CHAPTER XXX

RETIREMENT FROM THE SERVICE

Retirement
Retirement is the withdrawal from office, employment or occupation, upon reaching a certain age
or after rendering a certain number of years of service.
As to when an employee can retire or be retired, will primarily be determined by the retirement
plan, collective bargaining agreement, or employment contract. If there is no retirement plan,
collective bargaining agreement, or employment contract, the retirement of the employees will be
governed by the provisions of Labor Code.

Who are covered by the retirement provisions of the Labor Code?

The Labor Code provisions on retirement apply to all employees who have rendered service for
at least five (5) years, regardless of their position, designation, status and irrespective of the
method by which their wages are paid.

Who are not covered by the retirement provisions of the Labor Code?

a. Employees who have not rendered service for at least five (5) years;
b. Domestic helpers and persons in the personal service of another;
c. Employees of retail establishments regularly employing not more than ten (10) employees;
“Retail establishment” is one principally engaged in the sale of goods to end users for
personal or household use. It shall lose its retail character qualified for exemption if it is
engaged in both retail and wholesale of goods.
d. Employees of service establishments regularly employing not more than ten (10)
employees;
“Service establishment” is one principally engaged in the sale of service to individuals for
their own or household use and is generally recognized as such.
e. Employees of agricultural establishments or operations regularly employing not more than
ten (10) employees. [Secs. 1 and 2, Rule II, Book VI, Rules Implementing the Labor Code]
“Agricultural establishment/operation” refers to an employer which is engaged in
agriculture. This term refers to all farming activities in all branches and includes, among
others, the cultivation and tillage of soil, production, cultivation, growing and harvesting
of any agricultural or horticultural commodities, dairying, raising of livestock or poultry,
the culture of fish and other aquatic products in farms or ponds, and any activities
performed by a farmer or on a farm as an incident to, or in conjunction with, such farming
operations, but does not include the manufacture and/or processing of sugar, coconut,
abaca, tobacco, pineapple, aquatic or other farm products.

Note: Employees of the National Government and its political subdivisions, including
government-owned and/or controlled corporations, if they are covered by the Civil Service
Law and its regulations.

Article 287 of the Labor Code, as amended by Republic Act No. 7641, provides for two (2) types
of retirement: (a) optional; and (b) compulsory.
Optional Retirement
Optional retirement may be based on age or length of service. Thus, a retirement plan, collective
bargaining agreement, or employment contract which provides for retirement of employees after
rendering twenty-five (25) years of service is valid and enforceable. It is not violative of the right
to security of tenure because the retirement plan forms part of the employment contract. The
intention and spirit of Article 292 of the Labor Code is to give employers and employees a free
hand to determine and agree upon the terms and conditions of retirement.

1. PAL v Airlines Pilots' Association 373 SCRA 302 (2002) PAL vs AIRLINES PILOTS'
ASSOCIATION Respondent ALPAP is the exclusive bargaining representative of all
commercial airline pilots of PAL. The issue is rooted in PAL's act of unilaterally retiring
pilot Capt. Albino Collantes under the PAL-ALPAP Retirement Plan, which respondent
claims is illegal dismissal and union busting. ALPAP filed a Notice of Strike with the
DOLE. DOLE Secretary issued the assailed order upholding PAL's action of retiring Capt.
Collantes, and ordered the basis of computation of his retirement benefits to be Art. 287 of
the Labor Code and no the PAL-ALPAP Retirement Plan. Secretary added that PAL should
first consult the pilot concerned before implementing his retirement.
ISSUES:
1. What should be the basis for the computation of retirement benefits?
2. WON PAL should consult the pilot concerned before exercising its option to retire pilots
HELD:
1. Retirement benefits should be computed according to the PAL-ALPAP Retirement Plan
which provides: SECTION 1. Normal Retirement. (a) Any member who completed twenty
(20) years of service as a pilot for PAL or has flown 20,000 hours for PAL shall be eligible
for normal retirement. The normal retirement date is the date on which he completes twenty
(20) years of service, or on which he logs his 20,000 hours as a pilot for PAL. The member
who retires on his normal retirement shall be entitled to either (a) a lump sum payment of
P100,000.00 or (b) to such termination pay benefits to which he may be entitled to under
existing laws, whichever is the greater amount. SECTION 2. Late Retirement. Any
member who remains in the service of the Company after his normal retirement date may
retire either at his option or at the option of the Company and when so retired he shall be
entitled either (a) to a lump sum payment of P5,000.00 for each completed year of service
rendered as a pilot, or (b) to such termination pay benefits to which he may be entitled
under existing laws, whichever is the greater amount. On the other hand, Art. 287 of the
Labor Code provides: Art. 287. Retirement. – Any employee may be retired upon reaching
the retirement age established in the collective bargaining agreement or other applicable
employment contract. In case of retirement, the employee shall be entitled to receive such
retirement benefits as he may have earned under existing laws and any collective
bargaining agreement and other agreements: provided, however, That an employee’s
retirement benefits under any collective bargaining and other agreements shall not be less
than those provided herein. In the absence of a retirement plan or agreement plan providing
for retirement benefits of employees in the establishment, an employee upon reaching the
age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared as the compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay equivalent to at least one-
 half (1/2) month salary for every year of service, a fraction of at least six (6) months being
considered as one whole year. Unless the parties provide for broader inclusions, the term
‘one-half (1/2) month salary’ shall mean fifteen (15) days plus one-twelfth (1/12) of the
13th month pay and the cash equivalent of not more than five (5) days of service incentive
leaves. xxx xxx xxx. The retirement benefits that a pilot would get under LC 287 are less
than those under PAL's retirement plan. Additionally, the Labor Code does not contemplate
the peculiar circumstance of PAL pilots, as LC 287 is intended for those who have no more
plans of employment after retirement. Thus, petitioner should be paid according to the
PAL-ALPAP Retirement Plan.
2. NO. Surely, the requirement to consult the pilots prior to their retirement defeats the
exercise by management of its option to retire the said employees. It gives the pilot
concerned an undue prerogative to assail the decision of management. Due process only
requires that notice be given to the pilot of petitioner’s decision to retire him. Hence, the
Secretary of Labor overstepped the boundaries of reason and fairness when he imposed on
petitioner the additional requirement of consulting each pilot prior to retiring him.

Who can exercise the option to retire?

As to who can exercise the option to retire will be primarily determined by the terms of the
retirement plan, collective bargaining agreement, or employment contract. These could be gleaned
from the provisions of Article 292 of the Labor Code which provides that:
“ART. 292. Retirement. – Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contract.”

On the other hand, if there is no retirement plan, collective bargaining agreement or employment
contract the option to retire can be exercised only by the employee. This can be gleaned from the
provisions of Article 292 of the Labor Code which provides that:
“ART. 292. Retirement. – xxx In the absence of a retirement plan or agreement providing for the
retirement benefits of employees in the establishment, an employee upon reaching the age of sixty
(60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory
retirement age, who has served at least five (5) years in the said establishment, may retire and
shall be entitled to retirement pay equivalent to at least one-half (½) month salary for every year
of service, a fraction of at least six (6) months being considered as one whole year.”

The Optional Retirement Age Under Labor Code

Under Article 292 of the Labor Code, the optional retirement age is
 Sixty (60) years – for ordinary employees;
 Fifty (50) years – for underground mining employees

The Compulsory Retirement Age

The compulsory retirement age under the Labor Code is:
 Sixty-five (65) years old – for ordinary employees;
 Sixty (60) years old – for underground mining employees
Amount of Retirement Pay
The amount of retirement pay will primarily be determined by the provisions of the retirement
plan, collective bargaining agreement or employment contract, if any, but it should not fall below
the floor limits set by the Labor Code.
In the absence of the retirement plan, collective bargaining agreement or employment contract, the
retirement pay, as provided for under the Labor Code is one-half (½) month salary of every year
of service, a fraction of at least six (6) months being considered as one whole year. This translates
to 22.5 days for every year of service because by law, it is composed of the following:
 Fifteen (15) days salary based on the employee’s latest salary rate;
 Cash equivalent of five (5) days service incentive leave; and
 One twelfth (1/12) of the thirteen month pay due to the employee.
This could be gleaned from Article 292 of the Labor Code which provides that:
“ART. 292. Retirement. – xxx In the absence of a retirement plan or agreement providing
for the retirement benefits of employees in the establishment, an employee upon reaching
the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay equivalent to at least
one-half (½) month salary for every year of service, a fraction of at least six (6) months
being considered as one whole year.
Unless the parties provide for broader inclusions, the term ‘one half (1/2) month salary’
shall mean fifteen (15) days plus one twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive leaves.”
If the retirement pay under the retirement plan, collective bargaining agreement or individual
employment contract is less than that provided for in the Labor Code, the employer shall pay the
difference.
If the retirement fund comes from the contribution of both the employer and the employee, the
employer’s total contribution should not be less than the total retirement benefits to which the
employee would have been entitled had there been no such retirement fund. In case the employer’s
contribution is less than the amount prescribed by the Labor Code, the employer shall pay the
difference. [Sec. 3, 3.3, Rule II, Book VI, Rules Implementing the Labor Code]. Commented [L1]:
Employees will be entitled to retirement pay prescribed by the Labor Code if they:
 Have rendered service for at least five (5) years; and
 Retire between the age of 60 and 65 years or between 50 and 60 years for underground
mining employees.
Computation of Length of Service
Considering that the retirement pay is gauged by the term “for every year of service” stress should
be on actual service. The period of time when the establishment of closed should not be included.
Likewise, the period of time when seasonal workers did not render any service because of off-
season, should not be counted in computing the length of service. However, the period covered by
authorized leaves of absences, regular holidays and the mandatory fulfillment of a military or civic
duty should not be deducted from the length of service.
Extension of Services After Retirement
Upon retirement of an employee, whether optional or compulsory, his services shall be continued
or extended on a case-to-case basis upon agreement of the employer and the employee.

CHAPTER XXXI
VOLUNTARY ARBITRATION

Meaning of Voluntary Arbitration

Voluntary arbitration is a system whereby the parties agree to refer their dispute to an impartial
third person called voluntary arbitrator for a final and binding resolution. It differs from
compulsory arbitration in the sense that in compulsory arbitration, the third party is appointed by
the government.
Matters subject to Voluntary Arbitration
All grievances not settled at the grievance machinery are subject to voluntary arbitration.

What is a grievance?
Grievance is a dispute or controversy between an employer and the collective bargaining agent,
individual employee or group of employees, arising from interpretation or implementation of the
Collective Bargaining Agreement (CBA) or interpretation or enforcement of company personnel
policies.

Grievances that are Cognizable by the Grievance Machinery

Only grievances arising from the interpretation or implementation of their CBA and those arising
from the interpretation or enforcement of company personnel policies are cognizable by the
grievance machinery.

Simple Violations of CBA Now Treated as Ordinary Grievance

Violations of a CBA (except those which are gross in character), are now considered as ordinary
grievances to be resolved under grievance machinery of the CBA. This could be gleaned from
Article 266 of the Labor Code which provides that:

“ART. 266. Jurisdiction of Voluntary Arbitrators or Panel of Voluntary Arbitrators – xxx

violations of a Collective Bargaining Agreement, except those which are gross in character, shall
no longer be treated as unfair labor practice and shall be resolved as grievances under the CBA.
For the purposes of this Article, gross violation of CBA shall mean flagrant and/or malicious
refusal to comply with the economic provisions of such agreement.”

Grievance Machinery – Mandatory for every CBA

In the Philippines, the parties are obliged to include in their CBA a provision on grievance
machinery. This is a mandatory requirement. A CBA which does not contain a provision on
grievance machinery will not be registered. This could be gleaned from Article 265 of the Labor
Code which provides that:

“ART. 265. Grievance machinery and voluntary arbitration - The parties to a Collective
Bargaining Agreement shall include therein provisions that will ensure the mutual observance of
its terms and conditions. They shall establish a machinery for the adjustment and resolution of
grievances arising from the interpretation or implementation of their Collective Bargaining
Agreement and those arising from the interpretation or enforcement of company personnel
policies.”

Jurisdictional Preconditions of Voluntary Arbitration

a. The dispute should be first brought to the grievance machinery for resolution;
b. The grievance machinery failed to resolve the dispute; and
c. The parties must agree to submit the dispute for voluntary arbitration.
Voluntary arbitrator
In its simplest term, a voluntary arbitrator is any person chosen by the parties to resolve their
disputes.
Who can be a voluntary arbitrator?
a. Any person accredited as such by NCMB;
b. Any person chosen or designated in the CBA;
c. Any person chosen pursuant to a selection procedure agreed upon in the CBA; or
d. Any official who may be authorized by the SOLE to act as voluntary arbitrator upon the
written request of the parties. [Art. 218(n), Labor Code]
The parties can even choose a LA to act as VA. There is nothing in the law that prohibits LA from
acting as VA as long as the parties agree to have him hear and decide their dispute.

2. MANILA CENTRAL LINE CORPORATION, petitioner, vs. MANILA CENTRAL LINE FREE WORKERS UNION-
NATIONAL FEDERATION OF LABOR and the NATIONAL LABOR RELATIONS COMMISSION, respondents.
[G.R. No. 109383. June 15, 1998]

FACTS:
This case arose out of a collective bargaining deadlock between petitioner Manila Central Line Corporation and private respondent
Manila Central Line Free Workers Union-National Federation of Labor. The parties’ collective bargaining agreement had expired
on March 15, 1989. As the parties failed to reach new agreement, private respondent Manila Central Line Free Workers Union-
National Federation of Labor sought the aid of the National Conciliation and Mediation Board on October 30, 1989, but the deadlock
remained unresolved.
Private respondent filed a “Petition for Compulsory Arbitration” in the Arbitration Branch for the National Capital Region of the
National Labor Relations Commission. At the initial hearing before the labor arbiter, the parties declared that conciliation efforts
before the NCMB had terminated and it was their desire to submit the case for compulsory arbitration. Accordingly, they were
required to submit their position papers and proposals, which they did, and in which they indicated portions of their respective
proposals to which they agreed, leaving the rest for arbitration.

Labor Arbiter's Decision

The petitioner UNION and the respondent COMPANY are directed to execute and formalize their new five-year collective
bargaining agreement (CBA) retroactive to the date of expiry of the 1986-1989 CBA

Petitioner appealed, but its appeal was denied by the NLRC. The NLRC denied petitioner’s motion for reconsideration. Hence,
this petition with the following assignment of errors:
a) The NLRC erred in affirming the Labor Arbiter’s decision –
1. increasing the commission rate, the incentive pay, the salaries and wages of the fixed income employees covered by the CBA.
2. granting P500.00 signing bonus to the complainant-appellee; and
3. holding that the effectivity of the renegotiated CBA shall be retroactive to March 15, 1989, the expiry date of the old CBA
b) There are serious errors in the findings of facts of the Labor Arbiter which were unqualified affirmed by the NLRC and which
justify the review by this Honorable SUPREME COURT.
c) The NLRC erred in upholding the jurisdiction of the Labor Arbiter; and
d) The NLRC erred in affirming the finalization of the CBA by the Labor Arbiter in disregard of the provisions agreed upon by the
parties.

ISSUE:
1) Whether or not NLRC erred in upholding the jurisdiction of the Labor Arbiter
HELD: No. (Art 250(e) and 262 of the Labor Code; Essence of voluntary arbitration - agreement of the parties; nothing in the law
that prohibits these labor arbiters from also acting as voluntary arbitrators)

Indeed, the Labor Code formerly provided that if the parties in collective bargaining fail to reach an agreement, the Bureau of
Labor Relations should call them to conciliation meetings and, if its efforts were not successful, certify the dispute to a labor arbiter
for compulsory arbitration. But this was changed by R.A.No. 6715 which took effect on March 21, 1989. Art 250(e) of the Labor
Code now provides that if effects of conciliation fail, the Board shall “encourage the parties to submit their case to a voluntary
arbitrator.” With specific reference to cases involving deadlocks in collective bargaining, Art. 262 provides:
Jurisdiction over other labor disputes – The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of the parties,
shall also hear and decide all other labor disputes including unfair labor practices and bargaining deadlocks.
This is what the parties did in this case. After the Board failed to resolve the bargaining deadlock between parties, the union filed
a petition for compulsory arbitration in the Arbitration Branch of the NLRC. Petitioner Manila Central Line Corporation joined the
petition and the case was submitted for decision. Although the union’s petition was for “compulsory arbitration,” the subsequent
agreement of petitioner to submit the matter for arbitration in effect made the arbitration a voluntary one. The essence of voluntary
arbitration, after all is that it is by agreement of the parties, rather than compulsion of law, that a matter is submitted for arbitration.
It does not matter that the person chosen as arbitrator is a labor arbiter who, under Art 217 of the Labor Code, is charged with the
compulsory arbitration of certain labor cases. There is nothing in the law that prohibits these labor arbiters from also acting as
voluntary arbitrators as long as the parties agree to have him hear and decide their dispute.
Moreover, petitioner Manila Central Line Corporation must be deemed to be estopped from questioning the authority of Labor
Arbiter Donato G. Quinto, Jr., to act as voluntary arbitrator and render a decision in this case. Petitioner Manila Central Line
Corporation agreed together with the union, to refer their dispute for arbitration to him.

Selection Procedure
The voluntary arbitrator may be designated in advance in the CBA or the CBA can stipulate on
the procedure for the selection of VA.
If the parties cannot agree on the choice of the VA despite the procedure outlined in the CBA, the
NCMB shall designate the VA. This could be gleaned from the provisions of Art. 265 of the Labor
Code which provides that:
ART. 272 [260]. GRIEVANCE MACHINERY AND VOLUNTARY ARBITRATION. —xxx In
case the parties fail to select a Voluntary Arbitrator or panel of Voluntary Arbitrators, the Board
shall designate the Voluntary Arbitrator or panel of Voluntary Arbitrators, as may be necessary,
pursuant to the selection procedure agreed upon in the Collective Bargaining Agreement, which
shall act with the same force and effect as if the Arbitrator or panel of Arbitrators has been selected
by the parties as described above.”

Jurisdiction of VAs
VAs have original and exclusive jurisdiction over the following:
a. Unresolved grievance arising from interpretation or implementation of CBA or
interpretation or enforcement of company personnel policies [Art. 266, Labor Code as
amended];
b. Wage distortion disputes in organized establishments [Art. 124, Labor Code];
c. Disputes arising from interpretation and implementation of the productivity incentive
programs under RA 6971[Sec. 4 Rule XIX, Book V, Rules Implementing the Labor Code,
as amended by D.O. 40-03].

Jurisdiction over ULPs and CBA Deadlock

VAs can acquire jurisdiction over complaints for ULP and deadlock in CBA negotiations only
when the parties agree to submit the matter to VA. Without an express agreement between the
parties, no one can arrogate into the powers of VAs the original and exclusive jurisdiction of LA
over ULP, termination disputes, and claims for damages.

Jurisdiction over Termination Disputes

By law, the jurisdiction of VAs is confined to termination disputes arising from interpretation and
implementation of the CBA or company personnel policies. It does not extend to violations of the
Code of Discipline.
3. CASIANO NAVARRO vs DAMASCO & BUSCO SUGAR MILLING CO

G.R. No. 101875. July 14, 1995

Facts: Petitioner Navarro, a typist of BUSCO SUGAR MILLING CO, went to visit Mercie Baylas,
whom he was courting, in the company’s ladies’ dormitory. Upon seeing him, Baylas ran towards
her room but lost her balance; petitioner overcame her, embraced her, put himself on top of her
and started kissing her until other employees responded to Baylas' flee for help. The company
put Navarro under preventive suspension because of the incident and he was meted out the
penalty of dismissal upon the recommendation of the investigator for violating the company's
Code of Conduct against acts of immorality and gross discourtesy to a co-employee inside
company premises.
The President of the Mindanao Sugar Workers Union, for and in behalf of petitioner, and the
Personnel Officer of the company agreed to submit the case of petitioner to voluntary arbitration.
Counsel for petitioner, during the initial conference with the Voluntary Arbitrator, questioned
whether the grievance procedure in the CBA before bringing the case before the Voluntary
Arbitrator had been followed. The parties, however, also agreed to submit the case for decision
based on their position papers. The Voluntary Arbitrator rendered a decision dismissing petitioner
from employment and holding that the company did not violate the provisions of the grievance
procedure under the CBA.
Petitioner contends that the grievance procedure provided for in the CBA was not followed; hence,
the Voluntary Arbitrator exceeded his authority when he took cognizance of the labor case.
Issues:
WON the case of petitioner should have been brought to the company’s grievance machinery
prior to the Voluntary Arbitrator.
Held:
No. It is the policy of the State to promote voluntary arbitration as a mode of settling labor disputes.
The instant case is not a grievance that must be submitted to the grievance machinery. What are
subject of the grievance procedure for adjustment and resolution are grievances arising from the
interpretation or implementation of the CBA. The acts of petitioner involved a violation of the Code
of Employee Discipline, particularly the provision penalizing the immoral conduct of employees.
Consequently, there was no justification for petitioner to invoke the grievance machinery
provisions of the Collective Bargaining Agreement.
Also, the case of petitioner was submitted to voluntary arbitration by agreement of the president
of the labor union to which petitioner belongs, and his employer, through its personnel officer.
Petitioner himself voluntarily submitted to the jurisdiction of the Voluntary Arbitrator when he,
through his counsel, filed his position paper with the Voluntary Arbitrator and even submitted
additional documentary evidence.
WHEREFORE, the Decision of the respondent Voluntary Arbitrator is AFFIRMED

Disputes resulting from enforcement of disciplinary rules fall within the original and exclusive
jurisdiction of the LA. This could be gleaned from Article 282(b) of the Labor Code which
expressly provides that:
ART. 282. MISCELLANEOUS PROVISIONS. — xxx (b) Subject to the constitutional right of
workers to security of tenure and their right to be protected against dismissal except for a just and
authorized cause and without prejudice to the requirement of notice under Article 283 of this Code,
the employer shall furnish the worker whose employment is sought to be terminated a written
notice containing a statement of the causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the assistance of his representative if he so
desires in accordance with company rules and regulations promulgated pursuant to guidelines set
by the Department of Labor and Employment. Any decision taken by the employer shall be
without prejudice to the right of the worker to contest the validity or legality of his dismissal
by filing a complaint with the regional branch of the National Labor Relations Commission.

The Delineation of Jurisdiction

If the issue pertains only to interpretation or implementation, the termination dispute is cognizable
by grievance machinery and voluntary arbitration.
If the issue pertains to the validity of the dismissal, the termination dispute is cognizable by the
Labor Arbiter because the issue is no longer on interpretation or implementation (of CBA or
personnel policies) but on the validity of the dismissal.

4. Sanyo Phils. Workers Union v. Canizares, 211 SCRA 361

Facts:

 PSSLU had an existing CBA with Sanyo. It provides that “all members of the union covered by this
agreement must retain their membership as condition of his/her continued employment with the
company. The union shall have the right to demand from the company the dismissal of the members
of the union by reason of their voluntary resignation from membership or willful refusal to pay the
Union Dues or by reasons of their having formed, organized, joined, affiliated, supported and/or aided
directly or indirectly another labor organization, and the union thus hereby guarantees and holds the
company free and harmless from any liability.”
 PSSLU, through its national president, informed Sanyo that the respondent employees were notified
that their membership with PSSLU were cancelled for anti-union, activities, economic sabotage,
threats, coercion and intimidation, disloyalty and for joining another union. On February 14,
1990,respondent executed a pledged of cooperation with PSSLU promising cooperation with the
latter union and among others, respecting, accepting and honoring the CBA between Sanyo and
specifically
 On March 4, 1991, PSSLU through its national and local presidents, wrote another letter to Sanyo
recommending the dismissal of the respondent. They were engaged and were still engaging in anti-
union activities; 2) they willfully violated the pledge of cooperation with PSSLU which they signed
and executed on February 14, 1990; and 3) they threatened and were still threatening with bodily
harm and even death the officers of the union
 The company received no information on whether or not said employees appealed to PSSLU. Hence,
it considered them dismissed as of March 23, 1991
 The dismissed employees filed a complaint with the NLRC for illegal dismissal.
 PSSLU filed a motion to dismiss the complaint alleging that the Labor Arbiter was without jurisdiction
over the case. The cases arising from the interpretation or implementation of the collective
 bargaining agreements shall be disposed of by the labor arbiter by referring the same to the
grievance machinery and voluntary arbitration.

Issue: Whether the labor arbiter has jurisdiction and the case is not subject to grievance machinery and
voluntary arbitration.

HELD: Yes. We hold that the Labor Arbiter and not the Grievance Machinery provided for in the CBA has the
jurisdiction to hear and decide the complaints of the private respondents. While it appears that the dismissal
of the private respondents was made upon the recommendation of PSSLU pursuant to the union security
clause provided in the CBA, We are of the opinion that these facts do not come within the phrase
"grievances arising from the interpretation or implementation of (their) Collective Bargaining
Agreement and those arising from the interpretation or enforcement of company personnel policies,"
the jurisdiction of which pertains to the Grievance Machinery or thereafter, to a voluntary arbitrator or panel
of voluntary arbitrators. Article 260 of the Labor Code on grievance machinery and voluntary arbitrator states
that "(t)he parties to a Collective Bargaining Agreement shall include therein provisions that will ensure the
mutual observance of its terms and conditions. They shall establish a machinery for the adjustment and
resolution of grievances arising from the interpretation or implementation of their Collective Bargaining
Agreement and those arising from the interpretation or enforcement of company personnel policies." It is
further provided in said article that the parties to a CBA shall name or designate their respective
representatives to the grievance machinery and if the grievance is not settled in that level, it shall
automatically be referred to voluntary arbitrators (or panel of voluntary arbitrators) designated in advance by
the parties. It need not be mentioned that the parties to a CBA are the union and the company. Hence, only
disputes involving the union and the company shall be referred to the grievance machinery or voluntary
arbitrators.

In the instant case, both the union and the company are united or have come to an agreement regarding the
dismissal of private respondents. No grievance between them exists which could be brought to a
grievance machinery. The problem or dispute in the present case is between the union and the
company on the one hand and some union and non-union members who were dismissed, on the
other hand. The dispute has to be settled before an impartial body. The grievance machinery with members
designated by the union and the company cannot be expected to be impartial against the dismissed
employees. Due process demands that the dismissed workers grievances be ventilated before an impartial
body. Since there has already been an actual termination, the matter falls within the jurisdiction of the Labor
Arbiter.

When the VA Acquires Jurisdiction

The jurisdiction of the VA over the dispute is acquired upon receipt of the Submission Agreement duly
signed by both parties. [Sec. 3, Rule IV, Procedural Guidelines in the Conduct of Voluntary Arbitration
proceeding].

Powers of VA

a. Conciliate or mediate the parties;

b. Conduct hearings and receive evidence;
c. Issue subpoena ad testificandum or duces tecum; and
d. Issue writs of execution.
Scope of Arbitration Awards

The power and authority of VAs to decide a case is limited to those matters which have been submitted
to them for arbitration. They may grant any remedy or relief which may deem just and equitable, provided
that it is within the scope of the submission agreement [Sec. 1, Rule V, Procedural Guidelines in the
Conduct of Voluntary Arbitration Proceeding].

Judicial Review of Arbitration Awards

Decisions or awards of VAs are appealable to the CA under Rule 43 of the Rules of Court and not through
special civil action for certiorari under Rule 65 [AMA Computer College v. Nacino, 544 SCRA 502]

Power to Enhance arbitration Awards

The VA has the power to issue writ of execution and may require the Sheriff of the LRRC or the regular
courts or any public offices whom the parties may designate in the submission agreement, to execute the
arbitration award. In the absence of VA or in case of his incapacity, the motion for issuance of writ may
be filed with the LA in the region having jurisdiction over the workplace [Sec. 7, Rule VII, Procedural
Guidelines in the Conduct of Voluntary Arbitration].

VA’s Fee and Arbitration Cost

Unless the parties agree otherwise, the cost of voluntary arbitration proceedings and voluntary arbitration
shall be shared equally by the parties. If their funds are insufficient, they may avail of the subsidy under
the Special Voluntary Arbitrator’s Fund [Sec. 9, Rule XIX, Bok V, Rules Implementing the Labor Code as
amended].

Chapter XXXII

Compulsory Arbitration Branches

The Regional Arbitration Branches of the NLRC are manned by the LAs headed by an Executive LA. There
are as many arbitration branches as there are regional offices of the DOLE.

Qualifications of LAs

a. Must be members of the Philippine Bar;

b. Must have engaged in the practice of law in the Philippines for at least ten (10) YEARS, at least
five (5) years of which must relate to experience or exposure in the field of labor-management
relations. [Art. 221, Labor Code]
Term of Office

LAs hold office until the age of 65 years. The President of the Philippines may extend the services of
Arbiters up to the maximum age of 70 upon the recommendation of the NLRC en banc. [Art. 221, Labor
Code]

Jurisdiction of LAs

Section 1, Rule 5, of the 2011 NLRC Rules of Procedure (in relation to Article 223 of the Labor Code, as
amended), lays down the original and exclusive jurisdiction of the LAs in this wise:

‘Section 1. Jurisdiction of LAs. – LAs shall have original and exclusive jurisdiction to hear and decide the
following cases involving all workers, whether agricultural or non-agricultural:

a. ULP cases’
b. Termination disputes;
c. If accompanied with a claim for reinstatement, those cases that workers may file involving wages,
rates of pay, hours of work and other terms and conditions of employment;
d. Claims for actual, moral and other forms of damages arising from employer-employee relations;
e. Cases arising from any violation of Article 269 of the Labor Code, as amended, including questions
involving the legality of the strikes and lockouts;
f. Except claims for employees compensation not included in the next succeeding paragraph, social
security, medicare, and maternity benefits, all other claims arising from employer-employee
relations, including those of persons in domestic or household service, involving an amount
exceeding P5,000.00, whether or not accompanied with the claim for reinstatement;
g. Wage distortion in unorganized establishment not voluntarily settled by the parties pursuant to
RA 6727;
h. Enforcement of compromise agreements when there is non-compliance by any parties pursuant
to Art. 227 of the Labor Code, as amended;
i. Money claims arising out of 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 as provided by Sec. 10 of RA 8042, as amended by RA 10022; and
j. Other cases as may be provided by law.”

The Unifying Element

The unifying element in the jurisdictional grant is the consistent reference to case or disputes arising
out of or in connection with an employer-employee relationship. Without this critical element of
employment relationship, the LA and the NLRC can never acquire jurisdiction over a dispute.
5. AFP MUTUAL BENEFIT ASSOCIATION, INC., vs. NATIONAL LABOR RELATIONS COMMISSION and EUTIQUIO
BUSTAMANTE (G.R. No. and petitioner and who is respondent)CHECK the digest

FACTS: Eutiquio Bustamante is an insurance underwriter. Under their agreement, petitioner dismissed private respondent
for misrepresentation and for simultaneously selling insurance for another life insurance company in violation of said
agreement. Respondent filed a complaint with the Office of the Insurance Commission for collection of sums of money. Advised
private respondent that it was the Department of Labor and Employment that had jurisdiction over his complaint. LA for PR.
The labor arbiter relied on the Sales Agent's Agreement proviso that petitioner could assign private respondent a specific area
of responsibility and a production quota, and read it as signaling the existence of employer- employee relationship between
petitioner and private respondent. NLRC affirmed.

Issues: Is there employer-employee relationship? Does the NLRC have jurisdiction.

Held: NO. We hold, however, that respondent Commission misappreciated the facts of the case. Time and again, the Court
has applied the "four-fold" test in determining the existence of employer-employee relationship. This test considers the
following elements: (1) the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control, the
last being the most important element.
Thus, the exclusivity restriction clearly springs from a regulation issued by the Insurance Commission, and not from an intention
by petitioner to establish control over the method and manner by which private respondent shall accomplish his work

The reasonable Causal connection Doctrine

A claim is a said to have a reasonable causal connection with employer-employee relationship if
the principal relief sought can be resolved only by reference to the labor code or other labor laws
and not by the general civil laws.
Appling this doctrine, the Labor Arbiter cannot take cognizance over a complaint for
damages arising from the negligence of a co-worker because the claim does not arise from
employer-employee relations. It is a claim arising from quasi-delict, and therefore, it has no
reasonable causal connection with any claims provided for in Article 223 of the Labor Code.
Similarly, the Labor Arbiter has no jurisdiction over a complaint for damages filed by an
employee against his employer because of slanderous remarks against the employee. The reason
is because the claim does not arise from employer-employee relations. It is simple action for
damages for tortious acts committed by the employer.
Also complaint for damages filed by employee against the employer because malicious
prosecution is beyond the jurisdiction of the labor Arbiter because the claim has no reasonable
causal connection with the relations of the parties as employer and employee.
Likewise, the labor Arbiter does not have jurisdiction over a complaint filed by the
employer against the employee for sum of money arising from loan. The reason is because the
complaint is not labor dispute but civil controversy as it involves a debtor –creditor relations rather
the employer-employee relations.
An action filed by the employee for recovery of car that was issued to the employee under
the car plan policy is also beyond the jurisdiction of the labor arbiter because recovery of car is
not a labor but civil dispute as it does not involved employer-employee relationship but debtor-
creditor relationship.

A claim against the principal (employer) for separation pay of security guards filed by the
security agency as trustee of its security guards, does not fall within the jurisdiction of the Labor
Arbiter because there is no employee relationship between security agency and its security guards,
on the one hand, and principal (employer). [Philippines Airlines v. NLRC, 263 SCRA 638].
Along the same line, a cross-claim for reimbursement of monetary benefits that may be
awarded to the security guards (pleaded in the labor case) by a principal against the security agency
falls beyond the jurisdiction of the Labor Arbiter because there is no employer-employee
relationship between the security agency and the principal. There is no labor dispute involved in
the cross claim. The cross-claim involves a civil dispute between the security agency and the
principal, hence, within the realm of civil law, jurisdiction over it belongs to the regular courts.
Unfair Labor Practice Cases
An unfair practices case is suit which charges a party with any of the acts enumerated in
Articles 253 and 254 of the labor practice case
Termination Disputes
Labor Arbiters have original and exclusive jurisdiction over termination disputes involving
all employees, whether agricultural and non-agricultural, except:
a. Termination disputes involving corporate officers, and
b. Termination disputes arising from interpretation or implementation of:

 Collective bargaining agreement ; or

 Company personnel policies.

Termination Disputes involving Corporation Officers

Termination of corporate officers is not a labor dispute but an intra-corporate controversy.
A corporate officer’s dismissal is always a corporate act or an intra-corporate controversy, and that
nature is not altered by the reason or wisdom with which the Board of Directors may have in taking
such action.
Cases involving termination of corporate officers do not fall under the jurisdiction Labor
Arbiter but of the designated Regional Trial Court pursuant to A. M No. 00-11-03-SC promulgated
by the Supreme Court on Nov. 21, 2000.
Termination Disputes Arising from Interpretation or Implementation of CBA
A distinction should be made between:
 Termination disputes pertaining to interpretation/implementation of CBA, and
 Termination disputes pertaining to the validity of the dismissal.

In a termination disputes over the interpretation or implementation of CBA, actual

dismissal has not yet taken place - the issue is whether or not the employee could be validly
dismissed under the terms of CBA.
In a termination dispute over the validity of dismissal, there is already actual dismissal –
the issue is whether or not the dismissal is valid. Thus:
  Where the dispute is just in the interpretation or implementation stage, the matter is
cognizable by the grievance machinery and eventually by the voluntary arbitrator.
 When there is already actual termination, i. e violation of the rights, the dispute is already
cognizable by the labor Arbiters.

Terminal Disputes Arising from the implementation of Personnel Policies

Personnel policies are different from the disciplinary rules and regulations in the sense that
the personnel policies are non-punitive, while disciplinary rules and regulations are punitive in
character, dealing as it does, with the employee discipline.
Termination disputes pertaining to interpretation or implementation of the company
personnel policies, e.g. retrenchment policy, are cognizable by the grievance machinery and
voluntary arbitration [Art.223(c), Labor code].
Termination disputes resulting from the enforcement of disciplinary rules and regulations
fall within the original and exclusive jurisdiction of the labor Arbiter. This could be gleaned from
the article 282 (b) of the labor Code which expressly provides that ‘’any decision taken by the
employer shall be without prejudice to the right of the worker to contest the validity or legality of
his dismissal by filing a complaint with the regional branch of the NLRC”.

Money Claims Employees

If there is a demand for reinstatement - the money claim will fall under the original and exclusive
jurisdiction of the labor Arbiter, regardless of the amount involved.

If there is no demand for reinstatement - the jurisdiction will be determined by the amount
involved, to wit:
 If the aggregate money claim of each employee is more than P5,000.00 the labor
Arbiter has jurisdiction [Art. 223 (a) 3 Labor code]
 If the aggregate money claim of each employee does not exceed p5,000.00 the
DOLE Regional Director has jurisdiction [Art. 129 Labor Code]

Money Claims of Migrant Workers

Labor Arbiters have original and exclusive jurisdiction over claims of migrant workers
arising from employer-employee relationship, including claims for actual, moral, exemplary and
others forms of damages. Section 10 of the Migrants Workers and Overseas Filipinos Act of 1995
as amended, expressly provide as follows:
“Sec. 10. Money claims - Notwithstanding any provision of law to the country, 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
compliant, the claims arising out of an employer-employee relations 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.’’

Money claims of employers

Labor Arbiters can validly take cognizance over a money claim or counterclaim filed by
an employer against his employee, as long as the claim has a reasonable causal connection with
employer-employee relationship.
Money claims of corporate officers
In determining which judicial body has jurisdiction over money claims of corporate
officers, the controversy should be tested along the reasonable causal connection doctrine, ie.
reasonable causal connection with employer-employee relations. Thus:
 If the money claim pertains to perquisites of the corporate position, the Labor
Arbiters has no jurisdiction, because, there is no reasonable causal connections with
employer-employee relations.
 If the claim pertains to perquisites of the compensations or benefits as an employee,
the Labor Arbiter has jurisdiction because of its reasonable causal connections with
employment relations.

Prescriptive Period of Money Claims

Money claims prescribe in three (3) years reckoned from the time the cause of action
accrued. This could be gleaned from articles 296 of the Labor Code which reads as follows:
Art 296. Money claims- all money claims arising from employer-employee relations
accruing during the effectivity of this code which reads as follows:

[National Union of Bank Employee v. Lazaro, 157 SCRA 123]

[Fortune Cement v. NLRC 193 SCRA 258]
[Maneja v. NLRC, 290 SCRA 603]
, [Banez v. Valdevilla, 331 SCRA 584]
Cagayan de oro Coliseum v. MOLE. 192 SCRA 315].

[Mainland Construction v. Movilla 250 SCRA 290].

[SEAFDEC v. NLRC, 206 SCRA 283 SEAFDEC v. Acosta, 226 SCRA 49],
[Ebro v. NLRC, 261 SCRA 399]
International Catholic Migration v. Calleja, 190 SCRA 130]
[Domisig v.NLRC, 261 SCRA 779]
[Luna v. NLRC, 270 SCRA 227,233]