DOUGLAS MILLARES and ROGELIO LAGDA, petitioners, vs.
NATIONAL LABOR To recall, the facts of the case are, as follows:
RELATIONS COMMISSION, TRANS-GLOBAL MARITIME AGENCY, INC. and ESSO
INTERNATIONAL SHIPPING CO., LTD. respondents. (SEAFARERS ARE CONTRACTUAL
EMPLOYEES; NOT REGULAR)
RESOLUTION
KAPUNAN, J.:
On March 14, 2000, the Court promulgated its decision in the above-entitled case, ruling in
favor of the petitioners. The dispositive portion reads, as follows:
WHEREFORE, premises considered, the assailed Decision, dated June 1, 1993, of the
National Labor Relations Commission is hereby REVERSED and SET ASIDE and a new
judgment is hereby rendered ordering the private respondents to:
(1) Reinstate petitioners Millares and Lagda to their former positions without loss of
seniority rights, and to pay full backwages computed from the time of illegal dismissal to the
time of actual reinstatement;
(2) Alternatively, if reinstatement is not possible, pay petitioners Millares and Lagda
separation pay equivalent to one months salary for every year of service; and,
(3) Jointly and severally pay petitioners One Hundred Percent (100%) of their total
credited contributions as provided under the Consecutive Enlistment Incentive Plan.
SO ORDERED.i[1]
A motion for reconsideration was consequently filedii[2] by the private respondents to which
petitioners filed an Opposition thereto.iii[3]
In a Minute Resolution dated June 28, 2000, the Court resolved to deny the motion for
reconsideration with finality.iv[4]
Subsequently, the Filipino Association for Mariners Employment, Inc. (FAME) filed a Motion
for Leave to Intervene and to Admit a Motion for Reconsideration in Intervention.
Private respondents, meanwhile, also filed a Motion for Leave to File a Second Motion for
Reconsideration of our decision.
In both motions, the private respondents and FAME respectively pray in the main that the
Court reconsider its ruling that Filipino seafarers are considered regular employees within the
context of Article 280 of the Labor Code. They claim that the decision may establish a
precedent that will adversely affect the maritime industry.
The Court resolved to set the case for oral arguments to enable the parties to present their
sides.
Petitioner Douglas Millares was employed by private respondent ESSO International Shipping
Company LTD. (Esso International, for brevity) through its local manning agency, private
respondent Trans-Global Maritime Agency, Inc. (Trans-Global, for brevity) on November 16,
1968 as a machinist. In 1975, he was promoted as Chief Engineer which position he occupied
until he opted to retire in 1989. He was then receiving a monthly salary of US $1,939.00.
On June 13, 1989, petitioner Millares applied for a leave of absence for the period July 9 to
August 7, 1989. In a letter dated June 14, 1989, Michael J. Estaniel, President of private
respondent Trans-Global, approved the request for leave of absence. On June 21, 1989,
petitioner Millares wrote G.S. Hanly, Operations Manager of Exxon International Co., (now
Esso International) through Michael J. Estaniel, informing him of his intention to avail of the
optional retirement plan under the Consecutive Enlistment Incentive Plan (CEIP) considering
that he had already rendered more than twenty (20) years of continuous service. On July 13,
1989 respondent Esso International, through W.J. Vrints, Employee Relations Manager,
denied petitioner Millares request for optional retirement on the following grounds, to wit: (1)
he was employed on a contractual basis; (2) his contract of enlistment (COE) did not provide
for retirement before the age of sixty (60) years; and (3) he did not comply with the
requirement for claiming benefits under the CEIP, i.e., to submit a written advice to the
company of his intention to terminate his employment within thirty (30) days from his last
disembarkation date.
On August 9, 1989, petitioner Millares requested for an extension of his leave of absence from
August 9 to 24, 1989. On August 19, 1989, Roy C. Palomar, Crewing Manager, Ship Group
A, Trans-global, wrote petitioner Millares advising him that respondent Esso International has
corrected the deficiency in its manpower requirement specifically in the Chief Engineer rank
by promoting a First Assistant Engineer to this position as a result of (his) previous leave of
absence which expired last August 8, 1989. The adjustment in said rank was required in order
to meet manpower schedules as a result of (his) inability.
On September 26, 1989, respondent Esso International, through H. Regenboog, Personnel
Administrator, advised petitioner Millares that in view of his absence without leave, which is
equivalent to abandonment of his position, he had been dropped from the roster of crew
members effective September 1, 1989.
On the other hand, petitioner Lagda was employed by private respondent Esso International as
wiper/oiler in June 1969. He was promoted as Chief Engineer in 1980, a position he continued
to occupy until his last COE expired on April 10, 1989. He was then receiving a monthly
salary of US$1,939.00.
On May 16, 1989, petitioner Lagda applied for a leave of absence from June 19, 1989 up to
the whole month of August 1989. On June 14, 1989, respondent Trans-Globals President,
Michael J. Estaniel, approved petitioner Lagdas leave of absence from June 22, 1989 to July
20, 1989 and advised him to report for re-assignment on July 21, 1989.
On June 26, 1989, petitioner Lagda wrote a letter to G.S. Stanley, Operations Manager of
respondent Esso International, through respondent Trans-Globals President Michael J.
Estaniel, informing him of his intention to avail of the optional early retirement plan in view
of his twenty (20) years continuous service in the complaint.
On July 13, 1989, respondent Trans-global denied petitioner Lagdas request for availment of
the optional early retirement scheme on the same grounds upon which petitioner Millares
request was denied.
On August 3, 1989, he requested for an extension of his leave of absence up to August 26,
1989 and the same was approved. However, on September 27, 1989, respondent Esso
International, through H. Regenboog, Personnel Administrator, advised petitioner Lagda that
in view of his unavailability for contractual sea service, he had been dropped from the roster
of crew members effective September 1, 1989.
On October 5, 1989, petitioners Millares and Lagda filed a complaint-affidavit, docketed as
POEA (M) 89-10-9671, for illegal dismissal and non-payment of employee benefits against
private respondents Esso International and Trans-Global, before the POEA.v[5]
On July 17, 1991, the POEA rendered a decision dismissing the complaint for lack of merit.
On appeal to the NLRC, the decision of the POEA was affirmed on June 1, 1993 with the
following disquisition:
The first issue must be decided in the negative. Complainants-appellants, as seamen and
overseas contract workers are not covered by the term regular employment as defined under
Article 280 of the Labor Code. The POEA, which is tasked with protecting the rights of the
Filipino workers for overseas employment to fair and equitable recruitment and employment
practices and to ensure their welfare, prescribes a standard employment contract for seamen on
board ocean-going vessels for a fixed period but in no case to exceed twelve (12) months (Part
1, Sec. C). This POEA policy appears to be in consonance with the international maritime
practice. Moreover, the Supreme Court in Brent School, Inc. vs. Zamora, 181 SCRA 702, had
held that a fixed term is essential and natural appurtenance of overseas employment contracts
to which the concept of regular employment with all that it implies is not applicable, Article
280 of the Labor Code notwithstanding. There is, therefore, no reason to disturb the POEA
Administrators finding that complainants-appellants were hired on a contractual basis and for
a definite period. Their employment is thus governed by the contracts they sign each time they
are re-hired and is terminated at the expiration of the contract period.vi[6]
Undaunted, the petitioners elevated their case to this Courtvii[7] and successfully obtained the
favorable action, which is now vehemently being assailed.
At the hearing on November 15, 2000, the Court defined the issues for resolution in this case,
namely:
I. ARE PETITIONERS REGULAR OR CONTRACTUAL EMPLOYEES WHOSE
EMPLOYMENTS ARE TERMINATED EVERYTIME THEIR CONTRACTS OF
EMPLOYMENT EXPIRE?
II. ASSUMING THAT PETITIONERS ARE REGULAR EMPLOYEES, WERE
THEY DISMISSED WITHOUT JUST CAUSE SO AS TO BE ENTITLED TO
REINSTATEMENT AND BACKWAGES, INCLUDING PAYMENT OF 100% OF THEIR
TOTAL CREDITED CONTRIBUTIONS TO THE CONSECUTIVE ENLISTMENT
INCENTIVE PLAN (CEIP)?
III. DOES THE PROVISION OF THE POEA STANDARD CONTRACT FOR
SEAFARERS ON BOARD FOREIGN VESSELS (SEC. C., DURATION OF CONTRACT)
PRECLUDE THE ATTAINMENT BY SEAMEN OF THE STATUS OF REGULAR
EMPLOYEES?
IV. DOES THE DECISION OF THE COURT IN G.R. NO. 110524 CONTRAVENE
INTERNATIONAL MARITIME LAW, ALLEGEDLY PART OF THE LAW OF THE
LAND UNDER SECTION 2, ARTICLE II OF THE CONSTITUTION?
V. DOES THE SAME DECISION OF THE COURT CONSTITUTE A DEPARTURE
FROM ITS RULING IN COYOCA VS. NLRC (G.R. NO. 113658, March 31, 1995)?viii[8]
In answer to the private respondents Second Motion for Reconsideration and to FAMEs
Motion for Reconsideration in Intervention, petitioners maintain that they are regular
employees as found by the Court in the March 14, 2000 Decision. Considering that petitioners
performed activities which are usually necessary or desirable in the usual business or trade of
private respondents, they should be considered as regular employees pursuant to Article 280,
Par. 1 of the Labor Code.ix[9] Other justifications for this ruling include the fact that
petitioners have rendered over twenty (20) years of service, as admitted by the private
respondents;x[10] that they were recipients of Merit Pay which is an express acknowledgment
by the private respondents that petitioners are regular and not just contractual
employees;xi[11] that petitioners were registered under the Social Security System (SSS).
The petitioners further state that the case of Coyoca v. NLRCxii[12] which the private
respondents invoke is not applicable to the case at bar as the factual milieu in that case is not
the same. Furthermore, private respondents fear that our judicial pronouncement will spell the
death of the manning industry is far from real. Instead, with the valuable contribution of the
manning industry to our economy, these seafarers are supposed to be considered as Heroes of
the Republic whose rights must be protected.xiii[13] Finally, the first motion for
reconsideration has already been denied with finality by this Court and it is about time that the
Court should write finis to this case.
The private respondents, on the other hand, contend that: (a) the ruling holding petitioners as
regular employees was not in accord with the decision in Coyoca v. NLRC, 243 SCRA 190;
(b) Art. 280 is not applicable as what applies is the POEA Rules and Regulations Governing
Overseas Employment; (c) seafarers are not regular employees based on international
maritime practice; (d) grave consequences would result on the future of seafarers and manning
agencies if the ruling is not reconsidered; (e) there was no dismissal committed; (f) a
dismissed seafarer is not entitled to back wages and reinstatement, that being not allowed
under the POEA rules and the Migrant Workers Act; and, (g) petitioners are not entitled to
claim the total amount credited to their account under the CEIP.xiv[14]
Meanwhile, Intervenor Filipino Association of Mariners Employment (FAME) avers that our
decision, if not reconsidered, will have negative consequences in the employment of Filipino
Seafarers overseas which, in turn, might lead to the demise of the manning industry in the
Philippines. As intervenor FAME puts it:
xxx
7.1 Foreign principals will start looking for alternative sources for seafarers to man their ships.
AS reported by the BIMCO/ISF study, there is an expectancy that there will be an increasing
demand for (and supply of) Chinese seafarers, with some commentators suggesting that this
may be a long-term alternative to the Philippines. Moreover, the political changes within the
former Eastern Bloc have made new sources of supply available to the international market.
Intervenors recent survey among its members shows that 50 Philippine manning companies
had already lost some 6,300 slots to other Asian, East Europe and Chinese competition for the
last two years;
7.2 The Philippine stands to lose an annual foreign income estimated at U.S. DOLLARS TWO
HUNDRED SEVENTY FOUR MILLION FIVE HUNDRED FORTY NINE THOUSAND
(US$ 274,549,000.00) from the manning industry and another US DOLLARS FOUR
BILLION SIX HUNDRED FIFTY MILLION SEVEN HUNDRED SIX THOUSAND (US$
4,650,760,000.00) from the land-based sector if seafarers and equally situated land-based
contract workers will be declared regular employees;
7.3 Some 195,917 (as of 1998) deployed overseas Filipino seafarers will be rendered jobless
should we lose the market;
7.4 Some 360 manning agencies (as of 30 June 2000) whose principals may no longer be
doing business with them will close their shops;
7.5 The contribution to the Overseas Workers Welfare Administration by the sector, which is
USD 25.00 per contract and translates to US DOLLARS FOUR MILLION (US$
4,000,000.00)annually, will be drastically reduced. This is not to mention the processing fees
paid to POEA, Philippine Regulatory Commission (PRC), Department of Foreign Affairs
(DFA) and Maritime Industry Authority (MARINA) for the documentation of these seafarers;
7.6 Worst, some 195,917 (as of 1998) families will suffer socially and economically, as their
breadwinners will be rendered jobless; and
7.7 It will considerably slow down the governments program of employment generation,
considering that, as expected foreign employers will now avoid hiring Filipino overseas
contract workers as they will become regular employees with all its concomitant
effects.xv[15]
Significantly, the Office of the Solicitor General, in a departure from its original position in
this case, has now taken the opposite view. It has expressed its apprehension in sustaining our
decision and has called for a re-examination of our ruling.xvi[16]
Considering all the arguments presented by the private respondents, the Intervenor FAME and
the OSG, we agree that there is a need to reconsider our position with respect to the status of
seafarers which we considered as regular employees under Article 280 of the Labor Code. We,
therefore, partially grant the second motion for reconsideration.
In Brent School Inc. v. Zamora,xvii[17] the Supreme Court stated that Article 280 of the Labor
Code does not apply to overseas employment.
In the light of the foregoing description of the development of the provisions of the Labor
Code bearing on term or fixed-period employment that the question posed in the opening
paragraph of this opinion should now be addressed. Is it then the legislative intention to outlaw
stipulations in employment contracts laying down a definite period therefor? Are such
stipulations in essence contrary to public policy and should not on this account be accorded
legitimacy?
On the other hand, there is the gradual and progressive elimination of references to term or
fixed-period employment in the Labor Code, and the specific statement of the rule that:
Regular and Casual Employment The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer except where the
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 employee is seasonal in nature and the employment is for the duration of
the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph;
provided 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 with respect to the
activity in which he is employed and his employment shall continue while such actually exists.
There is, on the other hand, the Civil Code, which has always recognized, and continues to
recognize, the validity and propriety of contracts and obligations with a fixed or definite
period, and imposes no restraints on the freedom of the parties to fix the duration of a contract,
whatever its object, be it specific, goods or services, except the general admonition against
stipulations contrary to law, morals, good customs, public order or public policy. Under the
Civil code, therefore, and as a general proposition, fixed-term employment contracts are not
limited, as they are under the present Labor Code, to those by natural seasonal or for specific
projects with predetermined dates of completion; they also include those to which the parties
by free choice have assigned a specific date of termination.
Some familiar examples may be cited of employment contract which may be neither for
seasonal work nor for specific projects, but to which a fixed term is an essential and
natural appurtenance: overseas employment contracts, for one, to which, whatever the
nature of the engagement, the concept of regular employment with all that it implies does
not appear ever to have been applied. Article 280 of the Labor Code notwithstanding also
appointments to the positions of dean, assistant dean, college secretary, principal, and other
administrative offices in educational institutions, which are by practice or tradition rotated
among the faculty members, and where fixed terms are a necessity without which no
reasonable rotation would be possible. Similarly, despite the provisions of Article 280, Policy
Instructions. No. 8 of the Minister of Labor implicitly recognize that certain company officials
may be elected for what would amount to fix periods, at the expiration of which they would
have to stand down, in providing that these officials, xxx may lose their jobs as president,
executive vice-president or vice-president, etc. because the stockholders or the board of
directors for one reason or another did not reelect them.
There can of course be no quarrel with the proposition that where from the circumstances it is
apparent that periods have been imposed to preclude acquisition of tenurial security by the
employee, they should be struck down or disregard as contrary to public policy, morals, etc.
But where no such intent to circumvent the law is shown, or stated otherwise, where the
reason for the law does not exists, e.g., where it is indeed the employee himself who insists
upon a period or where the nature of the engagement is such that, without being seasonal or
for a specific project, a definite date of termination is a sine qua non, would an agreement
fixing a period be essentially evil or illicit, therefore anathema? Would such an agreement
come within the scope of Article 280 which admittedly was enacted to prevent the
circumvention of the right of the employee to be secured in xxx his employment
As it is evident from even only the three examples already given that Article 280 of the Labor
Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of
employment contracts to which the lack of a fixed period would be an anomaly, but would
also appear to restrict, without reasonable distinctions, the right of an employee to freely
stipulate within his employer the duration of his engagement, it logically follows that such a
literal interpretation should be eschewed or avoided. The law must be given a reasonable
interpretation, to preclude absurdity in its application. Outlawing the whole concept of term
employment and subverting to boot the principle of freedom of contract to remedy the evil of
employers using it as a means to prevent their employees from obtaining security of tenure is
like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping of
the head.
It is a salutary principle in statutory construction that there exists a valid presumption that
undesirable consequences were never intended by a legislative measure, and that a
construction of which the statute is fairly susceptible is favored, which will avoid all
objectionable, mischievous, indefensible, wrongful, evil, and injurious consequences.
Nothing is better settled than that courts are not to give words a meaning which would lead to
absurd or unreasonable consequences. That is a principle that goes back to In re Allen decided
on October 27, 1902, where it was held that a literal interpretation is to be rejected if it would
be unjust or lead to absurd results. That is a strong argument against its adoption. The words
of Justice Laurel are particularly apt. Thus: the appellants would lead to an absurdity is
another argument for rejecting it.
Xxx We have, here, then a case where the true intent of the law is clear that calls for the
application of the cardinal rule of statutory construction that such intent of spirit must prevail
over the letter thereof, for whatever is within the spirit of a statute is within the statute, since
adherence to the letter would result in absurdity, injustice and contradictions and would defeat
the plain and vital purpose of the statute.
Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor code clearly appears to have been, as
already observed, to prevent circumvention of the employees right to be secure in his
tenure, the clause in said article indiscriminately and completely ruling out all written or
oral agreements conflicting with the concept of regular employment as defined therein
should be construed to refer to the substantive evil that the Code itself has singled out;
agreements entered into precisely to circumvent security of tenure. It should have no
application to instances where a fixed period of employment was agreed upon knowingly
and voluntarily by the parties, without any force, duress or improper pressure being
brought to bear upon the employee and absent any other circumstances vitiating his
consent, or where it satisfactorily appears that the employer and employee dealt with
each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter. Unless thus limited in its purview, the law would be
made to apply to purposes other than those explicitly stated by its framers; it thus becomes
pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended
consequences.
Again, in Pablo Coyoca v. NLRC,xviii[18] the Court also held that a seafarer is not a regular
employee and is not entitled to separation pay. His employment is governed by the POEA
Standard Employment Contract for Filipino Seamen.
XXX. In this connection, it is important to note that neither does the POEA standard
employment contract for Filipino seamen provide for such benefits.
As a Filipino seaman, petitioner is governed by the Rules and Regulations Governing
Overseas Employment and the said Rules do not provide for separation or termination
pay. What is embodied in petitioners contract is the payment of compensation arising from
permanent partial disability during the period of employment. We find that private respondent
complied with the terms of contract when it paid petitioner P42,315.00 which, in our opinion,
is a reasonable amount, as compensation for his illness.
Lastly, petitioner claims that he eventually became a regular employee of private respondent
and thus falls within the purview of Articles 284 and 95 of the Labor Code. In support of this
contention, petitioner cites the case of Worth Shipping Service, Inc., et al. v. NLRC, et al.,
wherein we held that the crew members of the shipping company had attained regular status
and thus, were entitled to separation pay. However, the facts of said case differ from the
present. In Worth, we held that the principal and agent had operational control and
management over the MV Orient Carrier and thus, were the actual employers of their crew
members.
From the foregoing cases, it is clear that seafarers are considered contractual employees. They
can not be considered as regular employees under Article 280 of the Labor Code. Their
employment is governed by the contracts they sign everytime they are rehired and their
employment is terminated when the contract expires. Their employment is contractually fixed
for a certain period of time. They fall under the exception of Article 280 whose employment
has been fixed for a specific project or undertaking the completion or termination of which has
been determined at the time of engagement of the employee or where the work or services to
be performed is seasonal in nature and the employment is for the duration of the
season.xix[19] We need not depart from the rulings of the Court in the two aforementioned
cases which indeed constitute stare decisis with respect to the employment status of seafarers.
Petitioners insist that they should be considered regular employees, since they have rendered
services which are usually necessary and desirable to the business of their employer, and that
they have rendered more than twenty(20) years of service. While this may be true, the Brent
case has, however, held that there are certain forms of employment which also require the
performance of usual and desirable functions and which exceed one year but do not
necessarily attain regular employment status under Article 280.xx[20] Overseas workers
including seafarers fall under this type of employment which are governed by the mutual
agreements of the parties.
In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are governed by
the Rules and Regulations of the POEA. The Standard Employment Contract governing the
employment of All Filipino seamen on Board Ocean-Going Vessels of the POEA, particularly
in Part I, Sec. C specifically provides that the contract of seamen shall be for a fixed period.
And in no case should the contract of seamen be longer than 12 months. It reads:
Section C. Duration of Contract
The period of employment shall be for a fixed period but in no case to exceed 12 months and
shall be stated in the Crew Contract. Any extension of the Contract period shall be subject to
the mutual consent of the parties.
Moreover, it is an accepted maritime industry practice that employment of seafarers are for a
fixed period only. Constrained by the nature of their employment which is quite peculiar and
unique in itself, it is for the mutual interest of both the seafarer and the employer why the
employment status must be contractual only or for a certain period of time. Seafarers spend
most of their time at sea and understandably, they can not stay for a long and an indefinite
period of time at sea.xxi[21] Limited access to shore society during the employment will have
an adverse impact on the seafarer. The national, cultural and lingual diversity among the crew
during the COE is a reality that necessitates the limitation of its period.xxii[22]
Petitioners make much of the fact that they have been continually re-hired or their contracts
renewed before the contracts expired (which has admittedly been going on for twenty (20)
years). By such circumstance they claim to have acquired regular status with all the rights and
benefits appurtenant to it.
Such contention is untenable. Undeniably, this circumstance of continuous re-hiring was
dictated by practical considerations that experienced crew members are more preferred.
Petitioners were only given priority or preference because of their experience and
qualifications but this does not detract the fact that herein petitioners are contractual
employees. They can not be considered regular employees. We quote with favor the
explanation of the NLRC in this wise:
Xxx The reference to permanent and probationary masters and employees in these papers is a
misnomer and does not alter the fact that the contracts for enlistment between complainants-
appellants and respondent-appellee Esso International were for a definite periods of time,
ranging from 8 to 12 months. Although the use of the terms permanent and probationary is
unfortunate, what is really meant is eligible for-re-hire. This is the only logical conclusion
possible because the parties cannot and should not violate POEAs requirement that a contract
of enlistment shall be for a limited period only; not exceeding twelve (12)months.xxiii[23]
From all the foregoing, we hereby state that petitioners are not considered regular or
permanent employees under Article 280 of the Labor Code. Petitioners employment have
automatically ceased upon the expiration of their contracts of enlistment (COE). Since there
was no dismissal to speak of, it follows that petitioners are not entitled to reinstatement or
payment of separation pay or backwages, as provided by law.
With respect to the benefits under the Consecutive Enlistment Incentive Plan (CEIP), we hold
that the petitioners are still entitled to receive 100% of the total amount credited to him under
the CEIP. Considering that we have declared that petitioners are contractual employees, their
compensation and benefits are covered by the contracts they signed and the CEIP is part and
parcel of the contract.
The CEIP was formulated to entice seamen to stay long in the company. As the name implies,
the program serves as an incentive for the employees to renew their contracts with the same
company for as long as their services were needed. For those who remained loyal to them,
they were duly rewarded with this additional remuneration under the CEIP, if eligible. While
this is an act of benevolence on the part of the employer, it can not, however, be denied that
this is part of the benefits accorded to the employees for services rendered. Such right to the
benefits is vested upon them upon their eligibility to the program.
The CEIP provides that an employee becomes covered under the Plan when he completes
thirty-six (36) months or an equivalent of three (3) years of credited service with respect to
employment after June 30, 1973.xxiv[24] Upon eligibility, an amount shall be credited to his
account as it provides, among others:
III. Distribution of Benefits
A. Retirement, Death and Disability
When the employment of an employee terminates because of his retirement,
death or permanent and total disability, a percentage of the total amount
credited to his account will be distributed to him (or his eligible survivor(s)
in accordance with the following:
Reason for Termination Percentage
a) Attainment of mandatory retire- 100%
ment age of 60.
b) Permanent and total disability, 100%
while under contract, that is
not due to accident or misconduct.
c) Permanent and total disability, 100%
while under contract, that is
due to accident, and not due to
misconduct.
xxx
B. Voluntary Termination
When an employee voluntary terminates his employment with at least 36 months of credited
service without any misconduct on his part, 18 percent of the total amount credited to his
account, plus an additional of one percent for each month (up to a maximum of 164 months of
credited service in excess of 36, will be distributed to him provided (1) the employee has
completed his last Contract of Enlistment and (2) employee advises the company in writing,
within 30 days, from his last disembarkation date, of his intention to terminate his
employment. (To advise the Company in writing means that the original letter must be sent to
the Companys agent in the Philippines, a copy sent to the Company in New York).
xxx
C. Other Terminations
When the employment of an employee is terminated by the Company for a
reason other than one in A and B above, without any misconduct on his
part, a percentage of the total amount credited to his account will be
distributed to him in accordance with the following.
Credited Service Percentage
36 months 50%
48
75%
60 100%
When the employment of an employee is terminated due to his poor-
performance, misconduct, unavailability, etc., or if employee is not offered
re-engagement for similar reasons, no distribution of any portion of
employees account will ever be made to him (or his eligible survivor[s]).
It must be recalled that on June 21, 1989, Millares wrote a letter to his employer informing his
intention to avail of the optional retirement plan under the CEIP considering that he has
rendered more than twenty (20) years of continuous service. Lagda, likewise, manifested the
same intention in a letter dated June 26, 1989. Private respondent, however, denied their
requests for benefits under the CEIP since: (1) the contract of enlistment (COE) did not
provide for retirement before 60 years of age; and that (2) petitioners failed to submit a written
notice of their intention to terminate their employment within thirty (30) days from the last
disembarkation date pursuant to the provision on Voluntary Termination of the CEIP.
Petitioners were eventually dropped from the roster of crew members and on grounds of
abandonment and unavailability for contractual sea service, respectively, they were
disqualified from receiving any benefits under the CEIP.xxv[25]
In our March 14, 2000 Decision, we, however, found that petitioners Millares and Lagda were
not guilty of abandonment or unavailability for contractual sea service, as we have stated:
The absence of petitioners was justified by the fact that they secured the approval of private
respondents to take a leave of absence after the termination of their last contracts of
enlistment. Subsequently, petitioners sought for extensions of their respective leaves of
absence. Granting arguendo that their subsequent requests for extensions were not approved, it
cannot be said that petitioners were unavailable or had abandoned their work when they failed
to report back for assignment as they were still questioning the denial of private respondents
of their desire to avail of the optional early retirement policy, which they believed in good
faith to exist.xxvi[26]
Neither can we consider petitioners guilty of poor performance or misconduct since they were
recipients of Merit Pay Awards for their exemplary performances in the company.
Anent the letters dated June 21, 1989 (for Millares) and June 26, 1989 (for Lagda) which
private respondent considered as belated written notices of termination, we find such assertion
specious. Notwithstanding, we could conveniently consider the petitioners eligible under
Section III-B of the CEIP (Voluntary Termination), but this would, however, award them only
a measly amount of benefits which to our mind, the petitioners do not rightfully deserve under
the facts and circumstances of the case. As the CEIP provides:
III. Distribution of Benefits
xxx
E. Distribution of Accounts
When an employee terminates under conditions that would qualify for a distribution of more
than one specified in A, B or C above, the largest single amount, only, will be distributed.
Since petitioners termination of employment under the CEIP do not fall under Section III-A
(Retirement, Death and Disability) or Section III-B (Voluntary Termination), nor could they
be considered under the second paragraph of Section III-C, as earlier discussed; it follows that
their termination falls under the first paragraph of Section III-C for which they are entitled to
100% of the total amount credited to their accounts. The private respondents can not now
renege on their commitment under the CEIP to reward deserving and loyal employees as the
petitioners in this case.
In taking cognizance of private respondents Second Motion for Reconsideration, the Court
hereby suspends the rules to make them conformable to law and justice and to subserve an
overriding public interest.
IN VIEW OF THE FOREGOING, THE COURT Resolved to Partially GRANT Private
Respondents Second Motion for Reconsideration and Intervenor FAMES Motion for
Reconsideration in Intervention. The Decision of the National Labor Relations Commission
dated June 1, 1993 is hereby REINSTATED with MODIFICATION. The Private
Respondents, Trans-Global Maritime Agency, Inc. and Esso International Shipping Co.,Ltd.
are hereby jointly and severally ORDERED to pay petitioners One Hundred Percent (100%)
of their total credited contributions as provided under the Consecutive Enlistment Incentive
Plan(CEIP).
SO ORDERED.
MARSAMAN MANNING AGENCY, INC. and DIAMANTIDES MARITIME, INC.,
petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and WILFREDO T.
CAJERAS, respondents.
DECISION
BELLOSILLO, J.:
MARSAMAN MANNING AGENCY, INC. (MARSAMAN) and its foreign principal
DIAMANTIDES MARITIME, INC. (DIAMANTIDES) assail the Decision of public
respondent National Labor Relations Commission dated 16 September 1996 as well as its
Resolution dated 12 November 1996 affirming the Labor Arbiter's decision finding them
guilty of illegal dismissal and ordering them to pay respondent Wilfredo T. Cajeras salaries
corresponding to the unexpired portion of his employment contract, plus attorney's fees.
Private respondent Wilfredo T. Cajeras was hired by petitioner MARSAMAN, the local
manning agent of petitioner DIAMANTIDES, as Chief Cook Steward on the MV Prigipos,
owned and operated by DIAMANTIDES, for a contract period of ten (10) months with a
monthly salary of US$600.00, evidenced by a contract between the parties dated 15 June
1995. Cajeras started work on 8 August 1995 but less than two (2) months later, or on 28
September 1995, he was repatriated to the Philippines allegedly by mutual consent.
On 17 November 1995 private respondent Cajeras filed a complaint for illegal dismissal
against petitioners with the NLRC National Capital Region Arbitration Branch alleging that he
was dismissed illegally, denying that his repatriation was by mutual consent, and asking for
his unpaid wages, overtime pay, damages, and attorneys fees.xxvii[1] Cajeras alleged that he
was assigned not only as Chief Cook Steward but also as assistant cook and messman in
addition to performing various inventory and requisition jobs. Because of his additional
assignments he began to feel sick just a little over a month on the job constraining him to
request for medical attention. He was refused at first by Capt. Kouvakas Alekos, master of the
MV Prigipos, who just ordered him to continue working. However a day after the ships arrival
at the port of Rotterdam, Holland, on 26 September 1995 Capt. Alekos relented and had him
examined at the Medical Center for Seamen. However, the examining physician, Dr. Wden
Hoed, neither apprised private respondent about the diagnosis nor issued the requested
medical certificate allegedly because he himself would forward the results to private
respondents superiors. Upon returning to the vessel, private respondent was unceremoniously
ordered to prepare for immediate repatriation the following day as he was said to be suffering
from a disease of unknown origin.
On 28 September 1995 he was handed his Seaman's Service Record Book with the following
entry: "Cause of discharge - Mutual Consent."xxviii[2] Private respondent promptly objected
to the entry but was not able to do anything more as he was immediately ushered to a waiting
taxi which transported him to the Amsterdam Airport for the return flight to Manila. After his
arrival in Manila on 29 September 1995 Cajeras complained to MARSAMAN but to no
avail.xxix[3]
MARSAMAN and DIAMANTIDES, on the other hand, denied the imputation of illegal
dismissal. They alleged that Cajeras approached Capt. Alekos on 26 September 1995 and
informed the latter that he could not sleep at night because he felt something crawling over his
body. Furthermore, Cajeras reportedly declared that he could no longer perform his duties and
requested for repatriation. The following paragraph in the vessel's Deck Log was allegedly
entered by Capt. Alekos, to wit:
Cajeras approached me and he told me that he cannot sleep at night and that he feels
something crawling on his body and he declared that he can no longer perform his duties and
he must be repatriated.xxx[4]
Private respondent was then sent to the Medical Center for Seamen at Rotterdam where he
was examined by Dr. Wden Hoed whose diagnosis appeared in a Medical Report as paranoia
and other mental problems.xxxi[5] Consequently, upon Dr. Hoeds recommendation, Cajeras
was repatriated to the Philippines on 28 September 1995.
On 29 January 1996 Labor Arbiter Ernesto S. Dinopol resolved the dispute in favor of private
respondent Cajeras ruling that the latter's discharge from the MV Prigipos allegedly by mutual
consent was not proved by convincing evidence. The entry made by Capt. Alekos in the Deck
Log was dismissed as of little probative value because it was a mere unilateral act unsupported
by any document showing mutual consent of Capt. Alekos, as master of the MV Prigipos, and
Cajeras to the premature termination of the overseas employment contract as required by Sec.
H of the Standard Employment Contract Governing the Employment of all Filipino Seamen on
Board Ocean-Going Vessels. Dr. Hoeds diagnosis that private respondent was suffering from
paranoia and other mental problems was likewise dismissed as being of little evidentiary value
because it was not supported by evidence on how the paranoia was contracted, in what stage it
was, and how it affected respondent's functions as Chief Cook Steward which, on the contrary,
was even rated Very Good in respondent's Service Record Book. Thus, the Labor Arbiter
disposed of the case as follows:
WHEREFORE, judgment is hereby rendered declaring the repatriation and dismissal of
complaint Wilfredo T. Cajeras as illegal and ordering respondents Marsaman Manning
Agency, Inc. and Diamantides Maritime, Inc. to jointly and severally pay complainant the sum
of USD 5,100.00 or its peso equivalent at the time of payment plus USD 510.00 as 10%
attorneys fees it appearing that complainant had to engage the service of counsel to protect his
interest in the prosecution of this case.
The claims for nonpayment of wages and overtime pay are dismissed for having been
withdrawn (Minutes, December 18, 1995). The claims for damages are likewise dismissed for
lack of merit, since no evidence was presented to show that bad faith characterized the
dismissal.xxxii[6]
Petitioners appealed to the NLRC.xxxiii[7] On 16 September 1996 the NLRC affirmed the
appealed findings and conclusions of the Labor Arbiter.xxxiv[8] The NLRC subscribed to the
view that Cajeras repatriation by alleged mutual consent was not proved by petitioners,
especially after noting that private respondent did not actually sign his Seamans Service
Record Book to signify his assent to the repatriation as alleged by petitioners. The entry made
by Capt. Alekos in the Deck Log was not considered reliable proof that private respondent
agreed to his repatriation because no opportunity was given the latter to contest the entry
which was against his interest. Similarly, the Medical Report issued by Dr. Hoed of Holland
was dismissed as being of dubious value since it contained only a sweeping statement of the
supposed ailment of Cajeras without any elaboration on the factual basis thereof.
Petitioners' motion for reconsideration was denied by the NLRC in its Resolution dated 12
November 1996.xxxv[9] Hence, this petition contending that the NLRC committed grave
abuse of discretion: (a) in not according full faith and credit to the official entry by Capt.
Alekos in the vessels Deck Log conformably with the rulings in Haverton Shipping Ltd. v.
NLRCxxxvi[10] and Wallem Maritime Services, Inc. v. NLRC;xxxvii[11] (b) in not
appreciating the Medical Report issued by Dr. Wden Hoed as conclusive evidence that
respondent Cajeras was suffering from paranoia and other mental problems; (c) in affirming
the award of attorneys fees despite the fact that Cajeras' claim for exemplary damages was
denied for lack of merit; and, (d) in ordering a monetary award beyond the maximum of three
(3) months salary for every year of service set by RA 8042.
We deny the petition. In the Contract of Employmentxxxviii[12] entered into with private
respondent, petitioners convenanted strict and faithful compliance with the terms and
conditions of the Standard Employment Contract approved by the POEA/DOLExxxix[13]
which provides:
1. The employment of the seaman shall cease upon expiration of the contract period indicated
in the Crew Contract unless the Master and the Seaman, by mutual consent, in writing, agree
to an early termination x x x x (underscoring ours).
Clearly, under the foregoing, the employment of a Filipino seaman may be terminated prior to
the expiration of the stipulated period provided that the master and the seaman (a) mutually
consent thereto and (b) reduce their consent in writing.
In the instant case, petitioners do not deny the fact that they have fallen short of the
requirement. No document exists whereby Capt. Alekos and private respondent reduced to
writing their alleged mutual consent to the termination of their employment contract. Instead,
petitioners presented the vessel's Deck Log wherein an entry unilaterally made by Capt.
Alekos purported to show that private respondent himself asked for his repatriation. However,
the NLRC correctly dismissed its evidentiary value. For one thing, it is a unilateral act which
is vehemently denied by private respondent. Secondly, the entry in no way satisfies the
requirement of a bilateral documentation to prove early termination of an overseas
employment contract by mutual consent required by the Standard Employment Contract.
Hence, since the latter sets the minimum terms and conditions of employment for the
protection of Filipino seamen subject only to the adoption of better terms and conditions over
and above the minimum standards,xl[14] the NLRC could not be accused of grave abuse of
discretion in not accepting anything less.
However petitioners contend that the entry should be considered prima facie evidence that
respondent himself requested his repatriation conformably with the rulings in Haverton
Shipping Ltd. v. NLRCxli[15] and Abacast Shipping and Management Agency, Inc. v.
NLRC.xlii[16] Indeed, Haverton says that a vessels log book is prima facie evidence of the
facts stated therein as they are official entries made by a person in the performance of a duty
required by law. However, this jurisprudential principle does not apply to win the case for
petitioners. In Wallem Maritime Services, Inc. v. NLRCxliii[17] the Haverton ruling was not
given unqualified application because the log book presented therein was a mere typewritten
collation of excerpts from what could be the log book.xliv[18] The Court reasoned that since
the log book was the only piece of evidence presented to prove just cause for the termination
of respondent therein, the log book had to be duly identified and authenticated lest an injustice
would result from a blind adoption of its contents which were but prima facie evidence of the
incidents stated therein.
In the instant case, the disputed entry in the Deck Log was neither authenticated nor supported
by credible evidence. Although petitioners claim that Cajeras signed his Seamans Service
Record Book to signify his conformity to the repatriation, the NLRC found the allegation to be
actually untrue since no signature of private respondent appeared in the Record Book.
Neither could the Medical Report prepared by Dr. Hoed be considered corroborative and
conclusive evidence that private respondent was suffering from paranoia and other mental
problems, supposedly just causes for his repatriation. Firstly, absolutely no evidence, not even
an allegation, was offered to enlighten the NLRC or this Court as to Dr. Hoed's qualifications
to diagnose mental illnesses. It is a matter of judicial notice that there are various
specializations in medical science and that a general practitioner is not competent to diagnose
any and all kinds of illnesses and diseases. Hence, the findings of doctors who are not proven
experts are not binding on this Court.xlv[19] Secondly, the Medical Report prepared by Dr.
Hoed contained only a general statement that private respondent was suffering from paranoia
and other mental problems without providing the details on how the diagnosis was arrived at
or in what stage the illness was. If Dr. Hoed indeed competently examined private respondent
then he would have been able to discuss at length the circumstances and precedents of his
diagnosis. Petitioners cannot rely on the presumption of regularity in the performance of
official duties to make the Medical Report acceptable because the presumption applies only to
public officers from the highest to the lowest in the service of the Government, departments,
bureaus, offices, and/or its political subdivisions,xlvi[20] which Dr. Wden Hoed was not
shown to be. Furthermore, neither did petitioners prove that private respondent was
incompetent or continuously incapacitated for the duties for which he was employed by reason
of his alleged mental state. On the contrary his ability as Chief Cook Steward, up to the very
moment of his repatriation, was rated Very Good in his Seamans Service Record Book as
correctly observed by public respondent.
Considering all the foregoing we cannot ascribe grave abuse of discretion on the part of the
NLRC in ruling that petitioners failed to prove just cause for the termination of private
respondent's overseas employment. Grave abuse of discretion is committed only when the
judgment is rendered in a capricious, whimsical, arbitrary or despotic manner, which is not
true in the present case.xlvii[21]
With respect to attorneys fees, suffice it to say that in actions for recovery of wages or where
an employee was forced to litigate and thus incurred expenses to protect his rights and
interests, a maximum award of ten percent (10%) of the monetary award by way of attorneys
fees is legally and morally justifiable under Art. 111 of the Labor Code,xlviii[22] Sec. 8, Rule
VIII, Book III of its Implementing Rules,xlix[23] and par. 7, Art. 2208l[24] of the Civil
Code.li[25] The case of Albenson Enterprises Corporation v. Court of Appealslii[26] cited by
petitioners in arguing against the award of attorneys fees is clearly not applicable, being a civil
action for damages which deals with only one of the eleven (11) instances when attorneys fees
could be recovered under Art. 2208 of the Civil Code.
Lastly, on the amount of salaries due private respondent, the rule has always been that an
illegally dismissed worker whose employment is for a fixed period is entitled to payment of
his salaries corresponding to the unexpired portion of his employment.liii[27] However on 15
July 1995, RA 8042 otherwise known as the Migrant Workers and Overseas Filipinos Act of
1995 took effect, Sec. 10 of which provides:
Sec. 10. In case of termination of overseas employment without just, valid or authorized cause
as defined by law or contract, the worker shall be entitled to the full reimbursement of his
placement fee with interest at twelve percent (12%) per annum, plus his salaries for the
unexpired portion of the employment contract or for three (3) months for every year of the
unexpired term whichever is less (underscoring ours).
The Labor Arbiter, rationalizing that the aforesaid law did not apply since it became effective
only one (1) month after respondent's overseas employment contract was entered into on 15
June 1995, simply awarded private respondent his salaries corresponding to the unexpired
portion of his employment contract, i.e., for 8.6 months. The NLRC affirmed the award and
the Office of the Solicitor General (OSG) fully agreed. But petitioners now insist that Sec. 10,
RA 8042 is applicable because although private respondents contract of employment was
entered into before the law became effective his alleged cause of action, i.e., his repatriation
on 28 September 1995 without just, valid or authorized cause, occurred when the law was
already in effect. Petitioners' purpose in so arguing is to invoke the law in justifying a lesser
monetary award to private respondent, i.e., salaries for three (3) months only pursuant to the
last portion of Sec. 10 as opposed to the salaries for 8.6 months awarded by the Labor Arbiter
and affirmed by the NLRC.
We agree with petitioners that Sec. 10, RA 8042, applies in the case of private respondent and
to all overseas contract workers dismissed on or after its effectivity on 15 July 1995 in the
same way that Sec. 34,liv[28] RA 6715,lv[29] is made applicable to locally employed workers
dismissed on or after 21 March 1989.lvi[30] However, we cannot subscribe to the view that
private respondent is entitled to three (3) months salary only. A plain reading of Sec. 10
clearly reveals that the choice of which amount to award an illegally dismissed overseas
contract worker, i.e., whether his salaries for the unexpired portion of his employment contract
or three (3) months salary for every year of the unexpired term, whichever is less, comes into
play only when the employment contract concerned has a term of at least one (1) year or more.
This is evident from the words for every year of the unexpired term which follows the words
salaries x x x for three months. To follow petitioners thinking that private respondent is
entitled to three (3) months salary only simply because it is the lesser amount is to completely
disregard and overlook some words used in the statute while giving effect to some. This is
contrary to the well-established rule in legal hermeneutics that in interpreting a statute, care
should be taken that every part or word thereof be given effectlvii[31] since the law-making
body is presumed to know the meaning of the words employed in the statue and to have used
them advisedly.lviii[32] Ut res magis valeat quam pereat.lix[33]
WHEREFORE, the questioned Decision and Resolution dated 16 September 1996 and 12
November 1996, respectively, of public respondent National Labor Relations Commission are
AFFIRMED. Petitioners MARSAMAN MANNING AGENCY, INC., and DIAMANTIDES
MARITIME, INC., are ordered, jointly and severally, to pay private respondent WILFREDO
T. CAJERAS his salaries for the unexpired portion of his employment contract or
USD$5,100.00, reimburse the latter's placement fee with twelve percent (12%) interest per
annum conformably with Sec. 10 of RA 8042, as well as attorney's fees of ten percent (10%)
of the total monetary award. Costs against petitioners.
SO ORDERED.
ANTONIO M. SERRANO, Petitioner,
vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC.,
Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and communities out of
poverty. Their earnings have built houses, provided health care, equipped schools and planted
the seeds of businesses. They have woven together the world by transmitting ideas and
knowledge from country to country. They have provided the dynamic human link between
cultures, societies and economies. Yet, only recently have we begun to understand not only
how much international migration impacts development, but how smart public policies can
magnify this effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 20071
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of
Section 10, Republic Act (R.A.) No. 8042,2 to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just,
valid or authorized cause as defined by law or contract, the workers shall be entitled to the full
reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or for three (3) months for
every year of the unexpired term, whichever is less.
x x x x (Emphasis and underscoring supplied)
does not magnify the contributions of overseas Filipino workers (OFWs) to national
development, but exacerbates the hardships borne by them by unduly limiting their entitlement
in case of illegal dismissal to their lump-sum salary either for the unexpired portion of their
employment contract "or for three months for every year of the unexpired term, whichever is
less" (subject clause). Petitioner claims that the last clause violates the OFWs' constitutional
rights in that it impairs the terms of their contract, deprives them of equal protection and
denies them due process.
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the
December 8, 2004 Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA),
which applied the subject clause, entreating this Court to declare the subject clause
unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd.
Nov. 01/30, 1998 2,590.00
(respondents) under a Philippine Overseas Employment Administration (POEA)-approved
Contract of Employment with the following terms and conditions:
Dec. 01/31, 1998 2,590.00

Jan. 01/31, 1999 2,590.00

Duration of contract 12 months
Feb. 01/28, 1999 2,590.00
Position Chief Officer
Mar. 1/19, 1999 (19 days) incl. leave 1,640.00
Basic monthly salary US$1,400.00 pay

Hours of work 48.0 hours per week --------------------------------------------------------------

Overtime US$700.00 per month 25,382.23

Vacation leave with pay 7.00 days per month5 Amount adjusted to chief mate's salary

(March 19/31, 1998 to April 1/30, 1998) 1,060.5010

On March 19, 1998, the date of his departure, petitioner was constrained to accept a +
downgraded employment contract for the position of Second Officer with a monthly salary of
US$1,000.00, upon the assurance and representation of respondents that he would be made --------------------------------------------------------------
Chief Officer by the end of April 1998.6
TOTAL CLAIM US$ 26,442.7311
Respondents did not deliver on their promise to make petitioner Chief Officer. 7 Hence,
petitioner refused to stay on as Second Officer and was repatriated to the Philippines on May as well as moral and exemplary damages and attorney's fees.
26, 1998.8
The LA rendered a Decision dated July 15, 1999, declaring the dismissal of
Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to petitioner illegal and awarding him monetary benefits, to wit:
March 19, 1999, but at the time of his repatriation on May 26, 1998, he had served only two
(2) months and seven (7) days of his contract, leaving an unexpired portion of nine (9) months
WHEREFORE, premises considered, judgment is hereby rendered declaring that the
and twenty-three (23) days.
dismissal of the complainant (petitioner) by the respondents in the above-entitled
case was illegal and the respondents are hereby ordered to pay the complainant
Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive [petitioner], jointly and severally, in Philippine Currency, based on the rate of
dismissal and for payment of his money claims in the total amount of US$26,442.73, broken exchange prevailing at the time of payment, the amount of EIGHT THOUSAND
down as follows: SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00), representing the
complainant’s salary for three (3) months of the unexpired portion of the
aforesaid contract of employment.1avvphi1
May 27/31, 1998 (5 days) incl. Leave US$ 413.90
pay
The respondents are likewise ordered to pay the complainant [petitioner], jointly and
June 01/30, 1998 2,590.00 severally, in Philippine Currency, based on the rate of exchange prevailing at the
time of payment, the amount of FORTY FIVE U.S. DOLLARS (US$ 45.00), 12
July 01/31, 1998 2,590.00 representing the complainant’s claim for a salary differential. In addition, the
respondents are hereby ordered to pay the complainant, jointly and severally, in
August 01/31, 1998 2,590.00 Philippine Currency, at the exchange rate prevailing at the time of payment, the
complainant’s (petitioner's) claim for attorney’s fees equivalent to ten percent (10%)
Sept. 01/30, 1998 2,590.00 of the total amount awarded to the aforesaid employee under this Decision.

Oct. 01/31, 1998 2,590.00 The claims of the complainant for moral and exemplary damages are hereby
DISMISSED for lack of merit.
 All other claims are hereby DISMISSED.
SO ORDERED.13 (Emphasis supplied)
In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his
computation on the salary period of three months only -- rather than the entire
unexpired portion of nine months and 23 days of petitioner's employment contract -
applying the subject clause. However, the LA applied the salary rate of
US$2,590.00, consisting of petitioner's "[b]asic salary, US$1,400.00/month +
US$700.00/month, fixed overtime pay, + US$490.00/month, vacation leave pay =
US$2,590.00/compensation per month."14
Respondents appealed15 to the National Labor Relations Commission (NLRC) to
question the finding of the LA that petitioner was illegally dismissed.
Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not
applying the ruling of the Court in Triple Integrated Services, Inc. v. National Labor
Relations Commission17 that in case of illegal dismissal, OFWs are entitled to their
salaries for the unexpired portion of their contracts.18
In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are
hereby ordered to pay complainant, jointly and severally, in Philippine currency, at
the prevailing rate of exchange at the time of payment the following:
1. Three (3) months salary
$1,400 x 3 US$4,200.00
2. Salary differential 45.00
US$4,245.00
3. 10% Attorney’s fees 424.50
TOTAL US$4,669.50
The other findings are affirmed.
SO ORDERED.19
The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by
reducing the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042
"does not provide for the award of overtime pay, which should be proven to have been
actually performed, and for vacation leave pay."20
Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the
constitutionality of the subject clause.21 The NLRC denied the motion.22
Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge
against the subject clause.24 After initially dismissing the petition on a technicality, the CA
eventually gave due course to it, as directed by this Court in its Resolution dated August 7,
2003 which granted the petition for certiorari, docketed as G.R. No. 151833, filed by
petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of
the applicable salary rate; however, the CA skirted the constitutional issue raised by
petitioner.25
His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause
to this Court on the following grounds:
I
The Court of Appeals and the labor tribunals have decided the case in a way not in accord with
applicable decision of the Supreme Court involving similar issue of granting unto the migrant
worker back wages equal to the unexpired portion of his contract of employment instead of
limiting it to three (3) months
II
In the alternative that the Court of Appeals and the Labor Tribunals were merely applying
their interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of
Appeals gravely erred in law when it failed to discharge its judicial duty to decide questions of
substance not theretofore determined by the Honorable Supreme Court, particularly, the
constitutional issues raised by the petitioner on the constitutionality of said law, which
unreasonably, unfairly and arbitrarily limits payment of the award for back wages of overseas
workers to three (3) months.
III
Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042,
the Court of Appeals gravely erred in law in excluding from petitioner’s award the overtime
pay and vacation pay provided in his contract since under the contract they form part of his
salary.28
On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old
and sickly, and he intends to make use of the monetary award for his medical treatment and
medication.29 Required to comment, counsel for petitioner filed a motion, urging the court to
allow partial execution of the undisputed monetary award and, at the same time, praying that
the constitutional question be resolved.30
Considering that the parties have filed their respective memoranda, the Court now takes up the
full merit of the petition mindful of the extreme importance of the constitutional question
raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is
not disputed. Likewise not disputed is the salary differential of US$45.00 awarded to
petitioner in all three fora. What remains disputed is only the computation of the lump-sum
salary to be awarded to petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of
petitioner at the monthly rate of US$1,400.00 covering the period of three months out of the
unexpired portion of nine months and 23 days of his employment contract or a total of
US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends that, in addition to
the US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a
total of US$25,382.23, equivalent to his salaries for the entire nine months and 23 days left of
his employment contract, computed at the monthly rate of US$2,590.00.31
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional because it unduly impairs the
freedom of OFWs to negotiate for and stipulate in their overseas employment contracts a
determinate employment period and a fixed salary package.32 It also impinges on the equal
protection clause, for it treats OFWs differently from local Filipino workers (local workers) by
putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of illegal
dismissal, while setting no limit to the same monetary award for local workers when their
dismissal is declared illegal; that the disparate treatment is not reasonable as there is no
substantial distinction between the two groups;33 and that it defeats Section 18,34 Article II of
the Constitution which guarantees the protection of the rights and welfare of all Filipino
workers, whether deployed locally or overseas.35
Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line
with existing jurisprudence on the issue of money claims of illegally dismissed OFWs.
Though there are conflicting rulings on this, petitioner urges the Court to sort them out for the
guidance of affected OFWs.36
Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves
no other purpose but to benefit local placement agencies. He marks the statement made by the
Solicitor General in his Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder the payment of money
claims in the event that jurisdiction over the foreign employer is not acquired by the court or if
the foreign employer reneges on its obligation. Hence, placement agencies that are in good
faith and which fulfill their obligations are unnecessarily penalized for the acts of the foreign
employer. To protect them and to promote their continued helpful contribution in deploying
Filipino migrant workers, liability for money claims was reduced under Section 10 of R.A. No.
8042. 37 (Emphasis supplied)
Petitioner argues that in mitigating the solidary liability of placement agencies, the subject
clause sacrifices the well-being of OFWs. Not only that, the provision makes foreign
employers better off than local employers because in cases involving the illegal dismissal of
employees, foreign employers are liable for salaries covering a maximum of only three months
of the unexpired employment contract while local employers are liable for the full lump-sum
salaries of their employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the amount of
backwages they have to give their employees they have illegally dismissed, following well-
entrenched and unequivocal jurisprudence on the matter. On the other hand, foreign employers
will only be limited to giving the illegally dismissed migrant workers the maximum of three
(3) months unpaid salaries notwithstanding the unexpired term of the contract that can be more
than three (3) months.38
Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives
him of the salaries and other emoluments he is entitled to under his fixed-period employment
contract.39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that the constitutional issue should
not be entertained, for this was belatedly interposed by petitioner in his appeal before the CA,
and not at the earliest opportunity, which was when he filed an appeal before the NLRC. 40
The Arguments of the Solicitor General
The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995,
its provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A.
No. 8042 having preceded petitioner's contract, the provisions thereof are deemed part of the
minimum terms of petitioner's employment, especially on the matter of money claims, as this
was not stipulated upon by the parties.42
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of
their employment, such that their rights to monetary benefits must necessarily be treated
differently. The OSG enumerates the essential elements that distinguish OFWs from local
workers: first, while local workers perform their jobs within Philippine territory, OFWs
perform their jobs for foreign employers, over whom it is difficult for our courts to acquire
jurisdiction, or against whom it is almost impossible to enforce judgment; and second, as held
in Coyoca v. National Labor Relations Commission43 and Millares v. National Labor
Relations Commission,44 OFWs are contractual employees who can never acquire regular
employment status, unlike local workers who are or can become regular employees. Hence,
the OSG posits that there are rights and privileges exclusive to local workers, but not available
to OFWs; that these peculiarities make for a reasonable and valid basis for the differentiated
treatment under the subject clause of the money claims of OFWs who are illegally dismissed.
Thus, the provision does not violate the equal protection clause nor Section 18, Article II of
the Constitution.45
Lastly, the OSG defends the rationale behind the subject clause as a police power measure
adopted to mitigate the solidary liability of placement agencies for this "redounds to the
benefit of the migrant workers whose welfare the government seeks to promote. The survival
of legitimate placement agencies helps [assure] the government that migrant workers are
properly deployed and are employed under decent and humane conditions."46
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial review of the acts of its co-
equals, such as the Congress, it does so only when these conditions obtain: (1) that there is an
actual case or controversy involving a conflict of rights susceptible of judicial determination; 47
(2) that the constitutional question is raised by a proper party48 and at the earliest
opportunity;49 and (3) that the constitutional question is the very lis mota of the case, 50
otherwise the Court will dismiss the case or decide the same on some other ground.51
Without a doubt, there exists in this case an actual controversy directly involving petitioner
who is personally aggrieved that the labor tribunals and the CA computed his monetary award
based on the salary period of three months only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that the requirement
that a constitutional issue be raised at the earliest opportunity entails the interposition of the
issue in the pleadings before a competent court, such that, if the issue is not raised in the
pleadings before that competent court, it cannot be considered at the trial and, if not
considered in the trial, it cannot be considered on appeal. 52 Records disclose that the issue on
the constitutionality of the subject clause was first raised, not in petitioner's appeal with the
NLRC, but in his Motion for Partial Reconsideration with said labor tribunal, 53 and reiterated
in his Petition for Certiorari before the CA.54 Nonetheless, the issue is deemed seasonably
raised because it is not the NLRC but the CA which has the competence to resolve the
constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-judicial
function – its function in the present case is limited to determining questions of fact to which
the legislative policy of R.A. No. 8042 is to be applied and to resolving such questions in
accordance with the standards laid down by the law itself;55 thus, its foremost function is to
administer and enforce R.A. No. 8042, and not to inquire into the validity of its provisions.
The CA, on the other hand, is vested with the power of judicial review or the power to declare
unconstitutional a law or a provision thereof, such as the subject clause. 56 Petitioner's
interposition of the constitutional issue before the CA was undoubtedly seasonable. The CA
was therefore remiss in failing to take up the issue in its decision.
The third condition that the constitutional issue be critical to the resolution of the case likewise
obtains because the monetary claim of petitioner to his lump-sum salary for the entire
unexpired portion of his 12-month employment contract, and not just for a period of three
months, strikes at the very core of the subject clause.
Thus, the stage is all set for the determination of the constitutionality of the subject clause.
Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract
on the term of his employment and the fixed salary package he will receive 57 is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly enacted have only a
prospective operation,58 and cannot affect acts or contracts already perfected;59 however, as to
laws already in existence, their provisions are read into contracts and deemed a part thereof. 60
Thus, the non-impairment clause under Section 10, Article II is limited in application to laws
about to be enacted that would in any way derogate from existing acts or contracts by
enlarging, abridging or in any manner changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the
execution of the employment contract between petitioner and respondents in 1998. Hence, it
cannot be argued that R.A. No. 8042, particularly the subject clause, impaired the employment
contract of the parties. Rather, when the parties executed their 1998 employment contract, they
were deemed to have incorporated into it all the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be declared
unconstitutional on the ground that it impinges on the impairment clause, for the law was
enacted in the exercise of the police power of the State to regulate a business, profession or
calling, particularly the recruitment and deployment of OFWs, with the noble end in view of
ensuring respect for the dignity and well-being of OFWs wherever they may be employed.61
Police power legislations adopted by the State to promote the health, morals, peace, education,
good order, safety, and general welfare of the people are generally applicable not only to
future contracts but even to those already in existence, for all private contracts must yield to
the superior and legitimate measures taken by the State to promote public welfare. 62
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of law nor shall
any person be denied the equal protection of the law.
Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector,
without distinction as to place of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions
translate to economic security and parity: all monetary benefits should be equally enjoyed by
workers of similar category, while all monetary obligations should be borne by them in equal
degree; none should be denied the protection of the laws which is enjoyed by, or spared the
burden imposed on, others in like circumstances.65
Such rights are not absolute but subject to the inherent power of Congress to incorporate,
when it sees fit, a system of classification into its legislation; however, to be valid, the
classification must comply with these requirements: 1) it is based on substantial distinctions;
2) it is germane to the purposes of the law; 3) it is not limited to existing conditions only; and
4) it applies equally to all members of the class.66
There are three levels of scrutiny at which the Court reviews the constitutionality of a
classification embodied in a law: a) the deferential or rational basis scrutiny in which the
challenged classification needs only be shown to be rationally related to serving a legitimate
state interest;67 b) the middle-tier or intermediate scrutiny in which the government must show
that the challenged classification serves an important state interest and that the classification is
at least substantially related to serving that interest;68 and c) strict judicial scrutiny69 in which a
legislative classification which impermissibly interferes with the exercise of a fundamental
right70 or operates to the peculiar disadvantage of a suspect class71 is presumed
unconstitutional, and the burden is upon the government to prove that the classification is
necessary to achieve a compelling state interest and that it is the least restrictive means to
protect such interest.72
Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications 73
based on race74 or gender75 but not when the classification is drawn along income categories.76
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas)
Employee Association, Inc. v. Bangko Sentral ng Pilipinas, 77 the constitutionality of a
provision in the charter of the Bangko Sentral ng Pilipinas (BSP), a government financial
institution (GFI), was challenged for maintaining its rank-and-file employees under the Salary
Standardization Law (SSL), even when the rank-and-file employees of other GFIs had been
exempted from the SSL by their respective charters. Finding that the disputed provision
contained a suspect classification based on salary grade, the Court deliberately employed the
standard of strict judicial scrutiny in its review of the constitutionality of said provision. More
significantly, it was in this case that the Court revealed the broad outlines of its judicial
philosophy, to wit:
Congress retains its wide discretion in providing for a valid classification, and its policies
should be accorded recognition and respect by the courts of justice except when they run afoul
of the Constitution. The deference stops where the classification violates a fundamental right,
or prejudices persons accorded special protection by the Constitution. When these
violations arise, this Court must discharge its primary role as the vanguard of constitutional
guaranties, and require a stricter and more exacting adherence to constitutional limitations.
Rational basis should not suffice.
Admittedly, the view that prejudice to persons accorded special protection by the Constitution
requires a stricter judicial scrutiny finds no support in American or English jurisprudence.
Nevertheless, these foreign decisions and authorities are not per se controlling in this
jurisdiction. At best, they are persuasive and have been used to support many of our decisions.
We should not place undue and fawning reliance upon them and regard them as indispensable
mental crutches without which we cannot come to our own decisions through the employment
of our own endowments. We live in a different ambience and must decide our own problems
in the light of our own interests and needs, and of our qualities and even idiosyncrasies as a
people, and always with our own concept of law and justice. Our laws must be construed in
accordance with the intention of our own lawmakers and such intent may be deduced from the
language of each law and the context of other local legislation related thereto. More
importantly, they must be construed to serve our own public interest which is the be-all and
the end-all of all our laws. And it need not be stressed that our public interest is distinct and
different from others.
xxxx
Further, the quest for a better and more "equal" world calls for the use of equal protection as a
tool of effective judicial intervention.
Equality is one ideal which cries out for bold attention and action in the Constitution. The
Preamble proclaims "equality" as an ideal precisely in protest against crushing inequities in
Philippine society. The command to promote social justice in Article II, Section 10, in "all
phases of national development," further explicitated in Article XIII, are clear commands to
the State to take affirmative action in the direction of greater equality. x x x [T]here is thus in
the Philippine Constitution no lack of doctrinal support for a more vigorous state effort
towards achieving a reasonable measure of equality.
Our present Constitution has gone further in guaranteeing vital social and economic rights to
marginalized groups of society, including labor. Under the policy of social justice, the law
bends over backward to accommodate the interests of the working class on the humane
justification that those with less privilege in life should have more in law. And the obligation
to afford protection to labor is incumbent not only on the legislative and executive branches
but also on the judiciary to translate this pledge into a living reality. Social justice calls for the
humanization of laws and the equalization of social and economic forces by the State so that
justice in its rational and objectively secular conception may at least be approximated.
xxxx
Under most circumstances, the Court will exercise judicial restraint in deciding questions of
constitutionality, recognizing the broad discretion given to Congress in exercising its
legislative power. Judicial scrutiny would be based on the "rational basis" test, and the
legislative discretion would be given deferential treatment.
But if the challenge to the statute is premised on the denial of a fundamental right, or the
perpetuation of prejudice against persons favored by the Constitution with special
protection, judicial scrutiny ought to be more strict. A weak and watered down view would
call for the abdication of this Court’s solemn duty to strike down any law repugnant to the
Constitution and the rights it enshrines. This is true whether the actor committing the
unconstitutional act is a private person or the government itself or one of its instrumentalities.
Oppressive acts will be struck down regardless of the character or nature of the actor.
xxxx
In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-
employee status. It is akin to a distinction based on economic class and status, with the higher
grades as recipients of a benefit specifically withheld from the lower grades. Officers of the
BSP now receive higher compensation packages that are competitive with the industry, while
the poorer, low-salaried employees are limited to the rates prescribed by the SSL. The
implications are quite disturbing: BSP rank-and-file employees are paid the strictly regimented
rates of the SSL while employees higher in rank - possessing higher and better education and
opportunities for career advancement - are given higher compensation packages to entice them
to stay. Considering that majority, if not all, the rank-and-file employees consist of people
whose status and rank in life are less and limited, especially in terms of job marketability, it is
they - and not the officers - who have the real economic and financial need for the adjustment .
This is in accord with the policy of the Constitution "to free the people from poverty, provide
adequate social services, extend to them a decent standard of living, and improve the quality
of life for all." Any act of Congress that runs counter to this constitutional desideratum
deserves strict scrutiny by this Court before it can pass muster. (Emphasis supplied)
Imbued with the same sense of "obligation to afford protection to labor," the Court in the
present case also employs the standard of strict judicial scrutiny, for it perceives in the subject
clause a suspect classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs.
However, a closer examination reveals that the subject clause has a discriminatory intent
against, and an invidious impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one year vis-à-vis OFWs with
employment contracts of one year or more;
Second, among OFWs with employment contracts of more than one year; and
Third, OFWs vis-à-vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis-à-vis OFWs with employment
contracts of one year or more
As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor
Relations Commission79 (Second Division, 1999) that the Court laid down the following rules
on the application of the periods prescribed under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an
illegally dismissed overseas contract worker, i.e., whether his salaries for the unexpired
portion of his employment contract or three (3) months’ salary for every year of the
unexpired term, whichever is less, comes into play only when the employment contract
concerned has a term of at least one (1) year or more. This is evident from the words "for
every year of the unexpired term" which follows the words "salaries x x x for three
months." To follow petitioners’ thinking that private respondent is entitled to three (3) months
salary only simply because it is the lesser amount is to completely disregard and overlook
some words used in the statute while giving effect to some. This is contrary to the well-
established rule in legal hermeneutics that in interpreting a statute, care should be taken that
every part or word thereof be given effect since the law-making body is presumed to know the
meaning of the words employed in the statue and to have used them advisedly. Ut res magis
valeat quam pereat.80 (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two months into his 10-month
contract, but was awarded his salaries for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court made conflicting
rulings on Section 10(5). One was Asian Center for Career and Employment System and
Services v. National Labor Relations Commission (Second Division, October 1998),81 which
involved an OFW who was awarded a two-year employment contract, but was dismissed after
working for one year and two months. The LA declared his dismissal illegal and awarded him
SR13,600.00 as lump-sum salary covering eight months, the unexpired portion of his contract.
On appeal, the Court reduced the award to SR3,600.00 equivalent to his three months’ salary,
this being the lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without
just, valid or authorized cause is entitled to his salary for the unexpired portion of his
employment contract or for three (3) months for every year of the unexpired term, whichever
is less.
In the case at bar, the unexpired portion of private respondent’s employment contract is eight
(8) months. Private respondent should therefore be paid his basic salary corresponding to three
(3) months or a total of SR3,600.82
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission
(Third Division, December 1998),83 which involved an OFW (therein respondent Erlinda
Osdana) who was originally granted a 12-month contract, which was deemed renewed for
another 12 months. After serving for one year and seven-and-a-half months, respondent
Osdana was illegally dismissed, and the Court awarded her salaries for the entire unexpired
portion of four and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:
Case Title Contract Period Period of Service Unexp
Skippers v. Maguad84 6 months 2 months 4m
Bahia Shipping v. 9 months 8 months 4m
Reynaldo Chua 85
 contract, whereas OFW-B will be entitled to only US$3,000.00, equivalent to his salaries for 3
Centennial Transmarine v. 9 months 4 months 5 months 5 months
months of the unexpired portion of his contract, instead of US$14,000.00 for the unexpired
dela Cruz l86 portion of 14 months of his contract, as the US$3,000.00 is the lesser amount.

Talidano v. Falcon87 12 months 3 months 9 months 3 months

The disparity becomes more aggravating when the Court takes into account jurisprudence that,
prior to the effectivity of R.A. No. 8042 on July 14, 1995, 97 illegally dismissed OFWs, no
Univan v. CA 88 12 months 3 months 9 months 3 months
matter how long the period of their employment contracts, were entitled to their salaries for
the entire unexpired portions of their contracts. The matrix below speaks for itself:
Oriental v. CA 89 12 months more than 2 months 10 months 3 months

PCL v. NLRC90 12 months more than 2 months more or less 9 months Case Title 3 months Contract Period Period of Service Unexpired

Olarte v. Nayona91 12 months 21 days 11 months and 9 days 3 months

ATCI v. CA, et al.98 2 years 2 months 22 mo
JSS v.Ferrer92 12 months 16 days 11 months and 24 days 3 months
Phil. Integrated v. NLRC99 2 years 7 days 23 months a
Pentagon v. Adelantar93 12 months 9 months and 7 days 2 months and 23 days 2 months and 23 days
JGB v. NLC100 2 years 9 months 15 mo
Phil. Employ v. Paramio, 12 months 10 months 2 months Unexpired portion
et al.94 Agoy v. NLRC101 2 years 2 months 22 mo

Flourish Maritime v. 2 years 26 days 23 months and 4 daysEDI v. NLRC,

6 months
et al.or
102 3 months for 2
each
years 5 months 19 mo
Almanzor 95 year of contract
Barros v. NLRC, et al.103 12 months 4 months 8 mo
Athenna Manpower v. 1 year, 10 months 1 month 1 year, 9 months and 28 days 6 months or 3 months for each
Villanos 96 and 28 days year v.
Philippine Transmarine of contract 12 months 6 months and 22 days 5 months an
Carilla104
As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories.
The first category includes OFWs with fixed-period employment contracts of less than one It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the
year; in case of illegal dismissal, they are entitled to their salaries for the entire unexpired unexpired portions thereof, were treated alike in terms of the computation of their monetary
portion of their contract. The second category consists of OFWs with fixed-period benefits in case of illegal dismissal. Their claims were subjected to a uniform rule of
employment contracts of one year or more; in case of illegal dismissal, they are entitled to computation: their basic salaries multiplied by the entire unexpired portion of their
monetary award equivalent to only 3 months of the unexpired portion of their contracts. employment contracts.

The disparity in the treatment of these two groups cannot be discounted. In Skippers, the
respondent OFW worked for only 2 months out of his 6-month contract, but was awarded his
salaries for the remaining 4 months. In contrast, the respondent OFWs in Oriental and PCL
who had also worked for about 2 months out of their 12-month contracts were awarded their
salaries for only 3 months of the unexpired portion of their contracts. Even the OFWs involved
in Talidano and Univan who had worked for a longer period of 3 months out of their 12-
month contracts before being illegally dismissed were awarded their salaries for only 3
months.
The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of
computation of the money claims of illegally dismissed OFWs based on their employment
periods, in the process singling out one category whose contracts have an unexpired portion of
one year or more and subjecting them to the peculiar disadvantage of having their monetary
awards limited to their salaries for 3 months or for the unexpired portion thereof, whichever is
less, but all the while sparing the other category from such prejudice, simply because the
latter's unexpired contracts fall short of one year.

Among OFWs With Employment Contracts of More Than One Year

To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with
an employment contract of 10 months at a monthly salary rate of US$1,000.00 and a
hypothetical OFW-B with an employment contract of 15 months with the same monthly salary Upon closer examination of the terminology employed in the subject clause, the Court now
rate of US$1,000.00. Both commenced work on the same day and under the same employer, has misgivings on the accuracy of the Marsaman interpretation.
and were illegally dismissed after one month of work. Under the subject clause, OFW-A will
be entitled to US$9,000.00, equivalent to his salaries for the remaining 9 months of his
The Court notes that the subject clause "or for three (3) months for every year of the unexpired
term, whichever is less" contains the qualifying phrases "every year" and "unexpired term."
By its ordinary meaning, the word "term" means a limited or definite extent of time. 105
Corollarily, that "every year" is but part of an "unexpired term" is significant in many ways:
first, the unexpired term must be at least one year, for if it were any shorter, there would be no
occasion for such unexpired term to be measured by every year; and second, the original term
must be more than one year, for otherwise, whatever would be the unexpired term thereof will
not reach even a year. Consequently, the more decisive factor in the determination of when the
subject clause "for three (3) months for every year of the unexpired term, whichever is less"
shall apply is not the length of the original contract period as held in Marsaman,106 but the
length of the unexpired portion of the contract period -- the subject clause applies in cases
when the unexpired portion of the contract period is at least one year, which arithmetically
requires that the original contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs
whose contract periods are for more than one year: those who are illegally dismissed with less
than one year left in their contracts shall be entitled to their salaries for the entire unexpired
portion thereof, while those who are illegally dismissed with one year or more remaining in
their contracts shall be covered by the subject clause, and their monetary benefits limited to
their salaries for three months only.
To concretely illustrate the application of the foregoing interpretation of the subject clause, the
Court assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at a
salary rate of US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and
OFW-D, on the 13th month. Considering that there is at least 12 months remaining in the
contract period of OFW-C, the subject clause applies to the computation of the latter's
monetary benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total
salaries for the 12 months unexpired portion of the contract, but to the lesser amount of
US$3,000.00 or the latter's salaries for 3 months out of the 12-month unexpired term of the
contract. On the other hand, OFW-D is spared from the effects of the subject clause, for there
are only 11 months left in the latter's contract period. Thus, OFW-D will be entitled to
US$11,000.00, which is equivalent to his/her total salaries for the entire 11-month unexpired
portion.
OFWs vis-à-vis Local Workers
With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary
awards of illegally dismissed OFWs was in place. This uniform system was applicable even to
local workers with fixed-term employment.107
The earliest rule prescribing a uniform system of computation was actually Article 299 of the
Code of Commerce (1888),108 to wit:
Article 299. If the contracts between the merchants and their shop clerks and employees
should have been made of a fixed period, none of the contracting parties, without the consent
of the other, may withdraw from the fulfillment of said contract until the termination of the
period agreed upon.
Persons violating this clause shall be subject to indemnify the loss and damage suffered, with
the exception of the provisions contained in the following articles.
In Reyes v. The Compañia Maritima,109 the Court applied the foregoing provision to
determine the liability of a shipping company for the illegal discharge of its managers prior to
the expiration of their fixed-term employment. The Court therein held the shipping company
liable for the salaries of its managers for the remainder of their fixed-term employment.
There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of
Commerce which provides:
Article 605. If the contracts of the captain and members of the crew with the agent should be
for a definite period or voyage, they cannot be discharged until the fulfillment of their
contracts, except for reasons of insubordination in serious matters, robbery, theft, habitual
drunkenness, and damage caused to the vessel or to its cargo by malice or manifest or proven
negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie, 110 in
which the Court held the shipping company liable for the salaries and subsistence allowance of
its illegally dismissed employees for the entire unexpired portion of their employment
contracts.
While Article 605 has remained good law up to the present, 111 Article 299 of the Code of
Commerce was replaced by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and
for a certain work cannot leave or be dismissed without sufficient cause, before the fulfillment
of the contract. (Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as
a conjunctive "and" so as to apply the provision to local workers who are employed for a time
certain although for no particular skill. This interpretation of Article 1586 was reiterated in
Garcia Palomar v. Hotel de France Company.113 And in both Lemoine and Palomar, the Court
adopted the general principle that in actions for wrongful discharge founded on Article 1586,
local workers are entitled to recover damages to the extent of the amount stipulated to be paid
to them by the terms of their contract. On the computation of the amount of such damages, the
Court in Aldaz v. Gay114 held:
The doctrine is well-established in American jurisprudence, and nothing has been brought to
our attention to the contrary under Spanish jurisprudence, that when an employee is
wrongfully discharged it is his duty to seek other employment of the same kind in the same
community, for the purpose of reducing the damages resulting from such wrongful discharge.
However, while this is the general rule, the burden of showing that he failed to make an effort
to secure other employment of a like nature, and that other employment of a like nature was
obtainable, is upon the defendant. When an employee is wrongfully discharged under a
contract of employment his prima facie damage is the amount which he would be entitled to
had he continued in such employment until the termination of the period. (Howard vs. Daly,
61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich.,
43.)115 (Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term
employment: Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2
(Contract of Labor) and 3 (Contract for a Piece of Work), Chapter 3, Title VIII, Book IV. 116
Much like Article 1586 of the Civil Code of 1889, the new provisions of the Civil Code do not
expressly provide for the remedies available to a fixed-term worker who is illegally
discharged. However, it is noted that in Mackay Radio & Telegraph Co., Inc. v. Rich, 117 the
Court carried over the principles on the payment of damages underlying Article 1586 of the
Civil Code of 1889 and applied the same to a case involving the illegal discharge of a local
worker whose fixed-period employment contract was entered into in 1952, when the new Civil
Code was already in effect.118
More significantly, the same principles were applied to cases involving overseas Filipino
workers whose fixed-term employment contracts were illegally terminated, such as in First
Asian Trans & Shipping Agency, Inc. v. Ople,119 involving seafarers who were illegally
discharged. In Teknika Skills and Trade Services, Inc. v. National Labor Relations
Commission,120 an OFW who was illegally dismissed prior to the expiration of her fixed-
period employment contract as a baby sitter, was awarded salaries corresponding to the
unexpired portion of her contract. The Court arrived at the same ruling in Anderson v.
National Labor Relations Commission,121 which involved a foreman hired in 1988 in Saudi
Arabia for a fixed term of two years, but who was illegally dismissed after only nine months
on the job -- the Court awarded him salaries corresponding to 15 months, the unexpired
portion of his contract. In Asia World Recruitment, Inc. v. National Labor Relations
Commission,122 a Filipino working as a security officer in 1989 in Angola was awarded his
salaries for the remaining period of his 12-month contract after he was wrongfully discharged.
Finally, in Vinta Maritime Co., Inc. v. National Labor Relations Commission, 123 an OFW
whose 12-month contract was illegally cut short in the second month was declared entitled to
his salaries for the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who
were illegally discharged were treated alike in terms of the computation of their money
claims: they were uniformly entitled to their salaries for the entire unexpired portions of their
contracts. But with the enactment of R.A. No. 8042, specifically the adoption of the subject
clause, illegally dismissed OFWs with an unexpired portion of one year or more in their
employment contract have since been differently treated in that their money claims are subject
to a 3-month cap, whereas no such limitation is imposed on local workers with fixed-term
employment.
The Court concludes that the subject clause contains a suspect classification in that, in the
computation of the monetary benefits of fixed-term employees who are illegally discharged,
it imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or
more in their contracts, but none on the claims of other OFWs or local workers with fixed-
term employment. The subject clause singles out one classification of OFWs and burdens it
with a peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected by the
Constitution, the Court now subjects the classification to a strict judicial scrutiny, and
determines whether it serves a compelling state interest through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers
arrayed in the Constitution and calibrated by history.124 It is akin to the paramount interest of
the state125 for which some individual liberties must give way, such as the public interest in
safeguarding health or maintaining medical standards,126 or in maintaining access to
information on matters of public concern.127
In the present case, the Court dug deep into the records but found no compelling state interest
that the subject clause may possibly serve.
The OSG defends the subject clause as a police power measure "designed to protect the
employment of Filipino seafarers overseas x x x. By limiting the liability to three months [sic],
Filipino seafarers have better chance of getting hired by foreign employers." The limitation
also protects the interest of local placement agencies, which otherwise may be made to
shoulder millions of pesos in "termination pay."128
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the payment of money
claims in the event that jurisdiction over the foreign employer is not acquired by the court or if
the foreign employer reneges on its obligation. Hence, placement agencies that are in good
faith and which fulfill their obligations are unnecessarily penalized for the acts of the foreign
employer. To protect them and to promote their continued helpful contribution in deploying
Filipino migrant workers, liability for money are reduced under Section 10 of RA 8042.
This measure redounds to the benefit of the migrant workers whose welfare the government
seeks to promote. The survival of legitimate placement agencies helps [assure] the government
that migrant workers are properly deployed and are employed under decent and humane
conditions.129 (Emphasis supplied)
However, nowhere in the Comment or Memorandum does the OSG cite the source of its
perception of the state interest sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in
sponsorship of House Bill No. 14314 (HB 14314), from which the law originated; 130 but the
speech makes no reference to the underlying reason for the adoption of the subject clause.
That is only natural for none of the 29 provisions in HB 14314 resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to
wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of
the complaint, the claims arising out of an employer-employee relationship or by virtue of the
complaint, the claim arising out of an employer-employee relationship or by virtue of any law
or contract involving Filipino workers for overseas employment including claims for actual,
moral, exemplary and other forms of damages.
The liability of the principal and the recruitment/placement agency or any and all claims under
this Section shall be joint and several.
Any compromise/amicable settlement or voluntary agreement on any money claims exclusive
of damages under this Section shall not be less than fifty percent (50%) of such money claims:
Provided, That any installment payments, if applicable, to satisfy any such compromise or
voluntary settlement shall not be more than two (2) months. Any compromise/voluntary
agreement in violation of this paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of cases provided under this
Section shall subject the responsible officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his decision or resolution
within the prescribed period shall be, or caused to be, withheld until the said official
complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any appointive public
office for five (5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any
liability which any such official may have incurred under other existing laws or rules and
regulations as a consequence of violating the provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of
money claims.
A rule on the computation of money claims containing the subject clause was inserted and
eventually adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined
the rationale of the subject clause in the transcripts of the "Bicameral Conference Committee
(Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing Provisions of
Senate Bill No. 2077 and House Bill No. 14314)." However, the Court finds no discernible
state interest, let alone a compelling one, that is sought to be protected or advanced by the
adoption of the subject clause.
In fine, the Government has failed to discharge its burden of proving the existence of a
compelling state interest that would justify the perpetuation of the discrimination against
OFWs under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the
employment of OFWs by mitigating the solidary liability of placement agencies, such callous
and cavalier rationale will have to be rejected. There can never be a justification for any form
of government action that alleviates the burden of one sector, but imposes the same burden on
another sector, especially when the favored sector is composed of private businesses such as
placement agencies, while the disadvantaged sector is composed of OFWs whose protection
no less than the Constitution commands. The idea that private business interest can be elevated
to the level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of
placement agencies vis-a-vis their foreign principals, there are mechanisms already in place
that can be employed to achieve that purpose without infringing on the constitutional rights of
OFWs.
The POEA Rules and Regulations Governing the Recruitment and Employment of Land-
Based Overseas Workers, dated February 4, 2002, imposes administrative disciplinary
measures on erring foreign employers who default on their contractual obligations to migrant
workers and/or their Philippine agents. These disciplinary measures range from temporary
disqualification to preventive suspension. The POEA Rules and Regulations Governing the
Recruitment and Employment of Seafarers, dated May 23, 2003, contains similar
administrative disciplinary measures against erring foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive means of aiding
local placement agencies in enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the
right of petitioner and other OFWs to equal protection.1avvphi1
Further, there would be certain misgivings if one is to approach the declaration of the
unconstitutionality of the subject clause from the lone perspective that the clause directly
violates state policy on labor under Section 3,131 Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing,132 there are
some which this Court has declared not judicially enforceable, Article XIII being one,133
particularly Section 3 thereof, the nature of which, this Court, in Agabon v. National Labor
Relations Commission,134 has described to be not self-actuating:
Thus, the constitutional mandates of protection to labor and security of tenure may be deemed
as self-executing in the sense that these are automatically acknowledged and observed without
need for any enabling legislation. However, to declare that the constitutional provisions are
enough to guarantee the full exercise of the rights embodied therein, and the realization of
ideals therein expressed, would be impractical, if not unrealistic. The espousal of such view
presents the dangerous tendency of being overbroad and exaggerated. The guarantees of "full
protection to labor" and "security of tenure", when examined in isolation, are facially
unqualified, and the broadest interpretation possible suggests a blanket shield in favor of labor
against any form of removal regardless of circumstance. This interpretation implies an
unimpeachable right to continued employment-a utopian notion, doubtless-but still hardly
within the contemplation of the framers. Subsequent legislation is still needed to define the
parameters of these guaranteed rights to ensure the protection and promotion, not only the
rights of the labor sector, but of the employers' as well. Without specific and pertinent
legislation, judicial bodies will be at a loss, formulating their own conclusion to approximate
at least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive
enforceable right to stave off the dismissal of an employee for just cause owing to the failure
to serve proper notice or hearing. As manifested by several framers of the 1987 Constitution,
the provisions on social justice require legislative enactments for their enforceability. 135
(Emphasis added)
Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable
rights, for the violation of which the questioned clause may be declared unconstitutional. It
may unwittingly risk opening the floodgates of litigation to every worker or union over every
conceivable violation of so broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the working class
any actual enforceable right, but merely clothes it with the status of a sector for whom the
Constitution urges protection through executive or legislative action and judicial recognition.
Its utility is best limited to being an impetus not just for the executive and legislative
departments, but for the judiciary as well, to protect the welfare of the working class. And it
was in fact consistent with that constitutional agenda that the Court in Central Bank (now
Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas,
penned by then Associate Justice now Chief Justice Reynato S. Puno, formulated the judicial
precept that when the challenge to a statute is premised on the perpetuation of prejudice
against persons favored by the Constitution with special protection -- such as the working
class or a section thereof -- the Court may recognize the existence of a suspect classification
and subject the same to strict judicial scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny formulated in
Central Bank Employee Association exaggerate the significance of Section 3, Article XIII is a
groundless apprehension. Central Bank applied Article XIII in conjunction with the equal
protection clause. Article XIII, by itself, without the application of the equal protection clause,
has no life or force of its own as elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject clause violates
petitioner's right to substantive due process, for it deprives him of property, consisting of
monetary benefits, without any existing valid governmental purpose. 136
The argument of the Solicitor General, that the actual purpose of the subject clause of limiting
the entitlement of OFWs to their three-month salary in case of illegal dismissal, is to give
them a better chance of getting hired by foreign employers. This is plain speculation. As
earlier discussed, there is nothing in the text of the law or the records of the deliberations
leading to its enactment or the pleadings of respondent that would indicate that there is an
existing governmental purpose for the subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental purpose; and it is for
that precise reason that the clause violates not just petitioner's right to equal protection, but
also her right to substantive due process under Section 1,137 Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire
unexpired period of nine months and 23 days of his employment contract, pursuant to law and
jurisprudence prior to the enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the salary basis in the
computation of his monetary award, because these are fixed benefits that have been stipulated
into his contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like
petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment
Contract of Seafarers, in which salary is understood as the basic wage, exclusive of overtime,
leave pay and other bonuses; whereas overtime pay is compensation for all work "performed"
in excess of the regular eight hours, and holiday pay is compensation for any work
"performed" on designated rest days and holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and
holiday pay in the computation of petitioner's monetary award, unless there is evidence that he
performed work during those periods. As the Court held in Centennial Transmarine, Inc. v.
Dela Cruz,138
However, the payment of overtime pay and leave pay should be disallowed in light of our
ruling in Cagampan v. National Labor Relations Commission, to wit:
The rendition of overtime work and the submission of sufficient proof that said was actually
performed are conditions to be satisfied before a seaman could be entitled to overtime pay
which should be computed on the basis of 30% of the basic monthly salary. In short, the
contract provision guarantees the right to overtime pay but the entitlement to such benefit must
first be established.
In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is
unwarranted since the same is given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for
every year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of
Republic Act No. 8042 is DECLARED UNCONSTITUTIONAL; and the December 8, 2004
Decision and April 1, 2005 Resolution of the Court of Appeals are MODIFIED to the effect
that petitioner is AWARDED his salaries for the entire unexpired portion of his employment
contract consisting of nine months and 23 days computed at the rate of US$1,400.00 per
month.
No costs.
SO ORDERED.
EDI-STAFFBUILDERS INTERNATIONAL, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ELEAZAR S. GRAN,
respondents.
DECISION
VELASCO, JR., J.:
 The Case
This Petition for Review on Certiorari1 seeks to set aside the October 18, 2000 Decision2 of
the Court of Appeals (CA) in CA-G.R. SP No. 56120 which affirmed the January 15, 1999
Decision3 and September 30, 1999 Resolution4 rendered by the National Labor Relations
Commission (NLRC) (Third Division) in POEA ADJ (L) 94-06-2194, ordering Expertise
Search International (ESI), EDI-Staffbuilders International, Inc. (EDI), and Omar Ahmed Ali
Bin Bechr Est. (OAB) jointly and severally to pay Eleazar S. Gran (Gran) the amount of USD
16,150.00 as unpaid salaries.
The Facts
Petitioner EDI is a corporation engaged in recruitment and placement of Overseas Filipino
Workers (OFWs).5 ESI is another recruitment agency which collaborated with EDI to process
the documentation and deployment of private respondent to Saudi Arabia.
Private respondent Gran was an OFW recruited by EDI, and deployed by ESI to work for
OAB, in Riyadh, Kingdom of Saudi Arabia.6
It appears that OAB asked EDI through its October 3, 1993 letter for curricula vitae of
qualified applicants for the position of "Computer Specialist."7 In a facsimile transmission
dated November 29, 1993, OAB informed EDI that, from the applicants' curricula vitae
submitted to it for evaluation, it selected Gran for the position of "Computer Specialist." The
faxed letter also stated that if Gran agrees to the terms and conditions of employment
contained in it, one of which was a monthly salary of SR (Saudi Riyal) 2,250.00 (USD
600.00), EDI may arrange for Gran's immediate dispatch.8
After accepting OAB's offer of employment, Gran signed an employment contract9 that
granted him a monthly salary of USD 850.00 for a period of two years. Gran was then
deployed to Riyadh, Kingdom of Saudi Arabia on February 7, 1994.
Upon arrival in Riyadh, Gran questioned the discrepancy in his monthly salary—his
employment contract stated USD 850.00; while his Philippine Overseas Employment Agency
(POEA) Information Sheet indicated USD 600.00 only. However, through the assistance of
the EDI office in Riyadh, OAB agreed to pay Gran USD 850.00 a month.10
After Gran had been working for about five months for OAB, his employment was terminated
through OAB's July 9, 1994 letter,11 on the following grounds:
1. Non-compliance to contract requirements by the recruitment agency primarily on
your salary and contract duration.
2. Non-compliance to pre-qualification requirements by the recruitment agency[,]
vide OAB letter ref. F-5751-93, dated October 3, 1993.12
3. Insubordination or disobedience to Top Management Order and/or instructions
(non-submittal of daily activity reports despite several instructions).
On July 11, 1994, Gran received from OAB the total amount of SR 2,948.00 representing his
final pay, and on the same day, he executed a Declaration13 releasing OAB from any financial
obligation or otherwise, towards him.
After his arrival in the Philippines, Gran instituted a complaint, on July 21, 1994, against
ESI/EDI, OAB, Country Bankers Insurance Corporation, and Western Guaranty Corporation
with the NLRC, National Capital Region, Quezon City, which was docketed as POEA ADJ
(L) 94-06-2194 for underpayment of wages/salaries and illegal dismissal.
The Ruling of the Labor Arbiter
In his February 10, 1998 Decision,14 Labor Arbiter Manuel R. Caday, to whom Gran's case
was assigned, ruled that there was neither underpayment nor illegal dismissal.
The Labor Arbiter reasoned that there was no underpayment of salaries since according to the
POEA-Overseas Contract Worker (OCW) Information Sheet, Gran's monthly salary was USD
600.00, and in his Confirmation of Appointment as Computer Specialist, his monthly basic
salary was fixed at SR 2,500.00, which was equivalent to USD 600.00.
Arbiter Caday also cited the Declaration executed by Gran, to justify that Gran had no claim
for unpaid salaries or wages against OAB.
With regard to the issue of illegal dismissal, the Labor Arbiter found that Gran failed to refute
EDI's allegations; namely, (1) that Gran did not submit a single activity report of his daily
activity as dictated by company policy; (2) that he was not qualified for the job as computer
specialist due to his insufficient knowledge in programming and lack of knowledge in ACAD
system; (3) that Gran refused to follow management's instruction for him to gain more
knowledge of the job to prove his worth as computer specialist; (4) that Gran's employment
contract had never been substituted; (5) and that Gran was paid a monthly salary of USD
850.00, and USD 350.00 monthly as food allowance.
Accordingly, the Labor Arbiter decided that Gran was validly dismissed from his work due to
insubordination, disobedience, and his failure to submit daily activity reports.
Thus, on February 10, 1998, Arbiter Caday dismissed Gran's complaint for lack of merit.
Dissatisfied, Gran filed an Appeal15 on April 6, 1998 with the NLRC, Third Division.
However, it appears from the records that Gran failed to furnish EDI with a copy of his Appeal
Memorandum.
The Ruling of the NLRC
The NLRC held that EDI's seemingly harmless transfer of Gran's contract to ESI is actually
"reprocessing," which is a prohibited transaction under Article 34 (b) of the Labor Code. This
scheme constituted misrepresentation through the conspiracy between EDI and ESI in
misleading Gran and even POEA of the actual terms and conditions of the OFW's
employment. In addition, it was found that Gran did not commit any act that constituted a
legal ground for dismissal. The alleged non-compliance with contractual stipulations relating
to Gran's salary and contract duration, and the absence of pre-qualification requirements
cannot be attributed to Gran but to EDI, which dealt directly with OAB. In addition, the
charge of insubordination was not substantiated, and Gran was not even afforded the required
notice and investigation on his alleged offenses.
Thus, the NLRC reversed the Labor Arbiter's Decision and rendered a new one, the dispositive
portion of which reads:
WHEREFORE, the assailed decision is SET ASIDE. Respondents Expertise Search
International, Inc., EDI Staffbuilders Int'l., Inc. and Omar Ahmed Ali Bin Bechr Est.
(OAB) are hereby ordered jointly and severally liable to pay the complainant
Eleazar Gran the Philippine peso equivalent at the time of actual payment of
SIXTEEN THOUSAND ONE HUNDRED FIFTY US DOLLARS (US$16,150.00)
representing his salaries for the unexpired portion of his contract.
SO ORDERED.16
Gran then filed a Motion for Execution of Judgment17 on March 29, 1999 with the NLRC and
petitioner receiving a copy of this motion on the same date. 18
To prevent the execution, petitioner filed an Opposition19 to Gran's motion arguing that the
Writ of Execution cannot issue because it was not notified of the appellate proceedings before
the NLRC and was not given a copy of the memorandum of appeal nor any opportunity to
participate in the appeal.
Seeing that the NLRC did not act on Gran's motion after EDI had filed its Opposition,
petitioner filed, on August 26, 1999, a Motion for Reconsideration of the NLRC Decision after
receiving a copy of the Decision on August 16, 1999.20
The NLRC then issued a Resolution21 denying petitioner's Motion for Reconsideration,
ratiocinating that the issues and arguments raised in the motion "had already been amply
discussed, considered, and ruled upon" in the Decision, and that there was "no cogent reason
or patent or palpable error that warrant any disturbance thereof."
Unconvinced of the NLRC's reasoning, EDI filed a Petition for Certiorari before the CA.
Petitioner claimed in its petition that the NLRC committed grave abuse of discretion in giving
due course to the appeal despite Gran's failure to perfect the appeal.
The Ruling of the Court of Appeals
The CA subsequently ruled on the procedural and substantive issues of EDI's petition.
On the procedural issue, the appellate court held that "Gran's failure to furnish a copy of his
appeal memorandum [to EDI was] a mere formal lapse, an excusable neglect and not a
jurisdictional defect which would justify the dismissal of his appeal."22 The court also held
that petitioner EDI failed to prove that private respondent was terminated for a valid cause and
in accordance with due process; and that Gran's Declaration releasing OAB from any
monetary obligation had no force and effect. The appellate court ratiocinated that EDI had the
burden of proving Gran's incompetence; however, other than the termination letter, no
evidence was presented to show how and why Gran was considered to be incompetent. The
court held that since the law requires the recruitment agencies to subject OFWs to trade tests
before deployment, Gran must have been competent and qualified; otherwise, he would not
have been hired and deployed abroad.
As for the charge of insubordination and disobedience due to Gran's failure to submit a "Daily
Activity Report," the appellate court found that EDI failed to show that the submission of the
"Daily Activity Report" was a part of Gran's duty or the company's policy. The court also held
that even if Gran was guilty of insubordination, he should have just been suspended or
reprimanded, but not dismissed.
The CA also held that Gran was not afforded due process, given that OAB did not abide by the
twin notice requirement. The court found that Gran was terminated on the same day he
received the termination letter, without having been apprised of the bases of his dismissal or
afforded an opportunity to explain his side.
Finally, the CA held that the Declaration signed by Gran did not bar him from demanding
benefits to which he was entitled. The appellate court found that the Declaration was in the
form of a quitclaim, and as such is frowned upon as contrary to public policy especially where
the monetary consideration given in the Declaration was very much less than what he was
legally entitled to—his backwages amounting to USD 16,150.00.
As a result of these findings, on October 18, 2000, the appellate court denied the petition to set
aside the NLRC Decision.
Hence, this instant petition is before the Court.
The Issues
Petitioner raises the following issues for our consideration:
I. WHETHER THE FAILURE OF GRAN TO FURNISH A COPY OF HIS
APPEAL MEMORANDUM TO PETITIONER EDI WOULD CONSTITUTE A
JURISDICTIONAL DEFECT AND A DEPRIVATION OF PETITIONER EDI'S
RIGHT TO DUE PROCESS AS WOULD JUSTIFY THE DISMISSAL OF
GRAN'S APPEAL.
II. WHETHER PETITIONER EDI HAS ESTABLISHED BY WAY OF
SUBSTANTIAL EVIDENCE THAT GRAN'S TERMINATION WAS
JUSTIFIABLE BY REASON OF INCOMPETENCE. COROLLARY HERETO,
WHETHER THE PRIETO VS. NLRC RULING, AS APPLIED BY THE COURT
OF APPEALS, IS APPLICABLE IN THE INSTANT CASE.
III. WHETHER PETITIONER HAS ESTABLISHED BY WAY OF
SUBSTANTIAL EVIDENCE THAT GRAN'S TERMINATION WAS
JUSTIFIABLE BY REASON OF INSUBORDINATION AND DISOBEDIENCE.
 IV. WHETHER GRAN WAS AFFORDED DUE PROCESS PRIOR TO
TERMINATION.
V. WHETHER GRAN IS ENTITLED TO BACKWAGES FOR THE UNEXPIRED
PORTION OF HIS CONTRACT.23
The Court's Ruling
The petition lacks merit except with respect to Gran's failure to furnish EDI with his Appeal
Memorandum filed with the NLRC.
First Issue: NLRC's Duty is to Require Respondent to Provide Petitioner a Copy of the
Appeal
Petitioner EDI claims that Gran's failure to furnish it a copy of the Appeal Memorandum
constitutes a jurisdictional defect and a deprivation of due process that would warrant a
rejection of the appeal.
This position is devoid of merit.
In a catena of cases, it was ruled that failure of appellant to furnish a copy of the appeal to
the adverse party is not fatal to the appeal.
In Estrada v. National Labor Relations Commission,24 this Court set aside the order of the
NLRC which dismissed an appeal on the sole ground that the appellant did not furnish the
appellee a memorandum of appeal contrary to the requirements of Article 223 of the New
Labor Code and Section 9, Rule XIII of its Implementing Rules and Regulations.
Also, in J.D. Magpayo Customs Brokerage Corp. v. NLRC, the order of dismissal of an appeal
to the NLRC based on the ground that "there is no showing whatsoever that a copy of the
appeal was served by the appellant on the appellee"25 was annulled. The Court ratiocinated as
follows:
The failure to give a copy of the appeal to the adverse party was a mere formal
lapse, an excusable neglect. Time and again We have acted on petitions to review
decisions of the Court of Appeals even in the absence of proof of service of a copy
thereof to the Court of Appeals as required by Section 1 of Rule 45, Rules of Court.
We act on the petitions and simply require the petitioners to comply with the
rule.26 (Emphasis supplied.)
The J.D. Magpayo ruling was reiterated in Carnation Philippines Employees Labor Union-
FFW v. National Labor Relations Commission,27 Pagdonsalan v. NLRC,28 and in Sunrise
Manning Agency, Inc. v. NLRC.29
Thus, the doctrine that evolved from these cases is that failure to furnish the adverse party
with a copy of the appeal is treated only as a formal lapse, an excusable neglect, and hence,
not a jurisdictional defect. Accordingly, in such a situation, the appeal should not be
dismissed; however, it should not be given due course either. As enunciated in J.D. Magpayo,
the duty that is imposed on the NLRC, in such a case, is to require the appellant to
comply with the rule that the opposing party should be provided with a copy of the
appeal memorandum.
While Gran's failure to furnish EDI with a copy of the Appeal Memorandum is excusable, the
abject failure of the NLRC to order Gran to furnish EDI with the Appeal Memorandum
constitutes grave abuse of discretion.
The records reveal that the NLRC discovered that Gran failed to furnish EDI a copy of the
Appeal Memorandum. The NLRC then ordered Gran to present proof of service. In
compliance with the order, Gran submitted a copy of Camp Crame Post Office's list of
mail/parcels sent on April 7, 1998.30 The post office's list shows that private respondent Gran
sent two pieces of mail on the same date: one addressed to a certain Dan O. de Guzman of
Legaspi Village, Makati; and the other appears to be addressed to Neil B. Garcia (or Gran), 31
of Ermita, Manila—both of whom are not connected with petitioner.
This mailing list, however, is not a conclusive proof that EDI indeed received a copy of the
Appeal Memorandum.
Sec. 5 of the NLRC Rules of Procedure (1990) provides for the proof and completeness of
service in proceedings before the NLRC:
Section 5.32 Proof and completeness of service.—The return is prima facie proof of
the facts indicated therein. Service by registered mail is complete upon receipt by
the addressee or his agent; but if the addressee fails to claim his mail from the post
office within five (5) days from the date of first notice of the postmaster, service
shall take effect after such time. (Emphasis supplied.)
Hence, if the service is done through registered mail, it is only deemed complete when the
addressee or his agent received the mail or after five (5) days from the date of first notice of
the postmaster. However, the NLRC Rules do not state what would constitute proper proof of
service.
Sec. 13, Rule 13 of the Rules of Court, provides for proofs of service:
Section 13. Proof of service.—Proof of personal service shall consist of a written
admission of the party served or the official return of the server, or the affidavit of
the party serving, containing a full statement of the date, place and manner of
service. If the service is by ordinary mail, proof thereof shall consist of an affidavit
of the person mailing of facts showing compliance with section 7 of this Rule. If
service is made by registered mail, proof shall be made by such affidavit and
registry receipt issued by the mailing office. The registry return card shall be
filed immediately upon its receipt by the sender, or in lieu thereof the
unclaimed letter together with the certified or sworn copy of the notice given by
the postmaster to the addressee (emphasis supplied).
Based on the foregoing provision, it is obvious that the list submitted by Gran is not
conclusive proof that he had served a copy of his appeal memorandum to EDI, nor is it
conclusive proof that EDI received its copy of the Appeal Memorandum. He should have
submitted an affidavit proving that he mailed the Appeal Memorandum together with the
registry receipt issued by the post office; afterwards, Gran should have immediately filed the
registry return card.
Hence, after seeing that Gran failed to attach the proof of service, the NLRC should not have
simply accepted the post office's list of mail and parcels sent; but it should have required
Gran to properly furnish the opposing parties with copies of his Appeal Memorandum as
prescribed in J.D. Magpayo and the other cases. The NLRC should not have proceeded
with the adjudication of the case, as this constitutes grave abuse of discretion.
The glaring failure of NLRC to ensure that Gran should have furnished petitioner EDI a copy
of the Appeal Memorandum before rendering judgment reversing the dismissal of Gran's
complaint constitutes an evasion of the pertinent NLRC Rules and established jurisprudence.
Worse, this failure deprived EDI of procedural due process guaranteed by the Constitution
which can serve as basis for the nullification of proceedings in the appeal before the NLRC.
One can only surmise the shock and dismay that OAB, EDI, and ESI experienced when they
thought that the dismissal of Gran's complaint became final, only to receive a copy of Gran's
Motion for Execution of Judgment which also informed them that Gran had obtained a
favorable NLRC Decision. This is not level playing field and absolutely unfair and
discriminatory against the employer and the job recruiters. The rights of the employers to
procedural due process cannot be cavalierly disregarded for they too have rights assured under
the Constitution.
However, instead of annulling the dispositions of the NLRC and remanding the case for
further proceedings we will resolve the petition based on the records before us to avoid a
protracted litigation.33
The second and third issues have a common matter—whether there was just cause for Gran's
dismissal—hence, they will be discussed jointly.
Second and Third Issues: Whether Gran's dismissal is justifiable by reason of
incompetence, insubordination, and disobedience
In cases involving OFWs, the rights and obligations among and between the OFW, the local
recruiter/agent, and the foreign employer/principal are governed by the employment contract.
A contract freely entered into is considered law between the parties; and hence, should be
respected. In formulating the contract, the parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.34
In the present case, the employment contract signed by Gran specifically states that Saudi
Labor Laws will govern matters not provided for in the contract (e.g. specific causes for
termination, termination procedures, etc.). Being the law intended by the parties (lex loci
intentiones) to apply to the contract, Saudi Labor Laws should govern all matters relating to
the termination of the employment of Gran.
In international law, the party who wants to have a foreign law applied to a dispute or case has
the burden of proving the foreign law. The foreign law is treated as a question of fact to be
properly pleaded and proved as the judge or labor arbiter cannot take judicial notice of a
foreign law. He is presumed to know only domestic or forum law.35
Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter; thus, the
International Law doctrine of presumed-identity approach or processual presumption comes
into play.36 Where a foreign law is not pleaded or, even if pleaded, is not proved, the
presumption is that foreign law is the same as ours.37 Thus, we apply Philippine labor laws in
determining the issues presented before us.
Petitioner EDI claims that it had proven that Gran was legally dismissed due to incompetence
and insubordination or disobedience.
This claim has no merit.
In illegal dismissal cases, it has been established by Philippine law and jurisprudence that the
employer should prove that the dismissal of employees or personnel is legal and just.
Section 33 of Article 277 of the Labor Code38 states that:
ART. 277. MISCELLANEOUS PROVISIONS39
(b) Subject to the constitutional right of workers to security of tenure and their right
to be protected against dismissal except for a just and authorized cause and without
prejudice to the requirement of notice under Article 283 of this Code, the employer
shall furnish the worker whose employment is sought to be terminated a written
notice containing a statement of the causes for termination and shall afford the latter
ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and regulations
promulgated pursuant to guidelines set by the Department of Labor and
Employment. Any decision taken by the employer shall be without prejudice to the
right of the workers to contest the validity or legality of his dismissal by filing a
complaint with the regional branch of the National Labor Relations Commission.
The burden of proving that the termination was for a valid or authorized cause
shall rest on the employer. x x x
In many cases, it has been held that in termination disputes or illegal dismissal cases, the
employer has the burden of proving that the dismissal is for just and valid causes; and failure
to do so would necessarily mean that the dismissal was not justified and therefore illegal.40
Taking into account the character of the charges and the penalty meted to an employee, the
employer is bound to adduce clear, accurate, consistent, and convincing evidence to prove that
the dismissal is valid and legal.41 This is consistent with the principle of security of tenure as
guaranteed by the Constitution and reinforced by Article 277 (b) of the Labor Code of the
Philippines.42
In the instant case, petitioner claims that private respondent Gran was validly dismissed for
just cause, due to incompetence and insubordination or disobedience. To prove its allegations,
EDI submitted two letters as evidence. The first is the July 9, 1994 termination letter,43
addressed to Gran, from Andrea E. Nicolaou, Managing Director of OAB. The second is an
unsigned April 11, 1995 letter44 from OAB addressed to EDI and ESI, which outlined the
reasons why OAB had terminated Gran's employment.
Petitioner claims that Gran was incompetent for the Computer Specialist position because he
had "insufficient knowledge in programming and zero knowledge of [the] ACAD system."45
Petitioner also claims that Gran was justifiably dismissed due to insubordination or
disobedience because he continually failed to submit the required "Daily Activity Reports."46
However, other than the abovementioned letters, no other evidence was presented to show
how and why Gran was considered incompetent, insubordinate, or disobedient. Petitioner EDI
had clearly failed to overcome the burden of proving that Gran was validly dismissed.
Petitioner's imputation of incompetence on private respondent due to his "insufficient
knowledge in programming and zero knowledge of the ACAD system" based only on the
above mentioned letters, without any other evidence, cannot be given credence.
An allegation of incompetence should have a factual foundation. Incompetence may be shown
by weighing it against a standard, benchmark, or criterion. However, EDI failed to establish
any such bases to show how petitioner found Gran incompetent.
In addition, the elements that must concur for the charge of insubordination or willful
disobedience to prosper were not present.
In Micro Sales Operation Network v. NLRC, we held that:
For willful disobedience to be a valid cause for dismissal, the following twin
elements must concur: (1) the employee's assailed conduct must have been willful,
that is, characterized by a wrongful and perverse attitude; and (2) the order violated
must have been reasonable, lawful, made known to the employee and must pertain
to the duties which he had been engaged to discharge.47
EDI failed to discharge the burden of proving Gran's insubordination or willful disobedience.
As indicated by the second requirement provided for in Micro Sales Operation Network, in
order to justify willful disobedience, we must determine whether the order violated by the
employee is reasonable, lawful, made known to the employee, and pertains to the duties which
he had been engaged to discharge. In the case at bar, petitioner failed to show that the order of
the company which was violated—the submission of "Daily Activity Reports"—was part of
Gran's duties as a Computer Specialist. Before the Labor Arbiter, EDI should have provided a
copy of the company policy, Gran's job description, or any other document that would show
that the "Daily Activity Reports" were required for submission by the employees, more
particularly by a Computer Specialist.
Even though EDI and/or ESI were merely the local employment or recruitment agencies and
not the foreign employer, they should have adduced additional evidence to convincingly show
that Gran's employment was validly and legally terminated. The burden devolves not only
upon the foreign-based employer but also on the employment or recruitment agency for the
latter is not only an agent of the former, but is also solidarily liable with the foreign principal
for any claims or liabilities arising from the dismissal of the worker.48
Thus, petitioner failed to prove that Gran was justifiably dismissed due to incompetence,
insubordination, or willful disobedience.
Petitioner also raised the issue that Prieto v. NLRC,49 as used by the CA in its Decision, is not
applicable to the present case.
In Prieto, this Court ruled that "[i]t is presumed that before their deployment, the petitioners
were subjected to trade tests required by law to be conducted by the recruiting agency to
insure employment of only technically qualified workers for the foreign principal."50 The CA,
using the ruling in the said case, ruled that Gran must have passed the test; otherwise, he
would not have been hired. Therefore, EDI was at fault when it deployed Gran who was
allegedly "incompetent" for the job.
According to petitioner, the Prieto ruling is not applicable because in the case at hand, Gran
misrepresented himself in his curriculum vitae as a Computer Specialist; thus, he was not
qualified for the job for which he was hired.
We disagree.
The CA is correct in applying Prieto. The purpose of the required trade test is to weed out
incompetent applicants from the pool of available workers. It is supposed to reveal applicants
with false educational backgrounds, and expose bogus qualifications. Since EDI deployed
Gran to Riyadh, it can be presumed that Gran had passed the required trade test and that Gran
is qualified for the job. Even if there was no objective trade test done by EDI, it was still EDI's
responsibility to subject Gran to a trade test; and its failure to do so only weakened its position
but should not in any way prejudice Gran. In any case, the issue is rendered moot and
academic because Gran's incompetency is unproved.
Fourth Issue: Gran was not Afforded Due Process
As discussed earlier, in the absence of proof of Saudi laws, Philippine Labor laws and
regulations shall govern the relationship between Gran and EDI. Thus, our laws and rules on
the requisites of due process relating to termination of employment shall apply.
Petitioner EDI claims that private respondent Gran was afforded due process, since he was
allowed to work and improve his capabilities for five months prior to his termination.51 EDI
also claims that the requirements of due process, as enunciated in Santos, Jr. v. NLRC,52 and
Malaya Shipping Services, Inc. v. NLRC,53 cited by the CA in its Decision, were properly
observed in the present case.
This position is untenable.
In Agabon v. NLRC,54 this Court held that:
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the
employer must give the employee two written notices and a hearing or opportunity
to be heard if requested by the employee before terminating the employment: a
notice specifying the grounds for which dismissal is sought a hearing or an
 opportunity to be heard and after hearing or opportunity to be heard, a notice of the
decision to dismiss; and (2) if the dismissal is based on authorized causes under
Articles 283 and 284, the employer must give the employee and the Department of
Labor and Employment written notices 30 days prior to the effectivity of his
separation.
Under the twin notice requirement, the employees must be given two (2) notices before their
employment could be terminated: (1) a first notice to apprise the employees of their fault, and
(2) a second notice to communicate to the employees that their employment is being
terminated. In between the first and second notice, the employees should be given a hearing or
opportunity to defend themselves personally or by counsel of their choice.55
A careful examination of the records revealed that, indeed, OAB's manner of dismissing Gran
fell short of the two notice requirement. While it furnished Gran the written notice informing
him of his dismissal, it failed to furnish Gran the written notice apprising him of the charges
against him, as prescribed by the Labor Code.56 Consequently, he was denied the opportunity
to respond to said notice. In addition, OAB did not schedule a hearing or conference with Gran
to defend himself and adduce evidence in support of his defenses. Moreover, the July 9, 1994
termination letter was effective on the same day. This shows that OAB had already
condemned Gran to dismissal, even before Gran was furnished the termination letter. It should
also be pointed out that OAB failed to give Gran the chance to be heard and to defend himself
with the assistance of a representative in accordance with Article 277 of the Labor Code.
Clearly, there was no intention to provide Gran with due process. Summing up, Gran was
notified and his employment arbitrarily terminated on the same day, through the same letter,
and for unjustified grounds. Obviously, Gran was not afforded due process.
Pursuant to the doctrine laid down in Agabon,57 an employer is liable to pay nominal damages
as indemnity for violating the employee's right to statutory due process. Since OAB was in
breach of the due process requirements under the Labor Code and its regulations, OAB, ESI,
and EDI, jointly and solidarily, are liable to Gran in the amount of PhP 30,000.00 as
indemnity.
Fifth and Last Issue: Gran is Entitled to Backwages
We reiterate the rule that with regard to employees hired for a fixed period of employment, in
cases arising before the effectivity of R.A. No. 8042 58 (Migrant Workers and Overseas
Filipinos Act) on August 25, 1995, that when the contract is for a fixed term and the
employees are dismissed without just cause, they are entitled to the payment of their salaries
corresponding to the unexpired portion of their contract.59 On the other hand, for cases arising
after the effectivity of R.A. No. 8042, when the termination of employment is without just,
valid or authorized cause as defined by law or contract, the worker shall be entitled to the full
reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term whichever is less.60
In the present case, the employment contract provides that the employment contract shall be
valid for a period of two (2) years from the date the employee starts to work with the
employer.61 Gran arrived in Riyadh, Saudi Arabia and started to work on February 7, 1994; 62
hence, his employment contract is until February 7, 1996. Since he was illegally dismissed on
July 9, 1994, before the effectivity of R.A. No. 8042, he is therefore entitled to backwages
corresponding to the unexpired portion of his contract, which was equivalent to USD 16,150.
Petitioner EDI questions the legality of the award of backwages and mainly relies on the
Declaration which is claimed to have been freely and voluntarily executed by Gran. The
relevant portions of the Declaration are as follows:
I, ELEAZAR GRAN (COMPUTER SPECIALIST) AFTER RECEIVING MY
FINAL SETTLEMENT ON THIS DATE THE AMOUNT OF:
S.R. 2,948.00 (SAUDI RIYALS TWO THOUSAND NINE
HUNDRED FORTY EIGHT ONLY)
REPRESENTING COMPLETE PAYMENT (COMPENSATION) FOR THE
SERVICES I RENDERED TO OAB ESTABLISHMENT.
I HEREBY DECLARE THAT OAB EST. HAS NO FINANCIAL OBLIGATION
IN MY FAVOUR AFTER RECEIVING THE ABOVE MENTIONED AMOUNT
IN CASH.
I STATE FURTHER THAT OAB EST. HAS NO OBLIGATION TOWARDS ME
IN WHATEVER FORM.
I ATTEST TO THE TRUTHFULNESS OF THIS STATEMENT BY AFFIXING
MY SIGNATURE VOLUNTARILY.
SIGNED.
ELEAZAR GRAN
Courts must undertake a meticulous and rigorous review of quitclaims or waivers, more
particularly those executed by employees. This requirement was clearly articulated by Chief
Justice Artemio V. Panganiban in Land and Housing Development Corporation v. Esquillo:
Quitclaims, releases and other waivers of benefits granted by laws or contracts in
favor of workers should be strictly scrutinized to protect the weak and the
disadvantaged. The waivers should be carefully examined, in regard not only to
the words and terms used, but also the factual circumstances under which they
have been executed.63 (Emphasis supplied.)
This Court had also outlined in Land and Housing Development Corporation, citing Periquet
v. NLRC,64 the parameters for valid compromise agreements, waivers, and quitclaims:
Not all waivers and quitclaims are invalid as against public policy. If the agreement
was voluntarily entered into and represents a reasonable settlement, it is binding on
the parties and may not later be disowned simply because of a change of mind. It is
only where there is clear proof that the waiver was wangled from an unsuspecting or
 gullible person, or the terms of settlement are unconscionable on its face, that the
law will step in to annul the questionable transaction. But where it is shown that the
person making the waiver did so voluntarily, with full understanding of what
he was doing, and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as a valid and binding undertaking.
(Emphasis supplied.)
Is the waiver and quitclaim labeled a Declaration valid? It is not.
The Court finds the waiver and quitclaim null and void for the following reasons:
1. The salary paid to Gran upon his termination, in the amount of SR 2,948.00, is
unreasonably low. As correctly pointed out by the court a quo, the payment of SR 2,948.00 is
even lower than his monthly salary of SR 3,190.00 (USD 850.00). In addition, it is also very
much less than the USD 16,150.00 which is the amount Gran is legally entitled to get from
petitioner EDI as backwages.
2. The Declaration reveals that the payment of SR 2,948.00 is actually the payment for Gran's
salary for the services he rendered to OAB as Computer Specialist. If the Declaration is a
quitclaim, then the consideration should be much much more than the monthly salary of SR
3,190.00 (USD 850.00)—although possibly less than the estimated Gran's salaries for the
remaining duration of his contract and other benefits as employee of OAB. A quitclaim will
understandably be lower than the sum total of the amounts and benefits that can possibly be
awarded to employees or to be earned for the remainder of the contract period since it is a
compromise where the employees will have to forfeit a certain portion of the amounts they are
claiming in exchange for the early payment of a compromise amount. The court may however
step in when such amount is unconscionably low or unreasonable although the employee
voluntarily agreed to it. In the case of the Declaration, the amount is unreasonably small
compared to the future wages of Gran.
3. The factual circumstances surrounding the execution of the Declaration would show that
Gran did not voluntarily and freely execute the document. Consider the following chronology
of events:
a. On July 9, 1994, Gran received a copy of his letter of termination;
b. On July 10, 1994, Gran was instructed to depart Saudi Arabia and required to pay
his plane ticket;65
c. On July 11, 1994, he signed the Declaration;
d. On July 12, 1994, Gran departed from Riyadh, Saudi Arabia; and
e. On July 21, 1994, Gran filed the Complaint before the NLRC.
The foregoing events readily reveal that Gran was "forced" to sign the Declaration and
constrained to receive the amount of SR 2,948.00 even if it was against his will—since he was
told on July 10, 1994 to leave Riyadh on July 12, 1994. He had no other choice but to sign the
Declaration as he needed the amount of SR 2,948.00 for the payment of his ticket. He could
have entertained some apprehensions as to the status of his stay or safety in Saudi Arabia if he
would not sign the quitclaim.
4. The court a quo is correct in its finding that the Declaration is a contract of adhesion which
should be construed against the employer, OAB. An adhesion contract is contrary to public
policy as it leaves the weaker party—the employee—in a "take-it-or-leave-it" situation.
Certainly, the employer is being unjust to the employee as there is no meaningful choice on
the part of the employee while the terms are unreasonably favorable to the employer. 66
Thus, the Declaration purporting to be a quitclaim and waiver is unenforceable under
Philippine laws in the absence of proof of the applicable law of Saudi Arabia.
In order to prevent disputes on the validity and enforceability of quitclaims and waivers of
employees under Philippine laws, said agreements should contain the following:
1. A fixed amount as full and final compromise settlement;
2. The benefits of the employees if possible with the corresponding amounts, which the
employees are giving up in consideration of the fixed compromise amount;
3. A statement that the employer has clearly explained to the employee in English, Filipino, or
in the dialect known to the employees—that by signing the waiver or quitclaim, they are
forfeiting or relinquishing their right to receive the benefits which are due them under the law;
and
4. A statement that the employees signed and executed the document voluntarily, and had fully
understood the contents of the document and that their consent was freely given without any
threat, violence, duress, intimidation, or undue influence exerted on their person.
It is advisable that the stipulations be made in English and Tagalog or in the dialect known to
the employee. There should be two (2) witnesses to the execution of the quitclaim who must
also sign the quitclaim. The document should be subscribed and sworn to under oath
preferably before any administering official of the Department of Labor and Employment or
its regional office, the Bureau of Labor Relations, the NLRC or a labor attaché in a foreign
country. Such official shall assist the parties regarding the execution of the quitclaim and
waiver.67 This compromise settlement becomes final and binding under Article 227 of the
Labor Code which provides that:
[A]ny compromise settlement voluntarily agreed upon with the assistance of the
Bureau of Labor Relations or the regional office of the DOLE, shall be final and
binding upon the parties and the NLRC or any court "shall not assume jurisdiction
over issues involved therein except in case of non-compliance thereof or if there is
prima facie evidence that the settlement was obtained through fraud,
misrepresentation, or coercion.
It is made clear that the foregoing rules on quitclaim or waiver shall apply only to labor
contracts of OFWs in the absence of proof of the laws of the foreign country agreed upon to
govern said contracts. Otherwise, the foreign laws shall apply. January 25, 2006

WHEREFORE, the petition is DENIED. The October 18, 2000 Decision in CA-G.R. SP No.
56120 of the Court of Appeals affirming the January 15, 1999 Decision and September 30,
1999 Resolution of the NLRC
x - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
is AFFIRMED with the MODIFICATION that petitioner EDI-Staffbuilders International,
Inc. shall pay the amount of PhP 30,000.00 to respondent Gran as nominal damages for non-
compliance with statutory due process.

No costs.
DECISION
SO ORDERED.

SUNACE INTERNATIONAL G.R. No. 161757

MANAGEMENT SERVICES, INC.

CARPIO MORALES, J.:
Petitioner, Present:

QUISUMBING, J., Chairperson,

Petitioner, Sunace International Management Services (Sunace), a corporation duly
- versus - CARPIO, organized and existing under the laws of the Philippines, deployed to Taiwan Divina A.
Montehermozo (Divina) as a domestic helper under a 12-month contract effective February 1,
CARPIO MORALES, and
TINGA, JJ. 1997.[1] The deployment was with the assistance of a Taiwanese broker, Edmund Wang,
President of Jet Crown International Co., Ltd.
NATIONAL LABOR RELATIONS
COMMISSION, Second Division; HON.
ERNESTO S. DINOPOL, in his capacity as
Labor Arbiter, NLRC; NCR, Arbitration
Branch, Quezon City and DIVINA A. After her 12-month contract expired on February 1, 1998, Divina continued working
MONTEHERMOZO,
for her Taiwanese employer, Hang Rui Xiong, for two more years, after which she returned to
Respondents. the Philippines on February 4, 2000.

Shortly after her return or on February 14, 2000, Divina filed a complaint[2] before
Promulgated: the National Labor Relations Commission (NLRC) against Sunace, one Adelaide Perez, the
Taiwanese broker, and the employer-foreign principal alleging that she was jailed for three and while the amounts deducted in 1997 were refunded to her, those deducted in 1998 and
months and that she was underpaid. 1999 were not. On even date, Sunace, by its Proprietor/General Manager Maria Luisa Olarte,
filed its Verified Answer and Position Paper,[6] claiming as follows, quoted verbatim:

The following day or on February 15, 2000, Labor Arbitration Associate Regina T.
COMPLAINANT IS NOT ENTITLED
Gavin issued Summons[3] to the Manager of Sunace, furnishing it with a copy of Divinas FOR THE REFUND OF HER 24 MONTHS
complaint and directing it to appear for mandatory conference on February 28, 2000. SAVINGS

3. Complainant could not anymore claim nor entitled for the refund of her 24 months
savings as she already took back her saving already last year and the
employer did not deduct any money from her salary, in accordance with a
The scheduled mandatory conference was reset. It appears to have been concluded, Fascimile Message from the respondent SUNACEs employer, Jet Crown
International Co. Ltd., a xerographic copy of which is herewith attached as
however.
ANNEX 2 hereof;

COMPLAINANT IS NOT ENTITLED

TO REFUND OF HER 14 MONTHS TAX
AND PAYMENT OF ATTORNEYS FEES
On April 6, 2000, Divina filed her Position Paper[4] claiming that under her original
4. There is no basis for the grant of tax refund to the complainant as the she finished
one-year contract and the 2-year extended contract which was with the knowledge and consent her one year contract and hence, was not illegally dismissed by her
of Sunace, the following amounts representing income tax and savings were deducted: employer. She could only lay claim over the tax refund or much more be
awarded of damages such as attorneys fees as said reliefs are available
only when the dismissal of a migrant worker is without just valid or
lawful cause as defined by law or contract.

The rationales behind the award of tax refund and payment of attorneys fees is not
to enrich the complainant but to compensate him for actual injury
suffered. Complainant did not suffer injury, hence, does not deserve to be
Year Deduction for Deduction for Savings compensated for whatever kind of damages.

Income Tax Hence, the complainant has NO cause of action against respondent SUNACE for
monetary claims, considering that she has been totally paid of all the
monetary benefits due her under her Employment Contract to her full
satisfaction.
1997 NT10,450.00 NT23,100.00
1998 NT9,500.00 NT36,000.00
6. Furthermore, the tax deducted from her salary is in
1999 NT13,300.00 NT36,000.00;[5]
compliance with the Taiwanese law, which respondent SUNACE has no
control and complainant has to obey and this Honorable Office has no
authority/jurisdiction to intervene because the power to tax is a sovereign
power which the Taiwanese Government is supreme in its own territory.
The sovereign power of taxation of a state is recognized under
international law and among sovereign states.

7. That respondent SUNACE respectfully reserves the right to file supplemental
Verified Answer and/or Position Paper to substantiate its prayer for the
dismissal of the above case against the herein respondent. AND BY WAY
OF -
x x x x (Emphasis and underscoring supplied)
Reacting to Divinas Position Paper, Sunace filed on April 25, 2000 an . . . ANSWER TO
COMPLAINANTS POSITION PAPER[7] alleging that Divinas 2-year extension of her contract was
without its knowledge and consent, hence, it had no liability attaching to any claim arising
therefrom, and Divina in fact executed a Waiver/Quitclaim and Release of Responsibility and
an Affidavit of Desistance, copy of each document was annexed to said . . . ANSWER TO
COMPLAINANTS POSITION PAPER.
To Sunaces . . . ANSWER TO COMPLAINANTS POSITION PAPER, Divina filed a 2-page reply,[8]
without, however, refuting Sunaces disclaimer of knowledge of the extension of her contract
and without saying anything about the Release, Waiver and Quitclaim and Affidavit of
Desistance.
The Labor Arbiter, rejected Sunaces claim that the extension of Divinas contract for two more
years was without its knowledge and consent in this wise:
We reject Sunaces submission that it should not be
held responsible for the amount withheld because her contract
was extended for 2 more years without its knowledge and
consent because as Annex B[9] shows, Sunace and Edmund
Wang have not stopped communicating with each other and yet
the matter of the contracts extension and Sunaces alleged non-
consent thereto has not been categorically established.
What Sunace should have done was to write to POEA
about the extension and its objection thereto, copy furnished the
complainant herself, her foreign employer, Hang Rui Xiong and
the Taiwanese broker, Edmund Wang.
And because it did not, it is presumed to have
consented to the extension and should be liable for anything that
resulted thereform (sic).[10] (Underscoring supplied)
The Labor Arbiter rejected too Sunaces argument that it is not liable on account of Divinas
execution of a Waiver and Quitclaim and an Affidavit of Desistance. Observed the Labor
Arbiter:
Should the parties arrive at any agreement as to the whole or any
part of the dispute, the same shall be reduced to writing and signed by the
parties and their respective counsel (sic), if any, before the Labor Arbiter.
The settlement shall be approved by the Labor Arbiter after
being satisfied that it was voluntarily entered into by the parties and after
having explained to them the terms and consequences thereof.
A compromise agreement entered into by the parties not in the
presence of the Labor Arbiter before whom the case is pending shall be
approved by him, if after confronting the parties, particularly the
complainants, he is satisfied that they understand the terms and conditions
of the settlement and that it was entered into freely voluntarily (sic) by
them and the agreement is not contrary to law, morals, and public policy.
And because no consideration is indicated in the documents, we
strike them down as contrary to law, morals, and public policy.[11]
He accordingly decided in favor of Divina, by decision of October 9, 2000,[12] the dispositive
portion of which reads:
 SO ORDERED.
Wherefore, judgment is hereby rendered ordering respondents
SUNACE INTERNATIONAL SERVICES and its owner ADELAIDA (Emphasis on words in capital letters in the original; emphasis
PERGE, both in their personal capacities and as agent of Hang Rui on words in small letters and underscoring supplied)
Xiong/Edmund Wang to jointly and severally pay complainant DIVINA
A. MONTEHERMOZO the sum of NT91,950.00 in its peso equivalent at
the date of payment, as refund for the amounts which she is hereby
adjudged entitled to as earlier discussed plus 10% thereof as attorneys fees
since compelled to litigate, complainant had to engage the services of
counsel.
Its Motion for Reconsideration having been denied by the appellate court by Resolution of
SO ORDERED.[13] (Underescoring
January 14, 2004,[18] Sunace filed the present petition for review on certiorari.
supplied)

On appeal of Sunace, the NLRC, by Resolution of April 30, 2002,[14] affirmed the
Labor Arbiters decision.
Via petition for certiorari,[15] Sunace elevated the case to the Court of Appeals
which dismissed it outright by Resolution of November 12, 2002,[16] the full text of which
reads:
The Court of Appeals affirmed the Labor Arbiter and NLRCs finding that Sunace
knew of and impliedly consented to the extension of Divinas 2-year contract. It went on to
state that It is undisputed that [Sunace] was continually communicating with [Divinas] foreign
employer. It thus concluded that [a]s agent of the foreign principal, petitioner cannot profess
ignorance of such extension as obviously, the act of the principal extending complainant (sic)
employment contract necessarily bound it.

Contrary to the Court of Appeals finding, the alleged continuous communication

was with the Taiwanese broker Wang, not with the foreign employer Xiong.
The petition for certiorari faces outright dismissal.

The petition failed to allege facts constitutive of grave abuse of

discretion on the part of the public respondent amounting to lack of The February 21, 2000 telefax message from the Taiwanese broker to Sunace, the
jurisdiction when the NLRC affirmed the Labor Arbiters finding that
petitioner Sunace International Management Services impliedly consented only basis of a finding of continuous communication, reads verbatim:
to the extension of the contract of private respondent Divina A.
Montehermozo. It is undisputed that petitioner was continually
communicating with private respondents foreign employer (sic). As agent
of the foreign principal, petitioner cannot profess ignorance of such
extension as obviously, the act of the principal extending complainant xxxx
(sic) employment contract necessarily bound it. Grave abuse of
discretion is not present in the case at bar. Regarding to Divina, she did not say
anything about her saving in police station. As we
ACCORDINGLY, the petition is hereby DENIED DUE contact with her employer, she took back her saving
COURSE and DISMISSED.[17] already last years. And they did not deduct any money
 from her salary. Or she will call back her employer to
check it again. If her employer said yes! we will get it
back for her.
Thank you and best regards.
(sgd.)
Edmund Wang
President[19]
The finding of the Court of Appeals solely on the basis of the above-quoted telefax
message, that Sunace continually communicated with the foreign principal (sic) and therefore
was aware of and had consented to the execution of the extension of the contract is misplaced.
The message does not provide evidence that Sunace was privy to the new contract executed
after the expiration on February 1, 1998 of the original contract. That Sunace and the
Taiwanese broker communicated regarding Divinas allegedly withheld savings does not
necessarily mean that Sunace ratified the extension of the contract. As Sunace points out in its
Reply[20] filed before the Court of Appeals,
As can be seen from that letter communication, it was
just an information given to the petitioner that the private
respondent had t[aken] already her savings from her foreign
employer and that no deduction was made on her salary. It
contains nothing about the extension or the petitioners consent
thereto.[21]
Parenthetically, since the telefax message is dated February 21, 2000, it is safe to
assume that it was sent to enlighten Sunace who had been directed, by Summons issued on
February 15, 2000, to appear on February 28, 2000 for a mandatory conference following
Divinas filing of the complaint on February 14, 2000.
Respecting the Court of Appeals following dictum:
As agent of its foreign principal, [Sunace] cannot profess
ignorance of such an extension as obviously, the act of its principal
extending [Divinas] employment contract necessarily bound it,[22]
it too is a misapplication, a misapplication of the theory of imputed knowledge.
The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the
principal, employer Xiong, not the other way around.[23] The knowledge of the principal-
foreign employer cannot, therefore, be imputed to its agent Sunace.
There being no substantial proof that Sunace knew of and consented to be bound
under the 2-year employment contract extension, it cannot be said to be privy thereto. As such,
it and its owner cannot be held solidarily liable for any of Divinas claims arising from the 2-
year employment extension. As the New Civil Code provides,
Contracts take effect only between the parties, their
assigns, and heirs, except in case where the rights and
obligations arising from the contract are not transmissible by
their nature, or by stipulation or by provision of law.[24]
Furthermore, as Sunace correctly points out, there was an implied revocation of its
agency relationship with its foreign principal when, after the termination of the original
employment contract, the foreign principal directly negotiated with Divina and entered into a
new and separate employment contract in Taiwan. Article 1924 of the New Civil Code reading
The agency is revoked if the principal directly manages the
business entrusted to the agent, dealing directly with third persons.
thus applies.

In light of the foregoing discussions, consideration of the validity of the Waiver and
Affidavit of Desistance which Divina executed in favor of Sunace is rendered unnecessary.

WHEREFORE, the petition is GRANTED. The challenged resolutions of the

Court of Appeals are hereby REVERSED and SET ASIDE. The complaint of respondent
Divina A. Montehermozo against petitioner is DISMISSED.

SO ORDERED.