1
G.R. No. 76633 October 18, 1988
EASTERN SHIPPING LINES, INC., petitioner,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF
LABOR AND EMPLOYMENT, HEARING OFFICER ABDUL BASAR and KATHLEEN D.
SACO, respondents.
Jimenea, Dala & Zaragoza Law Office for petitioner.
The Solicitor General for public respondent.
Dizon Law Office for respondent Kathleen D. Saco.
CRUZ, J.:
The private respondent in this case was awarded the sum of P192,000.00 by the Philippine Overseas
Employment Administration (POEA) for the death of her husband. The decision is challenged by the
petitioner on the principal ground that the POEA had no jurisdiction over the case as the husband was
not an overseas worker.
Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he was killed in an accident in
Tokyo, Japan, March 15, 1985. His widow sued for damages under Executive Order No. 797 and
Memorandum Circular No. 2 of the POEA. The petitioner, as owner of the vessel, argued that the
complaint was cognizable not by the POEA but by the Social Security System and should have been
filed against the State Insurance Fund. The POEA nevertheless assumed jurisdiction and after
considering the position papers of the parties ruled in favor of the complainant. The award consisted of
P180,000.00 as death benefits and P12,000.00 for burial expenses.
The petitioner immediately came to this Court, prompting the Solicitor General to move for dismissal
on the ground of non-exhaustion of administrative remedies.
Ordinarily, the decisions of the POEA should first be appealed to the National Labor Relations
Commission, on the theory inter alia that the agency should be given an opportunity to correct the
errors, if any, of its subordinates. This case comes under one of the exceptions, however, as the
questions the petitioner is raising are essentially questions of law. 1 Moreover, the private respondent
himself has not objected to the petitioner's direct resort to this Court, observing that the usual
procedure would delay the disposition of the case to her prejudice.
The Philippine Overseas Employment Administration was created under Executive Order No. 797,
promulgated on May 1, 1982, to promote and monitor the overseas employment of Filipinos and to
protect their rights. It replaced the National Seamen Board created earlier under Article 20 of the Labor
Code in 1974. Under Section 4(a) of the said executive order, the POEA is vested with "original and
exclusive jurisdiction over all cases, including money claims, involving employee-employer relations
arising out of or by virtue of any law or contract involving Filipino contract workers, including
seamen." These cases, according to the 1985 Rules and Regulations on Overseas Employment issued
by the POEA, include "claims for death, disability and other benefits" arising out of such employment.
2
The petitioner does not contend that Saco was not its employee or that the claim of his widow is not
compensable. What it does urge is that he was not an overseas worker but a 'domestic employee and
consequently his widow's claim should have been filed with Social Security System, subject to appeal
to the Employees Compensation Commission.
We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was an overseas
employee of the petitioner at the time he met with the fatal accident in Japan in 1985.
Under the 1985 Rules and Regulations on Overseas Employment, overseas employment is defined as
"employment of a worker outside the Philippines, including employment on board vessels plying
international waters, covered by a valid contract. 3 A contract worker is described as "any person
working or who has worked overseas under a valid employment contract and shall include seamen" 4
or "any person working overseas or who has been employed by another which may be a local
employer, foreign employer, principal or partner under a valid employment contract and shall include
seamen." 5 These definitions clearly apply to Vitaliano Saco for it is not disputed that he died while
under a contract of employment with the petitioner and alongside the petitioner's vessel, the M/V
Eastern Polaris, while berthed in a foreign country. 6
It is worth observing that the petitioner performed at least two acts which constitute implied or tacit
recognition of the nature of Saco's employment at the time of his death in 1985. The first is its
submission of its shipping articles to the POEA for processing, formalization and approval in the
exercise of its regulatory power over overseas employment under Executive Order NO. 797. 7 The
second is its payment 8 of the contributions mandated by law and regulations to the Welfare Fund for
Overseas Workers, which was created by P.D. No. 1694 "for the purpose of providing social and
welfare services to Filipino overseas workers."
Significantly, the office administering this fund, in the receipt it prepared for the private respondent's
signature, described the subject of the burial benefits as "overseas contract worker Vitaliano Saco." 9
While this receipt is certainly not controlling, it does indicate, in the light of the petitioner's own
previous acts, that the petitioner and the Fund to which it had made contributions considered Saco to
be an overseas employee.
The petitioner argues that the deceased employee should be likened to the employees of the Philippine
Air Lines who, although working abroad in its international flights, are not considered overseas
workers. If this be so, the petitioner should not have found it necessary to submit its shipping articles to
the POEA for processing, formalization and approval or to contribute to the Welfare Fund which is
available only to overseas workers. Moreover, the analogy is hardly appropriate as the employees of
the PAL cannot under the definitions given be considered seamen nor are their appointments coursed
through the POEA.
The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was made by the
POEA pursuant to its Memorandum Circular No. 2, which became effective on February 1, 1984. This
circular prescribed a standard contract to be adopted by both foreign and domestic shipping companies
in the hiring of Filipino seamen for overseas employment. A similar contract had earlier been required
by the National Seamen Board and had been sustained in a number of cases by this Court. 10 The
petitioner claims that it had never entered into such a contract with the deceased Saco, but that is
hardly a serious argument. In the first place, it should have done so as required by the circular, which
specifically declared that "all parties to the employment of any Filipino seamen on board any ocean-
going vessel are advised to adopt and use this employment contract effective 01 February 1984 and to
desist from using any other format of employment contract effective that date." In the second place,
even if it had not done so, the provisions of the said circular are nevertheless deemed written into the
contract with Saco as a postulate of the police power of the State. 11
But the petitioner questions the validity of Memorandum Circular No. 2 itself as violative of the
principle of non-delegation of legislative power. It contends that no authority had been given the
POEA to promulgate the said regulation; and even with such authorization, the regulation represents an
exercise of legislative discretion which, under the principle, is not subject to delegation.
The authority to issue the said regulation is clearly provided in Section 4(a) of Executive Order No.
797, reading as follows:

... The governing Board of the Administration (POEA), as hereunder provided shall
promulgate the necessary rules and regulations to govern the exercise of the
adjudicatory functions of the Administration (POEA).
Similar authorization had been granted the National Seamen Board, which, as earlier observed, had
itself prescribed a standard shipping contract substantially the same as the format adopted by the
POEA.
The second challenge is more serious as it is true that legislative discretion as to the substantive
contents of the law cannot be delegated. What can be delegated is the discretion to determine how the
law may be enforced, not what the law shall be. The ascertainment of the latter subject is a prerogative
of the legislature. This prerogative cannot be abdicated or surrendered by the legislature to the
delegate. Thus, in Ynot v. Intermediate Apellate Court 12 which annulled Executive Order No. 626, this
Court held:
We also mark, on top of all this, the questionable manner of the disposition of the
confiscated property as prescribed in the questioned executive order. It is there
authorized that the seized property shall be distributed to charitable institutions and
other similar institutions as the Chairman of the National Meat Inspection
Commission may see fit, in the case of carabaos.' (Italics supplied.) The phrase "may
see fit" is an extremely generous and dangerous condition, if condition it is. It is
laden with perilous opportunities for partiality and abuse, and even corruption. One
searches in vain for the usual standard and the reasonable guidelines, or better still,
the limitations that the officers must observe when they make their distribution.
There is none. Their options are apparently boundless. Who shall be the fortunate
beneficiaries of their generosity and by what criteria shall they be chosen? Only the
officers named can supply the answer, they and they alone may choose the grantee as
they see fit, and in their own exclusive discretion. Definitely, there is here a 'roving
commission a wide and sweeping authority that is not canalized within banks that
keep it from overflowing,' in short a clearly profligate and therefore invalid
delegation of legislative powers.
There are two accepted tests to determine whether or not there is a valid delegation of legislative
power, viz, the completeness test and the sufficient standard test. Under the first test, the law must be
complete in all its terms and conditions when it leaves the legislature such that when it reaches the
delegate the only thing he will have to do is enforce it. 13 Under the sufficient standard test, there must
be adequate guidelines or stations in the law to map out the boundaries of the delegate's authority and
prevent the delegation from running riot. 14
Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not
allowed to step into the shoes of the legislature and exercise a power essentially legislative.
The principle of non-delegation of powers is applicable to all the three major powers of the
Government but is especially important in the case of the legislative power because of the many
instances when its delegation is permitted. The occasions are rare when executive or judicial powers
have to be delegated by the authorities to which they legally certain. In the case of the legislative
power, however, such occasions have become more and more frequent, if not necessary. This had led
to the observation that the delegation of legislative power has become the rule and its non-delegation
the exception.
The reason is the increasing complexity of the task of government and the growing inability of the
legislature to cope directly with the myriad problems demanding its attention. The growth of society
has ramified its activities and created peculiar and sophisticated problems that the legislature cannot be
2
expected reasonably to comprehend. Specialization even in legislation has become necessary. To many
of the problems attendant upon present-day undertakings, the legislature may not have the competence
to provide the required direct and efficacious, not to say, specific solutions. These solutions may,
however, be expected from its delegates, who are supposed to be experts in the particular fields
assigned to them.
The reasons given above for the delegation of legislative powers in general are particularly applicable
to administrative bodies. With the proliferation of specialized activities and their attendant peculiar
problems, the national legislature has found it more and more necessary to entrust to administrative
agencies the authority to issue rules to carry out the general provisions of the statute. This is called the
"power of subordinate legislation."
With this power, administrative bodies may implement the broad policies laid down in a statute by
"filling in' the details which the Congress may not have the opportunity or competence to provide. This
is effected by their promulgation of what are known as supplementary regulations, such as the
implementing rules issued by the Department of Labor on the new Labor Code. These regulations have
the force and effect of law.
Memorandum Circular No. 2 is one such administrative regulation. The model contract prescribed
thereby has been applied in a significant number of the cases without challenge by the employer. The
power of the POEA (and before it the National Seamen Board) in requiring the model contract is not
unlimited as there is a sufficient standard guiding the delegate in the exercise of the said authority.
That standard is discoverable in the executive order itself which, in creating the Philippine Overseas
Employment Administration, mandated it to protect the rights of overseas Filipino workers to "fair and
equitable employment practices."
Parenthetically, it is recalled that this Court has accepted as sufficient standards "Public interest" in
People v. Rosenthal 15 "justice and equity" in Antamok Gold Fields v. CIR 16 "public convenience and
welfare" in Calalang v. Williams 17 and "simplicity, economy and efficiency" in Cervantes v. Auditor
General, 18 to mention only a few cases. In the United States, the "sense and experience of men" was
accepted in Mutual Film Corp. v. Industrial Commission, 19 and "national security" in Hirabayashi v.
United States. 20
It is not denied that the private respondent has been receiving a monthly death benefit pension of
P514.42 since March 1985 and that she was also paid a P1,000.00 funeral benefit by the Social
Security System. In addition, as already observed, she also received a P5,000.00 burial gratuity from
the Welfare Fund for Overseas Workers. These payments will not preclude allowance of the private
respondent's claim against the petitioner because it is specifically reserved in the standard contract of
employment for Filipino seamen under Memorandum Circular No. 2, Series of 1984, that—
Section C. Compensation and Benefits.—
1. In case of death of the seamen during the term of his Contract, the employer shall
pay his beneficiaries the amount of:
a. P220,000.00 for master and chief engineers
b. P180,000.00 for other officers, including radio operators and
master electrician
c. P 130,000.00 for ratings.
2. It is understood and agreed that the benefits mentioned above shall be separate and
distinct from, and will be in addition to whatever benefits which the seaman is
entitled to under Philippine laws. ...
3. ...
 3

c. If the remains of the seaman is buried in the Philippines, the

owners shall pay the beneficiaries of the seaman an amount not
exceeding P18,000.00 for burial expenses.
The underscored portion is merely a reiteration of Memorandum Circular No. 22, issued by the
National Seamen Board on July 12,1976, providing an follows:
Income Benefits under this Rule Shall be Considered Additional Benefits.—
All compensation benefits under Title II, Book Four of the Labor Code of the
Philippines (Employees Compensation and State Insurance Fund) shall be granted, in
addition to whatever benefits, gratuities or allowances that the seaman or his
beneficiaries may be entitled to under the employment contract approved by the
NSB. If applicable, all benefits under the Social Security Law and the Philippine
Medicare Law shall be enjoyed by the seaman or his beneficiaries in accordance with
such laws.
The above provisions are manifestations of the concern of the State for the working class, consistently
with the social justice policy and the specific provisions in the Constitution for the protection of the
working class and the promotion of its interest.
One last challenge of the petitioner must be dealt with to close t case. Its argument that it has been
denied due process because the same POEA that issued Memorandum Circular No. 2 has also
sustained and applied it is an uninformed criticism of administrative law itself. Administrative agencies
are vested with two basic powers, the quasi-legislative and the quasi-judicial. The first enables them to
promulgate implementing rules and regulations, and the second enables them to interpret and apply
such regulations. Examples abound: the Bureau of Internal Revenue adjudicates on its own revenue
regulations, the Central Bank on its own circulars, the Securities and Exchange Commission on its own
rules, as so too do the Philippine Patent Office and the Videogram Regulatory Board and the Civil
Aeronautics Administration and the Department of Natural Resources and so on ad infinitum on their
respective administrative regulations. Such an arrangement has been accepted as a fact of life of
modern governments and cannot be considered violative of due process as long as the cardinal rights
laid down by Justice Laurel in the landmark case of Ang Tibay v. Court of Industrial Relations 21 are
observed.
Whatever doubts may still remain regarding the rights of the parties in this case are resolved in favor of
the private respondent, in line with the express mandate of the Labor Code and the principle that those
with less in life should have more in law.
When the conflicting interests of labor and capital are weighed on the scales of social justice, the
heavier influence of the latter must be counter-balanced by the sympathy and compassion the law must
accord the underprivileged worker. This is only fair if he is to be given the opportunity and the right to
assert and defend his cause not as a subordinate but as a peer of management, with which he can
negotiate on even plane. Labor is not a mere employee of capital but its active and equal partner.
WHEREFORE, the petition is DISMISSED, with costs against the petitioner. The temporary
restraining order dated December 10, 1986 is hereby LIFTED. It is so ordered.

G.R. No. 120077 October 13, 2000
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA AND
MARCELO G. SANTOS, respondents.
PARDO, J.:
The case before the Court is a petition for certiorari1 to annul the following orders of the National
Labor Relations Commission (hereinafter referred to as "NLRC") for having been issued without or
with excess jurisdiction and with grave abuse of discretion:2
(1) Order of May 31, 1993.3 Reversing and setting aside its earlier resolution of August 28,
1992.4 The questioned order declared that the NLRC, not the Philippine Overseas
Employment Administration (hereinafter referred to as "POEA"), had jurisdiction over private
respondent's complaint;
(2) Decision of December 15, 1994.5 Directing petitioners to jointly and severally pay private
respondent twelve thousand and six hundred dollars (US$ 12,600.00) representing salaries for
the unexpired portion of his contract; three thousand six hundred dollars (US$3,600.00) as
extra four months salary for the two (2) year period of his contract, three thousand six
hundred dollars (US$3,600.00) as "14th month pay" or a total of nineteen thousand and eight
hundred dollars (US$19,800.00) or its peso equivalent and attorney's fees amounting to ten
percent (10%) of the total award; and
(3) Order of March 30, 1995.6 Denying the motion for reconsideration of the petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos") was an overseas
worker employed as a printer at the Mazoon Printing Press, Sultanate of Oman. Subsequently, in June
1988, he was directly hired by the Palace Hotel, Beijing, People's Republic of China and later
terminated due to retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and the Manila Hotel
International Company, Limited (hereinafter referred to as "MHICL").
When the case was filed in 1990, MHC was still a government-owned and controlled corporation duly
organized and existing under the laws of the Philippines.
MHICL is a corporation duly organized and existing under the laws of Hong Kong.7 MHC is an
"incorporator" of MHICL, owning 50% of its capital stock. 8
By virtue of a "management agreement"9 with the Palace Hotel (Wang Fu Company Limited),
MHICL10 trained the personnel and staff of the Palace Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the Sultanate of Oman, respondent Santos
received a letter dated May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace Hotel,
Beijing, China. Mr. Schmidt informed respondent Santos that he was recommended by one Nestor
Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly salary
and increased benefits. The position was slated to open on October 1, 1988. 11
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign employment
contract to respondent Santos. Mr. Henk advised respondent Santos that if the contract was acceptable,
to return the same to Mr. Henk in Manila, together with his passport and two additional pictures for his
visa to China.
4
On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press, effective June 30,
1988, under the pretext that he was needed at home to help with the family's piggery and poultry
business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henk's letter.
Respondent Santos enclosed four (4) signed copies of the employment contract (dated June 4, 1988)
and notified them that he was going to arrive in Manila during the first week of July 1988.
The employment contract of June 4, 1988 stated that his employment would commence September 1,
1988 for a period of two years.12 It provided for a monthly salary of nine hundred dollars (US$900.00)
net of taxes, payable fourteen (14) times a year.13
On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing, China. He started to work at the Palace
Hotel.14
Subsequently, respondent Santos signed an amended "employment agreement" with the Palace Hotel,
effective November 5, 1988. In the contract, Mr. Shmidt represented the Palace Hotel. The Vice
President (Operations and Development) of petitioner MHICL Miguel D. Cergueda signed the
employment agreement under the word "noted".
From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave. He returned to
China and reassumed his post on July 17, 1989.
On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna suggested in a handwritten note
that respondent Santos be given one (1) month notice of his release from employment.
On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by Mr. Shmidt that
his employment at the Palace Hotel print shop would be terminated due to business reverses brought
about by the political upheaval in China.15 We quote the letter:16
"After the unfortunate happenings in China and especially Beijing (referring to Tiannamen
Square incidents), our business has been severely affected. To reduce expenses, we will not
open/operate printshop for the time being.
"We sincerely regret that a decision like this has to be made, but rest assured this does in no
way reflect your past performance which we found up to our expectations."
"Should a turnaround in the business happen, we will contact you directly and give you
priority on future assignment."
On September 5, 1989, the Palace Hotel terminated the employment of respondent Santos and paid all
benefits due him, including his plane fare back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the Philippines.
On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr. Shmidt,
demanding full compensation pursuant to the employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit: 17
His service with the Palace Hotel, Beijing was not abruptly terminated but we followed the
one-month notice clause and Mr. Santos received all benefits due him.
"For your information the Print Shop at the Palace Hotel is still not operational and with a low
business outlook, retrenchment in various departments of the hotel is going on which is a
normal management practice to control costs.
"When going through the latest performance ratings, please also be advised that his
performance was below average and a Chinese National who is doing his job now shows a
better approach.

"In closing, when Mr. Santos received the letter of notice, he hardly showed up for work but
still enjoyed free accommodation/laundry/meals up to the day of his departure."
On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with the Arbitration
Branch, National Capital Region, National Labor Relations Commission (NLRC). He prayed for an
award of nineteen thousand nine hundred and twenty three dollars (US$19,923.00) as actual damages,
forty thousand pesos (P40,000.00) as exemplary damages and attorney's fees equivalent to 20% of the
damages prayed for. The complaint named MHC, MHICL, the Palace Hotel and Mr. Shmidt as
respondents.
The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in the
proceedings before the Labor Arbiter.18
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against petitioners, thus:19
"WHEREFORE, judgment is hereby rendered:
"1. directing all the respondents to pay complainant jointly and severally;
"a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries;
"b) P50,000.00 as moral damages;
"c) P40,000.00 as exemplary damages; and
"d) Ten (10) percent of the total award as attorney's fees.
"SO ORDERED."
On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the NLRC had
jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution, stating: 20
"WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void for want
of jurisdiction. Complainant is hereby enjoined to file his complaint with the POEA.
"SO ORDERED."
On September 18, 1992, respondent Santos moved for reconsideration of the afore-quoted resolution.
He argued that the case was not cognizable by the POEA as he was not an "overseas contract
worker."21
On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC directed Labor Arbiter
Emerson Tumanon to hear the case on the question of whether private respondent was retrenched or
dismissed.22
On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the testimonial and
documentary evidence presented to and heard by him. 23
Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the National Capital Region,
Arbitration Branch, and the case was transferred to Labor Arbiter Jose G. de Vera. 24
On November 25, 1994, Labor Arbiter de Vera submitted his report. 25 He found that respondent Santos
was illegally dismissed from employment and recommended that he be paid actual damages equivalent
to his salaries for the unexpired portion of his contract. 26
On December 15, 1994, the NLRC ruled in favor of private respondent, to wit: 27
"WHEREFORE, finding that the report and recommendations of Arbiter de Vera are
supported by substantial evidence, judgment is hereby rendered, directing the respondents to
jointly and severally pay complainant the following computed contractual benefits: (1)
US$12,600.00 as salaries for the unexpired portion of the parties' contract; (2) US$3,600.00
as extra four (4) months salary for the two (2) years period (sic) of the parties' contract; (3)
US$3,600.00 as "14th month pay" for the aforesaid two (2) years contract stipulated by the
parties or a total of US$19,800.00 or its peso equivalent, plus (4) attorney's fees of 10% of
complainant's total award.
5
"SO ORDERED."
On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter de
Vera's recommendation had no basis in law and in fact.28
On March 30, 1995, the NLRC denied the motion for reconsideration. 29
Hence, this petition.30
On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance of a temporary
restraining order and/or writ of preliminary injunction and a motion for the annulment of the entry of
judgment of the NLRC dated July 31, 1995.31
On November 20, 1995, the Court denied petitioner's urgent motion. The Court required respondents to
file their respective comments, without giving due course to the petition. 32
On March 8, 1996, the Solicitor General filed a manifestation stating that after going over the petition
and its annexes, they can not defend and sustain the position taken by the NLRC in its assailed
decision and orders. The Solicitor General prayed that he be excused from filing a comment on behalf
of the NLRC33
On April 30,1996, private respondent Santos filed his comment. 34
On June 26, 1996, the Court granted the manifestation of the Solicitor General and required the NLRC
to file its own comment to the petition.35
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two foreign jurisdictions and the case involves
purely foreign elements. The only link that the Philippines has with the case is that respondent Santos
is a Filipino citizen. The Palace Hotel and MHICL are foreign corporations. Not all cases involving our
citizens can be tried here.
The employment contract. — Respondent Santos was hired directly by the Palace Hotel, a foreign
employer, through correspondence sent to the Sultanate of Oman, where respondent Santos was then
employed. He was hired without the intervention of the POEA or any authorized recruitment agency of
the government.36
Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over the
case if it chooses to do so provided: (1) that the Philippine court is one to which the parties may
conveniently resort to; (2) that the Philippine court is in a position to make an intelligent decision as to
the law and the facts; and (3) that the Philippine court has or is likely to have power to enforce its
decision.37 The conditions are unavailing in the case at bar.
Not Convenient. — We fail to see how the NLRC is a convenient forum given that all the incidents of
the case — from the time of recruitment, to employment to dismissal occurred outside the Philippines.
The inconvenience is compounded by the fact that the proper defendants, the Palace Hotel and MHICL
are not nationals of the Philippines. Neither .are they "doing business in the Philippines." Likewise, the
main witnesses, Mr. Shmidt and Mr. Henk are non-residents of the Philippines.
No power to determine applicable law. — Neither can an intelligent decision be made as to the law
governing the employment contract as such was perfected in foreign soil. This calls to fore the
application of the principle of lex loci contractus (the law of the place where the contract was made). 38
The employment contract was not perfected in the Philippines. Respondent Santos signified his
acceptance by writing a letter while he was in the Republic of Oman. This letter was sent to the Palace
Hotel in the People's Republic of China.

No power to determine the facts. — Neither can the NLRC determine the facts surrounding the alleged
illegal dismissal as all acts complained of took place in Beijing, People's Republic of China. The
NLRC was not in a position to determine whether the Tiannamen Square incident truly adversely
affected operations of the Palace Hotel as to justify respondent Santos' retrenchment.
Principle of effectiveness, no power to execute decision. — Even assuming that a proper decision could
be reached by the NLRC, such would not have any binding effect against the employer, the Palace
Hotel. The Palace Hotel is a corporation incorporated under the laws of China and was not even served
with summons. Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have no power to solve controversies involving
foreign employers. Neither are we saying that we do not have power over an employment contract
executed in a foreign country. If Santos were an "overseas contract worker", a Philippine forum,
specifically the POEA, not the NLRC, would protect him.39 He is not an "overseas contract worker" a
fact which he admits with conviction.40
Even assuming that the NLRC was the proper forum, even on the merits, the NLRC's decision cannot
be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL
was liable for Santos' retrenchment, still MHC, as a separate and distinct juridical entity cannot be held
liable.
True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock. However,
this is not enough to pierce the veil of corporate fiction between MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the corporate fiction
is used to defeat public convenience, justify wrong, protect fraud or defend a crime. 41 It is done only
when a corporation is a mere alter ego or business conduit of a person or another corporation.
In Traders Royal Bank v. Court of Appeals,42 we held that "the mere ownership by a single stockholder
or by another corporation of all or nearly all of the capital stock of a corporation is not of itself a
sufficient reason for disregarding the fiction of separate corporate personalities."
The tests in determining whether the corporate veil may be pierced are: First, the defendant must have
control or complete domination of the other corporation's finances, policy and business practices with
regard to the transaction attacked. There must be proof that the other corporation had no separate mind,
will or existence with respect the act complained of. Second, control must be used by the defendant to
commit fraud or wrong. Third, the aforesaid control or breach of duty must be the proximate cause of
the injury or loss complained of. The absence of any of the elements prevents the piercing of the
corporate veil.43
It is basic that a corporation has a personality separate and distinct from those composing it as well as
from that of any other legal entity to which it may be related. 44 Clear and convincing evidence is
needed to pierce the veil of corporate fiction.45 In this case, we find no evidence to show that MHICL
and MHC are one and the same entity.
III. MHICL not Liable
Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his employment
contract with the Palace Hotel. This fact fails to persuade us.
First, we note that the Vice President (Operations and Development) of MHICL, Miguel D. Cergueda
signed the employment contract as a mere witness. He merely signed under the word "noted".
When one "notes" a contract, one is not expressing his agreement or approval, as a party would.46 In
Sichangco v. Board of Commissioners of Immigration,47 the Court recognized that the term "noted"
6
means that the person so noting has merely taken cognizance of the existence of an act or declaration,
without exercising a judicious deliberation or rendering a decision on the matter.
Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing part" of the
document is that which, "in a deed or other formal instrument is that part which comes after the
recitals, or where there are no recitals, after the parties (emphasis ours)."48 As opposed to a party to a
contract, a witness is simply one who, "being present, personally sees or perceives a thing; a beholder,
a spectator, or eyewitness."49 One who "notes" something just makes a "brief written statement" 50 a
memorandum or observation.
Second, and more importantly, there was no existing employer-employee relationship between Santos
and MHICL. In determining the existence of an employer-employee relationship, the following
elements are considered:51
"(1) the selection and engagement of the employee;
"(2) the payment of wages;
"(3) the power to dismiss; and
"(4) the power to control employee's conduct."
MHICL did not have and did not exercise any of the aforementioned powers. It did not select
respondent Santos as an employee for the Palace Hotel. He was referred to the Palace Hotel by his
friend, Nestor Buenio. MHICL did not engage respondent Santos to work. The terms of employment
were negotiated and finalized through correspondence between respondent Santos, Mr. Schmidt and
Mr. Henk, who were officers and representatives of the Palace Hotel and not MHICL. Neither did
respondent Santos adduce any proof that MHICL had the power to control his conduct. Finally, it was
the Palace Hotel, through Mr. Schmidt and not MHICL that terminated respondent Santos' services.
Neither is there evidence to suggest that MHICL was a "labor-only contractor."52 There is no proof that
MHICL "supplied" respondent Santos or even referred him for employment to the Palace Hotel.
Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same entity.
The fact that the Palace Hotel is a member of the "Manila Hotel Group" is not enough to pierce the
corporate veil between MHICL and the Palace Hotel.
IV. Grave Abuse of Discretion
Considering that the NLRC was forum non-conveniens and considering further that no employer-
employee relationship existed between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina
J. Diosana clearly had no jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-
90.
Labor Arbiters have exclusive and original jurisdiction only over the following: 53
"1. Unfair labor practice cases;
"2. Termination disputes;
"3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment;
"4. Claims for actual, moral, exemplary and other forms of damages arising from employer-
employee relations;
"5. Cases arising from any violation of Article 264 of this Code, including questions involving
legality of strikes and lockouts; and
"6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand pesos
(P5,000.00) regardless of whether accompanied with a claim for reinstatement."
In all these cases, an employer-employee relationship is an indispensable jurisdictional requirement.
 7

The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to
disputes arising from an employer-employee relationship which can be resolved by reference to the
Labor Code, or other labor statutes, or their collective bargaining agreements. 54
"To determine which body has jurisdiction over the present controversy, we rely on the sound judicial
principle that jurisdiction over the subject matter is conferred by law and is determined by the
allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims
asserted therein."55
The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the complaint. His
failure to dismiss the case amounts to grave abuse of discretion. 56
V. The Fallo
WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the orders and
resolutions of the National Labor Relations Commission dated May 31, 1993, December 15, 1994 and
March 30, 1995 in NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90).
No costs.
SO ORDERED.
 8

G.R. No. 189871 August 13, 2013 Aug. 18, 1998

DARIO NACAR, PETITIONER, a) 1/24/97 to 2/5/98 = 12.36 mos.
vs. ₱196.00/day x 12.36 mos.
GALLERY FRAMES AND/OR FELIPE BORDEY, JR., RESPONDENTS. = ₱62,986.56
DECISION b) 2/6/98 to 8/18/98 = 6.4 months
PERALTA, J.: Prevailing Rate per day
This is a petition for review on certiorari assailing the Decision1 dated September 23, 2008 of the = ₱62,986.00
Court of Appeals (CA) in CA-G.R. SP No. 98591, and the Resolution2 dated October 9, 2009 denying ₱198.00 x 26 days x 6.4 mos.
petitioner’s motion for reconsideration. = ₱32,947.20
The factual antecedents are undisputed. TOTAL
Petitioner Dario Nacar filed a complaint for constructive dismissal before the Arbitration Branch of the = ₱95.933.76
National Labor Relations Commission (NLRC) against respondents Gallery Frames (GF) and/or Felipe xxxx
Bordey, Jr., docketed as NLRC NCR Case No. 01-00519-97. WHEREFORE, premises considered, judgment is hereby rendered finding respondents guilty of
On October 15, 1998, the Labor Arbiter rendered a Decision3 in favor of petitioner and found that he constructive dismissal and are therefore, ordered:
was dismissed from employment without a valid or just cause. Thus, petitioner was awarded To pay jointly and severally the complainant the amount of sixty-two thousand nine hundred eighty-six
backwages and separation pay in lieu of reinstatement in the amount of ₱158,919.92. The dispositive pesos and 56/100 (₱62,986.56) Pesos representing his separation pay;
portion of the decision, reads: To pay jointly and severally the complainant the amount of nine (sic) five thousand nine hundred
With the foregoing, we find and so rule that respondents failed to discharge the burden of showing that thirty-three and 36/100 (₱95,933.36) representing his backwages; and
complainant was dismissed from employment for a just or valid cause. All the more, it is clear from the All other claims are hereby dismissed for lack of merit.
records that complainant was never afforded due process before he was terminated. As such, we are SO ORDERED.4
perforce constrained to grant complainant’s prayer for the payments of separation pay in lieu of Respondents appealed to the NLRC, but it was dismissed for lack of merit in the Resolution5 dated
reinstatement to his former position, considering the strained relationship between the parties, and his February 29, 2000. Accordingly, the NLRC sustained the decision of the Labor Arbiter. Respondents
apparent reluctance to be reinstated, computed only up to promulgation of this decision as follows: filed a motion for reconsideration, but it was denied.6
SEPARATION PAY Dissatisfied, respondents filed a Petition for Review on Certiorari before the CA. On August 24, 2000,
Date Hired the CA issued a Resolution dismissing the petition. Respondents filed a Motion for Reconsideration,
= but it was likewise denied in a Resolution dated May 8, 2001.7
August 1990 Respondents then sought relief before the Supreme Court, docketed as G.R. No. 151332. Finding no
Rate reversible error on the part of the CA, this Court denied the petition in the Resolution dated April 17,
= 2002.8
₱198/day An Entry of Judgment was later issued certifying that the resolution became final and executory on
Date of Decision May 27, 2002.9 The case was, thereafter, referred back to the Labor Arbiter. A pre-execution
= conference was consequently scheduled, but respondents failed to appear.10
Aug. 18, 1998 On November 5, 2002, petitioner filed a Motion for Correct Computation, praying that his backwages
Length of Service be computed from the date of his dismissal on January 24, 1997 up to the finality of the Resolution of
= the Supreme Court on May 27, 2002.11 Upon recomputation, the Computation and Examination Unit
8 yrs. & 1 month of the NLRC arrived at an updated amount in the sum of ₱471,320.31.12
₱198.00 x 26 days x 8 months = ₱41,184.00 On December 2, 2002, a Writ of Execution13 was issued by the Labor Arbiter ordering the Sheriff to
BACKWAGES collect from respondents the total amount of ₱471,320.31. Respondents filed a Motion to Quash Writ
Date Dismissed of Execution, arguing, among other things, that since the Labor Arbiter awarded separation pay of
= ₱62,986.56 and limited backwages of ₱95,933.36, no more recomputation is required to be made of the
January 24, 1997 said awards. They claimed that after the decision becomes final and executory, the same cannot be
Rate per day altered or amended anymore.14 On January 13, 2003, the Labor Arbiter issued an Order15 denying the
= motion. Thus, an Alias Writ of Execution16 was issued on January 14, 2003.
₱196.00 Respondents again appealed before the NLRC, which on June 30, 2003 issued a Resolution17 granting
Date of Decisions the appeal in favor of the respondents and ordered the recomputation of the judgment award.
=

On August 20, 2003, an Entry of Judgment was issued declaring the Resolution of the NLRC to be
final and executory. Consequently, another pre-execution conference was held, but respondents failed
to appear on time. Meanwhile, petitioner moved that an Alias Writ of Execution be issued to enforce
the earlier recomputed judgment award in the sum of ₱471,320.31.18
The records of the case were again forwarded to the Computation and Examination Unit for
recomputation, where the judgment award of petitioner was reassessed to be in the total amount of
only ₱147,560.19.
Petitioner then moved that a writ of execution be issued ordering respondents to pay him the original
amount as determined by the Labor Arbiter in his Decision dated October 15, 1998, pending the final
computation of his backwages and separation pay.
On January 14, 2003, the Labor Arbiter issued an Alias Writ of Execution to satisfy the judgment
award that was due to petitioner in the amount of ₱147,560.19, which petitioner eventually received.
Petitioner then filed a Manifestation and Motion praying for the re-computation of the monetary award
to include the appropriate interests.19
On May 10, 2005, the Labor Arbiter issued an Order20 granting the motion, but only up to the amount
of ₱11,459.73. The Labor Arbiter reasoned that it is the October 15, 1998 Decision that should be
enforced considering that it was the one that became final and executory. However, the Labor Arbiter
reasoned that since the decision states that the separation pay and backwages are computed only up to
the promulgation of the said decision, it is the amount of ₱158,919.92 that should be executed. Thus,
since petitioner already received ₱147,560.19, he is only entitled to the balance of ₱11,459.73.
Petitioner then appealed before the NLRC,21 which appeal was denied by the NLRC in its
Resolution22 dated September 27, 2006. Petitioner filed a Motion for Reconsideration, but it was
likewise denied in the Resolution23 dated January 31, 2007.
Aggrieved, petitioner then sought recourse before the CA, docketed as CA-G.R. SP No. 98591.
On September 23, 2008, the CA rendered a Decision24 denying the petition. The CA opined that since
petitioner no longer appealed the October 15, 1998 Decision of the Labor Arbiter, which already
became final and executory, a belated correction thereof is no longer allowed. The CA stated that there
is nothing left to be done except to enforce the said judgment. Consequently, it can no longer be
modified in any respect, except to correct clerical errors or mistakes.
Petitioner filed a Motion for Reconsideration, but it was denied in the Resolution25 dated October 9,
2009.
Hence, the petition assigning the lone error:
I The second part is the computation of the awards made. On its face, the computation the labor arbiter
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED,
COMMITTED GRAVE ABUSE OF DISCRETION AND DECIDED CONTRARY TO LAW IN
UPHOLDING THE QUESTIONED RESOLUTIONS OF THE NLRC WHICH, IN TURN,
SUSTAINED THE MAY 10, 2005 ORDER OF LABOR ARBITER MAGAT MAKING THE
DISPOSITIVE PORTION OF THE OCTOBER 15, 1998 DECISION OF LABOR ARBITER
LUSTRIA SUBSERVIENT TO AN OPINION EXPRESSED IN THE BODY OF THE SAME
DECISION.26
Petitioner argues that notwithstanding the fact that there was a computation of backwages in the Labor
Arbiter’s decision, the same is not final until reinstatement is made or until finality of the decision, in
case of an award of separation pay. Petitioner maintains that considering that the October 15, 1998
decision of the Labor Arbiter did not become final and executory until the April 17, 2002 Resolution of
the Supreme Court in G.R. No. 151332 was entered in the Book of Entries on May 27, 2002, the
reckoning point for the computation of the backwages and separation pay should be on May 27, 2002
9
and not when the decision of the Labor Arbiter was rendered on October 15, 1998. Further, petitioner
posits that he is also entitled to the payment of interest from the finality of the decision until full
payment by the respondents.
On their part, respondents assert that since only separation pay and limited backwages were awarded to
petitioner by the October 15, 1998 decision of the Labor Arbiter, no more recomputation is required to
be made of said awards. Respondents insist that since the decision clearly stated that the separation pay
and backwages are "computed only up to [the] promulgation of this decision," and considering that
petitioner no longer appealed the decision, petitioner is only entitled to the award as computed by the
Labor Arbiter in the total amount of ₱158,919.92. Respondents added that it was only during the
execution proceedings that the petitioner questioned the award, long after the decision had become
final and executory. Respondents contend that to allow the further recomputation of the backwages to
be awarded to petitioner at this point of the proceedings would substantially vary the decision of the
Labor Arbiter as it violates the rule on immutability of judgments.
The petition is meritorious.
The instant case is similar to the case of Session Delights Ice Cream and Fast Foods v. Court of
Appeals (Sixth Division),27 wherein the issue submitted to the Court for resolution was the propriety
of the computation of the awards made, and whether this violated the principle of immutability of
judgment. Like in the present case, it was a distinct feature of the judgment of the Labor Arbiter in the
above-cited case that the decision already provided for the computation of the payable separation pay
and backwages due and did not further order the computation of the monetary awards up to the time of
the finality of the judgment. Also in Session Delights, the dismissed employee failed to appeal the
decision of the labor arbiter. The Court clarified, thus:
In concrete terms, the question is whether a re-computation in the course of execution of the labor
arbiter's original computation of the awards made, pegged as of the time the decision was rendered and
confirmed with modification by a final CA decision, is legally proper. The question is posed, given
that the petitioner did not immediately pay the awards stated in the original labor arbiter's decision; it
delayed payment because it continued with the litigation until final judgment at the CA level.
A source of misunderstanding in implementing the final decision in this case proceeds from the way
the original labor arbiter framed his decision. The decision consists essentially of two parts.
The first is that part of the decision that cannot now be disputed because it has been confirmed with
finality. This is the finding of the illegality of the dismissal and the awards of separation pay in lieu of
reinstatement, backwages, attorney's fees, and legal interests.
made shows that it was time-bound as can be seen from the figures used in the computation. This part,
being merely a computation of what the first part of the decision established and declared, can, by its
nature, be re-computed. This is the part, too, that the petitioner now posits should no longer be re-
computed because the computation is already in the labor arbiter's decision that the CA had affirmed.
The public and private respondents, on the other hand, posit that a re-computation is necessary because
the relief in an illegal dismissal decision goes all the way up to reinstatement if reinstatement is to be
made, or up to the finality of the decision, if separation pay is to be given in lieu reinstatement.
That the labor arbiter's decision, at the same time that it found that an illegal dismissal had taken place,
also made a computation of the award, is understandable in light of Section 3, Rule VIII of the then
NLRC Rules of Procedure which requires that a computation be made. This Section in part states:
[T]he Labor Arbiter of origin, in cases involving monetary awards and at all events, as far as
practicable, shall embody in any such decision or order the detailed and full amount awarded.

Clearly implied from this original computation is its currency up to the finality of the labor arbiter's
decision. As we noted above, this implication is apparent from the terms of the computation itself, and
no question would have arisen had the parties terminated the case and implemented the decision at that
point.
However, the petitioner disagreed with the labor arbiter's findings on all counts - i.e., on the finding of
illegality as well as on all the consequent awards made. Hence, the petitioner appealed the case to the
NLRC which, in turn, affirmed the labor arbiter's decision. By law, the NLRC decision is final,
reviewable only by the CA on jurisdictional grounds.
The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a
timely filed Rule 65 petition for certiorari. The CA decision, finding that NLRC exceeded its authority
in affirming the payment of 13th month pay and indemnity, lapsed to finality and was subsequently
returned to the labor arbiter of origin for execution.
It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the
original labor arbiter's decision, the implementing labor arbiter ordered the award re-computed; he
apparently read the figures originally ordered to be paid to be the computation due had the case been
terminated and implemented at the labor arbiter's level. Thus, the labor arbiter re-computed the award
to include the separation pay and the backwages due up to the finality of the CA decision that fully
terminated the case on the merits. Unfortunately, the labor arbiter's approved computation went beyond
the finality of the CA decision (July 29, 2003) and included as well the payment for awards the final
CA decision had deleted - specifically, the proportionate 13th month pay and the indemnity awards.
Hence, the CA issued the decision now questioned in the present petition.
We see no error in the CA decision confirming that a re-computation is necessary as it essentially
considered the labor arbiter's original decision in accordance with its basic component parts as we
discussed above. To reiterate, the first part contains the finding of illegality and its monetary
consequences; the second part is the computation of the awards or monetary consequences of the
illegal dismissal, computed as of the time of the labor arbiter's original decision.28
Consequently, from the above disquisitions, under the terms of the decision which is sought to be
executed by the petitioner, no essential change is made by a recomputation as this step is a necessary
consequence that flows from the nature of the illegality of dismissal declared by the Labor Arbiter in
that decision.29 A recomputation (or an original computation, if no previous computation has been
made) is a part of the law – specifically, Article 279 of the Labor Code and the established
jurisprudence on this provision – that is read into the decision. By the nature of an illegal dismissal
case, the reliefs continue to add up until full satisfaction, as expressed under Article 279 of the Labor
Code. The recomputation of the consequences of illegal dismissal upon execution of the decision does
not constitute an alteration or amendment of the final decision being implemented. The illegal
dismissal ruling stands; only the computation of monetary consequences of this dismissal is affected,
and this is not a violation of the principle of immutability of final judgments.30
That the amount respondents shall now pay has greatly increased is a consequence that it cannot avoid
as it is the risk that it ran when it continued to seek recourses against the Labor Arbiter's decision.
Article 279 provides for the consequences of illegal dismissal in no uncertain terms, qualified only by
jurisprudence in its interpretation of when separation pay in lieu of reinstatement is allowed. When that
happens, the finality of the illegal dismissal decision becomes the reckoning point instead of the
reinstatement that the law decrees. In allowing separation pay, the final decision effectively declares
that the employment relationship ended so that separation pay and backwages are to be computed up to
that point.31
10
Finally, anent the payment of legal interest. In the landmark case of Eastern Shipping Lines, Inc. v.
Court of Appeals,32 the Court laid down the guidelines regarding the manner of computing legal
interest, to wit:
II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the
Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to
a forbearance of credit.33
Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution No.
796 dated May 16, 2013, approved the amendment of Section 234 of Circular No. 905, Series of 1982
and, accordingly, issued Circular No. 799,35 Series of 2013, effective July 1, 2013, the pertinent
portion of which reads:
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions
governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section
2 of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six
percent (6%) per annum.
Section 2. In view of the above, Subsection X305.136 of the Manual of Regulations for Banks and
Sections 4305Q.1,37 4305S.338 and 4303P.139 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that would
govern the parties, the rate of legal interest for loans or forbearance of any money, goods or credits and
the rate allowed in judgments shall no longer be twelve percent (12%) per annum - as reflected in the
case of Eastern Shipping Lines40 and Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial
Institutions, before its amendment by BSP-MB Circular No. 799 - but will now be six percent (6%) per
annum effective July 1, 2013. It should be noted, nonetheless, that the new rate could only be applied
 11

prospectively and not retroactively. Consequently, the twelve percent (12%) per annum legal interest (1) backwages computed from the time petitioner was illegally dismissed on January 24, 1997 up to
shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum May 27, 2002, when the Resolution of this Court in G.R. No. 151332 became final and executory;
shall be the prevailing rate of interest when applicable. (2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one month pay per
Corollarily, in the recent case of Advocates for Truth in Lending, Inc. and Eduardo B. Olaguer v. year of service; and
Bangko Sentral Monetary Board,41 this Court affirmed the authority of the BSP-MB to set interest (3) interest of twelve percent (12%) per annum of the total monetary awards, computed from May 27,
rates and to issue and enforce Circulars when it ruled that "the BSP-MB may prescribe the maximum 2002 to June 30, 2013 and six percent (6%) per annum from July 1, 2013 until their full satisfaction.
rate or rates of interest for all loans or renewals thereof or the forbearance of any money, goods or The Labor Arbiter is hereby ORDERED to make another recomputation of the total monetary benefits
credits, including those for loans of low priority such as consumer loans, as well as such loans made by awarded and due to petitioner in accordance with this Decision.
pawnshops, finance companies and similar credit institutions. It even authorizes the BSP-MB to SO ORDERED.
prescribe different maximum rate or rates for different types of borrowings, including deposits and
deposit substitutes, or loans of financial intermediaries."
Nonetheless, with regard to those judgments that have become final and executory prior to July 1,
2013, said judgments shall not be disturbed and shall continue to be implemented applying the rate of
interest fixed therein.1awp++i1
To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping
Lines42 are accordingly modified to embody BSP-MB Circular No. 799, as follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII
on "Damages" of the Civil Code govern in determining the measure of recoverable damages.1âwphi1
II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:
When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.
When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to
a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1, 2013,
shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.
WHEREFORE, premises considered, the Decision dated September 23, 2008 of the Court of Appeals
in CA-G.R. SP No. 98591, and the Resolution dated October 9, 2009 are REVERSED and SET
ASIDE. Respondents are Ordered to Pay petitioner:

G.R. No. 170139 August 5, 2014
SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner,
vs.
JOY C. CABILES, Respondent.
DECISION
LEONEN, J.:
This case involves an overseas Filipino worker with shattered dreams. It is our duty, given the facts
and the law, to approximate justice for her.
We are asked to decide a petition for review1 on certiorari assailing the Court of Appeals’ decision2
dated June 27, 2005. This decision partially affirmed the National Labor RelationsCommission’s
resolution dated March 31, 2004,3 declaring respondent’s dismissal illegal, directing petitioner to pay
respondent’s three-month salary equivalent to New Taiwan Dollar (NT$) 46,080.00, and ordering it to
reimburse the NT$3,000.00 withheld from respondent, and pay her NT$300.00 attorney’s fees. 4
Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement agency.5
Responding to an ad it published, respondent, Joy C. Cabiles, submitted her application for a quality
control job in Taiwan.6
Joy’s application was accepted.7 Joy was later asked to sign a oneyear employment contract for a
monthly salary of NT$15,360.00.8 She alleged that Sameer Overseas Agency required her to pay a
placement fee of ₱70,000.00 when she signed the employment contract.9
Joy was deployed to work for TaiwanWacoal, Co. Ltd. (Wacoal) on June 26, 1997. 10 She alleged that
in her employment contract, she agreed to work as quality control for one year. 11 In Taiwan, she was
asked to work as a cutter.12
Sameer Overseas Placement Agencyclaims that on July 14, 1997, a certain Mr. Huwang from Wacoal
informedJoy, without prior notice, that she was terminated and that "she should immediately report to
their office to get her salary and passport." 13 She was asked to "prepare for immediate repatriation." 14
Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of NT$9,000. 15
According to her, Wacoal deducted NT$3,000 to cover her plane ticket to Manila. 16
On October 15, 1997, Joy filed a complaint17 with the National Labor Relations Commission against
petitioner and Wacoal. She claimed that she was illegally dismissed. 18 She asked for the return of her
placement fee, the withheld amount for repatriation costs, payment of her salary for 23 months as well
as moral and exemplary damages.19 She identified Wacoal as Sameer Overseas Placement Agency’s
foreign principal.20
Sameer Overseas Placement Agency alleged that respondent's termination was due to her inefficiency,
negligence in her duties, and her "failure to comply with the work requirements [of] her foreign
[employer]."21 The agency also claimed that it did not ask for a placement fee of ₱70,000.00. 22 As
evidence, it showedOfficial Receipt No. 14860 dated June 10, 1997, bearing the amount of
₱20,360.00.23 Petitioner added that Wacoal's accreditation with petitioner had already been transferred
to the Pacific Manpower & Management Services, Inc. (Pacific) as of August 6, 1997.24 Thus,
petitioner asserts that it was already substituted by Pacific Manpower. 25
Pacific Manpower moved for the dismissal of petitioner’s claims against it. 26 It alleged that there was
no employer-employee relationship between them.27 Therefore, the claims against it were outside the
jurisdiction of the Labor Arbiter.28 Pacific Manpower argued that the employment contract should first
be presented so that the employer’s contractual obligations might be identified. 29 It further denied that
it assumed liability for petitioner’s illegal acts.30
On July 29, 1998, the Labor Arbiter dismissed Joy’s complaint.31 Acting Executive Labor Arbiter
Pedro C.Ramos ruled that her complaint was based on mereallegations. 32 The Labor Arbiter found that
12
there was no excess payment of placement fees, based on the official receipt presented by petitioner. 33
The Labor Arbiter found unnecessary a discussion on petitioner’s transfer of obligations to Pacific 34
and considered the matter immaterial in view of the dismissal of respondent’s complaint. 35
Joy appealed36 to the National Labor Relations Commission.
In a resolution37 dated March 31, 2004, the National Labor Relations Commission declared that Joy
was illegally dismissed.38 It reiterated the doctrine that the burden of proof to show that the dismissal
was based on a just or valid cause belongs to the employer. 39 It found that Sameer Overseas Placement
Agency failed to prove that there were just causes for termination.40 There was no sufficient proofto
show that respondent was inefficient in her work and that she failed to comply with company
requirements.41 Furthermore, procedural dueprocess was not observed in terminating respondent. 42
The National Labor Relations Commission did not rule on the issue of reimbursement of placement
fees for lack of jurisdiction.43 It refused to entertain the issue of the alleged transfer of obligations to
Pacific.44 It did not acquire jurisdiction over that issue because Sameer Overseas Placement Agency
failed to appeal the Labor Arbiter’s decision not to rule on the matter. 45
The National Labor Relations Commission awarded respondent only three (3) months worth of
salaryin the amount of NT$46,080, the reimbursement of the NT$3,000 withheld from her, and
attorney’s fees of NT$300.46
The Commission denied the agency’s motion for reconsideration47 dated May 12, 2004 through a
resolution48 dated July 2, 2004.
Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing of a petition 49 for
certiorari with the Court of Appeals assailing the National Labor Relations Commission’s resolutions
dated March 31, 2004 and July 2, 2004.
The Court of Appeals50 affirmed the decision of the National Labor Relations Commission with
respect to the finding of illegal dismissal, Joy’s entitlement to the equivalent of three months worth of
salary, reimbursement of withheld repatriation expense, and attorney’s fees. 51 The Court of Appeals
remanded the case to the National Labor Relations Commission to address the validity of petitioner's
allegations against Pacific.52 The Court of Appeals held, thus: Although the public respondent found
the dismissal of the complainant-respondent illegal, we should point out that the NLRC merely
awarded her three (3) months backwages or the amount of NT$46,080.00, which was based upon its
finding that she was dismissed without due process, a finding that we uphold, given petitioner’s lack of
worthwhile discussion upon the same in the proceedings below or before us. Likewise we sustain
NLRC’s finding in regard to the reimbursement of her fare, which is squarely based on the law; as well
as the award of attorney’s fees.
But we do find it necessary to remand the instant case to the public respondent for further proceedings,
for the purpose of addressing the validity or propriety of petitioner’s third-party complaint against the
transferee agent or the Pacific Manpower & Management Services, Inc. and Lea G. Manabat. We
should emphasize that as far as the decision of the NLRC on the claims of Joy Cabiles, is concerned,
the same is hereby affirmed with finality, and we hold petitioner liable thereon, but without prejudice
to further hearings on its third party complaint against Pacific for reimbursement.
WHEREFORE, premises considered, the assailed Resolutions are hereby partly AFFIRMED in
accordance with the foregoing discussion, but subject to the caveat embodied inthe last sentence. No
costs.
SO ORDERED.53
Dissatisfied, Sameer Overseas Placement Agency filed this petition. 54
We are asked to determine whether the Court of Appeals erred when it affirmed the ruling of the
National Labor Relations Commission finding respondent illegally dismissed and awarding her three

months’ worth of salary, the reimbursement of the cost ofher repatriation, and attorney’s fees despite
the alleged existence of just causes of termination.
Petitioner reiterates that there was just cause for termination because there was a finding of Wacoal
that respondent was inefficient in her work.55
Therefore, it claims that respondent’s dismissal was valid.56
Petitioner also reiterates that since Wacoal’s accreditation was validly transferred to Pacific at the time
respondent filed her complaint, it should be Pacific that should now assume responsibility for
Wacoal’s contractual obligations to the workers originally recruited by petitioner. 57
Sameer Overseas Placement Agency’spetition is without merit. We find for respondent.
I employment is within the Philippines and that these need not be strictly observed in cases of
Sameer Overseas Placement Agency failed to show that there was just cause for causing Joy’s
dismissal. The employer, Wacoal, also failed to accord her due process of law.
Indeed, employers have the prerogative to impose productivity and quality standards at work. 58 They
may also impose reasonable rules to ensure that the employees comply with these standards. 59 Failure
to comply may be a just cause for their dismissal.60 Certainly, employers cannot be compelled to retain
the services of anemployee who is guilty of acts that are inimical to the interest of the employer. 61
While the law acknowledges the plight and vulnerability of workers, it does not "authorize the
oppression or self-destruction of the employer."62 Management prerogative is recognized in law and in
our jurisprudence.
This prerogative, however, should not be abused. It is "tempered with the employee’s right to security
of tenure."63 Workers are entitled to substantive and procedural due process before termination. They
may not be removed from employment without a validor just cause as determined by law and without
going through the proper procedure.
Security of tenure for labor is guaranteed by our Constitution. 64
Employees are not stripped of their security of tenure when they move to work in a different
jurisdiction. With respect to the rights of overseas Filipino workers, we follow the principle of lex loci
contractus.Thus, in Triple Eight Integrated Services, Inc. v. NLRC, 65 this court noted:
Petitioner likewise attempts to sidestep the medical certificate requirement by contending that since
Osdana was working in Saudi Arabia, her employment was subject to the laws of the host country.
Apparently, petitioner hopes tomake it appear that the labor laws of Saudi Arabia do not require any
certification by a competent public health authority in the dismissal of employees due to illness.
Again, petitioner’s argument is without merit.
First, established is the rule that lex loci contractus (the law of the place where the contract is made)
governs in this jurisdiction. There is no question that the contract of employment in this case was
perfected here in the Philippines. Therefore, the Labor Code, its implementing rules and regulations,
and other laws affecting labor apply in this case.Furthermore, settled is the rule that the courts of the
forum will not enforce any foreign claim obnoxious to the forum’s public policy. Herein the
Philippines, employment agreements are more than contractual in nature. The Constitution itself, in
Article XIII, Section 3, guarantees the special protection of workers, to wit:
The State shall afford full protection to labor, local and overseas, organized and unorganized, and
promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to selforganization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. Theyshall also participate
in policy and decision-making processes affecting their rights and benefits as may be provided by law.
....
13
This public policy should be borne in mind in this case because to allow foreign employers to
determine for and by themselves whether an overseas contract worker may be dismissed on the ground
of illness would encourage illegal or arbitrary pretermination of employment contracts.66 (Emphasis
supplied, citation omitted)
Even with respect to fundamental procedural rights, this court emphasized in PCL Shipping
Philippines, Inc. v. NLRC,67 to wit:
Petitioners admit that they did notinform private respondent in writing of the charges against him and
that they failed to conduct a formal investigation to give him opportunity to air his side. However,
petitioners contend that the twin requirements ofnotice and hearing applies strictly only when the
international maritime or overseas employment.
The Court does not agree. The provisions of the Constitution as well as the Labor Code which afford
protection to labor apply to Filipino employees whether working within the Philippines or abroad.
Moreover, the principle of lex loci contractus (the law of the place where the contract is made) governs
in this jurisdiction. In the present case, it is not disputed that the Contract of Employment entered into
by and between petitioners and private respondent was executed here in the Philippines with the
approval of the Philippine Overseas Employment Administration (POEA). Hence, the Labor Code
together with its implementing rules and regulations and other laws affecting labor apply in this case. 68
(Emphasis supplied, citations omitted)
By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or authorized cause
and after compliance with procedural due process requirements.
Article 282 of the Labor Code enumerates the just causes of termination by the employer. Thus:
Art. 282. Termination by employer. An employer may terminate an employment for any of the
following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.
Petitioner’s allegation that respondentwas inefficient in her work and negligent in her duties 69 may,
therefore, constitute a just cause for termination under Article 282(b), but only if petitioner was able to
prove it.
The burden of proving that there is just cause for termination is on the employer. "The employer must
affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause."70
Failure to show that there was valid or just cause for termination would necessarily mean that the
dismissal was illegal.71
To show that dismissal resulting from inefficiency in work is valid, it must be shown that: 1) the
employer has set standards of conduct and workmanship against which the employee will be judged; 2)
the standards of conduct and workmanship must have been communicated tothe employee; and 3) the
communication was made at a reasonable time prior to the employee’s performance assessment.
This is similar to the law and jurisprudence on probationary employees, which allow termination ofthe
employee only when there is "just cause or when [the probationary employee] fails to qualify as a

regular employee in accordance with reasonable standards made known by the employer to the
employee at the time of his [or her] engagement." 72
However, we do not see why the application of that ruling should be limited to probationary
employment. That rule is basic to the idea of security of tenure and due process, which are guaranteed
to all employees, whether their employment is probationary or regular.
The pre-determined standards that the employer sets are the bases for determining the probationary
employee’s fitness, propriety, efficiency, and qualifications as a regular employee. Due process
requires that the probationary employee be informed of such standards at the time of his or her
engagement so he or she can adjusthis or her character or workmanship accordingly. Proper adjustment
to fit the standards upon which the employee’s qualifications will be evaluated will increase one’s
chances of being positively assessed for regularization by his or her employer.
Assessing an employee’s work performance does not stop after regularization. The employer, on a
regular basis, determines if an employee is still qualified and efficient, based on work standards. Based
on that determination, and after complying with the due process requirements of notice and hearing,
the employer may exercise its management prerogative of terminating the employee found unqualified.
The regular employee must constantlyattempt to prove to his or her employer that he or she meets all
the standards for employment. This time, however, the standards to be met are set for the purpose of
retaining employment or promotion. The employee cannot be expected to meet any standard of
character or workmanship if such standards were not communicated to him or her. Courts should
remain vigilant on allegations of the employer’s failure to communicatework standards that would
govern one’s employment "if [these are] to discharge in good faith [their] duty to adjudicate." 73
In this case, petitioner merely alleged that respondent failed to comply with her foreign employer’s
work requirements and was inefficient in her work.74 No evidence was shown to support such
allegations. Petitioner did not even bother to specify what requirements were not met, what efficiency
standards were violated, or what particular acts of respondent constituted inefficiency.
There was also no showing that respondent was sufficiently informed of the standards against which
her work efficiency and performance were judged. The parties’ conflict as to the position held by
respondent showed that even the matter as basic as the job title was not clear.
The bare allegations of petitioner are not sufficient to support a claim that there is just cause for
termination. There is no proof that respondent was legally terminated.
Petitioner failed to comply with
the due process requirements
Respondent’s dismissal less than one year from hiring and her repatriation on the same day show not
onlyfailure on the partof petitioner to comply with the requirement of the existence of just cause for
termination. They patently show that the employersdid not comply with the due process requirement.
A valid dismissal requires both a valid cause and adherence to the valid procedure of dismissal. 75 The
employer is required to give the charged employee at least two written notices before termination. 76
One of the written notices must inform the employee of the particular acts that may cause his or her
dismissal.77 The other notice must "[inform] the employee of the employer’s decision." 78 Aside from
the notice requirement, the employee must also be given "an opportunity to be heard." 79
Petitioner failed to comply with the twin notices and hearing requirements. Respondent started
working on June 26, 1997. She was told that she was terminated on July 14, 1997 effective on the same
day and barely a month from her first workday. She was also repatriated on the same day that she was
informed of her termination. The abruptness of the termination negated any finding that she was
properly notified and given the opportunity to be heard. Her constitutional right to due process of law
was violated.
14
II
Respondent Joy Cabiles, having been illegally dismissed, is entitled to her salary for the unexpired
portion ofthe employment contract that was violated together with attorney’s fees and reimbursement
of amounts withheld from her salary.
Section 10 of Republic Act No. 8042,otherwise known as the Migrant Workers and Overseas Filipinos
Act of1995, states thatoverseas workers who were terminated without just, valid, or authorized cause
"shall be entitled to the full reimbursement of his placement fee with interest of twelve (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."
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 filing of the complaint, the
claims arising out of an employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas deployment including claims for actual, moral, exemplary and other
forms of damages.
The liability of the principal/employer and the recruitment/placement agency for any and all claims
under this section shall be joint and several. This provisions [sic] shall be incorporated in the contract
for overseas employment and shall be a condition precedent for its approval. The performance bond to
be filed by the recruitment/placementagency, as provided by law, shall be answerable for all money
claims or damages that may be awarded to the workers. If the recruitment/placement agency is a
juridical being, the corporate officers and directors and partners as the case may be, shall themselves
be jointly and solidarily liable with the corporation orpartnership for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment contract and shall
not be affected by any substitution, amendment or modification made locally or in a foreign country of
the said contract.
Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages
under this section shall be paid within four (4) months from the approval of the settlement by the
appropriate authority.
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 (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.
....
(Emphasis supplied)
Section 15 of Republic Act No. 8042 states that "repatriation of the worker and the transport of his [or
her] personal belongings shall be the primary responsibility of the agency which recruited or deployed
the worker overseas." The exception is when "termination of employment is due solely to the fault of
the worker,"80 which as we have established, is not the case. It reads: SEC. 15. REPATRIATION OF
WORKERS; EMERGENCY REPATRIATION FUND. – The repatriation of the worker and the
transport of his personal belongings shall be the primary responsibility of the agency which recruited
or deployed the worker overseas. All costs attendant to repatriation shall be borne by or charged to the
agency concerned and/or its principal. Likewise, the repatriation of remains and transport of the
personal belongings of a deceased worker and all costs attendant thereto shall be borne by the principal
and/or local agency. However, in cases where the termination of employment is due solely to the fault
of the worker, the principal/employer or agency shall not in any manner be responsible for the
repatriation of the former and/or his belongings.

....
The Labor Code81 also entitles the employee to 10% of the amount of withheld wages as attorney’s
feeswhen the withholding is unlawful.
The Court of Appeals affirmedthe National Labor Relations Commission’s decision to award
respondent NT$46,080.00 or the threemonth equivalent of her salary, attorney’s fees of NT$300.00,
and the reimbursement of the withheld NT$3,000.00 salary, which answered for her repatriation.
We uphold the finding that respondent is entitled to all of these awards. The award of the three-month
equivalent of respondent’s salary should, however, be increased to the amount equivalent to the
unexpired term of the employment contract.
In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc., 82 this court ruled that
the clause "or for three (3) months for every year of the unexpired term, whichever is less" 83 is
unconstitutional for violating the equal protection clause and substantive due process. 84
A statute or provision which was declared unconstitutional is not a law. It "confers no rights; it
imposes no duties; it affords no protection; it creates no office; it is inoperative as if it has not been
passed at all."85
We are aware that the clause "or for three (3) months for every year of the unexpired term, whichever
is less"was reinstated in Republic Act No. 8042 upon promulgation of Republic Act No. 10022 in
2010. Section 7 of Republic Act No. 10022 provides:
Section 7.Section 10 of Republic Act No. 8042, as amended, is hereby amended to read as follows:
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 any law or contract involving Filipino
workers for overseas deployment including claims for actual, moral, exemplary and other forms of
damage. Consistent with this mandate, the NLRC shall endeavor to update and keep abreast with the
developments in the global services industry.
The liability of the principal/employer and the recruitment/placement agency for any and all claims
under this section shall be joint and several. This provision shall be incorporated in the contract for
overseas employment and shall be a condition precedent for its approval. The performance bond to de
[sic] filed by the recruitment/placement agency, as provided by law, shall be answerable for all money
claims or damages that may be awarded to the workers. If the recruitment/placement agency is a
juridical being, the corporate officers and directors and partners as the case may be, shall themselves
be jointly and solidarily liable with the corporation or partnership for the aforesaid claims and
damages.
Such liabilities shall continue during the entire period or duration of the employment contract and shall
not be affected by any substitution, amendment or modification made locally or in a foreign country of
the said contract.
Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages
under this section shall be paid within thirty (30) days from approval of the settlement by the
appropriate authority.
In case of termination of overseas employment without just, valid or authorized cause as defined by
law or contract, or any unauthorized deductions from the migrant worker’s salary, the worker shall be
entitled to the full reimbursement if [sic] his placement fee and the deductions made with interest at
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.
15
In case of a final and executory judgement against a foreign employer/principal, it shall be
automatically disqualified, without further proceedings, from participating in the Philippine Overseas
Employment Program and from recruiting and hiring Filipino workers until and unless it fully satisfies
the judgement award.
Noncompliance with the mandatory periods for resolutions of case providedunder this section shall
subject the responsible officials to any or all of the following penalties:
(a) 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;
(b) Suspension for not more than ninety (90) days; or
(c) 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 incured [sic] under other existing laws or rules and regulations as a
consequence of violating the provisions of this paragraph. (Emphasis supplied)
Republic Act No. 10022 was promulgated on March 8, 2010. This means that the reinstatement of the
clause in Republic Act No. 8042 was not yet in effect at the time of respondent’s termination from
work in 1997.86 Republic Act No. 8042 before it was amended byRepublic Act No. 10022 governs this
case.
When a law is passed, this court awaits an actual case that clearly raises adversarial positions in their
proper context before considering a prayer to declare it as unconstitutional.
However, we are confronted with a unique situation. The law passed incorporates the exact clause
already declared as unconstitutional, without any perceived substantial change in the circumstances.
This may cause confusion on the part of the National Labor Relations Commission and the Court of
Appeals.At minimum, the existence of Republic Act No. 10022 may delay the execution of the
judgment in this case, further frustrating remedies to assuage the wrong done to petitioner.
Hence, there is a necessity to decide this constitutional issue.
Moreover, this court is possessed with the constitutional duty to "[p]romulgate rules concerning the
protection and enforcement of constitutional rights." 87 When cases become mootand academic, we do
not hesitate to provide for guidance to bench and bar in situations where the same violations are
capable of repetition but will evade review. This is analogous to cases where there are millions of
Filipinos working abroad who are bound to suffer from the lack of protection because of the restoration
of an identical clause in a provision previously declared as unconstitutional.
In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may
exercise its powers in any manner inconsistent with the Constitution, regardless of the existence of any
law that supports such exercise. The Constitution cannot be trumped by any other law. All laws must
be read in light of the Constitution. Any law that is inconsistent with it is a nullity.
Thus, when a law or a provision of law is null because it is inconsistent with the Constitution,the
nullity cannot be cured by reincorporation or reenactment of the same or a similar law or provision. A
law or provision of law that was already declared unconstitutional remains as such unless
circumstances have sochanged as to warrant a reverse conclusion.
We are not convinced by the pleadings submitted by the parties that the situation has so changed so as
to cause us to reverse binding precedent.
Likewise, there are special reasons of judicial efficiency and economy that attend to these cases. The
new law puts our overseas workers in the same vulnerable position as they were prior to Serrano.
Failure to reiterate the very ratio decidendi of that case will result in the same untold economic
hardships that our reading of the Constitution intended to avoid. Obviously, we cannot countenance

added expenses for further litigation thatwill reduce their hardearned wages as well as add to the
indignity of having been deprived of the protection of our laws simply because our precedents have not
been followed. There is no constitutional doctrine that causes injustice in the face of empty procedural
niceties. Constitutional interpretation is complex, but it is never unreasonable.
Thus, in a resolution88 dated October 22, 2013, we ordered the parties and the Office of the Solicitor
General to comment on the constitutionality of the reinstated clause in Republic Act No. 10022.
In its comment,89 petitioner argued that the clause was constitutional.90 The legislators intended a
balance between the employers’ and the employees’ rights by not unduly burdening the local
recruitment agency.91 Petitioner is also of the view that the clause was already declared as
constitutional in Serrano.92
The Office of the Solicitor General also argued that the clause was valid and constitutional. 93 However,
since the parties never raised the issue of the constitutionality of the clause asreinstated in Republic
Act No. 10022, its contention is that it is beyond judicial review. 94
On the other hand, respondentargued that the clause was unconstitutional because it infringed on
workers’ right to contract.95
We observe that the reinstated clause, this time as provided in Republic Act. No. 10022, violates the
constitutional rights to equal protection and due process.96 Petitioner as well as the Solicitor General
have failed to show any compelling changein the circumstances that would warrant us to revisit the
precedent.
We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should be recovered
by anillegally dismissed overseas worker to three months is both a violation of due process and the
equal protection clauses of the Constitution.
Equal protection of the law is a guarantee that persons under like circumstances and falling within the
same class are treated alike, in terms of "privileges conferred and liabilities enforced." 97 It is a
guarantee against "undue favor and individual or class privilege, as well as hostile discrimination or the
oppression of inequality."98
In creating laws, the legislature has the power "to make distinctions and classifications." 99
In exercising such power, it has a wide discretion.100
The equal protection clause does not infringe on this legislative power.101 A law is void on this basis,
only if classifications are made arbitrarily.102 There is no violation of the equal protection clause if the
law applies equally to persons within the same class and if there are reasonable grounds for
distinguishing between those falling within the class and those who do not fall within the class. 103 A
law that does not violate the equal protection clause prescribesa reasonable classification.104
A reasonable classification "(1) must rest on substantial distinctions; (2) must be germane to the
purposes of the law; (3) must not be limited to existing conditions only; and (4) must apply equally to
all members of the same class."105
The reinstated clause does not satisfy the requirement of reasonable classification.
In Serrano, we identified the classifications made by the reinstated clause. It distinguished between
fixed-period overseas workers and fixedperiod local workers. 106 It also distinguished between overseas
workers with employment contracts of less than one year and overseas workers with employment
contracts of at least one year.107 Within the class of overseas workers with at least one-year
employment contracts, there was a distinction between those with at least a year left in their contracts
and those with less than a year left in their contracts when they were illegally dismissed.108
The Congress’ classification may be subjected to judicial review. In Serrano, there is a "legislative
classification which impermissibly interferes with the exercise of a fundamental right or operates to the
peculiar disadvantage of a suspect class." 109
16
Under the Constitution, labor is afforded special protection.110 Thus, this court in Serrano, "[i]mbued
with the same sense of ‘obligation to afford protection to labor,’ . . . employ[ed] the standard of strict
judicial scrutiny, for it perceive[d] in the subject clause a suspect classification prejudicial to
OFWs."111
We also noted in Serranothat before the passage of Republic Act No. 8042, the money claims of
illegally terminated overseas and local workers with fixed-term employment werecomputed in the
same manner.112 Their money claims were computed based onthe "unexpired portions of their
contracts."113 The adoption of the reinstated clause in Republic Act No. 8042 subjected the money
claims of illegally dismissed overseas workers with an unexpired term of at least a year to a cap of
three months worth of their salary.114 There was no such limitation on the money claims of illegally
terminated local workers with fixed-term employment.115
We observed that illegally dismissed overseas workers whose employment contracts had a term of less
than one year were granted the amount equivalent to the unexpired portion of their employment
contracts.116 Meanwhile, illegally dismissed overseas workers with employment terms of at least a year
were granted a cap equivalent to three months of their salary for the unexpired portions of their
contracts.117
Observing the terminologies used inthe clause, we also found that "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 reinstated clause, and their monetary benefits
limited to their salaries for three months only." 118
We do not need strict scrutiny to conclude that these classifications do not rest on any real or
substantial distinctions that would justify different treatments in terms of the computation of money
claims resulting from illegal termination.
Overseas workers regardless of their classifications are entitled to security of tenure, at least for the
period agreed upon in their contracts. This means that they cannot be dismissed before the end of their
contract terms without due process. If they were illegally dismissed, the workers’ right to security of
tenure is violated.
The rights violated when, say, a fixed-period local worker is illegally terminated are neither greater
than norless than the rights violated when a fixed-period overseas worker is illegally terminated. It is
state policy to protect the rights of workers withoutqualification as to the place of employment.119 In
both cases, the workers are deprived of their expected salary, which they could have earned had they
not been illegally dismissed. For both workers, this deprivation translates to economic insecurity and
disparity.120 The same is true for the distinctions between overseas workers with an employment
contract of less than one year and overseas workers with at least one year of employment contract, and
between overseas workers with at least a year left in their contracts and overseas workers with less
than a year left in their contracts when they were illegally dismissed.
For this reason, we cannot subscribe to the argument that "[overseas workers] are contractual
employeeswho can never acquire regular employment status, unlike local workers" 121 because it
already justifies differentiated treatment in terms ofthe computation of money claims. 122
Likewise, the jurisdictional and enforcement issues on overseas workers’ money claims do not justify a
differentiated treatment in the computation of their money claims. 123 If anything, these issues justify an
equal, if not greater protection and assistance to overseas workers who generally are more prone to
exploitation given their physical distance from our government.

We also find that the classificationsare not relevant to the purpose of the law, which is to "establish a
higher standard of protection and promotion of the welfare of migrant workers, their families and
overseas Filipinos in distress, and for other purposes." 124 Further, we find specious the argument that
reducing the liability of placement agencies "redounds to the benefit of the [overseas] workers." 125
Putting a cap on the money claims of certain overseas workers does not increase the standard of
protection afforded to them. On the other hand, foreign employers are more incentivizedby the
reinstated clause to enter into contracts of at least a year because it gives them more flexibility to
violate our overseas workers’ rights. Their liability for arbitrarily terminating overseas workers is
decreased at the expense of the workers whose rights they violated. Meanwhile, these overseas workers
who are impressed with an expectation of a stable job overseas for the longer contract period disregard
other opportunities only to be terminated earlier. They are left with claims that are less than what
others in the same situation would receive. The reinstated clause, therefore, creates a situation where
the law meant to protect them makes violation of rights easier and simply benign to the violator.
As Justice Brion said in his concurring opinion in Serrano:
Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in fact provides a hidden
twist affecting the principal/employer’s liability. While intended as an incentive accruing to
recruitment/manning agencies, the law, as worded, simply limits the OFWs’ recovery in
wrongfuldismissal situations. Thus, it redounds to the benefit of whoever may be liable, including the
principal/employer – the direct employer primarily liable for the wrongful dismissal. In this sense,
Section 10 – read as a grant of incentives to recruitment/manning agencies – oversteps what it aims to
do by effectively limiting what is otherwise the full liability of the foreign principals/employers.
Section 10, in short, really operates to benefit the wrong party and allows that party, without justifiable
reason, to mitigate its liability for wrongful dismissals. Because of this hidden twist, the limitation
ofliability under Section 10 cannot be an "appropriate" incentive, to borrow the term that R.A. No.
8042 itself uses to describe the incentive it envisions under its purpose clause.
What worsens the situation is the chosen mode of granting the incentive: instead of a grant that, to
encourage greater efforts at recruitment, is directly related to extra efforts undertaken, the law simply
limits their liability for the wrongful dismissals of already deployed OFWs. This is effectively a
legally-imposed partial condonation of their liability to OFWs, justified solely by the law’s intent to
encourage greater deployment efforts. Thus, the incentive,from a more practical and realistic view, is
really part of a scheme to sell Filipino overseas labor at a bargain for purposes solely of attracting the
market. . . .
The so-called incentive is rendered particularly odious by its effect on the OFWs — the benefits
accruing to the recruitment/manning agencies and their principals are takenfrom the pockets of the
OFWs to whom the full salaries for the unexpired portion of the contract rightfully belong. Thus, the
principals/employers and the recruitment/manning agencies even profit from their violation of the
security of tenure that an employment contract embodies. Conversely, lesser protection is afforded the
OFW, not only because of the lessened recovery afforded him or her by operation of law, but also
because this same lessened recovery renders a wrongful dismissal easier and less onerous to undertake;
the lesser cost of dismissing a Filipino will always bea consideration a foreign employer will take into
account in termination of employment decisions. . . .126
Further, "[t]here 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 suchas placement agencies, while the disadvantaged sector is
composed ofOFWs whose protection no less than the Constitution commands. The idea thatprivate
business interest can be elevated to the level of a compelling state interest is odious." 127
17
Along the same line, we held that the reinstated clause violates due process rights. It is arbitrary as it
deprives overseas workers of their monetary claims without any discernable valid purpose. 128
Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in accordance
with Section 10 of Republic Act No. 8042. The award of the three-month equivalence of respondent’s
salary must be modified accordingly. Since she started working on June 26, 1997 and was terminated
on July 14, 1997, respondent is entitled to her salary from July 15, 1997 to June 25, 1998. "To rule
otherwise would be iniquitous to petitioner and other OFWs, and would,in effect, send a wrong signal
that principals/employers and recruitment/manning agencies may violate an OFW’s security of tenure
which an employment contract embodies and actually profit from such violation based on an
unconstitutional provision of law."129
III
On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013, which revised
the interest rate for loan or forbearance from 12% to 6% in the absence of stipulation,applies in this
case. The pertinent portions of Circular No. 799, Series of 2013, read: The Monetary Board, in its
Resolution No. 796 dated 16 May 2013, approved the following revisions governing the rate of interest
in the absence of stipulation in loan contracts, thereby amending Section 2 of Circular No. 905, Series
of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of an express contract as to such rateof interest, shall be six
percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Through the able ponencia of Justice Diosdado Peralta, we laid down the guidelines in computing legal
interest in Nacar v. Gallery Frames:130
II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been stipulated
in writing. Furthermore, the interest due shall itself earn legal interest from the time it is
judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum
to be computed from default, i.e., from judicial or extrajudicial demand under and subject to
the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court at
the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or
damages, except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code), but when such certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the
amount finally adjudged. 3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether the case falls under paragraph

1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1, 2013,
shall not be disturbed and shall continue to be implemented applying the rate of interest fixed
therein.131
Circular No. 799 is applicable only in loans and forbearance of money, goods, or credits, and in
judgments when there is no stipulation on the applicable interest rate. Further, it is only applicable if
the judgment did not become final and executory before July 1, 2013. 132
We add that Circular No. 799 is not applicable when there is a law that states otherwise. While the
Bangko Sentral ng Pilipinas has the power to set or limit interest rates, 133 these interest rates do not
apply when the law provides that a different interest rate shall be applied. "[A] Central Bank Circular
cannot repeal a law. Only a law can repeal another law."134
For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated overseas
workers are entitled to the reimbursement of his or her placement fee with an interest of 12% per
annum. Since Bangko Sentral ng Pilipinas circulars cannotrepeal Republic Act No. 8042, the issuance
of Circular No. 799 does not have the effect of changing the interest on awards for reimbursement of
placement fees from 12% to 6%. This is despite Section 1 of Circular No. 799, which provides that the
6% interest rate applies even to judgments.
Moreover, laws are deemed incorporated in contracts. "The contracting parties need not repeat them.
They do not even have to be referred to. Every contract, thus, contains not only what has been
explicitly stipulated, but the statutory provisions that have any bearing on the matter." 135 There is,
therefore, an implied stipulation in contracts between the placement agency and the overseasworker
that in case the overseas worker is adjudged as entitled to reimbursement of his or her placement fees,
the amount shall be subject to a 12% interest per annum. This implied stipulation has the effect of
removing awards for reimbursement of placement fees from Circular No. 799’s coverage.
The same cannot be said for awardsof salary for the unexpired portion of the employment contract
under Republic Act No. 8042. These awards are covered by Circular No. 799 because the law does not
provide for a specific interest rate that should apply.
In sum, if judgment did not become final and executory before July 1, 2013 and there was no
stipulation in the contract providing for a different interest rate, other money claims under Section 10
of Republic Act No. 8042 shall be subject to the 6% interest per annum in accordance with Circular
No. 799.
This means that respondent is also entitled to an interest of 6% per annum on her money claims from
the finality of this judgment.
IV
Finally, we clarify the liabilities ofWacoal as principal and petitioner as the employment agency that
facilitated respondent’s overseas employment.
Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the foreign
employer and the local employment agency are jointly and severally liable for money claims including
claims arising out of an employer-employee relationship and/or damages. This section also provides
that the performance bond filed by the local agency shall be answerable for such money claims or
damages if they were awarded to the employee.
This provision is in line with the state’s policy of affording protection to labor and alleviating workers’
plight.136
In overseas employment, the filing of money claims against the foreign employer is attended by
practical and legal complications.1âwphi1 The distance of the foreign employer alonemakes it difficult
18
for an overseas worker to reach it and make it liable for violations of the Labor Code. There are also
possible conflict of laws, jurisdictional issues, and procedural rules that may be raised to frustrate an
overseas worker’sattempt to advance his or her claims.
It may be argued, for instance, that the foreign employer must be impleaded in the complaint as an
indispensable party without which no final determination can be had of an action. 137
The provision on joint and several liability in the Migrant Workers and Overseas Filipinos Act of 1995
assures overseas workers that their rights will not be frustrated with these complications. The
fundamental effect of joint and several liability is that "each of the debtors is liable for the entire
obligation."138 A final determination may, therefore, be achieved even if only oneof the joint and
several debtors are impleaded in an action. Hence, in the case of overseas employment, either the local
agency or the foreign employer may be sued for all claims arising from the foreign employer’s labor
law violations. This way, the overseas workers are assured that someone — the foreign employer’s
local agent — may be made to answer for violationsthat the foreign employer may have committed.
The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers have recourse
in law despite the circumstances of their employment. By providing that the liability of the foreign
employer may be "enforced to the full extent" 139 against the local agent,the overseas worker is assured
of immediate and sufficientpayment of what is due them.140
Corollary to the assurance of immediate recourse in law, the provision on joint and several liability in
the Migrant Workers and Overseas Filipinos Act of 1995 shifts the burden of going after the foreign
employer from the overseas worker to the local employment agency. However, it must be emphasized
that the local agency that is held to answer for the overseas worker’s money claims is not leftwithout
remedy. The law does not preclude it from going after the foreign employer for reimbursement of
whatever payment it has made to the employee to answer for the money claims against the foreign
employer.
A further implication of making localagencies jointly and severally liable with the foreign employer is
thatan additional layer of protection is afforded to overseas workers. Local agencies, which are
businesses by nature, are inoculated with interest in being always on the lookout against foreign
employers that tend to violate labor law. Lest they risk their reputation or finances, local agenciesmust
already have mechanisms for guarding against unscrupulous foreign employers even at the level prior
to overseas employment applications.
With the present state of the pleadings, it is not possible to determine whether there was indeed a
transfer of obligations from petitioner to Pacific. This should not be an obstacle for the respondent
overseas worker to proceed with the enforcement of this judgment. Petitioner is possessed with the
resources to determine the proper legal remedies to enforce its rights against Pacific, if any.
V
Many times, this court has spoken on what Filipinos may encounter as they travel into the farthest and
mostdifficult reaches of our planet to provide for their families. In Prieto v. NLRC: 141
The Court is not unaware of the many abuses suffered by our overseas workers in the foreign land
where they have ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of
contract, maltreatment, rape, insufficient nourishment, sub-human lodgings, insults and other forms of
debasement, are only a few of the inhumane acts towhich they are subjected by their foreign
employers, who probably feel they can do as they please in their own country. Whilethese workers
may indeed have relatively little defense against exploitation while they are abroad, that disadvantage
must not continue to burden them when they return to their own territory to voice their muted
complaint. There is no reason why, in their very own land, the protection of our own laws cannot be
extended to them in full measure for the redress of their grievances. 142
 19

But it seems that we have not said enough.

We face a diaspora of Filipinos. Their travails and their heroism can be told a million times over; each
of their stories as real as any other. Overseas Filipino workers brave alien cultures and the heartbreak
of families left behind daily. They would count the minutes, hours, days, months, and years yearning to
see their sons and daughters. We all know of the joy and sadness when they come home to see them all
grown up and, being so, they remember what their work has cost them. Twitter accounts, Facetime,
and many other gadgets and online applications will never substitute for their lost physical presence.
Unknown to them, they keep our economy afloat through the ebb and flow of political and economic
crises. They are our true diplomats, they who show the world the resilience, patience, and creativity of
our people. Indeed, we are a people who contribute much to the provision of material creations of this
world.
This government loses its soul if we fail to ensure decent treatment for all Filipinos. We default by
limiting the contractual wages that should be paid to our workers when their contracts are breached by
the foreign employers. While we sit, this court will ensure that our laws will reward our overseas
workers with what they deserve: their dignity.
Inevitably, their dignity is ours as weil.
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED with
modification. Petitioner Sameer Overseas Placement Agency is ORDERED to pay respondent Joy C.
Cabiles the amount equivalent to her salary for the unexpired portion of her employment contract at an
interest of 6% per annum from the finality of this judgment. Petitioner is also ORDERED to reimburse
respondent the withheld NT$3,000.00 salary and pay respondent attorney's fees of NT$300.00 at an
interest of 6% per annum from the finality of this judgment.
The clause, "or for three (3) months for every year of the unexpired term, whichever is less" in Section
7 of Republic Act No. 10022 amending Section 10 of Republic Act No. 8042 is declared
unconstitutional and, therefore, null and void.
SO ORDERED.
 20

G.R. No. 167614 March 24, 2009 7.00 days per month5
ANTONIO M. SERRANO, Petitioner, On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded
vs. employment contract for the position of Second Officer with a monthly salary of US$1,000.00, upon
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents. the assurance and representation of respondents that he would be made Chief Officer by the end of
DECISION April 1998.6
AUSTRIA-MARTINEZ, J.: Respondents did not deliver on their promise to make petitioner Chief Officer.7 Hence, petitioner
For decades, the toil of solitary migrants has helped lift entire families and communities out of poverty. refused to stay on as Second Officer and was repatriated to the Philippines on May 26, 1998.8
Their earnings have built houses, provided health care, equipped schools and planted the seeds of Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March
businesses. They have woven together the world by transmitting ideas and knowledge from country to 19, 1999, but at the time of his repatriation on May 26, 1998, he had served only two (2) months and
country. They have provided the dynamic human link between cultures, societies and economies. Yet, seven (7) days of his contract, leaving an unexpired portion of nine (9) months and twenty-three (23)
only recently have we begun to understand not only how much international migration impacts days.
development, but how smart public policies can magnify this effect. Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive
United Nations Secretary-General Ban Ki-Moon dismissal and for payment of his money claims in the total amount of US$26,442.73, broken down as
Global Forum on Migration and Development follows:
Brussels, July 10, 20071 May 27/31, 1998 (5 days) incl. Leave pay
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section 10, US$ 413.90
Republic Act (R.A.) No. 8042,2 to wit: June 01/30, 1998
Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid or 2,590.00
authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement July 01/31, 1998
of his placement fee with interest of twelve percent (12%) per annum, plus his salaries for the 2,590.00
unexpired portion of his employment contract or for three (3) months for every year of the unexpired August 01/31, 1998
term, whichever is less. 2,590.00
x x x x (Emphasis and underscoring supplied) Sept. 01/30, 1998
does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but 2,590.00
exacerbates the hardships borne by them by unduly limiting their entitlement in case of illegal Oct. 01/31, 1998
dismissal to their lump-sum salary either for the unexpired portion of their employment contract "or for 2,590.00
three months for every year of the unexpired term, whichever is less" (subject clause). Petitioner Nov. 01/30, 1998
claims that the last clause violates the OFWs' constitutional rights in that it impairs the terms of their 2,590.00
contract, deprives them of equal protection and denies them due process. Dec. 01/31, 1998
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December 8, 2,590.00
2004 Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which applied the subject Jan. 01/31, 1999
clause, entreating this Court to declare the subject clause unconstitutional. 2,590.00
Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents) Feb. 01/28, 1999
under a Philippine Overseas Employment Administration (POEA)-approved Contract of Employment 2,590.00
with the following terms and conditions: Mar. 1/19, 1999 (19 days) incl. leave pay
Duration of contract 1,640.00
12 months
Position --------------------------------------------------------------------------------
Chief Officer
Basic monthly salary 25,382.23
US$1,400.00 Amount adjusted to chief mate's salary
Hours of work
48.0 hours per week (March 19/31, 1998 to April 1/30, 1998) +
Overtime 1,060.5010
US$700.00 per month
Vacation leave with pay ----------------------------------------------------------------------------------------------

TOTAL CLAIM
US$ 26,442.7311
as well as moral and exemplary damages and attorney's fees.
The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and
awarding him monetary benefits, to wit:
WHEREFORE, premises considered, judgment is hereby rendered declaring that the 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], jointly and severally, in Philippine Currency,
based on the rate of exchange prevailing at the time of payment, the amount of EIGHT THOUSAND
SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00), representing the complainant’s
salary for three (3) months of the unexpired portion of the aforesaid contract of employment.1avvphi1
The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in
Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount of
FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the complainant’s claim for a salary
differential. In addition, the respondents are hereby ordered to pay the complainant, jointly and
severally, in 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%) of the total
amount awarded to the aforesaid employee under this Decision.
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
21
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
22
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 receive57 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.
23
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 classifications73 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
24
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
 25

Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third Olarte v. Nayona91
Division, December 1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was 12 months
originally granted a 12-month contract, which was deemed renewed for another 12 months. After 21 days
serving for one year and seven-and-a-half months, respondent Osdana was illegally dismissed, and the 11 months and 9 days
Court awarded her salaries for the entire unexpired portion of four and one-half months of her contract. 3 months
The Marsaman interpretation of Section 10(5) has since been adopted in the following cases: JSS v.Ferrer92
Case Title 12 months
Contract Period 16 days
Period of Service 11 months and 24 days
Unexpired Period 3 months
Period Applied in the Computation of the Monetary Award Pentagon v. Adelantar93
Skippers v. Maguad84 12 months
6 months 9 months and 7 days
2 months 2 months and 23 days
4 months 2 months and 23 days
4 months Phil. Employ v. Paramio, et al.94
Bahia Shipping v. Reynaldo Chua 85 12 months
9 months 10 months
8 months 2 months
4 months Unexpired portion
4 months Flourish Maritime v. Almanzor 95
Centennial Transmarine v. dela Cruz l86 2 years
9 months 26 days
4 months 23 months and 4 days
5 months 6 months or 3 months for each year of contract
5 months Athenna Manpower v. Villanos 96
Talidano v. Falcon87 1 year, 10 months and 28 days
12 months 1 month
3 months 1 year, 9 months and 28 days
9 months 6 months or 3 months for each year of contract
3 months As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The
Univan v. CA 88 first category includes OFWs with fixed-period employment contracts of less than one year; in case of
12 months illegal dismissal, they are entitled to their salaries for the entire unexpired portion of their contract. The
3 months second category consists of OFWs with fixed-period employment contracts of one year or more; in
9 months case of illegal dismissal, they are entitled to monetary award equivalent to only 3 months of the
3 months unexpired portion of their contracts.
Oriental v. CA 89 The disparity in the treatment of these two groups cannot be discounted. In Skippers, the respondent
12 months OFW worked for only 2 months out of his 6-month contract, but was awarded his salaries for the
more than 2 months remaining 4 months. In contrast, the respondent OFWs in Oriental and PCL who had also worked for
10 months about 2 months out of their 12-month contracts were awarded their salaries for only 3 months of the
3 months unexpired portion of their contracts. Even the OFWs involved in Talidano and Univan who had
PCL v. NLRC90 worked for a longer period of 3 months out of their 12-month contracts before being illegally
12 months dismissed were awarded their salaries for only 3 months.
more than 2 months To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an
more or less 9 months employment contract of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-B
3 months with an employment contract of 15 months with the same monthly salary rate of US$1,000.00. Both
 26

commenced work on the same day and under the same employer, and were illegally dismissed after 12 months
one month of work. Under the subject clause, OFW-A will be entitled to US$9,000.00, equivalent to 6 months and 22 days
his salaries for the remaining 9 months of his contract, whereas OFW-B will be entitled to only 5 months and 18 days
US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion of his contract, instead of 5 months and 18 days
US$14,000.00 for the unexpired portion of 14 months of his contract, as the US$3,000.00 is the lesser It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired
amount. portions thereof, were treated alike in terms of the computation of their monetary benefits in case of
The disparity becomes more aggravating when the Court takes into account jurisprudence that, prior to illegal dismissal. Their claims were subjected to a uniform rule of computation: their basic salaries
the effectivity of R.A. No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no matter how long the multiplied by the entire unexpired portion of their employment contracts.
period of their employment contracts, were entitled to their salaries for the entire unexpired portions of The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation
their contracts. The matrix below speaks for itself: of the money claims of illegally dismissed OFWs based on their employment periods, in the process
Case Title singling out one category whose contracts have an unexpired portion of one year or more and
Contract Period subjecting them to the peculiar disadvantage of having their monetary awards limited to their salaries
Period of Service for 3 months or for the unexpired portion thereof, whichever is less, but all the while sparing the other
Unexpired Period category from such prejudice, simply because the latter's unexpired contracts fall short of one year.
Period Applied in the Computation of the Monetary Award Among OFWs With Employment Contracts of More Than One Year
ATCI v. CA, et al.98 Upon closer examination of the terminology employed in the subject clause, the Court now has
2 years misgivings on the accuracy of the Marsaman interpretation.
2 months The Court notes that the subject clause "or for three (3) months for every year of the unexpired term,
22 months whichever is less" contains the qualifying phrases "every year" and "unexpired term." By its ordinary
22 months meaning, the word "term" means a limited or definite extent of time.105 Corollarily, that "every year"
Phil. Integrated v. NLRC99 is but part of an "unexpired term" is significant in many ways: first, the unexpired term must be at least
2 years one year, for if it were any shorter, there would be no occasion for such unexpired term to be measured
7 days by every year; and second, the original term must be more than one year, for otherwise, whatever
23 months and 23 days would be the unexpired term thereof will not reach even a year. Consequently, the more decisive factor
23 months and 23 days in the determination of when the subject clause "for three (3) months for every year of the unexpired
JGB v. NLC100 term, whichever is less" shall apply is not the length of the original contract period as held in
2 years Marsaman,106 but the length of the unexpired portion of the contract period -- the subject clause
9 months applies in cases when the unexpired portion of the contract period is at least one year, which
15 months arithmetically requires that the original contract period be more than one year.
15 months Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose
Agoy v. NLRC101 contract periods are for more than one year: those who are illegally dismissed with less than one year
2 years left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof, while
2 months those who are illegally dismissed with one year or more remaining in their contracts shall be covered
22 months by the subject clause, and their monetary benefits limited to their salaries for three months only.
22 months To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court
EDI v. NLRC, et al.102 assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of
2 years US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th
5 months month. Considering that there is at least 12 months remaining in the contract period of OFW-C, the
19 months subject clause applies to the computation of the latter's monetary benefits. Thus, OFW-C will be
19 months entitled, not to US$12,000,00 or the latter's total salaries for the 12 months unexpired portion of the
Barros v. NLRC, et al.103 contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of the 12-
12 months month unexpired term of the contract. On the other hand, OFW-D is spared from the effects of the
4 months subject clause, for there are only 11 months left in the latter's contract period. Thus, OFW-D will be
8 months entitled to US$11,000.00, which is equivalent to his/her total salaries for the entire 11-month
8 months unexpired portion.
Philippine Transmarine v. Carilla104 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)
27
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.
28
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.
29
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.