME IS
NOT FAVORED UNDER PREVAILED JURISPRUDENCE;

IN HOLDING THAT WITH THE REMOVAL BY PRESIDENTIAL DECREE 1691 OF

THE PROVISO INSERTED IN ARTICLE 217 OF THE LABOR CODE BY
PRESIDENTIAL DECREE 1367, THE LABOR ARBITERS HAVE ACQUIRED
JURISDICTION OVER CLAIMS FOR DAMAGES ARISING FROM EMPLOYER-
EMPLOYEE RELATIONS TO THE EXCLUSION OF THE REGULAR COURTS,
WHEN A READING OF ARTICLE 217 WITHOUT THE PROVISO IN QUESTION
READILY REVEALS THAT JURISDICTION OVER DAMAGE CLAIMS IS STILL
VESTED WITH THE REGULAR COURTS;
 THIRD DIVISION
[G.R. No. 157010. June 21, 2005]
PHILIPPINE NATIONAL BANK, petitioner, vs. FLORENCE O. CABANSAG, respondent.
DECISION
PANGANIBAN, J.:
The Court reiterates the basic policy that all Filipino workers, whether employed locally or overseas,
enjoy the protective mantle of Philippine labor and social legislations. Our labor statutes may not be rendered
ineffective by laws or judgments promulgated, or stipulations agreed upon, in a foreign country.
The Case
Before us is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court, seeking to
reverse and set aside the July 16, 2002 Decision[2] and the January 29, 2003 Resolution[3] of the Court of
Appeals (CA) in CA-GR SP No. 68403. The assailed Decision dismissed the CA Petition (filed by herein
petitioner), which had sought to reverse the National Labor Relations Commission (NLRC)s June 29, 2001
Resolution,[4] affirming Labor Arbiter Joel S. Lustrias January 18, 2000 Decision.[5]
The assailed CA Resolution denied herein petitioners Motion for Reconsideration.
The Facts
The facts are narrated by the Court of Appeals as follows:
In late 1998, [herein Respondent Florence Cabansag] arrived in Singapore as a tourist. She applied
for employment, with the Singapore Branch of the Philippine National Bank, a private banking corporation
organized and existing under the laws of the Philippines, with principal offices at the PNB Financial Center,
Roxas Boulevard, Manila. At the time, the Singapore PNB Branch was under the helm of Ruben C. Tobias, a
lawyer, as General Manager, with the rank of Vice-President of the Bank. At the time, too, the Branch Office
had two (2) types of employees: (a) expatriates or the regular employees, hired in Manila and assigned
abroad including Singapore, and (b) locally (direct) hired. She applied for employment as Branch Credit
Officer, at a total monthly package of $SG4,500.00, effective upon assumption of duties after approval. Ruben
C. Tobias found her eminently qualified and wrote on October 26, 1998, a letter to the President of the Bank in
Manila, recommending the appointment of Florence O. Cabansag, for the position.
xxxxxxxxx
The President of the Bank was impressed with the credentials of Florence O. Cabansag that he approved the
recommendation of Ruben C. Tobias. She then filed an Application, with the Ministry of Manpower of the
Government of Singapore, for the issuance of an Employment Pass as an employee of the Singapore PNB
Branch. Her application was approved for a period of two (2) years.
On December 7, 1998, Ruben C. Tobias wrote a letter to Florence O. Cabansag offering her a temporary
appointment, as Credit Officer, at a basic salary of Singapore Dollars 4,500.00, a month and, upon her
successful completion of her probation to be determined solely, by the Bank, she may be extended at the
discretion of the Bank, a permanent appointment and that her temporary appointment was subject to the
following terms and conditions:
1. You will be on probation for a period of three (3) consecutive months from the date of your assumption of
duty.
2. You will observe the Banks rules and regulations and those that may be adopted from time to time.
3. You will keep in strictest confidence all matters related to transactions between the Bank and its clients.
4. You will devote your full time during business hours in promoting the business and interest of the Bank.
5. You will not, without prior written consent of the Bank, be employed in anyway for any purpose whatsoever
outside business hours by any person, firm or company.
6. Termination of your employment with the Bank may be made by either party after notice of one (1) day in
writing during probation, one month notice upon confirmation or the equivalent of one (1) days or months
salary in lieu of notice.
Florence O. Cabansag accepted the position and assumed office. In the meantime, the Philippine Embassy in
Singapore processed the employment contract of Florence O. Cabansag and, on March 8, 1999, she was
issued by the Philippine Overseas Employment Administration, an Overseas Employment Certificate,
certifying that she was a bona fide contract worker for Singapore.
xxxxxxxxx
Barely three (3) months in office, Florence O. Cabansag submitted to Ruben C. Tobias, on March 9, 1999, her
initial Performance Report. Ruben C. Tobias was so impressed with the Report that he made a notation and,
on said Report:GOOD WORK. However, in the evening of April 14, 1999, while Florence O. Cabansag was in
the flat, which she and Cecilia Aquino, the Assistant Vice-President and Deputy General Manager of the
Branch and Rosanna Sarmiento, the Chief Dealer of the said Branch, rented, she was told by the two (2) that
Ruben C. Tobias has asked them to tell Florence O. Cabansag to resign from her job. Florence O. Cabansag
was perplexed at the sudden turn of events and the runabout way Ruben C. Tobias procured her resignation
from the Bank. The next day, Florence O. Cabansag talked to Ruben C. Tobias and inquired if what Cecilia
Aquino and Rosanna Sarmiento had told her was true. Ruben C. Tobias confirmed the veracity of the
information, with the explanation that her resignation was imperative as a cost-cutting measure of the Bank.
Ruben C. Tobias, likewise, told Florence O. Cabansag that the PNB Singapore Branch will be sold or
transformed into a remittance office and that, in either way, Florence O. Cabansag had to resign from her
employment. The more Florence O. Cabansag was perplexed. She then asked Ruben C. Tobias that she be
furnished with a Formal Advice from the PNB Head Office in Manila. However, Ruben C. Tobias flatly refused.
Florence O. Cabansag did not submit any letter of resignation.
On April 16, 1999, Ruben C. Tobias again summoned Florence O. Cabansag to his office and demanded that
she submit her letter of resignation, with the pretext that he needed a Chinese-speaking Credit Officer to
penetrate the local market, with the information that a Chinese-speaking Credit Officer had already been hired
and will be reporting for work soon. She was warned that, unless she submitted her letter of resignation, her
employment record will be blemished with the notation DISMISSED spread thereon. Without giving any
definitive answer, Florence O. Cabansag asked Ruben C. Tobias that she be given sufficient time to look for
another job. Ruben C. Tobias told her that she should be out of her employment by May 15, 1999.
However, on April 19, 1999, Ruben C. Tobias again summoned Florence O. Cabansag and adamantly
ordered her to submit her letter of resignation. She refused. On April 20, 1999, she received a letter from
Ruben C. Tobias terminating her employment with the Bank.
xxxxxxxxx
On January 18, 2000, the Labor Arbiter rendered judgment in favor of the Complainant and against the
Respondents, the decretal portion of which reads as follows:
WHEREFORE, considering the foregoing premises, judgment is hereby rendered finding respondents guilty of
Illegal dismissal and devoid of due process, and are hereby ordered:
1. To reinstate complainant to her former or substantially equivalent position without loss of
seniority rights, benefits and privileges;
2. Solidarily liable to pay complainant as follows:
 a) To pay complainant her backwages from 16 April 1999 up to her actual reinstatement.
Her backwages as of the date of the promulgation of this decision amounted to
SGD 40,500.00 or its equivalent in Philippine Currency at the time of payment;
b) Mid-year bonus in the amount of SGD 2,250.00 or its equivalent in Philippine Currency
at the time of payment;
c) Allowance for Sunday banking in the amount of SGD 120.00 or its equivalent in
Philippine Currency at the time of payment;
d) Monetary equivalent of leave credits earned on Sunday banking in the amount of SGD
1,557.67 or its equivalent in Philippine Currency at the time of payment;
e) Monetary equivalent of unused sick leave benefits in the amount of SGD 1,150.60 or its
equivalent in Philippine Currency at the time of payment.
f) Monetary equivalent of unused vacation leave benefits in the amount of SGD 319.85 or
its equivalent in Philippine Currency at the time of payment.
g) 13th month pay in the amount of SGD 4,500.00 or its equivalent in Philippine Currency at
the time of payment;
3. Solidarily to pay complainant actual damages in the amount of SGD 1,978.00 or its equivalent
in Philippine Currency at the time of payment, and moral damages in the amount of PhP
200,000.00, exemplary damages in the amount of PhP 100,000.00;
4. To pay complainant the amount of SGD 5,039.81 or its equivalent in Philippine Currency at
the time of payment, representing attorneys fees.
SO ORDERED. [6] [Emphasis in the original.]
PNB appealed the labor arbiters Decision to the NLRC. In a Resolution dated June 29, 2001, the
Commission affirmed that Decision, but reduced the moral damages to P100,000 and the exemplary damages
to P50,000. In a subsequent Resolution, the NLRC denied PNBs Motion for Reconsideration.
Ruling of the Court of Appeals
In disposing of the Petition for Certiorari, the CA noted that petitioner bank had failed to adduce in
evidence the Singaporean law supposedly governing the latters employment Contract with respondent. The
appellate court found that the Contract had actually been processed by the Philippine Embassy in Singapore
and approved by the Philippine Overseas Employment Administration (POEA), which then used that Contract
as a basis for issuing an Overseas Employment Certificate in favor of respondent.
According to the CA, even though respondent secured an employment pass from the Singapore
Ministry of Employment, she did not thereby waive Philippine labor laws, or the jurisdiction of the labor arbiter
or the NLRC over her Complaint for illegal dismissal. In so doing, neither did she submit herself solely to the
Ministry of Manpower of Singapores jurisdiction over disputes arising from her employment. The appellate
court further noted that a cursory reading of the Ministrys letter will readily show that no such waiver or
submission is stated or implied.
Finally, the CA held that petitioner had failed to establish a just cause for the dismissal of respondent.
The bank had also failed to give her sufficient notice and an opportunity to be heard and to defend herself.
The CA ruled that she was consequently entitled to reinstatement and back wages, computed from the time of
her dismissal up to the time of her reinstatement.
Hence, this Petition.[7]
Issues
Petitioner submits the following issues for our consideration:
1. Whether or not the arbitration branch of the NLRC in the National Capital Region has jurisdiction
over the instant controversy;
2. Whether or not the arbitration of the NLRC in the National Capital Region is the most convenient
venue or forum to hear and decide the instant controversy; and
3. Whether or not the respondent was illegally dismissed, and therefore, entitled to recover moral and
exemplary damages and attorneys fees.[8]
In addition, respondent assails, in her Comment,[9] the propriety of Rule 45 as the procedural mode for
seeking a review of the CA Decision affirming the NLRC Resolution. Such issue deserves scant consideration.
Respondent miscomprehends the Courts discourse in St. Martin Funeral Home v. NLRC,[10] which has indeed
affirmed that the proper mode of review of NLRC decisions, resolutions or orders is by a special civil action
for certiorari under Rule 65 of the Rules of Court. The Supreme Court and the Court of Appeals
have concurrent original jurisdiction over such petitions for certiorari. Thus, in observance of the doctrine on
the hierarchy of courts, these petitions should be initially filed with the CA.[11]
Rightly, the bank elevated the NLRC Resolution to the CA by way of a Petition for Certiorari. In seeking
a review by this Court of the CA Decision -- on questions of jurisdiction, venue and validity of employment
termination -- petitioner is likewise correct in invoking Rule 45.[12]
It is true, however, that in a petition for review on certiorari, the scope of the Supreme Courts judicial
review of decisions of the Court of Appeals is generally confined only to errors of law. It does not extend to
questions of fact. This doctrine applies with greater force in labor cases. Factual questions are for the labor
tribunals to resolve. [13] In the present case, the labor arbiter and the NLRC have already determined the
factual issues. Their findings, which are supported by substantial evidence, were affirmed by the CA. Thus,
they are entitled to great respect and are rendered conclusive upon this Court, absent a clear showing of
palpable error or arbitrary disregard of evidence.[14]
The Courts Ruling
The Petition has no merit.
First Issue:
Jurisdiction
The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of the Labor Code as follows:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided under this
Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all workers, whether agricultural or non-
agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wage, rates of pay, hours of work and other terms and conditions of employment
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and
 6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount of exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied with a claim for
reinstatement.
(b) The commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
x x x x x x x x x.
More specifically, Section 10 of RA 8042 reads in part:
SECTION 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damages.
xxxxxxxxx
Based on the foregoing provisions, labor arbiters clearly have original and exclusive jurisdiction over
claims arising from employer-employee relations, including termination disputes involving all workers, among
whom are overseas Filipino workers (OFW).[15]
We are not unmindful of the fact that respondent was directly hired, while on a tourist status in
Singapore, by the PNB branch in that city state. Prior to employing respondent, petitioner had to obtain an
employment pass for her from the Singapore Ministry of Manpower. Securing the pass was a regulatory
requirement pursuant to the immigration regulations of that country.[16]
Similarly, the Philippine government requires non-Filipinos working in the country to first obtain a local
work permit in order to be legally employed here. That permit, however, does not automatically mean that the
non-citizen is thereby bound by local laws only, as averred by petitioner. It does not at all imply a waiver of
ones national laws on labor. Absent any clear and convincing evidence to the contrary, such permit simply
means that its holder has a legal status as a worker in the issuing country.
Noteworthy is the fact that respondent likewise applied for and secured an Overseas Employment
Certificate from the POEA through the Philippine Embassy in Singapore. The Certificate, issued on March 8,
1999, declared her a bona fide contract worker for Singapore. Under Philippine law, this document authorized
her working status in a foreign country and entitled her to all benefits and processes under our statutes. Thus,
even assuming arguendo that she was considered at the start of her employment as a direct hire governed by
and subject to the laws, common practices and customs prevailing in Singapore[17]she subsequently became a
contract worker or an OFW who was covered by Philippine labor laws and policies upon certification by the
POEA. At the time her employment was illegally terminated, she already possessed the POEA employment
Certificate.
Moreover, petitioner admits that it is a Philippine corporation doing business through a branch office in
Singapore.[18] Significantly, respondents employment by the Singapore branch office had to be approved by
Benjamin P. Palma Gil,[19] the president of the bank whose principal offices were in Manila. This circumstance
militates against petitioners contention that respondent was locally hired; and totally governed by and subject
to the laws, common practices and customs of Singapore, not of the Philippines. Instead, with more reason
does this fact reinforce the presumption that respondent falls under the legal definition of migrant worker, in
this case one deployed in Singapore. Hence, petitioner cannot escape the application of Philippine laws or the
jurisdiction of the NLRC and the labor arbiter.
In any event, we recall the following policy pronouncement of the Court in Royal Crown Internationale
v. NLRC:[20]
x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor
and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping
with the basic public policy of the State to afford protection to labor, promote full employment, ensure equal
work opportunities regardless of sex, race or creed, and regulate the relations between workers and
employers. For the State assures the basic rights of all workers to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work [Article 3 of the Labor Code of the Philippines; See
also Section 18, Article II and Section 3, Article XIII, 1987 Constitution]. This ruling is likewise rendered
imperative by Article 17 of the Civil Code which states that laws which have for their object public order, public
policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by
determination or conventions agreed upon in a foreign country.
Second Issue:
Proper Venue
Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:
Section 1. Venue (a) All cases which Labor Arbiters have authority to hear and decide may be filed in the
Regional Arbitration Branch having jurisdiction over the workplace of the complainant/petitioner; Provided,
however that cases of Overseas Filipino Worker (OFW) shall be filed before the Regional Arbitration Branch
where the complainant resides or where the principal office of the respondent/employer is situated, at the
option of the complainant.
For purposes of venue, workplace shall be understood as the place or locality where the employee is regularly
assigned when the cause of action arose. It shall include the place where the employee is supposed to report
back after a temporary detail, assignment or travel. In the case of field employees, as well as ambulant or
itinerant workers, their workplace is where they are regularly assigned, or where they are supposed to
regularly receive their salaries/wages or work instructions from, and report the results of their assignment to
their employers.
Under the Migrant Workers and Overseas Filipinos Act of 1995 (RA 8042), a migrant worker refers to a
person who is to be engaged, is engaged or has been engaged in a remunerated activity in a state of which
he or she is not a legal resident; to be used interchangeably with overseas Filipino worker. [21] Undeniably,
respondent was employed by petitioner in its branch office in Singapore. Admittedly, she is a Filipino and not a
legal resident of that state. She thus falls within the category of migrant worker or overseas Filipino worker.
As such, it is her option to choose the venue of her Complaint against petitioner for illegal dismissal.
The law gives her two choices: (1) at the Regional Arbitration Branch (RAB) where she resides or (2) at the
RAB where the principal office of her employer is situated. Since her dismissal by petitioner, respondent has
returned to the Philippines -- specifically to her residence at Filinvest II, Quezon City. Thus, in filing her
Complaint before the RAB office in Quezon City, she has made a valid choice of proper venue.
Third Issue:
Illegal Dismissal
The appellate court was correct in holding that respondent was already a regular employee at the time
of her dismissal, because her three-month probationary period of employment had already ended. This ruling
is in accordance with Article 281 of the Labor Code: An employee who is allowed to work after a probationary
period shall be considered a regular employee. Indeed, petitioner recognized respondent as such at the time it
dismissed her, by giving her one months salary in lieu of a one-month notice, consistent with provision No. 6
of her employment Contract.
Notice and Hearing
Not Complied With
As a regular employee, respondent was entitled to all rights, benefits and privileges provided under our
labor laws. One of her fundamental rights is that she may not be dismissed without due process of law. The
twin requirements of notice and hearing constitute the essential elements of procedural due process, and
neither of these elements can be eliminated without running afoul of the constitutional guarantee.[22]
In dismissing employees, the employer must furnish them two written notices: 1) one to apprise them of
the particular acts or omissions for which their dismissal is sought; and 2) the other to inform them of the
decision to dismiss them. As to the requirement of a hearing, its essence lies simply in the opportunity to be
heard.[23]
The evidence in this case is crystal-clear. Respondent was not notified of the specific act or omission
for which her dismissal was being sought. Neither was she given any chance to be heard, as required by law.
At any rate, even if she were given the opportunity to be heard, she could not have defended herself
effectively, for she knew no cause to answer to.
 All that petitioner tendered to respondent was a notice of her employment termination effective the very
same day, together with the equivalent of a one-month pay. This Court has already held that nothing in the law
gives an employer the option to substitute the required prior notice and opportunity to be heard with the mere
payment of 30 days salary.[24]
Well-settled is the rule that the employer shall be sanctioned for noncompliance with the requirements
of, or for failure to observe, due process that must be observed in dismissing an employee.[25]
No Valid Cause
for Dismissal
[respondents] resignation contravenes the fundamental guarantee and public policy of the Philippine
government on security of tenure.
[Respondent] likewise established that as a proximate result of her dismissal and prior demands for
resignation, she suffered and continues to suffer mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock and social humiliation. Her standing in the social and business
community as well as prospects for employment with other entities have been adversely affected by her
dismissal. [Petitioners] are thus liable for moral damages under Article 2217 of the Civil Code.
xxxxxxxxx

Moreover, Articles 282,[26] 283[27] and 284[28] of the Labor Code provide the valid grounds or causes for [Petitioners] likewise acted in a wanton, oppressive or malevolent manner in terminating [respondents]
an employees dismissal. The employer has the burden of proving that it was done for any of those just or employment and are therefore liable for exemplary damages. This should served [sic] as protection to other
authorized causes. The failure to discharge this burden means that the dismissal was not justified, and that employees of [petitioner] company, and by way of example or correction for the public good so that persons
the employee is entitled to reinstatement and back wages.[29] similarly minded as [petitioners] would be deterred from committing the same acts.[36]

Notably, petitioner has not asserted any of the grounds provided by law as a valid reason for
terminating the employment of respondent. It merely insists that her dismissal was validly effected pursuant to
the provisions of her employment Contract, which she had voluntarily agreed to be bound to.
Truly, the contracting parties may establish such stipulations, clauses, terms and conditions as they
want, and their agreement would have the force of law between them. However, petitioner overlooks the
qualification that those terms and conditions agreed upon must not be contrary to law, morals, customs, public
policy or public order.[30] As explained earlier, the employment Contract between petitioner and respondent is
governed by Philippine labor laws. Hence, the stipulations, clauses, and terms and conditions of the Contract
must not contravene our labor law provisions.
The Court also affirms the award of attorneys fees. It is settled that when an action is instituted for the
recovery of wages, or when employees are forced to litigate and consequently incur expenses to protect their
rights and interests, the grant of attorneys fees is legally justifiable.[37]
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs
against petitioner.
SO ORDERED.

Moreover, a contract of employment is imbued with public interest. The Court has time and time again
reminded parties that they are not at liberty to insulate themselves and their relationships from the impact of labor
laws and regulations by simply contracting with each other.[31] Also, while a contract is the law between the
parties, the provisions of positive law that regulate such contracts are deemed included and shall limit and
govern the relations between the parties.[32]

Basic in our jurisprudence is the principle that when there is no showing of any clear, valid, and legal
cause for the termination of employment, the law considers the matter a case of illegal dismissal.[33]

Awards for Damages

Justified

Finally, moral damages are recoverable when the dismissal of an employee is attended by bad faith or
constitutes an act oppressive to labor or is done in a manner contrary to morals, good customs or public
[34]
policy. Awards for moral and exemplary damages would be proper if the employee was harassed and
arbitrarily dismissed by the employer.[35]

In affirming the awards of moral and exemplary damages, we quote with approval the following
ratiocination of the labor arbiter:

The records also show that [respondents] dismissal was effected by [petitioners] capricious and high-handed
manner, anti-social and oppressive, fraudulent and in bad faith, and contrary to morals, good customs and
public policy. Bad faith and fraud are shown in the acts committed by [petitioners] before, during and after
[respondents] dismissal in addition to the manner by which she was dismissed. First, [respondent] was
pressured to resign for two different and contradictory reasons, namely, cost-cutting and the need for a
Chinese[-]speaking credit officer, for which no written advice was given despite complainants request. Such
wavering stance or vacillating position indicates bad faith and a dishonest purpose. Second, she was
employed on account of her qualifications, experience and readiness for the position of credit officer and
pressured to resign a month after she was commended for her good work. Third, the demand for
[respondents] instant resignation on 19 April 1999 to give way to her replacement who was allegedly reporting
soonest, is whimsical, fraudulent and in bad faith, because on 16 April 1999 she was given a period of [sic]
until 15 May 1999 within which to leave. Fourth, the pressures made on her to resign were highly oppressive,
anti-social and caused her absolute torture, as [petitioners] disregarded her situation as an overseas worker
away from home and family, with no prospect for another job. She was not even provided with a return trip
fare. Fifth, the notice of termination is an utter manifestation of bad faith and whim as it totally disregards
[respondents] right to security of tenure and due process. Such notice together with the demands for
 THIRD DIVISION
[G.R. No. 122791. February 19, 2003]
PLACIDO O. URBANES, JR., doing business under the name & style of CATALINA SECURITY
AGENCY, petitioner, vs. THE HONORABLE SECRETARY OF LABOR AND EMPLOYMENT and
SOCIAL SECURITY SYSTEM, respondents.
DECISION
CARPIO-MORALES, J.:
Before this Court is a Petition for Certiorari under Rule 65 of the Revised Rules of Court assailing the
June 22, 1995 Order of the Department of Labor and Employment (DOLE) Secretary which set aside the
September 16, 1994 Order of the Regional Director, National Capital Region (NCR).
The antecedent facts of the case are as follows:
Petitioner Placido O. Urbanes, Jr., doing business under the name and style of Catalina Security
Agency, entered into an agreement[1] to provide security services to respondent Social Security System (SSS).
During the effectivity of the agreement, petitioner, by letter of May 16, 1994, [2] requested the SSS for
the upward adjustment of their contract rate in view of Wage Order No. NCR-03 which was issued by the
Regional Tripartite Wages and Productivity Board-NCR pursuant to Republic Act 6727 otherwise known as the
Wage Rationalization Act, the pertinent provision of which wage order reads:
Section 9. In the case of contracts for construction projects and for security, janitorial and similar services, the
prescribed amount set forth herein for covered workers shall be borne by the principals or the clients of the
construction/service contractors and the contract shall be deemed amended accordingly. In the event,
however, that the principal or client failed to pay the prescribed increase, the construction/service contractors
shall be jointly and severally liable with the principal or client. (Emphasis and underscoring supplied.)
As his May 16, 1994 letter to the SSS remained unheeded, petitioner sent another letter, [3] dated June
7, 1994, reiterating the request, which was followed by still another letter,[4] dated June 8, 1994.
On June 24, 1994, petitioner pulled out his agencys services from the premises of the SSS and another
security agency, Jaguar, took over.[5]
On June 29, 1994, petitioner filed a complaint[6] with the DOLE-NCR against the SSS seeking the
implementation of Wage Order No. NCR-03.
In its position paper,[7] the SSS prayed for the dismissal of the complaint on the ground that petitioner is
not the real party in interest and has no legal capacity to file the same. In any event, it argued that if it had any
obligation, it was to the security guards.
On the other hand, petitioner in his position paper,[8] citing Eagle Security Agency, Inc. v.
NLRC,[9] contended that the security guards assigned to the SSS do not have any legal basis to file a
complaint against it for lack of contractual privity.
Finding for petitioner, the Regional Director of the DOLE-NCR issued an Order[10] of September 16,
1994, the dispositive portion of which reads, quoted verbatim:
WHEREFORE, premises considered, the respondent Social Security System (SSS) is hereby Ordered to pay
Complainant the total sum of ONE MILLION SIX HUNDRED THOUSAND EIGHT HUNDRED FIFTY EIGHT
AND 46/100 (P 1,600,858.46) representing the wage differentials under Wage Order No. NCR-03 of the ONE
HUNDRED SIXTY EIGHT (168) Security Guards of Catalina Security Agency covering the period
from December 16, 1993 to June 24, 1994, inclusive within ten (10) days from receipt hereof, otherwise a writ
of execution shall be issued to enforce this Order.
The claims for the payment of interest and Attorneys fees are hereby ordered dismissed for want of
jurisdiction.
SO ORDERED.
The SSS moved to reconsider the September 16, 1994 Order of the Regional Director, praying that the
computation be revised.[11]
By Order[12] of December 9, 1994, the Regional Director modified his September 16, 1994 Order by
reducing the amount payable by the SSS to petitioner. The dispositive portion of the Regional Directors Order
of December 9, 1994 reads:
WHEREFORE, premises considered, the Order of this Office dated September 16, 1994 is hereby modified.
Respondent Social Security System is hereby ordered to pay complainant the amount of ONE MILLION TWO
HUNDRED THIRTY SEVEN THOUSAND SEVEN HUNDRED FORTY PESOS (P 1,237,740.00) representing
the wage differentials under Wage Order No. NCR-03 of the one hundred sixty-eight (168) security guards of
Catalina Security Agency covering the period from December 16, 1993 to June 20, 1994, inclusive, within ten
(10) days from receipt of this Order, otherwise, execution shall issue.
The SSS appealed[13] to the Secretary of Labor upon the following assigned errors, quoted verbatim:
A. THE REGIONAL DIRECTOR HAS NO JURISDICTION OF THE CASE AT BAR.
B. THE HONORABLE REGIONAL DIRECTOR ERRED IN FINDING THAT COMPLAINANT IS THE REAL
PARTY IN INTEREST AND HAS LEGAL CAPACITY TO FILE THE CASE.
C. THE HONORABLE REGIONAL DIRECTOR ERRED IN ADOPTING COMPLAINANTS COMPUTATION
FOR WAGE ADJUSTMENT UNDER WAGE ORDER NO. NCR-03 AS BASIS OF RESPONDENTS
LIABILITY.[14]
The Secretary of Labor, by Order[15] of June 22, 1995, set aside the order of the Regional Director and
remanded the records of the case for recomputation of the wage differentials using P 5,281.00 as the basis of
the wage adjustment. And the Secretary held petitioners security agency JOINTLY AND SEVERALLY liable
for wage differentials, the amount of which should be paid DIRECTLY to the security guards concerned.
Petitioners Motion for Reconsideration of the DOLE Secretarys Order of June 22, 1995 having been
denied by Order[16] of October 10, 1995, the present petition was filed, petitioner contending that the
DOLESecretary committed grave abuse of discretion when he:
1. . . . TOTALLY IGNORED THE PROVISION OF ARTICLE 129 OF THE LABOR CODE FOR PERFECTING
AN APPEAL FROM THE DECISION OF THE REGIONAL DIRECTOR UNDER ARTICLE 129 INVOKED BY
RESPONDENT SSS;
2. . . . DISREGARDED THE PROVISION ON APPEALS FROM THE DECISIONS OR RESOLUTIONS OF
THE REGIONAL DIRECTOR, DOLE, UNDER ARTICLE 129 OF THE LABOR CODE, AS AMENDED BY
REPUBLIC ACT NO. 6715;
3. . . . TOTALLY OVERLOOKED THE LAW AND PREVAILING JURISPRUDENCE WHEN IT ACTED ON
THE APPEAL OF RESPONDENT SSS.[17]
Petitioner asserts that the Secretary of Labor does not have jurisdiction to review appeals from
decisions of the Regional Directors in complaints filed under Article 129 of the Labor Code[18] which provides:
ART. 129. RECOVERY OF WAGES, SIMPLE MONEY CLAIMS AND OTHER BENEFITS. Upon complaint of
any interested party, the regional director of the Department of Labor and Employment or any duly authorized
hearing officers of the Department is empowered, through summary proceeding and after due notice, to hear
and decide any matter involving the recovery of wages and other monetary claims and benefits, including legal
interest, owing to an employee or person employed in domestic or household service or househelper under
this Code, arising from employer-employee relations: Provided, That such complaint does not include a claim
for reinstatement; Provided, further, That the aggregate money claim of each employee or househelper does
not exceed Five Thousand pesos (P5,000.00). The regional director or hearing officer shall decide or resolve
the complaint within thirty (30) calendar days from the date of the filing of the same. Any sum thus recovered
on behalf of any employee or househelper pursuant to this Article shall be held in a special deposit account
by, and shall be paid on order of, the Secretary of Labor and Employment or the regional director directly to
the employee or househelper concerned. Any such sum not paid to the employee or househelper, because he
cannot be located after diligent and reasonable effort to locate him within a period of three (3) years, shall be
held as a special fund of the Department of Labor and Employment to be used exclusively for the amelioration
and benefit of workers.
Any decision or resolution of the regional director or officer pursuant to this provision may be appealed on the
same grounds provided in Article 223 of this Code, within five (5) calendar days from receipt of a copy of said
decision or resolution, to the National Labor Relations Commission which shall resolve the appeal within ten
(10) calendar days from submission of the last pleading required or allowed under its rules.
x x x (Emphasis supplied).
Petitioner thus contends that as the appeal of SSS was filed with the wrong forum, it should have been
dismissed.[19]
The SSS, on the other hand, contends that Article 128, not Article 129, is applicable to the case. Article
128 provides:
ART. 128. VISITORIAL AND ENFORCEMENT POWERS
xxx
(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary, and in cases
where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his
duly authorized representatives shall have the power to issue compliance orders to give effect to labor
legislation based on the findings of labor employment and enforcement officers or industrial safety
engineers made in the course of inspection.
xxx
An order issued by the duly authorized representative of the Secretary of Labor and Employment under this
article may be appealed to the latter.
x x x (Emphasis supplied).
Neither the petitioners contention nor the SSSs is impressed with merit. Lapanday Agricultural
Development Corporation v. Court of Appeals[20] instructs so. In that case, the security agency filed a
complaint before the Regional Trial Court (RTC) against the principal or client Lapanday for the upward
adjustment of the contract rate in accordance with Wage Order Nos. 5 and 6. Lapanday argued that it is the
National Labor Relations Commission, not the civil courts, which has jurisdiction to resolve the issue in the
case, it involving the enforcement of wage adjustment and other benefits due the agencys security guards as
mandated by several wage orders. Holding that the RTC has jurisdiction over the controversy, this Court ruled:
We agree with the respondent that the RTC has jurisdiction over the subject matter of the present case. It is
well settled in law and jurisprudence that where no employer-employee relationship exists between the parties
and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes or any
collective bargaining agreement, it is the Regional Trial Court that has jurisdiction. In its complaint, private
respondent is not seeking any relief under the Labor Code but seeks payment of a sum of money and
damages on account of petitioner's alleged breach of its obligation under their Guard Service Contract. The
action is within the realm of civil law hence jurisdiction over the case belongs to the regular courts. While the
resolution of the issue involves the application of labor laws, reference to the labor code was only for the
determination of the solidary liability of the petitioner to the respondent where no employer-employee relation
exists.[21]
x x x (Emphasis and underscoring supplied).
In the case at bar, even if petitioner filed the complaint on his and also on behalf of the security
guards,[22] the relief sought has to do with the enforcement of the contract between him and the SSS which
was deemed amended by virtue of Wage Order No. NCR-03. The controversy subject of the case at bar is
thus a civil dispute, the proper forum for the resolution of which is the civil courts.
But even assuming arguendo that petitioners complaint were filed with the proper forum, for lack of
cause of action it must be dismissed.
Articles 106, 107 and 109 of the Labor Code provide:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. Whenever an employer enters into contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wage of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same manner and extent that he is liable to
employees directly employed by him.
xxx (Emphasis and underscoring supplied)
ART. 107 INDIRECT EMPLOYER. The provisions of the immediately preceding Article shall likewise apply to
any person, partnership, association or corporation which, not being an employer, contracts with an
independent contractor for the performance of any work, task, job or project.
ART. 109. SOLIDARY LIABILTY. The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of
any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they
shall be considered as direct employers.(Emphasis supplied.)
In the case of Eagle Security Agency, Inc. v. NLRC,[23] this Court held:
The Wage Orders are explicit that payment of the increases are "to be borne" by the principal or client. "To be
borne", however, does not mean that the principal, PTSI in this case, would directly pay the security guards
the wage and allowance increases because there is no privity of contract between them. The security guards'
contractual relationship is with their immediate employer, EAGLE. As an employer, EAGLE is tasked, among
others, with the payment of their wages [See Article VII Sec. 3 of the Contract for Security Services, supra and
Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 665].
On the other hand, there existed a contractual agreement between PTSI and EAGLE wherein the former
availed of the security services provided by the latter. In return, the security agency collects from its client
payment for its security services. This payment covers the wages for the security guards and also expenses
for their supervision and training, the guards' bonds, firearms with ammunitions, uniforms and other
equipments, accessories, tools, materials and supplies necessary for the maintenance of a security force.
Premises considered, the security guards' immediate recourse for the payment of the increases is with their
direct employer, EAGLE. However, in order for the security agency to comply with the new wage and
allowance rates it has to pay the security guards, the Wage Orders made specific provision to amend existing
contracts for security services by allowing the adjustment of the consideration paid by the principal to the
security agency concerned. What the Wage Orders require, therefore, is the amendment of the contract as to
the consideration to cover the service contractor's payment of the increases mandated. In the end,
therefore, ultimate liability for the payment of the increases rests with the principal.
In view of the foregoing, the security guards should claim the amount of the increases from EAGLE. Under the
Labor Code, in case the agency fails to pay them the amounts claimed, PTSI should be held solidarily liable
with EAGLE [Articles 106, 107 and 109]. Should EAGLE pay, it can claim an adjustment from PTSI for an
increase in consideration to cover the increases payable to the security guards.
x x x (Emphasis and underscoring supplied).
Passing on the foregoing disquisition in Eagle, this Court, in Lapanday,[24] held:
It is clear also from the foregoing that it is only when [the] contractor pays the increases mandated that it can THIRD DIVISION
claim an adjustment from the principal to cover the increases payable to the security guards. The conclusion
that the right of the contractor (as principal debtor) to recover from the principal (as solidary co-debtor) arises
only if he has paid the amounts for which both of them are jointly and severally liable is in line with Article 1217 YUSEN AIR AND SEA SERVICE PHILIPPINES, G.R. No. 154060
of the Civil Code which provides: INCORPORATED,
Petitioner, Present:

Art. 1217. Payment made by one the solidary debtors extinguishes the obligation. If two or more solidary PANGANIBAN, J., Chairman
debtors offer to pay, the creditor may choose which offer to accept. SANDOVAL-GUTIERREZ,
CORONA,
- versus - CARPIO MORALES, and
He who made payment make claim from his co-debtors only the share which corresponds to each, with
GARCIA, JJ.
interest for the payment already made. If the payment is made before the debt is due, no interest for the
intervening period may be demanded. x x x[25] (Emphasis and underscoring supplied).
Promulgated:
In fine, the liability of the SSS to reimburse petitioner arises only if and when petitioner pays his ISAGANI A. VILLAMOR,
employee-security guards the increases mandated by Wage Order No. NCR-03. Respondent.
August 16, 2005
The records do not show that petitioner has paid the mandated increases to the security guards. The x----------------------------------------------------------------------------------x
security guards in fact have filed a complaint[26] with the NLRC against petitioner relative to, among other
things, underpayment of wages. DECISION

WHEREFORE, the present petition is hereby DISMISSED, and petitioners complaint before the
Regional Director is dismissed for lack of jurisdiction and cause of action. GARCIA, J.:

SO ORDERED.

Via this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Yusen Air and Sea

Service Philippines, Incorporated, urges us to annul and set aside the following orders of the Regional Trial

Court at Paraaque City, Branch 258, in its Civil Case No. 02-0063, to wit:

1. Order dated March 20, 2002,[1] dismissing, on ground of

lack of jurisdiction, petitioners complaint for injunction and damages with
prayer for a temporary restraining order filed by it against herein
respondent, Isagani A. Villamor; and

2. Order dated June 21, 2002,[2] denying petitioners motion

for reconsideration.

The facts:

Petitioner, a corporation organized and existing under Philippines laws, is engaged in the business of freight

forwarding. As such, it is contracted by clients to pick-up, unpack, consolidate, deliver, transport and distribute

all kinds of cargoes, acts as cargo or freight accommodation and enters into charter parties for the carriage of

all kinds of cargoes or freight.

On August 16, 1993, petitioner hired respondent as branch manager in its Cebu Office. Later, petitioner

reclassified respondents position to that of Division Manager, which position respondent held until his

resignation on February 1, 2002.


Immediately after his resignation, respondent started working for Aspac International, a corporation
engaged in the same line of business as that of petitioner.
On February 11, 2002, in the Regional Trial Court at Paraaque City, petitioner filed against respondent a
complaint[3] for injunction and damages with prayer for a temporary restraining order. Thereat docketed as
Civil Case No. 02-0063 which was raffled to Branch 258 of the court, the complaint alleged, inter alia, as
follows:
7. That [respondent] duly signed an undertaking to abide by the policies of
the [Petitioner] which includes the provision on the employees responsibility
and obligation in cases of conflict of interest, which reads:
No employee may engage in any business or undertaking that
is directly or indirectly in competition with that of the company
and its affiliates or engage directly or indirectly in any
undertaking or activity prejudicial to the interests of the
company or to the performance of his/her job or work
assignments. The same provision will be implemented for a
period of two (2) years from the date of an employees
resignation, termination or separation from the company.
8. That in clear violation and breach of his undertaking and agreement with
the policies of [petitioner], [respondent] joined Aspac International, within
two years from [his] date of resignation, whose business is directly in
conflict with that of [petitioner]. (Underscoring supplied; words in bracket
ours).
Petitioner thus prayed for a judgment enjoining respondent from further pursuing his work at Aspac
International, and awarding it P2,000,000 as actual damages; P300,000 as exemplary damages; and
another P300,000 as attorneys fees.
On March 4, 2002, apparently not to be outdone, respondent filed against petitioner a case for
illegal dismissal before the National Labor Relations Commission.
Meanwhile, instead of filing his answer in Civil Case No. 02-0063, respondent filed a Motion to
Dismiss,[4] arguing that the RTC has no jurisdiction over the subject matter of said case because an employer-
employee relationship is involved.
On March 20, 2002, the trial court issued the herein first assailed order dismissing petitioners complaint for
lack of jurisdiction over the subject matter thereof on the ground that the action was for damages arising from
employer-employee relations. Citing Article 217 of the Labor Code, the trial court ruled that it is the labor
arbiter which had jurisdiction over petitioners complaint:
xxx the Court, after going over all the assertions, averments and arguments of the
parties and after carefully evaluating the same, is of the firm and honest opinion that
the arguments raised by [respondent] movant are more in conformity with the rules and
jurisprudence as this case involves an employer-employee relationship and is within
the exclusive original jurisdiction of the NLRC pursuant to Art. 217 of the Labor Code of
the Philippines. Not only that, there is even a pending case for illegal dismissal against
herein [petitioner] filed by [respondent] before the Regional Arbitration Branch VII in
Cebu City.
WHEREFORE, this case is hereby ordered DISMISSED for lack of jurisdiction.
SO ORDERED. (Words in bracket ours).
In time, petitioner moved for a reconsideration but its motion was denied by the trial court in its
subsequent order of June 21, 2002.
Hence, petitioners present recourse, maintaining that its cause of action did not arise from employer-employee
relations even if the claim therein is based on a provision in its handbook, and praying that Civil Case No. 02-
0063 be remanded to the court a quo for further proceedings.
The petition is impressed with merit.
At the outset, we take note of the fact that the 2-year prohibition against employment in a competing company
which petitioner seeks to enforce thru injunction, had already expired sometime in February 2004.
Necessarily, upon the expiration of said period, a suit seeking the issuance of a writ of injunction
becomes functus oficio and therefore moot.As things go, however, it was not possible for us, due to the great
number of cases awaiting disposition, to have decided the instant case earlier. However, the issue of
damages remains unresolved. In Philippine National Bank v. CA,[5] we declared:
In the instant case, aside from the principal action for damages, private
respondent sought the issuance of a temporary restraining order and writ of preliminary
injunction to enjoin the foreclosure sale in order to prevent an alleged irreparable injury
to private respondent. It is settled that these injunctive reliefs are preservative
remedies for the protection of substantive rights and interests. Injunction is not a cause
of action in itself but merely a provisional remedy, an adjunct to a main suit. When the
 act sought to be enjoined ha[s] become fait accompli, only the prayer for provisional
remedy should be denied. However, the trial court should still proceed with the
determination of the principal action so that an adjudication of the rights of the parties
can be had.
[W]hile seemingly the cause of action arose from employer-employee relations, the
employers claim for damages is grounded on wanton failure and refusal without just
cause to report to duty coupled with the averment that the employee maliciously and
with bad faith violated the terms and conditions of the contract to the damage of the
employer. Such averments removed the controversy from the coverage of the Labor
Code of the Philippines and brought it within the purview of Civil Law.

Along similar vein, the damage aspect of the present suit was never rendered moot by the lapse of the 2-year

Indeed, jurisprudence has evolved the rule that claims for damages under paragraph 4 of Article 217, to be
prohibitive period against employment in a competing company.

cognizable by the Labor Arbiter, must have a reasonable causal connection with any of the claims provided for
This brings us to the sole issue of whether petitioner's claim for damages arose from employer-
in that article. Only if there is such a connection with the other claims can a claim for damages be considered
employee relations between the parties.
as arising from employer-employee relations.

We rule in the negative.

Article 217, as amended by Section 9 of RA 6715, provides:

Actually, the present case is not one of first impression. In a kindred case, Dai-Chi Electronics Manufacturing
Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as
[6]
otherwise provided under this Code, the Labor Arbiters shall have original and
vs. Villarama, with a substantially similar factual backdrop, we held that an action for breach of contractual exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without extension, even in the
obligation is intrinsically a civil dispute. absence of stenographic notes, the following cases involving all workers, whether
agricultural or non-agricultural:

There, a complaint for damages was filed with the regular court by an employer against a former employee xxx xxx xxx

4. Claims for actual, moral, exemplary and other

who allegedly violated the non-compete provision of their employment contract when, within two years from forms of damages arising from the employer-
employee relations;"
the date of the employees resignation, he applied with, and was hired by a corporation engaged in the same
xxx xxx xxx

line of business as that of his former employer. The employer sought to recover liquidated damages. The trial

court ruled that it had no jurisdiction over the subject matter of the controversy because the complaint was for
In San Miguel Corporation vs. National Labor Relations Commission,[7] we had occasion to

damages arising from employer-employee relations, citing Article 217 (4) of the Labor Code, as amended by
construe Article 217, as amended by B.P. Blg. 227. Article 217 then provided that the Labor Arbiter

R.A. No. 6715, which stated that it is the Labor Arbiter who had original and exclusive jurisdiction over the
had jurisdiction over all money claims of workers, but the phrase arising from employer-employee

subject matter of the case.

relation was deleted. We ruled thus:

While paragraph 3 above refers to all money claims of workers, it is not

When the case was elevated to this Court, we held that the claim for damages did not arise from employer-
employee relations, to wit:
Petitioner does not ask for any relief under the Labor Code of the Philippines. It seeks
to recover damages agreed upon in the contract as redress for private respondents
breach of his contractual obligation to its damage and prejudice. Such cause of action
is within the realm of Civil Law, and jurisdiction over the controversy belongs to the
regular courts. More so when we consider that the stipulation refers to the post-
employment relations of the parties.
necessary to suppose that the entire universe of money claims that might be asserted
by workers against their employers has been absorbed into the original and exclusive
jurisdiction of Labor Arbiters. In the first place, paragraph 3 should be read not in
isolation from but rather within the context formed by paragraph 1 (relating to unfair
labor practices), paragraph 2 (relating to claims concerning terms and conditions of
employment), paragraph 4 (claims relating to household services, a particular species
of employer-employee relations), and paragraph 5 (relating to certain activities
prohibited to employees or employers). It is evident that there is a unifying element
which runs through paragraph 1 to 5 and that is, that they all refer to cases or disputes
arising out of or in connection with an employer-employee relationship. This is, in other
words, a situation where the rule of noscitur a sociis may be usefully invoked in
clarifying the scope of paragraph 3, and any other paragraph of Article 217 of the
 Labor Code, as amended. We reach the above conclusion from an examination of the
terms themselves of Article 217, as last amended by B.P. Blg 227, and even though
earlier versions of Article 217 of the Labor Code expressly brought within the ACCORDINGLY, the assailed orders of the lower court are SET ASIDE and Civil Case No. 02-
jurisdiction of the Labor Arbiters and the NLRC cases arising from employer-employee
relations, which clause was not expressly carried over, in printers ink, in Article 217 as 0063 REMANDED to it for trial on the merits of the main claim for damages.
it exists today. For it cannot be presumed that money claims of workers which do not
arise out of or in connection with their employer-employee relationship, and which SO ORDERED.
would therefore fall within the general jurisdiction of regular courts of justice, were
intended by the legislative authority to be taken away from the jurisdiction of the courts
and lodged with Labor Arbiters on an exclusive basis. The Court, therefore, believes
and so holds that the money claims of workers referred to in paragraph 3 of Article 217
embraces money claims which arise out of or in connection with the employer-
employee relationship, or some aspect or incident of such relationship. Put a little
differently, that money claims of workers which now fall within the original and
exclusive jurisdiction of Labor Arbiters are those money claims which have
some reasonable causal connection with the employer-employee relationship.

When, as here, the cause of action is based on a quasi-delict or tort, which has no

reasonable causal connection with any of the claims provided for in Article 217, jurisdiction over

the action is with the regular courts.[8]

As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to recover damages

based on the parties contract of employment as redress for respondent's breach thereof. Such cause of action

is within the realm of Civil Law, and jurisdiction over the controversy belongs to the regular courts. More so

must this be in the present case, what with the reality that the stipulation refers to the post-employment

relations of the parties.

For sure, a plain and cursory reading of the complaint will readily reveal that the subject matter is

one of claim for damages arising from a breach of contract, which is within the ambit of the regular courts

jurisdiction.[9]

It is basic that jurisdiction over the subject matter is determined upon the allegations made in the complaint,

irrespective of whether or not the plaintiff is entitled to recover upon the claim asserted therein, which is a

matter resolved only after and as a result of a trial. Neither can jurisdiction of a court be made to depend upon

the defenses made by a defendant in his answer or motion to dismiss. If such were the rule, the question of

jurisdiction would depend almost entirely upon the defendant.[10]

 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 79004-08 October 4, 1991
FRANKLIN BAGUIO AND 15 OTHERS, BONIFACIO IGOT AND 6 OTHERS, ROY MAGALLANES AND 4
OTHERS, CLAUDIO BONGO, EDUARDO ANDALES and 4 OTHERS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (3rd DIVISION), GENERAL MILLING CORPORATION
and/or FELICIANO LUPO, respondents.
Public Attorney's Office for petitioners.
Joseph M. Baduel & Steve R. Siclot for private respondents.
MELENCIO-HERRERA, J.:
The liability of an employer in job contracting, vis-a-vis his contractor's employees, is the sole issue brought to
the fore in this labor dispute.
This Petition for certiorari seeks to set aside the Resolution, dated 27 February 1987, of public respondent
National Labor Relations Commission (NLRC), Third Division, which reversed the Resolution of its First
Division, dated 27 December 1985, and absolved private respondent General Milling Corporation (GMC) from
any and all liability to petitioners.
Sometime in 1983, private respondent Feliciano LUPO, a building contractor, entered into a contract with
GMC, a domestic corporation engaged in flour and feeds manufacturing, for the construction of an annex
building inside the latter's plant in Cebu City. In connection with the aforesaid contract, LUPO hired herein
petitioners either as carpenters, masons or laborers.
Subsequently, LUPO terminated petitioners' services, on different dates. As a result, petitioners filed
Complaints against LUPO and GMC before the NLRC Regional Arbitration Branch No. VII, Cebu City, for
unpaid wages, COLA differentials, bonus and overtime pay.
In a Decision, dated 21 November 1984, the Executive Labor Arbiter, Branch VII, found LUPO and GMC
jointly and severally liable to petitioners, premised on Article 109 of the Labor Code, infra, and ordered them to
pay the aggregate amount of P95,382.92. Elevated on appeal on 14 December 1984, the NLRC (First
Division) denied the same for lack of merit in a Resolution, dated 27 December 1985.
Upon Motion for Reconsideration, filed on 27 February 1986, the case was reassigned to the Third Division. In
a Resolution of 27 February 1987, that Division absolved GMC from any liability. It opined that petitioners
were only hired by LUPO as workers in his construction contract with GMC and were never meant to be
employed by the latter.
Petitioners now assail that judgment in this Petition for Certiorari.
Petitioners contend that GMC is jointly and severally liable with LUPO for the latter's obligations to them. They
seek recovery from GMC based on Article 106 of the Labor Code, infra, which holds the employer jointly and
severally liable with his contractor for unpaid wages of employees of the latter.
In his "Manifestation in lieu of Comment," the Solicitor General recognizes the solidary liability of GMC and
LUPO but bases recovery on Article 108 of the Labor Code, infra, contending that inasmuch as GMC failed to
require them LUPO a bond to answer for the latter's obligations to his employees, as required by said
provision, GMC should, correspondingly, be deemed solidarily liable.
In their respective Comments, both GMC and the NLRC maintain that Article 106 finds no application in the
instant case because it is limited to situations where the work being performed by the contractor's employees
are directly related to the principal business of the employer. The NLRC further opines that Article 109 on
"Solidary Liability" finds no application either because GMC was neither petitioners' employer nor indirect
employer.
Upon the facts and circumstances, we uphold the solidary liability of GMC and LUPO for the latter's liabilities
in favor of employees whom he had earlier employed and dismissed.
Recovery, however, should not be based on Article 106 of the Labor Code. This provision treats specifically of
"labor-only" contracting, which is not the set-up between GMC and LUPO.
Article 106 provides:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract
with another person for the performance of the former's work, the employees of the
contractor and of the latter's subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to
employees directly employed by him.
xxx xxx xxx
There is "labor-only" contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such persons are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him
(Emphasis supplied).
In other words, a person is deemed to be engaged in "labor only" contracting where (1) the person supplying
workers to an employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others; and (2) the workers recruited and placed by such person are
performing activities which are directly related to the principal business of such employer (See Section 9, Rule
VIII, Book III of the Omnibus Rules Implementing the Labor Code; emphasis supplied).
Since the construction of an annex building inside the company plant has no relation whatsoever with the
employer's business of flour and feeds manufacturing, "labor-only" contracting does not exist. Article 106 is
thus inapplicable.
Instead, it is "job contracting," covered by Article 107, which is involved, reading:
Art. 107. Indirect Employer. The provisions of the immediately preceding Article
shall likewise apply to any person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor for the performance of
any work, task, job or project. (Emphasis supplied).
Specifically, there is "job contracting" where (1) the contractor carries on an independent business and
undertakes the contract work on his own account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and (2) the contractor has substantial capital or
investment in the form of tools, equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business. It may be that LUPO subsequently ran out of capital and was unable
to satisfy the award to petitioners. That was an after-the-fact development, however, and does not detract
from his status as an independent contractor.
Further, Article 108 of the Labor Code requires the posting of a bond to answer for wages that a contractor
fails to pay, thus:
Article 108. Posting of Bond. An employer or indirect employer may require the
contractor or subcontractor to furnish a bond equal to the cost of labor under contract,
on condition that the bond will answer for the wages due the employees showed the
contractor or subcontractor, as the case may be, fails to pay the same.

Based on the foregoing, GMC qualifies as an "indirect employer." It entered into a contract with an
independent contractor, LUPO, for the construction of an annex building, a work, task, job or project not
directly related to GMC's business of flour and feeds manufacturing. Being an "indirect employer," GMC is
solidarily liable with LUPO for any violation of the Labor Code pursuant to Article 109 thereof, reading:
Art. 109. Solidary Liability. The provisions of existing laws to the contrary
notwithstanding, every employer or indirect employer shall be held responsible with a
contractor or subcontractor for any violation of any provision of this Code. For
purposes of determining the extent of their civil liability under this Chapter, they shall
be considered as direct employers.
Having failed to require LUPO to post such a bond, GMC must answer for whatever liabilities LUPO may have
incurred to his employees. This is without prejudice to its seeking reimbursement from LUPO for whatever
amount it will have to pay petitioners.
WHEREFORE, the Petition for certiorari is GRANTED. The Resolution of respondent NLRC, Third Division,
dated 27 February 1987, is hereby SET ASIDE, and the Decision of the Labor Arbiter, dated 21 November
1984, is hereby REINSTATED.
SO ORDERED.

The provision of existing law referred to is Article 1728 of the Civil Code, which states, among others, that "the
contractor is liable for all the claims of laborers and others employed by him ..."

The foregoing interpretation finds a precedent in the case o Deferia v. NLRC (G.R. No. 78713, 27 February
1991) per Sarmiento, J., where Articles 107 and 109 were applied as the statutory basis for the joint and
several liability of the employer with his contractor, in addition to Article 106, since the situation in that case
was clearly one of "labor-only" contracting.

The NLRC submission that Article 107 is not applicable in the instant case for the reason that the coverage
thereof is limited to one "not an employer" whereas GMC is such an employer as defined in Article 97 (b) of
the Labor Code, 1 is not well-taken. Under the peculiar set-up herein, GMC is, in fact, "not an employer" (in
the sense of not being a direct employer) as understood in Article 106 of the Labor Code, but qualifies as an
"indirect employer" under Article 107 of said Code.

The distinction between Articles 106 and 107 was in the fact that Article 106 deals with "labor-only"
contracting. Here, by operation of law, the contractor is merely considered as an agent of the employer, who is
deemed "responsible to the workers to the same extent as if the latter were directly employed by him." On the
other hand, Article 107 deals with "job contracting." In the latter situation, while the contractor himself is the
direct employer of the employees, the employer is deemed, by operation of law, as an indirect employer.

In other words, the phrase "not an employer" found in Article 107 must be read in conjunction with Article 106.
A contrary interpretation would render the provisions of Article 107 meaningless considering that everytime an
employer engages a contractor, the latter is always acting in the interest of the former, whether directly or
indirectly, in relation to his employees.

It should be recalled that a finding that a contractor is a "labor-only" contractor is equivalent to declaring that
there is an employer-employee relationship between the owner of the project and the employees of the "labor-
only" contractor (Associated Anglo-American Tobacco Corp. v. Clave, G.R. No. 50915, 30 August 1990, 189
SCRA 127; Industrial Timber Corp. v. NLRC, G.R. No. 83616, 20 January 1989, 169 SCRA 341). This is
evidently because, as heretofore stated, the "labor-only" contractor is considered as a mere agent of an
employer. In contrast, in "job contracting," no employer-employee relationship exists between the owner and
the employees of his contractor. The owner of the project is not the direct employer but merely an indirect
employer, by operation of law, of his contractor's employees.

As an indirect employer, and for purposes of determining the extent of its civil liability, GMC is deemed a
"direct employee" of his contractor's employees pursuant to the last sentence of Article 109 of the Labor Code.
As a consequence, GMC can not escape its joint and solidary liability to petitioners.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 144672 July 10, 2003
SAN MIGUEL CORPORATION, petitioner,
vs.
MAERC INTEGRATED SERVICES, INC.; and EMERBERTO ORQUE, ROGELIO PRADO, JR., EDDIE
SELLE, ALEJANDRO ANNABIEZA, ANNIAS JUAMO-AS, CONSORCIO MANLOLOYO, ANANIAS
ALCONTIN, REY GESTOPA, EDGARDO NUEZ, JUNEL CABATINGAN, PAUL DUMAQUETA, FELIMON
ECHAVEZ, VITO SEALANA, DENECIA PALAO, ROBERTO LAPIZ, BALTAZAR LABIO, LEONARDO
BONGO, EL CID ICALINA, JOSE DIOCAMPO, ADELO CANTILLAS, ISAIAS BRANZUELA, RAMON
ROSALES, GAUDENCIO PESON, HECTOR CABAOG, EDGARDO DAGMAYAN, ROGELIO CRUZ,
ROLANDO ESPINA, BERNARDINO REGIDOR, ARNELIO SUMALINOG, GUMERSINDO ALCONTIN,
LORETO NUEZ, JOEBE BOY DAYON, CONRADO MESANQUE, MARCELO PESCADOR, MARCELINO
JABAGAT, VICENTE DEVILLERES, VICENTE ALIN, RODOLFO PAHUGOT, RUEL NAVARES, DANILO
ANABIEZA, ALEX JUEN, JUANITO GARCES, SILVINO LIMBAGA, AURELIO JURPACIO, JOVITO LOON,
VICTOR TENEDERO, SASING MORENO, WILFREDO HORTEZUELA, JOSELITO MELENDEZ, ALFREDO
GESTOPA, REGINO GABUYA, JORGE GAMUZARNO, LOLITO COCIDO, EFRAIM YUBAL, VENERANDO
ROAMAR, GERARDO BUTALID, HIPOLITO VIDAS, VENGELITO FRIAS, VICENTE CELACIO, CORLITO
PESTAAS, ERVIN HYROSA, ROMMEL GUERERO, RODRIGO ENERLAS, FRANCISCO CARBONILLA,
NICANOR CUIZON, PEDRO BRIONES, RODOLFO CABALHUG, TEOFILO RICARDO, DANILO R. DIZON,
ALBERTO EMBONG, ALFONSO ECHAVEZ, GONZALO RORACEA, MARCELO CARACINA, RAUL
BORRES, LINO TONGALAMOS, ARTEMIO BONGO, JR., ROY AVILA, MELCHOR FREGLO, RAUL
CABILLADA, EDDIE CATAB, MELENCIO DURANO, ALLAN RAGO, DOMINADOR CAPARIDA, JOVITO
CATAB, ALBERT LASPIAS, ALEX ANABIEZA, NESTOR REYNANTE, EULOGIO GESTOPA, MARIO
BOLO, EDERLITO A. BALOCANO, JOEL PEPITO, REYNALDO LUDIA, MANUEL CINCO, ALLAN AGUSTIN,
PABLITO POLEGRATES, CLYDE PRADO, DINDO MISA, ROGER SASING, RAMON ARCALLANA,
GABRIEL SALAS, EDWIN SASAN, DIOSDADO BARRIGA, MOISES SASAN, SINFORIANO CANTAGO,
LEONARDO MARTURILLAS, MARIO RANIS, ALEXANDRO RANIDO, JEROME PRADO, RAUL OYAO,
VICTOR CELACIO, GERALDO ROQUE, ZOSIMO CARARATON, VIRGILIO ZANORIA, JOSE ZANORIA,
ALLAN ZANORIA, VICTORINO SENO, TEODULO JUMAO-AS, ALEXANDER HERA, ANTHONY ARANETA,
ALDRIN SUSON, VICTOR VERANO, RUEL SUFRERENCIA, ALFRED NAPARATE, WENCESLAO
BACLOHON, EDUARDO LANGITA, FELIX ORDENEZA, ARSENIO LOGARTA, EDUARDO DELA VEGA,
JOVENTINO CANOOG, ROGELIO ABAPO, RICARDO RAMAS, JOSE BANDIALAN, ANTONIO BASALAN,
LYNDON BASALAN, WILFREDO ALIVIANO, BIENVENIDO ROSARIO, JESUS CAPANGPANGAN, RENATO
MENDOZA, ALEJANDRO CATANDEJAN, RUBEN TALABA, FILEMON ECHAVEZ, MARCELINO
CARACENA, IGNACIO MISA, FELICIANO AGBAY, VICTOR MAGLASANG, ARTURO HEYROSA, ALIPIO
TIROL, ROSENDO MONDARES, ANICETO LUDIA, REYNALDO LAVANDERO, REUYAN HERCULANO,
TEODULO NIQUE, EMERBERTO ORQUE, ZOSIMO BAOBAO, MEDARDO SINGSON, ANTONIO
PATALINGHUG, ERNESTO SINGSON, ROBERTO TORRES, CESAR ESCARIO, LEODEGARIO
DOLLECIN, ALBERTO ANOBA, RODRIGO BISNAR, ZOSIMO BINGAS, ROSALIO DURAN, SR., ROSALIO
DURAN, JR., ROMEO DURAN, ANTONIO ABELLA, MARIANO REPOLLO, POLEGARPO DEGAMO, MARIO
CEREZA, ANTONIO LAOROMILLA, PROCTUSO MAGALLANES, ELADIO TORRES, WARLITO DEMANA,
HENRY GEDARO, DOISEDERIO GEMPERAO, ANICETO GEMPERAO, JERRY CAPAROSO, SERLITO
NOYNAY, LUCIANO RECOPELACION, JUANITO GARCES, FELICIANO TORRES, RANILO VILLAREAL,
FERMIN ALIVIANO, JUNJIE LAVISTE, TOMACITO DE CASTRO, JOSELITO CAPILINA, SAMUEL
CASQUEJO, LEONARDO NATAD, BENJAMIN SAYSON, PEDRO INOC, EDWARD FLORES, EDWIN
SASAN, JOSE REY INOT, EDGAR CORTES, ROMEO LOMBOG, NICOLAS RIBO, JAIME RUBIN,
ORLANDO REGIS, RICKY ALCONZA, RUDY TAGALOG, VICTORINO TAGALOG, EDWARD COLINA,
RONIE GONZAGA, PAUL CABILLADA, WILFREDO MAGALONA, JOEL PEPITO, PROSPERO
MAGLASANG, ALLAN AGUSTIN, FAUSTO BARGAYO, NOMER SANCHEZ, JOLITO ALIN, BIRNING
REGIDOR, GARRY DIGNOS, EDWIN DIGNOS, DARIO DIGNOS, ROGELIO DIGNOS, JIMMY CABIGAS,
FERNANDO ANAJAO, ALEX FLORES, FERNANDO REMEDIO, TOTO MOSQUIDA, ALBERTO YAGONIA,
VICTOR BARIQUIT, IGNACIO MISA, ELISEO VILLARENO, MANUEL LAVANDERO, VIRCEDE, MARIO
RANIS, JAIME RESPONSO, MARIANITO AGUIRRE, MARCIAL HERUELA, GODOFREDO TUACAO,
PERFECTO REGIS, ROEL DEMANA, ELMER CASTILLO, WINEFREDO CALAMOHOY, RUDY LUCERNAS,
ANTONIO CAETE, EFRAIM YUBAL, JESUS CAPANGPANGAN, DAMIAN CAPANGPANGAN, TEOFILO
CAPANGPANGAN, NILO CAPANGPANGAN, CORORENO CAPANGPANGAN, EMILIO MONDARES,
PONCIANO AGANA, VICENTE DEVILLERES, MARIO ALIPAN, ROMANITO ALIPAN, ALDEON ROBINSON,
FORTUNATO SOCO, CELSO COMPUESTO, WILLIAM ITORALDE, ANTONIO PESCADOR, JEREMIAS
RONDERO, ESTROPIO PUNAY, LEOVIJILDO PUNAY, ROMEO QUILONGQUILONG, WILFREDO
GESTOPA, ELISEO SANTOS, HENRY ORIO, JOSE YAP, NICANOR MANAYAGA, TEODORO SALINAS,
ANICETO MONTERO, RAFAELITO VERZOSA, ALEJANDRO RANIDO, HENRY TALABA, ROMULO
TALABA, DIOSDADO BESABELA, SYLVESTRE TORING, EDILBERTO PADILLA, ALLAN HEROSA,
ERNESTO SUMALINOG, ARISTON VELASCO, JR., FERNANDO LOPEZ, ALFONSO ECHAVEZ, NICANOR
CUIZON, DOMINADOR CAPARIDA, ZOSIMO CORORATION, ARTEMIO LOVERANES, DIONISIO
YAGONIA, VICTOR CELOCIA, HIPOLITO VIDAS, TEODORO ARCILLAS, MARCELINO HABAGAT,
GAUDIOSO LABASAN, LEOPOLDO REGIS, AQUILLO DAMOLE, WILLY ROBLE and NIEL
ZANORIA, respondents.
BELLOSILLO, J.:
TWO HUNDRED NINETY-ONE (291) workers filed their complaints (nine [9] complaints in all) against San
Miguel Corporation (petitioner herein) and Maerc Integrated Services, Inc. (respondent herein), for illegal
dismissal, underpayment of wages, non-payment of service incentive leave pays and other labor standards
benefits, and for separation pays from 25 June to 24 October 1991. The complainants alleged that they were
hired by San Miguel Corporation (SMC) through its agent or intermediary Maerc Integrated Services, Inc.
(MAERC) to work in two (2) designated workplaces in Mandaue City: one, inside the SMC premises at the
Mandaue Container Services, and another, in the Philphos Warehouse owned by MAERC. They washed and
segregated various kinds of empty bottles used by SMC to sell and distribute its beer beverages to the
consuming public. They were paid on a per piece or pakiao basis except for a few who worked as checkers
and were paid on daily wage basis.
Complainants alleged that long before SMC contracted the services of MAERC a majority of them had already
been working for SMC under the guise of being employees of another contractor, Jopard Services, until the
services of the latter were terminated on 31 January 1988.
SMC denied liability for the claims and averred that the complainants were not its employees but of MAERC,
an independent contractor whose primary corporate purpose was to engage in the business of cleaning,
receiving, sorting, classifying, etc., glass and metal containers.
It appears that SMC entered into a Contract of Services with MAERC engaging its services on a non-exclusive
basis for one (1) year beginning 1 February 1988. The contract was renewed for two (2) more years in March
1989. It also provided for its automatic renewal on a month-to-month basis after the two (2)-year period and
required that a written notice to the other party be given thirty (30) days prior to the intended date of
termination, should a party decide to discontinue with the contract.
In a letter dated 15 May 1991, SMC informed MAERC of the termination of their service contract by the end of
June 1991. SMC cited its plans to phase out its segregation activities starting 1 June 1991 due to the
installation of labor and cost-saving devices.
When the service contract was terminated, complainants claimed that SMC stopped them from performing
their jobs; that this was tantamount to their being illegally dismissed by SMC who was their real employer as
their activities were directly related, necessary and desirable to the main business of SMC; and, that MAERC
was merely made a tool or a shield by SMC to avoid its liability under the Labor Code.
MAERC for its part admitted that it recruited the complainants and placed them in the bottle segregation
project of SMC but maintained that it was only conveniently used by SMC as an intermediary in operating the
project or work directly related to the primary business concern of the latter with the end in view of avoiding its
obligations and responsibilities towards the complaining workers.
The nine (9) cases1 were consolidated. On 31 January 1995 the Labor Arbiter rendered a decision holding that
MAERC was an independent contractor.2 He dismissed the complaints for illegal dismissal but ordered
MAERC to pay complainants' separation benefits in the total amount of P2,334,150.00. MAERC and SMC
were also ordered to jointly and severally pay complainants their wage differentials in the amount of
P845,117.00 and to pay attorney's fees in the amount of P317,926.70.
The complainants appealed the Labor Arbiter's finding that MAERC was an independent contractor and solely
liable to pay the amount representing the separation benefits to the exclusion of SMC, as well as the Labor
Arbiter's failure to grant the Temporary Living Allowance of the complainants. SMC appealed the award of
attorney's fees.
The National Labor Relations Commission (NLRC) ruled in its 7 January 1997 decision that MAERC was a
labor-only contractor and that complainants were employees of SMC.3 The NLRC also held that whether
MAERC was a job contractor or a labor-only contractor, SMC was still solidarily liable with MAERC for the
latter's unpaid obligations, citing Art. 1094 of the Labor Code. Thus, the NLRC modified the judgment of the
Labor Arbiter and held SMC jointly and severally liable with MAERC for complainants' separation benefits. In
addition, both respondents were ordered to pay jointly and severally an indemnity fee of P2,000.00 to each
complainant.
SMC moved for a reconsideration which resulted in the reduction of the award of attorney's fees from
P317,926.70 to P84,511.70. The rest of the assailed decision was unchanged.5
On 12 March 1998, SMC filed a petition for certiorari with prayer for the issuance of a temporary restraining
order and/or injunction with this Court which then referred the petition to the Court of Appeals.
On 28 April 2000 the Court of Appeals denied the petition and affirmed the decision of the NLRC.6 The
appellate court also denied SMC's motion for reconsideration in a resolution7 dated 26 July 2000. Hence,
petitioner seeks a review of the Court of Appeals' judgment before this Court.
Petitioner poses the same issues brought up in the appeals court and the pivotal question is whether the
complainants are employees of petitioner SMC or of respondent MAERC.
Relying heavily on the factual findings of the Labor Arbiter, petitioner maintained that MAERC was a legitimate
job contractor. It directed this Court's attention to the undisputed evidence it claimed to establish this
assertion: MAERC is a duly organized stock corporation whose primary purpose is to engage in the business
of cleaning, receiving, sorting, classifying, grouping, sanitizing, packing, delivering, warehousing, trucking and
shipping any glass and/or metal containers and that it had listed in its general information sheet two hundred
seventy-eight (278) workers, twenty-two (22) supervisors, seven (7) managers/officers and a board of
directors; it also voluntarily entered into a service contract on a non-exclusive basis with petitioner from which
it earned a gross income of P42,110,568.24 from 17 October 1988 to 27 November 1991; the service contract
specified that MAERC had the selection, engagement and discharge of its personnel, employees or agents or
otherwise in the direction and control thereof; MAERC admitted that it had machinery, equipment and fixed
assets used in its business valued at P4,608,080.00; and, it failed to appeal the Labor Arbiter's decision which
declared it to be an independent contractor and ordered it to solely pay the separation benefits of the
complaining workers.
We find no basis to overturn the Court of Appeals and the NLRC. Well-established is the principle that findings
of fact of quasi-judicial bodies, like the NLRC, are accorded with respect, even finality, if supported by
substantial evidence.8 Particularly when passed upon and upheld by the Court of Appeals, they are binding
and conclusive upon the Supreme Court and will not normally be disturbed.9
This Court has invariably held that in ascertaining an employer-employee relationship, the following factors are
considered: (a) the selection and engagement of employee; (b) the payment of wages; (c) the power of
dismissal; and, (d) the power to control an employee's conduct, the last being the most
important.10 Application of the aforesaid criteria clearly indicates an employer-employee relationship between
petitioner and the complainants.
Evidence discloses that petitioner played a large and indispensable part in the hiring of MAERC's workers. It
also appears that majority of the complainants had already been working for SMC long before the signing of
the service contract between SMC and MAERC in 1988.
The incorporators of MAERC admitted having supplied and recruited workers for SMC even before MAERC
was created.11 The NLRC also found that when MAERC was organized into a corporation in February 1988,
the complainants who were then already working for SMC were made to go through the motion of applying for
work with Ms. Olga Ouano, President and General Manager of MAERC, upon the instruction of SMC through
its supervisors to make it appear that complainants were hired by MAERC. This was testified to by two (2) of
the workers who were segregator and forklift operator assigned to the Beer Marketing Division at the SMC
compound and who had been working with SMC under a purported contractor Jopard Services since March
1979 and March 1981, respectively. Both witnesses also testified that together with other complainants they
continued working for SMC without break from Jopard Services to MAERC.
As for the payment of workers' wages, it is conceded that MAERC was paid in lump sum but records suggest
that the remuneration was not computed merely according to the result or the volume of work performed. The
memoranda of the labor rates bearing the signature of a Vice-President and General Manager for the Vismin
Beer Operations12 as well as a director of SMC13 appended to the contract of service reveal that SMC
assumed the responsibility of paying for the mandated overtime, holiday and rest day pays of the MAERC
workers.14SMC also paid the employer's share of the SSS and Medicare contributions, the 13th month pay,
incentive leave pay and maternity benefits.15 In the lump sum received, MAERC earned a marginal amount
representing the contractor's share. These lend credence to the complaining workers' assertion that while
MAERC paid the wages of the complainants, it merely acted as an agent of SMC.
Petitioner insists that the most significant determinant of an employer-employee relationship, i.e., the right to
control, is absent. The contract of services between MAERC and SMC provided that MAERC was an
independent contractor and that the workers hired by it "shall not, in any manner and under any
circumstances, be considered employees of the Company, and that the Company has no control or
supervision whatsoever over the conduct of the Contractor or any of its workers in respect to how they
accomplish their work or perform the Contractor's obligations under the Contract." 16
In deciding the question of control, the language of the contract is not determinative of the parties' relationship;
rather, it is the totality of the facts and surrounding circumstances of each case.17
Despite SMCs disclaimer, there are indicia that it actively supervised the complainants. SMC maintained a
constant presence in the workplace through its own checkers. Its asseveration that the checkers were there
only to check the end result was belied by the testimony of Carlito R. Singson, head of the Mandaue Container
Service of SMC, that the checkers were also tasked to report on the identity of the workers whose
performance or quality of work was not according to the rules and standards set by SMC. According to
Singson, "it (was) necessary to identify the names of those concerned so that the management [referring to
MAERC] could call the attention to make these people improve the quality of work."18
Viewed alongside the findings of the Labor Arbiter that the MAERC organizational set-up in the bottle
segregation project was such that the segregators/cleaners were supervised by checkers and each checker
was also under a supervisor who was in turn under a field supervisor, the responsibility of watching over the
MAERC workers by MAERC personnel became superfluous with the presence of additional checkers from
SMC.
Reinforcing the belief that the SMC exerted control over the work performed by the segregators or cleaners,
albeit through the instrumentality of MAERC, were letters by SMC to the MAERC management. These were
letters19 written by a certain Mr. W. Padin20 addressed to the President and General Manager of MAERC as
well as to its head of operations,21 and a third letter22 from Carlito R. Singson also addressed to the President
and General Manager of MAERC. More than just a mere written report of the number of bottles improperly
cleaned and/or segregated, the letters named three (3) workers who were responsible for the rejection of
several bottles, specified the infraction committed in the segregation and cleaning, then recommended the
penalty to be imposed. Evidently, these workers were reported by the SMC checkers to the SMC inspector.
While the Labor Arbiter dismissed these letters as merely indicative of the concern in the end-result of the job
contracted by MAERC, we find more credible the contention of the complainants that these were
manifestations of the right of petitioner to recommend disciplinary measures over MAERC employees.
Although calling the attention of its contractors as to the quality of their services may reasonably be done by
SMC, there appears to be no need to instruct MAERC as to what disciplinary measures should be imposed on
the specific workers who were responsible for rejections of bottles. This conduct by SMC representatives went
beyond a mere reminder with respect to the improperly cleaned/segregated bottles or a genuine concern in
the outcome of the job contracted by MAERC.
Control of the premises in which the contractor's work was performed was also viewed as another phase of
control over the work, and this strongly tended to disprove the independence of the contractor. 23 In the case
at bar, the bulk of the MAERC segregation activities was accomplished at the MAERC-owned PHILPHOS
warehouse but the building along with the machinery and equipment in the facility was actually being rented
by SMC. This is evident from the memoranda of labor rates which included rates for the use of forklifts and the
warehouse at the PHILPHOS area, hence, the NLRC's conclusion that the payment for the rent was cleverly
disguised since MAERC was not in the business of renting warehouses and forklifts.24
Other instances attesting to SMC's supervision of the workers are found in the minutes of the meeting held by
the SMC officers on 5 December 1988. Among those matters discussed were the calling of SMC contractors
to have workers assigned to segregation to undergo and pass eye examination to be done by SMC EENT
company doctor and a review of compensation/incentive system for segregators to improve the segregation
activities.25
But the most telling evidence is a letter by Mr. Antonio Ouano, Vice-President of MAERC dated 27 May 1991
addressed to Francisco Eizmendi, SMC President and Chief Executive Officer, asking the latter to reconsider
the phasing out of SMC's segregation activities in Mandaue City. The letter was not denied but in fact used by
SMC to advance its own arguments.26
Briefly, the letter exposed the actual state of affairs under which MAERC was formed and engaged to handle
the segregation project of SMC. It provided an account of how in 1987 Eizmendi approached the would-be
incorporators of MAERC and offered them the business of servicing the SMC bottle-washing and segregation
department in order to avert an impending labor strike. After initial reservations, MAERC incorporators
accepted the offer and before long trial segregation was conducted by SMC at the PHILPHOS warehouse.27
The letter also set out the circumstances under which MAERC entered into the Contract of Services in 1988
with the assurances of the SMC President and CEO that the employment of MAERC's services would be long
term to enable it to recover its investments. It was with this understanding that MAERC undertook borrowings
from banking institutions and from affiliate corporations so that it could comply with the demands of SMC to
invest in machinery and facilities.
In sum, the letter attested to an arrangement entered into by the two (2) parties which was not reflected in the
Contract of Services. A peculiar relationship mutually beneficial for a time but nonetheless ended in dispute
when SMC decided to prematurely end the contract leaving MAERC to shoulder all the obligations to the
workers.
Petitioner also ascribes as error the failure of the Court of Appeals to apply the ruling in Neri v. NLRC.28 In that
case, it was held that the law did not require one to possess both substantial capital and investment in the
form of tools, equipment, machinery, work premises, among others, to be considered a job contractor. The
second condition to establish permissible job contracting29 was sufficiently met if one possessed either
attribute.
Accordingly, petitioner alleged that the appellate court and the NLRC erred when they declared MAERC a
labor-only contractor despite the finding that MAERC had investments amounting to P4,608,080.00 consisting
of buildings, machinery and equipment.
30
However, in Vinoya v. NLRC, we clarified that it was not enough to show substantial capitalization or
investment in the form of tools, equipment, machinery and work premises, etc., to be considered an
independent contractor. In fact, jurisprudential holdings were to the effect that in determining the existence of
an independent contractor relationship, several factors may be considered, such as, but not necessarily
confined to, whether the contractor was carrying on an independent business; the nature and extent of the
work; the skill required; the term and duration of the relationship; the right to assign the performance of
specified pieces of work; the control and supervision of the workers; the power of the employer with respect to
the hiring, firing and payment of the workers of the contractor; the control of the premises; the duty to supply
premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.31
In Neri, the Court considered not only the fact that respondent Building Care Corporation (BBC) had
substantial capitalization but noted that BCC carried on an independent business and performed its contract
according to its own manner and method, free from the control and supervision of its principal in all matters
except as to the results thereof.32 The Court likewise mentioned that the employees of BCC were engaged to
perform specific special services for their principal.33 The status of BCC had also been passed upon by the
Court in a previous case where it was found to be a qualified job contractor because it was "a big firm which
services among others, a university, an international bank, a big local bank, a hospital center, government
agencies, etc." Furthermore, there were only two (2) complainants in that case who were not only selected
and hired by the contractor before being assigned to work in the Cagayan de Oro branch of FEBTC but the
Court also found that the contractor maintained effective supervision and control over them.
In comparison, MAERC, as earlier discussed, displayed the characteristics of a labor-only contractor.
Moreover, while MAERC's investments in the form of buildings, tools and equipment amounted to more than
P4 Million, we cannot disregard the fact that it was the SMC which required MAERC to undertake such
investments under the understanding that the business relationship between petitioner and MAERC would be
on a long term basis. Nor do we believe MAERC to have an independent business. Not only was it set up to
specifically meet the pressing needs of SMC which was then having labor problems in its segregation division,
none of its workers was also ever assigned to any other establishment, thus convincing us that it was created
solely to service the needs of SMC. Naturally, with the severance of relationship between MAERC and SMC
followed MAERC's cessation of operations, the loss of jobs for the whole MAERC workforce and the resulting
actions instituted by the workers.
Petitioner also alleged that the Court of Appeals erred in ruling that "whether MAERC is an independent
contractor or a labor-only contractor, SMC is liable with MAERC for the latter's unpaid obligations to MAERC's
workers."
On this point, we agree with petitioner as distinctions must be made. In legitimate job contracting, the law
creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid
their wages.34 The principal employer becomes jointly and severally liable with the job contractor only for the
payment of the employees' wages whenever the contractor fails to pay the same. Other than that, the principal
employer is not responsible for any claim made by the employees.
On the other hand, in labor-only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an
agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if
such employees had been directly employed by the principal employer. The principal employer therefore
becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees.
This distinction between job contractor and labor-only contractor, however, will not discharge SMC from
paying the separation benefits of the workers, inasmuch as MAERC was shown to be a labor-only contractor;
in which case, petitioner's liability is that of a direct employer and thus solidarily liable with MAERC.
SMC also failed to comply with the requirement of written notice to both the employees concerned and the
Department of Labor and Employment (DOLE) which must be given at least one (1) month before the
intended date of retrenchment.35 The fines imposed for violations of the notice requirement have varied.36 The
measure of this award depends on the facts of each case and the gravity of the omission committed by the
employer.37 For its failure, petitioner was justly ordered to indemnify each displaced worker P2,000.00.
The NLRC and the Court of Appeals affirmed the Labor Arbiter's award of separation pay to the complainants
in the total amount of P2,334,150.00 and of wage differentials in the total amount of P845,117.00. These
amounts are the aggregate of the awards due the two hundred ninety-one (291) complainants as computed by
the Labor Arbiter. The following is a summary of the computation of the benefits due the complainants which is
part of the Decision of the Labor Arbiter.
SUMMARY
NAME SALARY SEPARATION PAY TOT
DIFFERENTIAL
Case No. 06-1165-9
1 Rogelio Prado, Jr. P3,056.00 P8,190.00
2 Eddie Selle 3,056.00 8,190.00
3 Alejandro Annabieza 3,056.00 8,190.00
4 Ananias Jumao-as 3,056.00 8,190.00
 5 Consorcio Manloloyo 3,056.00 8,190.00 11,246.00 39 Danilo Anabieza 3,056.00 8,190.00

6 Anananias Alcotin 3,056.00 8,190.00 11,246.00 40 Alex Juen 3,056.00 8,190.00

7 Rey Gestopa 2,865.00 8,190.00 11,055.00 41 Juanito Garces 3,056.00 8,190.00

8 Edgardo Nuez 2,865.00 8,190.00 11,055.00 42 Silvino Limbaga 3,056.00 8,190.00

9 Junel Cabatingan 2,865.00 8,190.00 11,055.00 43 Aurelio Jurpacio 3,056.00 8,190.00

10 Paul Dumaqueta 2,865.00 8,190.00 11,055.00 44 Jovito Loon 3,056.00 8,190.00

11 Felimon Echavez 2,843.00 8,190.00 10,673.00 45 Victor Tenedero 3,056.00 8,190.00

12 Vito Sealana 2,843.00 8,190.00 10,673.00 46 Sasing Moreno 3,056.00 8,190.00

13 Denecia Palao 2,843.00 8,190.00 10,673.00 47 Wilfredo Hortezuela 3,056.00 8,190.00

14 Roberto Lapiz 3,056.00 8,190.00 11,246.00 48 Joselito Melendez 3,056.00 8,190.00

15 Baltazar Labio 3,056.00 8,190.00 11,246.00 49 Alfredo Gestopa 3,056.00 8,190.00

16 Leonardo Bongo 3,056.00 8,190.00 11,246.00 50 Regino Gabuya 3,056.00 8,190.00

17 El Cid Icalina 3,056.00 8,190.00 11,246.00 51 Jorge Gamuzarno 3,056.00 8,190.00

18 Jose Diocampo 3,056.00 8,190.00 11,246.00 52 Lolito Cocido 3,056.00 8,190.00

19 Adelo Cantillas 3,056.00 8,190.00 11,246.00 53 Efraim Yubal 3,056.00 8,190.00

20 Isaias Branzuela 3,056.00 8,190.00 11,246.00 54 Venerando Roamar 3,056.00 8,190.00

21 Ramon Rosales 3,056.00 8,190.00 11,246.00 55 Gerardo Butalid 3,056.00 8,190.00

22 Gaudencio Peson 3,056.00 8,190.00 11,246.00 56 Hipolito Vidas 3,056.00 8,190.00

23 Hector Cabaog 3,056.00 8,190.00 11,246.00 57 Vengelito Frias 3,056.00 8,190.00

24 Edgardo Dagmayan 3,056.00 8,190.00 11,246.00 58 Vicente Celacio 3,056.00 8,190.00

25 Rogelio Cruz 3,056.00 8,190.00 11,246.00 59 Corlito Pestaas 3,056.00 8,190.00

26 Rolando Espina 3,056.00 8,190.00 11,246.00 60 Ervin Hyrosa 3,056.00 8,190.00

27 Bernardino Regidor 3,056.00 8,190.00 11,246.00 61 Rommel Guerero 3,056.00 8,190.00

28 Arnelio Sumalinog 3,056.00 8,190.00 11,246.00 62 Rodrigo Enerlas 3,056.00 8,190.00

29 Gumersindo Alcontin 3,056.00 8,190.00 11,246.00 63 Francisco Carbonilla 3,056.00 8,190.00

30 Loreto Nuez 3,056.00 8,190.00 11,246.00 64 Nicanor Cuizon 3,056.00 8,190.00

31 Joebe Boy Dayon 3,056.00 8,190.00 11,246.00 65 Pedro Briones 3,056.00 8,190.00

32 Conrado Mesanque 3,056.00 8,190.00 11,246.00 66 Rodolfo Cabalhug 3,056.00 8,190.00

33 Marcelo Pescador 3,056.00 8,190.00 11,246.00 67 Teofilo Ricardo 3,056.00 8,190.00

34 Marcelino Jabagat 3,056.00 8,190.00 11,246.00 68 Danilo R. Dizon 3,056.00 8,190.00

35 Vicente Devilleres 3,056.00 8,190.00 11,246.00 69 Alberto Embong 3,056.00 8,190.00

36 Vicente Alin 3,056.00 8,190.00 11,246.00 70 Alfonso Echavez 3,056.00 8,190.00

37 Rodolfo Pahugot 3,056.00 8,190.00 11,246.00 71 Gonzalo Roracea 3,056.00 8,190.00

38 Ruel Navares 3,056.00 8,190.00 11,246.00 72 Marcelo Caracina 3,056.00 8,190.00

 73 Raul Borres 3,056.00 8,190.00 11,246.00 107 Jerome Prado 3,056.00 8,190.00

74 Lino Tongalamos 3,056.00 8,190.00 11,246.00 108 Raul Oyao 3,056.00 8,190.00

75 Artemio Bongo, Jr. 3,056.00 8,190.00 11,246.00 109 Victor Celacio 3,056.00 5,460.00

76 Roy Avila 3,056.00 8,190.00 11,246.00 TOTAL P330,621.00 P884,520.00 P

77 Melchor Freglo 3,056.00 8,190.00 11,246.00

Case No. 07-1177-91
110 Gerardo Roque P3,056.00 P5,460.00
78 Raul Cabillada 3,056.00 8,190.00 11,246.00
Case No. 07-1176-91
79 Eddie Catab 3,056.00 8,190.00 11,246.00
111 Zosimo Cararaton P3,056.00 P8,192.00
80 Melencio Durano 3,056.00 8,190.00 11,246.00
Case No. 07-1219-91
81 Allan Rago 3,056.00 8,190.00 11,246.00 112 Virgilio Zanoria P3,056.00 P5,460.00

82 Dominador Caparida 3,056.00 8,190.00 11,246.00 113 Jose Zanoria 3,056.00 5,460.00

83 Jovito Catab 3,056.00 8,190.00 11,246.00 114 Allan Zanoria 3,056.00 5,460.00

84 Albert Laspias 3,056.00 8,190.00 11,246.00 115 Victorino Seno 3,056.00 5,460.00

85 Alex Anabieza 3,056.00 8,190.00 11,246.00 116 Teodulo Jumao-as 3,056.00 5,460.00

86 Nestor Reynante 3,056.00 8,190.00 11,246.00 117 Alexander Hera 3,056.00 5,460.00

87 Eulogio Estopa 3,056.00 8,190.00 11,246.00 118 Anthony Araneta 3,056.00 5,460.00

88 Mario Bolo 3,056.00 8,190.00 11,246.00 119 Aldrin Suson 3,056.00 5,460.00

89 Ederlito A. Balocano 3,056.00 8,190.00 11,246.00 120 Victor Verano 3,056.00 5,460.00

90 Joel Pepito 3,056.00 8,190.00 11,246.00 121 Ruel Sufrerencia 3,056.00 5,460.00

91 Reynaldo Ludia 3,056.00 5,460.00 8,516.00 122 Alfred Naparate 3,056.00 5,460.00

92 Manuel Cinco 3,056.00 5,460.00 8,516.00 123 Wenceslao Baclohon 3,056.00 8,190.00

93 Allan Agustin 3,056.00 8,190.00 11,246.00 124 Eduardo Langita 3,056.00 8,190.00

94 Pablito Polegrates 3,056.00 8,190.00 11,246.00 TOTAL P39,728.00 P76,440.00

95 Clyde Prado 3,056.00 8,190.00 11,246.00

Case No. 07-1283-91

96 Dindo Misa 3,056.00 8,190.00 11,246.00 125 Feliz Ordeneza P2,816.00 P8,190.00

97 Roger Sasing 3,056.00 8,190.00 11,246.00 126 Arsenio Logarta 3,056.00 8,190.00

98 Ramon Arcallana 3,056.00 8,190.00 11,246.00 127 Eduardo dela Vega 3,056.00 8,190.00

99 Gabriel Salas 3,056.00 8,190.00 11,246.00 128 Joventino Canoog 3,056.00 8,190.00

100 Edwin Sasan 3,056.00 8,190.00 11,246.00 TOTAL P11,984.00 P32,760.00

101 Diosdado Barriga 3,056.00 8,190.00 Case No. 10-1584-91

11,246.00
129 Regelio Abapo P3,056.00 P8,190.00
102 Moises Sasan 3,056.00 8,190.00 11,246.00
Case No. 08-1321-91
103 Sinforiano Cantago 3,056.00 8,190.00 11,246.00 130 Ricardo Ramas P3,056.00 P8,190.00
104 Leonardo Marturillas 3,056.00 8,190.00 11,246.00
Case No. 09-1507-91
105 Mario Ranis 3,056.00 8,190.00 11,246.00 131 Jose Bandialan P2,816.00 P8,190.00

106 Alejandro Ranido 3,056.00 8,190.00 11,246.00 132 Antonio Basalan 2,816.00 8,190.00
 133 Lyndon Basalan 2,816.00 8,190.00 11,006.00 165 Romeo Duran 2,816.00 8,190.00

134 Wilfredo Aliviano 2,816.00 8,190.00 11,006.00 166 Antonio Abella 2,816.00 8,190.00

135 Bienvenido Rosario 2,816.00 8,190.00 11,006.00 167 Mariano Repollo 2,816.00 8,190.00

136 Jesus Capangpangan 2,816.00 8,190.00 11,006.00 168 Polegarpo Degamo 2,816.00 8,190.00

137 Renato Mendoza 2,816.00 8,190.00 11,006.00 169 Mario Cereza 2,816.00 8,190.00

138 Alejandro Catandejan 2,816.00 8,190.00 11,006.00 170 Antonio Laoronilla 2,816.00 8,190.00

139 Ruben Talaba 2,816.00 8,190.00 11,006.00 171 Proctuso Magallanes 2,816.00 8,190.00

140 Filemon Echavez 2,816.00 8,190.00 11,006.00 172 Eladio Torres 2,816.00 8,190.00

141 Marcelino Caracena 2,816.00 8,190.00 11,006.00 173 Warlito Demana 2,816.00 8,190.00

142 Ignacio Misa 2,816.00 8,190.00 11,006.00 174 Henry Gedaro 2,816.00 8,190.00

143 Feliciano Agbay 2,816.00 8,190.00 11,006.00 175 Doisederio Gemperao 2,816.00 8,190.00

144 Victor Maglasang 2,816.00 8,190.00 11,006.00 176 Aniceto Gemperao 2,816.00 8,190.00

145 Arturo Heyrosa 2,816.00 8,190.00 11,006.00 177 Jerry Caparoso 2,816.00 8,190.00

146 Alipio Tirol 2,816.00 8,190.00 11,006.00 178 Serlito Noynay 2,816.00 8,190.00

147 Rosendo Mondares 2,816.00 8,190.00 11,006.00 179 Luciano Recopelacion 2,816.00 8,190.00

148 Aniceto Ludia 2,816.00 8,190.00 11,006.00 180 Juanito Garces 2,816.00 8,190.00

149 Reynaldo Lavandero 2,816.00 8,190.00 11,006.00 181 Feliciano Torres 2,816.00 8,190.00

150 Reuyan Herculano 2,816.00 8,190.00 11,006.00 182 Ranilo Villareal 2,816.00 8,190.00

151 Teodula Nique 2,816.00 8,190.00 11,006.00 183 Fermin Aliviano 2,816.00 8,190.00

TOTAL P59,136.00 P171,990.00 P231,126.00 184 Junjie Laviste 2,816.00 8,190.00

Case No. 06-1145-91 185 Tomacito de Castro 2,816.00 8,190.00

152 Emerberto Orque P2,816.00 P8,190.00 P11,006.00
186 Joselito Capilina 2,816.00 8,190.00
153 Zosimo Baobao 2,816.00 8,190.00 11,006.00
187 Samuel Casquejo 2,816.00 8,190.00
154 Medardo Singson 2,816.00 8,190.00 11,006.00
188 Leonardo Natad 2,816.00 8,190.00
155 Antonio Patalinghug 2,816.00 8,190.00 11,006.00
189 Benjamin Sayson 2,816.00 8,190.00
156 Ernesto Singson 2,816.00 8,190.00 11,006.00
190 Pedro Inoc 2,816.00 8,190.00
157 Roberto Torres 2,816.00 8,190.00 11,006.00
191 Edward Flores 2,816.00 8,190.00
158 Cesar Escario 2,816.00 8,190.00 11,006.00
192 Edwin Sasan 2,816.00 8,190.00
159 Leodegario Dollecin 2,816.00 8,190.00 11,006.00
193 Jose Rey Inot 2,816.00 8,190.00
160 Alberto Anoba 2,816.00 8,190.00 11,006.00
194 Edgar Cortes 2,816.00 8,190.00
161 Rodrigo Bisnar 2,816.00 8,190.00 11,006.00
195 Romeo Lombog 2,816.00 8,190.00
162 Zosimo Bingas 2,816.00 8,190.00 11,006.00
196 Nicolas Ribo 2,816.00 8,190.00
163 Rosalio Duran, Sr. 2,816.00 8,190.00 11,006.00
197 Jaime Rubin 2,816.00 8,190.00
164 Rosalio Duran, Jr. 2,816.00 8,190.00 11,006.00
198 Orlando Regis 2,816.00 8,190.00
199 Ricky Alconza 2,816.00 8,190.00 11,006.00 233 Perfecto Regis 2,816.00 8,190.00

200 Rudy Tagalog 2,816.00 8,190.00 11,006.00 234 Roel Demana 2,816.00 8,190.00

201 Victorino Tagalog 2,816.00 8,190.00 11,006.00 235 Elmer Castillo 2,816.00 8,190.00

202 Edward Colina 2,816.00 8,190.00 11,006.00 236 Wilfredo Calamohoy 2,816.00 8,190.00

203 Ronie Gonzaga 2,816.00 8,190.00 11,006.00 237 Rudy Lucernas 2,816.00 8,190.00

204 Paul Cabillada 2,816.00 8,190.00 11,006.00 238 Antonio Caete 2,816.00 8,190.00

205 Wilfredo Magalona 2,816.00 8,190.00 11,006.00 239 Efraim Yubal 2,816.00 8,190.00

206 Joel Pepito 2,816.00 8,190.00 11,006.00 240 Jesus Capangpangan 2,816.00 8,190.00

207 Prospero Maglasang 2,816.00 8,190.00 11,006.00 241 Damian Capangpangan 2,816.00 8,190.00

208 Allan Agustin 2,816.00 8,190.00 11,006.00 242 Teofilo Capangpangan 2,816.00 8,190.00

209 Fausto Bargayo 2,816.00 8,190.00 11,006.00 243 Nilo Capangpangan 2,816.00 8,190.00

210 Nomer Sanchez 2,816.00 8,190.00 11,006.00 244 Cororeno Capangpangan 2,816.00 8,190.00

211 Jolito Alin 2,816.00 8,190.00 11,006.00 245 Emilio Mondares 2,816.00 8,190.00

212 Birning Regidor 2,816.00 8,190.00 11,006.00 246 Ponciano Agana 2,816.00 8,190.00

213 Garry Dignos 2,816.00 8,190.00 11,006.00 247 Vicente Devilleres 2,816.00 8,190.00

214 Edwin Dignos 2,816.00 8,190.00 11,006.00 248 Mario Alipan 2,816.00 8,190.00

215 Dario Dignos 2,816.00 8,190.00 11,006.00 249 Romanito Alipan 2,816.00 8,190.00

216 Rogelio Dignos 2,816.00 8,190.00 11,006.00 250 Aldeon Robinson 2,816.00 8,190.00

217 Jimmy Cabigas 2,816.00 8,190.00 11,006.00 251 Fortunato Soco 2,816.00 8,190.00

218 Fernando Anajao 2,816.00 8,190.00 11,006.00 252 Celso Compuesto 2,816.00 8,190.00

219 Alex Flores 2,816.00 8,190.00 11,006.00 253 William Itoralde 2,816.00 8,190.00

220 Fernando Remedio 2,816.00 8,190.00 11,006.00 254 Antonio Pescador 2,816.00 8,190.00

221 Toto Mosquido 2,816.00 8,190.00 11,006.00 255 Jeremias Rondero 2,816.00 8,190.00

222 Alberto Yagonia 2,816.00 8,190.00 11,006.00 256 Estropio Punay 2,816.00 8,190.00

223 Victor Bariquit 2,816.00 8,190.00 11,006.00 257 Leovijildo Punay 2,816.00 8,190.00

224 Ignacio Misa 2,816.00 8,190.00 11,006.00 258 Romeo Quilongquilong 2,816.00 8,190.00

225 Eliseo Villareno 2,816.00 8,190.00 11,006.00 259 Wilfredo Gestopa 2,816.00 8,190.00

226 Manuel Lavandero 2,816.00 8,190.00 11,006.00 260 Eliseo Santos 2,816.00 8,190.00

227 Vircede 2,816.00 8,190.00 11,006.00 261 Henry Orio 2,816.00 8,190.00

228 Mario Ranis 2,816.00 8,190.00 11,006.00 262 Jose Yap 2,816.00 8,190.00

229 Jaime Responso 2,816.00 8,190.00 11,006.00 263 Nicanor Manayaga 2,816.00 8,190.00

230 Marianito Aguirre 2,816.00 8,190.00 11,006.00 264 Teodoro Salinas 2,816.00 8,190.00

231 Marcial Heruela 2,816.00 8,190.00 11,006.00 265 Aniceto Montero 2,816.00 8,190.00

232 Godofredo Tuacao 2,816.00 8,190.00 11,006.00 266 Rafaelito Versoza 2,816.00 8,190.00
267 Alejandro Ranido 2,816.00 8,190.00 11,006.00 09-1507-91 59,136.00 171,990.00

268 Henry Talaba 2,816.00 8,190.00 11,006.00 06-1145-91 391,424.00 1,138,410.00

269 Romulo Talaba 2,816.00 8,190.00 11,006.00 GRAND TOTAL P845,117.00 P2,334,150.00 P

270 Diosdado Besabela 2,816.00 8,190.00 However, certain matters have cropped up which require a review of the awards to some complainants and a
11,006.00
recomputation by the Labor Arbiter of the total amounts.
271 Sylvestre Toring 2,816.00 8,190.00 11,006.00

272 Edilberto Padilla 2,816.00 8,190.00 A scrutiny of the enumeration of all the complainants shows that some names38 appear twice by virtue of their
11,006.00
being included in two (2) of the nine (9) consolidated cases. A check of the Labor Arbiter's computation
273 Allan Herosa 2,816.00 8,190.00 discloses that most of these names were awarded different amounts of separation pay or wage differential in
11,006.00
each separate case where they were impleaded as parties because the allegations of the length and period of
274 Ernesto Sumalinog 2,816.00 8,190.00 their11,006.00
employment for the separate cases, though overlapping, were also different. The records before us are
incomplete and do not aid in verifying whether these names belong to the same persons but at least three (3)
275 Ariston Velasco, Jr. 2,816.00 8,190.00 of those names were found to have identical signatures in the complaint forms they filed in the separate
11,006.00
cases. It is likely therefore that the Labor Arbiter erroneously granted some complainants separation benefits
276 Fernando Lopez 2,816.00 8,190.00 wage differentials twice. Apart from this, we also discovered some names that are almost identical.39 It is
and11,006.00
possible that the minor variance in the spelling of some names may have been a typographical error and refer
277 Alfonso Echavez 2,816.00 8,190.00 to the same persons although the records seem to be inconclusive.
11,006.00

278 Nicanor Cuizon 2,816.00 8,190.00 11,006.00

Furthermore, one of the original complainants40 was inadvertently omitted by the Labor Arbiter from his
41 42
279 Dominador Caparida 2,816.00 8,190.00 computations.
11,006.00 The counsel for the complainants promptly filed a motion for inclusion/correction which
motion was treated as an appeal of the Decision as the Labor Arbiter was prohibited by the rules of the NLRC
280 Zosimo Cororation 2,816.00 8,190.00 entertaining any motion at that stage of the proceedings.43 The NLRC for its part acknowledged the
from11,006.00
omission44 but both the Commission and subsequently the Court of Appeals failed to rectify the oversight in
281 Artemio Loveranes 2,816.00 8,190.00 their11,006.00
decisions.

282 Dionisio Yagonia 2,816.00 8,190.00 11,006.00

Finally, the NLRC ordered both MAERC and SMC to pay P84,511.70 in attorneys fees which is ten percent
283 Victor Celocia 2,816.00 8,190.00 (10%) of the salary differentials awarded to the complainants in accordance with Art. 111 of the Labor Code.
11,006.00
The Court of Appeals also affirmed the award. Consequently, with the recomputation of the salary differentials,
284 Hipolito Vidas 2,816.00 8,190.00 the 11,006.00
award of attorney's fees must also be modified.

285 Teodoro Arcillas 2,816.00 8,190.00 11,006.00 the petition is DENIED. The assailed Decision of the Court of Appeals dated 28 April 2000 and
WHEREFORE,
the Resolution dated 26 July 2000 are AFFIRMED with MODIFICATION. Respondent Maerc Integrated
286 Marcelino Habagat 2,816.00 8,190.00 11,006.00
Services, Inc. is declared to be a labor-only contractor. Accordingly, both petitioner San Miguel Corporation
and respondent Maerc Integrated Services, Inc., are ordered to jointly and severally pay complainants (private
287 Gaudioso Labasan 2,816.00 8,190.00 11,006.00
respondents herein) separation benefits and wage differentials as may be finally recomputed by the Labor
Arbiter as herein directed, plus attorney's fees to be computed on the basis of ten percent (10%) of the
288 Leopoldo Regis 2,816.00 8,190.00 11,006.00
amounts which complainants may recover pursuant to Art. 111 of the Labor Code, as well as an indemnity fee
289 Aquillo Damole 2,816.00 8,190.00 of P2,000.00
11,006.00to each complainant.

290 Willy Roble 2,816.00 8,190.00 The11,006.00

Labor Arbiter is directed to review and recompute the award of separation pays and wage differentials
due complainants whose names appear twice or are notably similar, compute the monetary award due to
TOTAL P391,424.00 P1,138,410.00 P1,529,834.00
complainant Niel Zanoria whose name was omitted in the Labor Arbiter's Decision and immediately execute
the monetary awards as found in the Labor Arbiter's computations insofar as those complainants whose
RECAP
entitlement to separation pay and wage differentials and the amounts thereof are no longer in question. Costs
against petitioner.
CASE NO. SALARY SEPARATION PAY TOTAL
DIFFERENTIAL
06-1165-91 P330,621.00 P884,520.00 SO ORDERED.
P1,215,141.00

07-1177-91 3,056.00 5,460.00 8,516.00

06-1176-91 3,056.00 8,190.00 11,246.00

07-1219-91 39,728.00 76,440.00 116,168.00

07-1283-91 11,984.00 32,760.00 44,744.00

10-1584-91 3,056.00 8,190.00 11,246.00

08-1321-91 3,056.00 8,190.00 11,246.00

 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 86932 June 27, 1990
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DOROTHY S. ANCHETA, MA. MAGDALENA Y.
ARMARILLE, CONSTANTE A. ANCHETA, CONSTANTE B. BANAYOS, EVELYN BARRIENTOS, JOSE
BENAVIDEZ, LEONARDO BUENAAGUA, BENJAMIN BAROT, ERNESTO S. CANTILLER, EDUARDO
CANDA, ARMANDO CANDA, AIDA DE LUNA, PACIFICO M. DE JESUS, ALFREDO ESTRERA, AURELIO A.
FARINAS, FRANCISCO GREGORIO, DOMELINA GONZALES, JUANA JALANDONI, MANUEL MALUBAY,
FELICIANO OCAMPO, MABEL PADO, GEMINIANO PLETA, ERNESTO S. SALAMAT, JULIAN TRAQUENA,
JUSFIEL SILVERIO, JAMES CRISTALES, FRANCISCO BAMBIO, JOSE T. MARCELO, JR., SUSAN M.
OLIVAR, ERNESTO JULIO, CONSTANTE ANCHETA, JR., ENRIQUE NABUA and JAVIER P.
MATARO,respondents.
The Legal Counsel for petitioner.
CA. Ancheta & C.B. Banayos for private respondents.
REGALADO, J.:
The present petition for certiorari seeks the reversal of the decision of the National Labor Relations
Commission (NLRC) in, NLRC-NCR Case No. 00-07-02500-87, dated January 16, 1986, 1 which dismissed
the appeal of the Development Bank of the Philippines (DBP) from the decision of the labor arbiter ordering it
to pay the unpaid wages, 13th month pay, incentive pay and separation pay of herein private respondents.
Philippine Smelters Corporation (PSC), a corporation registered under Philippine law, obtained a loan in 1983
from the Development Bank of the Philippines, a government-owned financial institution created and operated
in accordance with Executive Order No. 81, to finance its iron smelting and steel manufacturing business. To
secure said loan, PSC mortgaged to DBP real properties with all the buildings and improvements thereon and
chattels, with its President, Jose T. Marcelo, Jr., as co-obligor.
By virtue of the said loan agreement, DBP became the majority stockholder of PSC, with stockholdings in the
amount of P31,000,000.00 of the total P60,226,000.00 subscribed and paid up capital stock. Subsequently, it
took over the management of PSC.
When PSC failed to pay its obligation with DBP, which amounted to P75,752,445.83 as of March 31, 1986,
DBP foreclosed and acquired the mortgaged real estate and chattels of PSC in the auction sales held on
February 25, 1987 and March 4, 1987.
On February 10, 1987, forty (40) petitioners filed a Petition for Involuntary Insolvency in the Regional Trial
Court, Branch 61 at Makati, Metropolitan Manila, docketed therein as Special Proceeding No. M-
1359, 2 against PSC and DBP, impleading as co-respondents therein Olecram Mining Corporation, Jose
Panganiban Ice Plant and Cold Storage, Inc. and PISO Bank, with said petitioners representing themselves as
unpaid employees of said private respondents, except PISO Bank.
On February 13, 1987, herein private respondents filed a complaint with the Department of Labor against PSC
for nonpayment of salaries, 13th month pay, incentive leave pay and separation pay. On February 20, 1987,
the complaint was amended to include DBP as party respondent. The case was thereafter indorsed to the
Arbitration Branch of the National Labor Relations Commission (NLRC). DBP filed its position paper on
September 7, 1987, invoking the absence of employer-employee relationship between private respondents
and DBP and submitting that when DBP foreclosed the assets of PSC, it did so as a foreclosing creditor.
On January 30, 1988, the labor arbiter rendered a decision, the dispositive portion of which directed that "DBP
as foreclosing creditor is hereby ordered to pay all the unpaid wages and benefits of the workers which remain
unpaid due to PSC's foreclosure." 3
On appeal by DBP, the NLRC sustained the ruling of the labor arbiter, holding DBP liable for unpaid wages of
private respondents "not as a majority stockholder of respondent PSC, but as the foreclosing creditor who
possesses the assets of said PSC by virtue of the auction sale it held in 1987." In addition, the NLRC held that
the labor arbiter is correct in assuming jurisdiction because "the worker's preference to the amount secured by
DBP by virtue of said foreclosure sales of PSC properties arose out of or are connected or interwoven with the
labor dispute brought forth by appellees against PSC and DBP. 4 Hence, the present petition by DBP.
DBP contends that the labor arbiter and the NLRC committed a grave abuse of discretion (1) in assuming
jurisdiction over DBP; (2) in applying the provisions of Article 110 of the Labor Code, as amended; and (3) in
not enforcing and applying Section 14 of Executive Order No. 81.
We find merit in the petition.
It is to be noted that in their comment, private respondents tried to prove the existence of employer-employee
relationship based on the fact that DBP is the majority stockholder of PSC and that the majority of the
members of the board of directors of PSC are from DBP. 5 We do not believe that these circumstances are
sufficient indicia of the existence of an employer-employee relationship as would confer jurisdiction over the
case on the labor arbiter, especially in the light of the express declaration of said labor arbiter and the NLRC
that DBP is being held liable as a foreclosing creditor. At any rate, this jurisdictional defect was cured when
DBP appealed the labor arbiter's decision to the NLRC and thereby submitted to its jurisdiction.
The pivotal issue for resolution is whether DBP, as foreclosing creditor, could be held liable for the unpaid
wages, 13th month pay, incentive leave pay and separation pay of the employees of PSC.
We rule in the negative.
During the dates material to the foregoing proceedings, Article 110 of the Labor Code read:
Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as
regards wages due them for services rendered during the period prior to the
bankruptcy or liquidation, any provision of law to the contrary notwithstanding. Unpaid
wages shall be paid in full before other creditors may establish any claim to a share in
the assets of the employer.
In conjunction therewith, Section 10, Rule VIII, Book III of the Implementing Rules and Regulations of the
Labor Code provided:
Sec. 10. Payment of wages in mm of bankruptcy.-Unpaid wages earned by the
employees before the declaration of bankruptcy or judicial liquidation of the employer's
business shall be given first preference and shall be paid in full before other creditors
may establish any claim to a share in the assets of the employer.
Interpreting the above provisions, this Court, in Development Bank of the Philippines vs. Hon. Labor Arbiter
Ariel C. Santos, et al., 6 explicated as follows:
It is quite clear from the provisions that a declaration of bankruptcy or a judicial
liquidation must be present before the worker's preference may be enforced. ... .
 xxx xxx xxx
Moreover, the reason behind the necessity for a judicial proceeding or a proceeding in
rem before the concurrence and preference of credits may be applied was explained
by this Court in the case of Philippine Savings Bank v. Lantin (124 SCRA 476 [1983]).
We said:
The proceedings in the court below do not partake of the nature
of the insolvency proceedings or settlement of a decedent's
estate. The action filed by Ramos was only to collect the unpaid
cost of the construction of the duplex apartment. It is far from
being a general liquidation of the estate of the Tabligan
spouses.
Insolvency proceedings and settlement of a decedent's estate
are both proceedings in rem which are binding against the
whole world. All persons having interest in the subject matter
involved, whether they were notified or not, are equally bound.
Consequently, a liquidation of similar import or 'other equivalent
general liquidation must also necessarily be a proceeding in
rem so that all interested persons whether known to the parties
or not may be bound by such proceeding.
In the case at bar, although the lower court found that 'there
were no known creditors other than the plaintiff and the
defendant herein,' this can not be conclusive. It will not bar
other creditors in the event they show up and present their
claim against the petitioner bank, claiming that they also have
preferred liens against the property involved. Consequently,
Transfer Certificate of Title No. 101864 issued in favor of the
bank which is supposed to be indefeasible would remain
constantly unstable and questionable. Such could not have
been the intention of Article 2243 of the Civil Code although it
considers claims and credits under Article 2242 as statutory
fines. Neither does the De Barreto case ...
The claims of all creditors whether preferred or non- preferred, the Identification of the
preferred ones and the totality of the employer's asset should be brought into the
picture. There can then be an authoritative, fair, and binding adjudication instead of the
piece meal settlement which would result from the questioned decision in this case.
Republic Act No. 6715, which took effect on March 21, 1989, amended Article 110 of the Labor Code to read
as follows:
Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as
regards their unpaid wages and other monetary claims, any provision of law to the
contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full
before the claims of the Government and other creditors may be paid.
As a consequence, Section 1 0, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor
Code was likewise amended, to wit:
Sec. 10. Payment of wages and other monetary claims in case of bankruptcy. In
case of bankruptcy or liquidation of the employer's business, the unpaid wages and
other monetary claims of the employees shall be given first preference and shall be
paid in full before the claims of government and other creditors may be paid.
Despite said amendments, however, the same interpretation of Article 110 as applied in the aforesaid case
of Development Bank of the Philippines vs. Hon. Labor Arbiter Ariel C. Santos, et al., supra, was adopted by
this Court in the recent case of Development Bank of the Philippines vs. National Labor Relations
Commission, et. al., 7 For facility of reference, especially the rationalization for the conclusions reached
therein, we reproduce the salient portions of the decision in this later case.
Notably, the terms "declaration" of bankruptcy or "judicial" liquidation have been
eliminated. Does this means then that liquidation proceedings have been done away
with?
We opine m the negative, upon the following considerations:
1. Because of its impact on the entire system of credit, Article 110 of the Labor Code
cannot be viewed in isolation but must be read in relation to the Civil Code scheme on
classification and preference of credits.
Article 110 of the Labor Code, in determining the reach of its
terms, cannot be viewed in isolation. Rather, Article 110 must
be read in relation to the provisions of the Civil Code
concerning the classification, concurrence and preference of
credits which provisions find particular application in insolvency
proceedings where the claims of all creditors, preferred or non-
preferred, may be adjudicated in a binding manner ... (Republic
vs. Peralta (G.R. No. L-56568, May 20, 1987, 150 SCRA 37).
2. In the same way that the Civil Code provisions on classification of credits and the
Insolvency Law have been brought into harmony, so also must the kindred provisions
of the Labor Law be made to harmonize with those laws.
3. In the event of insolvency, a principal objective should be to effect an equitable
distribution of the insolvent's property among his creditors. To accomplish this there
must first be some proceeding where notice to all of the insolvent's creditors may be
given and where the claims of preferred creditors may be bindingly adjudicated (De
Barretto vs. Villanueva, No. L-14938, December 29, 1962, 6 SCRA 928). The rationale
therefor has been expressed in the recent case of DBP vs. Secretary of Labor (G.R.
No. 79351, 28 November 1989), which we quote:
A preference of credit bestows upon the preferred creditor an
advantage of having his credit satisfied first ahead of other
claims which may be established against the debtor. Logically,
it becomes material only when the properties and assets of the
debtors are insufficient to pay his debts in full; for if the debtor is
amply able to pay his various creditors, in full, how can the
necessity exist to determine which of his creditors shall be paid
first or whether they shall be paid out of the proceeds of the
sale of the debtor's specific property? Indubitably, the
preferential right of credit attains significance only after the
properties of the debtor have been inventoried and liquidated,
and the claims held by his various creditors have been
established (Kuenzle & Streiff [Ltd.] vs. Villanueva, 41 Phil. 611
[1916]; Barretto vs. Villanueva, G.R. No. 14038, 29 December
1962, 6 SCRA 928; Philippine Savings Bank vs. Lantin, G.R.
33929, 2 September 1983,124 SCRA 476).
4. A distinction should be made between a preference of credit and a lien. A
preference applies only to claims which do not attach to specific properties. A hen
creates a charge on a particular property. The right of first preference as regards
unpaid wages recognize by Article 110 does not constitute a hen on the property of the
insolvent debtor in favor of workers. It is but a preference of credit in their favor, a
preference in application. It is a met-hod adopted to determine and specify the order in
which credits should be paid in the final distribution of the proceeds of the insolvent's
assets- It is a right to a first preference in the discharge of the funds of the judgment On the foregoing considerations and it appearing that an involuntary insolvency proceeding has been
debtor. in the words of Republic vs. Peralta,supra: instituted against PSC, private respondents should properly assert their respective claims in said proceeding. .

Article 110 of the Labor Code does not purport to create a lien WHEREFORE, the petition is GRANTED. The decision of public respondent is hereby ANNULLED and SET
in favor of workers or employees for unpaid wages either upon ASIDE.
all of the properties or upon any particular property owned by
their employer. Claims for unpaid wages do not therefore fall at
all within the category of specially preferred claims established SO ORDERED.
under Articles 2241 and 2242 of the Civil Code, except to the
extent that such claims for unpaid wages are already covered
by Article 2241, number 6: 'claims for laborers' wages, on the
goods manufactured or the work done; or by Article 2242,
number 3: 'claims of laborers and other workers engaged in the
construction, reconstruction or repair of buildings, canals and
other works, upon said buildings, canals or other works.' To the
extent that claims for unpaid wages fall outside the scope of
Article 2241, number 6 and Article 2242, number 3, they would
come within the ambit of the category of ordinary preferred
credits under Article 2244.'

5. The DBP anchors its claim on a mortgage credit. A mortgage directly and
immediately subjects the property upon which it is imposed, whoever the possessor
may be, to the fulfillment of the obligation for whose security it was constituted (Article
2176, Civil Code). It creates a real right which is enforceable against the whole world. It
is a lien on an Identified immovable property, which a preference is not. A recorded
mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code on
classification of credits. The preference given by Article 110, when not falling within
Article 2241 (6) and Article 2242 (3) of the Civil Code and not attached to any specific
property, is an ordinary preferred credit although its impact is to move it from second
priority to first priority in the order of preference established by Article 2244 of the Civil
Code (Republic vs. Peralta,supra).

In fact, under the Insolvency Law (Section 29) a creditor holding a mortgage or hen of
any kind as security is not permitted to vote in the election of the assignee in
insolvency proceedings unless the value of his security is first fixed or he surrenders all
such property to the receiver of the insolvent's estate.

6. Even if Article 110 and its Implementing Rule, as amended, should be interpreted to
mean 'absolute preference,' the same should be given only prospective effect in line
with the cardinal rule that laws shall have no retroactive effect, unless the contrary is
provided (Article 4, Civil Code). Thereby, any infringement on the constitutional
guarantee on non-impairment of obligation of contracts (Section 10, Article III, 1987
Constitution) is also avoided. In point of fact, DBP's mortgage credit antedated by
several years the amendatory law, RA No. 6715. To give Article 110 retroactive effect
would be to wipe out the mortgage in DBPs favor and expose it to a risk which it
sought to protect itself against by requiring a collateral in the form of real property.

In fine, the right to preference given to workers under Article 110 of the Labor Code
cannot exist in any effective way prior to the time of its presentation in distribution
proceedings. It will find application when, in proceedings such as insolvency, such
unpaid wages shall be paid in full before the 'claims of the Government and other
creditors' may be paid. But, for an orderly settlement of a debtor's assets, all creditors
must be convened, their claims ascertained and inventoried, and thereafter the
preference determined in the course of judicial proceedings which have for their object
the subjection of the property of the debtor to the payment of his debts or other lawful
obligations. Thereby, an orderly determination of preference of creditors' claims is
assured (Philippine Savings Bank vs. Lantin, No. L-33929, September 2, 1983, 124
SCRA 476); the adjudication made will be binding on all parties-in-interest, since those
proceedings are proceedings in rem; and the legal scheme of classification,
concurrence and preference of credits in the Civil Code, the Insolvency Law, and the
Labor Code is preserved in harmony.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. Nos. 97008-09 July 23, 1993
VIRGINIA G. NERI and JOSE CABELIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION FAR EAST BANK & TRUST COMPANY (FEBTC) and
BUILDING CARE CORPORATION, respondents.
R.L. Salcedo & Improso Law Office for petitioners.
Bengzon, Zarnaga, Narciso, Cudala, Pecson, Bengzon & Jimenez for Bldg. Care Corp.
Bautista, Picaso, Buyco, Tan & Fider for respondent FEBTC.
BELLOSILLO, J.:
Respondents are sued by two employees of Building Care Corporation, which provides janitorial and other
specific services to various firms, to compel Far Bast Bank and Trust Company to recognize them as its
regular employees and be paid the same wages which its employees receive.
Building Care Corporation (BCC, for brevity), in the proceedings below, established that it had substantial
capitalization of P1 Million or a stockholders equity of P1.5 Million. Thus the Labor Arbiter ruled that BCC was
only job contracting and that consequently its employees were not employees of Far East Bank and Trust
Company (FEBTC, for brevity). on appeal, this factual finding was affirmed by respondent National Labor
Relations Commission (NLRC, for brevity). Nevertheless, petitioners insist before us that BCC is engaged in
"labor-only" contracting hence, they conclude, they are employees of respondent FEBTC.
Petitioners Virginia G. Neri and Jose Cabelin applied for positions with, and were hired by, respondent BCC, a
corporation engaged in providing technical, maintenance, engineering, housekeeping, security and other
specific services to its clientele. They were assigned to work in the Cagayan de Oro City Branch of respondent
FEBTC on 1 May 1979 and 1 August 1980, respectively, Neri an radio/telex operator and Cabelin as janitor,
before being promoted to messenger on 1 April 1989.
On 28 June 1989, petitioners instituted complaints against FEBTC and BCC before Regional Arbitration
Branch No. 10 of the Department of Labor and Employment to compel the bank to accept them as regular
employees and for it to pay the differential between the wages being paid them by BCC and those received by
FEBTC employees with similar length of service.
On 16 November 1989, the Labor Arbiter dismissed the complaint for lack of merit. 1 Respondent BCC was
considered an independent contractor because it proved it had substantial capital. Thus, petitioners were held
to be regular employees of BCC, not FEBTC. The dismissal was appealed to NLRC which on 28 September
1990 affirmed the decision on appeal. 2 On 22 October 1990, NLRC denied reconsideration of its
affirmance, 3 prompting petitioners to seek redress from this Court.
Petitioners vehemently contend that BCC in engaged in "labor-only" contracting because it failed to adduce
evidence purporting to show that it invested in the form of tools, equipment, machineries, work premises and
other materials which are necessary in the conduct of its business. Moreover, petitioners argue that they
perform duties which are directly related to the principal business or operation of FEBTC. If the definition of
"labor-only" contracting 4 is to be read in conjunction with job contracting, 5 then the only logical conclusion is
that BCC is a "labor only" contractor. Consequently, they must be deemed employees of respondent bank by
operation of law since BCC is merely an agent of FEBTC following the doctrine laid down in Philippine Bank of
Communications v. National Labor Relations Commission 6 where we ruled that where "labor-only" contracting
exists, the Labor Code itself establishes an employer-employee relationship between the employer and the
employees of the "labor-only" contractor; hence, FEBTC should be considered the employer of petitioners who
are deemed its employees through its agent, "labor-only" contractor BCC.
We cannot sustain the petition.
Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work
premises, among others, because it has established that it has sufficient capitalization. The Labor Arbiter and
the NLRC both determined that BCC had a capital stock of P1 million fully subscribed and paid for. 7 BCC is
therefore a highly capitalized venture and cannot be deemed engaged in "labor-only" contracting.
It is well-settled that there is "labor-only" contracting where: (a) the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment, machineries, work premises,
among others; and, (b) the workers recruited and placed by such person are performing activities which are
directly related to the principal business of the employer. 8
Article 106 of the Labor Code defines "labor-only" contracting thus
Art. 106. Contractor or subcontractor. . . . . There is "labor-only" contracting where
the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others,
and the workers recruited by such persons are performing activities which are directly
related to the principal business of such employer . . . . (emphasis supplied).
Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has substantial
capital. While there may be no evidence that it has investment in the form of tools, equipment, machineries,
work premises, among others, it is enough that it has substantial capital, as was established before the Labor
Arbiter as well as the NLRC. In other words, the law does not require both substantial capital and investment
in the form of tools, equipment, machineries, etc. This is clear from the use of the conjunction "or". If the
intention was to require the contractor to prove that he has both capital and the requisite investment, then the
conjunction "and" should have been used. But, having established that it has substantial capital, it was no
longer necessary for BCC to further adduce evidence to prove that it does not fall within the purview of "labor-
only" contracting. There is even no need for it to refute petitioners' contention that the activities they perform
are directly related to the principal business of respondent bank.
Be that as it may, the Court has already taken judicial notice of the general practice adopted in several
government and private institutions and industries of hiring independent contractors to perform special
services. 9These services range from janitorial, 10 security 11 and even technical or other specific services such
as those performed by petitioners Neri and Cabelin. While these services may be considered directly related
to the principal business of the employer, 12 nevertheless, they are not necessary in the conduct of the
principal business of the employer.
In fact, the status of BCC as an independent contractor was previously confirmed by this Court in Associated
Labor Unions-TUCP v. National Labor Relations Commission, 13 where we held thus
The public respondent ruled that the complainants are not employees of the bank but
of the company contracted to serve the bank. Building Care Corporation is a big firm
which services, among others, a university, an international bank, a big local bank, a
hospital center, government agencies, etc. It is a qualified independent contractor. The
public respondent correctly ruled against petitioner's contentions . . . . (Emphasis
supplied).
Even assuming ex argumenti that petitioners were performing activities directly related to the principal
business of the bank, under the "right of control" test they must still be considered employees of BCC. In the
case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a
radio/telex operator. However, a cursory reading of the job description shows that what was sought to be
controlled by FEBTC was actually the end-result of the task, e.g., that the daily incoming and outgoing
telegraphic transfer of funds received and relayed by her, respectively, tallies with that of the register. The
guidelines were laid down merely to ensure that the desired end-result was achieved. It did not, however, tell
Neri how the radio/telex machine should be operated. In the Shipside case, 14 we ruled
. . . . If in the course of private respondents' work (referring to the workers), SHIPSIDE
occasionally issued instructions to them, that alone does not in the least detract from
the fact that only STEVEDORES is the employer of the private respondents, for in legal
contemplation, such instructions carry no more weight than mere requests, the privity
of contract being between SHIPSIDE and STEVEDORES . . . .
Besides, petitioners do not deny that they were selected and hired by BCC before being assigned to work in
the Cagayan de Oro Branch of FFBTC. BCC likewise acknowledges that petitioners are its employees. The
record is replete with evidence disclosing that BCC maintained supervision and control over petitioners
through its Housekeeping and Special Services Division: petitioners reported for work wearing the prescribed
uniform of BCC; leaves
of absence were filed directly with BCC; and, salaries were drawn only from BCC. 15
As a matter of fact, Neri even secured a certification from BCC on 16 May 1986 that she was employed by the
latter. On the other hand, on 24 May 1988, Cabelin filed a complaint for underpayment of wages, non-
integration of salary adjustments mandated by Wage Orders Nos. 5 & 6 and R.A. 6640 as well as for illegal
deduction 16against BCC alone which was provisionally dismissed on 19 August 1988 upon Cabelin's
manifestation that his money claim was negligible. 17
More importantly, under the terms and conditions of the contract, it was BCC alone which had the power to
reassign petitioners. Their deployment to FEBTC was not subject to the bank's acceptance. Cabelin was
promoted to messenger because the FEBTC branch manager promised BCC that two (2) additional janitors
would be hired from the company if the promotion was to be effected. 18 Furthermore, BCC was to be paid in
lump sum unlike in the situation in Philippine Bank of Communications 19 where the contractor, CESI, was to
be paid at a daily rate on a per person basis. And, the contract therein stipulated that the CESI was merely to
provide manpower that would render temporary services. In the case at bar, Neri and Cabelin were to perform
specific special services. Consequently, petitioners cannot be held to be employees of FEBTC as BCC
"carries an independent business" and undertaken the performance of its contract with various clients
according to its "own manner and method, free from the control and supervision" of its principals in all matters
"except as to the results thereof." 20
Indeed, the facts in Philippine Bank of Communications do not square with those of the instant case. Therein,
the Court ruled that CESI was a "labor-only" contractor because upholding the contract between the contractor
and the bank would in effect permit employers to avoid the necessity of hiring regular or permanent
employees and would enable them to keep their employees indefinitely on a temporary or casual basis, thus
denying them security of tenure in their jobs. This of course violates the Labor Code. BCC has not committed
any violation. Also, the former case was for illegal dismissal; this case, on the other hand, is for conversion of
employment status so that petitioners can receive the same salary being given to regular employees of
FEBTC. But, as herein determined, petitioners are not regular employees of FEBTC but of BCC. At any rate,
the finding that BCC in a qualified independent contractor precludes us from applying the Philippine Bank of
Communicationsdoctrine to the instant petition.
The determination of employer-employee relationship involves factual findings. 21 Absent any grave abuse of
discretion, and we find none in the case before us, we are bound by the findings of the Labor Arbiter as
affirmed by respondent NLRC.
IN VIEW OF THE FOREGOING, the Petition for Certiorari is DISMISSED.
SO ORDERED.
FIRST DIVISION
[G.R. No. 126586. February 2, 2000]
ALEXANDER VINOYA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, REGENT FOOD
CORPORATION AND/OR RICKY SEE (PRESIDENT), respondents.
DECISION
KAPUNAN, J.:
This petition for certiorari under Rule 65 seeks to annul and set aside the decision,[1] promulgated on 21 June
1996, of the National Labor Relations Commission ("NLRC") which reversed the decision[2] of the Labor
Arbiter, rendered on 15 June 1994, ordering Regent Food Corporation ("RFC") to reinstate Alexander Vinoya
to his former position and pay him backwages.
Private respondent Regent Food Corporation is a domestic corporation principally engaged in the manufacture
and sale of various food products. Private respondent Ricky See, on the other hand, is the president of RFC
and is being sued in that capacity.
Petitioner Alexander Vinoya, the complainant, worked with RFC as sales representative until his services were
terminated on 25 November 1991.
The parties presented conflicting versions of facts.
Petitioner Alexander Vinoya claims that he applied and was accepted by RFC as sales representative on 26
May 1990. On the same date, a company identification card[3] was issued to him by RFC. Petitioner alleges
that he reported daily to the office of RFC, in Pasig City, to take the latters van for the delivery of its products.
According to petitioner, during his employ, he was assigned to various supermarkets and grocery stores
where he booked sales orders and collected payments for RFC. For this task, he was required by RFC to put
up a monthly bond of P200.00 as security deposit to guarantee the performance of his obligation as sales
representative. Petitioner contends that he was under the direct control and supervision of Mr. Dante So and
Mr. Sadi Lim, plant manager and senior salesman of RFC, respectively. He avers that on 1 July 1991, he was
transferred by RFC to Peninsula Manpower Company, Inc. ("PMCI"), an agency which provides RFC with
additional contractual workers pursuant to a contract for the supply of manpower services (hereinafter referred
to as the "Contract of Service").[4] After his transfer to PMCI, petitioner was allegedly reassigned to RFC as
sales representative. Subsequently, on 25 November 1991, he was informed by Ms. Susan Chua, personnel
manager of RFC, that his services were terminated and he was asked to surrender his ID card. Petitioner was
told that his dismissal was due to the expiration of the Contract of Service between RFC and PMCI. Petitioner
claims that he was dismissed from employment despite the absence of any notice or investigation.
Consequently, on 3 December 1991, petitioner filed a case against RFC before the Labor Arbiter for illegal
dismissal and non-payment of 13th month pay.[5]
Private respondent Regent Food Corporation, on the other hand, maintains that no employer-employee
relationship existed between petitioner and itself. It insists that petitioner is actually an employee of PMCI,
allegedly an independent contractor, which had a Contract of Service[6] with RFC. To prove this fact, RFC
presents an Employment Contract[7] signed by petitioner on 1 July 1991, wherein PMCI appears as his
employer. RFC denies that petitioner was ever employed by it prior to 1 July 1991. It avers that petitioner was
issued an ID card so that its clients and customers would recognize him as a duly authorized representative of
RFC. With regard to the P200.00 pesos monthly bond posted by petitioner, RFC asserts that it was required in
order to guarantee the turnover of his collection since he handled funds of RFC. While RFC admits that it had
control and supervision over petitioner, it argues that such was exercised in coordination with PMCI. Finally,
RFC contends that the termination of its relationship with petitioner was brought about by the expiration of the
Contract of Service between itself and PMCI and not because petitioner was dismissed from employment.
On 3 December 1991, when petitioner filed a complaint for illegal dismissal before the Labor Arbiter, PMCI
was initially impleaded as one of the respondents. However, petitioner thereafter withdrew his charge against
PMCI and pursued his claim solely against RFC. Subsequently, RFC filed a third party complaint against
PMCI. After considering both versions of the parties, the Labor Arbiter rendered a decision,[8] dated 15 June
1994, in favor of petitioner. The Labor Arbiter concluded that RFC was the true employer of petitioner for the
following reasons: (1) Petitioner was originally with RFC and was merely transferred to PMCI to be deployed
as an agency worker and then subsequently reassigned to RFC as sales representative; (2) RFC had direct
control and supervision over petitioner; (3) RFC actually paid for the wages of petitioner although coursed
through PMCI; and, (4) Petitioner was terminated per instruction of RFC. Thus, the Labor Arbiter decreed as
follows:
ACCORDINGLY, premises considered respondent RFC is hereby declared guilty of
illegal dismissal and ordered to immediately reinstate complainant to his former
position without loss of seniority rights and other benefits and pay him backwages in
the amount of P103,974.00.
The claim for 13th month pay is hereby DENIED for lack of merit.
This case, insofar as respondent PMCI [is concerned] is DISMISSED, for lack of merit.
SO ORDERED.[9]
RFC appealed the adverse decision of the Labor Arbiter to the NLRC. In a decision,[10] dated 21 June 1996,
the NLRC reversed the findings of the Labor Arbiter. The NLRC opined that PMCI is an independent
contractor because it has substantial capital and, as such, is the true employer of petitioner. The NLRC, thus,
held PMCI liable for the dismissal of petitioner. The dispositive portion of the NLRC decision states:
WHEREFORE, premises considered, the appealed decision is modified as follows:
1. Peninsula Manpower Company Inc. is declared as employer of the complainant;
2. Peninsula is ordered to pay complainant his separation pay of P3,354.00 and his
proportionate 13th month pay for 1991 in the amount of P2,795.00 or the total amount
of P6,149.00.
SO ORDERED.[11]
Separate motions for reconsideration of the NLRC decision were filed by petitioner and PMCI. In a
resolution,[12] dated 20 August 1996, the NLRC denied both motions. However, it was only petitioner who
elevated the case before this Court.
In his petition for certiorari, petitioner submits that respondent NLRC committed grave abuse of discretion in
reversing the decision of the Labor Arbiter, and asks for the reinstatement of the latters decision.
Principally, this petition presents the following issues:
1. Whether petitioner was an employee of RFC or PMCI.
2. Whether petitioner was lawfully dismissed.
The resolution of the first issue initially boils down to a determination of the true status of PMCI, whether it is a
labor-only contractor or an independent contractor.
In the case at bar, RFC alleges that PMCI is an independent contractor on the sole ground that the latter is a
highly capitalized venture. To buttress this allegation, RFC presents a copy of the Articles of Incorporation and
the Treasurers Affidavit[13] submitted by PMCI to the Securities and Exchange Commission showing that it has
an authorized capital stock of One Million Pesos (P1,000,000.00), of which Three Hundred Thousand Pesos
(P300,000.00) is subscribed and Seventy-Five Thousand Pesos (P75,000.00) is paid-in. According to RFC,
PMCI is a duly organized corporation engaged in the business of creating and hiring a pool of temporary
personnel and, thereafter, assigning them to its clients from time to time for such duration as said clients may
require. RFC further contends that PMCI has a separate office, permit and license and its own organization.
Labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal.[14] In labor-only
contracting, the following elements are present:
(a) The contractor or subcontractor does not have substantial capital or investment to
actually perform the job, work or service under its own account and responsibility;
(b) The employees recruited, supplied or placed by such contractor or subcontractor
are performing activities which are directly related to the main business of the
principal.[15]
On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a principal
agrees to put out or farm out with a contractor or subcontractor the performance or completion of a specific
job, work or service within a definite or predetermined period, regardless of whether such job, work or service
is to be performed or completed within or outside the premises of the principal. [16] A person is considered
engaged in legitimate job contracting or subcontracting if the following conditions concur:
(a) The contractor or subcontractor carries on a distinct and independent business and
undertakes to perform the job, work or service on its own account and under its own
responsibility according to its own manner and method, and free from the control and
direction of the principal in all matters connected with the performance of the work
except as to the results thereof;
(b) The contractor or subcontractor has substantial capital or investment; and
(c) The agreement between the principal and contractor or subcontractor assures the
contractual employees entitlement to all labor and occupational safety and health
standards, free exercise of the right to self-organization, security of tenure, and social
and welfare benefits.[17]
Previously, in the case of Neri vs. NLRC,[18] we held that in order to be considered as a job contractor it is
enough that a contractor has substantial capital. In other words, once substantial capital is established it is no
longer necessary for the contractor to show evidence that it has investment in the form of tools, equipment,
machineries, work premises, among others. The rational for this is that Article 106 of the Labor Code does not
require that the contractor possess both substantial capital and investment in the form of tools, equipment,
machineries, work premises, among others.[19] The decision of the Court in Neri thus states:
Respondent BCC need not prove that it made investment in the form of tools,
equipment, machineries, work premises, among others, because it has established
that it has sufficient capitalization. The Labor Arbiter and the NLRC both determined
that BCC had a capital stock of P1 million fully subscribed and paid for. BCC is
therefore a highly capitalized venture and cannot be deemed engaged in "labor-only"
contracting.[20]
However, in declaring that Building Care Corporation ("BCC") was an independent contractor, the Court
considered not only the fact that it had substantial capitalization. The Court noted that BCC carried on an
independent business and undertook the performance of its contract according to its own manner and method,
free from the control and supervision of its principal in all matters except as to the results thereof.[21]The Court
likewise mentioned that the employees of BCC were engaged to perform specific special services for its
principal.[22] Thus, the Court ruled that BCC was an independent contractor.
The Court further clarified the import of the Neri decision in the subsequent case of Philippine Fuji Xerox
Corporation vs. NLRC.[23] In the said case, petitioner Fuji Xerox implored the Court to apply the Neridoctrine to
its alleged job-contractor, Skillpower, Inc., and declare the same as an independent contractor. Fuji Xerox
alleged that Skillpower, Inc. was a highly capitalized venture registered with the Securities and Exchange
Commission, the Department of Labor and Employment, and the Social Security System with assets
exceeding P5,000,000.00 possessing at least 29 typewriters, office equipment and service vehicles, and its
own pool of employees with 25 clerks assigned to its clients on a temporary basis.[24] Despite the evidence
presented by Fuji Xerox the Court refused to apply the Neri case and explained:
Petitioners cite the case of Neri v. NLRC, in which it was held that the Building Care
Corporation (BCC) was an independent contractor on the basis of finding that it had
substantial capital, although there was no evidence that it had investments in the form
of tools, equipment, machineries and work premises. But the Court in that case
considered not only the capitalization of the BCC but also the fact that BCC was
providing specific special services (radio/telex operator and janitor) to the employer;
that in another case, the Court had already found that BCC was an independent
contractor; that BCC retained control over the employees and the employer was
actually just concerned with the end-result; that BCC had the power to reassign the
employees and their deployment was not subject to the approval of the employer; and
that BCC was paid in lump sum for the services it rendered. These features of that
case make it distinguishable from the present one.[25]
Not having shown the above circumstances present in Neri, the Court declared Skillpower, Inc. to be engaged
in labor-only contracting and was considered as a mere agent of the employer.
From the two aforementioned decisions, it may be inferred that it is not enough to show substantial
capitalization or investment in the form of tools, equipment, machineries and work premises, among others, to
be considered as an independent contractor. In fact, jurisprudential holdings are to the effect that in
determining the existence of an independent contractor relationship, several factors might be considered such
as, but not necessarily confined to, whether the contractor is carrying on an independent business; the nature
and extent of the work; the skill required; the term and duration of the relationship; the right to assign the
performance of specified pieces of work; the control and supervision of the workers; the power of the employer
with respect to the hiring, firing and payment of the workers of the contractor; the control of the premises; the
duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of
payment.[26]
Given the above standards and the factual milieu of the case, the Court has to agree with the conclusion of
the Labor Arbiter that PMCI is engaged in labor-only contracting.
First of all, PMCI does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises, among others, to qualify as an independent contractor. While it has an
authorized capital stock of P1,000,000.00, only P75,000.00 is actually paid-in, which, to our mind, cannot be
considered as substantial capitalization. In the case of Neri, which was promulgated in 1993, BCC had a
capital stock of P1,000,000.00 which was fully subscribed and paid-for. Moreover, when the Neri case was
decided in 1993, the rate of exchange between the dollar and the peso was only P27.30 to $1[27] while
presently it is at P40.390 to $1.[28] The Court takes judicial notice of the fact that in 1993, the economic
situation in the country was not as adverse as the present, as shown by the devaluation of our peso. With the
current economic atmosphere in the country, the paid-in capitalization of PMCI amounting to P75,000.00
cannot be considered as substantial capital and, as such, PMCI cannot qualify as an independent contractor.
Second, PMCI did not carry on an independent business nor did it undertake the performance of its contract
according to its own manner and method, free from the control and supervision of its principal, RFC. The
evidence at hand shows that the workers assigned by PMCI to RFC were under the control and supervision of
the latter. The Contract of Service itself provides that RFC can require the workers assigned by PMCI to
render services even beyond the regular eight hour working day when deemed necessary.[29] Furthermore,
RFC undertook to assist PMCI in making sure that the daily time records of its alleged employees faithfully
reflect the actual working hours.[30] With regard to petitioner, RFC admitted that it exercised control and
supervision over him.[31] These are telltale indications that PMCI was not left alone to supervise and control its
alleged employees. Consequently, it can be concluded that PMCI was not an independent contractor since it
did not carry a distinct business free from the control and supervision of RFC.
Third, PMCI was not engaged to perform a specific and special job or service, which is one of the strong
indicators that an entity is an independent contractor as explained by the Court in the cases
of Neri andFuji. As stated in the Contract of Service, the sole undertaking of PMCI was to provide RFC with a
temporary workforce able to carry out whatever service may be required by it.[32] Such venture was complied
with by PMCI when the required personnel were actually assigned to RFC. Apart from that, no other particular
job, work or service was required from PMCI. Obviously, with such an arrangement, PMCI merely acted as a
recruitment agency for RFC. Since the undertaking of PMCI did not involve the performance of a specific job,
but rather the supply of manpower only, PMCI clearly conducted itself as labor-only contractor.
Lastly, in labor-only contracting, the employees recruited, supplied or placed by the contractor perform
activities which are directly related to the main business of its principal. In this case, the work of petitioner as
sales representative is directly related to the business of RFC. Being in the business of food manufacturing
and sales, it is necessary for RFC to hire a sales representative like petitioner to take charge of booking its
sales orders and collecting payments for such. Thus, the work of petitioner as sales representative in RFC can
only be categorized as clearly related to, and in the pursuit of the latters business. Logically, when petitioner
was assigned by PMCI to RFC, PMCI acted merely as a labor-only contractor.
Based on the foregoing, PMCI can only be classified as a labor-only contractor and, as such, cannot be
considered as the employer of petitioner.
However, even granting that PMCI is an independent contractor, as RFC adamantly suggests, still, a finding of
the same will not save the day for RFC. A perusal of the Contract of Service entered into between RFC and
PMCI reveals that petitioner is actually not included in the enumeration of the workers to be assigned to RFC.
The following are the workers enumerated in the contract:
1. Merchandiser
2. Promo Girl
3. Factory Worker
4. Driver[33]
Obviously, the above enumeration does not include the position of petitioner as sales representative. This only
shows that petitioner was never intended to be a part of those to be contracted out. However, RFC insists that
despite the absence of his position in the enumeration, petitioner is deemed included because this has been
agreed upon between itself and PMCI. Such contention deserves scant consideration. Had it really been the
intention of both parties to include the position of petitioner they should have clearly indicated the same in the
contract. However, the contract is totally silent on this point which can only mean that petitioner was never
really intended to be covered by it.
Even if we use the "four-fold test" to ascertain whether RFC is the true employer of petitioner the same result
would be achieved. In determining the existence of employer-employee relationship the following elements of
the "four-fold test" are generally considered, namely: (1) the selection and engagement of the employee or the
power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control the
employee.[34] Of these four, the "control test" is the most important.[35] A careful study of the evidence at hand
shows that RFC possesses the earmarks of being the employer of petitioner.
With regard to the first element, the power to hire, RFC denies any involvement in the recruitment and
selection of petitioner and asserts that petitioner did not present any proof that he was actually hired and
employed by RFC.
It should be pointed out that no particular form of proof is required to prove the existence of an employer-
employee relationship.[36] Any competent and relevant evidence may show the relationship.[37] If only
documentary evidence would be required to demonstrate that relationship, no scheming employer would ever
be brought before the bar of justice.[38] In the case at bar, petitioner presented the identification card issued to
him on 26 May 1990 by RFC as proof that it was the latter who engaged his services. To our mind, the ID card
is enough proof that petitioner was previously hired by RFC prior to his transfer as agency worker to PMCI. It
must be noted that the Employment Contract between petitioner and PMCI was dated 1 July 1991. On the
other hand, the ID card issued by RFC to petitioner was dated 26 May 1990, or more than one year before the
Employment Contract was signed by petitioner in favor of PMCI. It makes one wonder why, if petitioner was
indeed recruited by PMCI as its own employee on 1 July 1991, how come he had already been issued an ID
card by RFC a year earlier? While the Employment Contract indicates the word "renewal," presumably an
attempt to show that petitioner had previously signed a similar contract with PMCI, no evidence of a prior
contract entered into between petitioner and PMCI was ever presented by RFC. In fact, despite the demand
made by the counsel of petitioner for the production of the contract which purportedly shows that prior to 1
July 1991 petitioner was already connected with PMCI, RFC never made a move to furnish the counsel of
petitioner a copy of the alleged original Employment Contract. The only logical conclusion which may be
derived from such inaction is that there was no such contract and that the only Employment Contract entered
into between PMCI and petitioner was the 1 July 1991 contract and no other. Since, as shown by the ID card,
petitioner was already with RFC on 26 May 1990, prior to the time any Employment Contract was agreed upon
between PMCI and petitioner, it follows that it was RFC who actually hired and engaged petitioner to be its
employee.
With respect to the payment of wages, RFC disputes the argument of petitioner that it paid his wages on the
ground that petitioner did not submit any evidence to prove that his salary was paid by it, or that he was issued
payslip by the company. On the contrary RFC asserts that the invoices[39] presented by it, show that it was
PMCI who paid petitioner his wages through its regular monthly billings charged to RFC.
Since petitioner, due to his length of service, already attained the status of a regular employee,[47] he is entitled
to the security of tenure provided under the labor laws. Hence, he may only be validly terminated from service
upon compliance with the legal requisites for dismissal. Under the Labor Code, the requirements for the lawful
dismissal of an employee are two-fold, the substantive and the procedural aspects. Not only must the
dismissal be for a valid or authorized cause,[48] the rudimentary requirements of due process - notice and
hearing[49] must, likewise, be observed before an employee may be dismissed. Without the concurrence of the
two, the termination would, in the eyes of the law, be illegal.[50]
As the employer, RFC has the burden of proving that the dismissal of petitioner was for a cause allowed under
the law and that petitioner was afforded procedural due process. Sad to say, RFC failed to discharge this
burden. Indeed, RFC never pointed to any valid or authorized cause under the Labor Code which allowed it to
terminate the services of petitioner. Its lone allegation that the dismissal was due to the expiration or
completion of contract is not even one of the grounds for termination allowed by law. Neither did RFC show
that petitioner was given ample opportunity to contest the legality of his dismissal. In fact, no notice of such
impending termination was ever given him. Petitioner was, thus, surprised that he was already terminated from
employment without any inkling as to how and why it came about. Petitioner was definitely denied due
process. Having failed to establish compliance with the requirements on termination of employment under the
Labor Code, the dismissal of petitioner is tainted with illegality.

The Court takes judicial notice of the practice of employers who, in order to evade the liabilities under the
Labor Code, do not issue payslips directly to their employees.[40] Under the current practice, a third person,
usually the purported contractor (service or manpower placement agency), assumes the act of paying the
wage.[41] For this reason, the lowly worker is unable to show proof that it was directly paid by the true
employer. Nevertheless, for the workers, it is enough that they actually receive their pay, oblivious of the need
for payslips, unaware of its legal implications.[42] Applying this principle to the case at bar, even though the
wages were coursed through PMCI, we note that the funds actually came from the pockets of RFC. Thus, in
the end, RFC is still the one who paid the wages of petitioner albeit indirectly.
An employee who has been illegally dismissed is entitled to reinstatement to his former position without loss of
seniority rights and to payment of full backwages corresponding to the period from his illegal dismissal up to
actual reinstatement.[51] Petitioner is entitled to no less.
WHEREFORE, the petition is GRANTED. The decision of the NLRC, dated 21 June 1996, as well as its
resolution, promulgated on 20 August 1996, are ANNULLED and SET ASIDE. The decision of the Labor
Arbiter rendered on 15 June 1994, is hereby REINSTATED and AFFIRMED.

As to the third element, the power to dismiss, RFC avers that it was PMCI who terminated the employment of
petitioner. The facts on record, however, disprove the allegation of RFC. First of all, the Contract of Service SO ORDERED.
gave RFC the right to terminate the workers assigned to it by PMCI without the latters approval. Quoted
hereunder is the portion of the contract stating the power of RFC to dismiss, to wit:

7. The First party ("RFC") reserves the right to terminate the services of any worker
found to be unsatisfactory without the prior approval of the second party ("PMCI").[43]

In furtherance of the above provision, RFC requested PMCI to terminate petitioner from his employment with
the company. In response to the request of RFC, PMCI terminated petitioner from service. As found by the
Labor Arbiter, to which we agree, the dismissal of petitioner was indeed made under the instruction of RFC to
PMCI.

The fourth and most important requirement in ascertaining the presence of employer-employee relationship is
the power of control. The power of control refers to the authority of the employer to control the employee not
only with regard to the result of work to be done but also to the means and methods by which the work is to be
accomplished.[44] It should be borne in mind, that the "control test" calls merely for the existence of the right to
control the manner of doing the work, and not necessarily to the actual exercise of the right.[45] In the case at
bar, we need not belabor ourselves in discussing whether the power of control exists. RFC already admitted
that it exercised control and supervision over petitioner.[46] RFC, however, raises the defense that the power of
control was jointly exercised with PMCI. The Labor Arbiter, on the other hand, found that petitioner was under
the direct control and supervision of the personnel of RFC and not PMCI. We are inclined to believe the
findings of the Labor Arbiter which is supported not only by the admission of RFC but also by the evidence on
record. Besides, to our mind, the admission of RFC that it exercised control and supervision over petitioner,
the same being a declaration against interest, is sufficient enough to prove that the power of control truly
exists.

We, therefore, hold that an employer-employee relationship exists between petitioner and RFC.

Having determined the real employer of petitioner, we now proceed to ascertain the legality of his dismissal
from employment.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 87700 June 13, 1990
SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, DANIEL S.L. BORBON II, HERMINIA
REYES, MARCELA PURIFICACION, ET AL., petitioners,
vs.
HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 166, RTC, PASIG,
and SAN MIGUEL CORPORATION, respondents.
Romeo C. Lagman for petitioners.
Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for respondents.
MELENCIO-HERRERA, J.:
Respondent Judge of the Regional Trial Court of Pasig, Branch 166, is taken to task by petitioners in this
special civil action for certiorari and Prohibition for having issued the challenged Writ of Preliminary Injunction
on 29 March 1989 in Civil Case No. 57055 of his Court entitled "San Miguel Corporation vs. SMCEU-PTGWO,
et als."
Petitioners' plea is that said Writ was issued without or in excess of jurisdiction and with grave abuse of
discretion, a labor dispute being involved. Private respondent San Miguel Corporation (SanMig. for short), for
its part, defends the Writ on the ground of absence of any employer-employee relationship between it and the
contractual workers employed by the companies Lipercon Services, Inc. (Lipercon) and D'Rite Service
Enterprises (D'Rite), besides the fact that the Union is bereft of personality to represent said workers for
purposes of collective bargaining. The Solicitor General agrees with the position of SanMig.
The antecedents of the controversy reveal that:
Sometime in 1983 and 1984, SanMig entered into contracts for merchandising services with Lipercon and
D'Rite (Annexes K and I, SanMig's Comment, respectively). These companies are independent contractors
duly licensed by the Department of Labor and Employment (DOLE). SanMig entered into those contracts to
maintain its competitive position and in keeping with the imperatives of efficiency, business expansion and
diversity of its operation. In said contracts, it was expressly understood and agreed that the workers employed
by the contractors were to be paid by the latter and that none of them were to be deemed employees or
agents of SanMig. There was to be no employer-employee relation between the contractors and/or its
workers, on the one hand, and SanMig on the other.
Petitioner San Miguel Corporation Employees Union-PTWGO (the Union, for brevity) is the duly authorized
representative of the monthly paid rank-and-file employees of SanMig with whom the latter executed a
Collective Bargaining Agreement (CBA) effective 1 July 1986 to 30 June 1989 (Annex A, SanMig's Comment).
Section 1 of their CBA specifically provides that "temporary, probationary, or contract employees and workers
are excluded from the bargaining unit and, therefore, outside the scope of this Agreement."
In a letter, dated 20 November 1988 (Annex C, Petition), the Union advised SanMig that some Lipercon and
D'Rite workers had signed up for union membership and sought the regularization of their employment with
SMC. The Union alleged that this group of employees, while appearing to be contractual workers supposedly
independent contractors, have been continuously working for SanMig for a period ranging from six (6) months
to fifteen (15) years and that their work is neither casual nor seasonal as they are performing work or activities
necessary or desirable in the usual business or trade of SanMig. Thus, it was contended that there exists a
"labor-only" contracting situation. It was then demanded that the employment status of these workers be
regularized.
On 12 January 1989 on the ground that it had failed to receive any favorable response from SanMig, the
Union filed a notice of strike for unfair labor practice, CBA violations, and union busting (Annex D, Petition).
On 30 January 1989, the Union again filed a second notice of strike for unfair labor practice (Annex F,
Petition).
As in the first notice of strike. Conciliatory meetings were held on the second notice. Subsequently, the two (2)
notices of strike were consolidated and several conciliation conferences were held to settle the dispute before
the National Conciliation and Mediation Board (NCMB) of DOLE (Annex G, Petition).
Beginning 14 February 1989 until 2 March 1989, series of pickets were staged by Lipercon and D'Rite workers
in various SMC plants and offices.
On 6 March 1989, SMC filed a verified Complaint for Injunction and Damages before respondent Court to
enjoin the Union from:
a. representing and/or acting for and in behalf of the employees of LIPERCON and/or
D'RITE for the purposes of collective bargaining;
b. calling for and holding a strike vote, to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE;
c. inciting, instigating and/or inducing the employees or workers of LIPERCON and
D'RITE to demonstrate and/or picket at the plants and offices of plaintiff within the
bargaining unit referred to in the CBA,...;
d. staging a strike to compel plaintiff to hire the employees or workers of LIPERCON
and D'RITE;
e. using the employees or workers of LIPERCON AND D'RITE to man the strike area
and/or picket lines and/or barricades which the defendants may set up at the plants
and offices of plaintiff within the bargaining unit referred to in the CBA ...;
f. intimidating, threatening with bodily harm and/or molesting the other employees
and/or contract workers of plaintiff, as well as those persons lawfully transacting
business with plaintiff at the work places within the bargaining unit referred to in the
CBA, ..., to compel plaintiff to hire the employees or workers of LIPERCON and
D'RITE;
g. blocking, preventing, prohibiting, obstructing and/or impeding the free ingress to,
and egress from, the work places within the bargaining unit referred to in the CBA .., to
compel plaintiff to hire the employees or workers of LIPERCON and D'RITE;
h. preventing and/or disrupting the peaceful and normal operation of plaintiff at the
work places within the bargaining unit referred to in the CBA, Annex 'C' hereof, to
compel plaintiff to hire the employees or workers of LIPERCON and D'RITE. (Annex H,
Petition)
Respondent Court found the Complaint sufficient in form and substance and issued a Temporary Restraining
Order for the purpose of maintaining the status quo, and set the application for Injunction for hearing.
In the meantime, on 13 March 1989, the Union filed a Motion to Dismiss SanMig's Complaint on the ground of
lack of jurisdiction over the case/nature of the action, which motion was opposed by SanMig. That Motion was
denied by respondent Judge in an Order dated 11 April 1989.
After several hearings on SanMig's application for injunctive relief, where the parties presented both
testimonial and documentary evidence on 25 March 1989, respondent Court issued the questioned Order
(Annex A, Petition) granting the application and enjoining the Union from Committing the acts complained
of, supra. Accordingly, on 29 March 1989, respondent Court issued the corresponding Writ of Preliminary
Injunction after SanMig had posted the required bond of P100,000.00 to answer for whatever damages
petitioners may sustain by reason thereof.
In issuing the Injunction, respondent Court rationalized:
The absence of employer-employee relationship negates the existence of labor
dispute. Verily, this court has jurisdiction to take cognizance of plaintiff's grievance.
The evidence so far presented indicates that plaintiff has contracts for services with
Lipercon and D'Rite. The application and contract for employment of the defendants'
witnesses are either with Lipercon or D'Rite. What could be discerned is that there is
no employer-employee relationship between plaintiff and the contractual workers
employed by Lipercon and D'Rite. This, however, does not mean that a final
determination regarding the question of the existence of employer-employee
relationship has already been made. To finally resolve this dispute, the court must
extensively consider and delve into the manner of selection and engagement of the
putative employee; the mode of payment of wages; the presence or absence of a
power of dismissal; and the Presence or absence of a power to control the putative
employee's conduct. This necessitates a full-blown trial. If the acts complained of are
not restrained, plaintiff would, undoubtedly, suffer irreparable damages. Upon the other
hand, a writ of injunction does not necessarily expose defendants to irreparable
damages.
Evidently, plaintiff has established its right to the relief demanded. (p. 21, Rollo)
Anchored on grave abuse of discretion, petitioners are now before us seeking nullification of the challenged
Writ. On 24 April 1989, we issued a Temporary Restraining Order enjoining the implementation of the
Injunction issued by respondent Court. The Union construed this to mean that "we can now strike," which it
superimposed on the Order and widely circulated to entice the Union membership to go on strike. Upon being
apprised thereof, in a Resolution of 24 May 1989, we required the parties to "RESTORE the status quo
ante declaration of strike" (p. 2,62 Rollo).
In the meantime, however, or on 2 May 1989, the Union went on strike. Apparently, some of the contractual
workers of Lipercon and D'Rite had been laid off. The strike adversely affected thirteen (13) of the latter's
plants and offices.
On 3 May 1989, the National Conciliation and Mediation Board (NCMB) called the parties to conciliation. The
Union stated that it would lift the strike if the thirty (30) Lipercon and D'Rite employees were recalled, and
discussion on their other demands, such as wage distortion and appointment of coordinators, were made.
Effected eventually was a Memorandum of Agreement between SanMig and the Union that "without prejudice
to the outcome of G.R. No. 87700 (this case) and Civil Case No. 57055 (the case below), the laid-off
individuals ... shall be recalled effective 8 May 1989 to their former jobs or equivalent positions under the
same terms and conditions prior to "lay-off" (Annex 15, SanMig Comment). In turn, the Union would
immediately lift the pickets and return to work.
After an exchange of pleadings, this Court, on 12 October 1989, gave due course to the Petition and required
the parties to submit their memoranda simultaneously, the last of which was filed on 9 January 1990.
The focal issue for determination is whether or not respondent Court correctly assumed jurisdiction over the
present controversy and properly issued the Writ of Preliminary Injunction to the resolution of that question, is
the matter of whether, or not the case at bar involves, or is in connection with, or relates to a labor dispute. An
affirmative answer would bring the case within the original and exclusive jurisdiction of labor tribunals to the
exclusion of the regular Courts.
Petitioners take the position that 'it is beyond dispute that the controversy in the court a quo involves or arose
out of a labor dispute and is directly connected or interwoven with the cases pending with the NCMB-DOLE,
and is thus beyond the ambit of the public respondent's jurisdiction. That the acts complained of (i.e., the mass
concerted action of picketing and the reliefs prayed for by the private respondent) are within the competence
of labor tribunals, is beyond question" (pp. 6-7, Petitioners' Memo).
On the other hand, SanMig denies the existence of any employer-employee relationship and consequently of
any labor dispute between itself and the Union. SanMig submits, in particular, that "respondent Court is vested
with jurisdiction and judicial competence to enjoin the specific type of strike staged by petitioner union and its
officers herein complained of," for the reasons that:
A. The exclusive bargaining representative of an employer unit cannot strike to compel
the employer to hire and thereby create an employment relationship with contractual
workers, especially were the contractual workers were recognized by the union, under
the governing collective bargaining agreement, as excluded from, and therefore
strangers to, the bargaining unit.
B. A strike is a coercive economic weapon granted the bargaining representative only
in the event of a deadlock in a labor dispute over 'wages, hours of work and all other
and of the employment' of the employees in the unit. The union leaders cannot
instigate a strike to compel the employer, especially on the eve of certification
elections, to hire strangers or workers outside the unit, in the hope the latter will help
re-elect them.
C. Civil courts have the jurisdiction to enjoin the above because this specie of strike
does not arise out of a labor dispute, is an abuse of right, and violates the employer's
constitutional liberty to hire or not to hire. (SanMig's Memorandum, pp. 475-476, Rollo).
We find the Petition of a meritorious character.
A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any controversy or matter
concerning terms and conditions of employment or the association or representation of persons in negotiating,
fixing, maintaining, changing, or arranging the terms and conditions of employment, regardless of whether the
disputants stand in the proximate relation of employer and employee."
While it is SanMig's submission that no employer-employee relationship exists between itself, on the one
hand, and the contractual workers of Lipercon and D'Rite on the other, a labor dispute can nevertheless exist
"regardless of whether the disputants stand in the proximate relationship of employer and employee" (Article
212 [1], Labor Code, supra) provided the controversy concerns, among others, the terms and conditions of
employment or a "change" or "arrangement" thereof (ibid). Put differently, and as defined by law, the existence
of a labor dispute is not negative by the fact that the plaintiffs and defendants do not stand in the proximate
relation of employer and employee.
That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union seeks is to
regularize the status of the employees contracted by Lipercon and D'Rite in effect, that they be absorbed into
the working unit of SanMig. This matter definitely dwells on the working relationship between said employees
vis-a-vis SanMig. Terms, tenure and conditions of their employment and the arrangement of those terms are
thus involved bringing the matter within the purview of a labor dispute. Further, the Union also seeks to
represent those workers, who have signed up for Union membership, for the purpose of collective bargaining.
SanMig, for its part, resists that Union demand on the ground that there is no employer-employee relationship
between it and those workers and because the demand violates the terms of their CBA. Obvious then is that
representation and association, for the purpose of negotiating the conditions of employment are also involved.
In fact, the injunction sought by SanMig was precisely also to prevent such representation. Again, the matter
of representation falls within the scope of a labor dispute. Neither can it be denied that the controversy below
is directly connected with the labor dispute already taken cognizance of by the NCMB-DOLE (NCMB-NCR-
NS-01- 021-89; NCMB NCR NS-01-093-83).
Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and D'Rite
constitute "labor-only" contracting and, therefore, a regular employer-employee relationship may, in fact, be
said to exist; whether or not the Union can lawfully represent the workers of Lipercon and D'Rite in their
demands against SanMig in the light of the existing CBA; whether or not the notice of strike was valid and the
strike itself legal when it was allegedly instigated to compel the employer to hire strangers outside the working
unit; those are issues the resolution of which call for the application of labor laws, and SanMig's cause's of
action in the Court below are inextricably linked with those issues.
The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13 SCRA 738) relied upon by
SanMig is not controlling as in that case there was no controversy over terms, tenure or conditions, of
employment or the representation of employees that called for the application of labor laws. In that case, what
the petitioning union demanded was not a change in working terms and conditions, or the representation of
the employees, but that its members be hired as stevedores in the place of the members of a rival union,
which petitioners wanted discharged notwithstanding the existing contract of the arrastre company with the
latter union. Hence, the ruling therein, on the basis of those facts unique to that case, that such a demand
could hardly be considered a labor dispute.
As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor tribunals. As explicitly
provided for in Article 217 of the Labor Code, prior to its amendment by R.A. No. 6715 on 21 March 1989,
since the suit below was instituted on 6 March 1989, Labor Arbiters have original and exclusive jurisdiction to
hear and decide the following cases involving all workers including "1. unfair labor practice cases; 2. those that
workers may file involving wages, hours of work and other terms and conditions of employment; ... and 5.
cases arising from any violation of Article 265 of this Code, including questions involving the legality of striker
and lockouts. ..." Article 217 lays down the plain command of the law.
The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of the Civil Code would
not suffice to keep the case within the jurisdictional boundaries of regular Courts. That claim for damages is
interwoven with a labor dispute existing between the parties and would have to be ventilated before the
administrative machinery established for the expeditious settlement of those disputes. To allow the action filed
below to prosper would bring about "split jurisdiction" which is obnoxious to the orderly administration of justice
(Philippine Communications, Electronics and Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29
July 1968, 24 SCRA 321).
We recognize the proprietary right of SanMig to exercise an inherent management prerogative and its best
business judgment to determine whether it should contract out the performance of some of its work to
independent contractors. However, the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with law (Section 3,
Article XIII, 1987 Constitution) equally call for recognition and protection. Those contending interests must be
placed in proper perspective and equilibrium.
WHEREFORE, the Writ of certiorari is GRANTED and the Orders of respondent Judge of 25 March 1989 and
29 March 1989 are SET ASIDE. The Writ of Prohibition is GRANTED and respondent Judge is enjoined from
taking any further action in Civil Case No. 57055 except for the purpose of dismissing it. The status quo ante
declaration of strike ordered by the Court on 24 May 1989 shall be observed pending the proceedings in the
National Conciliation Mediation Board-Department of Labor and Employment, docketed as NCMB-NCR-NS-
01-02189 and NCMB-NCR-NS-01-093-83. No costs.
SO ORDERED.
SECOND DIVISION
[G.R. No. 118978. May 23, 1997]
PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY,* petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and GRACE DE GUZMAN, respondents.
DECISION
REGALADO, J.:
Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and Telephone
Company (hereafter, PT&T) invokes the alleged concealment of civil status and defalcation of company funds
as grounds to terminate the services of an employee. That employee, herein private respondent Grace de
Guzman, contrarily argues that what really motivated PT&T to terminate her services was her having
contracted marriage during her employment, which is prohibited by petitioner in its company policies. She thus
claims that she was discriminated against in gross violation of law, such a proscription by an employer being
outlawed by Article 136 of the Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever, specifically as a Supernumerary Project
Worker, for a fixed period from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio who went on
maternity leave.[1] Under the Reliever Agreement which she signed with petitioner company, her employment
was to be immediately terminated upon expiration of the agreed period. Thereafter, from June 10, 1991 to July
1, 1991, and from July 19, 1991 to August 8, 1991, private respondents services as reliever were again
engaged by petitioner, this time in replacement of one Erlinda F. Dizon who went on leave during both
periods.[2] After August 8, 1991, and pursuant to their Reliever Agreement, her services were terminated.
On September 2, 1991, private respondent was once more asked to join petitioner company as a
probationary employee, the probationary period to cover 150 days. In the job application form that was
furnished her to be filled up for the purpose, she indicated in the portion for civil status therein that she was
single although she had contracted marriage a few months earlier, that is, on May 26, 1991.[3]
It now appears that private respondent had made the same representation in the two successive
reliever agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner supposedly
learned about the same later, its branch supervisor in Baguio City, Delia M. Oficial, sent to private respondent
a memorandum dated January 15, 1992 requiring her to explain the discrepancy. In that memorandum, she
was reminded about the companys policy of not accepting married women for employment.[4]
In her reply letter dated January 17, 1992, private respondent stated that she was not aware of PT&Ts
policy regarding married women at the time, and that all along she had not deliberately hidden her true civil
[5]
status. Petitioner nonetheless remained unconvinced by her explanations. Private respondent was dismissed
from the company effective January 29, 1992,[6] which she readily contested by initiating a complaint for illegal
dismissal, coupled with a claim for non-payment of cost of living allowances (COLA), before the Regional
Arbitration Branch of the National Labor Relations Commission in Baguio City.
At the preliminary conference conducted in connection therewith, private respondent volunteered the
information, and this was incorporated in the stipulation of facts between the parties, that she had failed to
remit the amount of P2,380.75 of her collections. She then executed a promissory note for that amount in
favor of petitioner.[7] All of these took place in a formal proceeding and with the agreement of the parties and/or
their counsel.
On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring that
private respondent, who had already gained the status of a regular employee, was illegally dismissed by
petitioner. Her reinstatement, plus payment of the corresponding back wages and COLA, was correspondingly
ordered, the labor arbiter being of the firmly expressed view that the ground relied upon by petitioner in
dismissing private respondent was clearly insufficient, and that it was apparent that she had been
discriminated against on account of her having contracted marriage in violation of company rules.
On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld the
labor arbiter and, in its decision dated April 29, 1994, it ruled that private respondent had indeed been the
subject of an unjust and unlawful discrimination by her employer, PT&T. However, the decision of the labor
arbiter was modified with the qualification that Grace de Guzman deserved to be suspended for three months
in view of the dishonest nature of her acts which should not be condoned. In all other respects, the NLRC
affirmed the decision of the labor arbiter, including the order for the reinstatement of private respondent in her
employment with PT&T.
The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC in its
resolution of November 9, 1994, hence this special civil action assailing the aforestated decisions of the labor
arbiter and respondent NLRC, as well as the denial resolution of the latter.
1. Decreed in the Bible itself is the universal norm that women should be regarded with love and
respect but, through the ages, men have responded to that injunction with indifference, on the hubristic conceit
that women constitute the inferior sex. Nowhere has that prejudice against womankind been so pervasive as
in the field of labor, especially on the matter of equal employment opportunities and standards. In the
Philippine setting, women have traditionally been considered as falling within the vulnerable groups or types of
workers who must be safeguarded with preventive and remedial social legislation against discriminatory and
exploitative practices in hiring, training, benefits, promotion and retention.
The Constitution, cognizant of the disparity in rights between men and women in almost all phases of
social and political life, provides a gamut of protective provisions. To cite a few of the primordial ones, Section
14, Article II[8] on the Declaration of Principles and State Policies, expressly recognizes the role of women in
nation-building and commands the State to ensure, at all times, the fundamental equality before the law of
women and men. Corollary thereto, Section 3 of Article XIII[9] (the progenitor whereof dates back to both the
1935 and 1973 Constitution) pointedly requires the State to afford full protection to labor and to promote full
employment and equality of employment opportunities for all, including an assurance of entitlement to tenurial
security of all workers. Similarly, Section 14 of Article XIII[10] mandates that the State shall protect working
women through provisions for opportunities that would enable them to reach their full potential.
2. Corrective labor and social laws on gender inequality have emerged with more frequency in the
years since the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442, largely due to our
countrys commitment as a signatory to the United Nations Convention on the Elimination of All Forms of
Discrimination Against Women (CEDAW).[11]
Principal among these laws are Republic Act No. 6727[12] which explicitly prohibits discrimination
against women with respect to terms and conditions of employment, promotion, and training opportunities;
Republic Act No. 6955[13] which bans the mail-order-bride practice for a fee and the export of female labor to
countries that cannot guarantee protection to the rights of women workers; Republic Act No. 7192,[14]also
known as the Women in Development and Nation Building Act, which affords women equal opportunities with
men to act and to enter into contracts, and for appointment, admission, training, graduation, and
commissioning in all military or similar schools of the Armed Forces of the Philippines and the Philippine
National Police; Republic Act No. 7322[15] increasing the maternity benefits granted to women in the private
sector; Republic Act No. 7877[16] which outlaws and punishes sexual harassment in the workplace and in the
education and training environment; and Republic Act No. 8042,[17] or the Migrant Workers and Overseas
Filipinos Act of 1995, which prescribes as a matter of policy, inter alia, the deployment of migrant workers, with
emphasis on women, only in countries where their rights are secure. Likewise, it would not be amiss to point
out that in the Family Code,[18] womens rights in the field of civil law have been greatly enhanced and
expanded.
In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to 138
thereof. Article 130 involves the right against particular kinds of night work while Article 132 ensures the right
of women to be provided with facilities and standards which the Secretary of Labor may establish to ensure
their health and safety. For purposes of labor and social legislation, a woman working in a nightclub, cocktail
lounge, massage clinic, bar or other similar establishments shall be considered as an employee under Article
138. Article 135, on the other hand, recognizes a womans right against discrimination with respect to terms
and conditions of employment on account simply of sex. Finally, and this brings us to the issue at hand, Article
136 explicitly prohibits discrimination merely by reason of the marriage of a female employee.
3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of protection
to labor and security of tenure. Thus, an employer is required, as a condition sine qua non prior to severance
of the employment ties of an individual under his employ, to convincingly establish, through substantial
evidence, the existence of a valid and just cause in dispensing with the services of such employee, ones labor
being regarded as constitutionally protected property.
On the other hand, it is recognized that regulation of manpower by the company falls within the so-
called management prerogatives, which prescriptions encompass the matter of hiring, supervision of workers,
work assignments, working methods and assignments, as well as regulations on the transfer of employees,
lay-off of workers, and the discipline, dismissal, and recall of employees.[19] As put in a case, an employer is
free to regulate, according to his discretion and best business judgment, all aspects of employment, from
hiring to firing, except in cases of unlawful discrimination or those which may be provided by law.[20]
In the case at bar, petitioners policy of not accepting or considering as disqualified from work any
woman worker who contracts marriage runs afoul of the test of, and the right against, discrimination, afforded
all women workers by our labor laws and by no less than the Constitution. Contrary to petitioners assertion
that it dismissed private respondent from employment on account of her dishonesty, the record discloses
clearly that her ties with the company were dissolved principally because of the companys policy that married
women are not qualified for employment in PT&T, and not merely because of her supposed acts of
dishonesty.
That it was so can easily be seen from the memorandum sent to private respondent by Delia M. Oficial,
the branch supervisor of the company, with the reminder, in the words of the latter, that youre fully aware that
the company is not accepting married women employee (sic), as it was verbally instructed to you. [21] Again, in
the termination notice sent to her by the same branch supervisor, private respondent was made to understand
that her severance from the service was not only by reason of her concealment of her married status but, over
and on top of that, was her violation of the companys policy against marriage (and even told you that married
women employees are not applicable [sic] or accepted in our company.) [22] Parenthetically, this seems to be
the curious reason why it was made to appear in the initiatory pleadings that petitioner was represented in this
case only by its said supervisor and not by its highest ranking officers who would otherwise be solidarily liable
with the corporation.[23]
Verily, private respondents act of concealing the true nature of her status from PT&T could not be
properly characterized as willful or in bad faith as she was moved to act the way she did mainly because she
wanted to retain a permanent job in a stable company. In other words, she was practically forced by that very
same illegal company policy into misrepresenting her civil status for fear of being disqualified from work. While
loss of confidence is a just cause for termination of employment, it should not be simulated.[24] It must rest on
an actual breach of duty committed by the employee and not on the employers caprices.[25] Furthermore, it
should never be used as a subterfuge for causes which are improper, illegal, or unjustified.[26]
In the present controversy, petitioners expostulations that it dismissed private respondent, not because
the latter got married but because she concealed that fact, does have a hollow ring. Her concealment, so it is
claimed, bespeaks dishonesty hence the consequent loss of confidence in her which justified her
dismissal. Petitioner would asseverate, therefore, that while it has nothing against marriage, it nonetheless
takes umbrage over the concealment of that fact. This improbable reasoning, with interstitial distinctions,
perturbs the Court since private respondent may well be minded to claim that the imputation of dishonesty
should be the other way around.
Petitioner would have the Court believe that although private respondent defied its policy against its
female employees contracting marriage, what could be an act of insubordination was inconsequential. What it
submits as unforgivable is her concealment of that marriage yet, at the same time, declaring that marriage as
a trivial matter to which it supposedly has no objection. In other words, PT&T says it gives its blessings to its
female employees contracting marriage, despite the maternity leaves and other benefits it would consequently
respond for and which obviously it would have wanted to avoid. If that employee confesses such fact of
marriage, there will be no sanction; but if such employee conceals the same instead of proceeding to the
confessional, she will be dismissed. This line of reasoning does not impress us as reflecting its true
management policy or that we are being regaled with responsible advocacy.
This Court should be spared the ennui of strained reasoning and the tedium of propositions which
confuse through less than candid arguments. Indeed, petitioner glosses over the fact that it was its unlawful
policy against married women, both on the aspects of qualification and retention, which compelled private
respondent to conceal her supervenient marriage. It was, however, that very policy alone which was the cause
of private respondents secretive conduct now complained of. It is then apropos to recall the familiar saying
that he who is the cause of the cause is the cause of the evil caused.
Finally, petitioners collateral insistence on the admission of private respondent that she supposedly
misappropriated company funds, as an additional ground to dismiss her from employment, is somewhat
insincere and self-serving. Concededly, private respondent admitted in the course of the proceedings that she
failed to remit some of her collections, but that is an altogether different story. The fact is that she was
dismissed solely because of her concealment of her marital status, and not on the basis of that supposed
defalcation of company funds. That the labor arbiter would thus consider petitioners submissions on this
supposed dishonesty as a mere afterthought, just to bolster its case for dismissal, is a perceptive conclusion
born of experience in labor cases. For, there was no showing that private respondent deliberately
misappropriated the amount or whether her failure to remit the same was through negligence and, if so,
whether the negligence was in nature simple or grave. In fact, it was merely agreed that private respondent
execute a promissory note to refund the same, which she did, and the matter was deemed settled as a
peripheral issue in the labor case.
Private respondent, it must be observed, had gained regular status at the time of her dismissal. When
she was served her walking papers on January 29, 1992, she was about to complete the probationary period
of 150 days as she was contracted as a probationary employee on September 2, 1991. That her dismissal
would be effected just when her probationary period was winding down clearly raises the plausible conclusion
that it was done in order to prevent her from earning security of tenure. [27] On the other hand, her earlier stints
with the company as reliever were undoubtedly those of a regular employee, even if the same were for fixed
periods, as she performed activities which were essential or necessary in the usual trade and business of
PT&T.[28] The primary standard of determining regular employment is the reasonable connection between the
activity performed by the employee in relation to the business or trade of the employer.[29]
As an employee who had therefore gained regular status, and as she had been dismissed without just
cause, she is entitled to reinstatement without loss of seniority rights and other privileges and to full back
wages, inclusive of allowances and other benefits or their monetary equivalent.[30] However, as she had
undeniably committed an act of dishonesty in concealing her status, albeit under the compulsion of an
unlawful imposition of petitioner, the three-month suspension imposed by respondent NLRC must be upheld to
obviate the impression or inference that such act should be condoned. It would be unfair to the employer if she
were to return to its fold without any sanction whatsoever for her act which was not totally justified. Thus, her
entitlement to back wages, which shall be computed from the time her compensation was withheld up to the
time of her actual reinstatement, shall be reduced by deducting therefrom the amount corresponding to her
three months suspension.
4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by petitioner
PT&T. The Labor Code states, in no uncertain terms, as follows:
ART. 136. Stipulation against marriage. - It shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman shall not get married, or to stipulate expressly or
tacitly that upon getting married, a woman employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of marriage.
This provision had a studied history for its origin can be traced to Section 8 of Presidential Decree No.
148,[31] better known as the Women and Child Labor Law, which amended paragraph (c), Section 12 of
Republic Act No. 679,[32] entitled An Act to Regulate the Employment of Women and Children, to Provide
Penalties for Violations Thereof, and for Other Purposes. The forerunner to Republic Act No. 679, on the other
hand, was Act No. 3071 which became law on March 16, 1923 and which regulated the employment of
women and children in shops, factories, industrial, agricultural, and mercantile establishments and other
places of labor in the then Philippine Islands.
It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et al. vs. Philippine
Air Lines,[33] a decision that emanated from the Office of the President. There, a policy of Philippine Air Lines
requiring that prospective flight attendants must be single and that they will be automatically separated from
the service once they marry was declared void, it being violative of the clear mandate in Article 136 of the
Labor Code with regard to discrimination against married women. Thus:
Of first impression is the incompatibility of the respondents policy or regulation with the codal provision of
law. Respondent is resolute in its contention that Article 136 of the Labor Code applies only to women
employed in ordinary occupations and that the prohibition against marriage of women engaged in
extraordinary occupations, like flight attendants, is fair and reasonable, considering the pecularities of their
chosen profession.
We cannot subscribe to the line of reasoning pursued by respondent. All along, it knew that the controverted
policy has already met its doom as early as March 13, 1973 when Presidential Decree No. 148, otherwise
known as the Women and Child Labor Law, was promulgated. But for the timidity of those affected or their
labor unions in challenging the validity of the policy, the same was able to obtain a momentary reprieve. A
close look at Section 8 of said decree, which amended paragraph (c) of Section 12 of Republic Act No. 679,
reveals that it is exactly the same provision reproduced verbatim in Article 136 of the Labor Code, which was
promulgated on May 1, 1974 to take effect six (6) months later, or on November 1, 1974.
It cannot be gainsaid that, with the reiteration of the same provision in the new Labor Code, all policies and
acts against it are deemed illegal and therefore abrogated. True, Article 132 enjoins the Secretary of Labor to
establish standards that will ensure the safety and health of women employees and in appropriate cases shall
by regulation require employers to determine appropriate minimum standards for termination in special
occupations, such as those of flight attendants, but that is precisely the factor that militates against the policy
of respondent. The standards have not yet been established as set forth in the first paragraph, nor has the
Secretary of Labor issued any regulation affecting flight attendants.
It is logical to presume that, in the absence of said standards or regulations which are as yet to be established,
the policy of respondent against marriage is patently illegal. This finds support in Section 9 of the New
Constitution, which provides:
Sec. 9. The State shall afford protection to labor, promote full employment and equality in employment, ensure
equal work opportunities regardless of sex, race, or creed, and regulate the relations between workers and
employees. The State shall assure the rights of workers to self-organization, collective bargaining, security of
tenure, and just and humane conditions of work x x x.
Moreover, we cannot agree to the respondents proposition that termination from employment of flight
attendants on account of marriage is a fair and reasonable standard designed for their own health, safety,
protection and welfare, as no basis has been laid therefor. Actually, respondent claims that its concern is not
so much against the continued employment of the flight attendant merely by reason of marriage as observed
by the Secretary of Labor, but rather on the consequence of marriage-pregnancy. Respondent discussed at
length in the instant appeal the supposed ill effects of pregnancy on flight attendants in the course of their
employment. We feel that this needs no further discussion as it had been adequately explained by the
Secretary of Labor in his decision of May 2, 1976.
In a vain attempt to give meaning to its position, respondent went as far as invoking the provisions of Articles
52 and 216 of the New Civil Code on the preservation of marriage as an inviolable social institution and the
family as a basic social institution, respectively, as bases for its policy of non-marriage. In both instances,
respondent predicates absence of a flight attendant from her home for long periods of time as contributory to
an unhappy married life. This is pure conjecture not based on actual conditions, considering that, in this
modern world, sophisticated technology has narrowed the distance from one place to another. Moreover,
respondent overlooked the fact that married flight attendants can program their lives to adapt to prevailing
circumstances and events.
Article 136 is not intended to apply only to women employed in ordinary occupations, or it should have
categorically expressed so. The sweeping intendment of the law, be it on special or ordinary occupations, is
reflected in the whole text and supported by Article 135 that speaks of non-discrimination on the employment
of women.
The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial
Corporation[34] considered as void a policy of the same nature. In said case, respondent, in dismissing from
the service the complainant, invoked a policy of the firm to consider female employees in the project it was
undertaking as separated the moment they get married due to lack of facilities for married women.Respondent
further claimed that complainant was employed in the project with an oral understanding that her services
would be terminated when she gets married. Branding the policy of the employer as an example of
discriminatory chauvinism tantamount to denying equal employment opportunities to women simply on
account of their sex, the appellate court struck down said employer policy as unlawful in view of its
repugnance to the Civil Code, Presidential Decree No. 148 and the Constitution.
Under American jurisprudence, job requirements which establish employer preference or conditions
relating to the marital status of an employee are categorized as a sex-plus discrimination where it is imposed
on one sex and not on the other. Further, the same should be evenly applied and must not inflict adverse
effects on a racial or sexual group which is protected by federal job discrimination laws. Employment rules that
forbid or restrict the employment of married women, but do not apply to married men, have been held to
violate Title VII of the United States Civil Rights Act of 1964, the main federal statute prohibiting job
discrimination against employees and applicants on the basis of, among other things, sex.[35]
Further, it is not relevant that the rule is not directed against all women but just against married
women. And, where the employer discriminates against married women, but not against married men, the
variable is sex and the discrimination is unlawful.[36] Upon the other hand, a requirement that a woman
employee must remain unmarried could be justified as a bona fide occupational qualification, or BFOQ, where
the particular requirements of the job would justify the same, but not on the ground of a general principle, such
as the desirability of spreading work in the workplace. A requirement of that nature would be valid provided it
reflects an inherent quality reasonably necessary for satisfactory job performance. Thus, in one case, a no-
marriage rule applicable to both male and female flight attendants, was regarded as unlawful since the
restriction was not related to the job performance of the flight attendants.[37]
5. Petitioners policy is not only in derogation of the provisions of Article 136 of the Labor Code on the
right of a woman to be free from any kind of stipulation against marriage in connection with her employment,
but it likewise assaults good morals and public policy, tending as it does to deprive a woman of the freedom to
choose her status, a privilege that by all accounts inheres in the individual as an intangible and inalienable
right.[38] Hence, while it is true that the parties to a contract may establish any agreements, terms, and
conditions that they may deem convenient, the same should not be contrary to law, morals, good customs,
public order, or public policy.[39] Carried to its logical consequences, it may even be said that petitioners policy
against legitimate marital bonds would encourage illicit or common-law relations and subvert the sacrament of
marriage.

Parenthetically, the Civil Code provisions on the contract of labor state that the relations between the
parties, that is, of capital and labor, are not merely contractual, impressed as they are with so much public
interest that the same should yield to the common good.[40] It goes on to intone that neither capital nor labor
should visit acts of oppression against the other, nor impair the interest or convenience of the public.[41]In the
final reckoning, the danger of just such a policy against marriage followed by petitioner PT&T is that it strikes
at the very essence, ideals and purpose of marriage as an inviolable social institution and, ultimately, of the
family as the foundation of the nation.[42] That it must be effectively interdicted here in all its indirect, disguised
or dissembled forms as discriminatory conduct derogatory of the laws of the land is not only in order but
imperatively required.

ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone Company is
hereby DISMISSED for lack of merit, with double costs against petitioner.

SO ORDERED.