[ LABOR 2 | ATTY.
NOLASCO ] 1
1. PORTILLO v LIETZ
G.R. No. 196539
Perez, J.
Digest by: Intia
TOPIC: Jurisdiction and Remedies
PARTIES:
Employer – Respondent Rudolf Lietz
Employee – Petitioner Marietta Portillo
DOCTRINE:
 The "reasonable causal connection with the employer-employee
relationship" is a requirement not only in employees' money claims
against the employer but is, likewise, a condition when the claimant
is the employer.
FACTS:
 Portillo was hired by Rudolf in Lietz Co. under the condition that
Portillo will not engage in any other gainful employment by himself or
with any other company either directly or indirectly without written
consent of Lietz Inc., otherwise Portillo will be liable for liquidated
damages.
 Upon his promotion, Portillo signed another letter agreement
containing a “Goodwill Clause” stating that:
o “…on the termination of his employment and for a period of 3
years thereafter, he shall not engage directly or indirectly as
employee, manager, proprietor, or solicitor for himself or
others in a similar or competitive business or the same
character of work which he was employed by Lietz Inc. to do
and perform.
o Should he breach this good will clause of this Contract, he shall
pay Lietz Inc. as liquidated damages the amount of 100% of his
gross compensation over the last 12 months.”
 After 3 years, Portillo resigned from Lietz and during her exit interview,
Portillo declared that she intended to engages in business of rice
dealership (which is okay since it is not in any way related to the
business of Lietz Co.
 However, Lietz Inc. learned that Portillo had been hired by Ed Keller
Phil, Ltd to head its Pharma Raw Material Department, who is
purportedly a direct competitor of Lietz Inc.
 Meanwhile, Portillos demands from Lietz Inc. for the payment of her
remaining salaries and commissions went unheeded.
o Lietz Inc. gave Portillo the run around, on the pretext that her
salaries and commissions were still being computed.
 Because of this, Portillo filed a complaint with the NLRC for non-
payment of 1 mo salary, 2 mos comm, 13th month pay + damages and
attorneys fees.
 In its position paper, Lietz Inc. admitted liability for Portillos money
claims in the total amount of P110k
o However, Lietz Inc. raised the defense of legal compensation:
Portillos money claims should be offset against her liability to
Lietz Inc. for liquidated damages for Portillos alleged breach of
the "Goodwill Clause" in the employment contract when she
became employed with Ed Keller Phil, Ltd.
LA: In favor of Portillos
NLRC: Affirmed NLRC
CA: Modified NLRC’s ruling
 Portillos to get monetary award rep unpaid salary, commission due, it
ALLOWED legal compensation or set off such as monetary claims by her
liability to Lietz for liquidated damages arising from her violation of the
"Goodwill Clause" in her employment contract with them.
ISSUE/S:
 WON LA has jurisdiction – NONE
 WON Portillos’ money claims for unpaid salaries may be offset against
respondents claim for liquidated damages.
HELD:
1ST ISSUE: LA doesn’t have jurisdiction to hear the case, it belongs to civil
courts:
 Portillos 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.
o 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
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pay. The items claimed are the natural consequences flowing o Indeed, Lietz, Inc.'s argument about legal compensation
from breach of an obligation, intrinsically a civil dispute necessarily admits that it owes the money claimed by Portillo.
 The non-compete clause, as in the "Goodwill Clause" refers to o The alleged contractual violation did not arise during the
postemployment relations of the parties. existence of the employer-employee relationship. It was a post-
o The "Goodwill Clause" or the "NonCompete Clause" is a employment matter, a post-employment violation
contractual undertaking effective after the cessation of the
employment relationship between the parties. In accordance GRANTED
with jurisprudence, breach of the undertaking is a civil law
dispute, not a labor law case.
 IN THIS CASE, Portillos 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 Lietz’s breach.
o 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 postemployment relations of
the parties.

2ND ISSUE: Portillos’ money claims may not be offset against Lietz’s claim
for liquidated damages
 The application of compensation in this case is effectively barred by Art
113 LC which prohibits wage deductions except in three circumstances
as stated:
o In cases where the worker is insured with his consent by the
employer, and the deduction is to recompense the employer
for the amount paid by him as premium on the insurance;
o For union dues, in cases where the right of the worker or his
union to check-off has been recognized by the employer or
authorized in writing by the individual worker concerned;
o In cases where the employer is authorized by law or
regulations issued by the Secretary of Labor.
 IN THIS CASE, there is no causal connection between the petitioner
employees' claim for unpaid wages and the respondent employers'
claim for damages for the alleged "Goodwill Clause" violation.
o Portillo's claim for unpaid salaries did not have anything to do
with her alleged violation of the employment contract as, in
fact, her separation from employment is not "rooted" in the
alleged contractual violation.
o She resigned from her employment and was not dismissed.
o Portillo's entitlement to the unpaid salaries is not even
contested.

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