Labor Law 1
explain, within 72 hours from receipt of said document, why no disciplinary action should be
Art. 3 cases
G.R. No. 154628 December 6, 2006
ESTRELLITA G. SALAZAR, petitioner,
vs.
PHILIPPINE DUPLICATORS, INC., and /or LEONORA FONTANILLA, respondents.
DECISION
VELASCO, JR., J.:
Truth lives on in the midst of deception
– Friedrich von Schiller
This petition for review seeks the reversal of the March 15, 2002 Decision of the Court of
Appeals (CA) in CA-G.R. SP No. 62556, entitled Estrellita G. Salazar v. National Labor Relations
Commission, Philippine Duplicators, Inc. and/or Leonora Fontanilla, which declared petitioner
Salazar’s dismissal from employment lawful and valid, but nevertheless ordered respondent
Philippine Duplicators, Inc. liable for separation pay equal to one month’s salary for every year of
service and likewise assails the August 7, 2002 Resolution denying her Motion for
Reconsideration.
The Facts
Petitioner Estrellita Salazar became Sales Representative of respondent company, Philippine
Duplicators, Inc. (‘Duplicators’ for brevity), on May 1, 1987. She was assigned at the Southern
Section of Metro Manila under the direct supervision of respondent Leonora Fontanilla.
Petitioner received her last compensation in the amount of PhP 14,095.73 which covered her
basic salary and monthly commission.1
On November 23, 1998, respondent Fontanilla went over the three (3) accounts of Salazar,
namely, ICLARM, Bengson Law Office, and D.M. Consunji, Inc. The individual ledgers specified
that Salazar visited the said customers; that she talked with the contact persons identified in the
ledgers; and that she reported that these customers would not, in the meantime, purchase the
equipment because of budgetary constraints.2
During the last week of November 1998, respondent Fontanilla asked Salazar whether she went
to the aforementioned clients on November 20, 1998. The latter answered in the affirmative as
reflected in her Daily Sales Report (DSR) given to Fontanilla. However, respondent Fontanilla
told Salazar that upon verification, the said clients alleged that they neither knew nor met the
latter; but Salazar stood firm on her declaration that on the said date, she met all three (3)
customers.
Petitioner claimed that on December 7, 1998, respondent Fontanilla called her to the latter’s
office and handed her a memorandum with a ball pen requesting her to receive it. Petitioner
refused to receive it because it stated her termination from employment and asked Fontanilla
why she should be terminated as she had done nothing wrong. 3
On December 9, 1998, respondent Fontanilla directed Salazar, through a memorandum 4 to
taken against her in violation of Section 8, Category V of the company’s Handbook on
Constructive Discipline for "falsifying company records", but petitioner refused to receive the
memorandum. Hence, on December 10, 1998, it was sent through registered mail to Salazar’s
residence.5
Salazar claimed that on December 10, 1998, the union president also gave her a copy of the
December 9, 1998 memorandum charging her of falsification; and that the memorandum was
just a plan to comply with the procedural due process leading to her termination which had
already materialized when the first memorandum of termination was allegedly shown to her on
December 7, 1998. Consequently, she did not report to work anymore and readily filed a
complaint for illegal dismissal against the respondents on December 15, 1998, docketed as
NLRC-NCR Case No. 00-12-10174-98.
On December 16, 1998, through registered mail, Salazar eventually received a copy of the
December 9, 1998 memorandum about the charge of falsification.
Meanwhile, respondent company sought the dismissal of Salazar’s complaint of illegal dismissal,
claiming it was Salazar who abandoned work. Labor Arbiter Eduardo J. Carpio dismissed the
case without prejudice for lack of interest to prosecute through his February 23, 1999 Order. 6
On March 15, 1999, petitioner received the March 8, 1999 memorandum7 which charged her
with abandonment of work since December 15, 1998 in violation of Section 5, Category V of the
Handbook on Constructive Discipline. Petitioner replied through a letter addressed to Mr.
Vicente O. Reyes,8 President of the respondent company, indicating her amazement since the
case for illegal dismissal she filed before the NLRC against the respondents was still pending. 9
On the other hand, respondents averred that on March 8, 1999, Mr. Eduardo Melendres, Area
Sales Manager of respondent Fontanilla, sent a letter of termination addressed to Salazar
through registered mail for "falsifying company records" punishable under Category V,
paragraph 8 of the company handbook.10
On May 31, 1999, Salazar refiled the labor case which was redocketed as NLRC Case No. 00-
05-06051-99 and was re-raffled to Labor Arbiter Manuel R. Caday. When there was no
settlement arrived at during the conferences, the contending parties were subsequently directed
to submit their respective position papers.11 A copy of the March 8, 1999 termination letter
addressed to Salazar was appended as Annex "F" to respondents’ September 1, 1999 Position
Paper.12
In her position paper, Salazar disputed Duplicators’ assertion that she abandoned her
employment.
With respect to the March 8, 1999 termination letter dismissing her from employment for
"falsifying company records," she insisted that she did not receive said letter. In support of her
contention, she averred that the Muntinlupa City Post Office certified that Registry Receipt No.
4299 attached to the letter was assigned to Norma De Guia of Bacon, Sorsogon as addressee.
Petitioner believed that said letter could have been concocted to present a semblance of
defense for respondents.
Duplicators vehemently denied the alleged fabrication of the March 8, 1999 termination letter
and contended that if there had been an error, it was not Duplicators’ fault. It stressed the
presumed validity of the questioned registry receipt and submitted a certification from the
Postmaster of Biñan, Laguna which indicated that the mail matter addressed to Salazar was
covered by Registry Receipt No. 4295 and was in fact sent to Salazar’s residence at Block 3, Lot On April 3, 2002, Salazar filed a Motion for Reconsideration,19 but the CA consequently denied
12, Phase 36, Pacita Complex, Biñan, Laguna. said motion in its August 7, 2002 Resolution.20

On December 8, 1999, Labor Arbiter Manuel R. Caday rendered his Decision finding that Hence, this Petition for Review on Certiorari is before us.
petitioner’s dismissal was for a just cause, but respondent Duplicators breached the twin-notice
requirement for dismissal under Section 2 (c), Rule XXIII, Book V of the Implementing Rules and
The Issues
Regulations of the Labor Code. Thus, Duplicators was ordered to pay an indemnity of PhP
10,000.00 to petitioner Salazar.
Petitioner interposed the following issues:
The decretal portion reads:
A. ON THE PRESUMPTION THAT PETITIIONER WAS DISMISSED WITH JUST
CAUSE, THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
WHEREFORE, premises considered, judgment is hereby rendered ordering the
ERROR WHEN IT ALLOWED THE REVERSAL BY ERROR BY THE NATIONAL
respondent company to pay complainant the amount of P10,000.00 by way of
LABOR RELATIONS COMMISSION (NLRC) OF THE LABOR ARBITER’S
indemnity. x x x
FINDING/RULING THAT SHE WAS DISMMISSED IN VIOLATION OF THE
PROCEDURAL ASPECT OF DISMISSAL TO FAVOR RESPONDENTS WHO DID
All other claims are hereby dismissed for lack of merit. NOT APPEAL.

SO ORDERED.13 B. ON THE ASSUMPTION THAT A REVIEW OF THE FINDINGS OF THE LABOR

ARBITER ON PROCEDURAL ASPECT OF PETITIIONER’S DISMISSAL COULD BE
MADE, THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
On January 26, 2000, Salazar filed a Memorandum of Appeal14 from the adverse Decision. On
ERROR WHEN IT SAID THAT PEITIONER WAS SERVED NOTICE OF DISMISSAL
August 28, 2000, the NLRC decided the appeal finding that there was actually no termination of
BASED ON CERTIFICATION OF THE POST OFFICE OF BIÑAN LAGUNA,
Salazar’s employment but considering that reinstatement was not advisable due to the strained
REFERRING TO A DIFFERENT MAIL MATTER.
relationship between the parties, separation pay was ordered paid to petitioner in lieu of
reinstatement. The fallo of the August 28, 2000 Decision15 reads:
C. THE HONORABLE COURT OF APPEALS COMMITTTED REVERSIBLE ERROR
WHEN IT DID NOT RULE THAT RESPONDENTS’ DEFENSE IN THE ILLEGAL
WHEREFORE, the decision appealed from is hereby MODIFIED to the extent that the
CASE IS ABANDONMENT, WHICH IS UNTENABLE, AND THE ALLEGED
respondent company is hereby ordered to pay the complainant Php14,095.73
SUBSEQUENT DISMISSAL IS BUT AN AFTERTHOUGHT.
representing her one month separation pay. The award of indemnity is hereby deleted.
The other findings stand Affirmed.
D. THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHICH IT SUSTAINED THAT PETITIONER WAS DISMISSED WITH JUST CAUSE
In its October 25, 2000 Resolution, Salazar’s October 12, 2000 Motion for
16
IN DISREGARD OF THE SETTLED JURISPRUDENCE ON THE MATTER.21
Reconsideration17 was subsequently denied for lack of merit.

Believing in the merits of her complaint, Salazar filed a Petition for Certiorari with the CA on
January 11, 2001, which was docketed as CA-G.R. SP No. 62556.
In its March 15, 2002 Decision,18 the CA ruled this way:
WHEREFORE, on the basis of the dissertations that prescind, the assailed issuances
rendered by the NLRC are hereby AFFIRMED with modification. The dismissal of the
petitioner is perforce declared lawful and valid. Nonetheless, as a measure of
compassion and social justice, she is hereby pronounced entitled to separation pay
equivalent to one month’s salary for every year of service rendered.
Simply stated, the CA ruled that the termination of Salazar’s employment was legal and valid.
While the dismissed employee was not entitled to separation pay, the CA nonetheless awarded
severance pay pursuant to settled jurisprudence and in the interest of social justice. Lastly, it
ruled that there was no breach of the due process requirements prescribed for dismissal from
employment.
Petition Salazar claims that the NLRC should not have deleted the award of indemnity of PhP
10,000.00 in her favor since both Duplicators and Fontanilla did not interpose any appeal from
the Decision of Labor Arbiter Manuel Caday and hence, no affirmative relief could be granted to
said respondents.
This postulation is incorrect.
The Court’s Ruling
As a general rule, "a party who has not appealed cannot obtain from the appellate court any
affirmative relief other than the ones granted in the appealed decision."22
The reason for this rule is that since parties did not appeal from the decision or resolution, they
are presumed to be satisfied with the adjudication. Furthermore, Rule 141 on Legal Fees
provides that if the fee is not paid, then "the court may refuse to proceed with the action until
they are paid and may dismiss the appeal or the action or proceeding." The case or appeal is
deemed filed only upon payment of the docket or appeal fee considering that jurisdiction is
acquired by the court over the case or the appeal only upon full payment of the prescribed fee.
Thus, the court has no jurisdiction or authority to grant affirmative relief to the party who did not
appeal as there is no obligation to pay any fee. Furthermore, in the interest of fairness, it would It is clear that petitioner raised a question of fact which is not allowed by the factual issue bar
not be proper and just to award affirmative relief to the appellees since they did not comply with rule under Rule 45 considering that this Court is not a trier of facts.
the requirements of appeal. In this case, Rule VI, Section 3 of the NLRC Rules of Procedure
[2000]23 prescribes the following:
Granting arguendo that the issue at bar is an exception to the proscription against questions of
fact, we find that the CA did not commit any serious misstep in ruling that petitioner Salazar was
Section 3. REQUISITES FOR PERFECTION OF APPEAL. a) The Appeal shall be actually served with the dismissal notice. The CA explained its conclusion this way:
filed within the reglementary period as provided in Section 1 of this Rule; shall be
under oath with proof of payment of the required appeal fee and the posting of a cash
Proof exists to establish that the foregoing notice of termination was served upon the
or surety bond as provided in Section 6 of this Rule; shall be accompanied by
petitioner by registered mail. The Postmaster of [Biñan], Laguna Mr. Fermin De Villa
memorandum of appeal which shall state the grounds relied upon and the arguments
himself certified that this mail matter was delivered to the petitioner in her residence in
in support thereof; the relief prayed for; and a statement of the date when the
Biñan, Laguna and was received by a C.M. de Vera on March 23, 1999. 25
appellant received the appealed decision, order or award and proof of service on the
other party of such appeal.
In her petition, Salazar does not assail the veracity and accuracy of Fermin De Villa’s
certification that Mail Matter No. 4295 was received by C.M. de Vera on behalf of petitioner. On
Complying with these specifications is a difficult and tedious process, specifically the posting of
the other hand, she claims that Mail Matter No. 4295 does not refer to the alleged March 8, 1999
cash or surety bond. It would be discriminatory and inequitable if a party who has not complied
letter of termination based on "falsification of company records" but to another Duplicators’ letter
with these requirements will be granted affirmative relief.
also dated March 8, 1999 signed by Duplicator Sales Supervisor Leonora A. Fontanilla charging
petitioner of abandonment of work.
In the instant case, did the NLRC violate the rule in labor cases that an appellee cannot be
awarded any affirmative relief?
To support her contention, petitioner presented a letter,26 addressed to Philippine Duplicators
President Vicente O. Reyes, explaining her side of the abandonment issue. Thus, she questions
We find no deviation from the doctrine. the CA’s reliance on the De Villa certification on the receipt of Mail Matter No. 4295 to refer to
the termination letter based on falsification of company records. She explains that "the alleged
termination letter x x x dated March 8, 1999 likewise, was under Mail Matter No. 4299, as shown
The Labor Arbiter ruled that petitioner Salazar’s dismissal was for a just cause but discovered an
on the lower portion of the photo copy of the alleged letter of termination itself attached to
infraction of the two-notice requirement on the dismissal of an employee for which he ordered
respondents’ Position Paper."27 Based on the Muntinlupa Post Office’s Certification,28 Registry
Duplicators to pay the indemnity of PhP 10,000.00 to Salazar. However, on petitioner’s appeal,
Receipt No. 4299 involves mail matter sent by Ricardo Lipata and addressed to Norma De Sunia
the NLRC believed that there was after all no dismissal of petitioner Salazar but due to strained
of Bacon, Sorsogon. Petitioner therefore concludes that she was not served a copy of the March
relationship, the company was made to pay separation pay of PhP 14,095.73 instead of paying
8, 1999 termination letter grounded on her alleged falsification of company records because Mail
the indemnity of PhP 10,000.00 imposed by the Labor Arbiter. It is the deletion of the PhP
Matter no. 4299 was possibly sent to Norma De Sunia of Bacon, Sorsogon while Mail Matter No.
10,000.00 indemnity that is being assailed by the petitioner as a grant of affirmative relief to
4295 which petitioner admittedly received, referred to the March 8, 1999 letter for her alleged
respondent Duplicators.
work abandonment.

We are not persuaded.

To determine whether the March 8, 1999 termination letter was received by petitioner, we first
examine the documentary evidence, viz:
Petitioner’s first ground in her Memorandum of Appeal before the NLRC stated that Labor Arbiter
Caday’s ruling–that she was not illegally dismissed was "erroneous."24 In resolving this issue, the
1. The Muntinlupa Post Office Record of Registered Mails reveal the following:
NLRC overturned Caday’s finding of petitioner’s valid dismissal, and instead concluded that
there was no termination of petitioner’s employment. As a consequence, the NLRC had to recall
the award of PhP 10,000.00 indemnity imposed by Arbiter Caday although not prayed for by a. Registry Receipt No. 4295 was assigned to two (2) mail matters:
respondent Duplicators since the said award was inconsistent with the finding that petitioner’s
employment subsisted. Without petitioner’s dismissal, there can be no legal basis for the
1.) Sender: Phil. Duplicators Inc.
indemnity; hence, Duplicators is not obliged to comply with the two (2)–notice requirement. In
annulling the award, the NLRC merely exercised its authority under Article 218 (d) of the Labor
Code to correct or amend any error committed by a labor arbiter in aid of its exclusive appellate Addressee: Estrellita Salazar
jurisdiction. Petitioner has no reason to complain that she was deprived of monetary benefits
since the NLRC’s Decision did not actually benefit Duplicators as the PhP 14,095.76 separation
pay granted to petitioner is certainly greater than the PhP 10,000.00 indemnity deleted by the San Pedro, Laguna
NLRC.
2.) Sender: Janet Saduerte
Anent the second issue, petitioner claims that the CA committed reversible error when it
concluded that she was served with the dismissal notice based on a post office certification that Addressee: Corazon Saduerte
referred to a different mail matter.
Buli, Camarines Sur29
 b. Registry Receipt No. 4299
Sender: Ricardo Lipata
Addressee: Norma De Sunia
Bacon, Sorsogon30
c. Certification of Biñan, Laguna Postmaster Fermin T. De Villa which states that:
This is to certify that registered Letter No.4295 posted at Muntinlupa Post
Office on March 16, 1999 and addressed to Ms. Estrellita Salazar of Block 3
Lot 12 Phase 3b, Pacita Complex, Biñan, Laguna was delivered to and
received by Ms. C.M. de Vera on March 23, 1999.31
d. March 8, 1999 letter of Eduardo Z. Melendres to Estrellita G. Salazar terminating
her for "falsifying company records" with the Registry Receipt No. 4299 attached
thereto at the lower right portion of the letter.32
From the foregoing pieces of documentary evidence, it appears that there were two (2) mail
matters sent by registered mail to petitioner Salazar, namely: one sent to her address at San
Pedro, Laguna covered by Registry Receipt No. 4295 as can be seen from a copy of the Record
of Registered Mails33 and another covered by Registry Receipt No. 4295 sent to her address at
Block 3 Lot 12 Phase 3b, Pacita Complex, Biñan, Laguna which was received by C.M. de Vera
per the certification of Biñan Postmaster De Villa. Moreover, Registry Receipt No. 4295 was
assigned to two (2) mail matters: the first sent by Philippine Duplicators to petitioner and the
second sent by Janet Saduerte to Corazon Saduerte. To further complicate the already
confusing situation, Registry Receipt No. 4299 was issued to the March 8, 1999 termination
letter and at the same time was assigned to the letter sent by Ricardo Lipata to Norma De Sunia.
In this imbroglio, we rule that petitioner Salazar received the March 8, 1999 termination letter for
the following reasons, viz:
1. In its August 28, 2000 Decision, the NLRC ruled that the receipt of the March 8, 1999 letter on
termination petitioner’s was confirmed based on the certification34 issued by Postmaster Fermin
De Villa.
The CA upheld this finding by the NLRC when it observed that the "Postmaster of [Biñan]
Laguna, Mr. Fermin De Villa himself certified that this mail matter was delivered to the petitioner
in her residence in Biñan, Laguna and was received by C.M. de Vera on March 23, 1999". 35
The findings of fact of the NLRC are accorded with respect and even finality if based on
substantial evidence, and these findings are binding and conclusive upon this Court when
passed upon and upheld by the CA.36
2. In its Position Paper September 1, 1999 filed in NLRC NCR Case No. 00-05-06051-99 before
Labor Arbiter Caday, Duplicators stated that:
On March 8, 1999, Mr. Eduardo Z. Melendres, Area Sales Manager of Respondent
Leonora Fontanilla issued Private Complaint thru registered mail a letter of termination
for falsifying company records punishable under Category V, Paragraph 8 of
respondent company’s Handbook on Constructive Discipline. A copy of the
memorandum is hereto attached as Annex "F".37
Even granting arguendo that the post office was not able to deliver the March 8, 1999
termination letter and serve it on petitioner, still it cannot be denied that Salazar in fact got a
copy of said termination letter when she received a copy of respondent’s Position Paper with the
said letter’s copy attached Annex "F." It should be noted that neither Article 277 of the Labor
Code nor the Omnibus Rules implementing the Labor Code prescribe a time frame within which
the termination letter of the employee must be served. Thus, there was compliance with the
second required notice on termination of petitioner’s.
3. Philippine Duplicators categorically stated that the March 8, 1999 termination latter was
assigned Registry Receipt No. 4295 based on the record of Registered Mails although Registry
Receipt No. 4299 was inadvertently issued for said mail matter. Registry Receipt No. 4299 was
attached to the termination letter appended as Annex "F" to respondent’s Position Paper. It
explained the discrepancy by presenting a copy of the pertinent page in the record that indeed
Registry Receipt No. 4295 was assigned to the termination letter while Registry Receipt No.
4299 was actually assigned to the mail sent by Ricardo Lipata to Norma De Sunia of Bacon,
Sorsogon. This position was further buttressed by the Biñan, Laguna Postmaster Certification
that the letter covered by Registry Receipt No. 4295 was actually received by C.M. de Vera for
petitioner. Such certification is supported by the presumption that the postmaster’s official duty
had been regularly performed and in the absence of proof to the contrary, then such
presumption stands.
On the other hand, petitioner claims that what she received was the March 8, 1999 letter from
Duplicators requiring her to explain the charge of abandonment and not the alleged March 8,
1999 termination letter, which is just a fabrication, considering that Registry Receipt No. 4299
was assigned to another shipper—Mr. Ricardo Lipata and the addressee is Norma de Sunia.
However, other than her bare allegation and conclusion, she was not able to substantiate the
same. First of all, she could not explain how the Registry Receipt No. 4295 was assigned to the
March 8, 1999 show cause letter on the charge of abandonment considering the registration of
the mail with the post office was not done by her but by respondent company. She never
claimed that respondent forged or falsified Registry Receipt No. 4299. More importantly, if she
actually received the March 8, 1999 letter on the charge of abandonment, then she could have
submitted the envelope with the registry receipt number stamped in the envelope which is the
post office’s practice. Without such clear proof, we are not inclined to accept petitioner’s story
that she did not receive the March 8, 1999 termination letter sent by registered mail.
Petitioner was terminated for falsification of company records and not abandonment
Petitioner Salazar asseverates that she had already been dismissed from service as of
December 7, 1998 allegedly based on a notice of termination issued on that day. She explains
that the show cause order charging her with falsification of company records subsequently given
to her was a belated attempt to show some semblance of procedural due process preparatory to
her removal from employment. Lastly, she postulates that the real cause for her removal is
abandonment and not falsification of records.
We find such contentions without basis.
At the outset, the instant issue is a factual issue which should not be entertained under Rule 45.
Even if we consider said issue, relief is not availing. Petitioner merely relied on her self-serving
statements. No clear, convincing, and substantial evidence was adduced to prove and support
her version of the controversy.
The Labor Code and its implementing rules empower the Labor Arbiter to be the trier of facts in
labor cases. Much reliance is placed on the findings of facts of the arbiter having had the
opportunity to talk to and discuss with the parties and their witnesses the factual matters of the
case during the conciliation phase. Moreover, if hearing is conducted, the arbiter is able to know
first hand the demeanor and behavior of the witnesses while they are giving their narratives. He
has become an expert–over the years in such capacity as arbiter–to weigh, analyze, and
calibrate the value and credit that should be assigned to parol evidence.
The factual conclusions of Labor Arbiter Caday were sustained by the NLRC, which ruled that
Salazar’s claims could not be said to be of unquestionable veracity. Thus, her claim that her
employment was terminated on December 7, 1998 before she was given the December 9,1998
a show cause letter cannot be given much weight. Nary a proof was presented that there was a
December 7, 1998 memorandum terminating her for abandonment or falsification. Other than
her bare assertion, Salazar was not able to adduce any corroborating testimony or documentary
evidence to support her claim. She miserably failed to prove what she alleged.
Lastly, the CA also adopted Labor Arbiter Caday’s findings as affirmed by the NLRC, that
Salazar was not actually dismissed on December 7, 1998 without any evidence to prop up her
story. When the factual findings of the trier of facts (Labor Arbiter) have been adopted by both
the NLRC and the CA, then such conclusions automatically bind this Court as a matter of
course.
Petitioner was afforded due process
The procedure for terminating an employee is found in Book VI, Rule I, Section 2 (d) of the
Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. – In all cases of termination of
employment, the following standards of due process shall be substantially observed:
I. For termination of employment based on just causes as defined in Article 282 of the
Code:
(a) A written notice served on the employee specifying the ground or
grounds for termination, and giving to said employee reasonable opportunity
within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to
respond to the charge, present his evidence or rebut the evidence
presented against him; and
(c) A written notice of termination served on the employee indicating that
upon due consideration of all the circumstances, grounds have been
established to justify his termination.
In case of termination, the foregoing notices shall be served on the employee’s last
known address.
The aforelisted requirements have been met, thus:
1. Petitioner admitted that on December 10, 1998 she received from the union president a copy
of the December 9, 1998 memorandum charging her with falsification under Category V of the
company’s handbook.38
2. The second requisite—that a hearing or conference is set to enable the employee to respond
to the charge and adduce evidence––is deemed substantially complied with. The CA is correct
in its observation that "instead of utilizing the administrative inquiry as a reasonable avenue to
thresh out her claims and defenses, petitioner ignored the same."39
3. Petitioner received a copy of the March 8, 1999 termination letter by registered mail which she
received on March 23, 1999, or at the latest, on September 1, 1999 when she got a copy of
respondent’s Position Paper where the letter was appended as Annex "F." 40
Thus the twin notice requirement that constitutes due process has been satisfied.
Petitioner was dismissed for a just and valid cause
Petitioner was charged with "falsifying company records." On this issue, Labor Arbiter Caday
made the following findings, viz:
A scrutiny of these documentary evidence reveals that on November 20, 1998, at
around 3:00 PM complainant Salazar visited Juliet Alvarez of Banco-Filipino-Legal,
Paseo de Roxas, Legaspi Village, Makati City (Annex ‘A" and ‘A-1’ attached to
Respondents’ Rejoinder). This belies complainant’s claim that she visited the
respondent’s customer, D.M. Consunji, Inc. on November 20, 1998 at around
3:00P.M. (Annex ‘C" attached to Complainant’s Reply). Moreover, Mr. Enrique Patag
signed the Certification on December 15, 1998 on the date when complainant
(Salazar) was no longer reporting for work and filed a case for illegal dismissal against
respondents docketed as NLRC Case No. 00-12-10174-98 which was later ordered
dismissed by Labor Arbiter Eduardo Carpio for lack of interest to prosecute. Similarly,
the certification issued by Mr. Frederick Sison of the D.M. Consunji, Inc. attesting to
complainant’s visit on November 20, 1998, at 2:00 p.m. is confuted [sic] by the fact
that on November 20, 1998, complainant [Salazar] visited Fely/Federico and Lilian at
the Makati Medical Center as appearing in customer ledger of Makati Medical Center.
(Annex "B" and "B-1" attached to Respondent’s Rejoinder). With the foregoing
observations, complainant’s pretensions [are] at once noticeable and [merit] scant
consideration.41
The findings of Arbiter Caday jibe with those of the NLRC, to wit:
Specifically, in a report she stated that she made a follow-up with Leny Sambrano of
Bengson Law Office on November 20, 1998. However, in her ‘Reply’, she admitted
that she saw, not Sambrano, who was not around, but his secretary. It appears that
[in] the report in question, Sambrano wrote, "there was no visit last Friday,11/20" and
then affixed [her] signature. In another report, she stated that she made a follow-up
with Jun of ICLARM on November 20, 1998, but it appeared that Jun Fedrigon wrote
on the same report, which he also signed, that she did not visit his office on the date in
question. In a letter dated December 15, 1998, he stated that he had no memory of
seeing the complainant on the date in question.42 x x x
The findings of both Arbiter Caday and the NLRC were sustained by the CA, which ruled that
"there is ample proof to bear out that the petitioner knowingly recorded erroneous entries in her
Daily Sales Reports."
It is well-settled that the findings of fact of quasi-judicial agencies like the NLRC are accorded
not only respect but even finality if the findings are supported by substantial evidence; more so
when such findings were affirmed by the CA and such findings are binding and conclusive upon
this Court. Thus, we rule that petitioner committed fraud or willful breach of the employer’s trust
reposed in her under Article 282 of the Labor Code.

The constitutional policy to provide full protection to labor is not meant to be a sword to oppress
employers. The commitment under the fundamental law is that the cause of labor does not
prevent us from sustaining the employer when the law is clearly on its side.

WHEREFORE, the petition is DENIED and the March 15, 2002 Decision of the Court of Appeals
and the August 7, 2002 Resolution in CA-G.R. SP No. 62556 are AFFIRMED.
G.R. No. 199554 February 18, 2015 WHEREFORE, premises considered, the decision of the labor arbiter is hereby MODIFIED.
Complainant Appellant Zenaida Paz[’s] retirement pay should be computed pursuant to RA 7641
and that all the months she was engaged to work for respondent for the last twenty eight (28)
ZENAIDA PAZ, Petitioner,
years should be added and divide[d] by six (for a fraction of six months is considered as one
vs.
year) to get the number of years [for] her retirement pay[.] Complainant Teresa Lopez is hereby
NORTHERN TOBACCO REDRYING CO., INC., AND/OR ANGELO ANG, Respondents.
entitled to her separation pay computed at one half month pay for every year of service, a
fraction of six months shall be considered as one year, plus backwages from the time she was
DECISION illegally dismissed up to the filing of her complaint.

LEONEN, J.: The rest of the decision stays.

Zenaida Paz filed this Petition I praying that "the computation of Petitioner's Retirement Pay as SO ORDERED. 19

determined by the National Labor Relations Commission in its Decision dated 08 December
2008 be reinstated." 2

The Court of Appeals in its Decision dated May 25, 2011 dismissed the Petition and modified
20

the National Labor Relations Commission’s Decision in that "financial assistance is awarded to .
Northern Tobacco Redrying Co., Inc. (NTRCI), a flue-curing and redrying of tobacco leaves . . Zenaida Paz in the amount of ₱60,356.25": 21

business, employs approximately 100 employees with seasonal workers "tasked to sort,
3

process, store and transport tobacco leaves during the tobacco season of March to September." 4

WHEREFORE, the Petition is hereby DISMISSED. The Decision dated 8 December 2008 and
Resolution dated 16 September 2009 of the National Labor Relations Commission in NLRC CA
NTRCI hired Zenaida Paz (Paz) sometime in 1974 as a seasonal sorter, paid ₱185.00 daily. No. 046642-05(5) are MODIFIED in that (1) financial assistance is awarded to private
NTRCI regularly re-hired her every tobacco season since then. She signed a seasonal job respondent Zenaida Paz in the amount of 60,356.25; and (2) the dismissal of private respondent
contract at the start of her employment and a pro-forma application letter prepared by NTRCI in Teresa Lopez is declared illegal, and thus, she is awarded backwages and separation pay, in
order to qualify for the next season. 5 accordance with the foregoing discussion.

On May 18, 2003, Paz was 63 years old when NTRCI informed her that she was considered
6 SO ORDERED. 22

retired under company policy. A year later, NTRCI told her she would receive ₱12,000.00 as
7

retirement pay. 8

The Court of Appeals found that while applying the clear text of Article 287 resulted in the
amount of ₱12,487.50 as retirement pay, "this amount [was] so meager that it could hardly
Paz, with two other complainants, filed a Complaint for illegal dismissal against NTRCI on March support . . . Paz, now that she is weak and old, unable to find employment." It discussed
23

4, 2004. She amended her Complaint on April 27, 2004 into a Complaint for payment of
9 jurisprudence on financial assistance and deemed it appropriate to apply the formula: One half-
retirement benefits, damages, and attorney’s fees as ₱12,000.00 seemed inadequate for her 29
10 month pay multiplied by 29 years of service divided by two yielded ₱60,356.25 as Paz’s
years of service. The Complaint impleaded NTRCI’s Plant Manager, Angelo Ang, as
11 retirement pay. 24

respondent. The Complaint was part of the consolidated Complaints of 17 NTRCI workers.
12 13

Paz comes before this court seeking to reinstate the National Labor Relations Commission’s
NTRCI countered that no Collective Bargaining Agreement (CBA) existed between NTRCI and computation. NTRCI filed its Comment, and this court deemed waived the filing of a Reply.
25 26 27

its workers. Thus, it computed the retirement pay of its seasonal workers based on Article 287 of
the Labor Code. 14

Petitioner Paz contends that respondent NTRCI failed to prove the alleged company policy on
compulsory retirement for employees who reached 60 years of age or who rendered 30 years of
NTRCI raised the requirement of at least six months of service a year for that year to be service, whichever came first. Consequently, Article 287, as amended by Republic Act No.
28

considered in the retirement pay computation. It claimed that Paz only worked for at least six 7641, applies and entitles her to "retirement pay . . . equivalent to [at least] one-half month
29

months in 1995, 1999, and 2000 out of the 29 years she rendered service. Thus, Paz’s salary for every year of service, a fraction of at least six (6) months being considered as one
retirement pay amounted to ₱12,487.50 after multiplying her ₱185.00 daily salary by 221/2 whole year." She adds that she was then 63 years old, and while one may opt to retire at 60
30

working days in a month, for three years. 15 years old, the compulsory retirement age is 65 years old under Article 287, as
amended. Petitioner Paz then argues respondent NTRCI’s misplaced reliance on Philippine
31

Tobacco Flue-Curing & Redrying Corp. v. National Labor Relations Commission as that case
32

The Labor Arbiter in his Decision dated July 26, 2005 "[c]onfirm[ed] that the correct retirement
16

involved separation pay computation. 33

pay of Zenaida M. Paz [was] ₱12,487.50." 17

Lastly, petitioner Paz contends lack of legal basis that "an employee should have at least
The National Labor Relations Commission in its Decision dated December 8, 2008 modified the
18

worked for six (6) months for a particular season for that season to be included in the
Labor Arbiter’s Decision. It likewise denied reconsideration. The Decision’s dispositive portion computation of retirement pay[.]" She submits that regular seasonal employees are still
34

reads: considered employees during off season, and length of service determination should be applied
in retiree’s favor. 35
Respondent NTRCI counters that in retirement pay computation this court should consider its
ruling in Philippine Tobacco on computing separation pay of seasonal employees. It submits that
the proviso "a fraction of at least six (6) months being considered as one (1) whole year"
appears in both Article 287 on retirement pay and Articles 283 and 284 on separation pay. 36
Respondent NTRCI argues that unlike regular employees, seasonal workers like petitioner Paz
can offer their services to other employers during off-season. Thus, the six-month rule avoids the
situation where seasonal workers receive retirement pay twice — an even more favorable
position compared with regular employees. 37
Both parties appear to agree on petitioner Paz’s entitlement to retirement pay. The issue before
this court involves its proper computation. We also resolve whether there was illegal dismissal.
We affirm the Court of Appeals’ decision with modification.
Regular seasonal employees
Article 280 of the Labor Code and jurisprudence identified three types of employees, namely:
38
"(1) regular employees or those who have been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer; (2) project employees or
those whose employment has been fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature and the employment is for the
duration of the season; and (3) casual employees or those who are neither regular nor project
employees." 39
Jurisprudence also recognizes the status of regular seasonal employees. 40
Mercado, Sr. v. National Labor Relations Commission did not consider as regular employees
41
the rice and sugar farmland workers who were paid with daily wages. This was anchored on the
Labor Arbiter’s findings that "petitioners were required to perform phases of agricultural work for
a definite period, after which their services [were] available to any farm owner."
42
This court explained that the proviso in the second paragraph of Article 280 in that "any
employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee" applies only to "casual" employees and not
"project" and regular employees in the first paragraph of Article 280.43
On the other hand, the workers of La Union Tobacco Redrying Corporation in Abasolo v.
National Labor Relations Commission were considered regular seasonal employees since they
44
performed services necessary and indispensable to the business for over 20 years, even if their
work was only during tobacco season. This court applied the test laid down in De Leon v.
45
National Labor Relations Commission for determining regular employment status: [T]he test of
46
whether or not an employee is a regular employee has been laid down in De Leon v. NLRC, in
which this Court held:
The primary standard, therefore, of determining regular employment is the reasonable
connection between the particular activity performed by the employee in relation to the usual
trade or business of the employer. The test is whether the former is usually necessary or
desirable in the usual business or trade of the employer. The connection can be determined by
considering the nature of the work performed and its relation to the scheme of the particular
business or trade in its entirety. Also if the employee has been performing the job for at least a
year, even if the performance is not continuous and merely intermittent, the law deems repeated
and continuing need for its performance as sufficient evidence of the necessity if not
indispensability of that activity to the business. Hence, the employment is considered regular,
but only with respect to such activity, and while such activity exists.
Thus, the nature of one’s employment does not depend solely on the will or word of the
employer. Nor on the procedure for hiring and the manner of designating the employee, but on
the nature of the activities to be performed by the employee, considering the employer's nature
of business and the duration and scope of work to be done.
In the case at bar, while it may appear that the work of petitioners is seasonal, inasmuch as
petitioners have served the company for many years, some for over 20 years, performing
services necessary and indispensable to LUTORCO’s business, serve as badges of regular
employment. Moreover, the fact that petitioners do not work continuously for one whole year but
only for the duration of the tobacco season does not detract from considering them in regular
employment since in a litany of cases this Court has already settled that seasonal workers who
are called to work from time to time and are temporarily laid off during off-season are not
separated from service in said period, but are merely considered on leave until re-employed.
Private respondent's reliance on the case of Mercado v. NLRCis misplaced considering that
since in said case of Mercado, although the respondent company therein consistently availed of
the services of the petitioners therein from year to year, it was clear that petitioners therein were
not in respondent company's regular employ. Petitioners therein performed different phases of
agricultural work in a given year. However, during that period, they were free to contract their
services to work for other farm owners, as in fact they did. Thus, the Court ruled in that case that
their employment would naturally end upon the completion of each project or phase of farm work
for which they have been contracted. (Emphasis supplied, citations omitted)
47
The sugarcane workers in Hacienda Fatima v. National Federation of Sugarcane Workers-Food
and General Trade were also considered as regular employees since they performed the same
48
tasks every season for several years:
For respondents to be excluded from those classified as regular employees, it is not enough that
they perform work or services that are seasonal in nature. They must have also been employed
only for the duration of one season. . . . Evidently, petitioners employed respondents for more
than one season. Therefore, the general rule of regular employment is applicable.
....
The CA did not err when it ruled that Mercado v. NLRC was not applicable to the case at bar. In
the earlier case, the workers were required to perform phases of agricultural work for a definite
period of time, after which their services would be available to any other farm owner. They were
not hired regularly and repeatedly for the same phase/s of agricultural work, but on and off for
any single phase thereof. On the other hand, herein respondents, having performed the same
tasks for petitioners every season for several years, are considered the latter’s regular
employees for their respective tasks. Petitioners’ eventual refusal to use their services — even if
they were ready, able and willing to perform their usual duties whenever these were available —
and hiring of other workers to perform the tasks originally assigned to respondents amounted to
illegal dismissal of the latter. (Emphasis supplied, citation omitted)
49
Respondent NTRCI engaged the services of petitioner Paz as a seasonal sorter and had been
50
regularly rehired from 1974, until she was informed in 2003 that she was being retired under
51
company policy. 52
The services petitioner Paz performed as a sorter were necessary and indispensable to
respondent NTRCI’s business of flue-curing and redrying tobacco leaves. She was also regularly
rehired as a sorter during the tobacco seasons for 29 years since 1974. These considerations
taken together allowed the conclusion that petitioner Paz was a regular seasonal employee, Consequently, if "the intent to retire is not clearly established or if the retirement is involuntary, it
entitled to rights under Article 279 of the Labor Code:
53
is to be treated as a discharge." 63

Art. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate The National Labor Relations Commission considered petitioner Paz’s amendment of her
the services of an employee except for a just cause or when authorized by this Title. An Complaint on April 27, 2004 akin to an optional retirement when it determined her as illegally
employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of dismissed from May 18, 2003 to April 27, 2004, thus being entitled to full backwages from May
seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his 19, 2003 until April 26, 2004. 64

other benefits or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.
Illegal dismissal and backwages
Petitioner Paz initially filed a Complaint for illegal dismissal seeking separation pay, but later
Again, petitioner Paz never abandoned her argument of illegal dismissal despite the amendment
of her Complaint. This implied lack of intent to retire until she reached the compulsory age of 65.
Thus, she should be considered as illegally dismissed from May 18, 2003 until she reached the
compulsory retirement age of 65 in 2005 and should be entitled to full backwages for this period.
An award of full backwages is "inclusive of allowances and other benefits or their monetary
equivalent, from the time their actual compensation was withheld. . . ." 65

amended her Complaint into one for payment of retirement pay. Despite the amendment, she
54

maintained in her subsequent pleadings that she had been made to retire even before she
reached the compulsory retirement age of 65 under Article 287, as amended. 55
Backwages, considered as actual damages, requires proof of the loss suffered. The Court of
66

Appeals found "no positive proof of the total number of months that she actually rendered
work." Nevertheless, petitioner Paz’s daily pay of 185.00 was established. She also alleged that
67

Petitioner Paz alleged that respondent NTRCI required her to report on March 18, 2003 for the
her employment periods ranged from three to seven months. 68

2003 tobacco season, but she suffered a mild stroke sometime in April. Nevertheless,
respondent NTRCI extended her employment contract until May 18, 2003 when she was
informed that she was retired under company policy. 56
Since the exact number of days petitioner Paz would have worked between May 18, 2003 until
she would turn 65 in 2005 could not be determined with specificity, this court thus awards full
backwages in the amount of ₱22,200.00 computed by multiplying 185.00 by 20 days, then by
Since petitioner Paz was "unlearned and not knowledgeable in law, [she] just accepted such fact
three months, then by two years.
and waited to be paid her separation/retirement benefit as promised by . . .
NTRCI." Unfortunately, after a year of waiting, respondent NTRCI only offered her around
57

₱12,000.00 for all her services since 1974. 58

Due process and nominal damages

The National Labor Relations Commission recognized that like the other complainants against The Labor Code requires employers to comply with both procedural and substantive due
respondent NTRCI, petitioner Paz "was at a loss in what cause of action to take — whether process in dismissing employees. Agabon v. National Labor Relations Commission discussed 69

illegal dismissal or payment of retirement pay." 59

these rules and enumerated the four possible situations considering these rules:

Petitioner Paz’s amendment of her Complaint was not fatal to her cause of action for illegal
dismissal.
First, petitioner Paz never abandoned her argument that she had not reached the compulsory
retirement age of 65 pursuant to Article 287, as amended, when respondent NTRCI made her
retire on May 18, 2003.
Dismissals based on just causes contemplate acts or omissions attributable to the employee
while dismissals based on authorized causes involve grounds under the Labor Code which allow
the employer to terminate employees. A termination for an authorized cause requires payment of
separation pay. When the termination of employment is declared illegal, reinstatement and full
backwages are mandated under Article 279. If reinstatement is no longer possible where the
dismissal was unjust, separation pay may be granted.

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must
Second, the National Labor Relations Commission found that respondent NTRCI failed to prove
give the employee two written notices and a hearing or opportunity to be heard if requested by
a valid company retirement policy, yet it required its workers to retire after they had reached the
the employee before terminating the employment: a notice specifying the grounds for which
age of 60. The Court of Appeals also discussed that while respondent NTRCI produced
60

dismissal is sought a hearing or an opportunity to be heard and after hearing or opportunity to be

guidelines on its retirement policy for seasonal employees, it never submitted a copy of its
heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes
Collective Bargaining Agreement and even alleged in its Position Paper that none
under Articles 283 and 284, the employer must give the employee and the Department of Labor
existed. Petitioner Paz was only 63 years old on May 18, 2003 with two more years remaining
61

and Employment written notices 30 days prior to the effectivity of his separation.
before she would reach the compulsory retirement age of 65.

From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just
"Retirement is the result of a bilateral act of the parties, a voluntary agreement between the
cause under Article 282 of the Labor Code, for an authorized cause under Article 283, or for
employer and the employee whereby the latter, after reaching a certain age, agrees to sever his
health reasons under Article 284, and due process was observed; (2) the dismissal is without
or her employment with the former." Article 287, as amended, allows for optional retirement at
62

just or authorized cause but due process was observed; (3) the dismissal is without just or
the age of at least 60 years old.
authorized cause and there was no due process; and (4) the dismissal is for just or authorized
cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any
liability.
In the second and third situations where the dismissals are illegal, Article 279 mandates that the
employee is entitled to reinstatement without loss of seniority rights and other privileges and full
backwages, inclusive of allowances, and other benefits or their monetary equivalent computed
from the time the compensation was not paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be
cured, it should not invalidate the dismissal. However, the employer should be held liable for
noncompliance with the procedural requirements of due process. (Emphasis in the original)
70
Agabon focused on the fourth situation when dismissal was for just or authorized cause, but due
process was not observed. Agabon involved a dismissal for just cause, and this court awarded
71
₱30,000.00 as nominal damages for the employer’s non-compliance with statutory due
process. Jaka Food Processing Corporation v. Pacot involved a dismissal for authorized
72 73
cause, and this court awarded ₱50,000.00 as nominal damages for the employer’s non-
compliance with statutory due process. The difference in amounts is based on the difference in
74
dismissal ground. Nevertheless, this court has sound discretion in determining the amount
75
based on the relevant circumstances. In De Jesus v. Aquino, this court awarded ₱50,000.00 as
76 77
nominal damages albeit the dismissal was for just cause. Petitioner Paz’s case does not fall
78
under the fourth situation but under the third situation on illegal dismissal for having no just or
authorized cause and violation of due process. Respondent NTRCI had considered petitioner
Paz retired at the age of 63 before she reached the compulsory age of 65. This does not fall
under the just causes for termination in Article 282 of the Labor Code, the authorized causes for
termination in Article 283, or disease as a ground for termination in Article 284.
As regards due process, the Omnibus Rules Implementing the Labor Code provides:
Section 2. Standard of due process: requirements of notice. – In all cases of termination of
employment, the following standards of due process shall be substantially observed.
I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to
explain his side;
(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to respond to
the charge, present his evidence or rebut the evidence presented against him; and
(c) A written notice [of] termination served on the employee indicating that upon due
consideration of all the circumstance, grounds have been established to justify his
termination. . . .
79
There was no showing that respondent NTRCI complied with these due process requisites.
Thus, consistent with jurisprudence, petitioner Paz should be awarded ₱30,000.00as nominal
80
damages.
Retirement pay
An employer may provide for retirement benefits in an agreement with its employees such as in
a Collective Bargaining Agreement. Otherwise, Article 287 of the Labor Code, as amended,
governs.
Since respondent NTRCI failed to present a copy of a Collective Bargaining Agreement on the
alleged retirement policy, we apply Article 287 of the Labor Code, as amended by Republic Act
81
No. 7641. This provides for the proper computation of retirement benefits in the absence of a
retirement plan or agreement: 82
In the absence of a retirement plan or agreement 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 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. (Emphasis supplied)
83
Respondent NTRCI followed the formula in Article 287 and offered petitioner Paz the amount of
₱12,487.50 as retirement pay based on the three years she worked for at least six months in
84
1995, 1999, and 2000. 85
The Labor Arbiter agreed with respondent NTRCI’s computation based on these three years and
reached the same amount as petitioner Paz’s retirement pay. 86
On appeal, the National Labor Relations Commission found that petitioner Paz "became a
regular seasonal employee by virtue of her long years of service and the repetitive hiring of her
services by respondent NTRCI every season."87 It then considered her as having worked for
every tobacco season from 1974 to 2003 or for a total of 29 years. 88
The National Labor Relations Commission discussed that "[i]t would be a great injustice if
[petitioner Paz’s]services which did not last long for six months be disregarded in computing her
retirement pay especially so that it is upon the sole discretion of the respondent company on
how long her services for a given season was required." Thus, it explained that "Zenaida Paz’s
89
retirement pay should be computed pursuant to RA 7641 and that all the months she was
engaged to work for respondent for the last twenty eight (28) years should be added and
divide[d] by six (for a fraction of six months is considered as one year) to get the number of
years her retirement pay should be computed." 90
The National Labor Relations Commission also discussed that applying the computation of
separation pay in Philippine Tobacco to this case "would render nugatory the very purpose of
RA 7641, which seeks to reward employees of their long and dedicated service to their
employer, as well as its humanitarian purpose to provide for the retiree’s sustenance and
hopefully even comfort, when he no longer has the stamina to continue earning his livelihood." 91
This court in Philippine Tobacco explained its computation of separation pay as follows:
The amount of separation pay is based on two factors: the amount of monthly salary and the
number of years of service. Although the Labor Code provides different definitions as to what
constitutes "one year of service," Book Six does not specifically define "one year of service" for
purposes of computing separation pay. However, Articles 283 and 284 both state in connection
with separation pay that a fraction of at least six months shall be considered one whole year.
Applying this to the case at bar, we hold that the amount of separation pay which respondent
members of the Lubat and Luris groups should receive is one-half (1/2) their respective average
monthly pay during the last season they worked multiplied by the number of years they actually
rendered service, provided that they worked for at least six months during a given year.
The formula that petitioner proposes, wherein a year of work is equivalent to actual work
rendered for 303 days, is both unfair and inapplicable, considering that Articles 283 and 284
provide that in connection with separation pay, a fraction of at least six months shall be
considered one whole year. Under these provisions, an employee who worked for only six
months in a given year — which is certainly less than 303 days — is considered to have worked
for one whole year.
. . . . Finally, Manila Hotel Company v. CIR did not rule that seasonal workers are considered at
work during off-season with regard to the computation of separation pay. Said case merely held
that, in regard to seasonal workers, the employer-employee relationship is not severed during
off-season but merely suspended. (Citations omitted)
92
Philippine Tobacco considered Articles 283 and 284 of the Labor Code on separation pay, and
these articles include the proviso "a fraction of at least six (6) months shall be considered one
(1) whole year."
While the present case involves retirement pay and not separation pay, Article 287 of the Labor
Code on retirement pay similarly provides that "a fraction of at least six (6) months being
considered as one whole year."
Thus, this court’s reading of this proviso in the Labor Code in Philippine Tobacco applies in this
case. An employee must have rendered at least six months in a year for said year to be
considered in the computation.
Petitions for review pursuant to Rule 45 of the Rules of Court can raise only questions of
law. Generally, this court accords great respect for factual findings by quasi-judicial bodies,
93
even according such findings with finality when supported by substantial evidence. 94
The Court of Appeals found "no positive proof o[n] the total number of months [petitioner Paz]
actually rendered work [for respondent NTRCI]." On the other hand, both the Labor Arbiter and
95
the Court of Appeals established from the records that she rendered at least six months of
service for 1995, 1999, and 2000 only. 96
Based on these factual findings, retirement pay pursuant to Article 287 of the Labor Code was
correctly computed at 12,487.50 and was awarded to petitioner Paz.
Financial assistance
In addition, this court agrees with the Court of Appeals’ award of financial assistance in the
amount of 60,356.25 by applying the following formula: one-half-month pay multiplied by 29
97 98
years in service and then divided by 2. 99
The amount of ₱12,487.50 is indeed too meager to support petitioner Paz who has become old,
weak, and unable to find employment. 100
Republic Act No. 7641 is a social legislation with the purpose of "provid[ing] for the retiree’s
101
sustenance and hopefully even comfort, when he [or she] no longer has the stamina to continue
earning his [or her] livelihood."
102
The Court of Appeals recognized and emphasized petitioner Paz’s three decades of hard work
and service with respondent NTRCI. However, it disagreed with the National Labor Relations
Commission’s retirement pay computation for lack of factual basis:
Private respondent Paz rendered almost three decades of dedicated service to petitioner, and to
that, she gave away the prime of her life. In those long years of hard work, not a single
transgression or malfeasance of any company rule or regulation was ever reported against her.
Old age and infirmity now weaken her chances of employment. Veritably, We can call upon the
same "social and compassionate justice" allowing financial assistance in special circumstances.
These circumstances indubitably merit equitable concessions, via the principle of
"compassionate justice" for the working class.
In awarding retirement benefits, the NLRC deemed it proper to add all the months of service
rendered by private respondent Paz, then divide it by six to arrive at the number of years of
service. We cannot, however, subscribe to this computation because there is no positive proof of
the total number of months that she actually rendered work. (Emphasis supplied, citations
103
omitted)
At most, the Petition alleges that "[p]etitioner [was] regularly hired every season by respondents,
her employment periods ranging from three (3) to seven (7) months." None of the lower courts,
104
not even the National Labor Relations Commission that proposed the formula, made a factual
determination on the total number of months petitioner Paz rendered actual service.
In any event, this court has awarded financial assistance "as a measure of social justice [in]
exceptional circumstances, and as an equitable concession." 105
In Eastern Shipping Lines, Inc. v. Sedan, Sedan was granted equitable assistance equal to
106
one-half-month pay for each year of his 23 years of service with no derogatory record. This
107
court discussed jurisprudence on the grant of financial assistance:
We are not unmindful of the rule that financial assistance is allowed only in instances where the
employee is validly dismissed for causes other than serious misconduct or those reflecting on
his moral character. Neither are we unmindful of this Court’s pronouncements in Arc-Men Food
Industries Corporation v. NLRC, and Lemery Savings and Loan Bank v. NLRC, where the Court
ruled that when there is no dismissal to speak of, an award of financial assistance is not in order.
But we must stress that this Court did allow, in several instances, the grant of financial
assistance. In the words of Justice Sabino de Leon, Jr., now deceased, financial assistance may
be allowed as a measure of social justice and exceptional circumstances, and as an equitable
concession. The instant case equally calls for balancing the interests of the employer with those
of the worker, if only to approximate what Justice Laurel calls justice in its secular sense.
In this instance, our attention has been called to the following circumstances: that private
respondent joined the company when he was a young man of 25 years and stayed on until he
was 48 years old; that he had given to the company the best years of his youth, working on
board ship for almost 24 years; that in those years there was not a single report of him
transgressing any of the company rules and regulations; that he applied for optional retirement
under the company’s non-contributory plan when his daughter died and for his own health
reasons; and that it would appear that he had served the company well, since even the company
said that the reason it refused his application for optional retirement was that it still needed his
services; that he denies receiving the telegram asking him to report back to work; but that
considering his age and health, he preferred to stay home rather than risk further working in a
ship at sea.

In our view, with these special circumstances, we can call upon the same "social and
compassionate justice" cited in several cases allowing financial assistance. These
circumstances indubitably merit equitable concessions, via the principle of "compassionate
justice" for the working class. Thus, we agree with the Court of Appeals to grant financial
1âwphi1

assistance to private respondent. (Citations omitted)

108

We agree with the Court of Appeals that petitioner Paz’s circumstances "indubitably merit
equitable concessions, via the principle of ‘compassionate justice’ for the working
class." Petitioner Paz worked for respondent NTRCI for close to three decades. She had no
109

record of any malfeasance or violation of company rules in her long years of service. Her
110

advanced age has rendered her weak and lessened her employment opportunities.

Eastern Shipping Lines awarded Sedan with financial assistance equal to one-half-month pay for
every year of service. Sedan was hired as a 3rd marine engineer and oiler from 1973 until his
last voyage in 1997. On the other hand, petitioner Paz was a seasonal employee who worked
111

for periods ranging from three to seven months a year. This court thus finds the following Court
112

of Appeals formula for financial assistance as equitable: one-half-month pay multiplied by 29

years in service and then divided by 2.

This court has discussed that "labor law determinations are not only secundum rationem but
also secundum caritatem." The award of ₱60,356.25 as financial assistance will serve its
113

purpose in providing petitioner Paz sustenance and comfort after her long years of service.
Finally, legal interest of 6% per annum shall be imposed on the award of full backwages
beginning May 18, 2003 when petitioner Paz was deemed retired, until 2005 when she reached
compulsory retirement age, in the amount of ₱2,664.00 Legal interest of 6% per annum shall
114

also be imposed on the award of retirement pay beginning 2005 until full satisfaction.
WHEREFORE, the Court of Appeals Decision is AFFIRMED with MODIFICATION in that
respondent Northern Tobacco Redrying Co., Inc. is hereby ordered to pay petitioner Zenaida
Paz the following:

(1) ₱22,200.00 as full backwages;

(2) ₱30,000.00 as nominal damages for non-compliance with due process;

(3) Pl2,487.50 as retirement pay;

(4) ₱60,356.25 as financial assistance; and

(5) ₱2,664.00 as legal interest for the award of full backwages, and legal interest of
6% per annum for the award of retirement pay beginning 2005 until full satisfaction.

SO ORDERED.
G.R. No. 163561 July 24, 2007
CENTRAL PANGASINAN ELECTRIC COOPERATIVE, INC., Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and LITO CAGAMPAN, Respondents.
DECISION
QUISUMBING, J.:
This is a petition for review on certiorari assailing the Decision1 dated December 11, 2003 of the
Court of Appeals in CA-G.R. SP No. 62285 and its Resolution2 dated April 19, 2004, denying the
motion for reconsideration. The appellate court had affirmed the Decision3 dated July 31, 2000 of
the National Labor Relations Commission (NLRC), which sustained the decision4 dated January
14, 2000 of the Labor Arbiter.
The facts are undisputed.
Private respondent Lito Cagampan was the Acting Power Use Coordinator of petitioner Central
Pangasinan Electric Cooperative, Inc. (CENPELCO). On November 7, 1998, Cagampan
received a check amounting to ₱100,831 from Aurora B. Bonifacio as partial payment for the
installation of a transformer in her building and expansion of a three-phase line.
In a letter5 dated November 14, 1998, Bonifacio informed CENPELCO’s General Manager
Salvador de Guzman of the said transaction and that Cagampan did not issue a receipt for the
partial payment made. She also requested the immediate installation of the transformer.
Thereafter, Cagampan was directed to explain in writing why he should not be disciplined or
dismissed for the unauthorized acceptance of payments for new electrical connections.
Upon investigation, it appeared that Cagampan knowingly entered into an unauthorized contract
for the installation of a transformer, and that he was not authorized to accept payment. Hence,
Cagampan was found guilty of violating CENPELCO’s Code of Ethics and Discipline, namely: (1)
unauthorized acceptance of payments for new connection; (2) dishonest or unauthorized activity
whether for personal gain or not; and (3) defrauding others by using the name of the company.
He was dismissed from service.6
Cagampan filed a complaint for illegal dismissal, praying for payment of backwages and
damages, and reinstatement. In a decision dated January 14, 2000, the Labor Arbiter found that
Cagampan used his position as a CENPELCO employee to enter into a contract with Bonifacio
for the purchase of materials and hiring of labor force necessary for the installation of a
transformer, in violation of company rules.7 The Labor Arbiter dismissed the complaint for lack of
merit but ordered CENPELCO to pay Cagampan separation pay, thus,
WHEREFORE, PREMISES CONSIDERED, the instant complaint is hereby DISMISSED for lack
of merit. The respondent corporation is, however, ordered to pay the complainant P99,345.00
(P9,934.50 ÷ 2 = P4,967.25 x 20) by way of separation pay.
SO ORDERED. 8
Both parties appealed to the NLRC. In a decision dated July 31, 2000, the NLRC affirmed the
Labor Arbiter’s decision. Private respondent’s motion for reconsideration was denied.
CENPELCO sought reconsideration of the award of separation pay but was also denied. Hence,
petitioner filed a petition for certiorari with the Court of Appeals on the ground that the NLRC
committed grave abuse of discretion amounting to lack or in excess of jurisdiction by affirming
the award of separation pay to private respondent. The appellate court dismissed the petition for
lack of merit. Petitioner moved for reconsideration but was denied.
Hence, this petition where petitioner raises the lone issue of –
Whether the Honorable Court of Appeals’ decision upholding the award of separation pay to
private respondent Cagampan who was legally dismissed for gross misconduct and acts of
dishonesty is contrary to the existing jurisprudence.9
Simply stated, at issue in this case is the propriety of the award of separation pay to private
respondent.
Petitioner maintains that private respondent is not entitled to separation pay since he was
dismissed for gross misconduct and acts of dishonesty. It contends that separation pay or
financial assistance is not awarded to employees lawfully dismissed for serious misconduct or
for cause reflecting on his moral character.10
Private respondent for his part claims that payment of separation pay for humanitarian reasons
is proper considering that he had served petitioner for almost twenty-one years prior to his
termination.11
The Court of Appeals in affirming the NLRC decision held that the NLRC did not gravely abuse
its discretion in awarding the benefits of compassionate justice. It ratiocinated that considering
his long years of service, it did not necessarily follow that no award of separation pay could be
made if there was no illegal dismissal.12
We find for petitioner. Separation pay should not be awarded.
Section 7, Rule I, Book VI of the Omnibus Rules Implementing the Labor Code provides that
when the employee is dismissed for any of the just causes under Article 28213 of the Labor Code,
he shall not be entitled to termination pay without prejudice to applicable collective bargaining
agreement or voluntary employer policy or practice.14Separation pay shall be allowed only in
those instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character.15 Separation pay in such case is granted
to stand as a "measure of social justice."16 If the cause for the termination of employment cannot
be considered as one of mere inefficiency or incompetence but an act that constitutes an utter
disregard for the interest of the employer or a palpable breach of trust in him, the grant by the
Court of separation benefits is hardly justifiable.17
1avv phi 1
In this case, private respondent was found by the Labor Arbiter and the NLRC to have been
validly dismissed for violations of company rules, and certain acts tantamount to serious
misconduct. Such findings, if supported by substantial evidence, are accorded respect and even
finality by this Court.18
Although long years of service might generally be considered for the award of separation
benefits or some form of financial assistance to mitigate the effects of termination, this case is
not the appropriate instance for generosity under the Labor Code nor under our prior decisions.
The fact that private respondent served petitioner for more than twenty years with no negative
record prior to his dismissal, in our view of this case, does not call for such award of benefits,
since his violation reflects a regrettable lack of loyalty and worse, betrayal of the company. If an
employee’s length of service is to be regarded as a justification for moderating the penalty of
dismissal, such gesture will actually become a prize for disloyalty, distorting the meaning of
social justice and undermining the efforts of labor to cleanse its ranks of undesirables. 19

WHEREFORE, the petition is GRANTED. The Decision dated December 11, 2003 of the Court
of Appeals in CA-G.R. SP No. 62285 and its Resolution dated April 19, 2004, denying the
motion for reconsideration, are hereby REVERSED and SET ASIDE.

SO ORDERED.
 G.R. No. 211497, March 18, 2015
HOCHENG PHILIPPINES CORPORATION, Petitioner, v. ANTONIO M. FARRALES, Respondent.
DECISION
Before this Court on Petition for Review on Certiorari1 is the Decision2 dated October 17, 2013 of the Court of
Appeals (CA) in CA-G.R. SP No. 125103, which reversed the Decision3 dated February 29, 2012 and
Resolution4 dated May 7, 2012 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 08-002249-
11, and reinstated with modifications the Decision 5 dated April 29, 2011 of the Labor Arbiter (LA) in NLRC Case
No. RAB-IV-03-00618-10-C, which found that respondent Antonio M. Farrales (Farrales) was illegally dismissed
by Hocheng Philippines Corporation (HPC). The fallo of the appellate decision reads:
WHEREFORE, premises considered, the Decision of the Labor Arbiter dated April 29, 2011 in NLRC Case No.
RAB-IV-03-00618-10-C is reinstated with modifications. Private respondent Hocheng Philippines Corporation
is liable to pay [Farrales] the following: chanRoblesvi rtual Lawli bra ry
(1) Full backwages from date of dismissal on February 15, 2010 until date
of decision equivalent to P276,466.67;
(2) Separation pay of one (1) month salary per year of service for a period
of twelve years equivalent to P228,800.00;
(3) Appraisal year-end bonus in the sum of P11,000.00; and,
(4) Attorney’s fees equivalent to 10% of the total award.
SO ORDERED. 6 separation pay with full backwages, plus moral and exemplary damages and attorney’s fees. During the
The Facts
Farrales was first employed by HPC on May 12, 1998 as Production Operator, followed by promotions as (1)
Leadman in 2004, (2) Acting Assistant Unit Chief in 2007, and (3) Assistant Unit Chief of Production in 2008, a
supervisory position with a monthly salary of ?17,600.00. He was a consistent recipient of citations for
outstanding performance, as well as appraisal and year-end bonuses.7
On December 2, 2009, a report reached HPC management that a motorcycle helmet of an employee, Reymar
Solas (Reymar), was stolen at the parking lot within its premises on November 27, 2009. On December 3, 2009,
Security Officer Francisco Paragas III confirmed a video sequence recorded on closed-circuit television (CCTV)
around 3:00 p.m. on November 27, 2009 showing Farrales taking the missing helmet from a parked motorcycle,
to wit: chanRoblesvirt ualLaw lib rary
a. At around 3:07:44, [Farrales] was seen walking towards the motorcycle parking lot;
b. At around 3:08:47, [Farrales] walked back towards the pedestrian gate of the company, passing by
the motorcycle parking lot; chanrobleslaw
c. At around 3:08:51, [Farrales] walked back towards the motorcycle parking lot and returned to the
pedestrian gate;chanroble slaw
d. At around 3:09:10, [Farrales] called on the person of Andy Lopega and instructed him to get the
helmet he was pointing at; [and]
e. At around 3:09:30, Andy gave the helmet to [Farrales].
Later that day, HPC sent Farrales a notice to explain his involvement in the alleged theft. The investigation was
supported by the employees’ union, ULO-Hocheng.9Below is Farrales’ explanation, as summarized by the
CA:chanRoblesv irt ual Lawlib rary
On November 27, 2009, [Farrales] borrowed a helmet from his co-worker Eric Libutan (“Eric”) since they reside
in the same barangay. They agreed that Eric could get it at the house of [Farrales] or the latter could return it
the next time that they will see each other. Eric told him that his motorcycle was black in color. As there were
many motorcycles with helmets, he asked another employee, Andy Lopega (“Andy”) who was in the parking
area where he could find Eric’s helmet. Andy handed over to him the supposed helmet which he believed to be
owned by Eric, then he went home.
On November 28, 2009, at around 6 o’clock in the morning, he saw Eric at their barangayand told him to get
the helmet. But Eric was in a rush to go to work, he did not bother to get it.
In the morning of December 3, 2009, upon seeing Eric in the workplace, [Farrales] asked him why he did not
get the helmet from his house. Eric told him that, “Hindi po sa akin yung nakuha nyong helmet.” [Farrales] was
shocked and he immediately phoned the HPC’s guard to report the situation that he mistook the helmet which
he thought belonged to Eric. After several employees were asked as to the ownership of the helmet, he finally
found the owner thereof, which is Jun Reyes’s (“Jun”) nephew, Reymar, who was with him on November 27,
2009. [Farrales] promptly apologized to Jun and undertook to return the helmet the following day and explained
REYES, J.: that it was an honest mistake. These all happened in the morning of December 3, 2009; [Farrales] did not know
yet that HPC will send a letter demanding him to explain. 10
A hearing was held on December 10, 2009 at 1:00 p.m. Present were Farrales, Eric Libutan (Eric), Andy Lopega
(Andy), Jun Reyes, Antonio Alinda, a witness, and Rolando Garciso, representing ULO-Hocheng. From Andy it
was learned that at the time of the alleged incident, he was already seated on his motorcycle and about to leave
the company compound when Farrales approached and asked him to hand to him a yellow helmet hanging from
a motorcycle parked next to him. When Andy hesitated, Farrales explained that he owned it, and so Andy
complied. But Eric had specifically told Farrales that his helmet was colored red and black and his motorcycle
chanRoblesv irtual Lawlib rary
was a black Honda XRM-125 with plate number 8746-DI, parked near the perimeter fence away from the
walkway to the pedestrian gate. The CCTV showed Farrales instructing Andy to fetch a yellow helmet from a
blue Rossi 110 motorcycle with plate number 3653-DN parked in the middle of the parking lot, opposite the
location given by Eric. Farrales in his defense claimed he could no longer remember the details of what
transpired that time, nor could he explain why he missed Eric’s specific directions. 11 cha nrob lesvi rtua llawlib ra ry
On February 15, 2010, the HPC issued a Notice of Termination to Farrales dismissing him for violation of 12
Article 69, Class A, Item No. 29 of the HPC Code of Discipline, which provides that “stealing from the company,
its employees and officials, or from its contractors, visitors or clients,” is akin to serious misconduct and
fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative, which are just causes for termination of employment under Article 282 of the
Labor Code.
On March 25, 2010, Farrales filed a complaint for illegal dismissal, non-payment of appraisal and mid-year
bonuses, service incentive leave pay and 13th month pay. He also prayed for reinstatement, or in lieu thereof,
mandatory conference, HPC paid Farrales ?10,914.51, representing his 13th month pay for the period of
January to February 2010 and vacation leave/sick leave conversion. Farrales agreed to waive his claim for
incentive bonus.13 chanrob lesvi rtua llawlib ra ry
On April 29, 2011, the LA ruled in favor of Farrales,14 the fallo of which is as follows: chanRoble svirtual Lawlib ra ry
WHEREFORE, PREMISES CONSIDERED, all the respondents Hocheng Phils. Corporation, Inc. Sam Chen[g] and
Judy Geregale are found guilty of illegal dismissal and ordered jointly and severally to pay complainant the
chanrob lesvi rtual lawlib rary
following:chanRoblesvirt ual Lawlib rary
1. Full backwages from date of dismissal on February 15, 2010 until date of decision equivalent to
P276,466.67.
2. Separation pay of one (1) month salary per year of service for a period of twelve years equivalent to
P228,800.00.
chanrobles law
3. Appraisal year-end bonus in the sum of P11,000.00.
4. Moral damages in the sum of P200,000.00.
5. Exemplary damages in the sum of P100,000.00.
6. 10% of all sums owing as attorney’s fees or the amount of P81,626.67.
SO ORDERED.15
On appeal by HPC,16 the NLRC reversed the LA,17 and denied Farrales’ motion for reconsideration, finding
substantial evidence of just cause to terminate Farrales.18 chanrob lesvi rtua llawli bra ry
8 On petition for certiorari to the CA, Farrales sought to refute the NLRC’s factual finding that he committed
19
theft, as well as to question NLRC’s jurisdiction over HPC’s appeal for non-payment of appeal fees. But the CA
found that HPC was able to perfect its appeal by posting a bond equivalent to the monetary award of
?897,893.37 and paying the appeal fees by postal money order in the amount of ?520.00. 20 chanrob lesvi rtual lawlib rary
Concerning the substantive issues, the appellate court agreed with the LA that Farrales’ act of taking Reymar’s
helmet did not amount to theft, holding that HPC failed to prove that Farrales’ conduct was induced by a
perverse and wrongful intent to gain, in light of the admission of Eric that he did let Farrales borrow one of his
two helmets, only that Farrales mistook Reymar’s helmet as the one belonging to him.
Petition for Review to the Supreme Court

In this petition, HPC raises the following grounds for this Court’s review: chanRoblesvirtual Lawlib rary
A. THE HONORABLE [CA] PLAINLY ERRED AND ACTED CONTRARY TO EXISTING LAW AND
JURISPRUDENCE IN REVERSING THE DECISION OF THE [NLRC] AND DECLARING ILLEGAL THE
DISMISSAL FOR [HPC’s] ALLEGED FAILURE TO PROVE THE EXISTENCE OF JUST CAUSE.
1. THERE IS SUBSTANTIAL EVIDENCE TO SHOW THAT [FARRALES] COMMITTED THEFT IN
[HPC’s] PREMISES.
2. THEFT IS A JUST CAUSE FOR TERMINATION.
3. BY COMMITTING THEFT, [FARRALES], BEING A SUPERVISORIAL EMPLOYEE, FORFEITED
THE TRUST REPOSED IN HIM BY [HPC], THUS RENDERING HIM DISMISSIBLE FOR LOSS
OF CONFIDENCE.
B. IN DECLARING ILLEGAL THE DISMISSAL OF [FARRALES], THE HONORABLE [CA] VIOLATED
DOCTRINES LAID DOWN BY THE SUPREME COURT.
1. COURTS CANNOT SUBSTITUTE THEIR JUDGMENT FOR THAT OF THE MANAGEMENT.
2. COURTS MUST ACCORD DUE RESPECT TO THE FINDINGS OF ADMINISTRATIVE
AGENCIES.21
Chiefly, HPC insists that since the complaint below involves an administrative case, only substantial evidence,
not proof of guilt beyond reasonable doubt, is required to prove the guilt of Farrales; 22 that what the CA has
done is substitute its judgment for that of the NLRC, which is vested with statutory duty to make factual
determinations based on the evidence on record.23
cha nro blesvi rtua llawli bra ry
Ruling of the Court
The Court resolves to deny the petition.
To validly dismiss an employee, the law requires the employer to prove the existence of any of the valid or
authorized causes,24 which, as enumerated in Article 282 of the Labor Code, are: (a) serious misconduct or
willful disobedience by the employee of the lawful orders of his employer or the latter’s representative in
connection with his work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful
breach by the employee of the trust reposed in him by his employer or his duly authorized representative; (d)
commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and (e) other causes analogous to the
foregoing.25 As a supervisorial employee, Farrales is admittedly subject to stricter rules of trust and confidence,
and thus pursuant to its management prerogative HPC enjoys a wider latitude of discretion to assess his
continuing trustworthiness, than if he were an ordinary rank-and-file employee.26 HPC therefore insists that only
substantial proof of Farrales’ guilt for theft is needed to establish the just causes to dismiss him, as the NLRC
lengthily asserted in its decision.
Article 4 of the Labor Code mandates that all doubts in the implementation and interpretation of the provisions
thereof shall be resolved in favor of labor. Consistent with the State’s avowed policy to afford protection to
labor, as Article 3 of the Labor Code and Section 3, Article XIII of the 1987 Constitution have enunciated,
particularly in relation to the worker’s security of tenure, the Court held that “[t]o be lawful, the cause for
termination must be a serious and grave malfeasance to justify the deprivation of a means of livelihood. This is
merely in keeping with the spirit of our Constitution and laws which lean over backwards in favor of the working
class, and mandate that every doubt must be resolved in their favor.” 27 Moreover, the penalty imposed on the
erring employee ought to be proportionate to the offense, taking into account its nature and surrounding
circumstances.
The Court has always taken care, therefore, that the employer does not invoke any baseless justification, much
less management prerogative, as a subterfuge by which to rid himself of an undesirable worker, 28and thus in
exceptional cases the Court has never hesitated to delve into the NLRC’s factual conclusions where evidence was
found insufficient to support them, or too much was deduced from the bare facts submitted by the parties, or
the LA and the NLRC came up with conflicting positions, as is true in this case. 29
As aptly pointed out by the LA, while HPC has the onus probandi that the taking of Reymar’s helmet by Farrales
was with intent to gain, it failed to discharge this burden, as shown by the following circumstances: Farrales
sought and obtained the permission of Eric, his co-employee as well as barangayco-resident, to borrow his
helmet; at the parking lot, Farrales asked another employee, Andy, to fetch a yellow helmet from one of the
parked motorcycles, mistakenly thinking it belonged to Eric (whom he knew owned two helmets); the following
day, November 28, Farrales asked Eric why he had not dropped by his house to get his helmet, and Eric replied
that Farrales got the wrong helmet because he still had his other helmet with him; Farrales immediately sought
the help of the company guards to locate the owner of the yellow helmet, who turned out to be Reymar;
Farrales apologized to Reymar for his mistake, and his apology was promptly accepted. 30 All these
circumstances belie HPC’s claim that Farrales took Reymar’s helmet with intent to gain, the LA said.
In ruling that Farrales’ dismissal by HPC was attended with utmost malice and bad faith as to justify an award of
moral and exemplary damages and attorney’s fees, the LA stated that “[i]t is succinctly clear that [the]
respondents [therein] tried to blow out of proportions the indiscretion of [Farrales] for reasons known only to
them,” and moreover, “[f]inding that the dismissal on the ground of theft is unavailing, [the] respondents
[therein] immediately offered [Farrales] his former position when he filed [his] complaint. What does this act of
[the] respondents [therein] speak [of]?”31 chan roble svirtual lawlib rary
On the other hand, the NLRC found that Farrales lied, first, when he told Andy, then already astride his
motorbike at the parking area and about to leave the company premises, that the yellow helmet belonged to
him,32 and second, when he claimed that Eric was his neighbor, although they were not. It ruled as doubtful
Farrales’ hazy recollection about what happened that afternoon at the parking lot, since he could not even give a
description of the motorcycle from which he took the yellow helmet. These circumstances, the NLRC
determined, comprise substantial proof belying Farrales’ claim of good faith. As a supervisory employee, he held
a position of high responsibility in the company making him accountable to stricter rules of trust and confidence
than an ordinary employee, and under Article 282 of the Labor Code, he is guilty of a serious misconduct and a
willful breach of trust. The NLRC went on to cite a settled policy that in trying to protect the rights of labor, the
law does not authorize the oppression or self-destruction of the employer. Management also has its own rights,
which as such, are entitled to respect and enforcement in the interest of simple fair play. 33
chanrob lesvi rtua llawli bra ry
But the Court agrees with the CA that Farrales committed no serious or willful misconduct or disobedience to
warrant his dismissal. It is not disputed that Farrales lost no time in returning the helmet to Reymar the
moment he was apprised of his mistake by Eric, which proves, according to the CA, that he was not possessed
of a depravity of conduct as would justify HPC’s claimed loss of trust in him. Farrales immediately admitted his
error to the company guard and sought help to find the owner of the yellow helmet, and this, the appellate court
said, only shows that Farrales did indeed mistakenly think that the helmet he took belonged to Eric.
It is not, then, difficult to surmise that when Farrales told Andy that the yellow helmet was his, his intent was
not to put up a pretence of ownership over it and thus betray his intent to gain, as the NLRC held, but rather
simply to assuage Andy’s reluctance to heed his passing request to reach for the helmet for him; Andy, it will be
recalled, was at that moment already seated in his motorbike and about to drive out when Farrales made his
request. As to Farrales’ claim that he and Eric were neighbors, suffice it to say that as the CA noted, they
resided in the same barangay, and thus, loosely, were neighbors.
The CA also pointed out that although the alleged theft occurred within its premises, HPC was not prejudiced in
any way by Farrales’ conduct since the helmet did not belong to it but to Reymar. In light of Article 69, Class A,
Item No. 29 of the HPC Code of Discipline, this observation may be irrelevant, although it may be that the LA
regarded it as proving HPC’s bad faith.
Theft committed by an employee against a person other than his employer, if proven by substantial evidence, is
a cause analogous to serious misconduct.34 Misconduct is improper or wrong conduct, it is the transgression of
some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error in judgment. The misconduct to be serious must be of such grave
and aggravated character and not merely trivial or unimportant. Such misconduct, however serious, must,
nevertheless, be in connection with the employee’s work to constitute just cause for his separation.35 chanrob lesvi rtua llawlib ra ry
But where there is no showing of a clear, valid and legal cause for termination of employment, the law considers
the case a matter of illegal dismissal.36 If doubts exist between the evidence presented by the employer and
that of the employee, the scales of justice must be tilted in favor of the latter. The employer must affirmatively
show rationally adequate evidence that the dismissal was for a justifiable cause.37 chan roble svirtual lawlib rary
Nonetheless, the Court agrees with the CA’s dismissal of the award of moral and exemplary damages for lack of
merit. There is no satisfactory proof that the concerned officers of HPC acted in bad faith or with malice in
terminating Farrales. Notwithstanding the LA’s assertion to this effect, Farrales’ bare allegations of bad faith
deserve no credence, and neither is the mere fact that he was illegally dismissed sufficient to prove bad faith on
the part of HPC’s officers.38 But concerning the award of attorney’s fees, Farrales was dismissed for a flimsy
charge, and he was compelled to litigate to secure what is due him which HPC unjustifiably withheld.
WHEREFORE, premises considered, the petition for review is DENIED.
SO ORDERED.
chanroble svirtual lawlib rary
Velasco, Jr., (Chairperson), Peralta, Villarama, Jr., and Jardeleza, JJ., concur.
cralawlawlib ra ry
G.R. No. 202961 February 4, 2015 statements, employees ARE NOT granted separation benefits under the
law.
EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO DAVID, BONIFACIO
MATUNDAN, NORA MENDOZA, et al., Petitioners, 4. The COMPANY, by way of goodwill and in the spirit of generosity agrees
vs. to grant financial assistance less accountabilities to members of the Union
NATIONAL LABOR RELATIONS COMMISSION, ·SOLID MILLS, INC., and/or PHILIP based on length of service to be computed as follows: (Italics in this
ANG, Respondents. paragraph supplied)

DECISION Number of days - 12.625 for every year of service

LEONEN, J.: 5. In view of the above, the members of the UNION will receive such
financial assistance on an equal monthly installments basis based on the
following schedule:
An employer is allowed to withhold terminal pay and benefits pending the employee's return of
its properties.
First Check due on January 5, 2004 and every 5th of the month thereafter
until December 5, 2004.
Petitioners are respondent Solid Mills, Inc.' s (Solid Mills) employees. They are represented by
1

the National Federation of Labor Unions (NAFLU), their collective bargaining agent. 2

6. The COMPANY commits to pay any accrued benefits the Union members
are entitled to, specifically those arising from sick and vacation leave
As Solid Mills’ employees, petitionersand their families were allowed to occupy SMI Village, a
benefits and 13th month pay, less accountabilities based on the following
property owned by Solid Mills. According to Solid Mills, this was "[o]ut of liberality and for the
3

schedule:
convenience of its employees . . . [and] on the condition that the employees . . . would vacate
the premises anytime the Company deems fit." 4

One Time Cash Payment to bedistributed anywhere from. . . .

In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills would
cease its operations due to serious business losses. NAFLU recognized Solid Mills’ closure due
5
....
to serious business losses in the memorandum of agreement dated September 1, 2003. The 6

memorandum of agreement provided for Solid Mills’ grant of separation pay less
8. The foregoing agreement is entered into with full knowledge by the
accountabilities, accrued sick leave benefits, vacation leave benefits, and 13th month pay to the
parties of their rights under the law and they hereby bind themselves not to
employees. Pertinent portions of the agreement provide:
7

conduct any concerted action of whatsoever kind, otherwise the grant of

financial assistance as discussed above will be withheld. (Emphasis in the
8

WHEREAS, the COMPANYhas incurred substantial financial losses and is currently original)
experiencing further severe financial losses;
Solid Mills filed its Department of Labor and Employment termination report on September 2,
WHEREAS, in view of such irreversible financial losses, the COMPANY will cease its operations 2003.9

on October 10, 2003;

Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate SMI
WHEREAS, all employees of the COMPANY on account of irreversible financial losses, will Village. 10

bedismissed from employment effective October 10, 2003;

Petitioners were no longer allowed to report for work by October 10, 2003. They were required
11

In view thereof, the parties agree as follows: to sign a memorandum of agreement with release and quitclaim before their vacation and sick
leave benefits, 13th month pay, and separation pay would be released. Employees who signed
12

the memorandum of agreement were considered to have agreed to vacate SMI Village, and to
1. That UNION acknowledges that the COMPANY is experiencing severe
the demolition of the constructed houses inside as condition for the release of their termination
financial losses and as a consequence of which, management is
benefits and separation pay. Petitioners refused to sign the documents and demanded to be
13

constrained to cease the company’s operations.

paid their benefits and separation pay. 14

2. The UNION acknowledges that under Article 283 of the Labor Code,
Hence, petitioners filed complaintsbefore the Labor Arbiter for alleged non-payment of
separation pay is granted to employees who are dismissed due to closures
separation pay, accrued sick and vacation leaves, and 13th month pay. They argued that their
15

or cessation of operations NOT DUE to serious business losses.

accrued benefits and separation pay should not be withheld becausetheir payment is based on
company policy and practice. Moreover, the 13th month pay is based on law, specifically,
16

3. The UNION acknowledges that in view of the serious business losses the Presidential Decree No. 851. Their possession of Solid Mills property is not an accountability
17

Company has been experiencing as seen in their audited financial

that is subject to clearance procedures. They had already turned over to SolidMills their
18
WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated 10/17/05 is
uniforms and equipment when Solid Mills ceased operations. 19
AFFIRMED in so far as par. 3 thereof is concerned but modified in that paragraphs 1 and 2
thereof are REVERSED and SET ASIDE. Accordingly, the following complainants, namely: Emir
Milan, Ramon Masangkay, Alfredo Javier, Ronaldo David, Bonifacio Matundan, Nora Mendoza,
On the other hand, Solid Mills argued that petitioners’ complaint was premature because they
Myrna Igcas, Raul De Las Alas, Renato Estolano, Rex S. Dimaf[e]lix, Maura Milan, Jessica
had not vacated its property.20

Baybayon, Alfredo Mendoza, Roberto Igcas, Cleopatra Zacarias and Jerry L. Sesma’s monetary
claims in the form of separation pay, accrued 13th month pay for 2003, accrued vacation and
The Labor Arbiter ruled in favor of petitioners. According to the Labor Arbiter, Solid Mills
21 sick leave pays are held in abeyance pending compliance of their accountabilities to respondent
illegallywithheld petitioners’ benefits and separation pay. Petitioners’ right to the payment of
22 company by turning over the subject lots they respectively occupy at SMI Village Sucat
their benefits and separation pay was vestedby law and contract. The memorandum of
23

agreement dated September 1, 2003 stated no condition to the effect that petitioners must
Muntinlupa City, Metro Manila to herein respondent company. 31

vacate SolidMills’ property before their benefits could be given to them. Petitioners’ possession
24

should not be construed as petitioners’ "accountabilities" that must be cleared first before the
release of benefits. Their possession "is not by virtue of any employer-employee
25
The National Labor Relations Commission noted that complainants Marilou Linga, Renato Linga,
relationship." It is a civil issue, which isoutside the jurisdiction of the Labor Arbiter.
26 27
IsmaelMata, and Carlito Damian were already paid their respective separation pays and
benefits. Meanwhile, Teodora Mahilom already retired longbefore Solid Mills’ closure. She was
32 33

already given her retirement benefits. 34

The dispositive portion of the Labor Arbiter’s decision reads:

The National Labor Relations Commission ruled that because of petitioners’ failure to vacate
WHEREFORE, premises considered, judgment is entered ORDERING respondents SOLID
Solid Mills’ property, Solid Mills was justified in withholding their benefits and separation
MILLS, INC. and/or PHILIP ANG (President), in solido to pay the remaining 21 complainants:
pay. Solid Mills granted the petitioners the privilege to occupy its property on accountof
35

petitioners’ employment. It had the prerogative toterminate such privilege. The termination of
36 37

1) 19 of which, namely EMER MILAN, RAMON MASANGKAY, ALFREDO JAVIER, Solid Mills and petitioners’ employer-employee relationship made it incumbent upon petitioners
RONALDO DAVID, BONIFACIO MATUNDAN, NORA MENDOZA, MYRNA IGCAS, to turn over the property to Solid Mills. 38

RAUL DE LAS ALAS, RENATO ESTOLANO, REX S. DIMAFELIX, MAURA MILAN,

JESSICA BAYBAYON, ALFREDO MENDOZA, ROBERTO IGCAS, ISMAEL MATA,
Petitioners filed a motion for partial reconsideration on October 18, 2010, but this was denied in
39

CARLITO DAMIAN, TEODORA MAHILOM, MARILOU LINGA, RENATO LINGA their

the November 30, 2010 resolution. 40

separation pay of 12.625 days’ pay per year of service, pro-rated 13th month pay for
2003 and accrued vacation and sick leaves, plus 12% interest p.a. from date of filing
of the leadcase/judicial demand on 12/08/03 until actual payment and/or finality; Petitioners, thus, filed a petition for certiorari before the Court of Appeals to assail the National
41

LaborRelations Commission decision of August 31, 2010 and resolution of November 30, 2010. 42

2) the remaining 2 of which, complainants CLEOPATRA ZACARIAS, as she already

received on 12/19/03 her accrued 13th month pay for 2003, accrued VL/SL total On January 31, 2012, the Court of Appeals issued a decision dismissing petitioners’
amount of ₱15,435.16, likewise, complainant Jerry L. Sesma as he already received petition, thus:
43

his accrued 13th month pay for 2003, SL/VL in the total amount of ₱10,974.97, shall
be paid only their separation pay of 12.625 days’ pay per year of service but also with
WHEREFORE, the petition is hereby ordered DISMISSED. 44

12% interest p.a. from date of filing of the lead case/judicial demand on 12/08/03 until
actual payment and/or finality, which computation as of date, amount to as shown in
the attached computation sheet.
The Court of Appeals ruled thatSolid Mills’ act of allowing its employees to make temporary
dwellingsin its property was a liberality on its part. It may be revoked any time at its
discretion. As a consequence of Solid Mills’ closure and the resulting termination of petitioners,
45

3) Nine (9) individual complaintsviz., of Maria Agojo, Joey Suarez, Ronaldo Vergara,
the employer-employee relationship between them ceased to exist. There was no more reason
Ronnie Vergara, Antonio R. Dulo, Sr., Bryan D. Durano, Silverio P. Durano, Sr.,
for them to stay in Solid Mills’ property. Moreover, the memorandum of agreement between
46

Elizabeth Duarte and Purificacion Malabanan are DISMISSED WITH PREJUDICE due
Solid Mills and the union representing petitioners provided that Solid Mills’ payment of
to amicable settlement, whereas, that of [RONIE ARANAS], [EMILITO NAVARRO],
employees’ benefits should be "less accountabilities." 47

[NONILON PASCO], [GENOVEVA PASCO], [OLIMPIO A. PASCO] are DISMISSED

WITHOUT PREJUDICE, for lack of interest and/or failure to prosecute.
On petitioners’ claim that there was no evidence that Teodora Mahilom already received her
retirement pay, the Court of Appeals ruled that her complaint filed before the Labor Arbiter did
The Computation and Examination unit is directed to cause the computation of the award in
not include a claim for retirement pay. The issue was also raised for the first time on appeal,
Pars. 2 and 3 above. (Emphasis in the original)
28

which is not allowed. In any case, she already retired before Solid Mills ceased its operations.
48 49

Solid Mills appealed to the National Labor Relations Commission. It prayed for, among others,
29

The Court of Appeals agreed with the National Labor Relations Commission’s deletion of interest
the dismissal of the complaints against it and the reversal of the Labor Arbiter’s decision.30

since it found that Solid Mills’ act of withholding payment of benefits and separation pay was
proper. Petitioners’ terminal benefits and pay were withheld because of petitioners’ failure to
The National Labor Relations Commission affirmed paragraph 3 of the Labor Arbiter’s vacate Solid Mills’ property. 50

dispositive portion, but reversed paragraphs 1 and 2. Thus:

Finally, the Court of Appeals noted that Carlito Damian already received his separation pay and
benefits. Hence, he should no longer be awarded these claims.
51 52
In the resolution promulgated on July 16, 2012, the Court of Appeals denied petitioners’ motion
for reconsideration. 53
Petitioners raise in this petition the following errors:
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT RULED THAT PAYMENT OF THE MONETARY
CLAIMS OF PETITIONERS SHOULD BE HELD IN ABEYANCE PENDING
COMPLIANCE OF THEIR ACCOUNTABILITIES TO RESPONDENT SOLID MILLS
BY TURNING OVER THE SUBJECT LOTS THEY RESPECTIVELY OCCUPY AT SMI
VILLAGE, SUCAT, MUNTINLUPA CITY.
II
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT UPHELD THE RULING OF THE NLRC DELETING
THE INTEREST OF 12% PER ANNUM IMPOSED BY THE HONORABLE LABOR
ARBITER HERNANDEZ ON THE AMOUNTDUE FROM THE DATE OF FILING OF
THE LEAD CASE/JUDICIAL DEMAND ON DECEMBER 8, 2003 UNTIL ACTUAL
PAYMENT AND/OR FINALITY.
III
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT UPHELD THE RULING OF THE NLRC DENYING
THE CLAIM OF TEODORA MAHILOM FOR PAYMENT OF RETIREMENT
BENEFITS DESPITE LACK OF ANY EVIDENCE THAT SHE RECEIVED THE SAME.
IV
WHETHER OR NOT PETITIONER CARLITO DAMIAN IS ENTITLED TO HIS
MONETARY BENEFITS FROM RESPONDENT SOLID MILLS. 54
Petitioners argue that respondent Solid Mills and NAFLU’s memorandum of agreement has no
provision stating that benefits shall be paid only upon return of the possession of respondent
Solid Mills’ property. It only provides that the benefits shall be "less accountabilities," which
55
should not be interpreted to include such possession. The fact that majority of NAFLU’s
56
members were not occupants of respondent Solid Mills’ property is evidence that possession of
the property was not contemplated in the agreement. "Accountabilities" should be interpreted to
57
refer only to accountabilities that wereincurred by petitioners while they were performing their
duties asemployees at the worksite. Moreover, applicable laws, company practice, or policies
58
do not provide that 13th month pay, and sick and vacation leave pay benefits, may be withheld
pending satisfaction of liabilities by the employee. 59
Petitioners also point out thatthe National Labor Relations Commission and the Court of Appeals
have no jurisdiction to declare that petitioners’ act of withholding possession of respondent Solid
Mills’ property is illegal. The regular courts have jurisdiction over this issue. It is independent
60 61
from the issue of payment of petitioners’ monetary benefits. 62
For these reasons, and because, according to petitioners, the amount of monetary award is no
longer in question, petitioners are entitled to 12% interest per annum. 63
Petitioners also argue that Teodora Mahilom and Carlito Damian are entitled to their claims.
They insistthat Teodora Mahilom did not receive her retirement benefits and that Carlito Damian
did not receive his separation benefits. 64
Respondents Solid Mills and Philip Ang,in their joint comment, argue that petitioners’ failure to
turn over respondentSolid Mills’ property "constituted an unsatisfied accountability" for which
reason "petitioners’ benefits could rightfully be withheld." The term "accountability" should be
65
given its natural and ordinary meaning. Thus, it should be interpreted as "a state of being liable
66
or responsible," or "obligation." Petitioners’ differentiation between accountabilities incurred
67
while performing jobs at the worksite and accountabilities incurred outside the worksite is
baseless because the agreement with NAFLUmerely stated "accountabilities," without
qualification.68
On the removal of the award of 12% interest per annum, respondents argue that such removal
was proper since respondent Solid Mills was justified in withholding the monetary
claims. Respondents argue that Teodora Mahilom had no more cause of action for retirement
69
benefits claim. She had already retired more than a decade before Solid Mills’ closure. She also
70
already received her retirement benefits in 1991. Teodora Mahilom’s claim was also not
71
included in the complaint filed before the Labor Arbiter.It was improper to raise this claim for the
first time on appeal. In any case, Teodora Mahilom’s claim was asserted long after the three-
year prescriptive period provided in Article 291 of the Labor Code. 72
Lastly, according to respondents, it would be unjust if Carlito Damian would be allowed to
receive monetary benefits again, which he, admittedly, already received from Solid Mills. 73
I
The National Labor Relations Commission may preliminarily determine issues related to rights
arising from an employer-employee relationship
The National Labor Relations Commission has jurisdiction to determine, preliminarily, the
parties’rights over a property, when it is necessary to determine an issue related to rights or
claims arising from an employer-employee relationship.
Article 217 provides that the Labor Arbiter, in his or her original jurisdiction, and the National
Labor Relations Commission, in its appellate jurisdiction, may determine issues involving claims
arising from employeremployee relations. Thus:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. – (1) 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 workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
 2. Termination disputes; property had they not been its employees. The return of its properties in petitioners’ possession
by virtue of their status as employees is an issue that must be resolved to determine whether
benefits can be released immediately. The issue raised by the employer is, therefore, connected
3. If accompanied with a claim for reinstatement, those cases that workers may file
to petitioners’ claim for benefits and is sufficiently intertwined with the parties’ employeremployee
involving wages, rates of pay, hours of work and other terms and conditions of
relationship. Thus, it is properly within the labor tribunals’ jurisdiction.
employment;

II
4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;
Institution of clearance procedures has legal bases
5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and Requiring clearance before the release of last payments to the employee is a standard
procedure among employers, whether public or private. Clearance procedures are instituted to
ensure that the properties, real or personal, belonging to the employer but are in the possession
6. Except claims for Employees Compensation, Social Security, Medicare and
of the separated employee, are returned tothe employer before the employee’s departure.
maternity benefits, all other claims, arising from employer-employee relations including
those of persons in domestic or household service, involving an amount exceeding
five thousand pesos (₱5,000.00), regardless of whether accompanied with a claim for As a general rule, employers are prohibited from withholding wages from employees. The Labor
reinstatement. Code provides:

(2) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters. (Emphasis supplied)
Petitioners’ claim that they have the right to the immediate release of their benefits as
employees separated from respondent Solid Mills is a question arising from the employer-
employee relationship between the parties.
Art. 116. Withholding of wages and kickbacks prohibited.It shall be unlawful for any person,
directly or indirectly, to withhold any amount from the wages of a worker or induce him to give up
any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever
without the worker’s consent.
The Labor Code also prohibits the elimination or diminution of benefits. Thus:

Claims arising from an employer-employee relationship are not limited to claims by an Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be
employee. Employers may also have claims against the employee, which arise from the same construed to eliminate or in any way diminish supplements, or other employee benefits being
relationship. In Bañez v. Valdevilla, this court ruled that Article 217 of the Labor Code also
74
enjoyed at the time of promulgation of this Code.
applies to employers’ claim for damages, which arises from or is connected with the labor issue.
Thus: Whereas this Court in a number of occasions had applied the jurisdictional provisions of
However, our law supports the employers’ institution of clearance procedures before the release
Article 217 to claims for damages filed by employees, we hold that by the designating clause
of wages. As an exception to the general rule that wages may not be withheld and benefits may
"arising from the employer-employee relations" Article 217 should apply with equal force to the
not be diminished, the Labor Code provides:
claim of an employer for actual damages against its dismissed employee, where the basis for
the claim arises from or is necessarily connected with the factof termination, and should be
entered as a counterclaim in the illegal dismissal case. 75
Art. 113. Wage deduction.No employer, in his own behalf or in behalf of any person, shall make
any deduction from the wages of his employees, except:
Bañez was cited in Domondon v. National Labor Relations Commission. One of the issues in
76

Domondonis whether the Labor Arbiter has jurisdiction to decide an issue on the transfer of 1. In cases where the worker is insured with his consent by the employer, and the
ownership of a vehicle assigned to the employee. It was argued that only regular courts have deduction is to recompense the employer for the amount paid by him as premium on
jurisdiction to decide the issue.77
the insurance;

This court ruled that since the transfer of ownership of the vehicle to the employee was 2. For union dues, in cases where the right of the worker or his union to check-off has
connected to his separation from the employer and arose from the employer-employee been recognized by the employer or authorized in writing by the individual worker
relationship of the parties, the employer’s claim fell within the LaborArbiter’s jurisdiction. 78
concerned; and

As a general rule, therefore, a claim only needs to be sufficiently connected to the labor issue 3. In cases where the employer is authorized by law or regulations issued by the
raisedand must arise from an employeremployee relationship for the labortribunals to have Secretary of Labor and Employment. (Emphasis supplied)
jurisdiction.
The Civil Code provides that the employer is authorized to withhold wages for debts due:
In this case, respondent Solid Mills claims that its properties are in petitioners’ possession by
virtue of their status as its employees. Respondent Solid Mills allowed petitioners to use its
Article 1706. Withholding of the wages, except for a debt due, shall not be made by the
property as an act of liberality. Put in other words, it would not have allowed petitioners to use its
employer.
"Debt" in this case refers to any obligation due from the employee to the employer. It includes III
any accountability that the employee may have to the employer. There is no reason to limit its
scope to uniforms and equipment, as petitioners would argue.
Mahilom and Damian are not entitled to the benefits claimed

More importantly, respondent Solid Mills and NAFLU, the union representing petitioners, agreed
Teodora Mahilom is not entitled to separation benefits.
that the release of petitioners’ benefits shall be "less accountabilities."

Both the National Labor Relations Commission and the Court of Appeals found that Teodora
"Accountability," in its ordinary sense, means obligation or debt. The ordinary meaning of the
Mahilom already retired long before respondent Solid Mills’ closure. They found that she already
term "accountability" does not limit the definition of accountability to those incurred in the
received her retirement benefits. We have no reason to disturb this finding. This court is not a
worksite. As long as the debt or obligation was incurred by virtue of the employer-employee
trier of facts. Findings of the National Labor Relations Commission, especially when affirmed by
relationship, generally, it shall be included in the employee’s accountabilities that are subject to
the Court of Appeals, are binding upon this court. 83

clearance procedures.

Moreover, Teodora Mahilom’s claim for retirement benefits was not included in her complaint
It may be true that not all employees enjoyed the privilege of staying in respondent Solid Mills’
filed before the Labor Arbiter. Hence, it may not be raised in the appeal.
property. However, this alone does not imply that this privilege when enjoyed was not a result of
the employer-employee relationship. Those who did avail of the privilege were employees of
respondent Solid Mills. Petitioners’ possession should, therefore, be included in the term Similarly, the National Labor Relations Commission and the Court of Appeals found that Carlito
"accountability." Damian already received his terminal benefits. Hence, he may no longer claim terminal benefits.
The fact that respondent Solid Mills has not yet demolished Carlito Damian’s house in SMI
Village is not evidence that he did not receive his benefits. Both the National Labor Relations
Accountabilities of employees are personal. They need not be uniform among all employees in
Commission and the Court of Appeals found that he executed an affidavit stating that he already
order to be included in accountabilities incurred by virtue of an employer-employee relationship.
received the benefits.
Petitioners do not categorically deny respondent Solid Mills’ ownership of the property, and they
do not claim superior right to it. What can be gathered from the findings ofthe Labor Arbiter,
National Labor Relations Commission, and the Court ofAppeals is that respondent Solid Mills A bsent any showing that the National Labor Relations Commission and the Court of Appeals
allowed the use of its property for the benefit of petitioners as its employees. Petitioners were misconstrued these facts, we will not reverse these findings.
merely allowed to possess and use it out of respondent Solid Mills’ liberality. The employer may,
therefore, demand the property at will. 79

The return of the property’s possession became an obligation or liability on the part of the
employees when the employer-employee relationship ceased. Thus, respondent Solid Mills has
the right to withhold petitioners’ wages and benefitsbecause of this existing debt or liability. In
Solas v. Power and Telephone Supply Phils., Inc., et al., this court recognized this right of the
employer when it ruled that the employee in that case was not constructively dismissed. Thus:
80
Our laws provide for a clear preference for labor. This is in recognition of the asymmetrical
power of those with capital when they are left to negotiate with their workers without the
standards and protection of law. In cases such as these, the collective bargaining unit of workers
are able to get more benefits and in exchange, the owners are able to continue with the program
of cutting their losses or wind down their operations due to serious business losses. The
company in this case did all that was required by law.

The preferential treatment given by our law to labor, however, is not a license for abuse. It is not
84

There was valid reason for respondents’ withholding of petitioner’s salary for the month of a signal to commit acts of unfairness that will unreasonably infringe on the property rights of the
February 2000. Petitioner does not deny that he is indebted to his employer in the amount of company. Both labor and employer have social utility, and the law is not so biased that it does
around 95,000.00. Respondents explained that petitioner’s salary for the period of February 1- not find a middle ground to give each their due.
15, 2000 was applied as partial payment for his debt and for withholding taxes on his income;
while for the period of February 15-28, 2000, petitioner was already on absence without leave,
Clearly, in this case, it is for the workers to return their housing in exchange for the release of
hence, was not entitled to any pay. 81

their benefits. This is what they agreed upon. It is what is fair in the premises.
1âwphi1

The law does not sanction a situation where employees who do not even assert any claim over
WHEREFORE, the petition is DENIED. The Court of Appeals' decision is AFFIRMED.
the employer’s property are allowed to take all the benefits out of their employment while they
simultaneously withhold possession of their employer’s property for no rightful reason.
Withholding of payment by the employer does not mean that the employer may renege on its
obligation to pay employees their wages, termination payments, and due benefits. The
employees’ benefits are also not being reduced. It is only subjectedto the condition that the
employees return properties properly belonging to the employer. This is only consistent with the
equitable principle that "no one shall be unjustly enriched or benefited at the expense of
another."82

For these reasons, we cannot hold that petitioners are entitled to interest of their
withheldseparation benefits. These benefits were properly withheld by respondent Solid Mills
because of their refusal to return its property.
G.R. No. 198408 November 12, 2014 view of his prior repatriation on February 20, 2008, hence, was non-compensable. Moreover,
22

they denied the claim for damages and attorney’s fees for lack of factual and legal bases. 23

CONCHITA J. RACELIS, Petitioner,

vs. The LA Ruling
UNITED PHILIPPINE LINES, INC. and/or HOLLAND AMERICA LINES, INC.,* and
FERNANDO T. LISING,Respondents.
In a Decision dated November 28, 2008,the Labor Arbiter (LA) ruled in favor of petitioner, and
24

thereby ordered respondents to pay her death benefits pursuant to the ITWF-CBA in the amount
DECISION of US$60,000.00, burial assistance in the amount of US$1,000.00, and attorney’s fees
equivalent to 10% of the total monetary awards. 25

PERLAS-BERNABE, J.:
The LA held that Rodolfo’s death was compensable as the illness that caused his death
occurred in the course of his employment contract. It was likewise ruled that while Brainstem
26

Assailed in this petition for review on certiorari are the Decision dated March 28, 2011 and the
1 2

(pontine) Cavernous Malformation is not among the listed occupational diseases under the 2000
Resolution dated August 26, 2011 of the Court of Appeals (CA) in CA-G.R. SP. No. 113835
3

POEA-SEC, the same was still compensable, noting that the same may have been contracted in
which reversed and set aside the Decision dated November 10, 2009 of the National Labor
4

the course of his engagement with respondents, which started back in 1985 under various
Relations Commission (NLRC) in NLRC LAC Case No. OFW (M)-05- 000277-09, thereby
employment contracts. Also, the LA did not give credence to the medical opinion of Dr. Abaya
27 28

dismissing the complaint for death benefits, burial assistance, moral and exemplary damages,
which was unsigned and not certified by said doctor himself, hence, had no evidentiary value.
and attorney’s fees filed by petitioner Conchita J. Racelis (petitioner).
Further, the LA observed that there is no certainty as to the accuracy of the statement therein
that the disease is congenital in origin.29

The Facts
Unconvinced, respondents filed an appeal before the NLRC.
30

On January 15, 2008, Rodolfo L. Racelis (Rodolfo) was recruited and hired by respondent
United Philippine Lines, Inc. (UPL) for its principal, respondent Holland America Lines,Inc. (HAL)
The NLRC Ruling
to serve as "Demi Chef De Partie" on board the vessel MS Prinsendam, with a basic monthly
salary of US$799.55. The Contract of Employment was for a term of four (4) months, extendible
5 6

for another two (2) months upon mutual consent. After complying with the required pre- In a Decision dated November 10, 2009, the NLRC affirmed the LA’s verdict, holding that
31

employment medical examination where he was declared fit to work, Rodolfo joined the vessel
on January 25, 2008. Prior thereto, Rodolfo was repeatedly contracted by said respondents and
7
Rodolfo’s illness is disputably presumed to be work-related and that since it supervenedin the
course of his employment, the burden is on the respondents to prove otherwise. It held that the
32

was deployed under various contracts since December 17, 1985. 8

medical opinion of the company-designated physician, which showed that Rodolfo’s ailment is
not work-connected and may have pre-existed, is insufficient to rebut the presumption of
compensability. It likewise pointed out that the occurrence of death after the term of the contract
33

In the course of his last employment contract, Rodolfo experienced severe pain in his ears and
was immaterial since the proximate cause of Rodolfo’s death was the illness that supervened
high blood pressure causing him to collapse while in the performance of his duties. He consulted
during his employment. Finally, the NLRC sustained the award of attorney’s fees as petitioner
34

a doctor in Argentina and was medically repatriated on February 20, 2008for further medical
was compelled to litigate to protect her rights and interests. 35

treatment. Upon arrival in Manila, he was immediately brought to Medical City, Pasig City,
9

where he was seen by a company-designated physician, Dr. Gerardo Legaspi, M.D.

(Dr.Legaspi), and was diagnosed to be suffering from Brainstem (pontine) Dissatisfied, respondents filed a motion for reconsideration which was denied by the NLRC in a
36

Cavernous Malformation. He underwent surgery twice for the said ailment but developed
10 11
Resolution dated March 11, 2010; hence, they elevated the matter to the CA viaa petition for
37

complications and died on March 2, 2008. Through an electronic mail (e-mail) dated July 22,
12 13 14
certiorari.
38

2008, a certain Dr. Antonio "Toby" Abaya (Dr. Abaya) informed Atty. Florencio L. Aquino,
Managing Associate of the law firm of Del Rosario and Del Rosario, counsel for UPL, HAL, and
15

Meanwhile, petitioner moved for the execution of the affirmed LA Decision, which was granted
itsofficer, Fernando T. Lising (respondents), that Rodolfo’s illness was congenital and that there
16

by the NLRC. In consequence, respondents paid petitioner the amount of ₱3,031,683.00 as full
39 40

may be familial strains in his case, hence, his death was not work-related. 17

and complete satisfaction of the said NLRC Decision, without prejudice to the outcome of the
certiorari case before the CA. 41

Rodolfo’s surviving spouse, herein petitioner, sought to claim death benefits pursuant to the
International Transport Workers’ Federation- Collective Bargaining Agreement (ITWF-CBA), of 18

The CA Ruling
which her husband was a member, but to no avail. Consequently, she filed a Complaint for 19

death benefits, burial assistance, moral and exemplary damages, and attorney’s fees against
herein respondents before the NLRC, docketed as NLRC OFW Case No. (M) NCR-06-08452- In a Decision dated March 28, 2011, the CA granted respondents’ certiorari petition, and
42

08. In their defense, respondents maintained that petitioner is not entitled to death benefits
20
thereby annulled and set aside the ruling of the NLRC granting petitioner’s claim for death
under Section 20 (A) (1) of the 2000 Philippine Overseas Employment Administration Standard benefits.
Employment Contract (2000 POEA-SEC). They averred that Rodolfo’s illness, i.e., Brainstem
(pontine) Cavernous Malformation, was not work-related, considering that said illness is not
It held that Rodolfo’s death on March 2, 2008 did not occur while he was in the employ of
listed as an occupational disease under the 2000 POEASEC. They likewise pointed out that
21

Rodolfo’s death on March 2, 2008 did not occur during the term of his employment contract in respondents, ashis contract of employment ceased when he was medically repatriated on
February 20, 2008 pursuant to Section 18 (B) (1) of the 2000 POEA-SEC. Moreover, it
43
observed that Rodolfo’s illness cannot be presumed to be work-related, absent any proof to
show that his death was connected to his work orthat his working conditions increased the risk of
contracting Brainstem (pontine) Cavernous Malformation that eventually caused his death. 44
Aggrieved, petitioner sought for reconsideration but was denied in a Resolution dated August
45 46
26, 2011, hence, the instant petition.
The Issue Before the Court
The essential issue for the Court’s resolution is whether or not the CA erred in annulling the
NLRC’s grant of death benefits to petitioner on certiorari.
The Court's Ruling
Deemed incorporated in every seafarer’s employment contract, denominated as the POEA-SEC
or the Philippine Overseas Employment Administration-Standard Employment Contract, is a set
of standard provisions determined and implemented by the POEA, called the "Standard Terms
and Conditions Governing the Employment of Filipino Seafarers on Board Ocean Going
Vessels," which are considered to be the minimum requirements acceptable to the government
for the employment of Filipino seafarers on board foreign ocean-going vessels. 47
Among other basic provisions, the POEA-SEC – specifically, its 2000 version – stipulates that
the beneficiaries of a deceased seafarer may be able to claim death benefits for as long asthey
are able to establish that (a) the seafarer’s death is work-related, and (b) such death had
occurred during the term of his employment contract. These requirements are explicitly stated in
Section 20 (A) (1) thereof, which reads:
SECTION 20. COMPENSATION AND BENEFITS
A. COMPENSATION AND BENEFITS FOR DEATH
1. In the case of work-related death of the seafarer,during the term of his contractthe employer
shall pay his beneficiaries the Philippine Currency equivalent to the amount of Fifty Thousand
US dollars (US$50,000) and an additional amount of Seven Thousand US dollars (US$7,000) to
each child under the age of twenty-one (21) but not exceeding four (4) children, at the exchange
rate prevailing during the time of payment. (Emphases supplied)
After an assiduous examination of the records, and as will be expounded on below, the Court,
similar to both the LA and the NLRC, finds that the above-stated requirements positively attend
petitioner’s claim for death benefits.
I. The Death of the Seafarer is Work-Related.
In the recent case of Canuel v. Magsaysay Maritime Corporation (Canuel), the Court clarified
48
that the term "work-related death"refers to the seafarer’s death resulting from a work-related
injury or illness.
Under the 2000 POEA-SEC, the terms "work-related injury" and "work-related illness" are,
inturn, defined as follows:
Definition of Terms:
For purposes of this contract, the following terms are defined as follows:
xxxx
11. Work-Related Injury – injury(ies) resulting indisability or death arising out of and in the
course of employment.
12. Work-Related Illness – any sickness resulting todisability or deathas a result of an
occupational disease listed under Section 32-A of this contract with the conditions set therein
satisfied. (Emphases supplied)
Case law explains that "[t]he words ‘arising out of’ refer to the origin or cause of the accident,
and are descriptive of its character, while the words ‘in the course of’ refer to the time, place, and
circumstances under which the accident takes place. As a matter ofgeneral proposition, an injury
or accident is said to arise ‘in the course of employment’ when it takes place within the period of
the employment, at a place where the employee reasonably may be, and while he is fulfilling his
duties or is engaged in doing something incidental thereto." 49
In this case, respondents submit that petitioner was unable to prove that Rodolfo’s illness, i.e.,
Brainstem (pontine) Cavernous Malformation, which had supposedly supervened during the
term of his employment on board the vessel MS Prinsendam, was not related to his work. To 50
bolster the argument, respondents point to the fact that Brainstem (pontine) Cavernous
Malformation is not listed as an occupational disease under Section 32-A of the 2000 POEA-
51
SEC.
The contention is untenable.
While it is true that Brainstem (pontine) Cavernous Malformation is not listed as an occupational
disease under Section 32-A of the 2000 POEASEC, Section 20 (B) (4) of the same explicitly
provides that "[t[he liabilities of the employer when the seafarer suffers work-related injury or
illness during the term of his contractare as follows:(t)hose illnesses not listed in Section 32 of
this Contract are disputably presumed as work related." In other words, the 2000 POEA-SEC
"has created a disputable presumption in favor of compensability[,] saying that those illnesses
not listed in Section 32 are disputably presumed as work-related. This means that even if the
illness is not listed under Section 32-Aof the POEA-SEC as an occupational disease or illness, it
will still be presumed as work-related, and it becomes incumbent on the employer to overcome
the presumption." This presumption should be overturned only when the employer’s refutation
52
is found to be supported by substantial evidence, which, as traditionally defined is "such
53
relevant evidence as a reasonable mind might accept as sufficient to support a conclusion." As 54
held in the case of Magsaysay Maritime Services v. Laurel: 55
Anent the issue as to who has the burden to prove entitlement to disability benefits, the
petitioners argue that the burden is placed upon Laurel to prove his claim that his illness was
work-related and compensable. Their posture does not persuade the Court.
True, hyperthyroidism is not listed as an occupational disease under Section 32-A of the 2000
POEA-SEC. Nonetheless, Section 20 (B), paragraph (4) of the said POEA-SECstates that
"those illnesses not listed in Section 32 of this Contract are disputably presumed as
workrelated." The said provision explicitly establishes a presumption of compensability although
disputable by substantial evidence. The presumption operates in favor of Laurel as the burden
rests upon the employer to overcome the statutory presumption. Hence, unless contrary
evidence is presented by the seafarer’s employer/s, this disputable presumption stands. In the
case at bench, other than the alleged declaration of the attending physician that Laurel’s illness
was not work-related, the petitioners failed to discharge their burden. In fact, they even
conceded that hyperthyroidism may be caused by environmental factor. 56
Similarly in Jebsens Maritime, Inc. v. Babol: 57
The Principle of Work-relation
The 2000 POEA-SEC contract governs the claims for disability benefits by respondent as he
was employed by the petitioners in September of 2006.
Pursuant to the said contract, the injury or illness must be work related and must have existed
during the term of the seafarer’s employment in order for compensability to arise. Work-relation
must, therefore, be established.
As a general rule, the principle of work-relation requires that the disease in question must be one
of those listed as an occupational disease under Sec. 32-A of the POEA-SEC. Nevertheless,
should it be not classified as occupational in nature, Section 20 (B) paragraph 4 of the POEA-
SEC provides that such diseases are disputed are disputably presumed as work-related.
In this case, it is undisputed that NPC afflicted respondent while on board the petitioners’ vessel.
As a non-occupational disease, it has the disputable presumption of being work-related. This
presumption obviously works in the seafarer’sfavor. Hence, unless contrary evidence is
presented by the employers, the work-relatedness of the disease must be sustained.
And in Fil-Star Maritime Corporation v. Rosete: 58
Although Central Retinal Vein Occlusion is not listed as one of the occupational diseases under
Section 32-A of the 2000 Amended Terms of POEA-SEC, the resulting disability which is loss of
sight of one eye, is specifically mentioned in Section 32 thereof (Schedule of Disability or
Impediment for Injuries Suffered and Diseases Including Occupational Diseases or Illness
Contracted). More importantly, Section 20 (B), paragraph (4) states that "those illnesses not
listed in Section 32 of this Contract are disputably presumed as work-related."
The disputable presumption that a particular injury or illness that results in disability, or in some
cases death, is work-related stands in the absence of contrary evidence. In the case at bench,
the said presumption was not overturned by the petitioners. Although, the employer is not the
insurer of the health of his employees, he takes them as he finds them and assumes the risk of
liability. Consequently, the Court concurs with the finding of the courts below that respondent’s
disability is compensable. 59
Records show that respondents’ sole evidence to disprove that Rodolfo’s illness is work-related
was the medical opinion of Dr. Abaya, wherein it was explained that Rodolfo’s ailment is a
congenital malformation of blood vessels in the brain that may be due to familial
strains. However, as correctly observed by the LA, the document presented cannot be given
60
probative value as it was a mere print out of an e-mail that was not signed or certified to by the
doctor. Moreover, records reveal that Rodolfo was attended by Dr. Legaspi from the time he
61
was admitted at the Medical City on February 20, 2008 up to his death on March 2, 2008 and 62
not by Dr. Abaya whose qualifications to diagnose such kind of illness was not even established.
Likewise, the medical opinion was not backed up by any medical findings to substantiate the
claim that Rodolfo’s ailment was congenital in origin or that there were traces of the disease in
Rodolfo’s family history. Under the foregoing premises, the unsubstantiated and unauthenticated
medical findings of Dr. Abaya are therefore highly suspect and cannot be considered as
substantial evidence to support respondents’ postulation. Thus, with no substantial evidence on
the part of the employer and given that no other cogent reason exists to hold otherwise, the
presumption under Section 20 (B) (4) should stand. Accordingly, the Court is constrained to
pronounce that Rodolfo’s death, which appears to have been proximately caused by his
Brainstem (pontine) Cavernous Malformation, was work-related, in satisfaction of the first
requirement of compensability under Section 20 (A) (1) of the 2000 POEA-SEC.
II. The Seafarer’s Death Occurred During the Term of Employment.
Moving to the second requirement, respondents assert that Rodolfo’s death on March 2, 2008
had occurred beyond the term of his employment, considering his prior medical repatriation on
February 20, 2008 which had the effect of contract termination.The argument is founded on
Section 18 (B) (1) of the 2000 POEA-SEC, which reads:
SECTION 18. TERMINATION OF EMPLOYMENT
xxxx
B. The employment of the seafarer is also terminated when the seafarer arrives at the point of
hire for any of the following reasons:
1. when the seafarer signs-off and is disembarked for medical reasons pursuant to Section
20(B)[5] of this Contract.
63
While it is true that a medical repatriation has the effect of terminating the seafarer’s contract of
employment, it is, however, enough that the workrelated illness, which eventually becomes the
proximate cause of death, occurred while the contract was effective for recovery to be had. A
further exposition is apropos.
Consistent with the State’s avowed policy to afford full protection to labor as enshrined in Article
XIII of the 1987 Philippine Constitution, the POEA-SEC was designed primarily for the
64
protection and benefit of Filipino seafarers in the pursuit of their employment on board ocean-
going vessels. As such, it is a standing principle that its provisions are to be construed and
applied fairly, reasonably, and liberally in their favor.
65
Guided by this principle, the Court, in the recent case of Canuel, recognized that a medical
repatriation case constitutes an exception to the second requirement under Section 20 (A) (1) of
the 2000 POEA-SEC, i.e., that the seafarer’s death had occurred during the term of his
employment, in view of the terminative consequences of a medical repatriation under Section 18
(B) of the same. In essence, the Court held that under such circumstance, the work-related
death need not precisely occur during the term of his employment as it is enough that the
seafarer’s work-related injury or illness which eventually causes his death had occurred during
the term of his employment. As rationalized in that case:
With respect to the second requirement for death compensability, the Court takes this
opportunity to clarify that while the general rule is that the seafarer’s death should occur during
the term of his employment, the seafarer’s death occurring after the termination ofhis
employment due to his medical repatriation on account of a work-related injury or illness
constitutes an exception thereto. This is based on a liberal construction of the 2000 POEA-SEC
as impelled by the plight of the bereaved heirs who stand to be deprived of a just and
reasonable compensation for the seafarer’s death, notwithstanding its evident work-
connection. The present petition is a case in point.
1âwphi1
Here, Nancing’s repatriation occurred during the eighth (8th) month of his one (1) year Gau Sheng Phils., Inc. v. Joaquin (Gau Sheng), Spouses Aya-ay, Sr. v. Arpaphil Shipping
70

employment contract. Were it not for his injury, which had been earlier established as work- Corp. (Spouses Aya-ay, Sr.), Hermogenes v. Osco Shipping Services, Inc., Prudential Shipping
71 72

related, he would not have been repatriated for medical reasons and his contract consequently and Management Corp. v. Sta. Rita (Prudential), and Ortega v. CA (Ortega),since the element
73 74

terminated pursuant to Part 1 of Section 18 (B) of the 2000 POEA-SEC as hereunder quoted:
xxxx
The terminative consequence of a medical repatriation case then appears to present a rather
prejudicial quandary to the seafarer and his heirs. Particularly, if the Court wereto apply the
of work relatedness had not been established. All in all, the sense gathered from these cases, as
pointed out in Canuel, is that it is crucial to determine whether the death of the deceased was
reasonably connected with his work, or whether the working conditions increased the risk of
contracting the disease that resulted in the seafarer’s death. If the injury or illness is the
proximate cause, or at least increased the risk of his death for which compensation is sought,
recovery may behad for said death, or for that matter, for the injury or illness. Thus, in Seagull
Ship management and Trans., Inc. v. NLRC, the Court significantly observed that:
75

provisions of Section 20 of the 2000 POEA-SEC as above-cited based on a strict and literal
construction thereof, then the heirs of Nancing would stand to be barred from receiving any
Even assuming that the ailment of the worker was contracted prior to his employment, this still
compensation for the latter’s death despite its obvious work-relatedness. Again, this is for the
would not deprive him of compensation benefits. For what matters is that his work had
reason that the work-related death would, by mere legal technicality, be considered to have
contributed, even in a small degree, to the development of the disease and in bringing about his
occurred after the term of his employment on account of his medical repatriation. It equally bears
eventual death. Neither is it necessary, in order to recover compensation, that the employee
stressing that neither would the heirs be able to receive any disability compensation since the
must have been in perfect health at the time he contracted the disease. A worker brings with him
seafarer’s death in this case precluded the determination of a disability grade,which, following
possible infirmities in the course of his employment, and while the employer is not the insurer of
Section 20 (B) in relation to Section 32 of the 2000 POEA-SEC, stands as the basis therefor.
the health of the employees, he takes them as he finds them and assumes the risk of liability. If
However, a strict and literal construction of the 2000 POEA-SEC, especially when the same
the disease is the proximate cause of the employee’s death for which compensation is sought,
would result into inequitable consequences against labor, is not subscribed to in this jurisdiction.
the previous physical condition of the employee is unimportant, and recovery may be had for
Concordant with the State’s avowed policy to give maximum aid and full protection to labor as
said death, independently of any pre-existing disease. (Emphases and underscoring supplied;
76

enshrined in ArticleXIII of the 1987 Philippine Constitution, contracts of labor, such as the 2000
POEA-SEC, are deemedto be so impressed with public interest that the more beneficial
conditions must be endeavoured in favor of the laborer. The rule therefore is one of liberal
construction. As enunciated in the case of Philippine Transmarine Carriers, Inc. v. NLRC[(405
Phil. 487 [2001])]:
The POEA Standard Employment Contract for Seamen is designed primarily for the protection
and benefit of Filipino seamen in the pursuit of their employment on board ocean-going vessels.
Its provisions must [therefore] be construed and applied fairly, reasonably and liberally in their
favor [as it is only] then can its beneficent provisions be fully carried into effect. (Emphasis
supplied)
Applying the rule on liberal construction, the Court is thus brought to the recognition that medical
repatriation cases should be considered as an exception to Section 20 of the 2000 POEA-SEC.
Accordingly, the phrase "work-related death of the seafarer, during the term of his employment
citations omitted)
Employing the same spirit of liberality as fleshed out in Canuel, the Court finds that it would be
highly inequitable and even repugnant to the State’s policy on labor to deny petitioner’s claim for
death benefits for the mere technicality triggered by Rodolfo’s prior medical repatriation. As it
has been clearly established that Rodolfo had been suffering from a work-related illness during
the term of his employment that caused his medical repatriation and, ultimately, his death on
March 2, 2008, it is but proper to consider the same as a compensable work-related death
despite it having occurred after his repatriation. To echo Canuel, "it is enough that the seafarer’s
work-related injury orillness which eventually causes his death should have occurred during the
term of his employment. Taking all things into account, the Court reckons that it is by this
method of construction that undue prejudice to the laborer and his heirs may be obviated and
the State policy on labor protection be championed. For if the laborer’s death was brought about
(whether fully or partially) by the work he had harbored for his master’s profit, then it is but
proper that his demise be compensated." 77

contract" under Part A (1) of the said provision should not be strictly and literally construed to
mean that the seafarer’s work-related death should have precisely occurred during the term of
Lest it be misunderstood, the conclusion above-reached does not run counter to the Court’s
his employment. Rather, it is enough that the seafarer’s work-related injury or illness which
ruling in Klaveness Maritime Agency, Inc. v. Beneficiaries of the Late Second Officer Anthony s.
eventually causes his death should have occurred during the term of his employment. Taking all
Allas (Klaveness), which the CA inaccurately relied on. As similarly pointed out in Canuel, the
78

things into account, the Court reckons that it is by this method of construction that undue
Klaveness case involved a seafarer who was not medically repatriated but was actually signed
prejudice to the laborer and his heirs may be obviated and the State policy on labor protection
off from the vessel after the completion of his contract, his illness not proven to be work-
be championed. For if the laborer’s death was brought about (whether fully or partially) by the
related,and died almost two (2) years after the termination of his contract. Since the employment
work he had harbored for his master’s profit, then it is but proper that his demise be
contract was terminated without any connection toa work-related cause, but rather because of its
compensated. Here, since it has been established that (a) the seafarer had been suffering from
mere lapse, death benefits were denied to the seafarer’s heirs. This is definitely not the case
79

a workrelated injury or illness during the term of his employment, (b) his injury or illness was the
here since Rodolfo’s employment contract was terminated only because ofhis medical
cause for his medical repatriation, and (c) it was later determined that the injury or illness for
repatriation. Were it not for his illness, Rodolfo would not havebeen medically repatriated and his
which he was medically repatriated was the proximate cause ofhis actual death although the
employment contract, in turn, terminated. Evidently, the termination of employment was forced
same occurred after the term of his employment, the above-mentioned rule should squarely
upon by a work-related cause and it would be in contrast to the State’s policy on labor todeprive
apply. Perforce, the present claim for death benefits should be granted. (Citations omitted)
66

the seafarer’s heirs of death compensation despite its ascertained work-connection. 80

As elucidated in Canuel, the foregoing liberal approach was applied in Inter-Orient Maritime,
This variance also exists as to the cases of Gau Sheng, Spouses Ayaay, Sr., Prudential, and
81 82 83

Incorporated v. Candava, Interorient Maritime Enterprises, Inc. v. Remo, and Wallem Maritime
67 68

Ortega, which respondents invoke in their Comment dated February 16, 2012. As a common
84 85

Services, Inc. v. NLRC, wherein the Court had previously allowed the recovery of death benefits
69

denominator, the element of work-relatedness was not established in those cases. Thus, being
even if the seafarers in those cases had died after repatriation, given that there was proof of a
the primary factor considered in granting compensation, the Court denied the beneficiaries’
clear causal connection between their work and the illness which was contracted in the course of
respective claims. Again, the Court has pored over the records and remains satisfied that
employment, and their eventual death. The converse conclusion was reached in the cases of
Rodolfo’s death is work-related. Accordingly, this precludes the application of the above-stated hereby REVERSED and SET ASIDE and the Decision dated November 10, 2009 of the National
rulings. Labor Relations Commission is REINSTATED.

III. Amount of Death Benefits. SO ORDERED.

With the compensability of Rodolfo’s death now traversed, a corollary matter to determine is the
amount of benefits due petitioner.

Records show that respondents do not deny – and therefore admit – the late Rodolfo’s
membership in the AMOSUP that had entered into a collective bargaining agreement with HAL,
or the ITWF-CBA. Its provisions therefore must prevail over the standard terms and benefits
86

formulated by the POEA in its Standard Employment Contract. Hence, the NLRC’s award of
87

US$60,000.00as compensation for the death of Rodolfo in accordance with Article 21.2.1 of the
88

ITWF-CBA was in order. The same holds true for the award of burial assistance in the amount of
US$1,000.00which is provided under Section 20 (A) (4) (c) of the 2000 POEA-SEC. Moreover,
89

conformably with existing case law, the NLRC’s grant of attorney’s fees in the amount of
US$6,100.00was called for since petitioner was forced to litigate to protect her valid claim.
Where an employee is forced to litigate and incur expenses to protect his right and interest, he is
entitled to an award of attorney’s fees equivalent to 10% of the award.90

All in all, the NLRC’s award of US$67,100.00 – which, as the records bear, had already been
91

paid by respondents – is hereby sustained.

92

IV. A Final Point.

As a final point of rumination, it must be highlighted that the CA’s parameter of analysis in cases
elevatedto it from the NLRC is the existence of the latter’s grave abuse of discretion, considering
that they come before the appellate court through petitions for certiorari. This delimitation, in
relation to the Court’s task of reviewing the case eventually appealed before it, was explained in
Montoya v. Transmed Manila Corporation as follows:
93

[W]e review in this Rule 45 petition the decision of the CA on a Rule 65 petition filed by Montoya
withthat court. In a Rule45 review, we consider the correctness of the assailed CA decision, in
1âwphi1

contrast with the review for jurisdictional error that we undertake under Rule 65. Furthermore,
Rule 45 limits us to the review of questions of law raised against the assailed CA decision. In
ruling for legal correctness, we have to view the CA decision in the same context that the petition
for certiorari it ruled upon was presented to it; we have to examine the CA decision from the
prism of whether it correctly determined the presence or absence of grave abuse of discretion in
the NLRC decision before it, not on the basis of whether the NLRC decision on the merits of the
case was correct. In other words, we have to be keenly aware that the CA undertook a Rule 65
review, not a review on appeal, of the NLRC decision challenged before it. This is the approach
that should be basic in a Rule 45 review ofa CA ruling in a labor case. In question form, the
question to ask is: Did the CA correctly determine whether the NLRC committed grave abuse of
discretion in ruling on the case?94

Given that the NLRC’s ruling was amply supported by the evidence on record and current
jurisprudence on the subject matter, the Court, in opposition to the CA, finds that no grave abuse
of discretion had been committed by the labor tribunal. Hence,the CA’s grant of respondents’
certiorari petition before it ought to be reversed, and consequently the NLRC Decision be
reinstated.

WHEREFORE, the petition is GRANTED. The Decision dated March 28, 2011 and the
Resolution dated August 26, 2011 of the Court of Appeals in CA-G.R. SP. No. 113835 are
G.R. No. 85985 August 13, 1993
PHILIPPINE AIRLINES, INC. (PAL), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P.
ORTIGUERRA and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION
(PALEA), respondents.
Solon Garcia for petitioner.
Adolpho M. Guerzon for respondent PALEA.
MELO, J.:
In the instant petition for certiorari, the Court is presented the issue of whether or not the
formulation of a Code of Discipline among employees is a shared responsibility of the employer
and the employees.
On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of
Discipline. The Code was circulated among the employees and was immediately implemented,
and some employees were forthwith subjected to the disciplinary measures embodied therein.
Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a
complaint before the National Labor Relations Commission (NLRC) for unfair labor practice
(Case No. NCR-7-2051-85) with the following remarks: "ULP with arbitrary implementation of
PAL's Code of Discipline without notice and prior discussion with Union by Management" (Rollo,
p. 41). In its position paper, PALEA contended that PAL, by its unilateral implementation of the
Code, was guilty of unfair labor practice, specifically Paragraphs E and G of Article 249 and
Article 253 of the Labor Code. PALEA alleged that copies of the Code had been circulated in
limited numbers; that being penal in nature the Code must conform with the requirements of
sufficient publication, and that the Code was arbitrary, oppressive, and prejudicial to the rights of
the employees. It prayed that implementation of the Code be held in abeyance; that PAL should
discuss the substance of the Code with PALEA; that employees dismissed under the Code be
reinstated and their cases subjected to further hearing; and that PAL be declared guilty of unfair
labor practice and be ordered to pay damages (pp. 7-14, Record.)
PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to prescibe
rules and regulations regarding employess' conduct in carrying out their duties and functions,
and alleging that by implementing the Code, it had not violated the collective bargaining
agreement (CBA) or any provision of the Labor Code. Assailing the complaint as unsupported by
evidence, PAL maintained that Article 253 of the Labor Code cited by PALEA reffered to the
requirements for negotiating a CBA which was inapplicable as indeed the current CBA had been
negotiated.
In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor Code
was violated when PAL unilaterally implemented the Code, and cited provisions of Articles IV
and I of Chapter II of the Code as defective for, respectively, running counter to the construction
of penal laws and making punishable any offense within PAL's contemplation. These provisions
are the following:
Sec. 2. Non-exclusivity. — This Code does not contain the entirety of the
rules and regulations of the company. Every employee is bound to comply
with all applicable rules, regulations, policies, procedures and standards,
including standards of quality, productivity and behaviour, as issued and
promulgated by the company through its duly authorized officials. Any
violations thereof shall be punishable with a penalty to be determined by the
gravity and/or frequency of the offense.
Sec. 7. Cumulative Record. — An employee's record of offenses shall be
cumulative. The penalty for an offense shall be determined on the basis of
his past record of offenses of any nature or the absence thereof. The more
habitual an offender has been, the greater shall be the penalty for the latest
offense. Thus, an employee may be dismissed if the number of his past
offenses warrants such penalty in the judgment of management even if
each offense considered separately may not warrant dismissal. Habitual
offenders or recidivists have no place in PAL. On the other hand, due regard
shall be given to the length of time between commission of individual
offenses to determine whether the employee's conduct may indicate
occasional lapses (which may nevertheless require sterner disciplinary
action) or a pattern of incorrigibility.
Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but they
failed to appear at the scheduled date. Interpreting such failure as a waiver of the parties' right to
present evidence, the labor arbiter considered the case submitted for decision. On November 7,
1986, a decision was rendered finding no bad faith on the part of PAL in adopting the Code and
ruling that no unfair labor practice had been committed. However, the arbiter held that PAL was
"not totally fault free" considering that while the issuance of rules and regulations governing the
conduct of employees is a "legitimate management prerogative" such rules and regulations must
meet the test of "reasonableness, propriety and fairness." She found Section 1 of the Code
aforequoted as "an all embracing and all encompassing provision that makes punishable any
offense one can think of in the company"; while Section 7, likewise quoted above, is
"objectionable for it violates the rule against double jeopardy thereby ushering in two or more
punishment for the same misdemeanor." (pp. 38-39, Rollo.)
The labor arbiter also found that PAL "failed to prove that the new Code was amply circulated."
Noting that PAL's assertion that it had furnished all its employees copies of the Code is
unsupported by documentary evidence, she stated that such "failure" on the part of PAL resulted
in the imposition of penalties on employees who thought all the while that the 1966 Code was
still being followed. Thus, the arbiter concluded that "(t)he phrase ignorance of the law excuses
no one from compliance . . . finds application only after it has been conclusively shown that the
law was circulated to all the parties concerned and efforts to disseminate information regarding
the new law have been exerted. (p. 39, Rollo.) She thereupon disposed:
WHEREFORE, premises considered, respondent PAL is hereby ordered as
follows:
1. Furnish all employees with the new Code of Discipline;
2. Reconsider the cases of employees meted with penalties under the New
Code of Discipline and remand the same for further hearing; and
3. Discuss with PALEA the objectionable provisions specifically tackled in
the body of the decision.
 All other claims of the complainant union (is) [are] hereby, dismissed for lack
of merit.
SO ORDERED. (p. 40, Rollo.)
PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner
Encarnacion, with Presiding Commissioner Bonto-Perez and Commissioner Maglaya concurring,
found no evidence of unfair labor practice committed by PAL and affirmed the dismissal of
PALEA's charge. Nonetheless, the NLRC made the following observations:
Indeed, failure of management to discuss the provisions of a contemplated
code of discipline which shall govern the conduct of its employees would
result in the erosion and deterioration of an otherwise harmonious and
smooth relationship between them as did happen in the instant case. There
is no dispute that adoption of rules of conduct or discipline is a prerogative
of management and is imperative and essential if an industry, has to survive
in a competitive world. But labor climate has progressed, too. In the
Philippine scene, at no time in our contemporary history is the need for a
cooperative, supportive and smooth relationship between labor and
management more keenly felt if we are to survive economically.
Management can no longer exclude labor in the deliberation and adoption of
rules and regulations that will affect them.
The complainant union in this case has the right to feel isolated in the
adoption of the New Code of Discipline. The Code of Discipline involves
security of tenure and loss of employment — a property right! It is time that
management realizes that to attain effectiveness in its conduct rules, there
should be candidness and openness by Management and participation by
the union, representing its members. In fact, our Constitution has
recognized the principle of "shared responsibility" between employers and
workers and has likewise recognized the right of workers to participate in
"policy and decision-making process affecting their rights . . ." The latter
provision was interpreted by the Constitutional Commissioners to mean
participation in "management"' (Record of the Constitutional Commission,
Vol. II).
In a sense, participation by the union in the adoption of the code if conduct
could have accelerated and enhanced their feelings of belonging and would
have resulted in cooperation rather than resistance to the Code. In fact,
labor-management cooperation is now "the thing." (pp. 3-4, NLRC Decision
ff. p. 149, Original Record.)
Respondent Commission thereupon disposed:
WHEREFORE, premises considered, we modify the appealed decision in
the sense that the New Code of Discipline should be reviewed and
discussed with complainant union, particularly the disputed provisions [.]
(T)hereafter, respondent is directed to furnish each employee with a copy of
the appealed Code of Discipline. The pending cases adverted to in the
appealed decision if still in the arbitral level, should be reconsidered by the
respondent Philippine Air Lines. Other dispositions of the Labor Arbiter are
sustained.
SO ORDERED. (p. 5, NLRC Decision.)
PAL then filed the instant petition for certiorari charging public respondents with grave abuse of
discretion in: (a) directing PAL "to share its management prerogative of formulating a Code of
Discipline"; (b) engaging in quasi-judicial legislation in ordering PAL to share said prerogative
with the union; (c) deciding beyond the issue of unfair labor practice, and (d) requiring PAL to
reconsider pending cases still in the arbitral level (p. 7, Petition; p. 8, Rollo.)
As stated above, the Principal issue submitted for resolution in the instant petition is whether
management may be compelled to share with the union or its employees its prerogative of
formulating a code of discipline.
PAL asserts that when it revised its Code on March 15, 1985, there was no law which mandated
the sharing of responsibility therefor between employer and employee.
Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending
Article 211 of the Labor Code, that the law explicitly considered it a State policy "(t)o ensure the
participation of workers in decision and policy-making processes affecting the rights, duties and
welfare." However, even in the absence of said clear provision of law, the exercise of
management prerogatives was never considered boundless. Thus, in Cruz vs. Medina (177
SCRA 565 [1989]) it was held that management's prerogatives must be without abuse of
discretion.
In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]), we upheld
the company's right to implement a new system of distributing its products, but gave the
following caveat:
So long as a company's management prerogatives are exercised in good
faith for the advancement of the employer's interest and not for the purpose
of defeating or circumventing the rights of the employees under special laws
or under valid agreements, this Court will uphold them.
(at p. 28.)
All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is
circumscribed by limitations found in law, a collective bargaining agreement, or the general
principles of fair play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]).
Moreover, as enunciated in Abbott Laboratories (Phil.), vs. NLRC (154 713 [1987]), it must be
duly established that the prerogative being invoked is clearly a managerial one.
A close scrutiny of the objectionable provisions of the Code reveals that they are not purely
business-oriented nor do they concern the management aspect of the business of the company
as in the San Miguel case. The provisions of the Code clearly have repercusions on the
employee's right to security of tenure. The implementation of the provisions may result in the
deprivation of an employee's means of livelihood which, as correctly pointed out by the NLRC, is
a property right (Callanta, vs Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view of these
aspects of the case which border on infringement of constitutional rights, we must uphold the
constitutional requirements for the protection of labor and the promotion of social justice, for
these factors, according to Justice Isagani Cruz, tilt "the scales of justice when there is doubt, in
favor of the worker" (Employees Association of the Philippine American Life Insurance Company
vs. NLRC, 199 SCRA 628 [1991] 635).
Verily, a line must be drawn between management prerogatives regarding business
operations per se and those which affect the rights of the employees. In treating the latter,
management should see to it that its employees are at least properly informed of its decisions or
modes action. PAL asserts that all its employees have been furnished copies of the Code. Public
respondents found to the contrary, which finding, to say the least is entitled to great respect.
PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on June 27,
1990, PALEA in effect, recognized PAL's "exclusive right to make and enforce company rules
and regulations to carry out the functions of management without having to discuss the same
with PALEA and much less, obtain the latter's conformity thereto" (pp. 11-12, Petitioner's
Memorandum; pp 180-181, Rollo.) Petitioner's view is based on the following provision of the
agreement:

The Association recognizes the right of the Company to determine matters

of management it policy and Company operations and to direct its
manpower. Management of the Company includes the right to organize,
plan, direct and control operations, to hire, assign employees to work,
transfer employees from one department, to another, to promote, demote,
discipline, suspend or discharge employees for just cause; to lay-off
employees for valid and legal causes, to introduce new or improved
methods or facilities or to change existing methods or facilities and the right
to make and enforce Company rules and regulations to carry out the
functions of management.

The exercise by management of its prerogative shall be done in a just

reasonable, humane and/or lawful manner.

Such provision in the collective bargaining agreement may not be interpreted as cession of
employees' rights to participate in the deliberation of matters which may affect their rights and
the formulation of policies relative thereto. And one such mater is the formulation of a code of
discipline.

Indeed, industrial peace cannot be achieved if the employees are denied their just participation
in the discussion of matters affecting their rights. Thus, even before Article 211 of the labor Code
(P.D. 442) was amended by Republic Act No. 6715, it was already declared a policy of the State,
"(d) To promote the enlightenment of workers concerning their rights and obligations . . . as
employees." This was, of course, amplified by Republic Act No 6715 when it decreed the
"participation of workers in decision and policy making processes affecting their rights, duties
and welfare." PAL's position that it cannot be saddled with the "obligation" of sharing
management prerogatives as during the formulation of the Code, Republic Act No. 6715 had not
yet been enacted (Petitioner's Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained.
While such "obligation" was not yet founded in law when the Code was formulated, the
attainment of a harmonious labor-management relationship and the then already existing state
policy of enlightening workers concerning their rights as employees demand no less than the
observance of transparency in managerial moves affecting employees' rights.

Petitioner's assertion that it needed the implementation of a new Code of Discipline considering
the nature of its business cannot be overemphasized. In fact, its being a local monopoly in the
business demands the most stringent of measures to attain safe travel for its patrons.
Nonetheless, whatever disciplinary measures are adopted cannot be properly implemented in
the absence of full cooperation of the employees. Such cooperation cannot be attained if the
employees are restive on account, of their being left out in the determination of cardinal and
fundamental matters affecting their employment.

WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No special
pronouncement is made as to costs.

SO ORDERED.

Feliciano, Bidin, Romero and Vitug, JJ., concur.

Art. 4 cases
G.R. No. 184520 March 13, 2013
ROLANDO DS.TORRES, Petitioner,
vs.
RURAL BANK OF SAN JUAN, INC., ANDRES CANO CHUA, JOBEL GO CHUA, JESUS
CANO CHUA, MEINRADO DALISAY, JOSE MANALANSAN III, OFELIA GINA BE and NATY
ASTRERO, Respondents.
DECISION
REYES, J.:
This Petition for Review on Certiorari,1 under Rule 45 of the Rules of Court, seeks to reverse and
set aside the Decision2 dated February 21, 2008 of the Court of Appeals (CA) in CA-G.R. SP No.
94690 dismissing the complaint for illegal dismissal filed by petitioner Rolando OS. Torres
(petitioner) against respondent Rural Bank of San Juan, Inc. (RBSJT) and its officers who are
the herein individual respondents, namely: Andres Cano Chua (Andres), Jobel Go Chua (Jobel),
Jesus Cano Chua (Jesus), Meinrado Dalisay, Jose Manalansan III (Jose), Ofelia Ginabe (Ofelia)
and Naty Astrero (collectively referred to as respondents). 3
Likewise assailed is the CA Resolution4 dated June 3, 2008 which denied reconsideration.
The antecedents
Culled from the rulings of the labor tribunals and the appellate court are the ensuing factual
milieu:5
The petitioner was initially hired by RBSJI as Personnel and Marketing Manager in 1991. After a
six-month probationary period and finding his performance to be satisfactory, RBSJI renewed his
employment for the same post to a permanent/regular status. In June 1996, the petitioner was
offered the position of Vice-President for RBSJI’s newly created department, Allied Business
Ventures. He accepted the offer and concomitantly relinquished his post. The vacancy created
was filled by respondent Jobel who temporarily held the position concurrently as a Corporate
Planning and Human Resources Development Head.
On September 24, 1996, the petitioner was temporarily assigned as the manager of RBSJI’s N.
Domingo branch in view of the resignation of Jacinto Figueroa (Jacinto).
On September 27, 1996, Jacinto requested the petitioner to sign a standard employment
clearance pertaining to his accountabilities with RBSJI. When the petitioner declined his request,
Jacinto threw a fit and shouted foul invectives. To pacify him, the petitioner bargained to issue a
clearance but only for Jacinto’s paid cash advances and salary loan.
About seven months later or on April 17, 1997, respondent Jesus issued a memorandum to the
petitioner requiring him to explain why no administrative action should be imposed on him for his
unauthorized issuance of a clearance to Jacinto whose accountabilities were yet to be audited.
Jacinto was later found to have unliquidated cash advances and was responsible for a
questionable transaction involving ₱11 million for which RBSJI is being sued by a certain Actives
Builders Manufacturing Corporation. The memorandum stressed that the clearance petitioner
issued effectively barred RBSJI from running after Jacinto.6
The petitioner submitted his explanation on the same day clarifying that the clearance was
limited only to Jacinto’s paid cash advances and salary loan based on the receipts presented by
Lily Aguilar (Lily), the cashier of N. Domingo branch. He emphasized that he had no
foreknowledge nor was he forewarned of Jacinto’s unliquidated cash advances and
questionable transactions and that the clearance did not extend to those matters.7
After conducting an investigation, RBSJI’s Human Resources Department recommended the
petitioner’s termination from employment for the following reasons, to wit:
1. The issuance of clearance to Mr. Jacinto Figueroa by the petitioner have been
prejudicial to the Bank considering that damages [sic] found caused by Mr. Figueroa
during his stay with the bank;
2. The petitioner is not in any authority to issue said clearance which is a violation of
the Company Code of Conduct and Discipline under Category B Grave Offense No. 1
(falsifying or misrepresenting persons or other company records, documents or
papers) equivalent to termination; and
3. The nature of his participation in the issuance of the said clearance could be a
reasonable ground for the Management to believe that he is unworthy of the trust and
confidence demanded by his position which is also a ground for termination under
Article 282 of the Labor Code.8
On May 19, 1997, RBSJI’s Board of Directors adopted the above recommendation and issued
Resolution No. 97-102 terminating the petitioner from employment, the import of which was
communicated to him in a Memorandum dated May 30, 1997.9
Feeling aggrieved, the petitioner filed the herein complaint for illegal dismissal, illegal deduction,
non-payment of service incentive, leave pay and retirement benefits.10 The petitioner averred
that the supposed loss of trust and confidence on him was a sham as it is in fact the calculated
result of the respondents’ dubious plot to conveniently oust him from RBSJI.
He claimed that he was deceived to accept a Vice-President position, which turned out to be a
mere clerical and menial work, so the respondents can install Jobel, the son of a major
stockholder of RBSJI, as Personnel and Marketing Manager. The plot to oust the petitioner
allegedly began in 1996 when Jobel annexed the Personnel and Marketing Departments to the
Business Development and Corporate Planning Department thus usurping the functions of and
displacing the petitioner, who was put on a floating status and stripped of managerial privileges
and allowances.
The petitioner further alleged that he was cunningly assigned at N. Domingo branch so he can
be implicated in the anomalous transaction perpetrated by Jacinto. He narrated that on
September 27, 1996, the officers of RBSJI, namely: Jobel, Andres, Jose and Ofelia, were
actually at the N. Domingo branch but they all suspiciously left him to face the predicament
caused by Jacinto.
He recounted that the next day he was assigned back at the Tarlac extension office and
thereafter repeatedly harassed and forced to resign. He tolerated such treatment and pleaded
that he be allowed to at least reach his retirement age. On March 7, 1996, he wrote a letter to
George Cano Chua (George) expressing his detestation of how the "new guys" are dominating
the operations of the company by destroying the image of pioneer employees, like him, who
have worked hard for the good image and market acceptability of RBSJI. The petitioner
requested for his transfer to the operations or marketing department. His request was, however,
not acted upon.
The petitioner claimed that on March 19, 1997, respondent Jesus verbally terminated him from
employment but he later on retracted the same and instead asked the petitioner to tender a
resignation letter. The petitioner refused. A month thereafter, the petitioner received the
memorandum asking him to explain why he cleared Jacinto of financial accountabilities and
thereafter another memorandum terminating him from employment.
For their part, the respondents maintained that the petitioner was validly dismissed for loss of
trust and confidence precipitated by his unauthorized issuance of a financial accountability
clearance sans audit to a resigned employee. They averred that a copy of the clearance
mysteriously disappeared from RBSJI’s records hence, the petitioner’s claim that it pertained
only to Jacinto’s paid cash advances and salary loan cannot stand for being uncorroborated.
Attempts at an amicable settlement were made but the same proved futile hence, the Labor
Arbiter11 (LA) proceeded to rule on the complaint.
Ruling of LA
In its Decision12 dated November 27, 1998, the LA sustained the claims of the petitioner as
against the factually unsubstantiated allegation of loss of trust and confidence propounded by
the respondents. The LA observed that the petitioner’s selfless dedication to his job and efforts
to achieve RBSJI’s stability, which the respondents failed to dispute, negate any finding of bad
faith on his part when he issued a clearance of accountabilities in favor of Jacinto. As such, the
said act cannot serve as a valid and justifiable ground for the respondents to lose trust and
confidence in him.
The LA further held that the failure of both parties to present a copy of the subject clearance
amidst the petitioner’s explanation that it did not absolutely release Jacinto from liability, should
work against the respondents since it is the proof that will provide basis for their supposed loss
of trust and confidence.
The LA upheld the petitioner’s contention that the loss of trust and confidence in him was indeed
a mere afterthought to justify the respondents’ premeditated plan to ease him out of RBSJI. The
LA’s conclusion was premised on the convergence of the following circumstances: (1) the
petitioner’s stint from 1991-1996 was not marred with any controversy or complaint regarding his
performance; (2) when Jobel joined RBSJI in the latter part of 1996, he took over the department
led by the petitioner thus placing the latter in a floating status; and (3) the petitioner’s temporary
transfer to the N. Domingo branch was designed to deliberately put him in a bind and blame him
on whatever course of action he may take to resolve the same.
Accordingly, the petitioner was found to have been illegally dismissed and thus accorded the
following reliefs in the decretal portion of the LA Decision, viz:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Bank
and individual respondents, to reinstate [the petitioner to his previous or equivalent position,
without loss of seniority rights and other benefits and privileges appurtaining [sic] to him, and to
pay the petitioner the following:
1. The petitioner’s partial backwages and other emoluments in the form of allowances,
as gasoline, maintenance, representation, uniform and membership allowances, from
the time of his dismissal up to his actual date of reinstatement, which as of this date
amount to:
Backwages (Partial) …………………… ₱244,800.00
Gasoline Allowances ………………….. 63,000.00
Maintenance Allowance ………………. 45,000.00
Representation Allowance …………….. 54,000.00
Membership Allowance ……………….. 12,000.00
Uniform Allowance …………………… 8,000.00
Total ………₱426,800.00
2. The petitioner’s 13th month pay from the time of his dismissal up to actual date of
reinstatement, which as of this date amounts to Twenty-Seven Thousand Two
Hundred (₱27,200.00) Pesos;
3. Moral and exemplary damages in the amount of Fifty Thousand ([P]50,000.00)
Pesos each, respectively; and
4. Attorney’s fees amounting to ten percent (10%) of the total award, specifically
amounting to Fifty-Five Thousand Nine Hundred Twenty-Three Pesos and Eight
([P]55,923.08) Centavos.
All other claims are hereby Dismissed for lack of merit.
SO ORDERED.13
Ruling of the National Labor Relations Commission (NLRC)
In its Resolution14 dated April 14, 2000, the NLRC disagreed with the LA’s conclusion and opined
that it was anchored on irrelevant matters such as the petitioner’s performance and the
preferential treatment given to relatives of RBSJI’s stockholders. The NLRC held that the legality
of the petitioner’s dismissal must be based on an appreciation of the facts and the proof directly
related to the offense charged, which NLRC found to have weighed heavily in favor of the
respondents.
The NLRC remarked that the petitioner was indisputably not authorized to issue the clearance.
Also, the tantrums and furious attitude exhibited by Jacinto are not valid reasons to submit to his
demands. The fact that the N. Domingo branch had been sued civilly on February 25, 1997 for a
tax scam while under Jacinto’s leadership, should have alerted the petitioner into issuing him a
clearance. The action taken by the petitioner lacked the prudence expected from a man of his
stature thus prejudicing the interests of RBSJI. Accordingly, the dispositive portion of the
decision reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE. Let a new
one [sic] entered DISMISSING the instant case for lack of merit. However, respondent should
pay the petitioner his proportionate 13th month pay for 1997 as he was dismissed on May 30,
1997.
SO ORDERED.15
The petitioner sought reconsideration16 which was admitted by the NLRC in an Order dated SO ORDERED.25
September 30, 2005. From such Order, the respondents filed a motion for reconsideration on the
ground that the petitioner failed to present a copy of his purported motion bearing the requisite
The petitioner moved for reconsideration26 but the motion was denied in the CA
proof of filing.17
Resolution27 dated June 3, 2008. Hence, the present appeal.

Traversing both motions, the NLRC issued its Decision18 dated March 3, 2006: (1) granting the
Arguments of the parties
petitioner’s plea for the reconsideration of its Resolution dated April 14, 2000 thus effectively
reversing and nullifying the same; and (2) denying the respondents’ motion for reconsideration of
the Order dated September 30, 2005. The petitioner avers that the respondents’ claim of loss of trust and confidence is not worthy of
credence since they failed to present a copy of the clearance purportedly showing that he
cleared Jacinto of all his financial accountabilities and not merely as to his paid cash advances
Anent the first disposition, the NLRC accorded weight to the explanations proffered by the
and salary loan. He points out that RBSJI must be in custody thereof considering that it is a vital
petitioner that the clearance issued to Jacinto was limited only to his paid cash advances and
official record.
salary loan. The NLRC further held that the offense imputed to the petitioner is not covered by
Category B, Grave Offense No. 1 of RBSJI’s Code of Conduct and Discipline as it does not
appear that he falsified or misrepresented personal or other company records, documents or The petitioner insists that the alleged loss of trust and confidence in him is a mere subterfuge to
papers.19 cover the respondents’ ploy to oust him out of RBSJI. He asserts that the seven-month gap
between the date when he issued the subject clearance and the date when he was sent a
memorandum for the said act shows that the respondents’ supposed loss of trust and
Taking an entirely opposite stance, the NLRC declared that the clearance issued by the
confidence was a mere afterthought.28
petitioner did not prejudice RBSJI’s interest as it was limited in scope and did not entirely clear
Jacinto from all his financial accountabilities. Also, the petitioner was only "a day old" at the N.
Domingo branch and thus he cannot be reasonably expected to be aware of the misdeeds On the other hand, the respondents invoke the ratiocinations of the CA that they were justified in
purportedly committed by Jacinto.20 losing the trust and confidence reposed on the petitioner since he failed to exercise the degree
of care expected of his managerial position. They reiterate the petitioner’s admission that no
audit was yet conducted as to the accountabilities of Jacinto when he issued the clearance.
For the foregoing reasons, the NLRC reversed its earlier ruling and reinstated the LA’s Decision
dated November 27, 1998, thus:
The respondents further assert that as a former Personnel Manager, the petitioner is well-aware
of RBSJI’s policy that before a resigned employee can be cleared of accountabilities, he must be
WHEREFORE, the Arbiter’s decision of 27 November 1998 is hereby AFFIRMED and
first examined or audited. However, the petitioner opted to violate this policy and yield to
REINSTATED.
Jacinto’s tantrums.29

Accordingly, the Resolution of 14 April 2000 is REVERSED and SET ASIDE.

The above arguments yield the focal issue of whether or not the petitioner was validly dismissed
from employment.
Finally, the respondents’ Motion for Reconsideration dated 2 November 2005 is DENIED for lack
of merit.
The Court’s Ruling

SO ORDERED. 21
The petition is impressed with merit.

Ruling of the CA
The respondents sought recourse with the CA,22 which in its Decision23 dated February 21, 2008
reversed and set aside the NLRC Decision dated March 3, 2006 and ruled that the petitioner
was dismissed for a just cause. The appellate court articulated that as the Acting Manager of
RBSJI’s N. Domingo branch, the petitioner held a highly sensitive and critical position which
entailed the conscientious observance of company procedures. Not only was he unauthorized to
issue the clearance, he also failed to exercise prudence in clearing Jacinto of his accountabilities
given the fact that the same were yet to be audited. Such omission financially prejudiced RBSJI
and it amounted to gross negligence and incompetence sufficient to sow in his employer the
seed of mistrust and loss of confidence.24The decretal portion of the CA Decision thus reads:
IN VIEW OF ALL THE FOREGOING, the petition is GRANTED. The March 03, 2006 Decision of
the National Labor Relations Commission is REVERSED and SET ASIDE. The April 14, 2000
Decision of the National Labor Relations Commission is hereby REINSTATED. No costs.
Settled is the rule that when supported by substantial evidence, the findings of fact of the CA are
conclusive and binding on the parties and are not reviewable by this Court. 30 As such, only errors
of law are reviewed by the Court in petitions for review of CA decisions. By way of exception,
however, the Court will exercise its equity jurisdiction and re-evaluate, review and re-examine
the factual findings of the CA when, as in this case, the same are contradicting31 with the findings
of the labor tribunals.
The respondents failed to prove that the petitioner was dismissed for a just cause.
As provided in Article 28232 of the Labor Code and as firmly entrenched in jurisprudence,33 an
employer has the right to dismiss an employee by reason of willful breach of the trust and
confidence reposed in him.
To temper the exercise of such prerogative and to reconcile the same with the employee’s
Constitutional guarantee of security of tenure, the law imposes the burden of proof upon the
employer to show that the dismissal of the employee is for just cause failing which would mean It must be pointed out that the petitioner was caught in the quandary of signing on the spot a
that the dismissal is not justified. Proof beyond reasonable doubt is not necessary but the factual standard employment clearance for the furious Jacinto sans any information on his outstanding
basis for the dismissal must be clearly and convincingly established. 34 accountabilities, and refusing to so sign but risk alarming or scandalizing RBSJI, its employees
and clients. Contrary to the respondents’ allegation, the petitioner did not concede to Jacinto’s
demands. He was, in fact, able to equalize two equally undesirable options by bargaining to
Further, the law mandates that before validity can be accorded to a dismissal premised on loss
instead clear Jacinto only of his settled financial obligations after proper verification with branch
of trust and confidence, two requisites must concur, viz: (1) the employee concerned must be
cashier Lily. It was only after Lily confirmed Jacinto’s recorded payments that the petitioner
holding a position of trust; and (2) the loss of trust must be based on willful breach of trust
signed the clearance. The absence of an audit was precisely what impelled the petitioner to
founded on clearly established facts.35
decline signing a standard employment clearance to Jacinto and instead issue a different one
pertaining only to his paid accountabilities.
There is no arguing that the petitioner was part of the upper echelons of RBSJI’s management
from whom greater fidelity to trust is expected. At the time when he committed the act which
Under these circumstances, it cannot be concluded that the petitioner was in any way prompted
allegedly led to the loss of RBSJI’s trust and confidence in him, he was the Acting Manager of N.
by malicious motive in issuing the clearance. He was also able to ensure that RBSJI’s interests
Domingo branch. It was part of the petitioner’s responsibilities to effect a smooth turn-over of
are protected and that Jacinto is pacified. He did what any person placed in a similar situation
pending transactions and to sign and approve instructions within the limits assigned to the
can prudently do. He was able to competently evaluate and control Jacinto’s demands and thus
position under existing regulations.36 Prior thereto and ever since he was employed, he has
prevent compromising RBSJI’s image, employees and clients to an alarming scene.
occupied positions that entail the power or prerogative to dictate management policies – as
Personnel and Marketing Manager and thereafter as Vice-President.
The Court has repeatedly emphasized that the act that breached the trust must be willful such
that it was done intentionally, knowingly, and purposely, without justifiable excuse, as
The presence of the first requisite is thus certain. Anent the second requisite, the Court finds that
distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. 38 The
the respondents failed to meet their burden of proving that the petitioner’s dismissal was for a
conditions under which the clearance was issued exclude any finding of deliberate or conscious
just cause.
effort on the part of the petitioner to prejudice his employer.

The act alleged to have caused the loss of trust and confidence of the respondents in the
Also, the petitioner did not commit an irregular or prohibited act. He did not falsify or
petitioner was his issuance, without prior authority and audit, of a clearance to Jacinto who
misrepresent any company record as it was officially confirmed by Lily that the items covered by
turned out to be still liable for unpaid cash advances and for an ₱11-million fraudulent
the clearance were truly settled by Jacinto. Hence, the respondents had no factual basis in
transaction that exposed RBSJI to suit. According to the respondents, the clearance barred
declaring that the petitioner violated Category B Grave Offense No. 1 of the Company Code of
RBSJI from running after Jacinto. The records are, however, barren of any evidence in support
Conduct and Discipline.
of these claims.

The respondents cannot capitalize on the petitioner’s lack of authority to issue a clearance to
As correctly argued by the petitioner and as above set forth, the onus of submitting a copy of the
resigned employees. First, it remains but an unsubstantiated allegation despite the several
clearance allegedly exonerating Jacinto from all his accountabilities fell on the respondents. It
opportunities for them in the proceedings below to show, through bank documents, that the
was the single and absolute evidence of the petitioner’s act that purportedly kindled the
petitioner is not among those officers so authorized. Second, it is the Court’s considered view
respondents’ loss of trust. Without it, the respondents’ allegation of loss of trust and confidence
that by virtue of the petitioner’s stature in respondent bank, it was well-within his discretion to
has no leg to stand on and must thus be rejected. Moreover, one can reasonably expect that a
sign or certify the truthfulness of facts as they appear in RBSJI’s records. Here, the records of
copy of the clearance, an essential personnel document, is with the respondents. Their failure to
RBSJI cashier Lily clearly showed that Jacinto paid the cash advances and salary loan covered
present it and the lack of explanation for such failure or the document’s unavailability props up
by the clearance issued by the petitioner.
the presumption that its contents are unfavorable to the respondents’ assertions.

Lastly, the seven-month gap between the clearance incident and the April 17, 1997
At any rate, the absence of the clearance upon which the contradicting claims of the parties
memorandum asking the petitioner to explain his action is too lengthy to be ignored. It likewise
could ideally be resolved, should work against the respondents. With only sworn pleadings as
remains uncontroverted that during such period, respondent Jesus verbally terminated the
proof of their opposite claims on the true contents of the clearance, the Court is bound to apply
petitioner only to recall the same and instead ask the latter to tender a resignation letter. When
the principle that the scales of justice should be tilted in favor of labor in case of doubt in the
the petitioner refused, he was sent the memorandum questioning his issuance of a clearance to
evidence presented.37
Jacinto seven months earlier. The confluence of these undisputed circumstances supports the
inference that the clearance incident was a mere afterthought used to gain ground for the
RBSJI also failed to substantiate its claim that the petitioner’s act estopped them from pursuing petitioner’s dismissal.
Jacinto for his standing obligations. There is no proof that RBSJI attempted or at least
considered to demand from Jacinto the payment of his unpaid cash advances. Neither was
Loss of trust and confidence as a ground for dismissal has never been intended to afford an
RBSJI able to show that it filed a civil or criminal suit against Jacinto to make him responsible for
occasion for abuse because of its subjective nature. It should not be used as a subterfuge for
the alleged fraud. There is thus no factual basis for RBSJI’s allegation that it incurred damages
causes which are illegal, improper and unjustified. It must be genuine, not a mere afterthought
or was financially prejudiced by the clearance issued by the petitioner.
intended to justify an earlier action taken in bad faith.39

More importantly, the complained act of the petitioner did not evince intentional breach of the
All told, the unsubstantiated claims of the respondents fall short of the standard proof required
respondents’ trust and confidence. Neither was the petitioner grossly negligent or unjustified in
for valid termination of employment. They failed to clearly and convincingly establish that the
pursuing the course of action he took.
petitioner’s act of issuing a clearance to Jacinto rendered him unfit to continue working for
RBSJI. The petitioner was illegally dismissed from employment and is entitled to back wages, to
be computed from the date he was illegally dismissed until the finality of this decision. 40
The disposition of the case made by the LA in its Decision dated November 27, 1998, as
affirmed by the NLRC in its Decision dated March 6, 2006, is most in accord with the above
disquisitions hence, must be reinstated. However, the monetary awards therein should be
clarified.
The petitioner is entitled to separation pay in lieu of reinstatement and his back wages shall earn
legal interest.
In accordance with current jurisprudence, the award of back wages shall earn legal interest at
the rate of six percent (6%) per annum from the date of the petitioner’s illegal dismissal until the
finality of this decision.41 Thereafter, it shall earn 12% legal interest until fully paid42 in accordance
with the guidelines in Eastern Shipping Lines, Inc., v. Court of Appeals. 43
In addition to his back wages, the petitioner is also entitled to separation pay. It cannot be
gainsaid that animosity and antagonism have been brewing between the parties since the
petitioner was gradually eased out of key positions in RBSJI and to reinstate him will only
intensify their hostile working atmosphere.44 Thus, based on strained relations, separation pay
equivalent to one (1) month salary for every year of service, with a fraction of a year of at least
six (6) months to be considered as one (1) whole year, should be awarded in lieu of
reinstatement, to be computed from date of his engagement by RBSJI up to the finality of this
decision.45
The award of separation pay in case of strained relations is more beneficial to both parties in
that it liberates the employee from what could be a highly oppressive work environment in as
much as it releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust.46
The award of moral and exemplary damages is not warranted.
In M+W Zander Philippines, Inc. v. Enriquez,47 the Court decreed that illegal dismissal, by itself
alone, does not entitle the dismissed employee to moral damages; additional facts must be
pleaded and proven to warrant the grant of moral damages, thus:
Moral damages are recoverable only where the dismissal of the employee was attended by bad
faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to
morals, good customs or public policy. Such an award cannot be justified solely upon the
premise that the employer fired his employee without just cause or due process. Additional facts
must be pleaded and proven to warrant the grant of moral damages under the Civil Code, i.e.,
that the act of dismissal was attended by bad faith or fraud, or constituted an act oppressive to
labor, or was done in a manner contrary to morals, good customs or public policy; and, of
course, that social humiliation, wounded feelings, grave anxiety, and similar injury resulted
therefrom.48 (Citations omitted)
Bad faith does not connote bad judgment or negligence; it imports a dishonest purpose or some
moral obliquity and conscious doing of wrong; it means breach of a known duty through some
motive or interest or ill will; it partakes of the nature of fraud. 49
Here, the petitioner failed to prove that his dismissal was attended by explicit oppressive,
humiliating or demeaning acts. The following events merely sketch the struggle for power within
the upper management of RBSJI between the "old guys" and the "new guys"; they do not
convincingly prove that the respondents schemed to gradually ease the petitioner out, viz: (1) his
promotion as Vice-President; (2) his replacement by Jobel as Personnel and Marketing
Manager; (2) his designation as Acting Manager of N. Domingo branch and the recall thereof on
the very next day; (3) the presence of Andres, Jose and Ofelia at the N. Domingo branch in the
morning of
September 27, 1996; and (4) George’s inaction on the petitioner’s request to be transferred to
the operations or marketing department. As disagreeable as they may seem, these acts cannot
be equated with bad faith that can justify an award of damages.
Since no moral damages can be granted under the facts of the case, exemplary damages
cannot also be awarded.50
The solidary liability of individual respondents as corporate officers must be recalled.
In the same vein, the individual respondents cannot be made solidarily liable with RBSJI for the
illegal dismissal. Time and again, the Court has held that a corporation has its own legal
personality separate and distinct from those of its stockholders, directors or officers. Hence,
absent any evidence that they have exceeded their authority, corporate officers are not
personally liable for their official acts. Corporate directors and officers may be held solidarily
liable with the corporation for the termination of employment only if done with malice or in bad
faith.51 As discussed above, the acts imputed to the respondents do not support a finding of bad
faith.
In addition, the lack of a valid cause for the dismissal of an employee does not ipso facto mean
that the corporate officers acted with malice or bad faith. There must be an independent proof of
malice or bad faith,52 which is absent in the case at bar.
The award of 13th month pay is ncorrect.
Being a managerial employee, the petitioner is not entitled to 13th month pay. Pursuant to
1âwphi1
Memorandum Order No. 28, as implemented by the Revised Guidelines on the Implementation
of the 13th Month Pay Law dated November 16, 1987, managerial employees are exempt from
receiving such benefit without prejudice to the granting of other bonuses, in lieu of the 13th
month pay, to managerial employees upon the employer’s discretion.53
The award of attorney’s fees is proper.
It is settled that where an employee was forced to litigate and, thus, incur expenses to protect
his rights and interest, the award of attorney’s fees is legally and morally justifiable.54 Pursuant to
Article 111 of the Labor Code, ten percent (10%) of the total award is the reasonable amount of
attorney’s fees that can be awarded.
WHEREFORE, the petition is GRANTED. The Decision dated February 21, 2008 and Resolution
dated June 3, 2008 of the Court of Appeals in CA-G.R. SP No. 94690 are REVERSED and SET
ASIDE. The Decision of the Labor Arbiter dated November 27, 1998 is REINSTATED with the
following MODIFICATIONS/CLARIFICATIONS: Petitioner Rolando DS. Torres is entitled to the
payment of: (a) back wages reckoned from May 30, 1997 up to the finality of this Decision, with
interest at six percent (6%) per annum, and 12% legal interest thereafter until fully paid; and (b)
in lieu of reinstatement, separation pay equivalent to one (1) month salary for every year of
service, with a fraction of at least six (6) months to be considered as one (1) whole year, to be
computed from the date of his employment up to the finality of this decision.
The amounts awarded as moral damages, exemplary damages and 13th month pay are
DELETED. Only respondent Rural Bank of San Juan, Inc. is liable for the illegal dismissal and
the consequential monetary awards arising therefrom. The other portions of and monetary
awards in the Labor Arbiter's Decision dated November 27, 1998 are AFFIRMED.

SO ORDERED.
G.R. No. L-50999 March 23, 1990
JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,
vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER
FLAVIO AGUAS, and F.E. ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabora, Del Rosario & Castillo for private respondent.
MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of the National Labor Relations
Commission in NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres,
Complainants-Appellants, v. F.E. Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No.
RN- IV-20855-78-T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee," which dismissed the appeal of petitioners herein and in effect affirmed
the decision of the Labor Arbiter ordering private respondent to pay petitioners separation pay
equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year
of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the
Department of Labor (Regional Office No. 4) an application seeking clearance to terminate the
services of petitioners Jose Songco, Romeo Cipres, and Amancio Manuel (hereinafter referred
to as petitioners) allegedly on the ground of retrenchment due to financial losses. This
application was seasonably opposed by petitioners alleging that the company is not suffering
from any losses. They alleged further that they are being dismissed because of their
membership in the union. At the last hearing of the case, however, petitioners manifested that
they are no longer contesting their dismissal. The parties then agreed that the sole issue to be
resolved is the basis of the separation pay due to petitioners. Petitioners, who were in the sales
force of Zuellig received monthly salaries of at least P40,000. In addition, they received
commissions for every sale they made.
The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees
Association, of which petitioners are members, contains the following provision (p. 71, Rollo):
ARTICLE XIV — Retirement Gratuity
Section l(a)-Any employee, who is separated from employment due to old
age, sickness, death or permanent lay-off not due to the fault of said
employee shall receive from the company a retirement gratuity in an amount
equivalent to one (1) month's salary per year of service. One month
of salary as used in this paragraph shall be deemed equivalent to
the salary at date of retirement; years of service shall be deemed equivalent
to total service credits, a fraction of at least six months being considered
one year, including probationary employment. (Emphasis supplied)
On the other hand, Article 284 of the Labor Code then prevailing provides:
Art. 284. Reduction of personnel. — The termination of employment of any
employee due to the installation of labor saving-devices, redundancy,
retrenchment to prevent losses, and other similar causes, shall entitle the
employee affected thereby to separation pay. In case of termination due to
the installation of labor-saving devices or redundancy, the separation pay
shall be equivalent to one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment to
prevent losses and other similar causes, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year. (Emphasis supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code
provide:
xxx
Sec. 9(b). Where the termination of employment is due to retrechment
initiated by the employer to prevent losses or other similar causes, or where
the employee suffers from a disease and his continued employment is
prohibited by law or is prejudicial to his health or to the health of his co-
employees, the employee shall be entitled to termination pay equivalent at
least to his one month salary, or to one-half month pay for every year of
service, whichever is higher, a fraction of at least six (6) months being
considered as one whole year.
xxx
Sec. 10. Basis of termination pay. — The computation of the termination
pay of an employee as provided herein shall be based on his latest salary
rate, unless the same was reduced by the employer to defeat the intention
of the Code, in which case the basis of computation shall be the rate before
its deduction. (Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads
(p. 78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby,
ordered to pay the complainants separation pay equivalent to their one
month salary (exclusive of commissions, allowances, etc.) for every year of
service that they have worked with the company.
SO ORDERED.
The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of
merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and
Withdrawal of Petition dated April 7, 1980 filed by petitioner Romeo Cipres, based on the ground
that he wants "to abide by the decision appealed from" since he had "received, to his full and
complete satisfaction, his separation pay," resolved to dismiss the petition as to him.
The issue is whether or not earned sales commissions and allowances should be included in the
monthly salary of petitioners for the purpose of computation of their separation pay.
The petition is impressed with merit.
Petitioners' position was that in arriving at the correct and legal amount of separation pay due
them, whether under the Labor Code or the CBA, their basic salary, earned sales commissions
and allowances should be added together. They cited Article 97(f) of the Labor Code which
includes commission as part on one's salary, to wit;
(f) 'Wage' paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or
other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered, and includes
the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to
the employee. 'Fair reasonable value' shall not include any profit to the
employer or to any person affiliated with the employer.
Zuellig argues that if it were really the intention of the Labor Code as well as its implementing
rules to include commission in the computation of separation pay, it could have explicitly said so
in clear and unequivocal terms. Furthermore, in the definition of the term "wage", "commission"
is used only as one of the features or designations attached to the word remuneration or
earnings.
Insofar as the issue of whether or not allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation pay is concerned, this has been
settled in the case of Santos v. NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA
166, where We ruled that "in the computation of backwages and separation pay, account must
be taken not only of the basic salary of petitioner but also of her transportation and emergency
living allowances." This ruling was reiterated in Soriano v. NLRC, et al., G.R. No. 75510,
October 27, 1987, 155 SCRA 124 and recently, in Planters Products, Inc. v. NLRC, et al., G.R.
No. 78524, January 20, 1989.
We shall concern ourselves now with the issue of whether or not earned sales commission
should be included in the monthly salary of petitioner for the purpose of computation of their
separation pay.
Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It
has been repeatedly declared by the courts that where the law speaks in clear and categorical
language, there is no room for interpretation or construction; there is only room for application
(Cebu Portland Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24
SCRA 708; Gonzaga v. Court of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A
plain and unambiguous statute speaks for itself, and any attempt to make it clearer is vain labor
and tends only to obscurity. How ever, it may be argued that if We correlate Article 97(f) with
Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections
9(b) and 10 of the Implementing Rules, there appears to be an ambiguity. In this regard, the
Labor Arbiter rationalized his decision in this manner (pp. 74-76, Rollo):
The definition of 'wage' provided in Article 96 (sic) of the Code can be
correctly be (sic) stated as a general definition. It is 'wage ' in its generic
sense. A careful perusal of the same does not show any indication that
commission is part of salary. We can say that commission by itself may be
considered a wage. This is not something novel for it cannot be gainsaid
that certain types of employees like agents, field personnel and salesmen
do not earn any regular daily, weekly or monthly salaries, but rely mainly on
commission earned.
Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the
implementing rules in conjunction with Articles 273 and 274 (sic) of the
Code specifically states that the basis of the termination pay due to one who
is sought to be legally separated from the service is 'his latest salary rates.
x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly
salary'.
The above terms found in those Articles and the particular Rules were
intentionally used to express the intent of the framers of the law that for
purposes of separation pay they mean to be specifically referring to salary
only.
.... Each particular benefit provided in the Code and other Decrees on Labor
has its own pecularities and nuances and should be interpreted in that light.
Thus, for a specific provision, a specific meaning is attached to simplify
matters that may arise there from. The general guidelines in (sic) the
formation of specific rules for particular purpose. Thus, that what should be
controlling in matters concerning termination pay should be the specific
provisions of both Book VI of the Code and the Rules. At any rate, settled is
the rule that in matters of conflict between the general provision of law and
that of a particular- or specific provision, the latter should prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the implementing rules, it
could be deduced that wage is used in its generic sense and obviously
refers to the basic wage rate to be ascertained on a time, task, piece or
commission basis or other method of calculating the same. It does not,
however, mean that commission, allowances or analogous income
necessarily forms part of the employee's salary because to do so would
lead to anomalies (sic), if not absurd, construction of the word "salary." For
what will prevent the employee from insisting that emergency living
allowance, 13th month pay, overtime, and premium pay, and other fringe
benefits should be added to the computation of their separation pay. This
situation, to our mind, is not the real intent of the Code and its rules.
We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and
Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections
9(b) and 10 of the Implementing Rules, which mention the terms "pay" and "salary", is more
apparent than real. Broadly, the word "salary" means a recompense or consideration made to a
person for his pains or industry in another man's business. Whether it be derived from
"salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the
fundamental idea of compensation for services rendered. Indeed, there is eminent authority for
holding that the words "wages" and "salary" are in essence synonymous (Words and Phrases,
Vol. 38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div.
481; 38 Am. Jur. 496). "Salary," the etymology of which is the Latin word "salarium," is often
used interchangeably with "wage", the etymology of which is the Middle English word "wagen".
Both words generally refer to one and the same meaning, that is, a reward or recompense for
services performed. Likewise, "pay" is the synonym of "wages" and "salary" (Black's Law
Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary" have the same
meaning, and commission is included in the definition of "wage", the logical conclusion,
therefore, is, in the computation of the separation pay of petitioners, their salary base should
include also their earned sales commissions.
The aforequoted provisions are not the only consideration for deciding the petition in favor of the
petitioners.
consideration. This kind of interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of the Labor Code which states that
"all doubts in the implementation and interpretation of the provisions of the Labor Code including
its implementing rules and regulations shall be resolved in favor of labor" (Abella v. NLRC, G.R.
No. 71812, July 30,1987,152 SCRA 140; Manila Electric Company v. NLRC, et al., G.R. No.
78763, July 12,1989), and Article 1702 of the Civil Code which provides that "in case of doubt,
all labor legislation and all labor contracts shall be construed in favor of the safety and decent
living for the laborer.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National
Labor Relations Commission is MODIFIED by including allowances and commissions in the
separation pay of petitioners Jose Songco and Amancio Manuel. The case is remanded to the
Labor Arbiter for the proper computation of said separation pay.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Griño-Aquino, JJ., concur.

We agree with the Solicitor General that granting, in gratia argumenti, that the commissions
were in the form of incentives or encouragement, so that the petitioners would be inspired to put
a little more industry on the jobs particularly assigned to them, still these commissions are direct
remuneration services rendered which contributed to the increase of income of Zuellig .
Commission is the recompense, compensation or reward of an agent, salesman, executor,
trustees, receiver, factor, broker or bailee, when the same is calculated as a percentage on the
amount of his transactions or on the profit to the principal (Black's Law Dictionary, 5th Ed., citing
Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750). The nature of the work of a salesman and
the reason for such type of remuneration for services rendered demonstrate clearly that
commission are part of petitioners' wage or salary. We take judicial notice of the fact that some
salesmen do not receive any basic salary but depend on commissions and allowances or
commissions alone, are part of petitioners' wage or salary. We take judicial notice of the fact that
some salesman do not received any basic salary but depend on commissions and allowances or
commissions alone, although an employer-employee relationship exists. Bearing in mind the
preceeding dicussions, if we adopt the opposite view that commissions, do not form part of wage
or salary, then, in effect, We will be saying that this kind of salesmen do not receive any salary
and therefore, not entitled to separation pay in the event of discharge from employment. Will this
not be absurd? This narrow interpretation is not in accord with the liberal spirit of our labor laws
and considering the purpose of separation pay which is, to alleviate the difficulties which
confront a dismissed employee thrown the the streets to face the harsh necessities of life.

Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that
should be used in computing the separation pay, We held that:

The commissions also claimed by petitioner ('override commission' plus 'net

deposit incentive') are not properly includible in such base figure since such
commissions must be earned by actual market transactions attributable to
petitioner.

Applying this by analogy, since the commissions in the present case were earned by actual
market transactions attributable to petitioners, these should be included in their separation pay.
In the computation thereof, what should be taken into account is the average commissions
earned during their last year of employment.

The final consideration is, in carrying out and interpreting the Labor Code's provisions and its
implementing regulations, the workingman's welfare should be the primordial and paramount
Art. 5 case
G.R. No. L-52415 October 23, 1984
INSULAR BANK OF ASIA AND AMERICA EMPLOYEES' UNION (IBAAEU), petitioner,
vs.
HON. AMADO G. INCIONG, Deputy Minister, Ministry of Labor and INSULAR BANK OF
ASIA AND AMERICA, respondents.
Sisenando R. Villaluz, Jr. for petitioner.
Abdulmaid Kiram Muin colloborating counsel for petitioner.
The Solicitor General Caparas, Tabios, Ilagan Alcantara & Gatmaytan Law Office and Sycip,
Salazar, Feliciano & Hernandez Law Office for respondents.
MAKASIAR, J.: ñé+.£ªwph! 1
This is a petition for certiorari to set aside the order dated November 10, 1979, of respondent
Deputy Minister of Labor, Amado G. Inciong, in NLRC case No. RB-IV-1561-76 entitled "Insular
Bank of Asia and America Employees' Union (complainant-appellee), vs. Insular Bank of Asia
and America" (respondent-appellant), the dispositive portion of which reads as follows: têñ.£îhqwâ£
xxx xxx xxx
ALL THE FOREGOING CONSIDERED, let the appealed Resolution en
banc of the National Labor Relations Commission dated 20 June 1978 be,
as it is hereby, set aside and a new judgment. promulgated dismissing the
instant case for lack of merit (p. 109 rec.).
The antecedent facts culled from the records are as follows:
On June 20, 1975, petitioner filed a complaint against the respondent bank for the payment of
holiday pay before the then Department of Labor, National Labor Relations Commission,
Regional Office No. IV in Manila. Conciliation having failed, and upon the request of both parties,
the case was certified for arbitration on July 7, 1975 (p. 18, NLRC rec.
On August 25, 1975, Labor Arbiter Ricarte T. Soriano rendered a decision in the above-entitled
case, granting petitioner's complaint for payment of holiday pay. Pertinent portions of the
decision read: têñ.£îhqwâ£
xxx xxx xxx
The records disclosed that employees of respondent bank were not paid
their wages on unworked regular holidays as mandated by the Code,
particularly Article 208, to wit:
têñ.£îhqwâ£
Art. 208. Right to holiday pay.
(a) Every worker shall be paid his regular daily wage
during regular holidays, except in retail and service
establishments regularly employing less than 10
workers.
(b) The term "holiday" as used in this chapter, shall
include: New Year's Day, Maundy Thursday, Good
Friday, the ninth of April the first of May, the twelfth of
June, the fourth of July, the thirtieth of November, the
twenty-fifth and the thirtieth of December and the day
designated by law for holding a general election.
xxx xxx xxx
This conclusion is deduced from the fact that the daily rate of pay of the
bank employees was computed in the past with the unworked regular
holidays as excluded for purposes of determining the deductible amount for
absences incurred Thus, if the employer uses the factor 303 days as a
divisor in determining the daily rate of monthly paid employee, this gives rise
to a presumption that the monthly rate does not include payments for
unworked regular holidays. The use of the factor 303 indicates the number
of ordinary working days in a year (which normally has 365 calendar days),
excluding the 52 Sundays and the 10 regular holidays. The use of 251 as a
factor (365 calendar days less 52 Saturdays, 52 Sundays, and 10 regular
holidays) gives rise likewise to the same presumption that the unworked
Saturdays, Sundays and regular holidays are unpaid. This being the case, it
is not amiss to state with certainty that the instant claim for wages on
regular unworked holidays is found to be tenable and meritorious.
WHEREFORE, judgment is hereby rendered:
(a) xxx xxxx xxx
(b) Ordering respondent to pay wages to all its employees for all regular
h(olidays since November 1, 1974 (pp. 97-99, rec., underscoring supplied).
Respondent bank did not appeal from the said decision. Instead, it complied with the order of
Arbiter Ricarte T. Soriano by paying their holiday pay up to and including January, 1976.
On December 16, 1975, Presidential Decree No. 850 was promulgated amending, among
others, the provisions of the Labor Code on the right to holiday pay to read as follows: têñ.£îhqw â£
Art. 94. Right to holiday pay. — (a) Every worker shall be paid his regular
daily wages during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate
and
(c) As used in this Article, "holiday" includes New Year's Day, Maundy
Thursday, Good Friday, the ninth of April, the first of May, the twelfth of
 June, the fourth of July, the thirtieth of November, the twenty-fifth and the
thirtieth of December, and the day designated by law for holding a general
election.
Accordingly, on February 16, 1976, by authority of Article 5 of the same Code, the Department of
Labor (now Ministry of Labor) promulgated the rules and regulations for the implementation of
holidays with pay. The controversial section thereof reads: têñ.£îhqw â£
Sec. 2. Status of employees paid by the month. — Employees who are
uniformly paid by the month, irrespective of the number of working days
therein, with a salary of not less than the statutory or established minimum
wage shall be presumed to be paid for all days in the month whether worked
or not.
For this purpose, the monthly minimum wage shall not be less than the
statutory minimum wage multiplied by 365 days divided by twelve" (italics
supplied).
On April 23, 1976, Policy Instruction No. 9 was issued by the then Secretary of Labor (now
from January to December, and that no deductions are made from the monthly salaries of its
employees on account of holidays in months where they occur (pp. 64-65, NLRC rec.).
On October 18, 1976, Labor Arbiter Ricarte T. Soriano, instead of issuing a writ of execution,
issued an order enjoining the respondent bank to continue paying its employees their regular
holiday pay on the following grounds: (a) that the judgment is already final and the findings
which is found in the body of the decision as well as the dispositive portion thereof is res
judicata or is the law of the case between the parties; and (b) that since the decision had been
partially implemented by the respondent bank, appeal from the said decision is no longer
available (pp. 100-103, rec.).
On November 17, 1976, respondent bank appealed from the above-cited order of Labor Arbiter
Soriano to the National Labor Relations Commission, reiterating therein its contentions averred
in its opposition to the motion for writ of execution. Respondent bank further alleged for the first
time that the questioned order is not supported by evidence insofar as it finds that respondent
bank discontinued payment of holiday pay beginning January, 1976 (p. 84, NLRC rec.).
On June 20, 1978, the National Labor Relations Commission promulgated its resolution en
banc dismissing respondent bank's appeal, the dispositive portion of which reads as follows:
têñ.£îhqwâ£

Minister) interpreting the above-quoted rule, pertinent portions of which read: têñ.£îhqwâ£

In view of the foregoing, we hereby resolve to dismiss, as we hereby

dismiss, respondent's appeal; to set aside Labor Arbiter Ricarte T. Soriano's
xxx xxx xxx
order of 18 October 1976 and, as prayed for by complainant, to order the
issuance of the proper writ of execution (p. 244, NLRC rec.).
The ten (10) paid legal holidays law, to start with, is intended to benefit
principally daily employees. In the case of monthly, only those whose
Copies of the above resolution were served on the petitioner only on February 9, 1979 or almost
monthly salary did not yet include payment for the ten (10) paid legal
eight. (8) months after it was promulgated, while copies were served on the respondent bank on
holidays are entitled to the benefit.
February 13, 1979.

Under the rules implementing P.D. 850, this policy has been fully clarified to
On February 21, 1979, respondent bank filed with the Office of the Minister of Labor a motion for
eliminate controversies on the entitlement of monthly paid employees, The
reconsideration/appeal with urgent prayer to stay execution, alleging therein the following: (a)
new determining rule is this: If the monthly paid employee is receiving not
that there is prima facie evidence of grave abuse of discretion, amounting to lack of jurisdiction
less than P240, the maximum monthly minimum wage, and his monthly pay
on the part of the National Labor Relations Commission, in dismissing the respondent's appeal
is uniform from January to December, he is presumed to be already paid the
on pure technicalities without passing upon the merits of the appeal and (b) that the resolution
ten (10) paid legal holidays. However, if deductions are made from his
appealed from is contrary to the law and jurisprudence (pp. 260-274, NLRC rec.).
monthly salary on account of holidays in months where they occur, then he
is still entitled to the ten (10) paid legal holidays. ..." (emphasis supplied).
On March 19, 1979, petitioner filed its opposition to the respondent bank's appeal and alleged
the following grounds: (a) that the office of the Minister of Labor has no jurisdiction to entertain
Respondent bank, by reason of the ruling laid down by the aforecited rule implementing Article
the instant appeal pursuant to the provisions of P. D. 1391; (b) that the labor arbiter's decision
94 of the Labor Code and by Policy Instruction No. 9, stopped the payment of holiday pay to an
being final, executory and unappealable, execution is a matter of right for the petitioner; and (c)
its employees.
that the decision of the labor arbiter dated August 25, 1975 is supported by the law and the
evidence in the case (p. 364, NLRC rec.).
On August 30, 1976, petitioner filed a motion for a writ of execution to enforce the arbiter's
decision of August 25, 1975, whereby the respondent bank was ordered to pay its employees
On July 30, 1979, petitioner filed a second motion for execution pending appeal, praying that a
their daily wage for the unworked regular holidays.
writ of execution be issued by the National Labor Relations Commission pending appeal of the
case with the Office of the Minister of Labor. Respondent bank filed its opposition thereto on
On September 10, 1975, respondent bank filed an opposition to the motion for a writ of August 8, 1979.
execution alleging, among others, that: (a) its refusal to pay the corresponding unworked holiday
pay in accordance with the award of Labor Arbiter Ricarte T. Soriano dated August 25, 1975, is
On August 13, 1979, the National Labor Relations Commission issued an order which states:
based on and justified by Policy Instruction No. 9 which interpreted the rules implementing P. D.
têñ.£îhqwâ£

850; and (b) that the said award is already repealed by P.D. 850 which took effect on December
16, 1975, and by said Policy Instruction No. 9 of the Department of Labor, considering that its The Chief, Research and Information Division of this Commission is hereby
monthly paid employees are not receiving less than P240.00 and their monthly pay is uniform directed to designate a Socio-Economic Analyst to compute the holiday pay
of the employees of the Insular Bank of Asia and America from April 1976 to
 the present, in accordance with the Decision of the Labor Arbiter dated
August 25, 1975" (p. 80, rec.).
On November 10, 1979, the Office of the Minister of Labor, through Deputy Minister Amado G.
Inciong, issued an order, the dispositive portion of which states:
têñ.£îhqw â£
ALL THE FOREGOING CONSIDERED, let the appealed Resolution en
banc of the National Labor Relations Commission dated 20 June 1978 be,
as it is hereby, set aside and a new judgment promulgated dismissing the
instant case for lack of merit (p. 436, NLRC rec.).
Hence, this petition for certiorari charging public respondent Amado G. Inciong with abuse of
discretion amounting to lack or excess of jurisdiction.
The issue in this case is: whether or not the decision of a Labor Arbiter awarding payment of
regular holiday pay can still be set aside on appeal by the Deputy Minister of Labor even though
it has already become final and had been partially executed, the finality of which was affirmed by
the National Labor Relations Commission sitting en banc, on the basis of an Implementing Rule
and Policy Instruction promulgated by the Ministry of Labor long after the said decision had
become final and executory.
WE find for the petitioner.
I provisions of this Code, including its implementing rules and regulations, shall be resolved in
WE agree with the petitioner's contention that Section 2, Rule IV, Book III of the implementing
rules and Policy Instruction No. 9 issued by the then Secretary of Labor are null and void since
in the guise of clarifying the Labor Code's provisions on holiday pay, they in effect amended
them by enlarging the scope of their exclusion (p. 1 1, rec.).
Article 94 of the Labor Code, as amended by P.D. 850, provides: têñ.£îhqw â£
Art. 94. Right to holiday pay. — (a) Every worker shall be paid his regular
daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers. ...
The coverage and scope of exclusion of the Labor Code's holiday pay provisions is spelled out
under Article 82 thereof which reads: têñ.£îhqwâ£
Art. 82. Coverage. — The provision of this Title shall apply to employees in
all establishments and undertakings, whether for profit or not, but not to
government employees, managerial employees, field personnel members of
the family of the employer who are dependent on him for support domestic
helpers, persons in the personal service of another, and workers who are
paid by results as determined by the Secretary of Labor in appropriate
regulations.
... (emphasis supplied).
From the above-cited provisions, it is clear that monthly paid employees are not excluded from
the benefits of holiday pay. However, the implementing rules on holiday pay promulgated by the
then Secretary of Labor excludes monthly paid employees from the said benefits by inserting,
under Rule IV, Book Ill of the implementing rules, Section 2, which provides that: "employees
who are uniformly paid by the month, irrespective of the number of working days therein, with a
salary of not less than the statutory or established minimum wage shall be presumed to be paid
for all days in the month whether worked or not. "
Public respondent maintains that "(T)he rules implementing P. D. 850 and Policy Instruction No.
9 were issued to clarify the policy in the implementation of the ten (10) paid legal holidays. As
interpreted, 'unworked' legal holidays are deemed paid insofar as monthly paid employees are
concerned if (a) they are receiving not less than the statutory minimum wage, (b) their monthly
pay is uniform from January to December, and (c) no deduction is made from their monthly
salary on account of holidays in months where they occur. As explained in Policy Instruction No,
9, 'The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily paid
employees. In case of monthly, only those whose monthly salary did not yet include payment for
the ten (10) paid legal holidays are entitled to the benefit' " (pp. 340-341, rec.). This contention is
untenable.
It is elementary in the rules of statutory construction that when the language of the law is clear
and unequivocal the law must be taken to mean exactly what it says. In the case at bar, the
provisions of the Labor Code on the entitlement to the benefits of holiday pay are clear and
explicit - it provides for both the coverage of and exclusion from the benefits. In Policy Instruction
No. 9, the then Secretary of Labor went as far as to categorically state that the benefit is
principally intended for daily paid employees, when the law clearly states that every worker shall
be paid their regular holiday pay. This is a flagrant violation of the mandatory directive of Article
4 of the Labor Code, which states that "All doubts in the implementation and interpretation of the
favor of labor." Moreover, it shall always be presumed that the legislature intended to enact a
valid and permanent statute which would have the most beneficial effect that its language
permits (Orlosky vs. Haskell, 155 A. 112.)
Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority granted by
Article 5 of the Labor Code authorizing him to promulgate the necessary implementing rules and
regulations.
Public respondent vehemently argues that the intent and spirit of the holiday pay law, as
expressed by the Secretary of Labor in the case of Chartered Bank Employees Association v.
The Chartered Bank (NLRC Case No. RB-1789-75, March 24, 1976), is to correct the
disadvantages inherent in the daily compensation system of employment — holiday pay is
primarily intended to benefit the daily paid workers whose employment and income are
circumscribed by the principle of "no work, no pay." This argument may sound meritorious; but,
until the provisions of the Labor Code on holiday pay is amended by another law, monthly paid
employees are definitely included in the benefits of regular holiday pay. As earlier stated, the
presumption is always in favor of law, negatively put, the Labor Code is always strictly construed
against management.
While it is true that the contemporaneous construction placed upon a statute by executive
officers whose duty is to enforce it should be given great weight by the courts, still if such
construction is so erroneous, as in the instant case, the same must be declared as null and void.
It is the role of the Judiciary to refine and, when necessary, correct constitutional (and/or
statutory) interpretation, in the context of the interactions of the three branches of the
government, almost always in situations where some agency of the State has engaged in action
that stems ultimately from some legitimate area of governmental power (The Supreme Court in
Modern Role, C. B. Swisher 1958, p. 36).
Thus. in the case of Philippine Apparel Workers Union vs. National Labor Relations constitutional mandate. There must be strict compliance
Commission (106 SCRA 444, July 31, 1981) where the Secretary of Labor enlarged the scope of with the legislative enactment. Its terms must be
exemption from the coverage of a Presidential Decree granting increase in emergency followed the statute requires adherence to, not
allowance, this Court ruled that:têñ.£îhqw⣠departure from its provisions. No deviation is allowable.
In the terse language of the present Chief Justice, an
administrative agency "cannot amend an act of
... the Secretary of Labor has exceeded his authority when he included
Congress." Respondents can be sustained, therefore,
paragraph (k) in Section 1 of the Rules implementing P. D. 1 1 23.
only if it could be shown that the rules and regulations
promulgated by them were in accordance with what the
xxx xxx xxx Veterans Bill of Rights provides" (Phil. Apparel Workers
Union vs. National Labor Relations
Commission, supra, 463, 464, citing Teozon vs.
Clearly, the inclusion of paragraph k contravenes the statutory authority Members of the Board of Administrators, PVA 33 SCRA
granted to the Secretary of Labor, and the same is therefore void, as ruled
585; see also Santos vs. Hon. Estenzo, et al, 109 Phil.
by this Court in a long line of cases . . . .. têñ.£îhqwâ£

419; Hilado vs. Collector of Internal Revenue, 100 Phil.

295; Sy Man vs. Jacinto & Fabros, 93 Phil. 1093; Olsen
The recognition of the power of administrative officials & Co., Inc. vs. Aldanese and Trinidad, 43 Phil. 259).
to promulgate rules in the administration of the statute,
necessarily limited to what is provided for in the This ruling of the Court was recently reiterated in the case of American Wire & Cable Workers
legislative enactment, may be found in the early case of
Union (TUPAS) vs. The National Labor Relations Commission and American Wire & Cable Co.,
United States vs. Barrios decided in 1908. Then came Inc., G.R. No. 53337, promulgated on June 29, 1984.
in a 1914 decision, United States vs. Tupasi Molina (29
Phil. 119) delineation of the scope of such competence.
Thus: "Of course the regulations adopted under In view of the foregoing, Section 2, Rule IV, Book III of the Rules to implement the Labor Code
legislative authority by a particular department must be and Policy instruction No. 9 issued by the then Secretary of Labor must be declared null and
in harmony with the provisions of the law, and for the void. Accordingly, public respondent Deputy Minister of Labor Amado G. Inciong had no basis at
sole purpose of carrying into effect its general all to deny the members of petitioner union their regular holiday pay as directed by the Labor
provisions. By such regulations, of course, the law itself Code.
cannot be extended. So long, however, as the
regulations relate solely to carrying into effect the
II
provisions of the law, they are valid." In 1936, in People
vs. Santos, this Court expressed its disapproval of an
administrative order that would amount to an excess of It is not disputed that the decision of Labor Arbiter Ricarte T. Soriano dated August 25, 1975,
the regulatory power vested in an administrative official had already become final, and was, in fact, partially executed by the respondent bank.
We reaffirmed such a doctrine in a 1951 decision,
where we again made clear that where an
However, public respondent maintains that on the authority of De Luna vs. Kayanan, 61 SCRA
administrative order betrays inconsistency or
49, November 13, 1974, he can annul the final decision of Labor Arbiter Soriano since the
repugnancy to the provisions of the Act, 'the mandate of
ensuing promulgation of the integrated implementing rules of the Labor Code pursuant to P.D.
the Act must prevail and must be followed. Justice
850 on February 16, 1976, and the issuance of Policy Instruction No. 9 on April 23, 1976 by the
Barrera, speaking for the Court in Victorias Milling inc.
then Secretary of Labor are facts and circumstances that transpired subsequent to the
vs. Social Security Commission, citing Parker as well as
promulgation of the decision of the labor arbiter, which renders the execution of the said decision
Davis did tersely sum up the matter thus: "A rule is
impossible and unjust on the part of herein respondent bank (pp. 342-343, rec.).
binding on the Courts so long as the procedure fixed for
its promulgation is followed and its scope is within the
statutory authority granted by the legislature, even if the This contention is untenable.
courts are not in agreement with the policy stated
therein or its innate wisdom. ... On the other hand,
To start with, unlike the instant case, the case of De Luna relied upon by the public respondent
administrative interpretation of the law is at best merely
advisory, for it is the courts that finally determine chat is not a labor case wherein the express mandate of the Constitution on the protection to labor is
the law means." applied. Thus Article 4 of the Labor Code provides that, "All doubts in the implementation and
interpretation of the provisions of this Code, including its implementing rules and regulations,
shall be resolved in favor of labor and Article 1702 of the Civil Code provides that, " In case of
"It cannot be otherwise as the Constitution limits the doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and
authority of the President, in whom all executive power decent living for the laborer.
resides, to take care that the laws be faithfully
executed. No lesser administrative executive office or
agency then can, contrary to the express language of Consequently, contrary to public respondent's allegations, it is patently unjust to deprive the
members of petitioner union of their vested right acquired by virtue of a final judgment on the
the Constitution assert for itself a more extensive
prerogative. Necessarily, it is bound to observe the basis of a labor statute promulgated following the acquisition of the "right".
On the question of whether or not a law or statute can annul or modify a judicial order issued
prior to its promulgation, this Court, through Associate Justice Claro M. Recto, said: têñ.£îhqw â£
xxx xxx xxx
We are decidedly of the opinion that they did not. Said order, being
unappealable, became final on the date of its issuance and the parties who
acquired rights thereunder cannot be deprived thereof by a constitutional
provision enacted or promulgated subsequent thereto. Neither the
Constitution nor the statutes, except penal laws favorable to the accused,
have retroactive effect in the sense of annulling or modifying vested rights,
or altering contractual obligations" (China Ins. & Surety Co. vs. Judge of
First Instance of Manila, 63 Phil. 324, emphasis supplied).
In the case of In re: Cunanan, et al., 19 Phil. 585, March 18, 1954, this Court said: "... when a
court renders a decision or promulgates a resolution or order on the basis of and in accordance
with a certain law or rule then in force, the subsequent amendment or even repeal of said law or
rule may not affect the final decision, order, or resolution already promulgated, in the sense of
revoking or rendering it void and of no effect." Thus, the amendatory rule (Rule IV, Book III of the
Rules to Implement the Labor Code) cannot be given retroactive effect as to modify final
judgments. Not even a law can validly annul final decisions (In re: Cunanan, et al., Ibid).
Furthermore, the facts of the case relied upon by the public respondent are not analogous to that
of the case at bar. The case of De Luna speaks of final and executory judgment, while iii the
instant case, the final judgment is partially executed. just as the court is ousted of its jurisdiction
to annul or modify a judgment the moment it becomes final, the court also loses its jurisdiction to
annul or modify a writ of execution upon its service or execution; for, otherwise, we will have a
situation wherein a final and executed judgment can still be annulled or modified by the court
upon mere motion of a panty This would certainly result in endless litigations thereby rendering
inutile the rule of law.
Respondent bank counters with the argument that its partial compliance was involuntary
because it did so under pain of levy and execution of its assets (p. 138, rec.). WE find no merit in
this argument. Respondent bank clearly manifested its voluntariness in complying with the
decision of the labor arbiter by not appealing to the National Labor Relations Commission as
provided for under the Labor Code under Article 223. A party who waives his right to appeal is
deemed to have accepted the judgment, adverse or not, as correct, especially if such party
readily acquiesced in the judgment by starting to execute said judgment even before a writ of
execution was issued, as in this case. Under these circumstances, to permit a party to appeal
from the said partially executed final judgment would make a mockery of the doctrine of finality
of judgments long enshrined in this jurisdiction.
Section I of Rule 39 of the Revised Rules of Court provides that "... execution shall issue as a
matter of right upon the expiration of the period to appeal ... or if no appeal has been duly
perfected." This rule applies to decisions or orders of labor arbiters who are exercising quasi-
judicial functions since "... the rule of execution of judgments under the rules should govern all
kinds of execution of judgment, unless it is otherwise provided in other laws" Sagucio vs. Bulos 5
SCRA 803) and Article 223 of the Labor Code provides that "... decisions, awards, or orders of
the Labor Arbiter or compulsory arbitrators are final and executory unless appealed to the
Commission by any or both of the parties within ten (10) days from receipt of such awards,
orders, or decisions. ..."
Thus, under the aforecited rule, the lapse of the appeal period deprives the courts of jurisdiction
to alter the final judgment and the judgment becomes final ipso jure (Vega vs. WCC, 89 SCRA
143, citing Cruz vs. WCC, 2 PHILAJUR 436, 440, January 31, 1978; see also Soliven vs. WCC,
77 SCRA 621; Carrero vs. WCC and Regala vs. WCC, decided jointly, 77 SCRA 297; Vitug vs.
Republic, 75 SCRA 436; Ramos vs. Republic, 69 SCRA 576).
In Galvez vs. Philippine Long Distance Telephone Co., 3 SCRA 422, 423, October 31, 1961,
where the lower court modified a final order, this Court ruled thus:têñ.£îhqw â£
xxx xxx xxx
The lower court was thus aware of the fact that it was thereby altering or
modifying its order of January 8, 1959. Regardless of the excellence of the
motive for acting as it did, we are constrained to hold however, that the
lower court had no authorities to make said alteration or modification. ...
xxx xxx xxx
The equitable considerations that led the lower court to take the action
complained of cannot offset the dem ands of public policy and public
interest — which are also responsive to the tenets of equity — requiring that
an issues passed upon in decisions or final orders that have become
executory, be deemed conclusively disposed of and definitely closed for,
otherwise, there would be no end to litigations, thus setting at naught the
main role of courts of justice, which is to assist in the enforcement of the
rule of law and the maintenance of peace and order, by settling justiciable
controversies with finality.
xxx xxx xxx
In the recent case of Gabaya vs. Mendoza, 113 SCRA 405, 406, March 30, 1982, this Court
said: têñ.£îhqw â£
xxx xxx xxx
In Marasigan vs. Ronquillo (94 Phil. 237), it was categorically stated that the
rule is absolute that after a judgment becomes final by the expiration of the
period provided by the rules within which it so becomes, no further
amendment or correction can be made by the court except for clerical errors
or mistakes. And such final judgment is conclusive not only as to every
matter which was offered and received to sustain or defeat the claim or
demand but as to any other admissible matter which must have been
offered for that purpose (L-7044, 96 Phil. 526). In the earlier case of
Contreras and Ginco vs. Felix and China Banking Corp., Inc. (44 O.G.
4306), it was stated that the rule must be adhered to regardless of any
possible injustice in a particular case for (W)e have to subordinate the
equity of a particular situation to the over-mastering need of certainty and
immutability of judicial pronouncements
xxx xxx xxx
III
The despotic manner by which public respondent Amado G. Inciong divested the members of
the petitioner union of their rights acquired by virtue of a final judgment is tantamount to a
deprivation of property without due process of law Public respondent completely ignored the
rights of the petitioner union's members in dismissing their complaint since he knew for a fact
that the judgment of the labor arbiter had long become final and was even partially executed by
the respondent bank.

A final judgment vests in the prevailing party a right recognized and protected by law under the
due process clause of the Constitution (China Ins. & Surety Co. vs. Judge of First Instance of
Manila, 63 Phil. 324). A final judgment is "a vested interest which it is right and equitable that the
government should recognize and protect, and of which the individual could no. be deprived
arbitrarily without injustice" (Rookledge v. Garwood, 65 N.W. 2d 785, 791).

lt is by this guiding principle that the due process clause is interpreted. Thus, in the pithy
language of then Justice, later Chief Justice, Concepcion "... acts of Congress, as well as those
of the Executive, can deny due process only under pain of nullity, and judicial proceedings
suffering from the same flaw are subject to the same sanction, any statutory provision to the
contrary notwithstanding (Vda. de Cuaycong vs. Vda. de Sengbengco 110 Phil. 118, emphasis
supplied), And "(I)t has been likewise established that a violation of a constitutional right
divested the court of jurisdiction; and as a consequence its judgment is null and void and confers
no rights" (Phil. Blooming Mills Employees Organization vs. Phil. Blooming Mills Co., Inc., 51
SCRA 211, June 5, 1973).

Tested by and pitted against this broad concept of the constitutional guarantee of due process,
the action of public respondent Amado G. Inciong is a clear example of deprivation of property
without due process of law and constituted grave abuse of discretion, amounting to lack or
excess of jurisdiction in issuing the order dated November 10, 1979.

WHEREFORE, THE PETITION IS HEREBY GRANTED, THE ORDER OF PUBLIC

RESPONDENT IS SET ASIDE, AND THE DECISION OF LABOR ARBITER RICARTE T.
SORIANO DATED AUGUST 25, 1975, IS HEREBY REINSTATED.

COSTS AGAINST PRIVATE RESPONDENT INSULAR BANK OF ASIA AND AMERICA

SO ORDERED. 1äwphï1.ñët

Guerrero, Escolin and Cuevas, JJ., concur.

Aquino and Abad Santos, JJ., concur in the result.

Concepcion Jr., J., took no part.

Art. 6 Determination of existence of employer-employee relationship decreed abolition of the CIR and the hearing of the case intransferably
commenced on September 8, 1975.
G.R. No. L-48645 January 7, 1987
On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants
which was concurred in by the NLRC in a decision dated June 28, 1976.
"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO
The amount of backwages awarded, however, was reduced by NLRC to the
CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON, PATRICIO SERRANO,
equivalent of one (1) year salary.
ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO PARINAS, NORBERTO GALANG,
JUANITO NAVARRO, NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO L.
EGUIA, CARLOS SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B. On appeal, the Secretary in a decision dated June 1, 1977, set aside the
MATIAR, ET AL., petitioners, NLRC ruling, stressing the absence of an employer-mployee relationship as
vs. borne out by the records of the case. ...
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, OFFICE
OF THE PRESIDENT, HON. AMADO G. INCIONG, UNDERSECRETARY OF LABOR, SAN
The petitioners strongly argue that there exists an employer-employee relationship between
MIGUEL CORPORATION, GENARO OLIVES, ENRIQUE CAMAHORT, FEDERICO OÑATE,
them and the respondent company and that they were dismissed for unionism, an act
ERNESTO VILLANUEVA, ANTONIO BOCALING and GODOFREDO CUETO, respondents.
constituting unfair labor practice "for which respondents must be made to answer."

Armando V. Ampil for petitioners.

Siguion Reyna, Montecillo and Ongsiako Law Office for private respondents.
Unrebutted evidence and testimony on record establish that the petitioners are workers who
have been employed at the San Miguel Parola Glass Factory since 1961, averaging about seven
(7) years of service at the time of their termination. They worked as "cargadores" or "pahinante"
at the SMC Plant loading, unloading, piling or palleting empty bottles and woosen shells to and
from company trucks and warehouses. At times, they accompanied the company trucks on their
delivery routes.

GUTIERREZ, JR., J.:

The petitioners first reported for work to Superintendent-in-Charge Camahort. They were issued
gate passes signed by Camahort and were provided by the respondent company with the tools,
The elemental question in labor law of whether or not an employer-employee relationship exists equipment and paraphernalia used in the loading, unloading, piling and hauling operation.
between petitioners-members of the "Brotherhood Labor Unit Movement of the Philippines"
(BLUM) and respondent San Miguel Corporation, is the main issue in this petition. The disputed
Job orders emanated from Camahort. The orders are then transmitted to an assistant-officer-in-
decision of public respondent Ronaldo Zamora, Presidential Assistant for legal Affairs, contains
charge. In turn, the assistant informs the warehousemen and checkers regarding the same. The
a brief summary of the facts involved:
latter, thereafter, relays said orders to the capatazes or group leaders who then give orders to
the workers as to where, when and what to load, unload, pile, pallet or clean.
1. The records disclose that on July 11, 1969, BLUM filed a complaint with
the now defunct Court of Industrial Relations, charging San Miguel
Work in the glass factory was neither regular nor continuous, depending wholly on the volume of
Corporation, and the following officers: Enrique Camahort, Federico Ofiate
bottles manufactured to be loaded and unloaded, as well as the business activity of the
Feliciano Arceo, Melencio Eugenia Jr., Ernesto Villanueva, Antonio Bocaling
company. Work did not necessarily mean a full eight (8) hour day for the petitioners. However,
and Godofredo Cueto of unfair labor practice as set forth in Section 4 (a),
work,at times, exceeded the eight (8) hour day and necessitated work on Sundays and holidays.
sub-sections (1) and (4) of Republic Act No. 875 and of Legal dismissal. It
For this, they were neither paid overtime nor compensation for work on Sundays and holidays.
was alleged that respondents ordered the individual complainants to
disaffiliate from the complainant union; and that management dismissed the
individual complainants when they insisted on their union membership. Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the number
of cartons and wooden shells they were able to load, unload, or pile. The group leader notes
down the number or volume of work that each individual worker has accomplished. This is then
On their part, respondents moved for the dismissal of the complaint on the
made the basis of a report or statement which is compared with the notes of the checker and
grounds that the complainants are not and have never been employees of
warehousemen as to whether or not they tally. Final approval of report is by officer-in-charge
respondent company but employees of the independent contractor; that
Camahort. The pay check is given to the group leaders for encashment, distribution, and
respondent company has never had control over the means and methods
payment to the petitioners in accordance with payrolls prepared by said leaders. From the total
followed by the independent contractor who enjoyed full authority to hire and
earnings of the group, the group leader gets a participation or share of ten (10%) percent plus an
control said employees; and that the individual complainants are barred by
additional amount from the earnings of each individual.
estoppel from asserting that they are employees of respondent company.

The petitioners worked exclusive at the SMC plant, never having been assigned to other
While pending with the Court of Industrial Relations CIR pleadings and
companies or departments of SMC plant, even when the volume of work was at its minimum.
testimonial and documentary evidences were duly presented, although the
When any of the glass furnaces suffered a breakdown, making a shutdown necessary, the
actual hearing was delayed by several postponements. The dispute was
petitioners work was temporarily suspended. Thereafter, the petitioners would return to work at
taken over by the National Labor Relations Commission (NLRC) with the
the glass plant.
Sometime in January, 1969, the petitioner workers — numbering one hundred and forty (140)
organized and affiliated themselves with the petitioner union and engaged in union activities.
Believing themselves entitled to overtime and holiday pay, the petitioners pressed management,
airing other grievances such as being paid below the minimum wage law, inhuman treatment,
being forced to borrow at usurious rates of interest and to buy raffle tickets, coerced by
withholding their salaries, and salary deductions made without their consent. However, their
gripes and grievances were not heeded by the respondents.
On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor
Relations in connection with the dismissal of some of its members who were allegedly castigated
for their union membership and warned that should they persist in continuing with their union
activities they would be dismissed from their jobs. Several conciliation conferences were
scheduled in order to thresh out their differences, On February 12, 1969, union member Rogelio
Dipad was dismissed from work. At the scheduled conference on February 19, 1969, the
complainant union through its officers headed by National President Artemio Portugal Sr.,
presented a letter to the respondent company containing proposals and/or labor demands
together with a request for recognition and collective bargaining.
San Miguel refused to bargain with the petitioner union alleging that the workers are not their
employees.
On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter, denied
entrance to respondent company's glass factory despite their regularly reporting for work. A
complaint for illegal dismissal and unfair labor practice was filed by the petitioners.
The case reaches us now with the same issues to be resolved as when it had begun.
The question of whether an employer-employee relationship exists in a certain situation
continues to bedevil the courts. Some businessmen try to avoid the bringing about of an
employer-employee relationship in their enterprises because that judicial relation spawns
obligations connected with workmen's compensation, social security, medicare, minimum wage,
termination pay, and unionism. (Mafinco Trading Corporation v. Ople, 70 SCRA 139).
In determining the existence of an employer-employee relationship, the elements that are
generally considered are the following: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the
employee with respect to the means and methods by which the work is to be accomplished. It. is
labor; and the mode, manner and terms of payment" (56 CJS Master and Servant, Sec. 3(2), 46;
See also 27 AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75 ALR 7260727)
None of the above criteria exists in the case at bar.
Highly unusual and suspect is the absence of a written contract to specify the performance of a
specified piece of work, the nature and extent of the work and the term and duration of the
relationship. The records fail to show that a large commercial outfit, such as the San Miguel
Corporation, entered into mere oral agreements of employment or labor contracting where the
same would involve considerable expenses and dealings with a large number of workers over a
long period of time. Despite respondent company's allegations not an iota of evidence was
offered to prove the same or its particulars. Such failure makes respondent SMC's stand subject
to serious doubts.
Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners had
worked continuously and exclusively for the respondent company's shipping and warehousing
department. Considering the length of time that the petitioners have worked with the respondent
company, there is justification to conclude that they were engaged to perform activities
necessary or desirable in the usual business or trade of the respondent, and the petitioners are,
therefore regular employees (Phil. Fishing Boat Officers and Engineers Union v. Court of
Industrial Relations, 112 SCRA 159 and RJL Martinez Fishing Corporation v. National Labor
Relations Commission, 127 SCRA 454).
As we have found in RJL Martinez Fishing Corporation v. National Labor Relations Commission
(supra):
... [T]he employer-employee relationship between the parties herein is not
coterminous with each loading and unloading job. As earlier shown,
respondents are engaged in the business of fishing. For this purpose, they
have a fleet of fishing vessels. Under this situation, respondents' activity of
catching fish is a continuous process and could hardly be considered as
seasonal in nature. So that the activities performed by herein complainants,
i.e. unloading the catch of tuna fish from respondents' vessels and then
loading the same to refrigerated vans, are necessary or desirable in the
business of respondents. This circumstance makes the employment of
complainants a regular one, in the sense that it does not depend on any
specific project or seasonable activity. (NLRC Decision, p. 94, Rollo).
lwphl@itç

the called "control test" that is the most important element (Investment Planning Corp. of the
Phils. v. The Social Security System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and so as it with petitioners in the case at bar. In fact, despite past shutdowns of the glass plant for
Rosario Brothers, Inc. v. Ople, 131 SCRA 72). repairs, the petitioners, thereafter, promptly returned to their jobs, never having been replaced,
or assigned elsewhere until the present controversy arose. The term of the petitioners'
employment appears indefinite. The continuity and habituality of petitioners' work bolsters their
Applying the above criteria, the evidence strongly indicates the existence of an employer-
claim of employee status vis-a-vis respondent company,
employee relationship between petitioner workers and respondent San Miguel Corporation. The
respondent asserts that the petitioners are employees of the Guaranteed Labor Contractor, an
independent labor contracting firm. Even under the assumption that a contract of employment had indeed been executed between
respondent SMC and the alleged labor contractor, respondent's case will, nevertheless, fail.
The facts and evidence on record negate respondent SMC's claim.
Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:
The existence of an independent contractor relationship is generally established by the following
criteria: "whether or not the contractor is carrying on an independent business; the nature and Job contracting. — There is job contracting permissible under the Code if
extent of the work; the skill required; the term and duration of the relationship; the right to assign the following conditions are met:
the performance of a specified piece of work; the control and supervision of the work to another;
the employer's power with respect to the hiring, firing and payment of the contractor's workers;
the control of the premises; the duty to supply the premises tools, appliances, materials and
 (1) The contractor carries on an independent business and undertakes the Article 106 of the Labor Code provides the legal effect of a labor only contracting scheme, to wit:
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
... the person or intermediary shall be considered merely as an agent of the
employer or principal in all matters connected with the performance of the
employer who shall be responsible to the workers in the same manner and
work except as to the results thereof; and
extent as if the latter were directly employed by him.

(2) The contractor has substantial capital or investment in the form of tools,
Firmly establishing respondent SMC's role as employer is the control exercised by it over the
equipment, machineries, work premises, and other materials which are
petitioners that is, control in the means and methods/manner by which petitioners are to go
necessary in the conduct of his business.
about their work, as well as in disciplinary measures imposed by it.

We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor
Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as to the
investment to qualify as an independent contractor under the law. The premises, tools,
means and manner of performing the same is practically nil. For, how many ways are there to
equipment and paraphernalia used by the petitioners in their jobs are admittedly all supplied by
load and unload bottles and wooden shells? The mere concern of both respondent SMC and the
respondent company. It is only the manpower or labor force which the alleged contractors
alleged contractor is that the job of having the bottles and wooden shells brought to and from the
supply, suggesting the existence of a "labor only" contracting scheme prohibited by law (Article
warehouse be done. More evident and pronounced is respondent company's right to control in
106, 109 of the Labor Code; Section 9(b), Rule VIII, Book III, Implementing Rules and
the discipline of petitioners. Documentary evidence presented by the petitioners establish
Regulations of the Labor Code). In fact, even the alleged contractor's office, which consists of a
respondent SMC's right to impose disciplinary measures for violations or infractions of its rules
space at respondent company's warehouse, table, chair, typewriter and cabinet, are provided for
and regulations as well as its right to recommend transfers and dismissals of the piece workers.
by respondent SMC. It is therefore clear that the alleged contractors have no capital outlay
The inter-office memoranda submitted in evidence prove the company's control over the
involved in the conduct of its business, in the maintenance thereof or in the payment of its
petitioners. That respondent SMC has the power to recommend penalties or dismissal of the
workers' salaries.
piece workers, even as to Abner Bungay who is alleged by SMC to be a representative of the
alleged labor contractor, is the strongest indication of respondent company's right of control over
The payment of the workers' wages is a critical factor in determining the actuality of an the petitioners as direct employer. There is no evidence to show that the alleged labor contractor
employer-employee relationship whether between respondent company and petitioners or had such right of control or much less had been there to supervise or deal with the petitioners.
between the alleged independent contractor and petitioners. It is important to emphasize that in
a truly independent contractor-contractee relationship, the fees are paid directly to the
The petitioners were dismissed allegedly because of the shutdown of the glass manufacturing
manpower agency in lump sum without indicating or implying that the basis of such lump sum is
plant. Respondent company would have us believe that this was a case of retrenchment due to
the salary per worker multiplied by the number of workers assigned to the company. This is the
the closure or cessation of operations of the establishment or undertaking. But such is not the
rule in Social Security System v. Court of Appeals (39 SCRA 629, 635).
case here. The respondent's shutdown was merely temporary, one of its furnaces needing
repair. Operations continued after such repairs, but the petitioners had already been refused
The alleged independent contractors in the case at bar were paid a lump sum representing only entry to the premises and dismissed from respondent's service. New workers manned their
the salaries the workers were entitled to, arrived at by adding the salaries of each worker which positions. It is apparent that the closure of respondent's warehouse was merely a ploy to get rid
depend on the volume of work they. had accomplished individually. These are based on of the petitioners, who were then agitating the respondent company for benefits, reforms and
payrolls, reports or statements prepared by the workers' group leader, warehousemen and collective bargaining as a union. There is no showing that petitioners had been remiss in their
checkers, where they note down the number of cartons, wooden shells and bottles each worker obligations and inefficient in their jobs to warrant their separation.
was able to load, unload, pile or pallet and see whether they tally. The amount paid by
respondent company to the alleged independent contractor considers no business expenses or
As to the charge of unfair labor practice because of SMC's refusal to bargain with the petitioners,
capital outlay of the latter. Nor is the profit or gain of the alleged contractor in the conduct of its
it is clear that the respondent company had an existing collective bargaining agreement with the
business provided for as an amount over and above the workers' wages. Instead, the alleged
IBM union which is the recognized collective bargaining representative at the respondent's glass
contractor receives a percentage from the total earnings of all the workers plus an additional
plant.
amount corresponding to a percentage of the earnings of each individual worker, which,
perhaps, accounts for the petitioners' charge of unauthorized deductions from their salaries by
the respondents. There being a recognized bargaining representative of all employees at the company's glass
plant, the petitioners cannot merely form a union and demand bargaining. The Labor Code
provides the proper procedure for the recognition of unions as sole bargaining representatives.
Anent the argument that the petitioners are not employees as they worked on piece basis, we
This must be followed.
merely have to cite our rulings in Dy Keh Beng v. International Labor and Marine Union of the
Philippines (90 SCRA 161), as follows:
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel
Corporation is hereby ordered to REINSTATE petitioners, with three (3) years backwages.
"[C]ircumstances must be construed to determine indeed if payment by the
However, where reinstatement is no longer possible, the respondent SMC is ordered to pay the
piece is just a method of compensation and does not define the essence of
petitioners separation pay equivalent to one (1) month pay for every year of service.
the relation. Units of time . . . and units of work are in establishments like
respondent (sic) just yardsticks whereby to determine rate of compensation,
to be applied whenever agreed upon. We cannot construe payment by the SO ORDERED.
piece where work is done in such an establishment so as to put the worker
completely at liberty to turn him out and take in another at pleasure."
Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.