SECOND DIVISION

[G.R. No. 160391. August 9, 2005]

DUSIT HOTEL NIKKO and PHILIPPINE HOTELIERS, INC., petitioners, vs. NATIONAL UNION
OF WORKERS IN HOTEL, RESTAURANT AND ALLIED INDUSTRIES (NUWHRAIN) -
DUSIT HOTEL NIKKO CHAPTER and ROWENA AGONCILLO, respondents.

DECISION
CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA)
in CA-G.R. SP No. 72006 which affirmed the Decision[2] of the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 014111-97 finding Dusit Hotel Nikko (Hotel) and
Philippine Hoteliers, Inc. (PHI) of illegally terminating the employment services of respondent
Rowena Agoncillo.

The Case for Rowena Agoncillo

The PHI owned and operated the Dusit Hotel Nikko. Since March 1, 1984, Rowena Agoncillo
was employed by the Hotel. After some time, she was promoted as Supervisor of Outlet Cashiers
and later promoted as Senior Front Office Cashier, with a monthly salary of P14,600.00, inclusive
of service charge.[3] In January 1995, the Hotel decided to trim down the number of its employees
from the original count of 820 to 750.[4]
On February 21, 1996, the Hotel, through an Inter-Office Memorandum signed by the general
manager of Dusit, Yoshikazu Masuda, offered a Special Early Retirement Program (SERP) to all
its employees. It was stated therein that the program was intended to provide employees financial
benefits prior to prolonged renovation period and, at the same time, to enable management to
streamline the organization by eliminating redundant positions and having a more efficient and
productive manpower complement.[5]
In a Letter dated February 26, 1996 addressed to the Hotel, the National Union of Workers
in Hotel, Restaurant and Allied Industries, Hotel Nikko Manila Garden Chapter (Union), through
its president, Mr. Reynaldo Rasing, sought a commitment from the management that the
employees terminated due to redundancy will not be replaced by new employees; nor will their
positions be given to subcontractors, agencies or casual employees.
The Union received a Letter dated March 30, 1996 from Masuda confirming his earlier
decision to separate 243 employees from the Hotels services anchored on redundancy and that
the separation of the said employees will take effect on April 30, 1996.[6] Consequently, a total of
243 employees, including Agoncillo, 161 of whom were Union officers and members, were
separated from the Hotels employment. As a result, the membership of the Union was
substantially reduced.
 On April 1, 1996, the Hotel wrote Regional Director Romeo Young of the Department of Labor
and Employment (DOLE), National Capital Region, informing him that the Hotel terminated the
employment of 243 employees due to redundancy. On the same day, Agoncillo was summoned
by Hotel Comptroller Reynaldo Casacop, who gave her a letter of even date informing the latter
of her separation from service due to redundancy effective close of office hours of April 30, 1996.[7]
Casacop advised Agoncillo to just avail of the Hotel's SERP, as embodied in the inter-office
memorandum of Masuda.[8] He informed her that she had the option to avail of the program and
that, in the meantime, he will defer the processing of her termination papers to give her time to
decide. On April 3, 1996, Agoncillo finally told Casacop that she would not avail of the SERP
benefits. By then, she had decided to file a complaint for illegal dismissal against the Hotel.
Meanwhile, the Hotel temporarily closed operations because of the renovation thereof.
When news spread among the hotel employees that Agoncillo would contest her termination
before the NLRC, she was summoned by Personnel Manager Leticia Delarmente to a conference.
The two met on May 21, 1996 in the presence of Willy Dizon, who later became the Director for
Personnel and Training of the Hotel. At the said meeting, Delarmente and Dizon repeatedly asked
Agoncillo to give back the original copy of the April 1, 1996 termination letter. Agoncillo told them
that the letter was already in the possession of her counsel. Agoncillo was relieved when she was
given another letter of even date stating that, by reason of her non-availment of the SERP, she
was still considered an employee but on temporary lay-off due to the ongoing renovation of the
Hotel[9] and that she will just be advised accordingly of her work schedule when the Hotel
reopens.[10]
But her relief was shortlived. Delarmente and Dizon offered to reinstate Agoncillo but not to
her former position as Senior Front Office Cashier. Agoncillo objected but informed them that she
could accept the position of Reservation Clerk.[11] However, no response was received.
Meanwhile, the Hotel hired six (6) Front Office Cashiers on October 1, 1996.[12] On October
21, 1996, Agoncillo received a telegram from the Human Resources Department of the Hotel
directing her to report to Dizon as soon as possible.[13] She was told by Dizon that the Hotel was
willing to reinstate her but as an Outlet Cashier. Dizon explained that the Hotel had already hired
new employees for the positions of Reservation Clerks. Agoncillo, however, pointed out that she
was already an Outlet Cashier Supervisor before her promotion as Senior Front Office Cashier
and that if she accepted the position, it would be an unjustified demotion on her part. Dizon,
however, explained that the management wanted new graduates as front liners, i.e., new
graduates who would occupy the front desks and other sections exposed to guests. On the other
hand, Agoncillo reiterated that she could accept the lower position of Reservation Clerk, but Dizon
rejected the suggestion. Dizon countered that Agoncillo could be reinstated as a Room Service
Cashier para nakatago. At this point, Agoncillo was irked by the comments of Dizon and
asked, Bakit Sir, nakakaperhuwisyo ba ang physical appearance ko? As to which Dizon
replied, Kasi ikaw, nagpabaya ka sa katawan mo. The conversation between them transpired in
the presence and within hearing distance of other hotel employees, including Reynaldo Rasing,
the president of the Union.[14]
After Agoncillos meeting with Dizon on October 22, 1996, the latter kept on promising to find
a suitable position for her. In those meetings, Dizon always offered reinstatement to positions that
do not require guest exposure like Linen Dispatcher at the hotel basement or Secretary of
Roomskeeping. When Agoncillo refused, Dizon just instructed her to return. Agoncillo had no
specific position or assigned task to perform.
On November 1, 1996, the Hotel resumed operations. On November 11, 1996, the Union
filed a Notice of Strike for unfair labor practice with the DOLE.[15] On November 12, 1996, Agoncillo
with the assistance of the Union, filed a Complaint against the PHI and Dusit Hotel Nikko for illegal
dismissal before the NLRC.
Meantime, the Secretary of Labor and Employment (SOLE) assumed jurisdiction over the
dispute on November 29, 1996 after the requisite strike- vote was conducted.[16] The case was
docketed as NCMB-NCR-NS-11-425-96.
On January 5, 1997, the Hotel published an advertisement in the newspaper Manila Bulletin
inviting prospective applicants as guest relations agents, bell service agents/valet parkers,
housekeeping agents, and sales executives. The Hotel hired 135 additional employees, mostly
on probationary and contractual bases. These new workers performed tasks according to the
reclassified positions under the new Job Code, in violation of the Collective Bargaining Agreement
(CBA) between the Hotel and the Union.[17] A total of 215 workers replaced the previously
dismissed employees, including Agoncillo.

The Case for the Hotel

The petitioner Hotel, formerly known as Hotel Nikko Manila Garden, was owned and
managed by the PHI, a corporation substantially owned by Japan Airlines (JAL). In November
1995, JAL formally turned over its majority shareholdings in PHI to a Thai corporation, Dusit Thani
Public Co., Ltd. (Dusit). This gave Dusit the managerial control over the Hotel, which was then
renamed Dusit Hotel Nikko.[18]
With the very stiff competition in the hotel industry in mind, Dusit has set a twofold objective,
namely: (1) the total renovation of the Hotel, where it had earmarked the amount of
about P300,000,000.00; and (2) a complete reorganization of the Hotels manpower complement.
The renovation of the Hotel, which called for its closure, began on May 1, 1996 and ended six
months thereafter. On the other hand, the reorganization was done to standardize the Hotels
organizational set-up with all Dusit Hotels around the world and train the employees for their
eventual deployment to its other chain of hotels. The reorganization program started with a staff
reduction program wherein employees were given the chance to voluntarily avail of the SERP. As
per its guidelines, the SERP is a one-time program offered by the Hotel to its regular employees
who had at least one year of service as of April 30, 1996, in order to achieve the following:

a.) realize optimum operational productivity and efficiency through a reorganization that will
eliminate redundant position;

b.) reduce expenses of the company; and

c.) provide employees the opportunity to receive lump-sum benefits for their immediate use
before the 6-month closure.[19]

Pursuant to the reorganization program, a reclassification of positions ensued upon

resumption of the Hotels operation. Consequently, the position of Agoncillo as Senior Front Office
Cashier was abolished and a new position of Guest Services Agent absorbing its functions was
created. Considering that the new position requires skills in both reception and cashiering
operations, respondent Hotel deemed it necessary to transfer Agoncillo to another position as
Outlet Cashier, which does not require other skills aside from cashiering.[20]
 The transfer of Agoncillo from Senior Front Office Cashier to Outlet Cashier does not entail
any diminution of salary or rank. Despite which, she vehemently refused the transfer and insisted
that she be reinstated to her former position. Since Agoncillo was not amenable to the said
transfer, she did not assume her new position and since then had stopped reporting for work
despite the Hotels patient reminder to act on the contrary. Instead, she filed a complaint to
question the prerogative of the management to validly transfer her to another position as she
considers the transfer an act of constructive dismissal amounting to illegal termination and unfair
labor practice in the form of union busting.[21]

Proceedings before the Labor Arbiter, NLRC and the CA

On September 18, 1997, the Labor Arbiter rendered judgment dismissing the complaint for
unfair labor practice and constructive dismissal. The Labor Arbiter ruled that the reassignment of
the complainant was done by management in the valid exercise of management prerogative, and
that management has not dismissed her in any way.[22] On October 27, 1997, the complainant
appealed the decision to the NLRC.
In the meantime, on January 6, 1998, the SOLE issued an Order in NCMB-NCR-NS-11-425-
96 in favor of the Union. The fallo of the Order reads:

WHEREFORE, judgment is hereby rendered:

1. Declaring the termination of 243 employees, including 161 Union officers and members on April
1, 1996, illegal;

2. Ordering the immediate reinstatement of the 243 employees, without loss of seniority rights
and with full backwages and benefits from the time of their termination until actual reinstatement,
less the amounts received by them on account of the Companys Special Early Retirement
Program;

3. Declaring the Company guilty of unfair labor practice for:

a. implementing an illegal redundancy program in the guise of a Special Early Retirement

Program, terminating in the process 243 employees, including 161 Union officers and members;

b. implementing a New Job and Wage Classification and Manning Standards, in violation of Article
1, Section VII of the parties Collective Bargaining Agreement; and

c. violation of the CBA provisions on entry rates of new employees and rice subsidy for retained
employees who were on duty during the renovation of the Hotel.

4. Ordering the Company to cease and desist from further continuing with its commission of the
unfair labor practice acts herein complained of.

SO ORDERED.[23]

The respondents therein filed a motion for the reconsideration of the order but the SOLE
denied the same. On March 10, 2000, the Union and the Hotel executed a Memorandum of
Agreement (MOA) in which the Hotel agreed to pay P15,000.00 to each member of the Union by
way of amicable settlement of NCMB-NCR-NS-11-425-96 in addition to the redundancy pay
earlier paid to them and that they shall file with the DOLE a motion praying for the following:

a. Dismissal of the case with prejudice in regard to:

(i) illegal redundancy as to those who have received the settlement pay
above and signed the Special Power of Attorney and Release,
Waiver and Quitclaim;
(ii) all ULP charges; and

b. Dismissal of the case without prejudice as to those who have not yet received the
settlement pay.[24]

However, the MOA was not submitted to the NLRC for its approval. Neither did Agoncillo
receive any monetary benefits based on the MOA.
After due proceedings, the NLRC rendered judgment on January 30, 2002, reversing the
appealed decision of the Labor Arbiter, dated September 18, 1997. The fallo of the decision
reads:

WHEREFORE, the appealed decision is SET ASIDE. Judgment is hereby rendered ordering
respondent to:

1. immediately reinstate complainant to her former or equivalent position without loss of

seniority rights and benefits; and

2. to pay complainant full backwages computed from the time it was illegally withheld from
her as a result of her illegal dismissal up to the time she is actually reinstated.

SO ORDERED.[25]

The NLRC ruled that Agoncillo was illegally dismissed. It relied principally on the evidence of
the complainant and the Order of the SOLE dated January 6, 1998. The respondents filed a
motion for reconsideration,[26] which the NLRC denied. Hence, they filed before the Court of
Appeals a Petition for Certiorari with Very Urgent Prayer for the Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction,[27] which is anchored on the following
grounds, to wit:
I

WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
GRAVELY ERRED WHEN IT RULED THAT PRIVATE RESPONDENT AGONCILLO WAS
ILLEGALLY DISMISSSED CONSIDERING THAT, IN THE FIRST PLACE, PRIVATE
RESPONDENT AGONCILLO WAS NEVER DISMISSED, CONSTRUCTIVELY OR
OTHERWISE;

II
CONTRARY TO THE RULING OF THE HONORABLE COMMISSION, PRIVATE RESPONDENT
AGONCILLO'S TRANSFER FROM THE POSITION OF SENIOR FRONT OFFICE CASHIER TO
THE POSITION OF OUTLET CASHIER WAS A VALID EXERCISE OF MANAGEMENT
PREROGATIVE;

III

EVEN ASSUMING IN GRATIA ARGUMENTI THAT PRIVATE RESPONDENT AGONCILLO

WAS INDEED SEPARATED FROM THE HOTEL, HER SEPARATION DUE TO REDUNDANCY
WAS VALID AND/OR LEGAL. CONTRARY TO THE RULING OF THE HONORABLE
COMMISSION, THE REDUNDANCY PROGRAM IMPLEMENTED BY THE HOTEL IS VALID.
FURTHERMORE, PRIVATE RESPONDENTS ARE BOUND BY THE COMPROMISE
AGREEMENT BETWEEN THE UNION AND THE HOTEL WHICH, AMONG OTHERS,
RECOGNIZES THE VALIDITY OF THE SAID PROGRAM;

IV

CONSIDERING THE FOREGOING, THE PETITIONERS ARE NOT GUILTY OF UNFAIR LABOR
PRACTICE. PRIVATE RESPONDENT AGONCILLO, ON THE OTHER HAND, IS NOT
ENTITLED TO REINSTATEMENT WITH FULL BACKWAGES.[28]

On June 26, 2003, the CA rendered judgment dismissing the petition on the ground that no
grave abuse of discretion was committed by the respondents therein.
The petitioners motion for reconsideration[29] was denied by the CA. They forthwith filed their
petition for review alleging that:

THE HONORABLE COURT OF APPEALS ERRED IN RENDERING THE ASSAILED DECISION

AND RESOLUTION, HAVING DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORD WITH LAW AND THE APPLICABLE DECISIONS OF THIS HONORABLE COURT,
CONSIDERING THAT

THE NLRC GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF

JURISDICTION WHEN IT RULED THAT RESPONDENT AGONCILLO WAS ILLEGALLY
DISMISSED BECAUSE, IN THE FIRST PLACE, SHE WAS NEVER DISMISSED,
CONSTRUCTIVELY OR OTHERWISE.

II

RESPONDENT AGONCILLO'S TRANSFER FROM THE POSITION OF SENIOR FRONT

OFFICE CASHIER TO THE POSITION OF OUTLET CASHIER WAS A VALID EXERCISE OF
MANAGEMENT PREROGATIVE.

III

EVEN ON THE ASSUMPTION THAT RESPONDENT AGONCILLO WAS INDEED SEPARATED

FROM THE HOTEL, HER SEPARATION DUE TO A REDUNDANCY PROGRAM WAS LEGAL.
THE REDUNDANCY PROGRAM IMPLEMENTED BY THE HOTEL IS LIKEWISE VALID.
FURTHERMORE, RESPONDENTS ARE BOUND BY THE COMPROMISE AGREEMENT
BETWEEN THE UNION AND THE HOTEL WHICH, AMONG OTHERS, RECOGNIZES THE
VALIDITY OF THE SAID PROGRAM.

IV

IN LIGHT OF THE FOREGOING, THE PETITIONERS ARE NOT GUILTY OF ILLEGAL

DISMISSAL, MUCH LESS UNFAIR LABOR PRACTICE. HENCE, RESPONDENT AGONCILLO
CANNOT BE ENTITLED TO REINSTATEMENT NOR TO FULL BACKWAGES.[30]

The Court's Ruling

The petition is unmeritorious.

The issues for resolution are factual and Rule 45 of the Rules of Court provides that only
questions of law may be raised in a petition for review on certiorari. The raison detre is that the
Court is not a trier of facts. It is not to reexamine and reevaluate the evidence on record. Moreover,
the factual findings of the NLRC, as affirmed by the CA, are accorded high respect and finality
unless the factual findings and conclusions of the Labor Arbiter clash with those of the NLRC and
the CA in which case, the Court will have to review the records and the arguments of the parties
to resolve the factual issues and render substantial justice to the parties.[31]
The petitioners reiterate their submission that respondent Agoncillo had never been
dismissed; she was merely transferred to another position, that of Outlet Cashier. She had been
temporarily laid off because of the renovation of the hotel but she remained as an employee of
the hotel. Following the completion of the renovation of the hotel, she was offered the position of
outlet cashier; but she already filed her complaint before the Hotel was able to determine what
position she could occupy which was mutually acceptable. The petitioners aver that the transfer
of the respondent to the position of Outlet Cashier was a valid exercise of management
prerogative based on its assessment of her qualification, aptitude and competence, absent any
showing to be contrary to law, morals or public policy, unreasonable, inconvenient and prejudicial
to the employee. The petitioners insist that the transfer of Agoncillo was pursuant to its objective
of completely reorganizing its manpower component. It did not entail any diminution in salary,
benefits, privileges or job level. The petitioners also maintain that even if the respondent was
separated from the Hotel, it was justified to do so due to redundancy. The validity of the said
program was even recognized by the respondents in the MOA executed by petitioner Hotel and
the respondent Union. The petitioners maintain that the respondents are bound by the MOA.
The contentions are untenable. It is plain as day that the petitioners terminated the
employment of respondent Agoncillo effective April 30, 1996, as evidenced by their letter which
reads:

April 1, 1996

Ms. Rowena Agoncillo

26 A. Soriano, B.F. Homes
Paraaque, Metro Manila

Dear Ms. Agoncillo:

We have recently conducted a study of the Hotels organizational structure and found the need to
reorganize the same and eliminate many positions that have become redundant.

As a result of such study, it was determined that your position as Senior Front Office Cashier is
redundant. In this connection, please be advised of your separation from service due to
redundancy, effective close of office hours of April 30, 1996. You will receive not later than April
30, 1996 the separation pay provided for under the law, plus the amount of P19,000.00.

We take this opportunity to thank you for your service to Hotel Nikko Manila Garden and extend
to you our best wishes for your next endeavors.

Very truly yours,

(Sgd.)
PEARL V. ARAGON
Director for Administration[32]

The letter of the petitioners terminating the employment of Agoncillo on the ground of
redundancy was rejected by the Order of the SOLE in NCMB-NCR-NS-11-425-96 where he ruled
that the petitioners redundancy program was but a ploy, a contrivance cunningly scripted by them
to subvert the Union and unlawfully dismiss many of its employees. The SOLE declared that, by
their acts, the petitioners were guilty of unfair labor practice.
Redundancy exists when the service capability of the workforce is in excess of what is
reasonably needed to meet the demands of the business enterprise. A reasonably redundant
position is one rendered superfluous by any number of factors, such as overhiring of workers,
decreased volume of business, dropping of a particular product line previously manufactured by
the company or phasing out of service activity priorly undertaken by the business. Among the
requisites of a valid redundancy program are: (1) the good faith of the employer in abolishing the
redundant position; and (2) fair and reasonable criteria in ascertaining what positions are to be
declared redundant and accordingly abolished.[33] As found by the SOLE, the NLRC and the CA,
the position of respondent Agoncillo was not abolished or declared redundant. In fact, the
petitioners hired an entirely new set of employees to perform the tasks of respondent Agoncillo,
namely:

Don Vincent Hembrador - hired on October 1, 1996

Reynaldo Pajarito - hired on October 1, 1996
Eliza De Venecia - hired on October 1, 1996
Scarlet Galve - hired on October 1, 1996
Dheeny Laggui - hired on October 1, 1996
Eric Galos - hired on October 1, 1996
Carlota Pineda - hired on January 25, 1997[34]

We agree with the contention of the petitioners that it is the prerogative of management to
transfer an employee from one office to another within the business establishment based on its
assessment and perception of the employees qualification, aptitude and competence, and in order
to ascertain where he can function with the maximum benefit to the company. However, this Court
emphasized that:
But, like other rights, there are limits thereto. The managerial prerogative to transfer personnel
must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice
and fair play. Having the right should not be confused with the manner in which that right is
exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable
worker. In particular, the employer must be able to show that the transfer is not unreasonable,
inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution
of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of
proof, the employees transfer shall be tantamount to constructive dismissal, which has been
defined as a quitting because continued employment is rendered impossible, unreasonable or
unlikely; as an offer involving a demotion in rank and diminution in pay.[35]

There is constructive dismissal when there is a demotion in rank and/or diminution in pay; or
when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the
employee.[36]
In the present case, the petitioners recalled the termination of respondent Agoncillo when
they learned that she was going to file a complaint against them with the NLRC for illegal
dismissal. However, instead of reinstating her to her former position, she was offered the position
of Linen Dispatcher in the hotel basement or Secretary of the Roomskeeping Section, positions
much lower than that of a Supervisor of Outlet Cashiers which the respondent held before she
was promoted as Senior Front Office Cashier. With the said positions, the respondent would not
certainly be receiving the same salary and other benefits as Senior Front Office Cashier.
We agree with the ruling of the NLRC that the offers by the petitioners to transfer respondent
Agoncillo to other positions were made in bad faith, a ploy to stave off a suit for illegal dismissal.
In fact, respondent Agoncillo had not been transferred to another position at all.
Six months from the time the petitioners made offers to respondent Agoncillo, the latter never
heard from the petitioners again.

While the hotel gave complainant Rowena Agoncillo a second letter advising her that she was still
an employee who was merely on temporary lay-off, the circumstances surrounding the issuance
of such second letter is highly suspicious. To date, complainant Agoncillos affidavit (Annex F) on
the issuance of the second letter remains undisputed. It cannot be gainsaid that the second letter
was issued merely to entice complainant Agoncillo to return the termination letter. The said
second letter did not make mention of the termination letter. If, as claimed by the hotel, the second
letter was a withdrawal of the first letter, why was there no clear statement to this effect when it
could have easily been done? Why was it also necessary for the hotels officers to retrieve the
termination letter that it had issued to complainant? What we can gather from here is that the
hotel had tried to cover its tracks in order to rectify an error. Certainly, good faith cannot be
attributed on the part of the hotel in issuing the second letter.[37]

Even assuming, for the sake of argument, that the hotel had a valid ground for dismissing [the]
complainant and that it had merely spared her such fate, the hotel is still guilty of illegal dismissal.
Had the hotel made the transfer of complainant in good faith and in the normal course of its
operation, it would have been justified. In this case, however, the supposed transfer was made
only after complainant had been earlier terminated. Complainants statement in her affidavit that
she was summoned by the hotel after news of her plan to contest her dismissal circulated remains
unrefuted. Furthermore, the hotel has not explained why there was no official memorandum
issued to complainant formally informing her of her transfer. All these lead to only one conclusion
that the alleged transfer was not made in good faith as a valid exercise of management
prerogative but was intended as a settlement offer to complainant to prevent her from filing a
case.[38]

The offers made by the petitioners could not have the effect of validating an otherwise
arbitrary dismissal.[39]
We reject the contention of the petitioners that respondent Agoncillo is bound by the MOA
executed by the petitioners and respondent Union. There is no denying the right of the Union and
the petitioners under Article 227 of the Labor Code to enter into and execute a compromise
agreement with the assistance of the DOLE; and that such agreement is binding not only on the
Union generally but on its individual members.[40]
However, a plain reading of the MOA will readily show that it is not binding on respondent
Agoncillo. The MOA reads:

1. The Hotel shall pay the amount of P15,000.00 each to the members of the bargaining unit who
are represented by the Union in this case by way of amicable settlement of the case and in
addition to the redundancy pay already earlier given to such members.

2. For security purposes and an orderly proceeding, only claimants or their authorized
representatives shall be allowed entry into the premises of the Hotel accompanied by Union
representative.

3. On the date of application and actual payment, the claimants shall execute sworn release,
waiver and quitclaim as well as a special power of attorney authorizing the Union president to
amicably settle this case.

4. Unclaimed settlement pay after 15 April 2000 shall be turned over to the Union for its disposition
on condition that the Union shall take care of paying other claimants if any should show up to lay
their claim thereafter.

5. Following the execution of this Agreement, the Union and the Hotel shall file a manifestation
and motion with the DOLE, attached this Agreement, praying for the following:

a. Dismissal of the case with prejudice in regard to:

(i.) illegal redundancy as to those who have received the settlement pay above and
signed the Special Power of Attorney and Release, Waiver and Quitclaim;

(ii.) all ULP charges; and

b. Dismissal of the case without prejudice as to those who have not yet received the settlement
pay.[41]

The Union executed the MOA in behalf of the members of the bargaining unit. There is no
showing that Agoncillo is a member of that unit. The MOA applies only to the members of the
bargaining unit who agreed to the termination of their employment based on redundancy and
received redundancy pay. Agoncillo did not receive any redundancy pay or any monetary benefits
under the MOA or executed any deed or waiver or release in favor of the petitioners.
 The MOA executed by the petitioners and the Union settled only the case of the parties before
the SOLE for unfair labor practice and for illegal redundancy. It did not settle the case between
the petitioners and Agoncillo before the NLRC. This is the reason why the MOA was never
submitted by the parties therein to the NLRC for its approval. Although the petitioners sought a
reconsideration of the decision of the NLRC based, inter alia, on the MOA, the NLRC denied the
said motion. Indeed, the NLRC acted in accord with case law that:

First, even if a clear majority of the union members agreed to a settlement with the employer, the
union has no authority to compromise the individual claims of members who did not consent to
such settlement. Rule 138, Section 23 of the 1964 Revised Rules of Court requires a special
authority before an attorney may compromise his clients litigation. The authority to compromise
cannot lightly be presumed and should be duly established by evidence.

In the case at bar, minority union members did not authorize the union to compromise their
individual claims. Absent a showing of the unions special authority to compromise the individual
claims of private respondents for reinstatement and back wages, there is no valid waiver of the
aforesaid rights. As private respondents did not authorize the union to represent them in the
compromise settlement, they are not bound by the terms thereof.

Second, whether minority union members who did not consent to a compromise agreement are
bound by the majority decision approving a compromise settlement has been resolved in the
negative.

In La Campana, we explicitly declared:

Money claims due to laborers cannot be the object of settlement or compromise effected by a
union or counsel without the specific individual consent of each laborer concerned. The
beneficiaries are the individual complainants themselves. The union to which they belong can
only assist them but cannot decide for them.

The case of La Campana was re-affirmed in the General Rubber case as follows:

In the instant case, there is no dispute that private respondent has not ratified the Return-to-Work
Agreement. It follows, and we so hold, that private respondents cannot be held bound by the
Return-to-Work Agreement. The waiver of money claims, which in this case were accrued money
claims, by workers and employees must be regarded as a personal right, that is, a right that must
be personally exercised. For a waiver thereof to be legally effective, the individual consent or
ratification of the workers or employees involved must be shown. Neither the officers nor the
majority or the union had any authority to waive the accrued rights pertaining to the dissenting
minority members, even under a collective bargaining agreement which provided for a union shop.
The same considerations of public policy which impelled the Court to reach the conclusion it did
in La Campana, are equally compelling in the present case. The members of the union need the
protective shield of this doctrine not only vis--vis their employer but also, at times, vis-a-vis the
management of their own union, and at other times even against their own imprudence
impecuniousness.

We have consistently ruled that a compromise is governed by the basic principle that the
obligations arising therefrom have the force of law between the parties.
Consequently, private respondents may pursue their individual claims against petitioners before
the Labor Arbiter.

The judgment of the Labor Arbiter based on the compromise agreement in question does not
have the effect of res judicata upon private respondent who did not agree thereto.

A compromise, once approved by final orders of the court has the force of res judicata between
the parties and should not be disturbed except for vices of consent or forgery. A compromise is
basically a contract perfected by mere consent. Consent is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to constitute the contract. A
compromise agreement is not valid when a party in the case has not signed the same or when
someone signs for and in behalf of such party without authority to do so.

In SMI Fish Industries, Inc. vs. NLRC, this Court declared that where the compromise agreement
was signed by only three of the five respondents, the non-signatories cannot be bound by that
amicable settlement. This is so as a compromise agreement is a contract and cannot affect third
persons who are not parties to it.

Private respondents were not parties to the compromise agreement. Hence, the judgment
approving such agreement cannot have the effect of res judicata upon them since the requirement
of identity of parties is not satisfied. A judgment upon a compromise agreement has all the force
and effect of any other judgment, hence, conclusive only upon parties thereto and their privies.[42]

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against
the petitioners.
SO ORDERED.

FIRST DIVISION
[G.R. No. 155421. July 7, 2004]

ELMER M. MENDOZA, petitioner, vs. RURAL BANK OF LUCBAN, respondent.

DECISION
PANGANIBAN, J.:

The law protects both the welfare of employees and the prerogatives of management. Courts will
not interfere with business judgments of employers, provided they do not violate the law, collective
bargaining agreements, and general principles of fair play and justice. The transfer of personnel
from one area of operation to another is inherently a managerial prerogative that shall be upheld
if exercised in good faith -- for the purpose of advancing business interests, not of defeating or
circumventing the rights of employees.
The Case

The Court applies these principles in resolving the instant Petition for Review[1] under Rule 45 of
the Rules of Court, assailing the June 14, 2002 Decision[2] and September 25, 2002 Resolution[3]
of the Court of Appeals (CA) in CA-GR SP No. 68030. The assailed Decision disposed as follows:

WHEREFORE, the petition for certiorari is hereby DISMISSED for lack of merit.[4]

The challenged Resolution denied petitioners Motion for Reconsideration.

The Facts

On April 25, 1999, the Board of Directors of the Rural Bank of Lucban, Inc., issued Board
Resolution Nos. 99-52 and 99-53, which read:

Board Res. No. 99-52

RESOLVED AS IT IS HEREBY RESOLVED that in line with the policy of the bank to familiarize
bank employees with the various phases of bank operations and further strengthen the existing
internal control system[,] all officers and employees are subject to reshuffle of assignments.
Moreover, this resolution does not preclude the transfer of assignment of bank officers and
employees from the branch office to the head office and vice-versa.

Board Res. No. 95-53

Pursuant to Resolution No. 99-52, the following branch employees are hereby reshuffled to their
new assignments without changes in their compensation and other benefits.

NAME OF EMPLOYEES PRESENT ASSIGNMENT NEW ASSIGNMENT

JOYCE V. ZETA Bank Teller C/A Teller

CLODUALDO ZAGALA C/A Clerk Actg. Appraiser
ELMER L. MENDOZA Appraiser Clerk-Meralco Collection
CHONA R. MENDOZA Clerk-Meralco Bank Teller[5]
Collection

In a letter dated April 30, 1999, Alejo B. Daya, the banks board chairman, directed Briccio V.
Cada, the manager of the banks Tayabas branch, to implement the reshuffle.[6] The new
assignments were to be effective on May 1, 1999 without changes in salary, allowances, and
other benefits received by the aforementioned employees.[7]

On May 3, 1999, in an undated letter addressed to Daya, Petitioner Elmer Mendoza expressed
his opinion on the reshuffle, as follows:

RE: The recent reshuffle of employees as per

Board Resolution dated April 25, 1999

Dear Sir:

This is in connection with the aforementioned subject matter and which the undersigned received
on April 25, 1999.

Needless to state, the reshuffling of the undersigned from the present position as Appraiser to
Clerk-Meralco Collection is deemed to be a demotion without any legal basis. Before this action
on your part[,] the undersigned has been besieged by intrigues due to [the] malicious machination
of a certain public official who is bruited to be your good friend. These malicious insinuations were
baseless and despite the fact that I have been on my job as Appraiser for the past six (6) years
in good standing and never involved in any anomalous conduct, my being reshuffled to [C]lerk-
[M]eralco [C]ollection is a blatant harassment on your part as a prelude to my termination in due
time. This will constitute an unfair labor practice.

Meanwhile, may I beseech your good office that I may remain in my position as Appraiser until
the reason [for] my being reshuffled is made clear.

Your kind consideration on this request will be highly appreciated.[8]

On May 10, 1999, Daya replied:

Dear Mr. Mendoza,

Anent your undated letter expressing your resentment/comments on the recent managements
decision to reshuffle the duties of bank employees, please be informed that it was never the
intention (of management) to downgrade your position in the bank considering that your due
compensation as Bank Appraiser is maintained and no future reduction was intended.

Aside from giving bank employees a wider experience in various banking operations, the reshuffle
will also afford management an effective tool in providing the bank a sound internal control
system/check and balance and a basis in evaluating the performance of each employee. A
continuing bankwide reshuffle of employees shall be made at the discretion of management which
may include bank officers, if necessary as expressed in Board Resolution No. 99-53, dated April
25, 1999. Management merely shifted the duties of employees, their position title [may be]
retained if requested formally.

Being a standard procedure in maintaining an effective internal control system recommended by

the Bangko Sentral ng Pilipinas, we believe that the conduct of reshuffle is also a prerogative of
bank management.[9]

On June 7, 1999, petitioner submitted to the banks Tayabas branch manager a letter in which he
applied for a leave of absence from work:

Dear Sir:

I wish I could continue working but due to the ailment that I always feel every now and then, I
have the honor to apply for at least ten (10) days sick leave effective June 7, 1999.

Hoping that this request [merits] your favorable and kind consideration and understanding.[10]

On June 21, 1999, petitioner again submitted a letter asking for another leave of absence for
twenty days effective on the same date.[11]

On June 24, 1999, while on his second leave of absence, petitioner filed a Complaint before
Arbitration Branch No. IV of the National Labor Relations Commission (NLRC). The Complaint --
for illegal dismissal, underpayment, separation pay and damages -- was filed against the Rural
Bank of Lucban and/or its president, Alejo B. Daya; and its Tayabas branch manager, Briccio V.
Cada. The case was docketed as NLRC Case SRAB-IV-6-5862-99-Q.[12]

The labor arbiters June 14, 2000 Decision upheld petitioners claims as follows:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring respondents guilty of illegal dismissal.

2. Ordering respondents to reinstate complainant to his former position without loss of seniority
rights with full backwages from date of dismissal to actual reinstatement in the amount of
P55,000.00 as of June 30, 2000.

3. Ordering the payment of separation pay if reinstatement is not possible in the amount of
P30,000.00 in addition to 13th month pay of P5,000.00 and the usual P10,000.00 annual bonus
afforded the employees.

4. Ordering the payment of unpaid salary for the period covering July 1-30, 1999 in the amount of
P5,000.00

5. Ordering the payment of moral damages in the amount of P50,000.00.

6. Ordering the payment of exemplary damages in the amount of P25,000.00

7. Ordering the payment of Attorneys fees in the amount of P18,000.00 which is 10% of the
monetary award.[13]

On appeal, the NLRC reversed the labor arbiter.[14] In its July 18, 2001 Resolution, it held:

We can conceive of no reason to ascribe bad faith or malice to the respondent bank for its
implementation of its Board Resolution directing the reshuffle of employees at its Tayabas branch
to positions other than those they were occupying. While at first the employees thereby affected
would experience difficulty in adjusting to their new jobs, it cannot be gainsaid that the objective
for the reshuffle is noble, as not only would the employees obtain additional knowledge, they
would also be more well-rounded in the operations of the bank and thus help the latter further
strengthen its already existing internal control system.

The only inconvenience, as [w]e see it, that the [petitioner] may have experienced is that from an
appraiser he was made to perform the work of a clerk in the collection of Meralco payments, which
he may have considered as beneath him and his experience, being a pioneer employee. But it
cannot be discounted either that other employees at the Tayabas branch were similarly reshuffled.
The only logical conclusion therefore is that the Board Resolution was not aimed solely at the
[petitioner], but for all the other employees of the x x x bank as well. Besides, the complainant has
not shown by clear, competent and convincing evidence that he holds a vested right to the position
of Appraiser. x x x.

How and by what manner a business concern conducts its affairs is not for this Commission to
interfere with, especially so if there is no showing, as in the case at bar, that the reshuffle was
motivated by bad faith or ill-will. x x x.[15]

After the NLRC denied his Motion for Reconsideration,[16] petitioner brought before the CA a
Petition for Certiorari[17] assailing the foregoing Resolution.

Ruling of the Court of Appeals

Finding that no grave abuse of discretion could be attributed to the NLRC, the CA Decision ruled
thus:

The so-called harassment which Mendoza allegedly experienced in the aftermath of the
reshuffling of employees at the bank is but a figment of his imagination as there is no evidence
extant on record which substantiates the same. His alleged demotion, the cold shoulder stance,
the things about his chair and table, and the alleged reason for the harassment are but allegations
bereft of proof and are perforce inadmissible as self-serving statements and can never be
considered repositories of truth nor serve as foundations of court decisions anent the resolution
of the litigants rights.

When Mendoza was reshuffled to the position of clerk at the bank, he was not demoted as there
was no [diminution] of his salary benefits and rank. He could even retain his position title, had he
only requested for it pursuant to the reply of the Chairman of the banks board of directors to
Mendozas letter protesting the reshuffle. There is, therefore, no cause to doubt the reasons which
the bank propounded in support of its move to reshuffle its employees, viz:
1. to familiarize bank employees with the various phases of bank operations, and

2. to further strengthen the existing internal control system of the bank.

The reshuffling of its employees was done in good faith and cannot be made the basis of a finding
of constructive dismissal.

The fact that Mendoza was no longer included in the banks payroll for July 1 to 15, 1999 does not
signify that the bank has dismissed the former from its employ. Mendoza separated himself from
the banks employ when, on June 24, 1999, while on leave, he filed the illegal dismissal case
against his employer for no apparent reason at all.[18]

Hence, this Petition.[19]

The Issues

Petitioner raises the following issues for our consideration:

I. Whether or not the petitioner is deemed to have voluntarily separated himself from the service
and/or abandoned his job when he filed his Complaint for constructive and consequently illegal
dismissal;

II. Whether or not the reshuffling of private respondent[s] employees was done in good faith and
cannot be made as the basis of a finding of constructive dismissal, even as the [petitioners]
demotion in rank is admitted by both parties;

III. Whether or not the ruling in the landmark case of Ruben Serrano vs. NLRC [and Isetann
Department Store (323 SCRA 445)] is applicable to the case at bar;

IV. Whether or not the Court of Appeals erred in dismissing the petitioners money claims,
damages, and unpaid salaries for the period July 1-30, 1999, although this was not disputed by
the private respondent; and
V. Whether or not the entire proceedings before the Honorable Court of Appeals and the NLRC
are a nullity since the appeal filed by private respondent before the NLRC on August 5, 2000 was
on the 15th day or five (5) days beyond the reglem[e]ntary period of ten (10) days as provided for
by law and the NLRC Rules of Procedure.[20]

In short, the main issue is whether petitioner was constructively dismissed from his employment.

The Courts Ruling

The Petition has no merit.

Main Issue:
Constructive Dismissal

Constructive dismissal is defined as an involuntary resignation resorted to when continued

employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank
or a diminution of pay; or when a clear discrimination, insensibility or disdain by an employer
becomes unbearable to the employee.[21] Petitioner argues that he was compelled to file an
action for constructive dismissal, because he had been demoted from appraiser to clerk and not
given any work to do, while his table had been placed near the toilet and eventually removed.[22]
He adds that the reshuffling of employees was done in bad faith, because it was designed
primarily to force him to resign.[23]

Management Prerogative
to Transfer Employees

Jurisprudence recognizes the exercise of management prerogatives. For this reason, courts often
decline to interfere in legitimate business decisions of employers.[24] Indeed, labor laws
discourage interference in employers judgments concerning the conduct of their business.[25]
The law must protect not only the welfare of employees, but also the right of employers.

In the pursuit of its legitimate business interest, management has the prerogative to transfer or
assign employees from one office or area of operation to another -- provided there is no demotion
in rank or diminution of salary, benefits, and other privileges; and the action is not motivated by
discrimination, made in bad faith, or effected as a form of punishment or demotion without
sufficient cause.[26] This privilege is inherent in the right of employers to control and manage their
enterprise effectively.[27] The right of employees to security of tenure does not give them vested
rights to their positions to the extent of depriving management of its prerogative to change their
assignments or to transfer them.[28]

Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining
agreements, and general principles of fair play and justice.[29] The test for determining the validity
of the transfer of employees was explained in Blue Dairy Corporation v. NLRC[30] as follows:

[L]ike other rights, there are limits thereto. The managerial prerogative to transfer personnel must
be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and
fair play. Having the right should not be confused with the manner in which that right is exercised.
Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker.
In particular, the employer must be able to show that the transfer is not unreasonable,
inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution
of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of
proof, the employees transfer shall be tantamount to constructive dismissal, which has been
defined as a quitting because continued employment is rendered impossible, unreasonable or
unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive
dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has
become so unbearable to the employee leaving him with no option but to forego with his continued
employment.[31]

Petitioners Transfer Lawful

The employer bears the burden of proving that the transfer of the employee has complied with
the foregoing test. In the instant case, we find no reason to disturb the conclusion of the NLRC
and the CA that there was no constructive dismissal. Their finding is supported by substantial
evidence -- that amount of relevant evidence that a reasonable mind might accept as justification
for a conclusion.[32]

Petitioners transfer was made in pursuit of respondents policy to familiarize bank employees with
the various phases of bank operations and further strengthen the existing internal control
system[33] of all officers and employees. We have previously held that employees may be
transferred -- based on their qualifications, aptitudes and competencies -- to positions in which
they can function with maximum benefit to the company.[34] There appears no justification for
denying an employer the right to transfer employees to expand their competence and maximize
their full potential for the advancement of the establishment. Petitioner was not singled out; other
employees were also reassigned without their express consent.
Neither was there any demotion in the rank of petitioner; or any diminution of his salary, privileges
and other benefits. This fact is clear in respondents Board Resolutions, the April 30, 1999 letter
of Bank President Daya to Branch Manager Cada, and the May 10, 1999 letter of Daya to
petitioner.

On the other hand, petitioner has offered no sufficient proof to support his allegations. Given no
credence by both lower tribunals was his bare and self-serving statement that he had been
positioned near the comfort room, made to work without a table, and given no work
assignment.[35] Purely conjectural is his claim that the reshuffle of personnel was a harassment
in retaliation for an alleged falsification case filed by his relatives against a public official.[36] While
the rules of evidence prevailing in courts of law are not controlling in proceedings before the
NLRC,[37] parties must nonetheless submit evidence to support their contentions.

Secondary Issues:

Serrano v. NLRC Inapplicable

Serrano v. NLRC[38] does not apply to the present factual milieu. The Court ruled therein that the
lack of notice and hearing made the dismissal of the employee ineffectual, but not necessarily
illegal.[39] Thus, the procedural infirmity was remedied by ordering payment of his full back wages
from the time of his dismissal.[40] The absence of constructive dismissal in the instant case
precludes the application of Serrano. Because herein petitioner was not dismissed, then he is not
entitled to his claimed monetary benefits.

Alleged Nullity of NLRC

and CA Proceedings

Petitioner argues that the proceedings before the NLRC and the CA were void, since respondents
appeal before the NLRC had allegedly been filed beyond the reglementary period.[41] A careful
scrutiny of his Petition for Review[42] with the appellate court shows that this issue was not raised
there. Inasmuch as the instant Petition challenges the Decision of the CA, we cannot rule on
arguments that were not brought before it. This ruling is consistent with the due-process
requirement that no question shall be entertained on appeal, unless it has been raised in the court
below.[43]

WHEREFORE, this Petition is DENIED, and the June 14, 2002 Decision and the September 25,
2002 Resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 162021 June 16, 2014

MEGA MAGAZINE PUBLICATIONS, INC., JERRY TIU, AND SARITA V. YAP, Petitioners,
vs.
MARGARET A. DEFENSOR, Respondent.

DECISION

BERSAMIN, J.:

In labor cases, the rules on the degree of proof are enforced not as stringently as in other cases
in order to better serve the higher ends of justice. This lenity is intended to afford to the employee
every opportunity to level the playing field.

The Case

Being now assailed is the amended decision promulgated on November 19, 2003,1 whereby the
Court of Appeals (CA) reconsidered its original disposition, and granted the petition for certiorari
filed by respondent Margaret A. Defensor (respondent) by annulling and setting aside the adverse
resolutions dated July 31, 2002 and March 31, 2003 issued by the National Labor Relations
Commission (NLRC).

Antecedents
Petitioner Mega Magazine Publications, Inc. (MMPI) first employed the respondent as an
Associate Publisher in 1996, and later promoted her as a Group Publisher with a monthly salary
of P60,000.00.2

In a memorandum dated February 25, 1999, the respondent proposed to MMPI’s Executive Vice-
President Sarita V. Yap (Yap) year-end commissions for herself and a special incentive plan for
the Sales Department.3

The proposed schedule of the respondent’s commissions would be as follows:

1. MMPI Total revenue at P28-P29 M 0.05% outright commission

2. MMPI Total revenue at P30-P34 M 0.075% outright commission

3. MMPI Total revenue at P35-P38 M 0.1% outright commission

4. MMPI Total revenue at P39-P41 M 0.1% outright commission

5. MMPI Total revenue at P41M up 0.1% outright commission

while the proposed schedule of the special incentive plan would be the following:

1. MMPI Total revenue at P28-P29 M P5,000 each by year-end

2. MMPI Total revenue at P30-P34 M P7,000 each by year-end

3. MMPI Total revenue at P35-P38 M P8,500 each by year-end

4. MMPI Total revenue at P39-P41 M P10,000 each by year-end

5. MMPI Total revenue at P41M up P10,000 each by year-end Plus incentive trip abroad
Yap made marginal notes of her counter-proposals on her copy of the respondent’s memorandum
dated February 25, 1999 itself,4 crossing out proposed items 1 and 2 from the schedule of the
respondent’s commissions, and proposing instead that outright commissions be at 0.1% of P35-
P38 million in accordance with proposed item 3; and crossing out proposed items 1 and 2 from
the schedule of the special incentive plan, and writing "start here" and "stet" in reference to item
3. Yap also wrote on the memorandum: "Marge, if everything is ok w/ you, draft something for me
to sign …"; "You can also announce that at 5 M net for MMPI [acc to my computation, achievable
if they only meet their month min. quota] we can declare 14th month pay for entire company."5

The respondent sent another memorandum on April 5, 1999 setting out the 1999 advertisement
sales, target and commissions, and proposing that the schedule of her outright commissions
should start at .05% of P34.5 million total revenue, or P175,000.00;6 and further proposing that
the special incentives be given when total revenues reached P35-P38 million.

On August 31, 1999, the respondent sent Yap a report on sales and sales targets.7

On October 1999, the respondent tendered her letter of resignation effective at the end of
December 1999.1âwphi1 Yap accepted the resignation.8 Before leaving MMPI, the respondent
sent Yap another report on the sales and advertising targets for 1999.9 On December 8, 1999,
Yap responded with a "formalization" of her approval of the 1999 special incentive scheme
proposed by the respondent through her memorandum dated February 25, 1999,10 revising anew
the schedule by starting commissions at.05% of P35-P38 million gross advertising revenue
(including barter), and the proposed special incentives at P35-P38 million with P8,500.00
bonus.11

The respondent replied to Yap, pointing out that her memorandum dated April 5, 1999 had been
the result of Yap’s own comments on the special incentive scheme she had proposed, and that
she had assumed that Yap had been amenable to the proposal when she did not receive any
further reaction from the latter.12

On May 2000, after the respondent had left the company, she filed a complaint for payment of
bonus and incentive compensation with damages,13 specifically demanding the payment
ofP271,264.68 as sales commissions, P60,000.00 as 14th month pay, and P8,500.00 as her
share in the incentive scheme for the advertising and sales staff.14

Ruling of the Labor Arbiter

In a decision dated February 5, 2001,15 the Labor Arbiter (LA) dismissed the respondent’s
complaint, ruling that the respondent had not presented any evidence showing that MMPI had
agreed or committed to the terms proposed in her memorandum of April 5, 1999; that even
assuming that the petitioners had agreed to her terms, the table she had submitted justifying a
gross revenue of P36,216,624.07 was not an official account by MMPI;16 and that the petitioners
had presented a 1999 statement of income and deficit prepared by the auditing firm of
Punongbayan & Araullo showing MMPI’s gross revenue for 1999 being only P31,947,677.00.17

Decision of the NLRC

The respondent appealed, but the NLRC denied the appeal for its lack of merit,18 with the NLRC
concurring with the LA’s ruling that there had been no agreement between the petitioners and the
respondent on the terms and conditions of the incentives reached.

The respondent filed a motion for reconsideration and a supplement to the motion for
reconsideration.1âwphi1 In the supplement, she included a motion to admit additional evidence
(i.e., the affidavit of Lie Tabingo who had worked as a traffic clerk in the Advertising Department
of MMPI and had been in charge of keeping track of the advertisements placed with MMPI) on
the ground that such evidence had been "unavailable during the hearing as newly discovered
evidence in a motion for new trial".19

The NLRC denied the respondent’s motions for reconsideration.20

Judgment of the CA

The respondent brought a special civil action for certiorari in the CA.

In its decision promulgated on August 28, 2003,21 the CA dismissed the respondent’s petition for
certiorari and upheld the resolutions of the NLRC.

On motion for reconsideration by the respondent, however, the CA promulgated on November

19, 2003 its assailed amended decision granting the motion for reconsideration and giving due
course to the respondent’s petition for certiorari; annulling the challenged resolutions of the NLRC;
and remanding the case to the NLRC for the reception of additional evidence. The CA opined that
the NLRC had committed a grave abuse of discretion in finding that there had been no special
incentive scheme approved and implemented for 1999,22 and in disallowing the respondent from
presenting additional evidence that was crucial in establishing her claim about MMPI’s gross
revenue.23 The amended decision disposed as follows:
WHEREFORE, premises considered, the motion for reconsideration is hereby GRANTED. Our
Decision of August 28, 2003 is hereby RECONSIDERED AND SET ASIDE. A new judgment is
hereby entered GIVING DUE COURSE to the petition and GRANTING the writ prayed for.
Accordingly, the challenged Resolutions of the NLRC in NLRC NCR 00-03-61361-00 (CA No.
028358-01) dated July 31, 2002 and March 31, 2003 are hereby ANNULLED and SET ASIDE.
The case is hereby remanded to the NLRC for reception of additional evidence on appeal as
prayed for by petitioner and for proper proceedings in accordance with Our disquisitions herein.

The denial of the claim for 14th month pay is sustained for lack of evidentiary basis.

No pronouncement as to costs.

SO ORDERED.24

The petitioners and the respondent sought reconsideration of the CA’s amended decision, but the
CA denied their motions through the resolution promulgated on February 4, 2004.25

Issues

Hence, this appeal by petition for review on certiorari, with the petitioners urging that the CA erred
in ruling that –

I. RESPONDENT CAN INTRODUCE EVIDENCE THAT IS NOT NEWLY-DISCOVERED FOR

THE FIRST TIME ON APPEAL.

II. A [REMAND] OF THE CASETO THE NLRC FOR FURTHER RECEPTION OF EVIDENCE IS
JUSTIFIED BY REASON OF DEARTH OF EVIDENCE TO PROVE THAT TARGET GROSS
SALES OR REVENUES WEREACTUALLY MET AS TO ENTITLE RESPONDENT TO THE
INCENTIVE BONUS FOR THE SUBJECT PERIOD/YEAR.26

The petitioners argue that the circumstances of the case did not warrant the relaxation of the rules
of procedure in order to allow the submission of the memorandum and the affidavit of Tabingo to
the LA and the NLRC. They contend that the respondent had sought to introduce in the
proceedings before the LA Tabingo’s memorandum dated December 10, 1999 addressed to the
Accounting Department stating that the "gross revenue from all publications was P36,022,624.07,
while net revenue was P32,551,890.58";27 that Tabingo’s affidavit was meant to validate her
memorandum; that such pieces of evidence sought to prove that MMPI’s target gross sales had
been met, and would then entitle the respondent to her claims of commissions and special
incentives; that the LA actually considered but did not give any weight or value to Tabingo’s
memorandum in resolving the respondent’s claims; that any affidavit from Tabingo that the
respondent intended to introduce would be merely corroborative of the evidence already
presented, like the table purportedly showing MMPI’s gross revenue for 1999; and that such
evidence was already considered by the NLRC in resolving the appeal.28

The important issue is whether or not the respondent was entitled to the commissions and the
incentive bonus being claimed.

Ruling

The appeal is partly meritorious.

The grant of a bonus or special incentive, being a management prerogative, is not a demandable
and enforceable obligation, except when the bonus or special incentive is made part of the wage,
salary or compensation of the employee,29 or is promised by the employer and expressly agreed
upon by the parties.30 By its very definition, bonus is a gratuity or act of liberality of the giver,31
and cannot be considered part of an employee’s wages if it is paid only when profits are realized
or a certain amount of productivity is achieved. If the desired goal of production or actual work is
not accomplished, the bonus does not accrue.

Due to the nature of the bonus or special incentive being a gratuity or act of liberality on the part
of the giver, the respondent could not validly insist on the schedule proposed in her memorandum
of April 5, 1999 considering that the grant of the bonus or special incentive remained a
management prerogative. However, the Court agrees with the CA’s ruling that the petitioners had
already exercised the management prerogative to grant the bonus or special incentive. At no
instance did Yap flatly refuse or reject the respondent’s request for commissions and the bonus
or incentive. This is plain from the fact that Yap even "bargained" with the respondent on the
schedule of the rates and the revenues on which the bonus or incentive would be pegged. What
remained contested was only the schedule of the rates and the revenues. In her initial
memorandum of February 25, 1999, the respondent had suggested the following schedule,
namely: (a) 0.05% outright commission on total revenue of P28-P29 million; (b) 0.075% on P30-
P34 million; (c) 0.1% on P35-P38 million; (d) 0.1% on P39-P41 million pesos; and (f) 0.1% on P41
million or higher, but Yap had countered by revising the schedule to start at 0.1% as outright
commissions on a total revenue of P35-P38 million, and the special incentive bonus to start at
revenues of P35-P38 million. Moreover, on December 8, 1999, Yap sent to the respondent a
memorandum entitled Re: Formalization of my handwritten approval of 1999 Incentive scheme
dated 25 February 1999. Such actuations and actions by Yap indicated that, firstly, the petitioners
had already acceded to the grant of the special incentive bonus; and, secondly, the only issue still
to be threshed out was at which point and at what rate the respondent’s outright commissions
and the special incentive bonus for the sales staff should be given.

For sure, Yap’s memorandum dated December 8, 1999, aside from being the petitioners’
categorical admission of the grant of the commissions and the bonus or incentives, laid down the
petitioners’ own schedule of the commissions and the bonus or incentives,32 to wit:

Re: Formalization of my handwritten approval of 1999 incentive scheme dated 25 February 1999

1999 Incentive Scheme for Group Publisher

MMPI Gross Advertising Revenue

(includes barter) P35-38 M
P39-41 M
P41 M .05%
.075%
up 1%
Commissionable ad revenue is net of advertising agency commission and absorbed production
costs.1avvphi1 Commission will be paid in bartered goods and cash in direct proportion to
percentage of cash and bartered goods revenue for the year. This amount will be paid by January
30, 2000 if the documents (contracts, P.O.s) to support the gross revenue claim are in order and
submitted to Finance.

Group Incentive for Sale and Traffic Team

MMPI Gross Advertising Revenue P35-38 M

P39-41 M
P41 M up P8,500.00 each
P10,000.00 each
P10,000.00 each
+ incentive trip abroad
Concerning the remand of the case to the NLRC for reception of additional evidence at the
instance of the respondent, we hold that the CA committed a reversible error. Although, as a rule,
the submission to the NLRC of additional evidence like documents and affidavits is not prohibited,
so that the NLRC may properly consider such evidence for the first time on appeal,33 the
circumstances of the case did not justify the application of the rule herein.

The additional evidence the respondent has sought to be admitted (i.e., Tabingo’s affidavit
executed on October 14, 2002) was already attached to the pleadings filed in the NLRC, and was
part of the records thereat. Its introduction was apparently aimed to rebut the petitioners’ claim
that its gross revenue was only P31,947,677.00 and did not reach the minimum P35 million
necessary for the grant of the respondent’s outright commissions and the special incentive bonus
for the sales staff (inclusive of the respondent). Tabingo’s affidavit corroborated her memorandum
to the Accounting Department dated December 10, 1999 stating that MMPI’s revenue for 1999
was P36,216,624.07.341âwphi1

Confronted with the conflicting claims on MMPI’s gross revenue realized in 1999, the question is
which evidence must be given more weight?

The resolution of the question requires the re-examination and calibration of evidence.35 Such
re-examination and calibration, being of a factual nature, ordinarily lies beyond the purview of the
Court’s authority in this appeal. Yet, because the documents are already before the Court, we
hereby treat the situation as an exception in order to resolve the question promptly and finally
instead of still remanding the case to the CA for the reevaluation and calibration.

We start by observing that the degree of proof required in labor cases is not as stringent as in
other types of cases.36 This liberal approach affords to the employee every opportunity to level
the playing field in which her employer is pitted against her. Here, on the one hand, were
Tabingo’s memorandum and affidavit indicating that MMPI’s revenues in 1999 totaled
P36,216,624.07, and, on the other, the audit report showing MMPI’s gross revenues amounting
to only P31,947,677.00 in the same year. That the audit report was rendered by the auditing firm
of Punongbayan & Araullo did not make it weightier than Tabingo’s memorandum and affidavit,
for only substantial evidence – that amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion37 was required in labor adjudication. Moreover,
whenever the evidence presented by the employer and that by the employee are in equipoise,
the scales of justice must tilt in favor of the latter.38For purposes of determining whether or not
the petitioners’ gross revenue reached the minimum target of P35 million, therefore, Tabingo’s
memorandum and affidavit sufficed to positively establish that it did, particularly considering that
Tabingo’s memorandum was made in the course of the performance of her official tasks as a
traffic clerk of MMPI. In her affidavit, too, Tabingo asserted that her issuance of the memorandum
was pursuant to MMPI’s year-end procedures, an assertion that the petitioners did not refute. In
any event, Tabingo’s categorical declaration in her affidavit that "[because] of that achievement,
as part of the Sales and Traffic Team of MMPI, in addition to my other bonuses that year, I
received P8,500.00 in gift certificates as my share in the Group Incentive for the Sales and Traffic
Team for gross advertising revenue of P35 to P38 million xxx,"39 aside from the petitioners not
refuting it, was corroborated by the 1999 Advertising Target sent by the respondent to Yap on
December 2, 1999, in which the respondent reported a gross revenue of P36,216,624.07 as of
December 1, 1999.40

Accordingly, the Court concludes that the respondent was entitled to her 0.05% outright
commissions and to the special incentive bonus of P8,500.00 based on MMPI having reached
the minimum target of P35 million in gross revenues paid in "bartered goods and cash in direct
proportion to percentage of cash and bartered goods revenue for the year," as provided in Yap’s
memorandum of December 8, 1999.41

WHEREFORE, the Court REVERSES AND SETS ASIDE the amended decision promulgated on
November 19, 2003; ENTERS a new decision granting respondent Margaret A. Defensor’s claim
for outright commissions in the amount of P 181,083 .12 and special incentive bonus of P8,500.00,
or a total of 1!189,583.12; and DIRECTS petitioner Mega Magazine Publications, Inc. to pay the
costs of suit.

SO ORDERED.