Title I- Termination of Employment

Article 293 (278) Coverage

Article 294 (279) Security of Tenure

HOCHENG PHILIPPINES CORPORATION, PETITIONER, VS. ANTONIO M. FARRALES, RESPONDENT.

DECISION

REYES, J.:

Before this Court on Petition for Review on Certiorari[1] is the Decision[2] dated October 17, 2013 of the Court
of Appeals (CA) in CA-G.R. SP No. 125103, which reversed the Decision[3] dated February 29, 2012 and
Resolution[4] dated May 7, 2012 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 08-
002249-11, and reinstated with modifications the Decision[5] dated April 29, 2011 of the Labor Arbiter (LA) in
NLRC Case No. RAB-IV-03-00618-10-C, which found that respondent Antonio M. Farrales (Farrales) was
illegally dismissed by Hocheng Philippines Corporation (HPC). The fallo of the appellate decision reads:
WHEREFORE, premises considered, the Decision of the Labor Arbiter dated April 29, 2011 in NLRC Case No.
RAB-IV-03-00618-10-C is reinstated with modifications. Private respondent Hocheng Philippines Corporation
is liable to pay [Farrales] the following:

(1)
Full backwages from date of dismissal on February 15, 2010 until date of decision equivalent to P276,466.67;
(2)
Separation pay of one (1) month salary per year of service for a period of twelve years equivalent to
P228,800.00;
(3)
Appraisal year-end bonus in the sum of P11,000.00; and,
(4)
Attorney's fees equivalent to 10% of the total award.

SO ORDERED.[6]
The Facts

Farrales was first employed by HPC on May 12, 1998 as Production Operator, followed by promotions as (1)
Leadman in 2004, (2) Acting Assistant Unit Chief in 2007, and (3) Assistant Unit Chief of Production in 2008, a
supervisory position with a monthly salary of ?17,600.00. He was a consistent recipient of citations for
outstanding performance, as well as appraisal and year-end bonuses.[7]

On December 2, 2009, a report reached HPC management that a motorcycle helmet of an employee, Reymar
Solas (Reymar), was stolen at the parking lot within its premises on November 27, 2009. On December 3, 2009,
Security Officer Francisco Paragas III confirmed a video sequence recorded on closed-circuit television (CCTV)
around 3:00 p.m. on November 27, 2009 showing Farrales taking the missing helmet from a parked motorcycle,
to wit:
At around 3:07:44, [Farrales] was seen walking towards the motorcycle parking lot;

At around 3:08:47, [Farrales] walked back towards the pedestrian gate of the company, passing by the
motorcycle parking lot;
At around 3:08:51, [Farrales] walked back towards the motorcycle parking lot and returned to the pedestrian
gate;

At around 3:09:10, [Farrales] called on the person of Andy Lopega and instructed him to get the helmet he was
pointing at; [and]

At around 3:09:30, Andy gave the helmet to [Farrales].[8]

Later that day, HPC sent Farrales a notice to explain his involvement in the alleged theft. The investigation was
supported by the employees' union, ULO-Hocheng.[9] Below is Farrales' explanation, as summarized by the
CA:
On November 27, 2009, [Farrales] borrowed a helmet from his co-worker Eric Libutan ("Eric") since they reside
in the same barangay. They agreed that Eric could get it at the house of [Farrales] or the latter could return it
the next time that they will see each other. Eric told him that his motorcycle was black in color. As there were
many motorcycles with helmets, he asked another employee, Andy Lopega ("Andy") who was in the parking
area where he could find Eric's helmet. Andy handed over to him the supposed helmet which he believed to be
owned by Eric, then he went home.

On November 28, 2009, at around 6 o'clock in the morning, he saw Eric at their barangay and told him to get
the helmet. But Eric was in a rush to go to work, he did not bother to get it.

In the morning of December 3, 2009, upon seeing Eric in the workplace, [Farrales] asked him why he did not
get the helmet from his house. Eric told him that, "Hindi po sa akin yung nakuha nyong helmet." [Farrales] was
shocked and he immediately phoned the HPC's guard to report the situation that he mistook the helmet which
he thought belonged to Eric. After several employees were asked as to the ownership of the helmet, he finally
found the owner thereof, which is Jun Reyes's ("Jun") nephew, Reymar, who was with him on November 27,
2009. [Farrales] promptly apologized to Jun and undertook to return the helmet the following day and
explained that it was an honest mistake. These all happened in the morning of December 3, 2009; [Farrales]
did not know yet that HPC will send a letter demanding him to explain.[10]
A hearing was held on December 10, 2009 at 1:00 p.m. Present were Farrales, Eric Libutan (Eric), Andy Lopega
(Andy), Jun Reyes, Antonio Alinda, a witness, and Rolando Garciso, representing ULO-Hocheng. From Andy it
was learned that at the time of the alleged incident, he was already seated on his motorcycle and about to leave
the company compound when Farrales approached and asked him to hand to him a yellow helmet hanging
from a motorcycle parked next to him. When Andy hesitated, Farrales explained that he owned it, and so Andy
complied. But Eric had specifically told Farrales that his helmet was colored red and black and his motorcycle
was a black Honda XRM-125 with plate number 8746-DI, parked near the perimeter fence away from the
walkway to the pedestrian gate. The CCTV showed Farrales instructing Andy to fetch a yellow helmet from a
blue Rossi 110 motorcycle with plate number 3653-DN parked in the middle of the parking lot, opposite the
location given by Eric. Farrales in his defense claimed he could no longer remember the details of what
transpired that time, nor could he explain why he missed Eric's specific directions.[11]

On February 15, 2010, the HPC issued a Notice of Termination[12] to Farrales dismissing him for violation of
Article 69, Class A, Item No. 29 of the HPC Code of Discipline, which provides that "stealing from the company,
its employees and officials, or from its contractors, visitors or clients," is akin to serious misconduct and fraud
or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative,
which are just causes for termination of employment under Article 282 of the Labor Code.

On March 25, 2010, Farrales filed a complaint for illegal dismissal, non-payment of appraisal and mid-year
bonuses, service incentive leave pay and 13th month pay. He also prayed for reinstatement, or in lieu thereof,
separation pay with full backwages, plus moral and exemplary damages and attorney's fees. During the
mandatory conference, HPC paid Farrales ?10,914.51, representing his 13th month pay for the period of January
to February 2010 and vacation leave/sick leave conversion. Farrales agreed to waive his claim for incentive
bonus.[13]

On April 29, 2011, the LA ruled in favor of Farrales,[14] the fallo of which is as follows:
WHEREFORE, PREMISES CONSIDERED, all the respondents Hocheng Phils. Corporation, Inc. Sam Chen[g]
and Judy Geregale are found guilty of illegal dismissal and ordered jointly and severally to pay complainant the
following:

1. Full backwages from date of dismissal on February 15, 2010 until date of decision equivalent to P276,466.67.

2. Separation pay of one (1) month salary per year of service for a period of twelve years equivalent to
P228,800.00.

3. Appraisal year-end bonus in the sum of P11,000.00.

4. Moral damages in the sum of P200,000.00.

5. Exemplary damages in the sum of P100,000.00.

6. 10% of all sums owing as attorney's fees or the amount of P81,626.67.

SO ORDERED.[15]
On appeal by HPC,[16] the NLRC reversed the LA,[17] and denied Farrales' motion for reconsideration, finding
substantial evidence of just cause to terminate Farrales.[18]

On petition for certiorari to the CA,[19] Farrales sought to refute the NLRC's factual finding that he committed
theft, as well as to question NLRC's jurisdiction over HPC's appeal for non-payment of appeal fees. But the CA
found that HPC was able to perfect its appeal by posting a bond equivalent to the monetary award of
?897,893.37 and paying the appeal fees by postal money order in the amount of ?520.00.[20]

Concerning the substantive issues, the appellate court agreed with the LA that Farrales' act of taking Reymar's
helmet did not amount to theft, holding that HPC failed to prove that Farrales' conduct was induced by a
perverse and wrongful intent to gain, in light of the admission of Eric that he did let Farrales borrow one of his
two helmets, only that Farrales mistook Reymar's helmet as the one belonging to him.

Petition for Review to the Supreme Court

In this petition, HPC raises the following grounds for this Court's review:
THE HONORABLE [CA] PLAINLY ERRED AND ACTED CONTRARY TO EXISTING LAW AND JURISPRUDENCE
IN REVERSING THE DECISION OF THE [NLRC] AND DECLARING ILLEGAL THE DISMISSAL FOR [HPC's]
ALLEGED FAILURE TO PROVE THE EXISTENCE OF JUST CAUSE.

1. THERE IS SUBSTANTIAL EVIDENCE TO SHOW THAT [FARRALES] COMMITTED THEFT IN [HPC's]

PREMISES.

2. THEFT IS A JUST CAUSE FOR TERMINATION.

3. BY COMMITTING THEFT, [FARRALES], BEING A SUPERVISORIAL EMPLOYEE, FORFEITED THE TRUST
REPOSED IN HIM BY [HPC], THUS RENDERING HIM DISMISSIBLE FOR LOSS OF CONFIDENCE.

IN DECLARING ILLEGAL THE DISMISSAL OF [FARRALES], THE HONORABLE [CA] VIOLATED DOCTRINES
LAID DOWN BY THE SUPREME COURT.

1. COURTS CANNOT SUBSTITUTE THEIR JUDGMENT FOR THAT OF THE MANAGEMENT.

2. COURTS MUST ACCORD DUE RESPECT TO THE FINDINGS OF ADMINISTRATIVE AGENCIES.[21]

Chiefly, HPC insists that since the complaint below involves an administrative case, only substantial evidence,
not proof of guilt beyond reasonable doubt, is required to prove the guilt of Farrales;[22] that what the CA has
done is substitute its judgment for that of the NLRC, which is vested with statutory duty to make factual
determinations based on the evidence on record.[23]

Ruling of the Court

The Court resolves to deny the petition.

To validly dismiss an employee, the law requires the employer to prove the existence of any of the valid or
authorized causes,[24] which, as enumerated in Article 282 of the Labor Code, are: (a) serious misconduct or
willful disobedience by the employee of the lawful orders of his employer or the latter's representative in
connection with his work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful breach
by the employee of the trust reposed in him by his employer or his duly authorized representative; (d)
commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and (e) other causes analogous to the
foregoing.[25] As a supervisorial employee, Farrales is admittedly subject to stricter rules of trust and
confidence, and thus pursuant to its management prerogative HPC enjoys a wider latitude of discretion to
assess his continuing trustworthiness, than if he were an ordinary rank-and-file employee.[26] HPC therefore
insists that only substantial proof of Farrales' guilt for theft is needed to establish the just causes to dismiss
him, as the NLRC lengthily asserted in its decision.

Article 4 of the Labor Code mandates that all doubts in the implementation and interpretation of the provisions
thereof shall be resolved in favor of labor. Consistent with the State's avowed policy to afford protection to
labor, as Article 3 of the Labor Code and Section 3, Article XIII of the 1987 Constitution have enunciated,
particularly in relation to the worker's security of tenure, the Court held that "[t]o be lawful, the cause for
termination must be a serious and grave malfeasance to justify the deprivation of a means of livelihood. This is
merely in keeping with the spirit of our Constitution and laws which lean over backwards in favor of the working
class, and mandate that every doubt must be resolved in their favor."[27] Moreover, the penalty imposed on
the erring employee ought to be proportionate to the offense, taking into account its nature and surrounding
circumstances.

The Court has always taken care, therefore, that the employer does not invoke any baseless justification, much
less management prerogative, as a subterfuge by which to rid himself of an undesirable worker,[28] and thus
in exceptional cases the Court has never hesitated to delve into the NLRC's factual conclusions where evidence
was found insufficient to support them, or too much was deduced from the bare facts submitted by the parties,
or the LA and the NLRC came up with conflicting positions, as is true in this case.[29]

As aptly pointed out by the LA, while HPC has the onus probandi that the taking of Reymar's helmet by Farrales
was with intent to gain, it failed to discharge this burden, as shown by the following circumstances: Farrales
sought and obtained the permission of Eric, his co-employee as well as barangay co-resident, to borrow his
helmet; at the parking lot, Farrales asked another employee, Andy, to fetch a yellow helmet from one of the
parked motorcycles, mistakenly thinking it belonged to Eric (whom he knew owned two helmets); the following
day, November 28, Farrales asked Eric why he had not dropped by his house to get his helmet, and Eric replied
that Farrales got the wrong helmet because he still had his other helmet with him; Farrales immediately sought
the help of the company guards to locate the owner of the yellow helmet, who turned out to be Reymar;
Farrales apologized to Reymar for his mistake, and his apology was promptly accepted.[30] All these
circumstances belie HPC's claim that Farrales took Reymar's helmet with intent to gain, the LA said.

In ruling that Farrales' dismissal by HPC was attended with utmost malice and bad faith as to justify an award
of moral and exemplary damages and attorney's fees, the LA stated that "[i]t is succinctly clear that [the]
respondents [therein] tried to blow out of proportions the indiscretion of [Farrales] for reasons known only to
them," and moreover, "[f]inding that the dismissal on the ground of theft is unavailing, [the] respondents
[therein] immediately offered [Farrales] his former position when he filed [his] complaint. What does this act
of [the] respondents [therein] speak [of]?"[31]

On the other hand, the NLRC found that Farrales lied, first, when he told Andy, then already astride his
motorbike at the parking area and about to leave the company premises, that the yellow helmet belonged to
him,[32] and second, when he claimed that Eric was his neighbor, although they were not. It ruled as doubtful
Farrales' hazy recollection about what happened that afternoon at the parking lot, since he could not even give
a description of the motorcycle from which he took the yellow helmet. These circumstances, the NLRC
determined, comprise substantial proof belying Farrales' claim of good faith. As a supervisory employee, he
held a position of high responsibility in the company making him accountable to stricter rules of trust and
confidence than an ordinary employee, and under Article 282 of the Labor Code, he is guilty of a serious
misconduct and a willful breach of trust. The NLRC went on to cite a settled policy that in trying to protect the
rights of labor, the law does not authorize the oppression or self-destruction of the employer. Management
also has its own rights, which as such, are entitled to respect and enforcement in the interest of simple fair
play.[33]

But the Court agrees with the CA that Farrales committed no serious or willful misconduct or disobedience to
warrant his dismissal. It is not disputed that Farrales lost no time in returning the helmet to Reymar the moment
he was apprised of his mistake by Eric, which proves, according to the CA, that he was not possessed of a
depravity of conduct as would justify HPC's claimed loss of trust in him. Farrales immediately admitted his error
to the company guard and sought help to find the owner of the yellow helmet, and this, the appellate court
said, only shows that Farrales did indeed mistakenly think that the helmet he took belonged to Eric.

It is not, then, difficult to surmise that when Farrales told Andy that the yellow helmet was his, his intent was
not to put up a pretence of ownership over it and thus betray his intent to gain, as the NLRC held, but rather
simply to assuage Andy's reluctance to heed his passing request to reach for the helmet for him; Andy, it will
be recalled, was at that moment already seated in his motorbike and about to drive out when Farrales made
his request. As to Farrales' claim that he and Eric were neighbors, suffice it to say that as the CA noted, they
resided in the same barangay, and thus, loosely, were neighbors.

The CA also pointed out that although the alleged theft occurred within its premises, HPC was not prejudiced
in any way by Farrales' conduct since the helmet did not belong to it but to Reymar. In light of Article 69, Class
A, Item No. 29 of the HPC Code of Discipline, this observation may be irrelevant, although it may be that the
LA regarded it as proving HPC's bad faith.
Theft committed by an employee against a person other than his employer, if proven by substantial evidence,
is a cause analogous to serious misconduct.[34] Misconduct is improper or wrong conduct, it is the
transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in
character, and implies wrongful intent and not mere error in judgment. The misconduct to be serious must be
of such grave and aggravated character and not merely trivial or unimportant. Such misconduct, however
serious, must, nevertheless, be in connection with the employee's work to constitute just cause for his
separation.[35]

But where there is no showing of a clear, valid and legal cause for termination of employment, the law considers
the case a matter of illegal dismissal.[36] If doubts exist between the evidence presented by the employer and
that of the employee, the scales of justice must be tilted in favor of the latter. The employer must affirmatively
show rationally adequate evidence that the dismissal was for a justifiable cause.[37]

Nonetheless, the Court agrees with the CA's dismissal of the award of moral and exemplary damages for lack
of merit. There is no satisfactory proof that the concerned officers of HPC acted in bad faith or with malice in
terminating Farrales. Notwithstanding the LA's assertion to this effect, Farrales' bare allegations of bad faith
deserve no credence, and neither is the mere fact that he was illegally dismissed sufficient to prove bad faith
on the part of HPC's officers.[38] But concerning the award of attorney's fees, Farrales was dismissed for a
flimsy charge, and he was compelled to litigate to secure what is due him which HPC unjustifiably withheld.

WHEREFORE, premises considered, the petition for review is DENIED.

SO ORDERED.

Velasco, Jr., (Chairperson), Peralta, Villarama, Jr., and Jardeleza, JJ., concur.

CHERYLL SANTOS LEUS, Petitioner,

vs.
ST. SCHOLASTICA'S COLLEGE WESTGROVE and/or SR. EDNA QUIAMBAO, OSB, Respondents.

DECISION

REYES, J.:

Cheryll Santos Leus (petitioner) was hired by St. Scholastica's College Westgrove (SSCW), a Catholic
educational institution, as a non-teaching personnel, engaged in pre-marital sexual relations, got pregnant out
of wedlock, married the father of her child, and was dismissed by SSCW, in that order. The question that has
to be resolved is whether the petitioner's conduct constitutes a ground for her dismissal.
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and
set aside the Decision1 dated September 24, 2008 and Resolution2 dated March 2, 2009 issued by the Court of
Appeals (CA) in CA-G.R. SP No. 100188, which affirmed the Resolutions dated February 28, 20073 and May 21,
20074 of the National Labor Relations Commission (NLRC)in NLRC CA No. 049222-06.

The Facts

SSCW is a catholic and sectarian educational institution in Silang, Cavite. In May 2001, SSCW hired the
petitioner as an Assistant to SSCW’s Director of the Lay Apostolate and Community Outreach Directorate.

Sometime in 2003, the petitioner and her boyfriend conceived a child out of wedlock. When SSCW learned of
the petitioner’s pregnancy, Sr. Edna Quiambao (Sr. Quiambao), SSCW’s Directress, advised her to file a
resignation letter effective June 1, 2003. In response, the petitioner informed Sr. Quiambao that she would not
resign from her employment just because she got pregnant without the benefit of marriage.5

On May 28, 2003, Sr. Quiambao formally directed the petitioner to explain in writing why she should not be
dismissed for engaging in pre-marital sexual relations and getting pregnant as a result thereof, which amounts
to serious misconduct and conduct unbecoming of an employee of a Catholic school.6

In a letter7 dated May 31, 2003, the petitioner explained that her pregnancy out of wedlock does not amount
to serious misconduct or conduct unbecoming of an employee. She averred that she is unaware of any school
policy stating that being pregnant out of wedlock is considered as a serious misconduct and, thus, a ground for
dismissal. Further, the petitioner requested a copy of SSCW’s policy and guidelines so that she may better
respond to the charge against her. On June 2, 2003, Sr. Quiambao informed the petitioner that, pending the
promulgation of a "Support Staff Handbook," SSCW follows the 1992 Manual of Regulations for Private Schools
(1992 MRPS) on the causes for termination of employments; that Section 94(e) of the 1992 MRPS cites
"disgraceful or immoral conduct" as a ground for dismissal in addition to the just causes for termination of
employment provided under Article 282 of the Labor Code.8

On June 4, 2003, the petitioner, through counsel, sent Sr. Quiambao a letter,9 which, in part, reads:

To us, pre-marital sex between two consenting adults without legal impediment to marry each other who later
on married each other does not fall within the contemplation of "disgraceful or immoral conduct" and "serious
misconduct" of the Manual of Regulations for Private Schools and the Labor Code of the Philippines.

Your argument that what happened to our client would set a bad example to the students and other employees
of your school is speculative and is more imaginary than real. To dismiss her on that sole ground constitutes
grave abuse of management prerogatives.

Considering her untarnished service for two years, dismissing her with her present condition would also mean
depriving her to be more secure in terms of financial capacity to sustain maternal needs.10

In a letter11 dated June 6, 2003, SSCW, through counsel, maintained that pre-marital sexual relations, evenif
between two consenting adults without legal impediment to marry, is considered a disgraceful and immoral
conduct or a serious misconduct, which are grounds for the termination of employment under the 1992 MRPS
and the Labor Code. That SSCW, as a Catholic institution of learning, has the right to uphold the teaching of
the Catholic Church and expect its employees to abide by the same. They further asserted that the petitioner’s
indiscretion is further aggravated by the fact that she is the Assistant to the Director of the Lay Apostolate and
Community Outreach Directorate, a position of responsibility that the students look up to as rolemodel. The
petitioner was again directed to submit a written explanation on why she should not be dismissed.

On June 9, 2003, the petitioner informed Sr. Quiambao that she adopts her counsel’s letter dated June 4, 2003
as her written explanation.12

Consequently, in her letter13 dated June 11, 2003, Sr. Quiambao informed the petitioner that her employment
with SSCW is terminated on the ground of serious misconduct. She stressed that pre-marital sexual relations
between two consenting adults with no impediment to marry, even if they subsequently married, amounts to
immoral conduct. She further pointed out that SSCW finds unacceptable the scandal brought about by the
petitioner’s pregnancy out of wedlock as it ran counter to the moral principles that SSCW stands for and
teaches its students.

Thereupon, the petitioner filed a complaint for illegal dismissal with the Regional Arbitration Branch of the
NLRC in Quezon City against SSCW and Sr. Quiambao (respondents). In her position paper,14 the petitioner
claimed that SSCW gravely abused its management prerogative as there was no just cause for her dismissal.
She maintained that her pregnancy out of wedlock cannot be considered as serious misconduct since the same
is a purely private affair and not connected in any way with her duties as an employee of SSCW. Further, the
petitioner averred that she and her boyfriend eventually got married even prior to her dismissal.

For their part, SSCW claimed that there was just cause to terminate the petitioner’s employment with SSCW
and that the same is a valid exercise of SSCW’s management prerogative. They maintained that engaging in
pre-marital sex, and getting pregnant as a result thereof, amounts to a disgraceful or immoral conduct, which
is a ground for the dismissal of an employee under the 1992 MRPS.

They pointed out that SSCW is a Catholic educational institution, which caters exclusively to young girls; that
SSCW would lose its credibility if it would maintain employees who do not live up to the values and teachings
it inculcates to its students. SSCW further asserted that the petitioner, being an employee of a Catholic
educational institution, should have strived to maintain the honor, dignity and reputation of SSCW as a Catholic
school.15

The Ruling of the Labor Arbiter

On February 28, 2006, the Labor Arbiter (LA) rendered a Decision,16 in NLRC Case No. 6-17657-03-C which
dismissed the complaint filed by the petitioner. The LA found that there was a valid ground for the petitioner’s
dismissal; that her pregnancy out of wedlock is considered as a "disgraceful and immoral conduct." The LA
pointed out that, as an employee of a Catholic educational institution, the petitioner is expected to live up to
the Catholic values taught by SSCW to its students. Likewise, the LA opined that:

Further, a deep analysis of the facts would lead us to disagree with the complainant that she was dismissed
simply because she violate[d] a Catholic [teaching]. It should not be taken in isolation but rather it should be
analyzed in the lightof the surrounding circumstances as a whole. We must also take into [consideration] the
nature of her work and the nature of her employer-school. For us, it is not just an ordinary violation. It was
committed by the complainant in an environment where her strict adherence to the same is called for and
where the reputation of the school is at stake. x x x.17

The LA further held that teachers and school employees, both in their official and personal conduct, must
display exemplary behavior and act in a manner that is beyond reproach.
The petitioner appealed to the NLRC, insisting that there was no valid ground for the termination of her
employment. She maintained that her pregnancy out of wedlock cannot be considered as "serious misconduct"
under Article 282 of the Labor Code since the same was not of such a grave and aggravated character. She
asserted that SSCW did not present any evidence to establish that her pregnancy out of wedlock indeed eroded
the moral principles that it teaches its students.18

The Ruling of the NLRC

On February 28, 2007, the NLRC issued a Resolution,19 which affirmed the LA Decision dated February 28,
2006. The NLRC pointed out that the termination of the employment of the personnel of private schools is
governed by the 1992 MRPS; that Section 94(e) thereof cites "disgraceful or immoral conduct" as a just cause
for dismissal, in addition to the grounds for termination of employment provided for under Article 282 of the
Labor Code. The NLRC held that the petitioner’s pregnancy out of wedlock is a "disgraceful or immoral
conduct" within the contemplation of Section 94(e) of the 1992 MRPS and, thus, SSCW had a valid reason to
terminate her employment.

The petitioner sought reconsideration20 of the Resolution dated February 28, 2007 but it was denied by the
NLRC in its Resolution21 dated May 21, 2007.

Unperturbed, the petitioner filed a petition22 for certiorari with the CA, alleging that the NLRC gravely abused
its discretion in ruling that there was a valid ground for her dismissal. She maintained that pregnancy out of
wedlock cannot be considered as a disgraceful or immoral conduct; that SSCW failed to prove that its students
were indeed gravely scandalized by her pregnancy out of wedlock. She likewise asserted that the NLRC erred
in applying Section 94(e) of the 1992 MRPS.

The Ruling of the CA

On September 24, 2008, the CA rendered the herein assailed Decision,23 which denied the petition for
certiorari filed by the petitioner. The CA held that it is the provisions of the 1992 MRPS and not the Labor Code
which governs the termination of employment of teaching and non-teaching personnel of private schools,
explaining that:

It is a principle of statutory construction that where there are two statutes that apply to a particular case, that
which was specially intended for the said case must prevail. Petitioner was employed by respondent private
Catholic institution which undeniably follows the precepts or norms of conduct set forth by the Catholic Church.
Accordingly, the Manual of Regulations for Private Schools followed by it must prevail over the Labor Code, a
general statute. The Manual constitutes the private schools’ Implementing Rules and Regulations of Batas
Pambansa Blg. 232 or the Education Act of 1982. x x x.24

The CA further held that the petitioner’s dismissal was a valid exercise of SSCW’s management prerogative to
discipline and impose penalties on erring employees pursuant toits policies, rules and regulations. The CA
upheld the NLRC’s conclusion that the petitioner’s pregnancy out of wedlock is considered as a "disgraceful
and immoral conduct" and, thus, a ground for dismissal under Section 94(e) of the 1992 MRPS. The CA likewise
opined that the petitioner’s pregnancy out of wedlock is scandalous per segiven the work environment and
social milieu that she was in, viz:

Under Section 94 (e) of the [MRPS], and even under Article 282 (serious misconduct) of the Labor Code,
"disgraceful and immoral conduct" is a basis for termination of employment.
xxxx

Petitioner contends that her pre-marital sexual relations with her boyfriend and her pregnancy prior to
marriage was not disgraceful or immoral conduct sufficient for her dismissal because she was not a member of
the school’s faculty and there is no evidence that her pregnancy scandalized the school community.

We are not persuaded. Petitioner’s pregnancy prior to marriage is scandalous in itself given the work
environment and social milieu she was in. Respondent school for young ladies precisely seeks to prevent its
students from situations like this, inculcating in them strict moral values and standards. Being part of the
institution, petitioner’sprivate and public life could not be separated. Her admitted pre-marital sexual relations
was a violation of private respondent’s prescribed standards of conduct that views pre-marital sex as immoral
because sex between a man and a woman must only take place within the bounds of marriage.

Finally, petitioner’s dismissal is a valid exercise of the employer-school’s management prerogative to discipline
and impose penalties on erring employees pursuant to its policies, rules and regulations. x x x.25 (Citations
omitted)

The petitioner moved for reconsideration26 but it was denied by the CA in its Resolution27 dated March 2,
2009.

Hence, the instant petition.

Issues

Essentially, the issues set forth by the petitioner for this Court’s decision are the following: first, whether the
CA committed reversible error in ruling that it is the 1992 MRPS and not the Labor Code that governs the
termination of employment of teaching and non-teaching personnel of private schools; and second, whether
the petitioner’spregnancy out of wedlock constitutes a valid ground to terminate her employment.

The Ruling of the Court

The Court grants the petition.

First Issue: Applicability of the 1992 MRPS

The petitioner contends that the CA, in ruling that there was a valid ground to dismiss her, erred in applying
Section 94 of the 1992 MRPS. Essentially, she claims that the 1992 MRPS was issued by the Secretary of
Education as the revised implementing rules and regulations of Batas Pambansa Bilang 232 (BP 232) or the
"Education Act of 1982." That there is no provision in BP 232, which provides for the grounds for the termination
of employment of teaching and non-teaching personnel of private schools. Thus, Section 94 of the 1992 MRPS,
which provides for the causes of terminating an employment, isinvalid as it "widened the scope and coverage"
of BP 232.

The Court does not agree.

The Court notes that the argument against the validity of the 1992 MRPS, specifically Section 94 thereof, is
raised by the petitioner for the first time in the instant petition for review. Nowhere in the proceedings before
the LA, the NLRC or the CA did the petitioner assail the validity of the provisions of the 1992 MRPS.
"It is well established that issues raised for the first time on appeal and not raised in the proceedings in the
lower court are barred by estoppel. Points of law, theories, issues, and arguments not brought to the attention
of the trial court ought not to be considered by a reviewing court, as these cannot be raised for the first time
on appeal. To consider the alleged facts and arguments belatedly raised would amount to trampling on the
basic principles of fair play, justice, and due process."28

In any case, even if the Court were to disregard the petitioner’s belated claim of the invalidity of the 1992 MRPS,
the Court still finds the same untenable.

The 1992 MRPS, the regulation in force at the time of the instant controversy, was issued by the Secretary of
Education pursuant to BP 232. Section 7029 of BP 232 vests the Secretary of Education with the authority to
issue rules and regulations to implement the provisions of BP 232. Concomitantly, Section 5730 specifically
empowers the Department of Education to promulgate rules and regulations necessary for the administration,
supervision and regulation of the educational system in accordance with the declared policy of BP 232.

The qualifications of teaching and non-teaching personnel of private schools, as well as the causes for the
termination of their employment, are an integral aspect of the educational system of private schools.
Indubitably, ensuring that the teaching and non-teaching personnel of private schools are not only qualified,
but competent and efficient as well goes hand in hand with the declared objective of BP 232 – establishing and
maintaining relevant quality education.31 It is thus within the authority of the Secretary of Education to issue
a rule, which provides for the dismissal of teaching and non-teaching personnel of private schools based on
their incompetence, inefficiency, or some other disqualification.

Moreover, Section 69 of BP 232 specifically authorizes the Secretary of Education to "prescribe and impose
such administrative sanction as he may deem reasonable and appropriate in the implementing rules and
regulations" for the "[g]ross inefficiency of the teaching or non-teaching personnel" of private schools.32
Accordingly, contrary to the petitioner’s claim, the Court sees no reason to invalidate the provisions of the 1992
MRPS, specifically Section 94 thereof. Second Issue: Validity of the Petitioner’s Dismissal

The validity of the petitioner’s dismissal hinges on the determination of whether pregnancy out of wedlock by
an employee of a catholic educational institution is a cause for the termination of her employment.

In resolving the foregoing question,the Court will assess the matter from a strictly neutral and secular point of
view – the relationship between SSCW as employer and the petitioner as an employee, the causes provided for
by law in the termination of suchrelationship, and the evidence on record. The ground cited for the petitioner’s
dismissal, i.e., pre-marital sexual relations and, consequently, pregnancy outof wedlock, will be assessed as to
whether the same constitutes a valid ground for dismissal pursuant to Section 94(e) of the 1992 MRPS.

The standard of review in a Rule 45

petition from the CA decision in
labor cases.

In a petition for review under Rule 45 of the Rules of Court, such as the instant petition, where the CA’s
disposition in a labor case is sought to be calibrated, the Court’s review isquite limited. In ruling for legal
correctness, the Court has to view the CA decision in the same context that the petition for certiorari it ruled
upon was presented to it; the Court has to examine the CA decision from the prism of whether it correctly
determined the presence or absence of grave abuse of discretion in the NLRC decision before it, not on the
basis of whether the NLRC decision on the merits of the case was correct.33
The phrase "grave abuse of discretion" is well-defined in the Court’s jurisprudence. It exists where an act of a
court or tribunal is performed with a capricious or whimsical exercise ofjudgment equivalent to lack of
jurisdiction.34 The determination of the presence or absence of grave abuse of discretion does not include an
inquiry into the correctness of the evaluation of evidence, which was the basis of the labor agency in reaching
its conclusion.35

Nevertheless, while a certiorari proceeding does not strictly include an inquiry as to the correctness of the
evaluation of evidence (that was the basis of the labor tribunals in determining their conclusion), the
incorrectness of its evidentiary evaluation should not result in negating the requirement of substantial
evidence. Indeed, when there is a showing that the findings or conclusions, drawn from the same pieces of
evidence, were arrived at arbitrarily or in disregard of the evidence on record, they may be reviewed by the
courts. In particular, the CA can grant the petition for certiorariif it finds that the NLRC, in its assailed decision
or resolution, made a factual finding not supported by substantial evidence. A decision that is not supported
by substantial evidence is definitely a decision tainted with grave abuse of discretion.36

The labor tribunals’ respective

conclusions that the petitioner’s
pregnancy is a "disgraceful or
immoral conduct" were arrived at
arbitrarily.

The CA and the labor tribunals affirmed the validity of the petitioner’s dismissal pursuant to Section 94(e) of
the 1992 MRPS, which provides that:

Sec. 94. Causes of Terminating Employment – In addition to the just causes enumerated in the Labor Code, the
employment of school personnel, including faculty, may be terminated for any of the following causes:

xxxx

e. Disgraceful or immoral conduct;

xxxx

The labor tribunals concluded that the petitioner’s pregnancy out of wedlock, per se, is "disgraceful and
immoral"considering that she is employed in a Catholic educational institution. In arriving at such conclusion,
the labor tribunals merely assessed the fact of the petitioner’s pregnancy vis-à-visthe totality of the
circumstances surrounding the same.

However, the Court finds no substantial evidence to support the aforementioned conclusion arrived at by the
labor tribunals. The fact of the petitioner’s pregnancy out of wedlock, without more, is not enough to
characterize the petitioner’s conduct as disgraceful or immoral. There must be substantial evidence to establish
that pre-marital sexual relations and, consequently, pregnancy outof wedlock, are indeed considered
disgraceful or immoral.

The totality of the circumstances

surrounding the conduct alleged to
be disgraceful or immoral must be
assessed against the prevailing
norms of conduct.
In Chua-Qua v. Clave,37 the Court stressed that to constitute immorality, the circumstances of each particular
case must be holistically considered and evaluated in light of the prevailing norms of conductand applicable
laws.38 Otherwise stated, it is not the totality of the circumstances surrounding the conduct per se that
determines whether the same is disgraceful or immoral, but the conduct that is generally accepted by society
as respectable or moral. If the conduct does not conform to what society generally views as respectable or
moral, then the conduct is considered as disgraceful or immoral. Tersely put, substantial evidence must be
presented, which would establish that a particular conduct, viewed in light of the prevailing norms of conduct,
is considered disgraceful or immoral.

Thus, the determination of whether a conduct is disgraceful or immoral involves a two-step process: first, a
consideration of the totality of the circumstances surrounding the conduct; and second, an assessment of the
said circumstances vis-à-visthe prevailing norms of conduct, i.e., what the society generally considers moral
and respectable.

That the petitioner was employed by a Catholic educational institution per se does not absolutely determine
whether her pregnancy out of wedlock is disgraceful or immoral. There is still a necessity to determine whether
the petitioner’s pregnancy out of wedlock is considered disgraceful or immoral in accordance with the
prevailing norms of conduct.

Public and secular morality should determine the prevailing norms of conduct, not religious morality.

However, determining what the prevailing norms of conduct are considered disgraceful or immoral is not an
easy task. An individual’s perception of what is moral or respectable is a confluence of a myriad of influences,
such as religion, family, social status, and a cacophony of others. In this regard, the Court’s ratiocination in
Estrada v. Escritor39 is instructive.

In Estrada, an administrative case against a court interpreter charged with disgraceful and immoral conduct,
the Court stressed that in determining whether a particular conduct can be considered as disgraceful and
immoral, the distinction between public and secular morality on the one hand, and religious morality, on the
other, should be kept in mind.40 That the distinction between public and secular morality and religious morality
is important because the jurisdiction of the Court extends only to public and secular morality.41 The Court
further explained that:

The morality referred to in the law is public and necessarily secular, not religiousx x x. "Religious teachings as
expressed in public debate may influence the civil public order but public moral disputes may be resolved only
on grounds articulable in secular terms." Otherwise, if government relies upon religious beliefs in formulating
public policies and morals, the resulting policies and morals would require conformity to what some might
regard as religious programs or agenda.The non-believers would therefore be compelled to conform to a
standard of conduct buttressed by a religious belief, i.e., to a "compelled religion," anathema to religious
freedom. Likewise, if government based its actions upon religious beliefs, it would tacitly approve or endorse
that belief and thereby also tacitly disapprove contrary religious or non-religious views that would not support
the policy. As a result, government will not provide full religious freedom for all its citizens, or even make it
appear that those whose beliefs are disapproved are second-class citizens. Expansive religious freedom
therefore requires that government be neutral in matters of religion; governmental reliance upon religious
justification is inconsistent with this policy of neutrality.

In other words, government action, including its proscription of immorality as expressed in criminal law like
concubinage, must have a secular purpose. That is, the government proscribes this conduct because it is
"detrimental (or dangerous) to those conditions upon which depend the existence and progress of human
society" and not because the conduct is proscribed by the beliefs of one religion or the other. Although
admittedly, moral judgments based on religion might have a compelling influence on those engaged in public
deliberations over what actions would be considered a moral disapprobation punishable by law. After all, they
might also be adherents of a religion and thus have religious opinions and moral codes with a compelling
influence on them; the human mind endeavors to regulate the temporal and spiritual institutions of society in
a uniform manner, harmonizing earth with heaven. Succinctly put, a law could be religious or Kantian or
Aquinian or utilitarian in its deepest roots, but it must have an articulable and discernible secular purpose and
justification to pass scrutiny of the religion clauses.x x x.42 (Citations omitted and emphases ours)

Accordingly, when the law speaks of immoral or, necessarily, disgraceful conduct, it pertains to public and
secular morality; it refers to those conducts which are proscribed because they are detrimental to conditions
upon which depend the existence and progress of human society. Thus, in Anonymous v. Radam,43 an
administrative case involving a court utility worker likewise charged with disgraceful and immoral conduct,
applying the doctrines laid down in Estrada, the Court held that:

For a particular conduct to constitute "disgraceful and immoral" behavior under civil service laws, it must be
regulated on account of the concerns of public and secular morality. It cannot be judged based on personal
bias, specifically those colored by particular mores. Nor should it be grounded on "cultural" values not
convincingly demonstrated to have been recognized in the realm of public policy expressed in the Constitution
and the laws. At the same time, the constitutionally guaranteed rights (such as the right to privacy) should be
observed to the extent that they protect behavior that may be frowned upon by the majority.

Under these tests, two things may be concluded from the fact that an unmarried woman gives birth out of
wedlock:

(1) if the father of the child is himself unmarried, the woman is not ordinarily administratively liable for
disgraceful and immoral conduct.It may be a not-so-ideal situation and may cause complications for both
mother and child but it does not give cause for administrative sanction. There is no law which penalizes an
unmarried mother under those circumstances by reason of her sexual conduct or proscribes the consensual
sexual activity between two unmarried persons. Neither does the situation contravene any fundamental state
policy as expressed in the Constitution, a document that accommodates various belief systems irrespective of
dogmatic origins.

(2) if the father of the child born out of wedlock is himself married to a woman other thanthe mother, then
there is a cause for administrative sanction against either the father or the mother. In sucha case, the
"disgraceful and immoral conduct" consists of having extramarital relations with a married person. The sanctity
of marriage is constitutionally recognized and likewise affirmed by our statutes as a special contract of
permanent union. Accordingly, judicial employees have been sanctioned for their dalliances with married
persons or for their own betrayals of the marital vow of fidelity.

In this case, it was not disputed that, like respondent, the father of her child was unmarried. Therefore,
respondent cannot be held liable for disgraceful and immoral conduct simply because she gave birth to the
child Christian Jeon out of wedlock.44 (Citations omitted and emphases ours)

Both Estrada and Radamare administrative cases against employees in the civil service. The Court, however,
sees no reason not to apply the doctrines enunciated in Estrada and Radamin the instant case. Estrada and
Radamalso required the Court to delineate what conducts are considered disgraceful and/or immoral as would
constitute a ground for dismissal. More importantly, as in the said administrative cases, the instant case
involves an employee’s security of tenure; this case likewise concerns employment, which is not merely a specie
of property right, but also the means by which the employee and those who depend on him live.45

It bears stressing that the right of an employee to security of tenure is protected by the Constitution.
Perfunctorily, a regular employee may not be dismissed unless for cause provided under the Labor Code and
other relevant laws, in this case, the 1992 MRPS. As stated above, when the law refers to morality, it necessarily
pertains to public and secular morality and not religious morality. Thus, the proscription against "disgraceful or
immoral conduct" under Section 94(e) of the 1992 MRPS, which is made as a cause for dismissal, must
necessarily refer to public and secular morality. Accordingly, in order for a conduct tobe considered as
disgraceful or immoral, it must be "‘detrimental (or dangerous) to those conditions upon which depend the
existence and progress of human society’ and not because the conduct is proscribed by the beliefs of one
religion or the other."

Thus, in Santos v. NLRC,46 the Court upheld the dismissal of a teacher who had an extra-marital affair with his
co-teacher, who is likewise married, on the ground of disgraceful and immoral conduct under Section 94(e) of
the 1992 MRPS. The Court pointed out that extra-marital affair is considered as a disgraceful and immoral
conduct is an afront to the sanctity of marriage, which is a basic institution of society, viz:

We cannot overemphasize that having an extra-marital affair is an afront to the sanctity of marriage, which is
a basic institution of society. Even our Family Code provides that husband and wife must live together, observe
mutual love, respect and fidelity. This is rooted in the fact that both our Constitution and our laws cherish the
validity of marriage and unity of the family. Our laws, in implementing this constitutional edict on marriage
and the family underscore their permanence, inviolability and solidarity.47

The petitioner’s pregnancy out of wedlock is not a disgraceful or immoral conduct since she and the
father of her child have no impediment to marry each other.

In stark contrast to Santos, the Court does not find any circumstance in this case which would lead the Court to
conclude that the petitioner committed a disgraceful or immoral conduct. It bears stressing that the petitioner
and her boyfriend, at the time they conceived a child, had no legal impediment to marry. Indeed, even prior to
her dismissal, the petitioner married her boyfriend, the father of her child. As the Court held in Radam, there is
no law which penalizes an unmarried mother by reason of her sexual conduct or proscribes the consensual
sexual activity between two unmarried persons; that neither does such situation contravene any fundamental
state policy enshrined in the Constitution.

Admittedly, the petitioner is employed in an educational institution where the teachings and doctrines of the
Catholic Church, including that on pre-marital sexual relations, is strictly upheld and taught to the students.
That her indiscretion, which resulted in her pregnancy out of wedlock, is anathema to the doctrines of the
Catholic Church. However, viewed against the prevailing norms of conduct, the petitioner’s conduct cannot be
considered as disgraceful or immoral; such conduct is not denounced by public and secular morality. It may be
an unusual arrangement, but it certainly is not disgraceful or immoral within the contemplation of the law.

To stress, pre-marital sexual relations between two consenting adults who have no impediment to marry each
other, and, consequently, conceiving a child out of wedlock, gauged from a purely public and secular view of
morality, does not amount to a disgraceful or immoral conduct under Section 94(e) of the 1992 MRPS.

Accordingly, the labor tribunals erred in upholding the validity of the petitioner’s dismissal. The labor tribunals
arbitrarily relied solely on the circumstances surrounding the petitioner’s pregnancy and its supposed effect on
SSCW and its students without evaluating whether the petitioner’s conduct is indeed considered disgraceful or
immoral in view of the prevailing norms of conduct. In this regard, the labor tribunals’ respective haphazard
evaluation of the evidence amounts to grave abuse of discretion, which the Court will rectify.

The labor tribunals’ finding that the petitioner’s pregnancy out of wedlock despite the absence of substantial
evidence is not only arbitrary, but a grave abuse of discretion, which should have been set right by the CA.

There is no substantial evidence to prove that the petitioner’s pregnancy out of wedlock caused grave scandal
to SSCW and its students.

SSCW claimed that the petitioner was primarily dismissed because her pregnancy out of wedlock caused grave
scandal to SSCW and its students. That the scandal brought about by the petitioner’s indiscretion prompted
them to dismiss her. The LA upheld the respondents’ claim, stating that:

In this particular case, an "objective" and "rational evaluation" of the facts and circumstances obtaining in this
case would lead us to focus our attention x x x on the impact of the act committed by the complainant. The act
of the complainant x x x eroded the moral principles being taught and project[ed] by the respondent [C]atholic
school to their young lady students.48 (Emphasis in the original)

On the other hand, the NLRC opined that:

In the instant case, when the complainant-appellant was already conceiving a child even before she got
married, such is considered a shameful and scandalous behavior, inimical to public welfare and policy. It eroded
the moral doctrines which the respondent Catholic school, an exclusive school for girls, is teaching the young
girls. Thus, when the respondent-appellee school terminated complainant-appellant’s services, it was a valid
exercise of its management prerogative. Whether or not she was a teacher is of no moment. There is no
separate set of rules for non-teaching personnel. Respondents-appellees uphold the teachings of the Catholic
Church on pre-marital sex and that the complainant-appellant as an employee of the school was expected to
abide by this basic principle and to live up with the standards of their purely Catholic values. Her subsequent
marriage did not take away the fact that she had engaged in pre-marital sex which the respondent-appellee
school denounces as the same is opposed to the teachings and doctrines it espouses.49 (Emphasis ours)

Contrary to the labor tribunals’ declarations, the Court finds that SSCW failed to adduce substantial evidence
to prove that the petitioner’s indiscretion indeed caused grave scandal to SSCW and its students. Other than
the SSCW’s bare allegation, the records are bereft of any evidence that would convincingly prove that the
petitioner’s conduct indeed adversely affected SSCW’s integrity in teaching the moral doctrines, which it
stands for. The petitioner is only a non-teaching personnel; her interaction with SSCW’s students is very
limited. Itis thus quite impossible that her pregnancy out of wedlock caused such a grave scandal, as claimed
by SSCW, as to warranther dismissal.

Settled is the rule that in termination cases, the burden of proving that the dismissal of the employees was for
a valid and authorized cause rests on the employer. It is incumbent upon the employer to show by substantial
evidence that the termination of the employment of the employees was validly made and failure to discharge
that duty would mean that the dismissal is not justified and therefore illegal.50 "Substantial evidence is more
than a mere scintilla of evidence. It means such relevant evidence as a reasonable mind might accept as
adequateto support a conclusion, even if other minds equally reasonable mightconceivably opine
otherwise."51

Indubitably, bare allegations do not amount to substantial evidence. Considering that the respondents failed
to adduce substantial evidence to prove their asserted cause for the petitioner’s dismissal, the labor tribunals
should not have upheld their allegations hook, line and sinker. The labor tribunals’ respective findings, which
were arrived at sans any substantial evidence, amounts to a grave abuse of discretion, which the CA should
have rectified. "Security of tenure is a right which may not be denied on mere speculation of any unclearand
nebulous basis."52

The petitioner’s dismissal is not a valid exercise of SSCW’s management prerogative.

The CA be labored the management prerogative of SSCW to discipline its employees. The CA opined that the
petitioner’s dismissal is a valid exercise of management prerogative to impose penalties on erring employees
pursuant to its policies, rules and regulations.

The Court does not agree.

The Court has held that "management is free to regulate, according to its own discretion and judgment, all
aspects of employment, including hiring, work assignments, working methods, time, place and manner of
work, processes to be followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay off of workers and discipline, dismissal and recall of workers. The exercise of management
prerogative, however, is not absolute as it must beexercised in good faith and with due regard to the rights of
labor." Management cannot exercise its prerogative in a cruel, repressive, or despotic manner.53

SSCW, as employer, undeniably has the right to discipline its employees and, if need be, dismiss themif there
is a valid cause to do so. However, as already explained, there is no cause to dismiss the petitioner. Her conduct
is not considered by law as disgraceful or immoral. Further, the respondents themselves have admitted that
SSCW, at the time of the controversy, does not have any policy or rule against an employee who engages in
pre-marital sexual relations and conceives a child as a result thereof. There being no valid basis in law or even
in SSCW’s policy and rules, SSCW’s dismissal of the petitioner is despotic and arbitrary and, thus, not a valid
exercise of management prerogative.

In sum, the Court finds that the petitioner was illegally dismissed as there was no just cause for the termination
of her employment. SSCW failed to adduce substantial evidence to establish that the petitioner’s conduct, i.e.,
engaging in pre-marital sexual relations and conceiving a child out of wedlock, assessed in light of the prevailing
norms of conduct, is considered disgraceful or immoral. The labor tribunals gravely abused their discretion in
upholding the validity of the petitioner’s dismissal as the charge against the petitioner lay not on substantial
evidence, but on the bare allegations of SSCW. In turn, the CA committed reversible error in upholding the
validity of the petitioner’s dismissal, failing torecognize that the labor tribunals gravely abused their discretion
in ruling for the respondents.

The petitioner is entitled to separation pay, in lieu of actual reinstatement, full backwages and
attorney’s fees, but not to moral and exemplary damages.

Having established that the petitioner was illegally dismissed, the Court now determines the reliefs thatshe is
entitled to and their extent. Under the law and prevailing jurisprudence, "an illegally dismissed employee is
entitled to reinstatement as a matter of right."54 Aside from the instances provided under Articles 28355 and
28456 of the Labor Code, separation pay is, however, granted when reinstatement is no longer feasible because
of strained relations between the employer and the employee. In cases of illegal dismissal, the accepted
doctrine is that separation pay is available in lieu of reinstatement when the latter recourse is no longer practical
or in the best interest of the parties.57
In Divine Word High School v. NLRC,58 the Court ordered the employer Catholic school to pay the illegally
dismissed high school teacher separation pay in lieu of actual reinstatement since her continued presence as a
teacher in the school "may well bemet with antipathy and antagonism by some sectors in the school
community."59

In view of the particular circumstances of this case, it would be more prudent to direct SSCW to pay the
petitioner separation pay inlieu of actual reinstatement. The continued employment of the petitioner with
SSCW would only serve to intensify the atmosphere of antipathy and antagonism between the parties.
Consequently, the Court awards separation pay to the petitioner equivalent to one (1) month pay for every year
of service, with a fraction of at least six (6) months considered as one (1) whole year, from the time of her illegal
dismissal up to the finality of this judgment, as an alternative to reinstatement.

Also, "employees who are illegally dismissed are entitled to full backwages, inclusive of allowances and other
benefits or their monetary equivalent, computed from the time their actual compensation was withheld from
them up to the time of their actual reinstatement but if reinstatement is no longer possible, the backwages
shall be computed from the time of their illegal termination up to the finality of the decision."60 Accordingly,
the petitioner is entitled to an award of full backwages from the time she was illegally dismissed up to the
finality of this decision.

Nevertheless, the petitioner is not entitled to moral and exemplary damages. "A dismissed employee isentitled
to moral damages when the dismissal is attended by bad faith or fraud or constitutes an act oppressive to labor,
or is done in a manner contrary to good morals, good customs or public policy. Exemplary damages may be
awarded if the dismissal is effected in a wanton, oppressive or malevolent manner."61

"Bad faith, under the law, does not simply connote bad judgment or negligence.1âwphi1 It imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, or a breach of a known duty through some
motive or interest or ill will that partakes of the nature of fraud."62

"It must be noted that the burden of proving bad faith rests on the one alleging it"63 since basic is the principle
that good faith is presumed and he who alleges bad faith has the duty to prove the same.64 "Allegations of bad
faith and fraud must be proved by clear and convincing evidence."65

The records of this case are bereft of any clear and convincing evidence showing that the respondents acted in
bad faith or in a wanton or fraudulent manner in dismissing the petitioner. That the petitioner was illegally
dismissed is insufficient to prove bad faith. A dismissal may be contrary to law but by itself alone, it does not
establish bad faith to entitle the dismissed employee to moral damages. The award of moral and exemplary
damages cannot be justified solely upon the premise that the employer dismissed his employee without
cause.66

However, the petitioner is entitled to attorney’s fees in the amount of 10% of the total monetary award
pursuant to Article 11167 of the Labor Code. "It is settled that where an employee was forced to litigate and,
thus, incur expenses to protect his rights and interest, the award of attorney’s fees is legally and morally
justifiable."68

Finally, legal interest shall be imposed on the monetary awards herein granted at the rate of six percent (6%)
per annumfrom the finality of this judgment until fully paid.69
WHEREFORE, in consideration of the foregoing disquisitions, the petition is GRANTED. The Decision dated
September 24, 2008 and Resolution dated March 2, 2009 of the Court of Appeals in CA-G.R. SP No. 100188 are
hereby REVERSED and SET ASIDE.

The respondent, St. Scholastica’s College Westgrove, is hereby declared guilty of illegal dismissal and is hereby
ORDERED to pay the petitioner, Cheryll Santos Leus, the following: (a) separation pay in lieu of actual
reinstatement equivalent to one (1) month pay for every year of service, with a fraction of at least six (6) months
considered as one (1) whole year from the time of her dismissal up to the finality of this Decision; (b) full
backwages from the time of her illegal dismissal up to the finality of this Decision; and (c) attorney’s fees
equivalent to ten percent (10%) of the total monetary award. The monetary awards herein granted shall earn
legal interest at the rate of six percent (6%) per annumfrom the date of the finality of this Decision untilfully
paid. The case is REMANDED to the Labor Arbiter for the computation of petitioner’s monetary awards.

SO ORDERED.

RICHARD N. RIVERA, PETITIONER, VS. GENESIS TRANSPORT SERVICE, INC. AND RIZA A. MOISES,
RESPONDENTS.

DECISION

LEONEN, J.:

This resolves a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure praying that
the July 8, 2014 Decision[1] and the November 20, 2014 Resolution[2] of the Court of Appeals Fifth Division in
CA-G.R. SP No. 130801 be reversed and set aside, and that new judgment be entered finding petitioner Richard
N. Rivera to have been illegally dismissed and awarding to him his monetary claims.

The assailed July 8, 2014 Decision of the Court of Appeals dismissed the Petition for Certiorari under Rule 65 of
the 1997 Rules of Civil Procedure filed by Richard N. Rivera (Rivera) and affirmed the February 28, 2013[3] and
April 30, 2013[4] Resolutions of the National Labor Relations Commission Second Division. These Resolutions
sustained the ruling of Labor Arbiter Gaudencio P. Demaisip, Jr. who, in his June 26, 2012 Decision,[5] dismissed
Rivera's Complaint[6] for illegal dismissal.

The assailed November 20, 2014 Resolution of the Court of Appeals denied Rivera's Motion for
Reconsideration.

Rivera was employed by respondent Genesis Transport Service, Inc. (Genesis) beginning June 2002 as a bus
conductor, assigned to the Cubao-Baler, Aurora route. As part of the requisites for his employment, he was
required to post a cash bond of P6,000.00. Respondent Riza A. Moises is Genesis' President and General
Manager.[7]

In his Position Paper before the Labor Arbiter, Rivera acknowledged that he was dismissed by Genesis on
account of a discrepancy in the amount he declared on bus ticket receipts. He alleged that on June 10, 2010, he
received a Memorandum[8] giving him twenty-four (24) hours to explain why he should not be sanctioned for
reporting and remitting the amount of P198.00 instead of the admittedly correct amount of P394.00 worth of
bus ticket receipts. He responded that it was an honest mistake, which he was unable to correct "because the
bus encountered mechanical problems."[9]
The discrepancy between the reported and remitted amount as against the correct amount was detailed in the
"Irregularity Report" prepared by Genesis' Inspector, Arnel Villaseran (Villaseran).[10]

According to Villaseran, on May 25, 2010, he conducted a "man to man" inspection on the tickets held by the
passengers on board Bus No. 8286 who had transferred from Bus No. 1820 in San Fernando, Pampanga. (Bus
No. 1820 broke down.) In the course of his inspection, he noticed that Ticket No. 723374 VA had a written
corrected amount of P394.00. However, the amount marked by perforations made on the ticket, which was
the amount originally indicated by the bus conductor, was only P198.00. Upon inquiring with the passenger
holding the ticket, Villaseran found out that the passenger paid P500.00 to Rivera, who gave her change in the
amount of P106.00.[11]

Subsequently, Villaseran conducted verification works with the Ticket Section of Genesis' Cubao Main Office.
Per his inquiries, the duplicate ticket surrendered by Rivera to Genesis indicated only the unconnected amount
of P198.00. It was also found that Rivera remitted only P198.00.[12]

On July 20, 2010, Genesis served on Rivera a written notice[13] informing him that a hearing of his case was set
on July 23, 2010. Despite his explanations, Rivera's services were terminated through a written notice dated
July 30, 2010.[14] Contending that this termination was arbitrary and not based on just causes for terminating
employment, he filed the Complaint[15] for illegal dismissal, which is subject of this Petition.[16]

For their defense, Genesis and Riza A. Moises claimed that Rivera's misdeclaration of the amount in the bus
ticket receipts and failure to remit the correct amount clearly violated Genesis' policies and amounted to
serious misconduct, fraud, and willful breach of trust; thereby justifying his dismissal.[17]

In a Decision[18] dated June 26, 2012, Labor Arbiter Gaudencio P. Demaisip gave credence to respondents'
appreciation of the gravity of Rivera's acts of misdeclaring the amount of bus ticket receipts and failing to remit
the correct amount. Thus, he dismissed Rivera's Complaint.

In a Resolution[19] dated February 28, 2013, the National Labor Relations Commission Second Division
affirmed the Decision of Labor Arbiter Demaisip. In a Resolution[20] dated April 30, 2013, the National Labor
Relations Commission denied Rivera's Motion for Reconsideration.

Thereafter, Rivera filed a Rule 65 Petition before the Court of Appeals. In the assailed July 8, 2014 Decision,[21]
the Court of Appeals Fifth Division sustained the rulings of Labor Arbiter Demaisip and the National Labor
Relations Commission. In the assailed November 20, 2014 Resolution,[22] the Court of Appeals denied Rivera's
Motion for Reconsideration.

Hence, this Petition was filed.

For resolution is the issue of whether petitioner Richard N. Rivera's employment was terminated for just cause
by respondent Genesis Transport, Inc.

As Riza A. Moises, Genesis' President and General Manager, has been impleaded, this court must also rule on
her personal liability, should the termination of petitioner's employment be found invalid.

Our laws on labor, foremost of which is the Labor Code, are pieces of social legislation. They have been adopted
pursuant to the constitutional recognition of "labor as a primary social economic force"[23] and to the
constitutional mandates for the state to "protect the rights of workers and promote their welfare"[24] and for
Congress to "give highest priority to the enactment of measures that protect and enhance the right of all the
people to human dignity, [and] reduce social, economic, and political inequalities."[25]

They are means for effecting social justice, i.e., the "humanization of laws and the equalization of social and
economic forces by the State so that justice in the rational and objectively secular conception may at least be
approximated."[26]

Article XIII, Section 3 of the 1987 Constitution guarantees the right of workers to security of tenure. "One's
employment, profession, trade or calling is a 'property right,'"[27] of which a worker may be deprived only upon
compliance with due process requirements:
It is the policy of the state to assure the right of workers to "security of tenure" (Article XIII, Sec. 3 of the New
Constitution, Section 9, Article II of the 1973 Constitution). The guarantee is an act of social justice. When a
person has no property, his job may possibly be his only possession or means of livelihood. Therefore, he should
be protected against any arbitrary deprivation of his job. Article 280 of the Labor Code has construed security
of tenure as meaning that "the employer shall not terminate the services of an employee except for a just cause
or when authorized by" the code. Dismissal is not justified for being arbitrary where the workers were denied
due process and a clear denial of due process, or constitutional right must be safeguarded against at all
times.[28] (Citations omitted)
Conformably, liberal construction of Labor Code provisions in favor of workers is stipulated by Article 4 of the
Labor Code:
Art. 4. Construction in favor of labor. All doubts in the implementation and interpretation of the provisions of
this Code, including its implementing rules and regulations, shall be resolved in favor of labor.
This case is quintessentially paradigmatic of the need for the law to be applied in order to ensure social justice.
The resolution of this case should be guided by the constitutional command for courts to take a preferential
view in favor of labor in ambitious cases.

This case revolves around an alleged discrepancy between the amounts indicated on a single ticket. For the
paltry sum of P196.00 that petitioner failed to remit in his sole documented instance of apparent misconduct,
petitioner's employment was terminated. He was deprived of his means of subsistence.

II

Misconduct and breach of trust are just causes for terminating employment only when attended by such gravity
as would leave the employer no other viable recourse but to cut off an employee's livelihood.

The Labor Code recognizes serious misconduct, willful breach of trust or loss of confidence, and other
analogous causes as just causes for termination of employment:
Article 282. Termination by employer. An employer may terminate an employment for any of the following
just 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 representative; and
(e)
Other causes analogous to the foregoing.
Serious misconduct as a just cause for termination was discussed in Yabut v. Manila Electric Co.:[29]
Misconduct is defined as the "transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment." For serious
misconduct to justify dismissal, the following requisites must be present: (a) it must be serious; (b) it must relate
to the performance of the employee's duties; and (c) it must show that the employee has become unfit to
continue working for the employer.[30] (Emphasis supplied, citation omitted)
Thus, it is not enough for an employee to be found to have engaged in improper or wrongful conduct. To justify
termination of employment, misconduct must be so severe as to make it evident that no other penalty but the
termination of the employee's livelihood is viable.

In Philippine Plaza Holdings v. Episcope,[31] we discussed the requisites for valid dismissal on account of willful
breach of trust:
Among the just causes for termination is the employer's loss of trust and confidence in its employee. Article
296 (c) (formerly Article 282 [c]) of the Labor Code provides that an employer may terminate the services of an
employee for fraud or willful breach of the trust reposed in him. But in order for the said cause to be properly
invoked, certain requirements must be complied with[,] namely[:] (1) the employee concerned must be holding
a position of trust and confidence and (2) there must be an act that would justify the loss of trust and
confidence.[32]
Relating to the first requisite, Philippine Plaza Holdings clarified that two (2) classes of employees are
considered to hold positions of trust:
It is noteworthy to mention that there are two classes of positions of trust: on the one hand, there are
managerial employees whose primary duty consists of the management of the establishment in which they are
employed or of a department or a subdivision thereof, and to other officers or members of the managerial staff;
on the other hand, there are fiduciary rank-and-file employees, such as cashiers, auditors, property custodians,
or those who, in the normal exercise of their functions, regularly handle significant amounts of money or
property. These employees, though rank-and-file, are routinely charged with the care and custody of the
employer's money or property, and are thus classified as occupying positions of trust and confidence.[33]
(Emphasis supplied)
The position an employee holds is not the sole criterion. More important than this formalistic requirement is
that loss of trust and confidence must be justified. As with misconduct as basis for terminating employment,
breach of trust demands that a degree of severity attend the employee's breach of trust. In China City
Restaurant Corporation v. National Labor Relations Commission,[34] this court emphasized the need for
caution:
For loss of trust and confidence to be a valid ground for the dismissal of employees, it must be substantial and
not arbitrary, whimsical, capricious or concocted.

Irregularities or malpractices should not be allowed to escape the scrutiny of this Court. Solicitude for the
protection of the rights of the working class [is] of prime importance. Although this is not [al license to disregard
the rights of management, still the Court must be wary of the ploys of management to get rid of employees it
considers as undesirable.[35] (Emphasis supplied)
III
The social justice suppositions underlying labor laws require that the statutory grounds justifying termination
of employment should not be read to justify the view that bus conductors should, in all cases, be free from any
kind of error. Not every improper act should be taken to justify the termination of employment.

Concededly, bus conductors handle money. To this extent, their work may be analogous to that of tellers,
cashiers, and other similarly situated rank-and-file employees who occupy positions of trust and confidence.
However, even granting that the first requisite for termination of employment on account of willful breach of
trust has been satisfied, we find it improper to sustain the validity of the termination of petitioner's
employment.

We take judicial notice of bus conductors' everyday work. Bus conductors receive, exchange, and keep money
paid by passengers by way of transportation fare. They keep track of payments and make computations down
to the last centavo, literally on their feet while a bus is in transit.

Regardless of whether a bus is driving through awkward spaces—through steep inclines, rugged roads, or sharp
turns—or of whether a bus is packed with standing passengers, the lonesome task of keeping track of the
passengers' payments falls upon a bus conductor.

Thus, while they do handle money, their circumstances are not at all the same as those of regular cashiers. They
have to think quickly, literally on their feet. Regular cashiers, on the other hand, have the time and comfort to
deliberately and carefully examine the transactions of their employer.

However, handling passengers' fare payments is not their sole function. Bus conductors assist drivers as they
maneuver buses through tight spaces while they are in transit, depart, or park. They often act as dispatchers in
bus stops and other such places, assist passengers as they embark and alight, and sometimes even help
passengers load and unload goods and cargo. They manage the available space in a bus and ensure that no
space is wasted as the bus accommodates more passengers. Along with drivers, bus conductors commit to
memory the destination of each passenger so that they can anticipate their stops.

There are several ways to manifest the severity that suffices to qualify petitioner's alleged misconduct or
breach of trust as so grave that terminating his employment is warranted. It may be through the nature of the
act itself: spanning an entire spectrum between, on one end, an overlooked error, made entirely in good faith;
and, on another end, outright larceny. It may be through the sheer amount mishandled. It may be through
frequency of acts. It may be through other attendant circumstances, such as attempts to destroy or conceal
records and other evidence, or evidence of a motive to undermine the business of an employer.

We fail to appreciate any of these in this case.

To reiterate, what is involved is a paltry amount of P196.00. All that has been proven is the existence of a
discrepancy. No proof has been adduced of ill-motive or even of gross negligence. From all indications,
petitioner stood charged with a lone, isolated instance of apparent wrongdoing.

The records are bereft of evidence showing a pattern of discrepancies chargeable against petitioner. Seen in
the context of his many years of service to his employer and in the absence of clear proof showing otherwise,
the presumption should be that he has performed his functions faithfully and regularly. It can be assumed that
he has issued the correct tickets and given accurate amounts of change to the hundreds or even thousands of
passengers that he encountered throughout his tenure. It is more reasonable to assume that—except for a
single error costing a loss of only P196.00—the company would have earned the correct expected margins per
passenger, per trip, and per bus that it allowed to travel.
Absent any other supporting evidence, the error in a single ticket issued by petitioner can hardly be used to
justify the inference that he has committed serious misconduct or has acted in a manner that runs afoul of his
employer's trust. More so, petitioner cannot be taken to have engaged in a series of acts evincing a pattern or
a design to defraud his employer. Terminating his employment on these unfounded reasons is manifestly
unjust.

To infer from a single error that petitioner committed serious misconduct or besmirched his employer's trust is
grave abuse of discretion. It is an inference that is arbitrary and capricious. It is contrary to the high regard for
labor and social justice enshrined in our Constitution and our labor laws.

The Court of Appeals committed an error of law correctible by a petition for review under Rule 45. It erred when
it held that the National Labor Relations did not commit grave abuse of discretion when the latter did not
engage in the requisite scrutiny to review the inference and its bases.

IV

As his employment was illegally and unjustly terminated, petitioner is entitled to full backwages and benefits
from the time of his termination until the finality of this Decision. He is likewise entitled to separation pay in
the amount of one (1) month's salary for every year of service until the finality of this Decision, with a fraction
of a year of at least six (6) months being counted as one (1) whole year.

As he was compelled to litigate in order to seek relief for the illegal and unjust termination of his employment,
petitioner is likewise entitled to attorney's fees in the amount of 10% of the total monetary award.[36]

"Moral damages are awarded in termination cases where the employee's dismissal was attended by bad faith,
malice or fraud, or where it constitutes an act oppressive to labor, or where it was done in a manner contrary
to morals, good customs or public policy."[37] Also, to provide an "example or correction for the public
good,"[38] exemplary damages may be awarded.

However, we find no need to award these damages in favor of petitioner. While the termination of his
employment was invalid, we nevertheless do not find respondent Genesis to have acted with such a degree of
malice as to act out of a design to oppress petitioner. It remains that a discrepancy and shortage chargeable to
petitioner was uncovered, although this discrepancy and shortage does not justify a penalty as grave as
termination of employment.

Respondent Riza A. Moises may not be held personally liable for the illegal termination of petitioner's
employment.

As we explained in Saudi Arabian Airlines v. Rebesencio:[39]

A corporation has a personality separate and distinct from those of the persons composing it. Thus, as a rule,
corporate directors and officers are not liable for the illegal termination of a corporation's employees. It is only
when they acted in bad faith or with malice that they become solidarity liable with the corporation.

In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever Electrical, this court clarified
that "[b]ad faith does not connote bad judgment or negligence; it imports a dishonest purpose or some moral
obliquity and conscious doing of wrong; it means breach of a known duty through some motive or interest or
ill will; it partakes of the nature of fraud."[40]
Petitioner has not produced proof to show that respondent Riza A. Moises acted in bad faith or with malice as
regards the termination of his employment. Thus, she did not incur any personal liability.

WHEREFORE, the Petition for Review on Certiorari is PARTIALLY GRANTED. The assailed Decision dated July
8, 2014 and the assailed Resolution dated November 20, 2014 of the Court of Appeals Fifth Division in CA-G.R.
SP No. 130801, which dismissed the Petition for Certiorari filed by petitioner Richard N. Rivera and affirmed
the February 28, 2013 and April 30, 2013 Resolutions of the National Labor Relations Commission Second
Division, as well as the June 26, 2012 Decision of Labor Arbiter Gaudencio P. Demaisip, Jr., are REVERSED and
SET ASIDE. Accordingly, respondent Genesis Transport Service, Inc. is ordered to pay petitioner:

(1)
Full backwages and other benefits computed from July 30, 2010, when petitioner's employment was illegally
terminated, until the finality of this Decision;
(2)
Separation pay computed from June 2002, when petitioner commenced employment, until the finality of this
Decision, at the rate of one (1) month's salary for every year of service, with a fraction of a year of at least six
(6) months being counted as one (1) whole year; and
(3)
Attorney's fees equivalent to ten percent (10%) of the total award.

The case is REMANDED to the Labor Arbiter to make a detailed computation of the amounts due to petitioner,
which respondents should pay without delay.

The case is DISMISSED with respect to respondent Riza A. Moises.

SO ORDERED.

DIVISION

[ GR No. 196557, Jun 15, 2016 ]

GREGORIO 'TONGEE' BALAIS v. SE'LON BY AIMEE

PERALTA, J.:

This is a Petition for Review Certiorari[1] under Rule 45 of the Rules of Court seeking the reversal of the
Decision[2] dated February 25, 2011 and Resolution[3] dated April 19, 2011 of the Court of Appeals,
respectively, in CA-G.R. SP No. 114899 entitled "Se'lon by Aimee and/or Amelita Revilla and Alma Belarmino
v. NLRC and Gregorio "Tongee" Balais, Jr."

The instant petition stemmed from a complaint for illegal dismissal, non-payment of 13th month pay, damages
and attorney's fees filed by Gregorio "Tongee" Balais, Jr. (Balais) against Se'lon by Aimee, Amelita Revilla and
Alma Belarmino before the NLRC.

Balais narrated that he was Salon de Orient's senior hairstylist and make-up artist from October 16, 2004 until
November 26, 2007 when respondent Amelita Revilla (Revilla) took over the business. Revilla, however,
retained his services as senior hairstylist and make-up artist. Under the new management, Salon De Orient
became Se'lon by Aimee and respondent Alma Belarmino (Belarmino) was appointed as its salon manager,
who was in-charge of paying the employees' wages, dismissing erring employees, and exercising control over
them. Balais, on the other hand, being the senior hairstylist and make-up artist, allegedly had the discretion to
choose from among the junior hairstylist who should assist him in servicing his clients, as customarily observed
in beauty salons. He worked during the 10am-7pm shift or 11am-8pm shift, six (6) days a week with Sunday as
his regular rest day for a monthly salary of Php18,500.00 paid every two (2) weeks. In June 2008, his salary was
reduced to Php15,000.00. Balais claimed that his working relationship with respondents had been harmonious
until the evening of July 1, 2008 when Belarmino dismissed him without due process, in the following manner:
Belarmino angrily shouted: "You get out of this Company! I do not need you here at Se'lon by Aimee!"

Balais Jr., calmly replied: "Ibigay mo ang 13th month ko and sweldo ko, at separation pay."

Belarmino angrily replied: "Maghabla ka kahit saan na korle at haharapin kita."

Balais Jr. responded: "Maski ang Jollibee nagbibigay nang 13th month pay, sweldo and separation pay pag may
tinatanggal na empleyado!"

Belarmino retorted: "Eh di doon ka magtrabaho sa Jollibee kasi doon nagbibigay sila nang 13th month pay,
sweldo at separation pay pag may tinatanggal na empleyado."
Balais felt humiliated as he was berated in front of his co-workers. The next day, he did not report for work
anymore and instead filed the complaint before the NLRC.

For their part, respondents alleged that it was known to all their employees that one of the salon's policies was
for junior stylists to take turns in assisting any of the senior stylists for purposes of equalizing commissions.
However, Belarmino was told that Balais failed to comply with this policy as the latter allegedly gave preference
to only two (2) junior stylists, disregarding the other two (2) junior stylists. When Belarmino asked Balais for
explanation, the latter allegedly snapped and retorted that he would do whatever he wanted. Belarmino
reminded him of the salon's policy and his duty to comply with it but petitioner allegedly insisted he would do
as he pleased and if they can no longer take it, they would have to dismiss him. After the incident, Balais sued
them and never reported back to work.

Respondents insisted that Balais was not terminated from employment but he instead abandoned his work.
Respondents explained that even assuming that he was indeed dismissed, there was a valid ground therefor as
his acts amounted to serious misconduct against a superior and willful disobedience to reasonable policy
related to his work.

On February 11, 2009, the Labor Arbiter rendered a Decision[4] holding respondents liable for illegal dismissal.
It gave credence and weight to Balais' version that he was dismissed without cause and notice for merely
defending his decision to avail of the services of some selected junior stylist of his choice.

Aggrieved, respondents appealed the decision before the NLRC.

On February 19, 2010, the NLRC affirmed in toto the findings of the Labor Arbiter, declaring petitioner to be
illegally dismissed.[5] It ratiocinated that Se'lon by Aimee failed to prove that the act of petitioner amounted
to gross insubordination. Other than respondents' bare denial of illegal dismissal, the same was
unsubstantiated by a clear and convincing evidence. The NLRC further pointed out that respondents failed to
produce a copy of the supposed salon policy on the rule of rotation of junior stylists, thus, the veracity of the
allegation of insubordination against Balais failed to convince.
Respondents moved for reconsideration, but the same was denied in a Resolution dated April 22, 2010.

Thus, before the Court of Appeals, respondents filed a Petition for Certiorari with Prayer for the Issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction seeking to annul or modify the Resolutions
of the NLRC.

On February 25, 2011, the Court of Appeals granted the petition and reversed and set aside the NLRC Decision
and rendered a Decision[6] sustaining petitioner's dismissal as valid and required respondents to pay Balais his
accrued 13th month pay and unpaid salaries.

Petitioner moved for reconsideration, but was denied in a Resolution dated April 19, 2011. Thus, the instant
petition for review on certiorari raising the following issues:
I

WHETHER THE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE BY DECLARING THE
PETITIONER AS VALIDLY DISMISSED WHICH IS NOT IN ACCORD WITH LAW AND APPLICABLE DECISION
OF THE SUPREME COURT.

II

WHETHER THE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS AND CONTRARY TO THE FINDINGS OF THE LABOR ARBITER AND NLRC.[7]
We find merit in the petition.

The Court's jurisdiction in cases brought before it from the CA via Rule 45 of the Rules of Court is generally
limited to reviewing errors of law. The Court is not the proper venue to consider a factual issue as it is not a trier
of facts. This rule, however, is not ironclad and a departure therefrom may be warranted where the findings of
fact of the CA are contrary to the findings and conclusions of the NLRC and the LA, as in this case. In this regard,
there is therefore a need to review the records to determine which of them should be preferred as more
conformable to evidentiary facts.[8] In the instant case, the conflict between the NLRC's and the CA's factual
findings as shown in the records of this case prompts the Court to evaluate such findings anew.

Whether there was a valid dismissal.

The principle echoed and re-echoed in our jurisprudence is that the onus of proving that the employee was
dismissed for a just cause rests on the employer, and the latter's failure to discharge that burden would result
in a finding that the dismissal is unjustified.[9]

In the instant case, a perusal of the records would show that both parties presented their own versions of
stories, not necessarily contradicting but nonetheless lacking in some material points.

Balais alleged that he was illegally dismissed as his dismissal was allegedly made verbally and without due
process of law. Yet, Balais failed to explain what possibly prompted said termination or even the likely motive
for the same. He nevertheless submitted the Affidavits of Gemma Guerero[10] and Marie Gina A. Toralde,[11]
to prove his allegation.

Respondents, on the other hand, alleged that there was no illegal dismissal as it was Balais himself who did not
report to work, thus, he abandoned his work.
Interestingly, however, both parties never denied that there was an altercation between them. Without
admitting that he violated the salon policy of rotation of the junior stylists, Balais maintained that said policy
runs counter with customary salon practice which allows senior hairstylists to choose their preferred junior
stylist to assist them. For their part, supplemental to their claim of abandonment, respondents averred that
assuming that Balais was dismissed, they insisted that there was a valid ground therefor as he was disrespectful
and insubordinate due to his failure to comply with the salon's policy.

Noteworthy is the fact that respondents never denied that the incident narrated by Balais actually happened.
In Solas v. Power & Telephone Supply Phils., Inc.,[12] this silence constitutes an admission that fortifies the
truth of the employee's narration. While respondents were evasive on the complete details of how the reported
incident of termination transpired, they never categorically denied that said incident happened or the fact that
Belarmino uttered: "get out of this company! I do not need you here." Belarmino attempted to sidestep the fact
that she actually said it, yet, raised the defense that assuming she had indeed verbally terminated Balais, she
was justified in doing so because of the disrespect shown to her.

Under the rules of evidence, if an allegation is not specifically denied or the denial is a negative pregnant, the
allegation is deemed admitted.[13] In fine, the fact that respondents are even raising their own justification for
the alleged verbal dismissal means that the said verbal dismissal actually transpired. If in the first place, said
incident of verbal dismissal truly never happened, there is nothing to assume anymore or to justify. The fact
that Belarmino was offering justification for her action, it follows that indeed said incident of verbally
dismissing Balais on-the-spot actually happened.

Putting two versions of the story together, considering that none of the parties categorically deny that an
altercation erupted between them which resulted in the dismissal of Balais, and the tenor of Belarmino's
statements leaving no room for interpreting it other than a verbal dismissal, we are inclined to believe that
there was indeed a dismissal.

This being the case, having established that there was dismissal, it becomes axiomatic that respondents prove
that the dismissal was valid.

Respondents averred that there was abandonment as Balais failed to report back to work the following day
after the incident.

In this regard, this Court finds that respondents failed to establish that Balais abandoned his work. To
constitute abandonment, two elements must concur: (a) the failure to report for work or absence without valid
or justifiable reason, and (b) a clear intention to sever the employer-employee relationship, with the second
element as the more determinative factor and being manifested by some overt acts.[14] Mere absence is not
sufficient. The employer has the burden of proof to show a deliberate and unjustified refusal of the employee
to resume his employment without any intention of returning. Respondents, other than their bare allegation
of abandonment, failed to prove that these two elements were met. It cannot be said that Balais failed to report
back to work without justifiable reason as in fact he was told that he was no longer wanted in the salon.

Moreover, we likewise note the high improbability of petitioner intentionally abandoning his work, taking into
consideration his length of service, i.e., 18 years of service with the salon, ft does not make sense for an
employee who had worked for his employer for 18 years would just abandon his work and forego whatever
benefits he may be entitled, unless he was made to believe or was told that he was already terminated.

Respondents cannot discharge the burden of proving a valid dismissal by merely alleging that they did not
dismiss Balais; neither can they escape liability by claiming that Balais abandoned his work. When there is no
showing of a clear, valid and legal cause for the termination of employment, the law considers it a case of illegal
dismissal.

Thus, respondents, presumably thinking that their claim of abandonment holds no water, it likewise
manifested that assuming Balais was indeed terminated, there was a valid ground therefor because of his
insubordination.

We disagree.

Willful disobedience of the employer's lawful orders, as a just cause for the dismissal of an employee, envisages
the concurrence of at least two requisites: (1) the employee's assailed conduct must have been willful or
intentional, the willfulness being characterized by a "wrongful and perverse attitude;" and (2) the order violated
must have been reasonable, lawful, made known to the employee and must pertain to the duties which he had
been engaged to discharge.[15]

It must be likewise stressed anew that the burden of proving the insubordination as a just and valid cause for
dismissing an employee rests on the employer and his failure to do so shall result in a finding that the dismissal
is unjustified.

In this case, the salon policy of rotating the junior stylists who will assist the senior stylist appears to be
reasonable, lawful, made known to petitioner and pertained to his duty as senior hairstylist of respondent.
However, if we will look at Balais' explanation for his alleged disobedience thereto, it likewise appears to be
reasonable and lawful, to wit:
xxxx

The duty of the Senior Stylist has the overall function in seeing to it that the service accorded to the client is
excellent, thus, he has the right to refuse service of a junior stylist whom he thinks that such junior stylist cannot
give equal or over and above the service that he can give to the client, thus his refusal to obey the respondent
does not constitute a just cause for the treatment given by respondent to herein respondent (sic).

xxxx
The fact alone that Balais failed to comply with the salon policy does not establish that his conduct in failing to
comply with the salon's policy had been willful, or characterized by a wrongful and perverse attitude. Balais'
justification maybe adverse to that of the salon's policy but it was neither willful nor characterized by a perverse
attitude. We take note that the alleged non-compliance with the salon policy was brought to the attention of
Balais for the first time only during the said incident. There was no showing of prior warnings as to his non-
compliance. While respondents wield a wide latitude of discretion in the promulgation of policies, rules and
regulations on work-related activities of its employees, these must, however, be fair and reasonable at all
times, and the corresponding sanctions for violations thereof, when prescribed, must be commensurate
thereto as well as to the degree of the infraction. Given that Balais' preference on who will assist him is based
on the junior stylists' competence, the same should have been properly taken into account in the imposition of
the appropriate penalty for violation of the rotation policy. Suspension would have sufficed to caution him and
other employees who may be wont to violate the same policy.

In adjudging that the dismissal was grounded on a just and valid cause, the totality of infractions or the number
of violations committed during the period of employment shall be considered in determining the penalty to be
imposed upon an erring employee.[16] Let it not be forgotten that what is at stake is the means of livelihood,
the name, and the reputation of the employee. To countenance an arbitrary exercise of the management's
prerogative to terminate an employee is to negate the employee's constitutional right to security of tenure.
Whether the dismissal was effected with due process of law.

Under Article 211(b) of the Labor Code, the employer must send the employee who is about to be terminated,
a written notice stating the cause/s for termination and must give the employee the opportunity to be heard
and to defend himself.

Article 277 of the Labor Code provides, inter alia:

(a) x x x

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against
dismissal except for a just and authorized cause and notice under Article 283 of this Code, the employer shall
furnish the worker whose employment is sought to be terminated a written notice containing a statement of
causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the
assistance of his representative if he so desires in accordance with company rules and regulations promulgated
pursuant to guidelines set by the Department of Labor and Employment. x x x
In particular, Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code states:
Sec. 2. Standards of due process: requirements of notice. - In all cases of termination of employment, the
following standards of due process shall be substantially observed:
1. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination, and giving to
said employee reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the assistance of counsel if the
employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence
presented against him; and
(c) A written notice of termination served on the employee indicating that upon due consideration of all the
circumstances, grounds have been established to justify his termination.
Thus, to effect the dismissal of an employee, the law requires not only that there be just and valid cause as
provided under Article 282 of the Labor Code. It likewise enjoins the employer to afford the employee the
opportunity to be heard and to defend himself. On the latter aspect, the employer is mandated to furnish the
employee with two (2) written notices: (a) a written notice containing a statement of the cause for the
termination to afford the employee ample opportunity to be heard and defend himself with the assistance of
his representative, if he so desires; (b) if the employer decides to terminate the services of the employee, the
employer must notify him in writing of the decision to dismiss him, stating clearly the reason therefor.

Here, a perusal of the records revealed that, indeed, Belarmino's manner of verbally dismissing Balais on-the-
spot fell short of the two-notice requirement. There was no showing of prior warnings on Balais' alleged non-
compliance with the salon policy. There was no written notice informing him of his dismissal as in fact the
dismissal was done verbally and on-the-spot. Respondents failed to furnish Balais the written notice apprising
him of the charges against him, as prescribed by the Labor Code. There was no attempt to serve a notice of
dismissal on Balais. Consequently, he was denied due process of law accorded in dismissals.

Reliefs of Illegally Dismissed Employees

Having established that Balais was illegally dismissed, the Court now determines the reliefs that he is entitled
to and their extent. Under the law and prevailing jurisprudence, "an illegally dismissed employee is entitled to
reinstatement as a matter of right." Aside from the instances provided under Articles 283[17] and 284[18] of
the Labor Code, separation pay is, however, granted when reinstatement is no longer feasible because of
strained relations between the employer and the employee. In cases of illegal dismissal, the accepted doctrine
is that separation pay is available in lieu of reinstatement when the latter recourse is no longer practical or in
the best interest of the parties.[19]

However, other than the strained relationship between the parties, it appears that respondent salon had
already ceased operation of its business, thus, reinstatement is no longer feasible. Consequently, the Court
awards separation pay to the petitioner equivalent to one (1) month pay for every year of service, with a fraction
of at least six (6) months considered as one (1) whole year, from the time of her illegal dismissal up to the finality
of this judgment, as an alternative to reinstatement.[20]

Also, employees who are illegally dismissed are entitled to full backwages, inclusive of allowances and other
benefits or their monetary equivalent, computed from the time their actual compensation was withheld from
them up to the time of their actual reinstatement but if reinstatement is no longer possible, the backwages
shall be computed from the time of their illegal termination up to the finality of the decision. Accordingly, the
petitioner is entitled to an award of full backwages from the time he was illegally dismissed up to the finality of
this decision.[21]

Balais is likewise entitled to attorney's fees in the amount of 10% of the total monetary award pursuant to
Article 111[22] of the Labor Code. It is settled that where an employee was forced to litigate and, thus, incur
expenses to protect his rights and interest, the award of attorney's fees is legally and morally justifiable. Finally,
legal interest shall be imposed on the monetary awards herein granted at the rate of six percent (6%) per
annum from the finality of this judgment until fully paid.[23]

WHEREFORE, in consideration of the foregoing, the petition is GRANTED. The Decision dated February 25,
2011 and the Resolution dated April 19, 2011 of the Court of Appeals in CA-G.R. SP No. 114899 are hereby
REVERSED and SET ASIDE.

The respondents are hereby declared GUILTY OF ILLEGAL DISMISSAL AND ARE hereby ORDERED to pay the
petitioner, Gregorio Balais, Jr., the following:
(a) separation pay in lieu of actual reinstatement equivalent to one (1) month pay for every year of service, with
a fraction of at least six (6) months considered as one (1) whole year from the time of his dismissal up to the
finality of this Decision;
(b) full backwages from the time of his illegal dismissal up to the finality of this Decision; and
(c) attorney's fees equivalent to ten percent (10%) of the total monetary award.
The monetary awards herein granted shall earn legal interest at the rate of six percent (6%) per annum from
the date of the finality of this Decision until fully paid. The case is REMANDED to the Labor Arbiter for the
computation of petitioner's monetary award.

SO ORDERED.

[ GR No. 200898, Jun 15, 2015 ]

BROWN MADONNA PRESS INC. v. MARIA ROSARIO M. CASAS +

DECISION

BRION, J.:
Before the Court is the petition for review on certiorari,[1] filed by petitioners Brown Madonna Press, Inc.
(BMPI), Thaddeus Anthony Cabangon (Cabangon), Fortune Life Insurance Company (now Fortune General
Insurance Corporation) and/or Anthony Cabangon Chua (Cabangon Chua), to challenge the decision and
resolution of the Court of Appeals (CA) in CA-G.R. SP No. 116539.

Factual Antecedents

This case sprung from respondent Rosario M. Casas's (Casas) parting of ways with BMPI as its Vice President
for Finance and Administration on January 5, 2007. Casas claims she was forced to leave her work, while the
BMPI management asserts that she requested a graceful exit from the company to avoid an administrative
investigation. The facts leading to this dispute are outlined below.

On May 1, 1984, Casas was hired as an accounting clerk at Fortune General Insurance, a member of the ALC
Group of Companies. She eventually rose from the ranks; on December 1, 2003, she was transferred to BMPI,
another ALC member company, as its Vice President for Finance and Administration.[2]

On January 5, 2007, Casas met with Cabangon, BMPI's company president, and Victoria Nava (Nava), the Vice
President for the Central Human Resource Department of the ALC Group of Companies. During the meeting,
Casas was allegedly told not to report to work anymore starting January 8, 2007, upon the instructions of
Cabangon-Chua, ALC's Chairman Emeritus. Casas claims that the reason for her abrupt dismissal was not
disclosed to her, but she was promised a separation pay. She thus packed her things and left.[3]

BMPI, on the other hand, asserts that it was Casas who requested a graceful exit from the company during the
January 5, 2007 meeting. The meeting was supposedly held to confront Casas about certain complaints against
her, and about the growing rift between her and another company officer. BMPI asserts that Casas opted to
leave the company to avoid an administrative investigation against her and to give her the chance to jumpstart
her career outside the company. She succeeded in convincing Cabangon to grant her some form of financial
assistance as they were friends.[4]

Casas no longer reported for work on January 8, 2007, and BMPI, for its part, started the processing of her
clearance.[5] On May 17, 2007, Casas sent Cabangon-Chua a letter asking for the reconsideration of his decision
to terminate her employment. Cabangon-Chua did not act on this letter.[6]

On July 20, 2007, Casas filed a complaint for illegal dismissal and for payment of separation pay, backwages,
retirement benefits and attorney's fees before the Regional Arbitration Branch. The complaint was docketed
as NLRC LAC 05-001892-08.[7]

The Labor Arbiter's Ruling

Labor Arbiter (LA) Fedriel S. Panganiban dismissed Casas' complaint for lack of merit, and ordered BMPI to
reinstate her to her previous position without payment of backwages.[8]

The LA found that Casas was not dismissed from work; she instead abandoned her post. Citing Chong Guan
Trading Inc. v. NLRC[9] and Security & Credit Investigation, Inc. v. NLRC,[10] the LA held that no illegal
dismissal takes place when the employee has not been notified of his dismissal; in the absence of any positive
and overt act of dismissal, the claim of illegal dismissal cannot be sustained.[11]
The LA noted that there was no written notice of Casas' dismissal, and that it was contrary to sound business
practice to verbally terminate an employee facing investigation for reported irregularities; BMPI had every
reason to retain Casas' services and to proceed with the investigation against her. Thus, the LA agreed with
BMPI's contention that Casas left her work to pre-empt the investigation of complaints against her. Her act of
packing her things on January 5, 2007, in fact, demonstrated that she no longer intended to return to work.[12]

Because no illegal dismissal took place, the LA refused to grant Casas her demanded backwages, separation
pay and retirement benefit. Instead, the LA ordered BMPI to reinstate Casas so that a proper investigation may
be conducted on the irregularities she allegedly committed.[13]

The NLRC's ruling

Casas appealed the LA's ruling with the National Labor Relations Commission (NLRC), which reversed the LA's
finding that Casas had not been illegally dismissed.[14]

The NLRC found that Casas' dismissal had been sufficiently established by evidence on record. Contrary to the
petitioners' allegations, these records show that Casas' services had been terminated by BMPI as she was issued
a "Clearance and Quitclaim" document that clearly stated that she would "cease to be connected with the
company at the close of office hours on January 16, 2007." This, along with BMPI's failure to respond to Casas'
May 17, 2007 letter asking for the reconsideration of her termination, constitute positive and overt acts of
dismissal.[15]

Casas' dismissal, according to the NLRC, was without just cause and did not have the benefit of due process.
She was never accorded any hearing or even a show-cause notice, despite the serious allegations charged
against her. Instead, the records show only the "Clearance and Quitclaim" document, which does not explain
why her employment relationship with BMPI would cease. The NLRC also found that Cabangon and Cabangon-
Chua acted with malice and bad faith in dismissing Casas, and thus held them jointly and severally liable with
BMPI for payment of Casas' monetary award.[16]

The Court of Appeals' Decision

The Court of Appeals affirmed the NLRC's ruling, and held that it did not commit any grave abuse of discretion
in finding that Casas had been illegally dismissed. The CA cited with approval the NLRC's ruling that Casas'
dismissal was without cause and failed to comply with the procedural requirements of the law.[17]

The CA explained that Casas is presumed innocent until proven guilty of the charges against her. Since her
alleged infractions had not been investigated, it followed that Casas was dismissed without cause. The CA also
noted that BMPI failed to comply with the two written notices required prior to a lawful termination of an
employee, and hence failed to comply with the procedural due process that the law requires.[18]

The present petition

BMPI, Cabangon and Cabangon-Chua assail the CA ruling through the present petition for review on
certiorari,[19] based on the following arguments:

1)
Casas voluntarily left the company to preempt an administrative investigation against her, and to be able to
jumpstart a new career.[20]
2)
The clearance and quitclaim document is a standard operating procedure for a person who has resigned or
retired from the company for the protection of the employer. It establishes that the issue of employment
severance has been settled beforehand. In fact, BMPI cited the clearance and quitclaim document to explain
why Casas' last pay was temporarily withheld from her.[21]
3)
BMPI denied receipt of Casas's letter, and claimed that it did not issue any show cause order against Casas
because she left the company to prevent an administrative investigation against her. Her voluntary exit also
explains BMPI's non-compliance with the legal notice requirements.[22]

In her Comment/Opposition[23] to BMPI's petition, Casas maintained that the CA did not err in finding that she
had been illegally dismissed from work. She emphasized that the quitclaim and clearance document
unilaterally prepared by BMPI was evidence of their expectation to sever her employment,[24] and that BMPI
failed to present any resignation letter from her to prove that she voluntarily left her work.[25] Lastly, Casas
asserted that Cabangon compelled her to quit her job, in exchange for a retirement package. This package,
however, was never granted to her, despite her compliance with her end of the agreement that she would no
longer report to work after January 5, 2007.[26]

Issues

The parties' arguments present to us the sole issue of whether the Court of Appeals erred when it found no
grave abuse of discretion in the NLRC's ruling that Casas had been illegally dismissed.

The Court's Ruling

The CA did not err in finding that the NLRC did not commit any grave abuse of discretion in its decision.

Mode of review in illegal dismissal cases

The present petition involves mixed questions of fact and law, with the core issue being one of fact. This issue
- from which the other issues arise - relates to the nature of Casas' termination of employment relationship
with BMPI. Did she voluntarily resign from, or abandon her work at, BMPI, or was she summarily dismissed by
Cabangon?

This question of fact is an issue that we cannot resolved in a Rule 45 petition, except in the course of
determining whether the CA correctly ruled in determining that the NLRC did not commit grave abuse of
discretion. In other words, the question we ask in resolving the present case is not whether Casas abandoned
her work or was illegally dismissed; instead, we ask whether the CA erred in not finding grave abuse of
discretion in the NLRC's decision finding that Casas was dismissed from work.[27]

Should we find that Casas had indeed been summarily dismissed, the next question involves the nature of her
dismissal - did it comply with the procedural and substantial requirements of the law, or was it an illegal
dismissal that should warrant the award to Casas of backwages and separation pay?

Keen awareness of the lens used to review this question is critical, given the jurisdiction of this Court and the
nature of review employed in labor cases appealed to the Court under Rule 45. The Court, save for exceptional
cases, is not a trier of facts; as a general rule, it resolves only questions of law. Additionally, the NLRC's decision
is final and executory, and can be reviewed by the CA only when the NLRC committed a grave abuse of
discretion amounting to a lack or excess of jurisdiction.[28]
Thus, the CA, in a Rule 65 petition assailing the NLRC's decision, examines whether the NLRC acted in such a
"capricious and whimsical exercise of judgment so patent and gross as to amount to an evasion of a positive
duty or a virtual refusal to perform a duty enjoined by law."[29] This is in contrast with appeals reaching the CA
through a Rule 45 petition, where it has more leeway in reviewing both questions of fact and of law, and where
the appealed decision may be reversed because of an error in judgment.[30]

Once the CA decision reaches the Court through a Rule 45 petition, the question presented before us carries
with it the mode of review applied when the case has been appealed before the CA. Although we are asked to
determine whether the CA committed an error in judgment, we necessarily have to consider that the judgment
made by the CA involves the question of determining grave abuse of discretion. Unlike other petitions for
review on certiorari where we determine errors of law (and in exceptional cases, errors of fact), our appellate
jurisdiction in labor cases involves the determination of whether there had been an error in finding grave abuse
of discretion on the part of the NLRC.[31]

With these considerations in mind, the onus probandi in assailing a question of fact as determined by the NLRC
and upheld by the CA becomes heavier. Not only must an exceptional circumstance allowing the Court to
review a question of fact exist; it must also be shown that the NLRC's resolution of the factual issue must have
been tainted with grave abuse of discretion, such that the CA erred in affirming it.

Indeed, the labor arbiter and the NLRC in the present case arrived at factual conclusions — the LA found that
Casas had not been dismissed, but the NLRC reversed this finding. While the contradicting findings of the LA
and the NLRC may be a ground to re-evaluate the factual question of whether Casas abandoned her work or
had been dismissed, we find no reason to dispute the NLRC s conclusion.

The CA did not err in affirming the NLRC's factual finding that Casas had been dismissed from work

We support the CA in finding no grave abuse of discretion in the NLRC's factual conclusion that Casas had been
dismissed from work.

In illegal dismissal cases, the employer has the burden of proving that the employee's dismissal was legal.
However, to discharge this burden, the employee must first prove, by substantial evidence, that he had been
dismissed from employment.[32]

The CA, in affirming the NLRC's conclusion that Casas had been dismissed, gave emphasis to the existence of
two documents on record: first, the unsigned clearance and quitclaim document unilaterally prepared by BMPI,
and second, the letter Casas sent to Cabangon-Chua, asking the latter to reconsider her termination.

These pieces of evidence sufficiently establish Casas' dismissal from the company.

The Clearance and Quitclaim document discloses that Casas would "cease to be connected with the company
at the close of office on January 16, 2007." The document, which was even introduced as evidence by the
petitioners, was prepared unilaterally at Cabangon's instructions. It shows the company's intent to sever its
employment relationship with Casas. Considered together with the letter Casas sent Cabangon-Chua asking
for her reinstatement on May 17, 2007, these documents back Casas's assertion that she was compelled to leave
her job on January 5, 2007.

As their main defense, BMPI and Cabangon claim that they never dismissed Casas from work, and that she
instead requested a graceful exit from the company.
We do not find any merit in the petitioners' contention.

Jurisprudence has established that employers interposing their employee's resignation as a defense from
illegal dismissal cases have the burden of proving that the employee indeed voluntarily resigned.[33]
Resignation — the formal pronouncement or relinquishment of a position or office — is the voluntary act of an
employee compelled by personal reason(s) to disassociate himself from employment.[34] It is done with the
intention of relinquishing an office, accompanied by the act manifesting this intent.[35]

In the present case, the petitioners allege that Casas asked for a graceful exit from the company to avoid an
administrative investigation against her. They claim that Casas had grossly failed to manage and take control
of BMPFs ex-deal assets, which caused the company serious losses. When Casas was confronted about these
reports of mismanagement, she voluntarily resigned from office in exchange for separation pay.

In our view, the NLRC and CA correctly disregarded these allegations in concluding that Casas had been
terminated from office.

First, the pieces of evidence that the petitioners submitted are insufficient to establish their claim. To prove
that Casas voluntarily abandoned her work, the petitioners submitted affidavits from their employees,
Domingo Almoninia, Jr. and Victoria C. Nava, who both testified to the events leading to a private conversation
between Casas and Cabangon.

Domingo Almoninia, Jr., BMPI's former Chief Audit Executive, testified[36] that he had informed Cabangon of
reports regarding Casas's mismanagement of BMPI's ex-deal assets on January 5, 2007. Casas, together with
Vice President for Human Resources Victoria Nava, were then summoned to Cabangon's room. According to
Almoninia, he witnessed Cabangon confront Casas regarding reports about her mismanagement and certain
unauthorized transactions. In the course of the discussion, Cabangon allegedly told Casas that the reports
against her would have to be investigated, and instructed her to settle her differences with a certain Mr. Tayag.
Casas asked Cabangon if she was being dismissed, to which the latter answered in the negative. Both Almoninia
and Nava were then asked to leave the room.

Nava, on the other hand, corroborated Almoninia's narration, and added insinuations that Casas had been
having problems in the company.[37]

In considering their affidavits, we emphasize that neither Almoninia nor Nava were present in the private
conversation that ensued between Cabangon and Casas, after the confrontation that they witnessed. This
leaves Cabangon's claim that Casas asked for a graceful exit from the company uncorroborated; what stands
is Casas' statement contradicting the claim that she had not been dismissed from her job.

Second, Cabangon failed to provide any documentary evidence supporting Casas' voluntary resignation. BMPI
failed to show any resignation letter from Casas. The Clearance and Quitclaim document, which shows Casas'
severance from the company, does not contain her signature.[38] Neither was Casas given any return to work
order, notice of infraction, or notice of termination, all of which could have supported BMPI's theory that Casas
was never prevented from going back to work.

Third, Cabangon, Almoninia and Nava' s testimonies show that Casas could have entertained the motive to
resign from her work, but does not prove her intent to leave her office. Intent to relinquish one's office is
determined from the acts of an employee before and after the alleged resignation. Casas' acts after allegedly
resigning from work negate this intent: she wrote a letter asking Cabangon-Chua to reconsider her termination
from office; she refused to sign the Clearance and Quitclaim document; and she filed an illegal dismissal case
against her employers.

This conclusion brings us to the question of whether the CA erred in affirming the NLRC's conclusion that Casas
had been illegally terminated from work.

The CA did not err in affirming the NLRC's conclusion that Casas' dismissal violated the procedural
requirements of the Labor Code

In ruling that Casas' dismissal had been contrary to law, both the CA and the NLRC emphasized that her sudden
termination from office was without just cause and violated procedural due process.

According to the NLRC, despite the serious allegations that the BMPI lodged against Casas, it never asked her
to explain her acts, and instead opted to sever its employment relations with her. On this basis alone, the NLRC
concluded that Casas' dismissal had been illegal and non-compliant with procedural due process.[39]

The CA affirmed this conclusion by pointing out that Casas had been dismissed prior to any probe on her
reported violation of company rules and regulations.[40]

In determining whether an employee's dismissal had been legal, the inquiry focuses on whether the dismissal
violated his right to substantial and procedural due process. An employee's right not to be dismissed without
just or authorized cause as provided by law, is covered by his right to substantial due process. Compliance with
procedure provided in the Labor Code, on the other hand, constitutes the procedural due process right of an
employee.[41]

The violation of either the substantial due process right or the procedural due process right of an employee
produces different results. Termination without a just or authorized cause renders the dismissal invalid, and
entitles the employee to reinstatement without loss of seniority rights and other privileges and full backwages,
inclusive of allowances, and other benefits or their monetary equivalent computed from the time the
compensation was not paid up to the time of actual reinstatement.

An employee's removal for just or authorized cause but without complying with the proper procedure, on the
other hand, does not invalidate the dismissal. It obligates the erring employer to pay nominal damages to the
employee, as penalty for not complying with the procedural requirements of due process.[42]

Thus, two separate inquiries must be made in resolving illegal dismissal cases: first, whether the dismissal had
been made in accordance with the procedure set in the Labor Code; and second, whether the dismissal had
been for just or authorized cause.

There can be no doubt that the procedural requirements had not been complied with in the present case:
shortly after a private conversation between Cabangon and Casas, Casas took her belongings from the office
and left the building. As explained earlier, Casas's acts after this private conversation reveal that she had been
summarily dismissed: Casas gave no resignation letter, refused to sign the Clearance and Quitclaim document
that the company issued, and sent a letter asking for her reinstatement.

Notably, the private conversation that led to Casas's summary dismissal did not conform, in any way, to the
procedural due process requirements embodied in Rule XIV of the Omnibus Rules Implementing the Labor
Code, viz:
RULE XIV
Termination of Employment

SECTION 1. Security of tenure and due process. — No workers shall be dismissed except for a just or authorized
cause provided by law and after due process.

SECTION 2. Notice of dismissal. — Any employer who seeks to dismiss a worker shall furnish him a written
notice stating the particular acts or omission constituting the grounds for his dismissal. In cases of
abandonment of work, the notice shall be served at the worker's last known address.

xxx

SECTION 5. Answer and hearing. — The worker may answer the allegations stated against him in the notice of
dismissal within a reasonable period from receipt of such notice. The employer shall afford the worker ample
opportunity to be heard and to defend himself with the assistance of his representative, if he so desires.

SECTION 6. Decision to dismiss. — The employer shall immediately notify a worker in writing of a decision to
dismiss him stating clearly the reasons therefor.
Cabangon failed to show any written notice provided to Casas informing her of the charges against her, and
neither had she been informed in writing of her dismissal and the reasons behind it.

Even assuming arguendo that Casas had indeed voluntarily abandoned her work - an uncorroborated claim by
Cabangon - Cabangon had the duty to give Casas a written notice of the grounds leading to her dismissal.

Thus, Cabangon failed to comply with the two-notice requirement under the law, resulting in a violation of
Casas's right to procedural due process. This conlusion leads us to the next query: whether her dismissal was
for just cause.

The CA did not err in finding no grave abuse of discretion in the NLRC's decision to hold that Casas had been
dismissed without just cause

According to the CA, Casas's dismissal had not been for just cause, because at the time she was dismissed, not
one of the charges against her had been proven. Casas was, at the time of her dismissal, presumed innocent
until proven guilty; thus, there existed no just cause to terminate her employment at the time she was
summarily dismissed.[43]

In reaching this conclusion, the CA reviewed whether the NLRC acted with grave abuse of discretion in holding
that Casas's dismissal had no just cause. The NLRC, in its decision, held that Casas's dismissal had not been for
just cause because she was not even allowed to explain the supposed acts that had been inimical to BMPI's
interests.[44]

In affirming the NLRC's decision, the CA clarified the application of procedural and substantial due process in
the present case: Casas had not been given the two-notice requirement in the law, and hence, her procedural
due process rights had been violated. And because not one of the allegations against her had been proven at
the time she was summarily dismissed, there existed no cause to terminate her services.

We find that the CA did not err in making this ruling.

To reiterate, the CA reviews the decision of the NLRC using the prism of grave abuse of discretion, and not
through an appeal. Grave abuse of discretion implies such capricious and whimsical exercise of judgment as to
be equivalent to lack or excess of jurisdiction. In other words, power is exercised in an arbitrary or despotic
manner so patent or so gross that it amounts to an evasion of a positive duty or to a virtual refusal to act at all
in contemplation of law.

Thus, for a decision to be in grave abuse of discretion, it should involve not just an error of law or an error of
fact, but errors that are so patent or gross that the decision reached is a decision that had not been made in
contemplation of law at all.

No such error exists in the present case.

We have, in the past, affirmed the NLRC in ruling that an employee's act not proven at the time he had been
dismissed does not constitute just cause for his dismissal.[45] In other words, for an act to justify an employee's
dismissal, it should have been proven, with substantial evidence,[46] at the time he was dismissed. Otherwise,
the dismissal would not be for just cause.

This conclusion finds support in cases emphasizing that an unsubstantiated accusation will not ripen into a
holding that there is just cause for dismissal.[47] A mere accusation of wrongdoing is not sufficient cause for a
valid dismissal of an employee. The facts for which a dismissal is based should be backed by substantial
evidence at the time the employee is dismissed, and not at the time his dismissal is being questioned before
the courts.

In the present case, the petitioners allege that Casas had committed various infractions that would have
warranted disciplinary action against her. At the time that Casas was dismissed, however, these alleged
infractions were mere speculations. The present petition for review on certiorari admits this reality in two
instances: first, in the body of the petition itself stating that at the time of the January 5, 2007 meeting,
disciplinary proceedings had yet to be initiated against Casas and that the reports against her would still have
to be verified;[48] and second, through its annexes,[49] which provided that the result of the investigation in
the ex-deal assets that Casas allegedly mismanaged was produced only on February 17, 2007, or a full month
after Casas' dismissal.

Thus, at the time Cabangon asked Casas to leave her employment, all he had as basis for Casas's dismissal were
speculations. Worse, Cabangon's summary dismissal of Casas left her with little opportunity to adequately
defend herself from the allegations against her.

In these lights, we support the CA in holding that Casas' summary dismissal had not been for just cause.

Just cause must be proven with substantial evidence at the time of dismissal

At its core, substantive due process guarantees a right to liberty that cannot be taken away or unduly
constricted, except through valid causes provided in the law.[50]

The concepts of procedural and substantive due process had been carried over and applied to illegal dismissal
cases, although notably, employers are not governmental bodies to which these rights usually refer. Agabon
v. NLRC[51] described the due process required in dismissing employees as statutory - requirements that the
law imposes on employers to comply with, in contrast to constitutional due process rights that guarantee
against overreach from the government.

Although statutory in nature, the procedural and substantive due process requirements in illegal dismissal
cases stem from the protection that the Constitution provides labor - the Constitution has tasked the State to
promote the workers' security of tenure, humane conditions of work, and a living wage.[52] These guarantees,
as well as a host of other rights and responsibilities,[53] find implementation through the Labor Code, which
fleshed out the concept of security of tenure[54] as the continuance of regular employment until an employee's
services are terminated because of just or authorized causes enumerated in the law.

Thus, despite the differences in origin and application between constitutional due process rights and the
statutory requirements in the Labor Code, we have applied concepts implementing constitutional due process
rights to the statutory due process requirements of the Labor Code. We did this in the present case, when we
emphasized the need for substantial evidence to support the just cause for the employee's dismissal at the time
her services were terminated. In the same way that the crime charged against an accused must first be proven
before his or her right to liberty is taken away, or that a government employee's infraction must first be proven
before the accused is deprived of the right to continue to hold office, so too, must just cause against an
employee be proven before he or she may be deprived of a means of livelihood. Otherwise, the employee's
right to substantive due process would be violated.

In these lights, and in order to give full effect to the embodiment of substantive due process in illegal dismissal
cases, it is necessary to rule, that an employee, in this present case Casas, cannot be terminated from service
without sufficient substantial evidence of the just cause that would merit her dismissal.

WHEREFORE, premises considered, the petition is DISMISSED, and the Court of Appeals decision in CA-G.R.
SP No. 116539 is AFFIRMED.

SO ORDERED.

DIVISION

[ GR No. 190644, Jun 13, 2016 ]

NDC TAGUM FOUNDATION v. EVELYN B. SUMAKOTE +

RESOLUTION

SERENO, C.J.:

Before this Court is a Petition for Review on Certiorari assailing the Court of Appeals (CA) Decision[1] which
affirmed the Resolution[2] issued by the National Labor Relations Commission (NLRC) dismissing the
complaint for illegal dismissal filed by Evelyn B. Sumakote (respondent) against the NDC[3] Tagum
Foundation; and Anita B. Somoso (Somoso) and Lida U. Natavio (Natavio), its President and Administrator,
respectively. The CA, however, modified the NLRC ruling by awarding, in favor of respondent nominal damages
in the amount of P30,000 for petitioners' noncompliance with the hearing requirement in dismissal cases.

ANTECEDENT FACTS

Respondent was a full-time nursing instructor at the College of Nursing of the NDC Tagum Foundation before
she was appointed as its dean in 1996. Beginning 1999, she also operated a nursing review and caregiver
training center while simultaneously working at the NDC Tagum Foundation.[4]

While respondent was still under contract with the NDC Tagum Foundation, the University of Mindanao (UM)
engaged her services as consultant for the establishment of the UM's Nursing Department.[5] In February 2003,
she was interviewed for deanship at the UM; and within that month, her appointment as full-time program
head was approved by the president of the university. She was also listed as faculty member in the permit
application it submitted to the Commission on Higher Education (CHED).[6]

In a letter dated 11 February 2003, Natavio advised respondent that her engagement with the UM was in
conflict with the interests of the NDC Tagum Foundation, and that it was an act of disloyalty. Moreover, even
her work attendance was already affected. She was then requested to formally declare her plan to leave the
NDC Tagum Foundation, so it could appoint a new dean.[7]

Respondent did not respond to the letter. On April 2003, she declined the appointment at the UM, as she had
decided to stay with the NDC Tagum Foundation.[8]

On 4 September 2003, respondent received another letter from Natavio requiring the former to explain why
she should not be dismissed on the ground of neglect of duty because of her moonlighting activities. The letter
also stated that respondent not only had poor work attendance, but also neglected to update the school
curriculum.[9]

On the following day, respondent submitted a written explanation denying the charges of neglect. She
contended that she had not received any compensation from the UM; therefore, her work there could not be
considered as moonlighting. She also questioned the timing of the management's objection to her review and
training center, considering that it had been operational since 1999.[10]

On 15 September 2003, petitioners placed respondent on preventive suspension for five days pending the
outcome of the management's investigation of her supposed moonlighting activities and her reported
attempts to pirate some of the school's instructors for transfer to the UM. In a letter of even date, Somoso
notified respondent of the latter's preventive suspension and directed her to explain why she should not be
dismissed based on the reports.[11]

The next day, respondent submitted a letter denying the latest allegation and seeking a clarification of her
employment status. In addition, she prayed that the management's decision be made only after a proper
investigation.[12] In a letter dated 17 September 2003, petitioners notified her of her dismissal from
employment effective 18 September 2003.[13]

Upon a Complaint filed by respondent, the labor arbiter declared her dismissal illegal, ordering her
reinstatement and the payment of back wages, as well as moral and exemplary damages.[14]

The NLRC reversed the arbiter's Decision. It ruled that respondent was dismissed for just cause because her
moonlighting activities constituted dishonesty, serious misconduct, and gross neglect of duty.[15]

The CA, upon Petition for Certiorari filed by respondent, affirmed the findings of the NLRC that she had been
dismissed for cause. The appellate court, however, found that she was not afforded the opportunity to be
heard. In view of this failing, it ordered petitioners to pay her nominal damages in the amount of P30,000.[16]

Petitioners moved for the reconsideration of the award of nominal damages,[17] but the CA denied their
motion.[18] Hence, this Petition.

ISSUE
The lone issue to be resolved is whether the CA erred in holding that respondent was not given the opportunity
to be heard and to present her defense prior to her dismissal.

COURT RULING

We DENY the Petition.

Dismissals have two facets: the legality of the act of dismissal, which constitutes substantive due process; and
the legality of the manner of dismissal, which constitutes procedural due process.[19]

In this case, it is not disputed that respondent was terminated from employment for just cause under Article
282 of the Labor Code. The only question to be determined is whether the procedural due process requirements
for a valid dismissal were complied with. This is a factual issue. Ordinarily, We do not allow this kind of question
to be threshed out in a Rule 45 petition. The divergence between the factual findings of the NLRC and those of
the CA, however, constrain Us to revisit the evidence on record.[20]

Book VI, Rule I, Section 2 of the Omnibus Rules Implementing the Labor Code, provides:
SECTION 2. Security of tenure - (a) In cases of regular employment, the employer shall not terminate the
service of an employee except for just or authorized causes as provided by law, and subject to the requirements
of due process.

xxxx

(d) In all cases of termination of employment, the following standards of due process shall be substantially
observed:

For termination of employment based on just causes as defined in Article 282 of the Labor Code:

(i) A written notice served on the employee specifying the ground or grounds for termination, and giving said
employee reasonable opportunity within which to explain his side.

(ii) A hearing or conference during which the employee concerned, with the assistance of counsel if he so
desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence presented
against him.

(iii) A written notice of termination served on the employee, indicating that upon due consideration of all the
circumstances, grounds have been established to justify his termination.
In King of Kings Transport v. Mamac,[21] this Court elaborated on the above-quoted procedural requirements
as follows:
(1) The first written notice to be served on the employees should contain the specific causes or grounds for
termination against them, and a directive that the employees are given the opportunity to submit their written
explanation within a reasonable period. "Reasonable opportunity" under the Omnibus Rules means every kind
of assistance that management must accord to the employees to enable them to prepare adequately for their
defense. This should be construed as a period of at least five (5) calendar days from receipt of the notice to give
the employees an opportunity to study the accusation against them, consult a union official or lawyer, gather
data and evidence, and decide on the defenses they will raise against the complaint. Moreover, in order to
enable the employees to intelligently prepare their explanation and defenses, the notice should contain a
detailed narration of the facts and circumstances that will serve as basis for the charge against the employees.
A general description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being charged against
the employees.

(2) After serving the first notice, the employers should schedule and conduct a hearing or conference wherein
the employees will be given an opportunity to (1) explain and clarify their defenses to the charge against them;
(2) present evidence in support of their defenses; and (3) rebut the evidence presented against them by the
management. During the hearing or conference, the employees are given the chance to defend themselves
personally, with the assistance of a representative or counsel of their choice. Moreover, the conference or
hearing could be used by the parties as an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve the employees a
written notice of termination indicating that: (1) all circumstances involving the charge against the employees
have been considered; and (2) grounds have been established to justify the severance of their employment.[22]
In this case, petitioners argue that respondent was given four notices, referring to the letters dated 11 February
2003, 4 September 2003, 15 September 2003, and 17 September 2003. They claim that all these letters afforded
her the opportunity to explain her side and, therefore, she was given ample opportunity to be heard.

We do not agree.

The first letter sent by petitioners did not ask respondent to submit an explanation. It appears, rather, that they
had already decided to find a replacement for her and that they were only waiting for the confirmation of her
transfer to the UM:
In this connection, we feel that it would be best if you would just concentrate working with the University of
Mindanao full-time. And we shall highly appreciate it if you can formally advise us of your plans to separate
from us so that we will assign somebody in[sic] your position as dean of the College of Nursing.

May we hear from you in writing within three (3) days from your receipt of this letter so we can also prepare as
what we have to do for the good of school[sic].[23]
It is settled that a full adversarial hearing or conference is not required.[24] All that is required is a fair and
reasonable opportunity for the employee to explain the controversy at hand.[25] Yet, even if we consider the
letter dated 4 September 2003 as the first notice, there would still be a breach of the procedural due process
requirement. The breach occurred when petitioners did not call a hearing or conference during which
respondent could have presented her defense.[26] Instead, they placed her right away under preventive
suspension for five (5) days. Then they dismissed her from employment while she was still serving her
preventive suspension.

Clearly, the alleged opportunities given for her to explain her side, through the letters dated 4 and 15
September 2003, fell short of the minimum standard of what constitutes an opportunity to be heard in
administrative proceedings, i.e., a fair and reasonable chance to defend oneself against the bases cited for
one's dismissal.

Somoso and Natavio now lament that they should not have been impleaded in this case. They claim that
because they were not the actual employers of respondent, they are entitled to attorney's fees.[27]

Suffice it to say that attorney's fees are not awarded where, as in this case, no sufficient showing of bad faith is
reflected in a party's persistence in pursuing a case other than an erroneous conviction of the righteousness of
the complaint. The power of the court to award attorney's fees under Article 2208 demands factual, legal, and
equitable justification.[28]
Finally, in line with prevailing jurisprudence,[29] legal interest at the rate of 6% per annum is imposed on the
nominal damages awarded from the finality of this Decision until full payment.

WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED. The Court of Appeals
Decision dated 27 April 2009 is AFFIRMED with MODIFICATION in that legal interest at the rate of 6% per
annum is imposed on the award of damages from the finality of this Decision until full payment.

SO ORDERED.

G.R. No. 187691

Olympia Housing, Inc. vs. Lapastora
January 13, 2016
REYES, J.:

Facts:
A complaint for illegal dismissal, payment of backwages and other benefits, and regularization of employment
filed by Allan Lapastora (Lapastora) and Irene Ubalubao (Ubalubao) against Olympic Housing, Inc. (OHI), the
entity engaged in the management of the Olympia Executive Residences (OER), a condominium hotel building
situated in Makati City. Lapastora and Ubalubao alleged that they worked as room attendants of OHI from
March 1995 and June 1997, respectively, until they were placed on floating status on February 24, 2000, through
a memorandum sent by Fast Manpower.chanroblesvirtuallawlibrary

To establish employer-employee relationship with OHI, Lapastora and Ubalubao alleged that they were
directly hired by the company and received salaries directly from it. They also claimed that OHI exercised
control over them as they were issued time cards, disciplinary action reports and checklists of room
assignments. It was also OHI which terminated their employment after they petitioned for regularization. Prior
to their dismissal, they were subjected to investigations for their alleged involvement in the theft of personal
items and cash belonging to hotel guests and were summarily dismissed by OHI despite lack of
evidence.chanroblesvirtuallawlibrary

For their part, OHI and Limcaoco alleged that Lapastora and Ubalubao were not employees of the company
but of Fast Manpower, an independent contractor with which it had a contract of services, particularly, for the
provision of room attendants.

Reinforcing OHI's claims, Fast Manpower reiterated that it is a legitimate manpower agency and that it had a
valid contract of services with OHI, pursuant to which Lapastora and Ubalubao were deployed as room
attendants. Lapastora and Ubalubao were, however, found to have violated house rules and regulations and
were reprimanded accordingly. It denied the employees' claim that they were dismissed and maintained they
were only placed on floating status for lack of available work assignments.
During the pendency of the case, Ubalubao, on her own behalf, filed a Motion to Dismiss/Withdraw Complaint
and Waiver.

Issue:
Whether or not Lapastora was illegally dismissed.

Ruling:
The court ruled in the affirmative.

Indisputably, Lapastora was a regular employee of OHI. As found by the LA, he has been under the continuous
employ of OHI since March 3, 1995 until he was placed on floating status in February 2000. His uninterrupted
employment by OHI, lasting for more than a year, manifests the continuing need and desirability of his services,
which characterize regular employment.

By the nature of its petitioner’s business, it is necessary that it maintains a pool of housekeeping staff to ensure
that the premises remain an uncluttered place of comfort for the occupants. It is no wonder why Lapastora,
among several others, was continuously employed by OHI precisely because of the indispensability of their
services to its business.

The argument that formal notices of investigation were not complied with since he was not an employee of
OHI but of Fast Manpower does not hold because Lapastora was under the effective control and supervision of
OHI through the company supervisor. She gave credence to the pertinent records of Lapastora's employment,
i.e., timecards, medical records and medical examinations, which all indicated OHI as his employer. That there
is an existing contract of services between OHI and Fast Manpower where both parties acknowledged the latter
as the employer of the housekeeping staff, including Lapastora, did not alter established facts proving the
contrary.

To justify fully the dismissal of a regular employee, the employer must, as a rule, prove that the dismissal was
for a just cause and that the employee was afforded due process prior to dismissal. As a complementary
principle, the employer has the burden of proving with clear, accurate, consistent, and convincing evidence the
validity of the dismissal.

It appears that OHI failed to prove that Lapastora's dismissal was grounded on a just or authorized cause. While
it claims that it had called Lapastora's attention several times for his infractions, it does not appear from the
records that the latter had been notified of the company's dissatisfaction over his performance and that he was
not given an opportunity to explain. In the same manner, allegations regarding Lapastora's involvement in the
theft of personal items and cash belonging to hotel guests remained unfounded suspicions as they were not
proven despite OHI's probe into the incidents.

In the present case, Lapastora was not informed of the charges against him and was denied the opportunity to
disprove the same. He was summarily terminated from employment.

G.R. No. 166208 June 29, 2007

KING OF KINGS TRANSPORT INC., CLAIRE DELA FUENTE and MELISSA LIM, petitioners,
vs.
SANTIAGO O. MAMAC, respondent.
FACTS: Petitioner KKTI is a corporation engaged in public transportation and managed by Claire Dela Fuente
and Melissa Lim. Respondent was a conductor for Don Mariano Transit Corporation (DMTC). He was one of the
few people who established Damayan ng mga Manggagawa, Tsuper at Conductor-Transport Workers Union.
Pending the union’s certification election, respondent was transferred to KKTI. The KKTI employees later
organized the Kaisahan ng mga Kawani sa King of Kings (KKKK) which was registered with DOLE. Respondent
was elected KKKK president.

Upon audit of the October 28, 2001 Conductor’s Report of respondent, KKTI noted an irregularity. It discovered
that respondent declared several sold tickets as returned tickets causing KKTI to lose an income of eight
hundred and ninety pesos. While no irregularity report was prepared on the October 28, 2001 incident, KKTI
nevertheless asked respondent to explain the discrepancy. In his letter, respondent said that the erroneous
declaration in his October 28, 2001 Trip Report was unintentional. He explained that during that day’s trip, the
windshield of the bus assigned to them was smashed; and they had to cut short the trip in order to immediately
report the matter to the police. As a result of the incident, he got confused in making the trip report.

On November 26, 2001, respondent received a letter terminating his employment effective November 29,
2001. The dismissal letter alleged that the October 28, 2001 irregularity was an act of fraud against the
company. KKTI also cited as basis for respondent’s dismissal the other offenses he allegedly committed since
1999.

After that, he filed an action for illegal dismissal, among other claims. He denied committing any infraction and
alleged that his dismissal was intended to bust union activities. Moreover, he claimed that his dismissal was
effected without due process.

KKTI averred that it had observed due process in dismissing respondent and maintained that respondent was
not entitled to his money claims such as service incentive leave and 13th-month pay because he was paid on
commission or percentage basis.

LABOR ARBITER: he was validly dismissed

NLRC: Affirmed. CA held that there was just cause for respondent’s dismissal. It ruled that respondent’s act in
“declaring sold tickets as returned tickets x x x constituted fraud or acts of dishonesty justifying his dismissal.”

ISSUE: WON respondent was given due process (procedural)

HELD: NO. There was failure to observe the requirements of due process

Due process under the Labor Code involves two aspects: first, substantive––the valid and authorized causes of
termination of employment under the Labor Code; and second, procedural––the manner of dismissal.

Section 2(d) of Rule I of Book VI of the Omnibus Rules Implementing the Labor Code provides:

SEC. 2. Standards of due process; requirements of notice.––In all cases of termination of employment, the
following standards of due process shall be substantially observed:

For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination, and giving said
employee reasonable opportunity within which to explain his side.
(b) A hearing or conference during which the employee concerned, with the assistance of counsel if he so
desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence presented
against him.

(c) A written notice of termination served on the employee, indicating that upon due consideration of all the
circumstances, grounds have been established to justify his termination.

The first written notice to be served on the employees should contain the specific causes or grounds for
termination against them, and a directive that the employees are given the opportunity to submit their written
explanation within a reasonable period. “Reasonable opportunity” under the Omnibus Rules means every kind
of assistance that management must accord to the employees to enable them to prepare adequately for their
defense.15 This should be construed as a period of at least five (5) calendar days from receipt of the notice to
give the employees an opportunity to study the accusation against them, consult a union official or lawyer,
gather data and evidence, and decide on the defenses they will raise against the complaint. Moreover, in order
to enable the employees to intelligently prepare their explanation and defenses, the notice should contain a
detailed narration of the facts and circumstances that will serve as basis for the charge against the employees.
A general description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being charged against
the employees.
After serving the first notice, the employers should schedule and conduct a hearing or conference wherein the
employees will be given the opportunity to: (1) explain and clarify their defenses to the charge against them;
(2) present evidence in support of their defenses; and (3) rebut the evidence presented against them by the
management. During the hearing or conference, the employees are given the chance to defend themselves
personally, with the assistance of a representative or counsel of their choice. Moreover, this conference or
hearing could be used by the parties as an opportunity to come to an amicable settlement.
After determining that termination of employment is justified, the employers shall serve the employees a
written notice of termination indicating that: (1) all circumstances involving the charge against the employees
have been considered; and (2) grounds have been established to justify the severance of their employment.
Respondent was not issued a written notice charging him of committing an infraction. A verbal appraisal of the
charges against an employee does not comply with the first notice requirement.

The court observed from the irregularity reports against respondent for his other offenses that such contained
merely a general description of the charges against him. The reports did not even state a company rule or policy
that the employee had allegedly violated.

No hearing was conducted. Regardless of respondent’s written explanation, a hearing was still necessary in
order for him to clarify and present evidence in support of his defense. Moreover, respondent made the letter
merely to explain the circumstances relating to the irregularity in his October 28, 2001 Conductor’s Trip Report.
He was unaware that a dismissal proceeding was already being effected. Thus, he was surprised to receive the
November 26, 2001 termination letter indicating as grounds, not only his October 28, 2001 infraction, but also
his previous infractions.

Agabon vs NLRC

GR 158693
Facts:

Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing
ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as gypsum
board and cornice installers on January 2, 1992 until February 23, 1999 when they were dismissed for
abandonment of work. Thus, Petitioners then filed a complaint for illegal dismissal and payment of money
claims

Petitioners also claim that private respondent did not comply with the twin requirements of notice and hearing.
Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned
their work.

Issue: WON petitioners were illegally dismissed.

Held:

Accordingly, petitioners’ dismissal was for a just cause. They had abandoned their employment and were
already working for another employer.

To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the
employer to give the employee the opportunity to be heard and to defend himself.

Abandonment is the deliberate and unjustified refusal of an employee to resume his employment. It is a form
of neglect of duty, hence, a just cause for termination of employment by the employer.

After establishing that the terminations were for a just and valid cause, we now determine if the procedures for
dismissal were observed.

The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules
Implementing the Labor Code:

Standards of due process: requirements of notice. – In all cases of termination of employment, the following
standards of due process shall be substantially observed:

For termination of employment based on just causes as defined in Article 282 of the Code:

A written notice served on the employee specifying the ground or grounds for termination, and giving to said
employee reasonable opportunity within which to explain his side;
A hearing or conference during which the employee concerned, with the assistance of counsel if the employee
so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented
against him; and
(c) A written notice of termination served on the employee indicating that upon due consideration of all the
circumstances, grounds have been established to justify his termination.

In case of termination, the foregoing notices shall be served on the employee’s last known address.

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the
employee two written notices and a hearing or opportunity to be heard if requested by the employee before
terminating the employment: a notice specifying the grounds for which dismissal is sought a hearing or an
opportunity to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss; and
(2) if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the
employee and the Department of Labor and Employment written notices 30 days prior to the effectivity of his
separation.

From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under
Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons under Article
284, and due process was observed; (2) the dismissal is without just or authorized cause but due process was
observed; (3) the dismissal is without just or authorized cause and there was no due process; and (4) the
dismissal is for just or authorized cause but due process was not observed.

The present case squarely falls under the fourth situation. The dismissal should be upheld because it was
established that the petitioners abandoned their jobs to work for another company. Private respondent,
however, did not follow the notice requirements and instead argued that sending notices to the last known
addresses would have been useless because they did not reside there anymore. Unfortunately for the private
respondent, this is not a valid excuse because the law mandates the twin notice requirements to the employee’s
last known address. Thus, it should be held liable for non-compliance with the procedural requirements of due
process.

Petition denied. CA affirmed with modifications.

Article 295 (280) Regular and Casual Employment

GADIA, ET AL VS. SYKES ASIA, INC.

G.R. No. 209499, January 28, 2015 The Facts: On September 3, 2003, Alitel Communications Inc., a US-based
telecommunications company hired Sykes Asia,
a corporation engaged in Business Process Outsourcing (BPO), to handle its (Alitel) clients‟ needs and
demands
for its prepaid and postpaid services. Thus, on different dates, Sykes Asia hired the petitioners herein, who
commenced work until the services of Sykes Asia were terminated by Alitel sometime in 2009. In view of this
development, Sykes Asia sent end-of-life notices to the petitioners, informing them of their dismissal due to
the termination of the Alitel project. The petitioners thereafter filed separate complaints for illegal dismissal,
with prayer for reinstatement, and other monetary benefits against the company and several of its officers. In
their
defense, the respondents averred that the petitioners were “project
-based employees, not regular employees, as such the termination of the Alitel project served as a valid ground
for their dismissal. They were in fact furnished notices of termination at least 30 days prior to their dates of
dismissal. The Labor Arbiter ruled in favour of Sykes Asia, holding the employees as project-based employees,
thus the termination of the Alitel project necessitated their termination from employment. The NLRC however
disagreed with the LA ruling, holding that while it was known to the petitioners that their employment would
be co-terminus to the Alitel project, it was never made known to them when the project will be terminated;
since the employees
were performing work necessary or desirable in Sykes Asia‟ s business
, they are regular employees. Despite this, the termination of the Alitel project made their employment
redundant, hence they were legally dismissed and only entitled to separation pay. The respondents appealed
to the CA, which reinstated the LA ruling. According to the CA, a perusal of the contracts of employment would
show that they were specifically hired for the Alitel project, hence the termination of the Alitel project also
terminated their employment. Their employment contract need not state the enid of their employment; it is
enough that it is determinable. The petitioners thus elevated their case to the Supreme Court. The Issue:
Whether or not the petitioners are project-based employees.

The Court‟ s ruling:

The petition is without merit. At the outset, it must be stressed that to justify the grant of the extraordinary
remedy of certiorari, petitioners must satisfactorily show that the court or quasi-judicial authority gravely
abused the discretion conferred upon it. Grave abuse of discretion connotes judgment exercised in a capricious
and whimsical manner that is tantamount to lack
of jurisdiction. To be considered “grave,” discretion must be exercised in a despotic manner by reason of
passion
or personal hostility, and must be so patent and gross as to amount to an evasion of positive duty or to a virtual
refusal to perform the duty enjoined by or to act at all in contemplation of law.
⁠1
In labor disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia, its findings and the
conclusions reached thereby are not supported by substantial evidence. This requirement of substantial
evidence
is clearly expressed in Section 5, Rule 133 of the Rules of Court which provides that “in cases filed before
administrative or quasi-judicial bodies, a fact may be deemed established if it is supported by substantial
evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.”⁠2
Tested against these considerations, the Court fi
nds that the CA correctly granted respondents‟ certiorari petition
before it, since the NLRC gravely abused its discretion in ruling that petitioners were regular employees of
Sykes Asia when the latter had established by substantial evidence that they were merely project-based.
Article 294
⁠3 of the Labor Code,⁠4 as amended, distinguishes a project
-based employee from a regular employee as follows: Art. 294. Regular and casual employment.
—
The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer, except where
the employment has been fixed for a specific project or undertaking the completion or termination of which
has been determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season. x x x x (Emphasis and
underscoring supplied)

In Omni Hauling Services, Inc. v. Bon,

⁠5 the Court extensively discussed how to determine whether an employee
may be properly deemed project-based or regular, to wit: A project employee is assigned to a project which
begins and ends at determined or determinable times. Unlike regular employees who may only be dismissed
for just and/or authorized causes under the Labor Code, the
services of employees who are hired as “p
roject[-
based] employees” may be lawfully terminated at the completion
of the project. According to jurisprudence, the principal test for determining whether particular employees are
properly
characterised as “project[
-
based] employees” as distinguished from “regular employees,” is whether or not the employees were assigned
to carry out a “specific project or undertaking,” the duration (and scope) of which were
specified at the time they were engaged for that project. The project could either be (1) a particular job or
undertaking that is within the regular or usual business of the employer company, but which is distinct and
separate, and identifiable as such, from the other undertakings of the company; or (2) a particular job or
undertaking that is not within the regular business of the corporation. In order to safeguard the rights of
workers
against the arbitrary use of the word “project” to prevent employees from attaining a regular status, employers
claiming that their workers are project[-based] employees should not only prove that the duration and scope
of the employment was specified at the time they were engaged, but also, that there was indeed a project.
⁠6
(Emphases and underscoring supplied) Verily, for an employee to be considered project-based, the employer
must show compliance with two (2) requisites, namely that: (a) the employee was assigned to carry out a
specific project or undertaking; and (b) the duration and scope of which were specified at the time they were
engaged for such project. In this case, records reveal that Sykes Asia adequately informed petitioners of their
employment status at the time
of their engagement, as evidenced by the latter‟ s employment contracts which similarly provide that they
were
hired in connection with the A
lltel Project, and that their positions were “project
-based and as such is co-terminus
to the project.” In this light, the CA correctly ruled that petitioners were indeed project
-based employees, considering that: (a) they were hired to carry out a specific undertaking, i.e., the Alltel
Project; and (b) the duration
and scope of such project were made known to them at the time of their engagement, i.e., “co
-terminus with the
project.”

As regards the second requisite, the CA correctly stressed that “[t]he law and jurisprudence dictate that „the
duration of the undertaking begins and ends at determined or determinable times‟ ” while clarifying that “[t]he
phrase „determinable times‟ simply means capable of being determined or fixed.”⁠7 In this case, Sykes Asi
a
substantially complied with this requisite when it expressly indicated in petitioners‟ employment contracts
that their positions were “co
-
terminus with the project.” To the mind of the Court, this caveat sufficiently apprised petitioners
that their security of tenure with Sykes Asia would only last as long as the Alltel Project was subsisting. In other
words, when the Alltel Project was terminated, petitioners no longer had any project to work on, and hence,
Sykes Asia may validly terminate them from employment. Further, the Court likewise notes the fact that Sykes
Asia duly submitted an Establishment Employment Report
⁠8
and an Establishment Termination Report
⁠9 to the Department of Labor and Employment Makati
-Pasay Field Office regarding the cessation of the Alltel Project and the list of employees that would be affected
by such cessation. As correctly pointed out by the CA, case law deems such submission as an indication that
the employment was indeed project-based
⁠10.
In sum, respondents have shown by substantial evidence that petitioners were merely project-based
employees, and as such, their services were lawfully terminated upon the cessation of the Alltel Project.

DIVISION
[ GR No. 202015, Jul 13, 2016 ]
ANTONIO VALEROSO & ALLAN LEGATONA v. SKYCABLE CORPORATION +
RESOLUTION

DEL CASTILLO, J.:

By this Petition for Review on Certiorari,[1] Antonio Valeroso and Allan Legatona (petitioners) assail the
November 11, 2011 Decision[2] and May 18, 2012 Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP No.
116296, which reversed the May 24, 2010 Decision[4] of the National Labor Relations Commission (NLRC) and
consequently dismissed their Complaint for illegal dismissal and money claims against Skycable Corporation
(respondent).

Antecedent Facts

This case arose from a Complaint[5] for illegal dismissal, non-payment of 13th month pay, separation pay and
illegal deduction filed by petitioners against respondent on February 25, 2009 before the Labor Arbiter,
docketed as NLRC NCR Case No. 02-03439-09. The Complaint was subsequently amended to include
regularization and payment of moral and exemplary damages as additional causes of action.[6]

Petitioners Valeroso and Legatona alleged that they started working on November 1, 1998 and July 13,1998,
respectively, as account executives tasked to solicit cable subscriptions for respondent, as evidenced by
Certifications[7] issued by Michael T. De la Cuesta (De la Cuesta), respondent's Sales Territory Manager. As
shown in their payslips[8] for the years 2001 to 2006, they received commissions ranging from P15,000.00 to
530,000.00 each upon reaching a specific quota every month and an allowance of P6,500.00 to P7,000.00 per
month. From being direct hires of respondent, they were transferred on January 1, 2007 to Skill Plus Manpower
Services sans any agreement for their transfer. In February 2009, they were informed that their commissions
would be reduced due to the introduction of prepaid cards sold to cable subscribers resulting in lower monthly
cable subscriptions. Dismayed, they notified their manager, Marlon Pasta (Pasta), of their intention to file a
labor case with the NLRC, which they did on February 25, 2009. Pasta then informed them that they will be
dropped from the roster of its account executives, which act, petitioners claimed, constitutes unfair labor
practice.

Further, petitioners claimed that they did not receive 13th month pay for 2006 and were underpaid of such
benefit for the years 2007 and 2008; and that in January 2008, petitioner Legatona signed a Release and
Quitclaim[9] in consideration of the amount of P25,000.00 as loyalty bonus from respondent.
Respondent, on the other hand, claimed that it did not terminate the services of petitioners for there was never
an employer-employee relationship to begin with. It averred that in 1998, respondent (then Central CATV, Inc.)
engaged petitioners as independent contractors under a Sales Agency Agreement.[10] In 2007, respondents
decided to streamline its operations and instead of contracting with numerous independent account executives
such as petitioners, respondent engaged the services of an independent contractor, Armada Resources &
Marketing Solutions, Inc. (Armada, for brevity; formerly Skill Plus Manpower Services) under a Sales Agency
Agreement.[11] As a result, petitioners' contracts were terminated but they, together with other sales account
executives, were referred for transfer to Armada. Petitioners then became employees of Armada. In 2009,
respondent and Armada again entered into a Sales Agency Agreement,[12] wherein petitioners were again
tasked to solicit accounts/ generate sales for respondent.
Respondent insisted that in hiring petitioners and Armada as independent contractors, it engaged in legitimate
job contracting where no employer-employee relation exists between them. In an affidavit,[13] De la Cuesta
stated that the certifications he issued are not employment certifications but are mere accommodations,
requested by petitioners themselves, for their credit card and loan applications. Moreover, Armada's President,
Francisco Navasa (Navasa), in his affidavit,[14] verified that Armada is an independent contractor which
selected and engaged the services of petitioners, paid their compensation, exercised the power to control their
conduct and discipline or dismiss them. Therefore, when petitioners filed their Complaint in February 2009,
they were employees of Armada and as such, had no cause of action against respondent.

Petitioners, however, assailed the allegation that they were employees of Armada, claiming that they were
directly hired, paid and dismissed by respondent. They cited the following as indicators that they are under the
direct control and supervision of respondent: 1) respondent's officers supervise their area of work, monitor
them daily, update them of new promos and installations they need to work on, inform them of meetings and
penalize them for non-attendance, ask them to train new agents/account executives, and inform them of new
prices and expiration dates of product promos; 2) respondent's supervisors delegate to them authority to
investigate, campaign against and legalize unlawful cable connections; 3) respondent's supervisors monitor
their quota production and impose guaranteed charges as penalty for failing to meet their quota; and 4)
respondent consistently gives trophies to award them of their outstanding performance.

Ruling of the Labor Arbiter

In a Decision[15] dated August 26, 2009, the Labor Arbiter dismissed the Complaint since petitioners failed to
establish by substantial evidence that respondent was their employer. The Labor Arbiter observed that
petitioners failed to identify and specify the person who allegedly hired them, paid their wages and exercised
supervision and control over the manner and means of performing their work. There was neither any evidence
to prove that Pasta, who allegedly dismissed them, is an officer of respondent with an authority to dismiss
them. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the complaint filed in the instant case is dismissed as discussed in the body
hereof.

SO ORDERED.[16]

Ruling of the National Labor Relations Commission

Petitioners filed an appeal with the NLRC attributing reversible error on the Labor Arbiter in dismissing their
Complaint on the ground of no employer-employee relationship.
In a Decision[17] dated May 24, 2010, the NLRC reversed the Labor Arbiter's ruling. It found that petitioners are
regular employees of respondent having performed their job as account executives for more than one year,
even if not continuous and merely intermittent, and considering the indispensability and continuing need of
petitioners' tasks to the business. The NLRC observed that there was no evidence that petitioners have
substantial capitalization or investment to consider them as independent contractors. On the other hand, the
certifications and the payslips presented by petitioners constitute substantial evidence of employer-employee
relationship. The NLRC held that upon termination of the Sales Agency Agreement with Armada in 2009,
petitioners were considered dismissed without just cause and due process. The dispositive portion of the NLRC
Decision reads:

WHEREFORE, premises considered, the instant appeal is GRANTED and the assailed Decision of Labor Arbiter
Gaudencio P. Demaisip, Jr. dated August 26, 2009, is REVERSED and SET ASIDE, and a new one entered
declaring complainants to have been illegally dismissed. Accordingly, respondent Skycable
Corporation/Central CATV Inc. is hereby directed to immediately reinstate complainants to their former
positionfs] and to pay each of the complainants their full backwages reckoned from February 25,2009 up to the
actual payroll reinstatement, (tentatively computed at P607,200.00), in addition to the amount of P58,500.00
representing 13th month pay differentials and pro-ratal 3th month pay for 2009.

SO ORDERED.[18]

With the NLRC s ruling in favor of petitioners, respondent filed a motion for reconsideration. This motion was,
however, denied by the NLRC in its Resolution[19] of July 27, 2010.

Riding of the Court of Appeals

Respondent filed a Petition for Certiorari[20] with the CA, attributing grave abuse of discretion on the part of
the NLRC in holding it liable for the alleged illegal dismissal of petitioners.

The CA rendered a Decision[21] on November 11, 2011 granting respondent's Petition for Certiorari and
reversing the NLRC Decision. The CA sustained the Labor Arbiter's finding that there was no evidence to
substantiate the bare allegation of employer-employee relationship between the parties. The dispositive
portion of the CA Decision reads:

WHEREFORE, premises considered, the instant petition is GRANTED and the Decision dated May 24, 2010 of
the National Labor Relations Commission in NLRC NCR Case No. 02-03439-09 is hereby REVERSED and SET
ASIDE.

SO ORDERED.[22]

Petitioners moved for reconsideration which was denied by the CA in its Resolution[23] dated May 18, 2012.

Issues

Hence, this Petition raising the following issues:

I.

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RENDERING ITS DECISION DATED NOVEMBER
11, 2011.
II.

WHETHER THE PETITIONERS WERE RESPONDENT'S REGULAR EMPLOYEES, WHOSE DISMISSAL FROM
EMPLOYMENT WAS ILLEGAL.[24]

Petitioners maintain that respondent failed to discharge the burden of disproving the employer-employee
relationship through competent evidence of independent contractorship. They assert that the nature of their
work and length of service with respondent made them regular employees as defined in Article 280[25] of the
Labor Code. Consequently, the CA gravely erred in dismissing their Complaint for illegal dismissal against
respondent.

Our Ruling

The Petition has no merit.

The pivotal issue to be resolved in this case is whether petitioners were employees of respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a

question of fact and that the findings thereon by the Labor Arbiter and NLRC shall be accorded not only respect
but even finality when supported by substantial evidence.[26] However, considering the conflicting findings of
fact by the Labor Arbiter, the NLRC and the CA, the Court is impelled to re-examine the records and resolve
this factual issue.

To prove the claim of an employer-employee relationship, the following should be established by competent
evidence: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the employer's power to control the employee with respect to the means and methods by
which the work is to be accomplished.[27] Among the four, the most determinative factor in ascertaining the
existence of employer-employee relationship is the "right of control test."[28] Under this control test, the
person for whom the services are performed reserves the right to control not only the end to be achieved, but
also the means by which such end is reached.[29]

We rule that an employer-employee relationship is absent in this case. The evidence presented by petitioners
did not prove their claim that they were employees of respondent. The certifications issued by De la Cuesta are
not competent evidence of employer-employee relation as these merely certified that respondent had
engaged the services of petitioners without specifying the true nature of such engagement. These documents
did not certify that petitioners were employees but were only issued to accommodate petitioners' request for
loan applications, which fact was not refuted by petitioners. As for the payslips presented, it appears that only
the payslips for the years 2001 to 2006 were submitted. No payslips for the years material to this case (2007 to
2009) were submitted. It is undisputed that petitioners were transferred to Armada in 2007, thus, we cannot
give much credence to the payslips issued before this period.

We, further, find no merit in petitioners' assertion that respondent's control over them was demonstrated.
"[Guidelines indicative of labor law 'control' do not merely relate to the mutually desirable result intended by
the contractual relationship; they must have the nature of dictating the means and methods to be employed
in attaining the result."[30] Here, we find that respondent's act of regularly updating petitioners of new promos,
new price listings, meetings and trainings of new account executives; imposing quotas and penalties; and
giving commendations for meritorious performance do not pertain to the means and methods of how
petitioners were to perform and accomplish their task of soliciting cable subscriptions. At most, these indicate
that respondent regularly monitors the result of petitioners' work but in no way dictate upon them the manner
in which they should perform their duties. Absent any intrusion by respondent into the means and manner of
conducting petitioners' tasks, bare assertion that petitioners' work was supervised and monitored does not
suffice to establish employer-employee relationship.

Reliance by petitioners on the case of Francisco v. National Labor Relations Commission[31] is misplaced. In
that case, the Court adopted a two-tiered test in order to determine the true relationship between the
employer and employee. This two-tiered test, which involves: "(1) the putative employer's power to control the
employee with respect to the means and methods by which the work is to be accomplished; and (2) the
underlying economic realities of the activity or relationship," has been made especially appropriate in cases
where there is no written agreement to base the relationship on and where the various tasks performed by the
worker brings complexity to the relationship with the employer.[32] Thus, in addition to the control test, the
totality of the economic circumstances of the worker is taken into light to determine the existence of
employment relationship.

In the present case, there is a written contract, i.e., the Sales Agency Agreement, which served as the primary
evidence of the nature of the parties' relationship. In this duly executed and signed agreement, petitioners and
respondent unequivocally agreed that petitioners' services were to be engaged on an agency basis as sales
account executives and that no employer-employee relationship is created but an independent contractorship.
It is therefore clear that the intention at the time of the signing of the agreement is not to be bound by an
employer-employee relationship. At any rate, even if we are to apply the two-tiered test pronounced in the
Francisco case, there can still be no employer-employee relationship since, as discussed, the element of control
is already absent.

Indeed, "[t]he presence of [the] power of control is indicative of an employment relationship while the absence
thereof is indicative of independent contractorship."[33] Moreover, evidence on record reveal the existence of
independent contractorship between the parties. As mentioned, the Sales Agency Agreement provided the
primary evidence of such relationship. "While the existence of employer-employee relationship is a matter of
law, the characterization made by the parties in their contract as to the nature of their juridical relationship
cannot be simply ignored, particularly in this case where the parties' written contract unequivocally states their
intention"[34] to be strictly bound by independent contractorship. Petitioner Legatona, in fact, in his Release
and Quitclaim, acknowledged that he was performing sales activities as sales agent/independent contractor
and not an employee of respondent. In the same token, De la Cuesta and Navasa, made sworn testimonies that
petitioners are employees of Armada which is an independent contractor engaged to provide marketing
services for respondent.

Neither can we subscribe to petitioners' contention that they are considered regular employees of respondent
for they perform functions necessary and desirable to the business operation of respondent in consonance with
Article 280 of the Labor Code. We have held that "Article 280 is not the yardstick for determining the existence
of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular
employees and casual employees, for purposes of determining [their rights] to certain benefits, [such as] to
join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment
relationship is in dispute,"[35] as in this case.

Evidently, the legal relation of petitioners as sales account executives to respondent can be that of an
independent contractor. There was no showing that respondent had control with respect to the details of how
petitioners must conduct their sales activity of soliciting cable subscriptions from the public. In the case of
Abante, Jr. v. Lamadrid Bearing & Parts Corporation,[36] Empermaco Abante, Jr., a commission salesman who
pursued his selling activities without interference or supervision from respondent company and relied on his
own resources to perform his functions, was held to be an independent contractor. Similarly, in Sandigan
Savings & Loan Bank, Inc. v. National Labor Relations Commission,[37] Anita Javier was also held to be an
independent contractor as the Court found that Sandigan Realty Development Corporation had no control over
her conduct as a realty sales agent since its only concern or interest was in the result of her work and not in how
it was achieved.

All told, we sustain the CA's factual findings and conclusion and accordingly, find no cogent reason to overturn
the dismissal of petitioners' Complaint against respondent.

WHEREFORE, the Petition is DENIED. The November 11, 2011 Decision and May 18, 2012 Resolution of the
Court of Appeals in CA-G.R. SP No. 116296 are AFFIRMED.
SO ORDERED.

HACIENDA FATIMA vs NATIONAL FEDERATION OF SUGARCANE WORKERS-FOOD AND GENERAL

TRADE Case Digest
[G.R. No. 149440. January 28, 2003]

FACTS: In the course of a labor dispute between the petitioner and respondent union, the union members were
not given work for more than one month. In protest, complainants staged a strike which was however settled
upon the signing of a Memorandum of Agreement. A conciliation meeting was conducted wherein Luisa
Rombo, Ramona Rombo, Bobong Abrega, and Boboy Silva were not considered by the company as employees,
and thus may not be members of the union. It was also agreed that a number of other employees will be
reinstated. When respondents again reneged on its commitment, complainants filed the present complaint. It
is alleged by the petitioners that the above employees are mere seasonal employees.

ISSUE: Whether or not the seasonal employees have become regular employees.

HELD: The SC held that for respondents to be excluded from those classified as regular employees, it is not
enough that they perform work or services that are seasonal in nature. They must have also been employed
only for the duration of one season. The evidence proves the existence of the first, but not of the second,
condition. The fact that respondents -- with the exception of Luisa Rombo, Ramona Rombo, Bobong Abriga
and Boboy Silva -- repeatedly worked as sugarcane workers for petitioners for several years is not denied by
the latter. Evidently, petitioners employed respondents for more than one season. Therefore, the general rule
of regular employment is applicable.

The primary standard of determining regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual trade or business of the employer. The test is
whether the former is usually necessary or desirable in the usual trade or business of the employer. The
connection can be determined by considering the nature of the work performed and its relation to the scheme
of the particular business or trade in its entirety. Also if the employee has been performing the job for at least
a year, even if the performance is not continuous and merely intermittent, the law deems repeated and
continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity
to the business. Hence, the employment is considered regular, but only with respect to such activity and while
such activity exists.

Petition is denied.
CHERRY J. PRICE, STEPHANIE G. DOMINGO AND LOLITA ARBILERA, Petitioners,
- versus -
INNODATA PHILS. INC.,/ INNODATA CORPORATION, LEO RABANG AND JANE NAVARETTE,
Respondents.
G.R. No. 178505

DECISION

CHICO-NAZARIO, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the Decision1 dated 25
September 2006 and Resolution2 dated 15 June 2007 of the Court of Appeals in CA-G.R. SP No. 72795, which
affirmed the Decision dated 14 December 2001 of the National Labor Relations Commission (NLRC) in NLRC
NCR Case No. 30-03-01274-2000 finding that petitioners were not illegally dismissed by respondents.

The factual antecedents of the case are as follows:

Respondent Innodata Philippines, Inc./Innodata Corporation (INNODATA) was a domestic corporation

engaged in the data encoding and data conversion business. It employed encoders, indexers, formatters,
programmers, quality/quantity staff, and others, to maintain its business and accomplish the job orders of its
clients. Respondent Leo Rabang was its Human Resources and Development (HRAD) Manager, while
respondent Jane Navarette was its Project Manager. INNODATA had since ceased operations due to business
losses in June 2002.

Petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita Arbilera were employed as formatters by
INNODATA. The parties executed an employment contract denominated as a "Contract of Employment for a
Fixed Period," stipulating that the contract shall be for a period of one year,3 to wit:

CONTRACT OF EMPLOYMENT FOR A FIXED PERIOD

WITNESSETH: That
WHEREAS, the EMPLOYEE has applied for the position of FORMATTER and in the course thereof and
represented himself/herself to be fully qualified and skilled for the said position;
WHEREAS, the EMPLOYER, by reason of the aforesaid representations, is desirous of engaging that the (sic)
services of the EMPLOYEE for a fixed period;

NOW, THEREFORE, for and in consideration of the foregoing premises, the parties have mutually agreed as
follows:

TERM/DURATION
The EMPLOYER hereby employs, engages and hires the EMPLOYEE and the EMPLOYEE hereby accepts such
appointment as FORMATTER effective FEB. 16, 1999 to FEB. 16, 2000 a period of ONE YEAR.

xxxx

TERMINATION

6.1 In the event that EMPLOYER shall discontinue operating its business, this CONTRACT shall also ipso facto
terminate on the last day of the month on which the EMPLOYER ceases operations with the same force and
effect as is such last day of the month were originally set as the termination date of this Contract. Further
should the Company have no more need for the EMPLOYEE’s services on account of completion of the project,
lack of work (sic) business losses, introduction of new production processes and techniques, which will negate
the need for personnel, and/or overstaffing, this contract maybe pre-terminated by the EMPLOYER upon
giving of three (3) days notice to the employee.

6.2 In the event period stipulated in item 1.2 occurs first vis-à-vis the completion of the project, this contract
shall automatically terminate.

6.3 COMPANY’s Policy on monthly productivity shall also apply to the EMPLOYEE.

6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without cause, by giving
at least Fifteen – (15) notice to that effect. Provided, that such pre-termination shall be effective only upon
issuance of the appropriate clearance in favor of the said EMPLOYEE.

6.5 Either of the parties may terminate this Contract by reason of the breach or violation of the terms and
conditions hereof by giving at least Fifteen (15) days written notice. Termination with cause under this
paragraph shall be effective without need of judicial action or approval.4

During their employment as formatters, petitioners were assigned to handle jobs for various clients of
INNODATA, among which were CAS, Retro, Meridian, Adobe, Netlib, PSM, and Earthweb. Once they finished
the job for one client, they were immediately assigned to do a new job for another client.

On 16 February 2000, the HRAD Manager of INNODATA wrote petitioners informing them of their last day of
work. The letter reads:

RE: End of Contract

Date: February 16, 2000

Please be informed that your employment ceases effective at the end of the close of business hours on
February 16, 2000.5

According to INNODATA, petitioners’ employment already ceased due to the end of their contract.

On 22 May 2000, petitioners filed a Complaint6 for illegal dismissal and damages against respondents.
Petitioners claimed that they should be considered regular employees since their positions as formatters were
necessary and desirable to the usual business of INNODATA as an encoding, conversion and data processing
company. Petitioners also averred that the decisions in Villanueva v. National Labor Relations Commission7
and Servidad v. National Labor Relations Commission,8 in which the Court already purportedly ruled "that the
nature of employment at Innodata Phils., Inc. is regular,"9 constituted stare decisis to the present case.
Petitioners finally argued that they could not be considered project employees considering that their
employment was not coterminous with any project or undertaking, the termination of which was
predetermined.

On the other hand, respondents explained that INNODATA was engaged in the business of data processing,
typesetting, indexing, and abstracting for its foreign clients. The bulk of the work was data processing, which
involved data encoding. Data encoding, or the typing of data into the computer, included pre-encoding,
encoding 1 and 2, editing, proofreading, and scanning. Almost half of the employees of INNODATA did data
encoding work, while the other half monitored quality control. Due to the wide range of services rendered to
its clients, INNODATA was constrained to hire new employees for a fixed period of not more than one year.
Respondents asserted that petitioners were not illegally dismissed, for their employment was terminated due
to the expiration of their terms of employment. Petitioners’ contracts of employment with INNODATA were
for a limited period only, commencing on 6 September 1999 and ending on 16 February 2000.10 Respondents
further argued that petitioners were estopped from asserting a position contrary to the contracts which they
had knowingly, voluntarily, and willfully agreed to or entered into. There being no illegal dismissal, respondents
likewise maintained that petitioners were not entitled to reinstatement and backwages.

On 17 October 2000, the Labor Arbiter11 issued its Decision12 finding petitioners’ complaint for illegal dismissal
and damages meritorious. The Labor Arbiter held that as formatters, petitioners occupied jobs that were
necessary, desirable, and indispensable to the data processing and encoding business of INNODATA. By the
very nature of their work as formatters, petitioners should be considered regular employees of INNODATA,
who were entitled to security of tenure. Thus, their termination for no just or authorized cause was illegal. In
the end, the Labor Arbiter decreed:

FOREGOING PREMISES CONSIDERED, judgment is hereby rendered declaring complainants’ dismissal illegal
and ordering respondent INNODATA PHILS. INC./INNODATA CORPORATION to reinstate them to their
former or equivalent position without loss of seniority rights and benefits. Respondent company is further
ordered to pay complainants their full backwages plus ten percent (10%) of the totality thereof as attorney’s
fees. The monetary awards due the complainants as of the date of this decision are as follows:

A. Backwages

1. Cherry J. Price

2/17/2000 – 10/17/2000 at 223.50/day

P5,811.00/mo/ x 8 mos. P46,488.00
2. Stephanie Domingo 46,488.00 (same computation)
3. Lolita Arbilera 46,488.00(same computation)
Total Backwages P139,464.00
B. Attorney’s fees (10% of total award) 13,946.40
Total Award P153,410.40
Respondent INNODATA appealed the Labor Arbiter’s Decision to the NLRC. The NLRC, in its Decision dated
14 December 2001, reversed the Labor Arbiter’s Decision dated 17 October 2000, and absolved INNODATA of
the charge of illegal dismissal.
The NLRC found that petitioners were not regular employees, but were fixed-term employees as stipulated in
their respective contracts of employment. The NLRC applied Brent School, Inc. v. Zamora13 and St. Theresa’s
School of Novaliches Foundation v. National Labor Relations Commission,14 in which this Court upheld the
validity of fixed-term contracts. The determining factor of such contracts is not the duty of the employee but
the day certain agreed upon by the parties for the commencement and termination of the employment
relationship. The NLRC observed that the petitioners freely and voluntarily entered into the fixed-term
employment contracts with INNODATA. Hence, INNODATA was not guilty of illegal dismissal when it
terminated petitioners’ employment upon the expiration of their contracts on 16 February 2000.
The dispositive portion of the NLRC Decision thus reads:
WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and SET ASIDE and a
new one entered DISMISSING the instant complaint for lack of merit.15
The NLRC denied petitioners’ Motion for Reconsideration in a Resolution dated 28 June 2002.16
In a Petition for Certiorari under Rule 65 of the Rules of Court filed before the Court of Appeals, petitioners
prayed for the annulment, reversal, modification, or setting aside of the Decision dated 14 December 2001 and
Resolution dated 28 June 2002 of the NLRC.lawphil.net
On 25 September 2006, the Court of Appeals promulgated its Decision sustaining the ruling of the NLRC that
petitioners were not illegally dismissed.
The Court of Appeals ratiocinated that although this Court declared in Villanueva and Servidad that the
employees of INNODATA working as data encoders and abstractors were regular, and not contractual,
petitioners admitted entering into contracts of employment with INNODATA for a term of only one year and
for a project called Earthweb. According to the Court of Appeals, there was no showing that petitioners entered
into the fixed-term contracts unknowingly and involuntarily, or because INNODATA applied force, duress or
improper pressure on them. The appellate court also observed that INNODATA and petitioners dealt with each
other on more or less equal terms, with no moral dominance exercised by the former on latter. Petitioners were
therefore bound by the stipulations in their contracts terminating their employment after the lapse of the fixed
term.
The Court of Appeals further expounded that in fixed-term contracts, the stipulated period of employment is
governing and not the nature thereof. Consequently, even though petitioners were performing functions that
are necessary or desirable in the usual business or trade of the employer, petitioners did not become regular
employees because their employment was for a fixed term, which began on 16 February 1999 and was
predetermined to end on 16 February 2000.
The appellate court concluded that the periods in petitioners’ contracts of employment were not imposed to
preclude petitioners from acquiring security of tenure; and, applying the ruling of this Court in Brent, declared
that petitioners’ fixed-term employment contracts were valid. INNODATA did not commit illegal dismissal for
terminating petitioners’ employment upon the expiration of their contracts.
The Court of Appeals adjudged:
WHEREFORE, the instant petition is hereby DENIED and the Resolution dated December 14, 2001 of the
National Labor Relations Commission declaring petitioners were not illegally dismissed is AFFIRMED.17
The petitioners filed a Motion for Reconsideration of the afore-mentioned Decision of the Court of Appeals,
which was denied by the same court in a Resolution dated 15 June 2007.
Petitioners are now before this Court via the present Petition for Review on Certiorari, based on the following
assignment of errors:
I.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW AND GRAVE ABUSE OF
DISCRETION WHEN IT DID NOT APPLY THE SUPREME COURT RULING IN THE CASE OF NATIVIDAD &
QUEJADA THAT THE NATURE OF EMPLOYMENT OF RESPONDENTS IS REGULAR NOT FIXED, AND AS SO
RULED IN AT LEAST TWO OTHER CASES AGAINST INNODATA PHILS. INC.
II.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN RULING THAT THE
STIPULATION OF CONTRACT IS GOVERNING AND NOT THE NATURE OF EMPLOYMENT AS DEFINED BY
LAW.
III.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION WHEN IT DID NOT CONSIDER THE EVIDENCE ON RECORD SHOWING THAT THERE
IS CLEAR CIRCUMVENTION OF THE LAW ON SECURITY OF TENURE THROUGH CONTRACT
MANIPULATION.18
The issue of whether petitioners were illegally dismissed by respondents is ultimately dependent on the
question of whether petitioners were hired by INNODATA under valid fixed-term employment contracts.
After a painstaking review of the arguments and evidences of the parties, the Court finds merit in the present
Petition. There were no valid fixed-term contracts and petitioners were regular employees of the INNODATA
who could not be dismissed except for just or authorized cause.
The employment status of a person is defined and prescribed by law and not by what the parties say it should
be.19 Equally important to consider is that a contract of employment is impressed with public interest such
that labor contracts must yield to the common good.20 Thus, provisions of applicable statutes are deemed
written into the contract, and the parties are not at liberty to insulate themselves and their relationships from
the impact of labor laws and regulations by simply contracting with each other.21
Regular employment has been defined by Article 280 of the Labor Code, as amended, which reads:
Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities which are usually necessary or desirable in
the usual business or trade of the employer, except where the employment has been fixed for a specific project
or undertaking the completion or termination of which has been determined at the time of engagement of the
employee or where the work or services to be performed is seasonal in nature and employment is for the
duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph. Provided, That,
any employee who has rendered at least one year of service, whether such service is continuous or broken, shall
be considered a regular employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists. (Underscoring ours).
Based on the afore-quoted provision, the following employees are accorded regular status: (1) those who are
engaged to perform activities which are necessary or desirable in the usual business or trade of the employer,
regardless of the length of their employment; and (2) those who were initially hired as casual employees, but
have rendered at least one year of service, whether continuous or broken, with respect to the activity in which
they are employed.
Undoubtedly, petitioners belong to the first type of regular employees.
Under Article 280 of the Labor Code, the applicable test to determine whether an employment should be
considered regular or non-regular is the reasonable connection between the particular activity performed by
the employee in relation to the usual business or trade of the employer.22
In the case at bar, petitioners were employed by INNODATA on 17 February 1999 as formatters. The primary
business of INNODATA is data encoding, and the formatting of the data entered into the computers is an
essential part of the process of data encoding. Formatting organizes the data encoded, making it easier to
understand for the clients and/or the intended end users thereof. Undeniably, the work performed by
petitioners was necessary or desirable in the business or trade of INNODATA.
However, it is also true that while certain forms of employment require the performance of usual or desirable
functions and exceed one year, these do not necessarily result in regular employment under Article 280 of the
Labor Code.23 Under the Civil Code, fixed-term employment contracts are not limited, as they are under the
present Labor Code, to those by nature seasonal or for specific projects with predetermined dates of
completion; they also include those to which the parties by free choice have assigned a specific date of
termination.24
The decisive determinant in term employment is the day certain agreed upon by the parties for the
commencement and termination of their employment relationship, a day certain being understood to be that
which must necessarily come, although it may not be known when. Seasonal employment and employment
for a particular project are instances of employment in which a period, where not expressly set down, is
necessarily implied.25
Respondents maintain that the contracts of employment entered into by petitioners with INNDOATA were
valid fixed-term employment contracts which were automatically terminated at the expiry of the period
stipulated therein, i.e., 16 February 2000.
The Court disagrees.
While this Court has recognized the validity of fixed-term employment contracts, it has consistently held that
this is the exception rather than the general rule. More importantly, a fixed-term employment is valid only
under certain circumstances. In Brent, the very same case invoked by respondents, the Court identified several
circumstances wherein a fixed-term is an essential and natural appurtenance, to wit:
Some familiar examples may be cited of employment contracts which may be neither for seasonal work nor for
specific projects, but to which a fixed term is an essential and natural appurtenance: overseas employment
contracts, for one, to which, whatever the nature of the engagement, the concept of regular employment with
all that it implies does not appear ever to have been applied, Article 280 of the Labor Code notwithstanding;
also appointments to the positions of dean, assistant dean, college secretary, principal, and other
administrative offices in educational institutions, which are by practice or tradition rotated among the faculty
members, and where fixed terms are a necessity without which no reasonable rotation would be possible.
Similarly, despite the provisions of Article 280, Policy Instructions No. 8 of the Minister of Labor implicitly
recognize that certain company officials may be elected for what would amount to fixed periods, at the
expiration of which they would have to stand down, in providing that these officials, "x x may lose their jobs as
president, executive vice-president or vice president, etc. because the stockholders or the board of directors
for one reason or another did not reelect them."26
As a matter of fact, the Court, in its oft-quoted decision in Brent, also issued a stern admonition that where,
from the circumstances, it is apparent that the period was imposed to preclude the acquisition of tenurial
security by the employee, then it should be struck down as being contrary to law, morals, good customs, public
order and public policy.27
After considering petitioners’ contracts in their entirety, as well as the circumstances surrounding petitioners’
employment at INNODATA, the Court is convinced that the terms fixed therein were meant only to circumvent
petitioners’ right to security of tenure and are, therefore, invalid.

The contracts of employment submitted by respondents are highly suspect for not only being ambiguous, but
also for appearing to be tampered with.

Petitioners alleged that their employment contracts with INNODATA became effective 16 February 1999, and
the first day they reported for work was on 17 February 1999. The Certificate of Employment issued by the
HRAD Manager of INNODATA also indicated that petitioners Price and Domingo were employed by
INNODATA on 17 February 1999.

However, respondents asserted before the Labor Arbiter that petitioners’ employment contracts were
effective only on 6 September 1999. They later on admitted in their Memorandum filed with this Court that
petitioners were originally hired on 16 February 1999 but the project for which they were employed was
completed before the expiration of one year. Petitioners were merely rehired on 6 September 1999 for a new
project. While respondents submitted employment contracts with 6 September 1999 as beginning date of
effectivity, it is obvious that in one of them, the original beginning date of effectivity, 16 February 1999, was
merely crossed out and replaced with 6 September 1999. The copies of the employment contracts submitted
by petitioners bore similar alterations.

The Court notes that the attempt to change the beginning date of effectivity of petitioners’ contracts was very
crudely done. The alterations are very obvious, and they have not been initialed by the petitioners to indicate
their assent to the same. If the contracts were truly fixed-term contracts, then a change in the term or period
agreed upon is material and would already constitute a novation of the original contract.

Such modification and denial by respondents as to the real beginning date of petitioners’ employment
contracts render the said contracts ambiguous. The contracts themselves state that they would be effective
until 16 February 2000 for a period of one year. If the contracts took effect only on 6 September 1999, then its
period of effectivity would obviously be less than one year, or for a period of only about five months.

Obviously, respondents wanted to make it appear that petitioners worked for INNODATA for a period of less
than one year. The only reason the Court can discern from such a move on respondents’ part is so that they can
preclude petitioners from acquiring regular status based on their employment for one year. Nonetheless, the
Court emphasizes that it has already found that petitioners should be considered regular employees of
INNODATA by the nature of the work they performed as formatters, which was necessary in the business or
trade of INNODATA. Hence, the total period of their employment becomes irrelevant.

Even assuming that petitioners’ length of employment is material, given respondents’ muddled assertions, this
Court adheres to its pronouncement in Villanueva v. National Labor Relations Commission,28 to the effect that
where a contract of employment, being a contract of adhesion, is ambiguous, any ambiguity therein should be
construed strictly against the party who prepared it. The Court is, thus, compelled to conclude that petitioners’
contracts of employment became effective on 16 February 1999, and that they were already working
continuously for INNODATA for a year.

Further attempting to exonerate itself from any liability for illegal dismissal, INNODATA contends that
petitioners were project employees whose employment ceased at the end of a specific project or undertaking.
This contention is specious and devoid of merit.

In Philex Mining Corp. v. National Labor Relations Commission,29 the Court defined "project employees" as
those workers hired (1) for a specific project or undertaking, and wherein (2) the completion or termination of
such project has been determined at the time of the engagement of the employee.

Scrutinizing petitioners’ employment contracts with INNODATA, however, failed to reveal any mention
therein of what specific project or undertaking petitioners were hired for. Although the contracts made general
references to a "project," such project was neither named nor described at all therein. The conclusion by the
Court of Appeals that petitioners were hired for the Earthweb project is not supported by any evidence on
record. The one-year period for which petitioners were hired was simply fixed in the employment contracts
without reference or connection to the period required for the completion of a project. More importantly, there
is also a dearth of evidence that such project or undertaking had already been completed or terminated to
justify the dismissal of petitioners. In fact, petitioners alleged - and respondents failed to dispute that
petitioners did not work on just one project, but continuously worked for a series of projects for various clients
of INNODATA.

In Magcalas v. National Labor Relations Commission,30 the Court struck down a similar claim by the employer
therein that the dismissed employees were fixed-term and project employees. The Court here reiterates the
rule that all doubts, uncertainties, ambiguities and insufficiencies should be resolved in favor of labor. It is a
well-entrenched doctrine that in illegal dismissal cases, the employer has the burden of proof. This burden was
not discharged in the present case.

As a final observation, the Court also takes note of several other provisions in petitioners’ employment
contracts that display utter disregard for their security of tenure. Despite fixing a period or term of
employment, i.e., one year, INNODATA reserved the right to pre-terminate petitioners’ employment under
the following circumstances:

6.1 x x x Further should the Company have no more need for the EMPLOYEE’s services on account of
completion of the project, lack of work (sic) business losses, introduction of new production processes and
techniques, which will negate the need for personnel, and/or overstaffing, this contract maybe pre-terminated
by the EMPLOYER upon giving of three (3) days notice to the employee.
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without cause, by giving
at least Fifteen – (15) [day] notice to that effect. Provided, that such pre-termination shall be effective only
upon issuance of the appropriate clearance in favor of the said EMPLOYEE. (Emphasis ours.)
Pursuant to the afore-quoted provisions, petitioners have no right at all to expect security of tenure, even for
the supposedly one-year period of employment provided in their contracts, because they can still be pre-
terminated (1) upon the completion of an unspecified project; or (2) with or without cause, for as long as they
are given a three-day notice. Such contract provisions are repugnant to the basic tenet in labor law that no
employee may be terminated except for just or authorized cause.
Under Section 3, Article XVI of the Constitution, it is the policy of the State to assure the workers of security of
tenure and free them from the bondage of uncertainty of tenure woven by some employers into their contracts
of employment. This was exactly the purpose of the legislators in drafting Article 280 of the Labor Code – to
prevent the circumvention by unscrupulous employers of the employee’s right to be secure in his tenure by
indiscriminately and completely ruling out all written and oral agreements inconsistent with the concept of
regular employment.

In all, respondents’ insistence that it can legally dismiss petitioners on the ground that their term of
employment has expired is untenable. To reiterate, petitioners, being regular employees of INNODATA, are
entitled to security of tenure. In the words of Article 279 of the Labor Code:

ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not terminate the services
of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.

By virtue of the foregoing, an illegally dismissed employee is entitled to reinstatement without loss of seniority
rights and other privileges, with full back wages computed from the time of dismissal up to the time of actual
reinstatement.
Considering that reinstatement is no longer possible on the ground that INNODATA had ceased its operations
in June 2002 due to business losses, the proper award is separation pay equivalent to one month pay31 for every
year of service, to be computed from the commencement of their employment up to the closure of
INNODATA.
The amount of back wages awarded to petitioners must be computed from the time petitioners were illegally
dismissed until the time INNODATA ceased its operations in June 2002.32
Petitioners are further entitled to attorney’s fees equivalent to 10% of the total monetary award herein, for
having been forced to litigate and incur expenses to protect their rights and interests herein.

Finally, unless they have exceeded their authority, corporate officers are, as a general rule, not personally liable
for their official acts, because a corporation, by legal fiction, has a personality separate and distinct from its
officers, stockholders and members. Although as an exception, corporate directors and officers are solidarily
held liable with the corporation, where terminations of employment are done with malice or in bad faith,33 in
the absence of evidence that they acted with malice or bad faith herein, the Court exempts the individual
respondents, Leo Rabang and Jane Navarette, from any personal liability for the illegal dismissal of petitioners.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The Decision dated 25 September 2006 and
Resolution dated 15 June 2007 of the Court of Appeals in CA-G.R. SP No. 72795are hereby REVERSED and SET
ASIDE. RespondentInnodata Philippines, Inc./Innodata Corporation is ORDERED to pay petitioners Cherry J.
Price, Stephanie G. Domingo, and Lolita Arbilera: (a) separation pay, in lieu of reinstatement, equivalent to one
month pay for every year of service, to be computed from the commencement of their employment up to the
date respondent Innodata Philippines, Inc./Innodata Corporation ceased operations; (b) full backwages,
computed from the time petitioners’ compensation was withheld from them up to the time respondent
Innodata Philippines, Inc./Innodata Corporation ceased operations; and (3) 10% of the total monetary award as
attorney’s fees. Costs against respondent Innodata Philippines, Inc./Innodata Corporation.
SO ORDERED.

DIVISION
[ GR No. 159350, Mar 09, 2016 ]
ALUMAMAY O. JAMIAS v. NLRC +
DECISION
BERSAMIN, J.:

The petitioners appeal the adverse judgment promulgated on July 31, 2002,[1] whereby the Court of Appeals
(CA) upheld the ruling of the National Labor Relations Commission (NLRC) declaring them as project
employees hired for a fixed period.

Antecedents

Respondent Innodata Philippines, Inc. (Innodata), a domestic corporation engaged in the business of data
processing and conversion for foreign clients,[2] hired the following individuals on various dates and under the
following terms, to wit:
Name Position Duration of Contract
Alumamay Jamias Manual Editor August 7, 1995 to August 7, 1996[3]
Marietha V. Delos Santos Manual Editor August 7, 1995 to August 7, 1996[4]
Lilian R. Guamil Manual Editor August 16, 1995 to August 16, 1996[5]
Rina C. Duque Manual Editor August 7, 1995 to August 7, 1996[6]
Marilen Agabayani Manual Editor August 23, 1995 to August 23, 1996[7]
Alvin V. Patnon Production Personnel September 1, 1995 to September 1,1996[8]
Analyn I. Beter Type Reader September 18, 1995 to September 18, 1996[9]
Jerry O. Soldevilla Production Personnel September 18, 1995 to September 18, 1996[10]
Ma. Concepcion A. Dela Cruz Production Personnel September 18, 1995 to September 18, 1996[11]
Jennifer Cruz Data Encoder November 20, 1995 to November 20, 1996[12]
Jennifer Matuguinas Data Encoder November 20, 1995 to November 20, 1996[13]
After their respective contracts expired, the aforenamed individuals filed a complaint for illegal dismissal
claiming that Innodata had made it appear that they had been hired as project employees in order to prevent
them from becoming regular employees.[14]

Decision of the Labor Arbiter

On September 8, 1998, Labor Arbiter (LA) Vicente Layawen rendered his decision dismissing the complaint for
lack of merit.[15] He found and held that the petitioners had knowingly signed their respective contracts in
which the durations of their engagements were clearly stated; and that their fixed term contracts, being
exceptions to Article 280 of the Labor Code, precluded their claiming regularization.

Ruling of the National Labor Relations Commission

On appeal, the NLRC affirmed the decision of LA Layawen,[16] opining that Article 280 of the Labor Code did
not prohibit employment contracts with fixed periods provided the contracts had been voluntarily entered into
by the parties, viz.:
[I]t is distinctly provided that complainants were hired for a definite period of one year incidental upon the
needs of the respondent by reason of the seasonal increase in the volume of its business. Consequently,
following the rulings in Pantranco North Express, Inc. vs. NLRC, et al., G.R. No. 106654, December 16, 1994,
the decisive determinant in term of employment should not be the activities that the employee is called upon
to perform, but the day certain agreed upon by the parties for the commencement and termination of their
employment relationship, a day certain being understood to be "that which must necessarily come, although
it may not be known when." Further, Article 280 of the Labor Code does not prescribe or prohibit an
employment contract with a fixed period provided, the same is entered into by the parties, without any force,
duress or improper pressure being brought to bear upon the employee and absent any other circumstance
vitiating consent. It does not necessarily follow that where the duties of the employee consist of activities
usually necessary or desirable in the usual business of the employer, the parties are forbidden from agreeing
on a period of time for the performance of such activities. There is thus nothing essentially contradictory
between a definite period of employment and the nature of the employee's duties. x x x[17]
Judgment of the CA

As earlier mentioned, the CA upheld the NLRC. It observed that the desirability and necessity of the functions
being discharged by the petitioners did not make them regular employees; that Innodata and the employees
could still validly enter into their contracts of employment for a fixed period provided they had agreed upon
the same at the time of the employees' engagement;[18] that Innodata's operations were contingent on job
orders or undertakings for its foreign clients; and that the availability of contracts from foreign clients, and the
duration of the employments could not be treated as permanent, but coterminous with the projects.[19]

The petitioners moved for reconsideration,[20] but the CA denied their motion on August 8, 2003.[21]

Hence, this appeal by only three of the original complainants, namely petitioners Alumamay Jamias, Jennifer
Matuguinas and Jennifer Cruz.

Issues

The petitioners anchor their appeal on the following:

I

THE HON. COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION OR IN EXCESS OF JURISDICTION AS IT CANNOT REVERSE OR ALTER THE SUPREME COURT
DECISION

THE SUPREME COURT HAS RULED THAT THE NATURE OF EMPLOYMENT AT RESPONDENTS IS REGULAR
NOT FIXED OR CONTRACTUAL IN AT LEAST TWO (2) CASES AGAINST INNODATA PHILS., INC.
II

THE HON. COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW WHEN IT DID NOT STICK TO
PRECENDENT AS IT HAS ALREADY RULED IN AN EARLIER CASE THAT THE NATURE OF EMPLOYMENT AT
INNODATA PHILS., INC. IS REGULAR AND NOT CONTRACTUAL

III

THE HON. COURT OF APPEALS PATENTLY ERRED IN LAW AND COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN RULING THAT PETITIONERS' EMPLOYMENT IS
FOR A FIXED PERIOD CO-TERMINOUS WITH A PROJECT WHEN THERE IS NO PROJECT TO SPEAK OF

IV

THE HON. COURT OF APPEALS PALPABLY ERRED IN LAW IN RULING THAT THE STIPULATION IN
CONTRACT IS GOVERNING AND NOT THE NATURE OF EMPLOYMENT AS DEFINED BY LAW.[22]
The petitioners maintain that the nature of employment in Innodata had been settled in Villanueva v. National
Labor Relations Commission (Second Division)[23] and Servidad v. National Labor Relations Commission,[24]
whereby the Court accorded regular status to the employees because the work they performed were necessary
and desirable to the business of data encoding, processing and conversion.[25] They insist that the CA
consequently committed serious error in not applying the pronouncement in said rulings, thereby ignoring the
principle of stare decisis in declaring their employment as governed by the contract of employment; that the
CA also erroneously found that the engagement of the petitioners was coterminous with the project that was
nonexistent; that Innodata engaged in "semantic interplay of words" by introducing the concept of "fixed term
employment" or "project employment" that were not founded in law;[26] and that Article 280 of the Labor
Code guarantees the right of workers to security of tenure, which rendered the contracts between the
petitioners and Innodata meaningless.[27]

In refutation, Innodata insists that the contracts dealt with in Villanueva and Servidad were different from those
entered into by the petitioners herein,[28] in that the former contained stipulations that violated the provisions
of the Labor Code on probationary employment and security of tenure,[29] while the latter contained terms
known and explained to the petitioners who then willingly signed the same;[30] that as a mere service provider,
it did not create jobs because its operations depended on the availability of job orders or undertakings from its
client;[31] that Article 280 of the Labor Code allowed "term employment" as an exception to security of tenure;
and that the decisive determinant was the day certain agreed upon by the parties, not the activities that the
employees were called upon to perform.[32]

Were the petitioners regular or project employees of Innodata?

Ruling of the Court

We deny the petition for review on certiorari.

Stare decisis does not apply where the facts are essentially different

Contrary to the petitioners' insistence, the doctrine of stare decisis, by which the pronouncements in Villanueva
and Servidad would control the resolution of this case, had no application herein.
The doctrine of stare decisis enjoins adherence to judicial precedents.[33] When a court has laid down a
principle of law as applicable to a certain state of facts, it will adhere to that principle and apply it to all future
cases in which the facts are substantially the same; but when the facts are essentially different, stare decisis
does not apply because a perfectly sound principle as applied to one set of facts might be entirely inappropriate
when a factual variance is introduced.[34]

Servidad and Villanueva involved contracts that contained stipulations not found in the contracts entered by
the petitioners. The cogent observations in this regard by the CA are worth reiterating:
A cursory examination of the facts would reveal that while all the cases abovementioned involved employment
contracts with a fixed term, the employment contract subject of contention in the Servidad and Villanueva
cases provided for double probation, meaning, that the employees concerned, by virtue of a clause
incorporated in their contracts, were made to remain as probationary employees even if they continue to work
beyond the six month probation period set by law. Indeed, such stipulation militates against Constitutional
policy of guaranteeing the tenurial security of the workingman. To Our mind, the provision alluded to is what
prodded the Supreme Court to disregard and nullify altogether the terms of the written entente. Nonetheless,
it does not appear to be the intendment of the High Tribunal to sweepingly invalidate or declare as unlawful all
employment contracts with a fixed period. To phrase it differently, the said agreements providing for a one
year term would have been declared valid and, consequently, the separation from work of the employees
concerned would have been sustained had their contracts not included any unlawful and circumventive
condition.

It ought to be underscored that unlike in the Servidad and Villanueva cases, the written contracts governing
the relations of the respondent company and the petitioners herein do not embody such illicit stipulation.[35]
We also disagree with the petitioners' manifestation[36] that the Court struck down in Innodata Philippines,
Inc. v. Quejada-Lopez[37] a contract of employment that was similarly worded as their contracts with Innodata.
What the Court invalidated in Innodata Philippines, Inc. v. Quejada-Lopez was the purported fixed-term
contract that provided for two periods - a fixed term of one year under paragraph 1 of the contract, and a three-
month period under paragraph 7.4 of the contract - that in reality placed the employees under probation. In
contrast, the petitioners' contracts did not contain similar stipulations, but stipulations to the effect that their
engagement was for the fixed period of 12 months, to wit:
1. The EMPLOYER shall employ the EMPLOYEE and the EMPLOYEE shall serve the EMPLOYER in the
EMPLOYER'S business as a MANUAL EDITOR on a fixed term only and for a fixed and definite period of twelve
months, commencing on August 7, 1995 and terminating on August 7, 1996, x x x.[38]
In other words, the terms of the petitioners' contracts did not subject them to a probationary period similar to
that indicated in the contracts struck down in Innodata, Villanueva and Servidad.

II

A fixed period in a contract of employment does not by itself signify an intention to circumvent Article 280 of
the Labor Code

The petitioners argue that Innodata circumvented the security of tenure protected under Article 280 of the
Labor Code by providing a fixed term; and that they were regular employees because the work they performed
were necessary and desirable to the business of Innodata.

The arguments of the petitioners lack merit and substance.

Article 280 of the Labor Code provides:

Art. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreements of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities which are usually necessary or desirable in
the usual business or trade of the employer except where the employment has been fixed for a specific project
or undertaking the completion or termination of which has been determined at the time of the engagement of
the employee or where the work or service to be performed is seasonal in nature and the employment is for the
duration of the season.

An employment shall be deemed casual if it is not covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall
continue while such actuallv exists.
The provision contemplates three kinds of employees, namely: (a) regular employees; (b) project employees;
and (c) casuals who are neither regular nor project employees. The nature of employment of a worker is
determined by the factors provided in Article 280 of the Labor Code, regardless of any stipulation in the
contract to the contrary.[39] Thus, in Brent School, Inc. v. Zamora,[40] we explained that the clause referring
to written contracts should be construed to refer to agreements entered into for the purpose of circumventing
the security of tenure. Obviously, Article 280 does not preclude an agreement providing for a fixed term of
employment knowingly and voluntarily executed by the parties.[41]

A fixed term agreement, to be valid, must strictly conform with the requirements and conditions provided in
Article 280 of the Labor Code. The test to determine whether a particular employee is engaged as a project or
regular employee is whether or not the employee is assigned to carry out a specific project or undertaking, the
duration or scope of which was specified at the time of his engagement.[42] There must be a determination of,
or a clear agreement on, the completion or termination of the project at the time the employee is engaged.[43]
Otherwise put, the fixed period of employment must be knowingly and voluntarily agreed upon by the parties,
without any force, duress or improper pressure being brought to bear upon the employee and absent any other
circumstances vitiating his consent, or it must satisfactorily appear that the employer and employee dealt with
each other on more or less equal terms with no moral dominance whatsoever being exercised by the former on
the latter.[44]

The contracts of the petitioners indicated the one-year duration of their engagement as well as their respective
project assignments (i.e., Jamias being assigned to the CD-ROM project; Cruz and Matuguinas to the TSET
project).[45] There is no indication that the petitioners were made to sign the contracts against their will.
Neither did they refute Innodata's assertion that it did not employ force, intimidate or fraudulently manipulate
the petitioners into signing their contracts, and that the terms thereof had been explained and made known to
them.[46] Hence, the petitioners knowingly agreed to the terms of and voluntarily signed their respective
contracts.

That Innodata drafted the contracts with its business interest as the overriding consideration did not
necessarily warrant the holding that the contracts were prejudicial against the petitioners.[47] The fixing by
Innodata of the period specified in the contracts of employment did not also indicate its ill-motive to
circumvent the petitioners' security of tenure. Indeed, the petitioners could not presume that the fixing of the
one-year term was intended to evade or avoid the protection to tenure under Article 280 of the Labor Code in
the absence of other evidence establishing such intention. This presumption must ordinarily be based on some
aspect of the agreement other than the mere specification of the fixed term of the employment agreement, or
on evidence aliunde of the intent to evade.[48]
Lastly, the petitioners posit that they should be accorded regular status because their work as editors and
proofreaders were usually necessary to Innodata's business of data processing.

We reject this position. For one, it would be unusual for a company like Innodata to undertake a project that
had no relationship to its usual business.[49] Also, the necessity and desirability of the work performed by the
employees are not the determinants in term employment, but rather the "day certain" voluntarily agreed upon
by the parties.[50] As the CA cogently observed in this respect:
There is proof to establish that Innodata's operations indeed rests upon job orders or undertakings coming
from its foreign clients. Apparently, its employees are assigned to projects - one batch may be given a fixed
period of one year, others, a slightly shorter duration, depending on the estimated time of completion of the
particular job or undertaking farmed out by the client to the company.[51]
In fine, the employment of the petitioners who were engaged as project employees for a fixed term legally
ended upon the expiration of their contract. Their complaint for illegal dismissal was plainly lacking in merit.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on July 31,
2002; and ORDER the petitioners to pay the costs of suit

SO ORDERED.

Article 296 (281) Probationary Employment

ROBINSONS GALLERIA/ROBINSONS SUPERMARKET CORPORATIONand/or JESS MANUEvs.IRENE R.

RANCHEZG.R. No. 177937January 19, 2011Facts:
Respondent was a probationary employee of petitioner Robinsons Galleria/RobinsonsSupermarket
Corporation (petitioner Supermarket) for a period of five (5) months, or from October 15, 1997 until March 14,
1998. She underwent six (6) weeks of trainingas a cashier before she was hired as such on October 15, 1997.
Two weeks after shewas hired, or on October 30, 1997, respondent reported to her supervisor the loss of cash
amounting to P20,299.00 which she had placed inside the company locker.

Petitioner Jess Manuel (petitioner Manuel), the Operations Manager of petitioner Supermarket, ordered that
respondent be strip-searched by the company guards.However, the search on her and her personal belongings
yielded nothing.Respondent acknowledged her responsibility and requested that she be allowed tosettle and
pay the lost amount. However, petitioner Manuel did not heed her requestand instead reported the matter to
the police. Petitioner Manuel likewise requested theQuezon City Prosecutor’s Office for an inquest.
Respondent filed a complaint for illegal dismissal and damages. On March 12, 1998, petitioners sent to
respondent bymail a notice of termination and/or notice of expiration of probationary employmentdated
March 9, 1998The Labor Arbiter ratiocinated that at the time respondent filed the complaintfor illegal
dismissal, she was not yet dismissed by petitioners. When she was strip-
searched by the security personnel of petitioner Supermarket, the guards were merelyconducting an
investigation. The subsequent referral of the loss to the policeauthorities might be considered routine.
Respondent’s non-reporting for work after her release from detention could be taken against her in the
investigation that petitioner supermarket would conduct.The NLRC ruled that respondent was denied due
process by petitioners. Strip-searching respondent and sending her to jail for two weeks certainly amounted
toconstructive dismissal because continued employment had been rendered impossible,unreasonable, and
unlikely. The wedge that had been driven between the parties wasimpossible to ignore. Although respondent
was only a probationary employee, thesubsequent lapse of her probationary contract of employment did not
have the effectof validly terminating her employment because constructive dismissal had already been
effected earlier by petitioners.

Issue:
Whether or not respondent was illegally terminated from employment by petitioners

Ruling:
The Court rule in the affirmative.There is probationary employment when theemployee upon his engagement
is made to undergo a trial period during which theemployer determines his fitness to qualify for regular
employment based onreasonable standards made known to him at the time of engagement.A probationary
employee, like a regular employee, enjoys security of tenure. However, in cases of probationary employment,
aside from just or authorizedcauses of termination, an additional ground is provided under Article 281 of the
Labor Code, i.e., the probationary employee may also be terminated for failure to qualify asa regular employee
in accordance with reasonable standards made known by theemployer to the employee at the time of the
engagement. Thus, the services of anemployee who has been engaged on probationary basis may be
terminated for any of the following: (1) a just or (2) an authorized cause; and (3) when he fails to qualify asa
regular employee in accordance with reasonable standards prescribed by theemployer.Article 277(b) of the
Labor Code mandates that subject to the constitutionalright of workers to security of tenure and their right to
be protected against dismissal,except for just and authorized cause and without prejudice to the requirement
of notice under Article 283 of the same Code, the employer shall furnish the worker,whose employment is
sought to be terminated, a written notice containing a statementof the causes of termination, and shall afford
the latter ample opportunity to be heardand to defend himself with the assistance of a representative if he so
desires, inaccordance with company rules and regulations pursuant to the guidelines set by theDepartment of
Labor and Employment.In the instant case, based on the facts on record, petitioners failed to
accordrespondent substantive and procedural due process. The haphazard manner in the investigation of the
missing cash, which was left to the determination of the policeauthorities and the Prosecutor’s Office, left
respondent with no choice but to cry foul.Administrative investigation was not conducted by petitioner
Supermarket. On thesame day that the missing money was reported by respondent to her immediatesuperior,
the company already pre-judged her guilt without proper investigation, andinstantly reported her to the police
as the suspected thief, which resulted in her languishing in jail for two weeks.An illegally or constructively
dismissed employee, respondent is entitled to:(1) either reinstatement, if viable, or separation pay, if
reinstatement is no longer viable; and (2) backwages. These two reliefs are separate and distinct from each
other and are awarded conjunctively. In this case, since respondent was a probationaryemployee at the time
she was constructively dismissed by petitioners, she is entitled toseparation pay and backwages.
Reinstatement of respondent is no longer viableconsidering the circumstances.

Buiser vs. Leogardo, Jr., 131 SCRA 151, No. L-63316 July 31, 1984

FACTS: Iluminada Ver Buiser, Ma. Cecilia Rilloacuña, and Ma. Mercedes P. Intengan allentered into an eighteen
month probationary contract of employment with General Telephone Directory Company (GTPD), a
business concerned with telephone directories, as salesrepresentative charged with soliciting
advertisements to include in the telephone directories. Allrespondents were terminated after the period for
failing to meet their sales quotas. Though theyappealed to the Ministry of Labor of and Employment, they were
both dismissed by the regionaldirector and Deputy Minister Leogardo, and ruled that they have not attained
regular status, thestipulated probationary period was justified and valid, and that the termination was valid
becausethey have not reached their required sales quotas. Petitioners contend that Leogardo committed
agrave abuse of discretion in rendering the decision in favor of Mariwasa and that, by law,probationary period
cannot exceed 6 months, meaning that the probationary period of GTPD wasillegal. Hence this petition.

ISSUE: Whether or not the stipulated eighteen month probationary period is violative of theLabor Code

.DECISION: The decision was rendered in favor of GTPD. According to the Labor Code, whilethe 6 month
general rule on probationary period is stated, it still allows parties to stipulate theterms of the employment
provided that they can come into agreement. Given that parties signedand agreed that the 18 month period is
the law between them, petitioners cannot impugn this bypartially implying the provision of the Labor Code in
their favor. Additionally, the grounds fortheir dismissal was just because it was proven that they did, in fact fail
to meet their sales quotas.Hence, this petition is dismissed.

THIRD DIVISION
[G.R. No. 148372. June 27, 2005]

CLARION PRINTING HOUSE, INC., and EULOGIO YUTINGCO, petitioners, vs. THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION (Third Division) and MICHELLE MICLAT, respondents.

DECISION

CARPIO-MORALES, J.:

Respondent Michelle Miclat (Miclat) was employed on April 21, 1997 on a probationary basis as marketing
assistant with a monthly salary of P6,500.00 by petitioner Clarion Printing House (CLARION) owned by its co-
petitioner Eulogio Yutingco. At the time of her employment, she was not informed of the standards that would
qualify her as a regular employee.

On September 16, 1997, the EYCO Group of Companies of which CLARION formed part filed with the Securities
and Exchange Commission (SEC) a Petition for the Declaration of Suspension of Payment, Formation and
Appointment of Rehabilitation Receiver/ Committee, Approval of Rehabilitation Plan with Alternative Prayer
for Liquidation and Dissolution of Corporation[1] the pertinent allegations of which read:

xxx

5. The situation was that since all these companies were sister companies and were operating under a unified
and centralized management team, the financial requirements of one company would normally be backed up
or supported by one of the available fundings from the other companies.

6. The expansion exhausted the cash availability of Nikon, NKI, and 2000 because those fundings were
absorbed by the requirements of NPI and EYCO Properties, Inc. which were placed on real estate investments.
However, at the time that those investments and expansions were made, there was no cause for alarm because
the market situation was very bright and very promising, hence, the decision of the management to implement
the expansion.
7. The situation resulted in the cash position being spread thin. However, despite the thin cash positioning, the
management still was very positive and saw a very viable proposition since the expansion and the additional
investments would result in a bigger real estate base which would be very credible collateral for further
expansions. It was envisioned that in the end, there would be bigger cash procurement which would result in
greater volume of production, profitability and other good results based on the expectations and projections
of the team itself.

8. Unfortunately, factors beyond the control and anticipation of the management came into play which caught
the petitioners flat-footed, such as:

a) The glut in the real estate market which has resulted in the bubble economy for the real estate demand which
right now has resulted in a severe slow down in the sales of properties;

b) The economic interplay consisting of the inflation and the erratic changes in the peso-dollar exchange rate
which precipitated a soaring banking interest.

c) Labor problems that has precipitated adverse company effect on the media and in the financial circuit.

d) Liberalization of the industry (GATT) which has resulted in flooding the market with imported goods;

e) Other related adverse matters.

9. The inability of the EYCO Group of Companies to meet the obligations as they fall due on the schedule
agreed with the bank has now become a stark reality. The situation therefore is that since the obligations would
not be met within the scheduled due date, complications and problems would definitely arise that would impair
and affect the operations of the entire conglomerate comprising the EYCO Group of Companies.

xxx

12. By virtue of this development, there is a need for suspension of all accounts o[r] obligations incurred by the
petitioners in their separate and combined capacities in the meantime that they are working for the
rehabilitation of the companies that would eventually redound to the benefit of these creditors.

13. The foregoing notwithstanding, however, the present combined financial condition of the petitioners
clearly indicates that their assets are more than enough to pay off the credits.

x x x (Emphasis and underscoring supplied)[2]

On September 19, 1997, the SEC issued an Order[3] the pertinent portions of which read:

xxx

It appearing that the petition is sufficient in form and substance, the corporate petitioners prayer for the
creation of management or receivership committee and creditors approval of the proposed Rehabilitation Plan
is hereby set for hearing on October 22, 1997 at 2:00 oclock in the afternoon at the SICD, SEC Bldg., EDSA,
Greenhills, Mandaluyong City.

xxx
Finally, the petitioners are hereby enjoined from disposing any and all of their properties in any manner,
whatsoever, except in the ordinary course of business and from making any payment outside of the legitimate
business expenses during the pendency of the proceedings and as a consequence of the filing of the Petition,
all actions, claims and proceedings against herein petitioners pending before any court, tribunal, office board
and/or commission are deemed SUSPENDED until further orders from this Hearing Panel pursuant to the
rulings of the Supreme Court in the cases of RCBC v. IAC et al., 213 SCRA 830 and BPI v. CA, 229 SCRA 223.
(Underscoring supplied)

And on September 30, 1997, the SEC issued an Order[4] approving the creation of an interim receiver for the
EYCO Group of Companies.

On October 10, 1997, the EYCO Group of Companies issued to its employees the following Memorandum:[5]

This is to formally announce the entry of the Interim Receiver Group represented by SGV from today until
October 22, 1997 or until further formal notice from the SEC.

This interim receiver groups function is to make sure that all assets of the company are secured and accounted
for both for the protection of us and our creditors.

Their function will involve familiarization with the different processes and controls in our organization &
keeping physical track of our assets like inventories and machineries.

Anything that would be required from you would need to be in writing and duly approved by the top
management in order for us to maintain a clear line.

We trust that this temporary inconvenience will benefit all of us in the spirit of goodwill. Lets extend our full
cooperation to them.

Thank you. (Underscoring supplied)

On October 22, 1997, the Assistant Personnel Manager of CLARION informed Miclat by telephone that her
employment contract had been terminated effective October 23, 1997. No reason was given for the
termination.

The following day or on October 23, 1997, on reporting for work, Miclat was informed by the General Sales
Manager that her termination was part of CLARIONs cost-cutting measures.

On November 17, 1997, Miclat filed a complaint[6] for illegal dismissal against CLARION and Yutingco
(petitioners) before the National Labor Relations Commission (NLRC).

In the meantime, or on January 7, 1998, the EYCO Group of Companies issued a Memorandum[7] addressed to
company managers advising them of a temporary partial shutdown of some operations of the Company
commencing on January 12, 1998 up to February 28, 1998:

In view of the numerous external factors such as slowdown in business and consumer demand and consistent
with Art. 286 of the Revised Labor Code of the Philippines, we are constrained to go on a temporary partial
shutdown of some operations of the Company.
To implement this measure, please submit to my office through your local HRAD the list of those whom you
will require to report for work and their specific schedules. Upon revalidation and approval of this list, all those
not in the list will not receive any pay nor will it be credited against their VL.

Please submit the listing no later than the morning of Friday, January 09, 1998.

Shutdown shall commence on January 12, 1998 up to February 28, 1998, unless otherwise recalled at an earlier
date.

Implementation of th[ese] directives will be done through your HRAD departments. (Underscoring supplied)

In her Position Paper[8] dated March 3, 1998 filed before the labor arbiter, Miclat claimed that she was never
informed of the standards which would qualify her as a regular employee. She asserted, however, that she
qualified as a regular employee since her immediate supervisor even submitted a written recommendation in
her favor before she was terminated without just or authorized cause.

Respecting the alleged financial losses cited by petitioners as basis for her termination, Miclat disputed the
same, she contending that as marketing assistant tasked to receive sales calls, produce sales reports and
conduct market surveys, a credible assessment on production and sales showed otherwise.

In any event, Miclat claimed that assuming that her termination was necessary, the manner in which it was
carried out was illegal, no written notice thereof having been served on her, and she merely learned of it only a
day before it became effective.

Additionally, Miclat claimed that she did not receive separation pay, 13th month pay and salaries for October
21, 22 and 23, 1997.

On the other hand, petitioners claimed that they could not be faulted for retrenching some of its employees
including Miclat, they drawing attention to the EYCO Group of Companies being placed under receivership,
notice of which was sent to its supervisors and rank and file employees via a Memorandum of July 21, 1997;
that in the same memorandum, the EYCO Group of Companies advised them of a scheme for voluntary
separation from employment with payment of severance pay; and that CLARION was only adopting the LAST
IN, FIRST OUT PRINCIPLE when it terminated Miclat who was relatively new in the company.

Contending that Miclats termination was made with due process, petitioners referred to the EYCO Group of
Companies abovesaid July 21, 1997 Memorandum which, so they claimed, substantially complied with the
notice requirement, it having been issued more than one month before Miclat was terminated on October 23,
1997.

By Decision[9] of November 23, 1998, the labor arbiter found that Miclat was illegally dismissed and directed
her reinstatement. The dispositive portion of the decision reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered ordering the respondent to
reinstate complainant to her former or equivalent position without loss of seniority rights and benefits and to
pay her backwages, from the time of dismissal to actual reinstatement, proportionate 13th month pay and two
(2) days salary computed as follows:

a.1) Backwages 10/23/97 to 11/30/98

P6,500.00 x 13.25 months = P86,125.00

a.2) Proportionate 13th month pay

1/12 of P86,125 = 7,177.08

b) 13th month pay - 1997

=P6,500 x 9.75 months/12 = 5,281.25

c) Two days salary

=P6,500/26 x 2 days = 500.00

TOTAL P 99,083.33

(Emphasis and underscoring supplied).

Before the National Labor Relations Commission (NLRC) to which petitioners appealed, they argued that:[10]

1. [CLARION] was placed under receivership thereby evidencing the fact that it sustained business losses to
warrant the termination of [Miclat] from her employment.

2. The dismissal of [Miclat] from her employment having been effected in accordance with the law and in good
faith, [Miclat] does not deserve to be reinstated and paid backwages, 13th month pay and two (2) days salary.

And petitioners pointed out that CLARION had expressed its decision to shutdown its operations by
Memorandum[11] of January 7, 1998 to its company managers.

Appended to petitioners appeal before the NLRC were photocopies of their balance sheets from 1997 to
November 1998 which they claimed to unanimously show that x x x [petitioner] company experienced business
reverses which were made the basis x x x in retrenching x x x.[12]

By Resolution[13] of June 17, 1999, the NLRC affirmed the labor arbiters decision. The pertinent portion of the
NLRC Resolution reads:

There are three (3) valid requisites for valid retrenchment: (1) the retrenchment is necessary to prevent losses
and such losses are proven; (2) written notices to the employees and to the Department of Labor and
Employment at least one (1) month prior to the intended date of retrenchment; and (3) payment of separation
pay equivalent to one (1) month pay or at least month pay for every year of service, whichever is higher. The
two notices are mandatory. If the notice to the workers is later than the notices sent to DOLE, the date of
termination should be at least one month from the date of notice to the workers.

In Lopez Sugar Corporation v. Federation of Free Workers Philippine Labor Union Association (PLUA-
NACUSIP) and National Labor Relations Commission, the Supreme Court had the occasion to set forth four
standards which would justify retrenchment, being, firstly, - the losses expected should be substantial and not
merely de minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown
to be insubstantial and inconsequential in character, the bona fide nature of the retrenchment would appear
to be seriously in question; secondly, - the substantial loss apprehended must be reasonably imminent, as such
imminence can be perceived objectively and in good faith by the employer. There should, in other words, be a
certain degree of urgency for the retrenchment, which is after all a drastic course with serious consequences
for the livelihood of the employees retired or otherwise laid-off; thirdly, - because of the consequential nature
of retrenchment, it must be reasonably necessary and likely to effectively prevent the expected losses. The
employer should have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other
cost than labor costs; and lastly, - the alleged losses if already realized and the expected imminent losses
sought to be forestalled, must be proven by sufficient and convincing evidence.

The records show that these requirements were not substantially complied with. And proofs presented by
respondents-appellants were short of being sufficient and convincing to justify valid retrenchment. Their
position must therefore fail. The reason is simple. Evidences on record presented fall short of the requirement
of substantial, sufficient and convincing evidence to persuade this Commission to declare the validity of
retrenchment espoused by respondents-appellants. The petition before the Securit[ies] and Exchange
Commission for suspension of payment does not prove anything to come within the bounds of justifying
retrenchment. In fact, the petition itself lends credence to the fact that retrenchment was not actually
reinstated under the circumstances prevailing when it stated, The foregoing notwithstanding, however, the
present combined financial condition of the petitioners clearly indicates that their assets are more than enough
to pay off the credits. Verily, reading further into the petition, We are not ready to disregard the fact that the
petition merely seeks to suspend payments of their obligation from creditor banks and other financing
institutions, and not because of imminent substantial financial loss. On this account, We take note of paragraph
7 of the petition which stated: The situation resulted in cash position being spread thin. However, despite the
thin cash positioning, the management was very positive and saw a very viable proposition since the expansion
and the additional investments would result in a bigger real estate base which would be a very credible
collateral for further expansions. It was envisioned that in the end, there would a bigger cash procurement
which would result in greater volume of production, profitability and other good results based on the
expectations and projections of the team itself. Admittedly, this does not create a picture of retrenchable
business atmosphere pursuant to Article 283 of the Labor Code.

We cannot disregard the fact that respondent-appellants failed in almost all of the criteria set by law and
jurisprudence in justifying valid retrenchment. The two (2) mandatory notices were violated. The supposed
notice to the DOLE (Annex 4, List of Employees on Shutdown) is of no moment, the same having no bearing in
this case. Herein complainant-appellee was not even listed therein and the date of receipt by DOLE, that is,
January 18, 1999, was way out of time in relation to this case. And no proof was adduced to evidence cost
cutting measures, to say the least. Nor was there proof shown that separation pay had been awarded to
complainant-appellee.

WHEREFORE, premises considered, and finding no grave abuse of discretion on the findings of Labor Arbiter
Nieves V. De Castro, the appeal is DENIED for lack of merit.

The decision appealed from is AFFIRMED in toto. (Italics in the original; underscoring supplied; citations
omitted)

Petitioners Motion for Reconsideration of the NLRC resolution having been denied by Resolution[14] of July
29, 1999, petitioners filed a petition for certiorari[15] before the Court of Appeals (CA) raising the following
arguments:

1. PETITIONER CLARION WAS PLACED UNDER RECEIVERSHIP THEREBY EVIDENCING THE FACT THAT IT
SUSTAINED BUSINESS LOSSES TO WARRANT THE TERMINATION OF PRIVATE RESPONDENT MICLAT
FROM HER EMPLOYMENT.
2. THE DISMISSAL OF PRIVATE RESPONDENT MICLAT FROM HER EMPLOYMENT HAVING BEEN EFFECTED
IN ACCORDANCE WITH THE LAW AND IN GOOD FAITH, PRIVATE RESPONDENT DOES NOT DESERVE TO
BE REINSTATED AND PAID BACKWAGES, 13TH MONTH PAY AND TWO (2) DAYS SALARY. (Underscoring
supplied)

By Decision[16] of November 24, 2000, the CA sustained the resolutions of the NLRC in this wise:

In the instant case, Clarion failed to prove its ground for retrenchment as well as compliance with the mandated
procedure of furnishing the employee and the Department of Labor and Employment (hereafter, DOLE) with
one (1) month written notice and payment of separation pay to the employee. Clarions failure to discharge its
burden of proof is evident from the following instances:

First, Clarion presented no evidence whatsoever before the Labor Arbiter. To prove serious business losses,
Clarion presented its 1997 and 1998 financial statements and the SEC Order for the Creation of an Interim
Receiver, for the first time on appeal before the NLRC. The Supreme Court has consistently disallowed such
practice unless the party making the belated submission of evidence had satisfactorily explained the delay. In
the instant case, said financial statements are not admissible in evidence due to Clarions failure to explain the
delay.

Second, even if such financial statements were admitted in evidence, they would not alter the outcome of the
case as statements have weak probative value. The required method of proof in such case is the presentation
of financial statements prepared by independent auditors and not merely by company accountants. Again,
petitioner failed in this regard.

Third, even audited financial statements are not enough. The employer must present the statement for the
year immediately preceding the year the employee was retrenched, which Clarion failed to do in the instant
case, to prove not only the fact of business losses but more importantly, the fact that such losses were
substantial, continuing and without immediate prospect of abatement. Hence, neither the NLRC nor the courts
must blindly accept such audited financial statements. They must examine and make inferences from the data
presented to establish business losses. Furthermore, they must be cautioned by the fact that sliding incomes
or decreasing gross revenues alone are not necessarily business losses within the meaning of Art. 283 since in
the nature of things, the possibility of incurring losses is constantly present in business operations.

Last, even if business losses were indeed sufficiently proven, the employer must still prove that retrenchment
was resorted to only after less drastic measures such as the reduction of both management and rank-and-file
bonuses and salaries, going on reduced time, improving manufacturing efficiency, reduction of marketing and
advertising costs, faster collection of customer accounts, reduction of raw materials investment and others,
have been tried and found wanting. Again, petitioner failed to prove the exhaustion of less drastic measures
short of retrenchment as it had failed with the other requisites.

It is interesting to note that Miclat started as a probationary employee on 21 April 1997. There being no
stipulation to the contrary, her probation period had a duration of six (6) months from her date of employment.
Thus, after the end of the probation period on 22 October 1997, she became a regular employee as of 23
October 1997 since she was allowed to work after the end of said period. It is also clear that her probationary
employment was not terminated at the end of the probation period on the ground that the employee failed to
qualify in accordance with reasonable standards made known to her at the time of engagement.
However, 23 October 1997 was also the day of Miclats termination from employment on the ground of
retrenchment. Thus, we have a bizarre situation when the first day of an employees regular employment was
also the day of her termination. However, this is entirely possible, as had in fact happened in the instant case,
where the employers basis for termination is Art. 288, instead of Art. 281 of the Labor Code. If petitioner
terminated Miclat with Art. 281 in mind, it would have been too late to present such theory at this stage and it
would have been equally devastating for petitioner had it done so because no evidence exists to show that
Miclat failed to qualify with petitioners standards for regularization. Failure to discharge its burden of proof
would still be petitioners undoing.

Whichever way We examine the case, the conclusion is the same Miclat was illegally dismissed. Consequently,
reinstatement without loss of seniority rights and full backwages from date of dismissal on 23 October 1997
until actual reinstatement is in order.

WHEREFORE, the instant petition is hereby DISMISSED and the 29 July 1999 and 7 June 1999 resolutions of
the NLRC are SUSTAINED. (Emphasis and underscoring supplied)

By Resolution[17] of May 23, 2001, the CA denied petitioners motion for reconsideration of the decision.

Hence, the present petition for review on certiorari, petitioners contending that:

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING THE
ASSAILED DECISIONS OF HONORABLE PUBLIC RESPONDENT COMMISSION:

A. HOLDING THAT PRIVATE RESPONDENT MICLAT WAS ILLEGALLY DISMISSED; and

B. ORDERING THE REINSTATEMENT OF PRIVATE RESPONDENT MICLAT TO HER FORMER OR

EQUIVALENT POSITION WITHOUT LOSS OF SENIORITY RIGHTS AND BENEFITS AND PAYMENT OF
BACKWAGES, 1[3]TH MONTH PAY AND TWO (2) DAYS SALARY.[18]

Petitioners argue that the conclusion of the CA that no sufficient proof of financial losses on the part of
CLARION was adduced is patently erroneous, given the serious business reverses it had gravely suffered as
reflected in its financial statements/balance sheets, thereby leaving as its only option the retrenchment of its
employees including Miclat.[19]

Petitioners further argue that when a company is under receivership and a receiver is appointed to take control
of its management and corporate affairs, one of the evident reasons is to prevent further losses of said
company and protect its remaining assets from being dissipated; and that the submission of financial
reports/statements prepared by independent auditors had been rendered moot and academic, the company
having shutdown its operations and having been placed under receivership by the SEC due to its inability to
pay or comply with its obligations.[20]

Respecting the CAs holding that the financial statements CLARION submitted for the first time on appeal
before the NLRC are inadmissible in evidence due to its failure to explain the delay in the submission thereof,
petitioners lament the CAs failure to consider that technical rules on evidence prevailing in the courts are not
controlling in proceedings before the NLRC which may consider evidence such as documents and affidavits
submitted by the parties for the first time on appeal.[21]

As to the CAs holding that CLARION failed to prove the exhaustion of less drastic measures short of
retrenching, petitioners advance that prior to the termination of Miclat, CLARION, together with the other
companies under the EYCO Group of Companies, was placed under receivership during which drastic measures
to continue business operations of the company and eventually rehabilitate itself were implemented.[22]

Denying Miclats entitlement to backwages, petitioners proffer that her dismissal rested upon a valid and
authorized cause. And petitioners assail as grossly erroneous the award of 13th month pay to Miclat, she not
having sought it and, therefore, there was no jurisdiction to award the same.[23]

The petition is partly meritorious.

Contrary to the CAs ruling, petitioners could present evidence for the first time on appeal to the NLRC. It is
well-settled that the NLRC is not precluded from receiving evidence, even for the first time on appeal, because
technical rules of procedure are not binding in labor cases.

The settled rule is that the NLRC is not precluded from receiving evidence on appeal as technical rules of
evidence are not binding in labor cases. In fact, labor officials are mandated by the Labor Code to use every and
all reasonable means to ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, all in the interest of due process. Thus, in Lawin Security Services v. NLRC,
and Bristol Laboratories Employees Association-DFA v. NLRC, we held that even if the evidence was not
submitted to the labor arbiter, the fact that it was duly introduced on appeal to the NLRC is enough basis for
the latter to be more judicious in admitting the same, instead of falling back on the mere technicality that said
evidence can no longer be considered on appeal. Certainly, the first course of action would be more consistent
with equity and the basic notions of fairness. (Italics in the original; citations omitted)[24]

It is likewise well-settled that for retrenchment to be justified, any claim of actual or potential business losses
must satisfy the following standards: (1) the losses are substantial and not de minimis; (2) the losses are actual
or reasonably imminent; (3) the retrenchment is reasonably necessary and is likely to be effective in preventing
expected losses; and (4) the alleged losses, if already incurred, or the expected imminent losses sought to be
forestalled, are proven by sufficient and convincing evidence.[25] And it is the employer who has the onus of
proving the presence of these standards.

Sections 5 and 6 of Presidential Decree No. 902-A (P.D. 902-A) (REORGANIZATION OF THE SECURITIES AND
EXCHANGE COMMISSION WITH ADDITIONAL POWERS AND PLACING SAID AGENCY UNDER THE
ADMINISTRATIVE SUPERVISION OF THE OFFICE OF THE PRESIDENT),[26] as amended, read:

SEC. 5 In addition to the regulatory and adjudicative functions of THE SECURITIES AND EXCHANGE
COMMISSION over corporations, partnerships and other forms of associations registered with it as expressly
granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide
cases involving:

xxx

(d) Petitions of corporations, partnerships or associations declared in the state of suspension of payments in
cases where the corporation, partnership or association possesses sufficient property to cover all debts but
foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation,
partnership, association has no sufficient assets to cover its liabilities, but is under the management of a
Rehabilitation Receiver or Management Committee created pursuant to this Decree.

SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:
xxx

(c) To appoint one or more receivers of the property, real and personal, which is the subject of the action
pending before the Commission in accordance with the provisions of the Rules of Court in such other cases
whenever necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the
investing public and creditors: Provided, however, That the Commission may in appropriate cases, appoint a
rehabilitation receiver of corporations, partnerships or other associations not supervised or regulated by other
government agencies who shall have, in addition to powers of the regular receiver under the provisions of the
Rules of Court, such functions and powers as are provided for in the succeeding paragraph (d) hereof: x x x

(d) To create and appoint a management committee, board or body upon petition or motu propio to undertake
the management of corporations, partnership or other associations not supervised or regulated by other
government agencies in appropriate cases when there is imminent danger of dissipation, loss, wastage or
destruction of assets or other properties or paralization of business operations of such corporations or entities
which may be prejudicial to the interest of minority stockholders, parties-litigants of the general public: x x x
(Emphasis and underscoring supplied).

From the above-quoted provisions of P.D. No. 902-A, as amended, the appointment of a receiver or
management committee by the SEC presupposes a finding that, inter alia, a company possesses sufficient
property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due
and there is imminent danger of dissipation, loss, wastage or destruction of assets of other properties or
paralization of business operations.

That the SEC, mandated by law to have regulatory functions over corporations, partnerships or
associations,[27] appointed an interim receiver for the EYCO Group of Companies on its petition in light of, as
quoted above, the therein enumerated factors beyond the control and anticipation of the management
rendering it unable to meet its obligation as they fall due, and thus resulting to complications and problems . .
. to arise that would impair and affect [its] operations . . . shows that CLARION, together with the other
member-companies of the EYCO Group of Companies, was suffering business reverses justifying, among other
things, the retrenchment of its employees.

This Court in fact takes judicial notice of the Decision[28] of the Court of Appeals dated June 11, 2000 in CA-
G.R. SP No. 55208, Nikon Industrial Corp., Nikolite Industrial Corp., et al. [including CLARION], otherwise
known as the EYCO Group of Companies v. Philippine National Bank, Solidbank Corporation, et al., collectively
known and referred as the Consortium of Creditor Banks, which was elevated to this Court via Petition for
Certiorari and docketed as G.R. No. 145977, but which petition this Court dismissed by Resolution dated May
3, 2005:

Considering the joint manifestation and motion to dismiss of petitioners and respondents dated February 24,
2003, stating that the parties have reached a final and comprehensive settlement of all the claims and
counterclaims subject matter of the case and accordingly, agreed to the dismissal of the petition for certiorari,
the Court Resolved to DISMISS the petition for certiorari (Underscoring supplied).

The parties in G.R. No. 145977 having sought, and this Court having granted, the dismissal of the appeal of the
therein petitioners including CLARION, the CA decision which affirmed in toto the September 14, 1999 Order
of the SEC, the dispositive portion of which SEC Order reads:

WHEREFORE, premises considered, the appeal is as it is hereby, granted and the Order dated 18 December
1998 is set aside. The Petition to be Declared in State of Suspension of payments is hereby disapproved and
the SAC Plan terminated. Consequently, all committee, conservator/ receivers created pursuant to said Order
are dissolved and discharged and all acts and orders issued therein are vacated.

The Commission, likewise, orders the liquidation and dissolution of the appellee corporations. The case is
hereby remanded to the hearing panel below for that purpose.

x x x (Emphasis and underscoring supplied),

has now become final and executory. Ergo, the SECs disapproval of the EYCO Group of Companies Petition for
the Declaration of Suspension of Payment . . . and the order for the liquidation and dissolution of these
companies including CLARION, must be deemed to have been unassailed.

That judicial notice can be taken of the above-said case of Nikon Industrial Corp. et al. v. PNB et al., there should
be no doubt.

As provided in Section 1, Rule 129 of the Rules of Court:

SECTION 1. Judicial notice, when mandatory. A court shall take judicial notice, without the introduction of
evidence, of the existence and territorial extent of states, their political history, forms of government and
symbols of nationality, the law of nations, the admiralty and maritime courts of the world and their seals, the
political constitution and history of the Philippines, the official acts of the legislative, executive and judicial
departments of the Philippines, the laws of nature, the measure of time, and the geographical divisions.
(Emphasis and underscoring supplied)

which Mr. Justice Edgardo L. Paras interpreted as follows:

A court will take judicial notice of its own acts and records in the same case, of facts established in prior
proceedings in the same case, of the authenticity of its own records of another case between the same parties,
of the files of related cases in the same court, and of public records on file in the same court. In addition judicial
notice will be taken of the record, pleadings or judgment of a case in another court between the same parties
or involving one of the same parties, as well as of the record of another case between different parties in the
same court. Judicial notice will also be taken of court personnel. (Emphasis and underscoring supplied)[29]

In fine, CLARIONs claim that at the time it terminated Miclat it was experiencing business reverses gains more
light from the SECs disapproval of the EYCO Group of Companies petition to be declared in state of suspension
of payment, filed before Miclats termination, and of the SECs consequent order for the group of companies
dissolution and liquidation.

This Courts finding that Miclats termination was justified notwithstanding, since at the time she was hired on
probationary basis she was not informed of the standards that would qualify her as a regular employee, under
Section 6, Rule I of the Implementing Rules of Book VI of the Labor Code which reads:

SEC. 6. Probationary employment. There is probationary employment where the employee, upon his
engagement, is made to undergo a trial period during which the employer determines his fitness to qualify for
regular employment, based on reasonable standards made known to him at the time of engagement.

Probationary employment shall be governed by the following rules:

xxx
(d) In all cases of probationary employment, the employer shall make known to the employee the standards
under which he will qualify as a regular employee at the time of his engagement. Where no standards are made
known to the employee at that time, he shall be deemed a regular employee (Emphasis and underscoring
supplied),

she was deemed to have been hired from day one as a regular employee.[30]

CLARION, however, failed to comply with the notice requirement provided for in Article 283 of the Labor Code,
to wit:

ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. The employer may also
terminate the employment of any employee due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on
the worker and the Ministry of Labor and Employment at least one (1) month before the intended date thereof.
x x x (Emphasis and underscoring supplied)

This Court thus deems it proper to award the amount equivalent to Miclats one (1) month salary of P6,500.00
as nominal damages to deter employers from future violations of the statutory due process rights of
employees.[31]

Since Article 283 of the Labor Code also provides that [i]n case of retrenchment to prevent losses, . . . the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. . . , [a] fraction of at least six (6) months [being] considered one (1) whole year, this
Court holds that Miclat is entitled to separation pay equivalent to one (1) month salary.

As to Miclats entitlement to 13th month pay, paragraph 6 of the Revised Guidelines on the 13th Month Pay Law
provides:

6. 13th Month Pay of Resigned or Separated Employee

An employee x x x whose services were terminated any time before the time for payment of the 13th month
pay is entitled to this monetary benefit in proportion to the length of time he worked during the calendar year
up to the time of his resignation or termination from the service. Thus if he worked only from January up to
September his proportionate 13th month pay shall be equivalent to 1/12 of his total basic salary he earned
during that period.

xxx

Having worked at CLARION for six months, Miclats 13th month pay should be computed as follows:

(Monthly Salary x 6 ) / 12 = Proportionate 13th month pay

(P6,500.00 x 6) / 12 = P3,250.00

With the appointment of a management receiver in September 1997, however, all claims and proceedings
against CLARION, including labor claims,[32] were deemed suspended during the existence of the
receivership.[33] The labor arbiter, the NLRC, as well as the CA should not have proceeded to resolve
respondents complaint for illegal dismissal and should instead have directed respondent to lodge her claim
before the then duly-appointed receiver of CLARION. To still require respondent, however, at this time to refile
her labor claim against CLARION under the peculiar circumstances of the case that 8 years have lapsed since
her termination and that all the arguments and defenses of both parties were already ventilated before the
labor arbiter, NLRC and the CA; and that CLARION is already in the course of liquidation this Court deems it
most expedient and advantageous for both parties that CLARIONs liability be determined with finality, instead
of still requiring respondent to lodge her claim at this time before the liquidators of CLARION which would just
entail a mere reiteration of what has been already argued and pleaded. Furthermore, it would be in the best
interest of the other creditors of CLARION that claims against the company be finally settled and determined
so as to further expedite the liquidation proceedings. For the lesser number of claims to be proved, the sooner
the claims of all creditors of CLARION are processed and settled.

WHEREFORE, the Court of Appeals November 24, 2000 Decision, together with its May 23, 2001 Resolution, is
SET ASIDE and another rendered declaring the legality of the dismissal of respondent, Michelle Miclat.
Petitioners are ORDERED, however, to PAY her the following in accordance with the foregoing discussions:

1) P6,500.00 as nominal damages for non-compliance with statutory due process;

2) P6,500.00 as separation pay; and

3) P3,250.00 as 13th month pay.

Let a copy of this Decision be furnished the SEC Hearing Panel charged with the liquidation and dissolution of
petitioner corporation for inclusion, in the list of claims of its creditors, respondent Michelle Miclats claims, to
be satisfied in accordance with Article 110 of the Labor Code in relation to the Civil Code provisions on
Concurrence and Preference of Credits.

Costs against petitioners.

SO ORDERED.

Article 297 (282) – Termination by Employer

a) Serious misconduct or willful disobedienceby the employee of the lawful orders of his employers or
representative in connection with his work;
THIRD DIVISION
G.R. No. 208735, July 19, 2017
BDO UNIBANK, INC. (FORMERLY EQUITABLE PCI BANK), Petitioner, v. NESTOR N. NERBES AND
ARMENIA F. SURAVILLA, Respondents.
DECISION
TIJAM, J.:
Assailed in this Petition for Review1 under Rule 45 are the Decision2 dated May 9, 2012 and
Resolution3dated August 15, 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 108317 which reversed
the decision of the National Labor Relations Commission (NLRC) and reinstated the Decision4 dated
August 26, 2005 of the Labor Arbiter (LA) in NLRC NCR Case No. 00-11-12543-04, finding respondents
Nestor N. Nerbes (Nerbes) and Armenia F. Suravilla (Suravilla) to have been illegally dismissed and thus
ordered their reinstatement and payment of backwages, or in lieu thereof, payment of separation pay.
The Factual Antecedents

Respondents Nerbes and Suravilla were employees of Equitable PCI Bank (now BDO Unibank, Inc.) (bank)
and members of Equitable PCI Bank Employees Union (EPCIBEU), a legitimate labor union and the sole
and exclusive bargaining representative of the rank and file employees of the bank.5

On February 4, 2004, an election of officers of EPCIBEU was held under the supervision of the Labor
Relations Division of the National Capital Region Regional Office of the Department of Labor and
Employment (DOLE-NCR). Nerbes and Suravilla won as President and Executive Vice President,
respectively, and were proclaimed as winners thru a Resolution issued by the OIC Regional Director of the
DOLE-NCR on March 19, 2004. The protest of the losing candidates was effectively dismissed.6

After taking their oath on March 22, 2004, Nerbes and Suravilla notified the bank of their decision to
exercise their privilege under Section 10[d][3], Article IV of the Collective Bargaining Agreement (CBA)
which allows the President and the Executive Vice President to be on full-time leave for the duration of
their term of office in order to devote their time in maintaining industrial peace. Nerbes and Suravilla
anchored their right to immediately assume their respective positions on Rule XV, Section 5 of
Department Order No. 09, Series of 1997 which, in part, provides that "Upon resolution of the protest, the
committee shall immediately proclaim the winners and the latter may assume their positions
immediately."7 Thus, Nerbes took his leave beginning March 22, 2004, while Suravilla took hers beginning
April 1, 2004.8

On April 1, 2004, the losing candidates appealed to the Bureau of Labor Relations (BLR) the DOLE-NCR's
Resolution dated March 19, 2004.9

Because of the pendency of said appeal, the bank disapproved Nerbes and Suravilla's union leaves and
were directed to refrain from being absent and to report back to work. Nerbes and Suravilla failed to
comply.10

Consequently, the bank issued show cause Memoranda on May 28, 2004 directing Nerbes and Suravilla to
explain why no disciplinary action should be imposed against them for violation of the bank's Code of
Conduct on attendance and punctuality, and obedience and cooperation.11 It appears that Nerbes himself
filed a complaint12 for unfair labor practice (ULP) against the banlc Thus, Nerbes was additionally asked to
explain his alleged falsification of public document and perjury pertaining to his submission of a position
paper in the ULP case which was purportedly signed by his lawyer but who later on denied having signed
the same.13

Administrative hearings were then conducted and on October 22, 2004, the bank found Nerbes and
Suravilla guilty of serious misconduct and willful disobedience and imposed upon them the penalty of
dismissal.14 Nerbes and Suravilla then filed before the LA a complaint for ULP, illegal dismissal and money
claims.

Meantime, in the proceedings before the BLR, the appeal filed by the losing candidates was initially
dismissed. However, on motion for reconsideration, the BLR, in its November 4, 2004 Decision15reversed
itself and nullified the election held on February 4, 2004. As a result, the BLR ordered a special election of
officers. A special election was then held on April 13, 2005 wherein Nerbes and Suravilla's opponents were
proclaimed as winners.16

On August 26, 2005, the LA rendered a Decision17 in favor of Nerbes and Suravilla's reinstatement, the
dispositive part of which reads:chanRoblesvirtualLawlibrary
WHEREFORE, judgment is hereby made finding [Nerbes and Suravilla's] dismissal for insubordination
a valid exercise of management prerogative but considering that [Nerbes and Suravilla's] defiance is
anchored on law, ordering the [bank] to reinstate them to their former or equivalent positions in the
[bank], without loss of seniority rights, with one (1) year backwages or, at the option of [Nerbes and
Suravilla], to accept from the [bank], in lieu of reinstatement and backwages, a separation pay
computed at thirty (30) days pay for every year of service, a fraction of at least six (6) months to be
considered a full year or an applicable separation pay under the subsisting [CBA], whichever is higher.

Subject to any subsequent developments involving the leadership of the [EPCIBEU] or a final decision
of an administrative body and/or superior court, the [bank] are hereby ordered to allow [Nerbes and
Suravilla], within the context of the [CBA], to go on paid union leaves and exercise their other rights as
the duly elected President and Executive Vice President of the union.

The charge of unfair labor practice and other claims are dismissed for lack of merit.

SO ORDERED.18
The bank appealed to the NLRC. In its Decision19 dated November 11, 2008, the NLRC reversed the
ruling of the LA and dismissed Nerbes and Suravilla's complaint. The NLRC disposed as
follows:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the Decision dated August 26, 2005 of [LA] Amansec is
VACATED and SET ASIDE, and a NEW ONE rendered dismissing the case for lack of merit.

SO ORDERED.20
Their Motion for Reconsideration21 likewise having been denied in the NLRC Resolution22 dated January
30, 2009, Nerbes and Suravilla filed a certiorari petition23 before the CA.
The Ruling of the CA

The CA framed the issue to be resolved as to whether Nerbes and Suravilla were illegally dismissed from
employment, the resolution of which is, in turn, anchored on whether their refusal to return to work
amounts to willful disobedience.

The CA held that while Nerbes and Suravilla disobeyed the bank's order to return to work, such
disobedience was not characterized by a wrongful or perverse attitude. The CA noted that their refusal to
return to work was brought by their honest belief that as elected officers, they were entitled to be on full-
time leave. As such, the CA reasoned, their offense was disproportionate to the ultimate penalty of
dismissal.

Anent the charge of falsification of public document and perjury against Nerbes, the CA noted that this
was a mere retaliatory move on the part of the bank which had nothing to do with the latter's work. In any
case, the CA observed that Nerbes' counsel already acknowledged having notarized the questioned
document.

In disposal, the CA pronounced:chanRoblesvirtualLawlibrary

WHEREFORE, in view of the foregoing considerations, the Petition for Certiorari is GRANTED. The
Decision of the [NLRC] in NLRC NCR CA No. 047601-06 dated November 11, 2008 and its subsequent
Resolution dated January 30, 2009 are ANNULLED AND SET ASIDE. The Decision of the [LA] dated
August 26, 2005 is REINSTATED insofar as it ordered private respondent Equitable PCI Bank (Now Banco
De Oro) to reinstate [Nerbes and Suravilla] to their former or equivalent positions in the bank, without
loss of seniority rights, with one (1) year backwages or, at the option of [Nerbes and Suravilla], to accept
from [the bank], in lieu of reinstatement and backwages, a separation pay computed at thirty (30) days
pay for every year of service, a fraction of at least six (6) months to be considered a full year or an
applicable separation pay under the subsisting [CBA], whichever is higher.

SO ORDERED.24
The bank's Motion for Reconsideration25 was similarly rebuked by the CA, in its Resolution26 dated August
15, 2013. Undaunted, the bank filed the instant petition.
Pending Incidents

Pending resolution of the instant petition, the bank moved for the withdrawal of its petition as regards
Suravilla in view of the parties' Compromise Agreement.27 Part of said Compromise Agreement is
Suravilla's undertaking to release the bank from any and all claims arising from or related to the instant
petition. The pertinent provisions of the Compromise Agreement state:chanRoblesvirtualLawlibrary
xxxx

2. Within five working days from the signing of this agreement, BDO, shall release to Ms. Suravilla the
amount of PESOS: THREE MILLION FOUR HUNDRED EIGHTY SEVEN THOUSAND FIVE HUNDRED
TWELVE AND 771100 (Php3,487,512.77) and Statement of Account, representing her separation pay net
of her accountabilities on loans, insurance, and credit cards if any. The Bank shall likewise release to Ms.
Suravilla, her BIR Form 2316.

3. Upon receipt of the check with the foregoing amount, Ms. Suravilla will acknowledge the same as the
full satisfaction of the separation benefits due her in connection with her employment with the BDO, as
well as any and all claims or court case she may have against the Bank.

4. Furthermore, Ms. Armenia F. Suravilla, her heirs, successors and assigns, hereby unconditionally
release, remiss, waive and forever discharge BDO Unibank, Inc., its affiliates, subsidiaries and successors-
in interest, stockholders, officers, directors, agents, employees, associates, contractors, and consultants
from any and all actions, whether civil, criminal, administrative or otherwise, or from any claim of any kind
or character arising directly from, incidental to, or in any manner related to her employment with the
Bank, as well as the release of her separation benefits and retirement claims in the amount quoted above.

5. More particularly, Ms. Armenia F. Suravilla, her heirs, successors and assigns, likewise unconditionally
release, remiss, waive and forever discharge BDO Unibank, Inc., its affiliates, subsidiaries, and successors-
in-interest, stockholders, officers, directors, agents, employees, associates, contractors, and consultants
from ALL claims of any kind or character arising directly from, incidental to,or in any manner related with
the case entitled "BDO Unibank, Inc. vs. Nestor Nerbes and Armenia Suravilla", pending with the
Supreme Court of the Philippines, and docketed as SC GR NO. 208735.
6. By virtue of the release of the said amount under this Compromise Agreement, Ms. Armenia F.
Suravilla hereby affirms that she has no further cause of action, demand, complaint, case or grievance
whatsoever against BDO, its affiliates, subsidiaries and succesors-in�interest stockholde:rs, officers,
directors, agents, employees, associates, contractors, and consultants in respect of any matter arising out
of the said separation benefits and retirement claims; and further affirms that this present agreement
serves as the FULL SATISFACTION of the judgment in any and all claims she has against the Bank,
specifically in the case "BDO Unibank, Inc. vs. Nestor Nerbes and Armenia Suravilla", pending with the
Supreme Court of the Philippines, and docketed as SC GR No. 208735.

x x x x28 (Emphasis omitted)

Attached to said motion are plain copies of the Compromise Agreement with Undertaking29 executed by
and between the bank and Suravilla; and Release Waiver and Quitclaim30 executed by Suravilla.
Consequently, Atty. Emmanuel R. Jabla (Atty. Jabla) of Jabla Brigola Bagas & Sampior Law Offices,
counsel for Nerbes and Suravilla, moved to intervene.31 Atty. Jabla alleged that said Compromise
Agreement was wrung from Suravilla without his knowledge and consent, as a result of which, he was
deprived of his professional fee supposed to be payable upon full recovery of her monetary claims. He
alleged that there was a verbal agreement between him and Suravilla for the latter to pay a contingent
fee of 10% of all money recovered. He prayed that the bank and Suravilla be held solidarily liable as joint
tortfeasors to pay his professional fee equivalent to 10% of the amount received by Suravilla, or PhP
348,751.27 and that a lien upon all judgments for the payment of money and executions issued in
pursuance of such judgments be granted in his favor.32
The Issues

We divide the issues raised in this petition into two: one, concerning the validity of Nerbes and Suravilla's
dismissal which is the main issue raised in the petition; and the other, the bank's motion to withdraw the
petition with respect to Suravilla and Atty. Jabla's motion to intervene.

Otherwise stated, the issues for our consideration and determination are: (a) whether Nerbes and
Suravilla's refusal to report to work despite the bank's order for them to do so constitutes disobedience of
such a willful character as to justify their dismissal from service; (b) whether there is merit in the bank's
motion to withdraw its petition with respect to Suravilla; and (c) whether the motion for intervention to
protect attorney's rights can prosper and, if so, how much is counsel entitled to recover.
The Ruling of this Court

We deny the petition.

We begin by first emphasizing the following rules that guide the Court in disposing of petitions filed under
Rule 45 which seek a review of a CA decision rendered under Rule 65, thus:chanRoblesvirtualLawlibrary
[I]n a Rule 45 review (of the CA decision rendered under Ru1e 65), the question of law that confronts the
Court is the legal correctness of the CA decision - i.e., whether the CA correctly determined the presence
or absence of grave abuse of discretion in the NLRC decision before it, and not on the basis of whether the
NLRC decision on the merits of the case was correct.

Specifically, in reviewing a CA labor ruling under Rule 45 of the Ru1es of Court, the Court's review is
limited to:chanRoblesvirtualLawlibrary
(1) Ascertaining the correctness of the CA's decision in finding the presence or absence of a grave abuse of
discretion. This is done by examining, on the basis of the parties' presentations, whether the CA correctly
determined that at the NLRC level, all the adduced pieces of evidence were considered; no evidence
which should not have been considered was considered; and the evidence presented supports the NLRC
findings; and

(2) Deciding any other jurisdictional error that attended the CA's interpretation or application of the law.33
Given this narrow scope of review, the ultimate question to be addressed by the Court is whether or not
the CA erred in finding that the NLRC gravely abused its discretion in holding that Nerbes and Suravilla
were dismissed for cause.

Further, We stress that the Court in a Rule 45 petition, as a rule, does not try facts and does not analyze
and again weigh the evidence presented before the lower tribunals.34 However, the conflicting findings of
the administrative bodies exercising quasi-judicial functions and the CA in this case warrants an
independent finding of facts from this Court.35

The present case likewise brings to fore the perennial task of balancing of interests between labor on one
hand, and management, on the other. The law and jurisprudence consistently echo the commitment to
protect the working class in keeping with the principle of social justice. In not a few instances, the Court
struck down employer acts, even at the guise of exercise of management prerogative, which undermine
the worker's right to security of tenure. Nevertheless, the law, in aiming to protect the rights of workers,
does not thereby authorize the oppression or self-destruction of the employer.36

With these basic postulates in mind, the Court thus proceeds to resolve the issues raised in the instant
petition.

Refusal to return to work was not characterized by a wrongful and perverse attitude to warrant
dismissal

Petitioner bank essentially argues that it validly dismissed Nerbes and Suravilla from employment
because they committed serious misconduct and willful disobedience when they failed to return to work
despite orders for them to do so. Nerbes and Suravilla counter that as duly-elected officers of the union
they are entitled to be on full-time leave. According to Nerbes and Suravilla, Department Order No. 09
allows them to immediately assume their respective positions upon resolution of the election protests of
the losing candidates and that the appeal to the BLR filed by their opponents could not have stayed the
execution of their proclamation as such appeal is not the appeal contemplated under Department Order
No. 09.

In siding with Nerbes and Suravilla, the LA held that their refusal to return to work, being anchored on the
text of Department Order No. 09, does not constitute serious misconduct or willful disobedience. The CA,
while finding that the bank's order for Nerbes and Suravilla to return to work was lawful and reasonable
and that they refused to comply with said order, nevertheless found that their refusal to do so was not
characterized by a wrongful and perverse attitude to warrant the supreme penalty of dismissal.

We agree.

Article 282,37 now Article 296, of the Labor Code enumerates the just causes for the termination of the
employment of an employee. Under Article 282(a), serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or representative in connection with his work is a just cause
for dismissal.

Misconduct is defined as an improper or wrong conduct. It is a transgression of some established and

definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful
intent and not mere error in judgment.38 To be a valid cause for dismissal, such misconduct must be of
grave and aggravated character and not merely trivial or unimportant.39 The misconduct must also be
related to the performance of the employee's duties showing him to be unfit to continue working for the
employer40 and that the employee's act or conduct was performed with wrongful intent.41

On the other hand, valid dismissal on the ground of willful disobedience requires the concurrence of twin
requisites: (1) the employee's assailed conduct must have been willful or intentional, the willfulness being
characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable,
lawful, made known to the employee and must pertain to the duties which he had been engaged to
discharge.42

As correctly held by the CA, the return to work order made by the bank is reasonable and lawful, and the
act required for Nerbes and Suravilla relates to the performance of their duties. The point of contention is
whether their refusal to return to work was willful or intentional and, if so, whether such willful or
intentional conduct is attended by a wrongful and perverse attitude.

In this case, Nerbes and Suravilla's failure to report for work despite the disapproval of their application
for leave was clearly intentional. However, though their refusal to do so may have been intentional, such
was not characterized by a wrongful and perverse attitude or with deliberate disregard of their duties as
such. At the time Nerbes and Suravilla notified the bank of their intent to avail of their union leaves, they
were already proclaimed as winners and in fact took their respective oaths of office. Following the terms
of the parties' CBA, which has the strength of law as between them, Nerbes and Suravilla, as duly-elected
union officers, were entitled to take their union leaves. That Nerbes and Suravilla were indeed entitled to
such privilege is tacitly recognized by the bank itself when it continued to pay them their full salaries,
despite not reporting for work, from March 22, 2004 until June 15, 2004.43

Nerbes and Suravilla's belief that they are entitled to immediately assume their positions as union officers
and thereby entitled to union leaves is not completely bereft of basis. For one, they based the exercise of
such privilege on the existing CBA, the terms of which the bank has not demonstrated to be inapplicable.
For another, it was only upon being proclaimed as winners did they assume their respective positions
which, under Department Order No. 09, take place immediately.

On the other hand, the bank's disapproval of union leaves and return to work order were essentially based
on the pendency of the appeal filed by Nerbes and Suravilla's opponents before the BLR. To the bank, the
appeal before the BLR defeated the immediately executory nature of Nerbes and Suravilla's
proclamation. Even then, their failure to report for work can hardly be equated as a perverse defiance of
the bank's orders as they believed that such appeal could not have stayed their immediate proclamation
and assumption to office for, after all, a doubtful or difficult question of law may be the basis of good
faith. As to which interpretation is correct is beside the point and, hence, should be addressed at a more
appropriate forum at a proper time.

So too, the Court finds that the penalty of dismissal in this case is harsh and severe. Not every case of
insubordination or willful disobedience by an employee reasonably deserves the penalty of dismissal
because the penalty to be imposed on an erring employee must be commensurate with the gravity of his
or her offense.44 It is settled that notwithstanding the existence of a just cause, dismissal should not be
imposed, as it is too severe a penalty, if the employee had been employed for a considerable length of
time in the service of his or her employer, and such employment is untainted by any kind of dishonesty
and irregularity.45 We note that aside from the subject incident, Nerbes and Suravilla were not previously
charged with any other offense or irregularity. Considering the surrounding facts, termination ofNerbes
and Suravilla's services was a disproportionately heavy penalty.

Compromise Agreement between petitioner bank and respondent Suravilla is approved; counsel's
right to compensation is protected

It is settled that a client may enter into a compromise agreement with the adverse party to terminate the
litigation before a judgment is rendered therein,46 and if the compromise agreement is found to be in
order and not contrary to law, morals, good customs and public policy, its judicial approval is in
order.47There being no impediment to the court's approval of the Compromise Agreement between the
bank and Suravilla, the court accordingly approves the same and grants the bank's motion to withdraw its
petition with respect to Suravilla.

Be that as it may, the grant of the bank's motion to withdraw the petition as regards Suravilla and the
approval of their Compromise Agreement does not affect counsel's right to compensation. On this score,
the Court's disquisition in Malvar v. Kraft Foods Philippines, Inc., et al.,48 resonates with relevance and is
thus quoted extensively:chanRoblesvirtualLawlibrary
On considerations of equity and fairness, the Court disapproves of the tendencies of clients compromising
their cases behind the backs of their attorneys for the purpose of unreasonably reducing or completely
setting to naught the stipulated contingent fees. Thus, the Court grants the Intervenor's Motion for
Intervention to Protect Attorney's Rights as a measure of protecting the Intervenor's right to its stipulated
professional fees that would be denied under the compromise agreement. The Court does so in the
interest of protecting the rights of the practicing Bar rendering professional services on contingent fee
basis.

Nonetheless, the claim for attorney's fees does not void or nullify the compromise agreement between
Malvar and the respondents. There being no obstacles to its approval, the Court approves the
compromise agreement. The Court adds, however, that the Intervenor is not left without a remedy, for
the payment of its adequate and reasonable compensation could not be annulled by the settlement of the
litigation without its participation and conformity. It remains entitled to the compensation, and its right is
safeguarded by the Court because its members are officers of the Court who are as entitled to judicial
protection against injustice or imposition of fraud committed by the client as much as the client is against
their abuses as her counsel. In other words, the duty of the Court is not only to ensure that the attorney
acts in a proper and lawful manner, but also to see to it that the attorney is paid his just fees. Even if the
compensation of the attorney is dependent only on winning the litigation, the subsequent withdrawal of
the case upon the client's initiative would not deprive the attorney of the legitimate compensation for
professional services rendered.49 (Citations omitted)
In this case, We find that Atty. Jabla adequately and sufficiently represented Suravilla and prepared all the
required pleadings50 on her behalf before the LA, the NLRC, the CA and this Court. Despite the absence of
a written agreement as to the payment of fees, his entitlement to reasonable compensation may still be
fairly ascertained. In this regard, Section 24 of Rule 138 of the Rules of Court should be observed in
determining Atty. Jabla's compensation which provides:chanRoblesvirtualLawlibrary
 SEC. 24. Compensation of attorney's; agreement as to fees. - An attorney shall be entitled to have and
recover from his client no more than a reasonable compensation for his services, with a view to the
importance of the subject matter of the controversy, the extent of the services rendered, and the
professional standing of the attorney. No court shall be bound by the opinion of attorneys as expert
witnesses as to the proper compensation, but may disregard such testimony and base its conclusion
on its own professional knowledge. A written contract for services shall control the amount to be paid
therefor unless found by the court to be unconscionable or unreasonable.
As well, the criteria found in the Code of Professional Responsibility are considered in assessing the
proper amount of compensation that a lawyer should receive. Canon 20, Rule 20.01
provides:chanRoblesvirtualLawlibrary
CANON 20 - A LAWYER SHALL CHARGE ONLY FAIR AND REASONABLE FEES.

Rule 20.01. A lawyer shall be guided by the following factors m determining his fees:

(a) The time spent and the extent of the services rendered or required;

(b) The novelty and difficulty of the question involved;

(c) The importance of the subject matter;

(d) The skill demanded;

(e) The probability of losing other employment as a result of acceptance of the proffered case;

(f) The customary charges for similar services and the schedule of fees of the IBP Chapter to which he
belongs;

(g) The amount involved in the controversy and the benefits resulting to the client from the service;

(h) The contingency or certainty of compensation;

(i) The character of the employment, whether occasional or established; and

(j) The professional standing of the lawyer.

Taking into account the foregoing, the Court finds that the amount equivalent to 10% of the settlement
amount received by Suravilla, or PhP 348,751.27 is reasonable compensation for the skill and services
rendered by Atty. Jabla.

However, the Court cannot easily hold the bank solidarily liable with Suravilla for the payment of said
attorney's fees in the absence of proof that the bank acted in connivance with Suravilla to deprive Atty.
Jabla of the fees reasonably due him. As held in Malvar,51 the opposing party would be liable if they were
shown to have connived with the client in the execution of the compromise agreement, with the intention
of depriving the intervenor of its attorney's fees. In such case, the opposing party would be solidarily liable
with the client for the attorney's fees under the theory that they unfairly and unjustly interfered with the
counsel's professional relationship with his client. Such was not shown to be the case here.

An illegally dismissed employee is entitled to reinstatement and backwages; in lieu of reinstatement,

separation pay is awarded

Having found that Nerbes was illegally dismissed, he is necessarily entitled to reinstatement to his former
position without loss of seniority and the payment of backwages pursuant to Section 279 of the Labor
Code which reads:chanRoblesvirtualLawlibrary
Article 279. Security of Tenure. - In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement.
Interpreting this provision, the Court held in Bustamante, et al. v. NLRC, et al.,52 that illegally dismissed
employees are entitled to full backwages without conditions or limitations. TheCA's award ofbackwages
that is limited to only one (1) year is thus without basis.

Moreover, the CA's award of separation pay in lieu of both reinstatement and backwages is incorrect.
Reinstatement and backwages are two separate reliefs available to an illegally dismissed employee.
Payment of backwages is a form of relief that restores the income that was lost by reason of unlawful
dismissal. Separation pay, on the other hand, is oriented towards the immediate future, the transitional
period the dismissed employee must undergo before locating a replacementjob.53

Hence, instead of limiting the payment of backwages to just one year and awarding separation pay in lieu
of both the reinstatement aspect and the payment of backwages, the correct award, as is consistent with
prevailing jurisprudence, is reinstatement and the payment of full backwages from the time of dismissal
until finality of the decision. It is however understood that if Nerbes had, in the meantime, been
reinstated on payroll and paid his corresponding salaries, such amounts should be deducted from the
award of backwages consistent with the rule against double recovery.

However, since 13 years had passed since Nerbes was dismissed, it is no longer reasonable for the Court to
direct him to return to work and for the bank to accept him.54 It is therefore just and equitable to award
separation pay, in lieu of reinstatement, in an amount equivalent to one month salary for every year of
service, computed up to the time of Nerbes' dismissal on October 22, 2004.

WHEREFORE, the petition is DENIED. The Decision dated May 9, 2012 and Resolution dated August 15,
2013 of the Court of Appeals in CA-G.R. SP No. 108317 are AFFIRMED insofar as it declared respondents
Nestor N. Nerbes and Armenia F. Suravilla to have been illegally dismissed.

The Compromise Agreement between petitioner BDO Unibank, Inc. (formerly Equitable PCI Bank) and
respondent Suravilla is APPROVED and the motion to withdraw petition with respect to respondent
Suravilla is accordingly GRANTED.

Respondent Suravilla is ORDERED to pay to movant-intervenor Jabla Brigola Bagas & Sampior Law
Offices, as represented by Atty. Emmanuel R. Jabla, the attorney's fees equivalent to 10% of the amount
received by respondent Suravilla, or PhP 348,751.27.
 The Labor Arbiter is DIRECTED to recompute the proper amount of backwages and separation pay due to
respondent Nerbes in accordance with this decision.

SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin, Jardeleza, and Reyes, Jr., JJ., concur.

ii.
FIRST DIVISION
January 27, 2016
G.R. No. 212070
CEBU PEOPLE'S MULTI-PURPOSE COOPERATIVE and MACARIO G. QUEVEDO, Petitioners,
vs.
NICERATO E. CARBONILLA, JR., Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated June 25, 2013 and the
Resolution3 dated March 17, 2014 of the Court of Appeals (CA) in CA-G.R. CEB SP No. 05403, which reversed
and set aside the Decision4 dated April 29, 2010 and the Resolution5 dated June 30, 2010 of the National
Labor Relations Commission (NLRC) in NLRC Case No. VAC-10-000977-2009, and accordingly, declared
respondent Nicerato E. Carbonilla, Jr. (Carbonilla, Jr.) to have been illegally dismissed by petitioner Cebu
People's Multi-Purpose Cooperative (CPMPC).
The Facts
On November 14, 2005, CPMPC hired Carbonilla, Jr. as a Credit and Collection Manager and, as such, was
tasked with the handling of the credit and collection activities of the cooperative, which included
recommending loan approvals, formulating and implementing credit and collection policies, and conducting
trainings.6 Sometime in 2007, CPMPC underwent a reorganization whereby Carbonilla, Jr. was also assigned
to perform the duties of Human Resources Department (HRD) Manager, i.e., assisting in the personnel hiring,
firing, and handling of labor disputes.7In 2008, he was appointed as Legal Officer and subsequently, held the
position of Legal and Collection Manager.8
However, beginning February 2008, CPMPC, through its HRD Manager, Ma. Theresa R. Marquez (HRD
Manager Marquez), sent various memoranda to Carbonilla, Jr. seeking explanation on the various infractions
he allegedly committed. The aforesaid memoranda, as well as his replies thereto, are detailed as follows:

CPMPC'S MEMORANDA: CARBONILLA, JR.'S REPLIES:

HRD 202 File 2008.02.19.017 dated
February 19, 20089
- Memorandum relative to his non-
attendance to the CLIMBS HOME PROTEK
Dinner Meeting.
He claimed that he was belatedly informed
and was not given any written notification
of the said meeting, and that he did not
find any relation of the said meeting to his
job as a Legal Officer.10
HRD 202 File 2008.02.26.034 dated
February 26, 200811- Memorandum
relative to his non-submission of Weekly
Executive Summary Reports and Itinerary
for the months of January and February.
HRD 202 File 2008.02.26.035 dated
February 26, 200812 - Memorandum on
why he allowed Joelito Aguipo (Aguipo), a
contractual collector for the Bantayan
Branch, to drive a motorcycle without a
driver's license and not being the owner
thereof.
HRD 202 File 2008.02.26.036 dated
February 26, 200815- Memorandum on why against him, and at the same time,
he failed to: (a) account for a motorcycle
being used by a former employee under his this Memorandum is "proven malicious,
branch; and ( b) reclassify the vehicle of
another employee.
HRD 202 File 2008.06.26.086 dated June
26, 200817
- Memorandum on why he insulted his
superior, CPMPC Chief Operation Officer
Agustina L. Bentillo (COO Bentillo), in front about Alfonso Vasquez (Vasquez), who was
of her subordinates, with the
statement: "Ikaw ra may di mosalig ba, ka
kwalipikado adto niya, maski
mag contest pa mo, lupigon gani ka" 18or
"You're the only one who doesn't trust her, taken almost a month before his20
she is very qualified, you even lose in
comparison to her."19
HRD 202 File 2008.06.26.087 dated June
26, 200821
- Memorandum on his alleged acts of
insubordination and gross disrespect when
he questioned the authority of HRD
Manager Marquez to refuse the hiring of a
new staff.
No reply.
He stated that there was no policy requiring
field collectors to own – in a strict legal
sense - a motorcycle, but merely to possess
the same so he can effect collections more
efficiently. Besides, Aguipo was allowed to
drive due to the urgency of collecting from
the Bantayan Branch. In any case, there is
an Affidavit of Undertaking13 exonerating
CPMPC from any liability.14
He sought clarification of the charges
threatened HRD Manager Marquez that if
[she] might be answerable to a certain
degree of civil liability which the 1987
Constitution has given to individuals."16
He dismissed the charge as made with
malicious intent and aimed to discredit his
person, claiming that he only had a
discussion with his superior, particularly,
unsystematically pulled out from his
department without his consent. He added
that if COO Bentillo was indeed offended
by his remarks, then it should not have
attention
was called regarding the matter.
Citing the Philippine Law Dictionary, he
explained that "[i]nsubordination means a
quality or state of being insubordinate to a
person in authority." He maintained that he
did not commit insubordination as he
merely sought clarification about the
deferment of the hiring of a working
student by HRD Manager Marquez despite
having prior approval of CPMPC Chief

HRD 202 File 2008.06.26.088 dated June
26, 200823
- Memorandum on his alleged acts of
insubordination and gross disrespect when
he insisted before CEO Quevedo that he
had the authority as Legal and Collection
Manager to hire a new staff.
HRD 202 File 2008.06.27.091 dated
June 27, 200825
- Memorandum asking Carbonilla, Jr. to
tum-over to the officer-in-charge custody
of the following documents: Banco de Oro
contract on staff loans, CPMPC firearm
contracts and licenses, branch offices
rentals, and others.26
HRD 202 File 2008.07.03.094 dated
July 3, 200828
- Memorandum on his alleged acts of gross
negligence in: (a) failing to submit the
employment assessment of one Marcelina
M. Remonde (Remonde ); ( b) promoting
one Mary Grace R. Batain (Batain) despite
lack of any performance appraisal; ( c)
failing to report the shortage of Batain
amounting to
Pl08,254.55; (d) disseminating a wrong
schedule of mediation activity which
caused confusion and pressure among
branch managers; ( e) failing to annotate
the encumbrance on the certificate of title
offered as collateral to CPMPC; (j) failing to
review and verify its contract with the
BISDA Security Agency (agency) which
exposed CPMPC to third-party liability for
failure of the agency to remit the Social
Security System, Philhealth and Pag-IBIG
premiums of its security guards to the
government; (g) failing to inform the
branch managers of any
Executive Officer (CEO), petitioner Macario
G. Quevedo (CEO Quevedo ).22
Reiterating the definition of
"insubordination" in Philippine Law
Dictionary, he maintained that his act of
clarifying with the CEO the policy on hiring
working students did not constitute
insubordination, but rather, was made in
the exercise of his right to express.24
He only reviewed the subject documents
and they were never entrusted to him for
safekeeping.27
He interposed the following
defenses:29 (a) he was not responsible for
employment assessments having been
transferred to the Legal Department; ( b) as
then HRD Manager, it was within his
discretion to promote Batain whose
appointment has been previously
concurred in by the CEO; ( c) he was not
informed of the shortage committed by
Batain nor was it within his primary
obligation to disclose the same; (d) the
printing of invitation was managed only by
his legal assistant, Joel Semblante
(Semblante) and Vasquez. However, the
latter was unexpectedly transferred to
another job assignment, leaving only
Semblante to do the job, which may have
caused the unintentional mistake;30 (e) a
certain Brenda Dela Cruz was the one
responsible for the annotation of the
encumbrances of real and personal
properties; (j) he was not responsible for
the review of the contract between the
agency and its security guards as CPMPC
had no employer-employee relationship
with them; (g) he was unaware of the
complaints of the branch managers
settlements or compromise agreements
entered into by the head office resulting in
confusion as to payments; and (h) failing to
submit to HRD Manager Marquez the
status of the firearms and licenses assigned
to the branch managers.
regarding the payment confusion as a
result of settlements or compromise
agreements; and (h) it was not his duty to
determine the status, custody, and licenses
of the firearms.31

HRD 202 File 2008.07.04.095 dated July 4, His acts did not constitute gross
200832 misconduct, gross disrespect, or loss of
- Memorandum on the allegations he made trust and confidence as he only questioned
the suspicious transactions of CEO
against the CEO during the Board of
Quevedo regarding the sale of a titled
Directors' inquiry hearing, which
parcel of land owned by the cooperative for
constituted gross misconduct, gross
an inadequate consideration. He then
disrespect, and loss of trust and confidence.
added that as a member of CPMPC, he has
the right to demand transparency of all the
transactions made by CEO Quevedo, of
which its consequences will affect the
cooperative.33

HRD 202 File 2008.07 .08.098 dated July The said meeting was scheduled outside
8, 200834 the regular meeting day and he was only
informed about it on the day of the
- Memorandum on his failure to attend the
meeting at which time, he was personally
management and operations committee
handling collection cases.35
meeting held on July 7, 2008 despite prior
notices.

HRD 202 File 2008.07.09.103 dated July 9,
200836 – Memorandum relative to the
mediation settlements which were
forwarded for notarization to one Atty.
Miñoza who is not the authorized legal
retainer of CPMPC.
He admitted that as head of the Legal
Department, he endorsed the documents
for notarization to his friend who only
charged P50.00 per document as compared
to the legal retainers who charged Pl00.00
per document. He added that "[t]he same is
more advantageous and secured rather
than having it notarized- by a 'murio-
murio' notary public at the back of the Cebu
City Hall."37

HRD 202 File 2008.07.09.104 dated July 9, The two cases were re-filed before the
200838 Regional Trial Court on May 29, 2008 as the
- Memorandum on his failure to update the amounts involved were beyond the
jurisdiction of the Municipal Trial Court
CEO and management committee of the
(MTC). He also explained that he was not
dismissal of the cases filed by CPMPC
against Spouses Alex and Alma Monisit in aware of the filing of these cases before the
Civil Case No. R-52633 and against Spouses MTC as he was occupying the position of
the HRD Manager at that time. 39
Helen and Rogelio Lopez in Civil Case No.
R-53274.
 HRD 202 File 2008.07.15.106 dated July
15, 200840
- Memorandum relative to Carbonilla, Jr. 's
instruction to Semblante to pull out
important records and vital
documents, i.e., Compromise/ Settlement
Agreement, Mediation Tracking Form,
Agreement to Mediate, Mediator's Report,
Evaluation of Mediation, among others,
from the head office without the
knowledge and approval of the
management, which documents were later
on returned tampered and altered.
He explained that as head of the Legal
Department, he was responsible for the
proper disposal of all legal documents and
contracts, and the cancellation of said
documents were done to protect the
interest of the cooperative. Moreover, he
claimed that the erasures were caused by
the
cancellation of the notarial subscription
since Carbonilla, Jr. found the requirements
of the notary public - which required all 125
respondents to appear personally and
present their community tax certificates -
impractical. Moreover, he claimed that the
cancellation of the documents "was not for
the purpose of falsifying or tampering the
same[,] but merely to protect the interest
of the cooperative against possible
sanctions [or] circulating bogus documents.
"41

HRD 202 File 2008.07.16.107 dated July
16, 200842 – Memorandum relative to the
unliquidated cash advances of the notarial
transactions of the mediation
agreements.43
The delay in liquidation was due to the
"agreement" he had with the notary public
about the disposition of the notarized
documents. He claimed that in the
afternoon of the same day, he turned over
the amount of P6,250.00 to the Accounting
Department.44

HRD 202 File 2008.07.19.111 dated July No reply.

19, 200845 - Memorandum on the alleged
tampering and loss of CPMPC's vital
records and documents, i.e., two (2) copies
of the compromise settlement agreement.

Unconvinced by Carbonilla, Jr.'s explanations, CPMPC scheduled several clarificatory hearings,46 but the
former failed to attend despite due notice.47 Later, CPMPC conducted a formal investigation where it
ultimately found Carbonilla, Jr. to have committed acts prejudicial to CPMPC's interests.48 As such, CPMPC,
CEO Quevedo, sent Carbonilla, Jr. a Notice of Dismissal49 dated August 5, 2008 informing the latter of his
termination on the grounds of: (a) loss of trust and confidence; (b) gross disrespect; (c) serious misconduct;
(d) gross negligence; (e) commission of a crime of falsification/inducing Aguipo to violate the law or the Land
Transportation and Traffic Code; and (e) committing acts highly prejudicial to the interest of the
cooperative.50
Consequently, Carbonilla, Jr. filed the instant case for illegal dismissal, non-payment of salaries, 13th month
pay, as well as damages and backawages, against CPMPC, before the NLRC, docketed as NLRC RAB VII-08-
1856-2008.51In support of his claims, Carbonilla, Jr. denied the administrative charges against him, asserting
that the Management and Board of Directors of CPMPC merely orchestrated means to unjustly dismiss him
from employment.52
In defense, CPMPC maintained that the totality of Carbonilla, Jr.'s infractions was sufficient to warrant his
dismissal, and that it had complied with the procedural due process in terminating him.53 Further, CPMPC
pointed out that Carbonilla, Jr. had been fully paid of all his benefits, notwithstanding his unsettled
obligations to it in the form of loans, insurance policy premiums, and cash advances, among others,
amounting to a total of P129,455.00.54
The LA Ruling
In a Decision55 dated July 1, 2009, the Labor Arbiter (LA) dismissed Carbonilla, Jr.' s complaint for lack of
merit.56The LA found that Carbonilla, Jr. committed a litany of infractions, the totality of which constituted
just cause for the termination of his employment.57 Likewise, it was determined that CPMPC afforded
Carbonilla, Jr. procedural due process prior to his termination, as evinced by the former's issuance of a series
of memoranda, as well as its conduct of investigation with notices to the latter.58 Furthermore, the LA denied
his claims for unpaid salaries and 13th month pay, as records show that the aggregate amount of his
monetary claims is not even enough to pay his accountabilities to CPMPC in the total amount of
P129,455.00.59
Aggrieved, Carbonilla, Jr. appealed to the NLRC, which was docketed as NLRC Case No. VAC-10-000977-
2009.60
The NLRC Ruling
In a Decision61 dated April 29, 2010, the NLRC affirmed the LA ruling. It found CPMPC to have substantially
proven the existence of just causes in dismissing Carbonilla, Jr., i.e., abuse of authority; disrespect to his
colleagues and superiors; being remiss in his duties; and commission of acts of misrepresentation.62 It further
held that Carbonilla, Jr. was given the opportunity to present his side and to disprove the charges against him,
but failed to do so.63Finally, the NLRC explained that while Carbonilla, Jr. may indeed be entitled to his claims
for unpaid salaries and 13th month pay, the same cannot be granted as his accountabilities with CPMPC were
larger than said claims.64
Carbonilla, Jr. moved for reconsideration,65 which was, however, denied in a Resolution66 dated June 30,
2010. Undaunted, he elevated the matter to the CA via a petition for certiorari.67
The CA Ruling
In a Decision68 dated June 25, 2013, the CA reversed and set aside the NLRC ruling and accordingly, ordered
Carbonilla, Jr.'s reinstatement and the remand of the case to the LA for the computation of his full
backwages, inclusive of allowances and other benefits, as well as attorney's fees.69 It held that the NLRC
gravely abused its discretion in declaring Carbonilla, Jr.'s dismissal as valid, considering that, other than
CPMPC's series of memoranda and self-serving allegations, it did not present substantial documents to
support a conclusion that would warrant Carbonilla, Jr.'s valid dismissal.70 In fine, CPMPC failed to discharge
the burden of proving that Carbonilla, Jr. 's dismissal was for just causes.71
Dissatisfied, petitioners moved for reconsideration,72 but the same was denied in a Resolution73 dated March
17, 2014; hence, this petition.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the CA correctly ascribed grave abuse of discretion
on the part of the NLRC in ruling that Carbonilla, Jr. 's dismissal was valid.
The Court's Ruling
The petition is impressed with merit.
To justify the grant of the extraordinary remedy of certiorari, petitioner must satisfactorily show that the
court or quasi-judicial authority gravely abused the discretion conferred upon it. Grave abuse of discretion
connotes a capricious and whimsical exercise of judgment, done in a despotic manner by reason of passion or
personal hostility, the character of which being so patent and gross as to amount to an evasion of positive
duty or to a virtual refusal to perform the duty enjoined by or to act at all in contemplation of law.74
In labor disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia, its findings and
conclusions are not supported by substantial evidence, or that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion.75
Guided by the foregoing considerations, the Court finds that the CA committed reversible error in granting
Carbonilla, Jr. 's certiorari petition since the NLRC did not gravely abuse its discretion in ruling that he was
validly dismissed from employment as CPMPC was able to prove, through substantial evidence, the existence
of just causes warranting the same.
Basic is the rule that an employer may validly terminate the services of an employee for any of the just
causesenumerated under Article 296 (formerly Article 282) of the Labor Code,76 namely:
(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.
As may be gathered from the tenor of CPMPC's Notice of Dismissal, it is apparent that Carbonilla, Jr.'s
employment was terminated on the grounds of, among others, serious misconduct and loss of trust and
confidence.77
On the first ground, case law characterizes misconduct as a transgression of some established and definite
rule of action, a forbidden act, a dereliction of duty, willful in character and implies wrongful intent and not
mere error injudgment.78 For misconduct to be considered as a just cause for termination, the following
requisites must concur: (a) the misconduct must be serious; (b) it must relate to the performance of the
employee's duties showing that the employee has become unfit to continue working for the employer; and
(c) it must have been performed with wrongful intent. 79
All of the foregoing requisites have been duly established in this case. Records reveal that Carbonilla, Jr. 's
serious misconduct consisted of him frequently exhibiting disrespectful and belligerent behavior, not only to
his colleagues, but also to his superiors. He even used his stature as a law graduate to insist that he is "above"
them, often using misguided legalese to weasel his way out of the charges against him, as well as to strong-
arm his colleagues and superiors into succumbing to his arrogance. Carbonilla Jr.'s obnoxious attitude is
highlighted by the following documents on record: (a) his reply to HRD 202 File 2008.02.26.036 dated
February 26, 2008 wherein he threatened HRD Manager Marquez with a lawsuit, stating that if the
memorandum is "proven malicious, [she] might be answerable to a certain degree of civil liability which the
1987 Constitution has given to individuals";80 (b) HRD 202 File 2008.06.26.086 dated June 26, 200881 wherein
he berated COO Bentillo in front of her subordinates with the statement: "[i]kaw ra may di mosalig ba, ka
kwalipikado adto niya, maski mag contest pa mo, lupigon gani ka"82 or "[y ]ou're the only one who doesn't trust
her, she is very qualified, you even lose in comparison to her[,]"83 and his reply thereto wherein he dismissed
the charge as made with malicious intent and aimed to discredit his person;84 (c) HRD 202 File 2008.06.26.088
dated June 26, 200885 wherein he argued with the CEO Quevedo, insisting that he had the authority to hire a
new staff, and his reply thereto where he cited the Philippine Law Dictionary to maintain that his act did not
amount to insubordination;86 (d) HRD 202 File 2008.06.26.087 dated June 26, 200887 wherein he openly
questioned the authority of HRD Manager Marquez in refusing to hire a new staff and his reply thereto where
he again cited the Philippine Law Dictionary to insist that he did not commit acts of
insubordination;88 and (e) HRD 202 File 2008.07.04.095 dated July 4, 200889 wherein he openly and
improperly confronted the CPMPC CEO during a Board of Directors' inquiry hearing, to which he again
maintained that his acts did not constitute misconduct, gross disrespect, and loss of trust and confidence as
he was only looking after the welfare of the cooperative.90
Indisputably, Carbonilla, Jr. 's demeanor towards his colleagues and superiors is serious in nature as it is not
only reflective of defiance but also breeds of antagonism in the work environment. Surely, within the bounds
of law, management has the rightful prerogative to take away dissidents and undesirables from the
workplace. It should not be forced to deal with difficult personnel, especially one who occupies a position of
trust and confidence, as will be later discussed, else it be compelled to act against the best interest of its
business. Carbonilla, Jr.'s conduct is also clearly work-related as all were incidents which sprung from the
performance of his duties. Lastly, the misconduct was performed with wrongful intent as no justifiable reason
was presented to excuse the same. On the contrary, Carbonilla, Jr. comes off as a smart aleck who would
even go to the extent of dangling whatever knowledge he had of the law against his employer in a combative
manner. As succinctly put by CPMPC, "[e]very time [Carbonilla, Jr.'s] attention was called for some
inappropriate actions, he would always show his Book, Philippine Law Dictionary and would ask the CEO or
HRD Manager under what provision of the law he would be liable for the complained action or
omission."91 Irrefragably, CPMPC is justified in no longer tolerating the grossly discourteous attitude of
Carbonilla, Jr. as it constitutes conduct unbecoming of his managerial position and a serious breach of order
and discipline in the workplace.92
With all these factored in, CPMPC's dismissal of Carbonilla, Jr. on the ground of serious misconduct was
amply warranted.1âwphi1
For another, Carbonilla, Jr. 's dismissal was also justified on the ground of loss of trust and confidence.
According to jurisprudence, loss of trust and confidence will validate an employee's dismissal when it is
shown that: (a) the employee concerned holds a position of trust and confidence; and ( b) he performs an act
that would justify such loss of trust and confidence.93 There are two (2) classes of positions of
trust: first, managerial employees whose primary duty consists of the management of the establishment in
which they are employed or of a department or a subdivision thereof, and to other officers or members of the
managerial staff; and second, fiduciary rank-and-file employees, such as cashiers, auditors, property
custodians, or those who, in the normal exercise of their functions, regularly handle significant amounts of
money or property. These employees, though rank-and-file, are routinely charged with the care and custody
of the employer's money or property, and are thus classified as occupying positions of trust and confidence.94
Records reveal that Carbonilla, Jr. occupied a position of trust and confidence as he was employed as Credit
and Collection Manager, and later on, as Legal and Collection Manager, tasked with the duties of, among
others, handling the credit and collection activities of the cooperative, which included recommending loan
approvals, formulating and implementing credit and collection policies, and conducting trainings.95 With such
responsibilities, it is fairly evident that Carbonilla, Jr. is a managerial employee within the ambit of the first
classification of employees afore-discussed. The loss of CPMPC's trust and confidence in Carbonilla, Jr., as
imbued in that position, was later justified in light of the latter's commission of the following acts: (a) the
forwarding of the mediation settlements for notarization to a lawyer who was not the authorized legal
retainer of CPMPC (HRD 202 File 2008.07.09.103 dated July 9, 200896); (b) the pull-out of important records
and vital documents from the office premises, which were either lost or returned already tampered and
altered (HRD 202 File 2008.07.15.106 dated July 15, 200897 and HRD 202 File 2008.07.19.111 dated July 19,
200898); and (c) the incurring of unliquidated cash advances related to the notarial transactions of the
mediation agreements (HRD 202 File 2008.07.16.107 dated July 16, 200899). While Carbonilla, Jr. posited that
these actuations were resorted with good intentions as he was only finding ways for CPMPC to save up on
legal fees, this defense can hardly hold, considering that all of these transactions were not only highly
irregular, but also done without the prior knowledge and consent of CPMPC's management. Cast against this
light, Carbonilla, Jr.'s performance of the said acts therefore gives CPMPC more than enough reason to lose
trust and confidence in him. To this, it must be emphasized that "employers are allowed a wider latitude of
discretion in terminating the services of employees who perform functions by which their nature require the
employer's full trust and confidence. Mere existence of basis for believing that the employee has breached
the trust and confidence of the employer is sufficient and does not require proof beyond reasonable doubt.
Thus, when an employee has been guilty of breach of trust or his employer has ample reason to distrust him,
a labor tribunal cannot deny the employer the authority to dismiss him,"100 as in this case.
Perforce, having established the actual breaches of duty committed by Carbonilla, Jr. and CPMPC's
observance of due process, the Court no longer needs to further examine the other charges against
Carbonilla, Jr., as it is already clear that the CA erred in ascribing grave abuse of discretion on the part of the
NLRC when the latter declared that CPMPC validly dismissed Carbonilla, Jr. from his job. The totality and
gravity of Carbonilla, Jr. 's infractions throughout the course of his employment completely justified CPMPC's
decision to finally terminate his employment. The Court's pronouncement in Realda v. New Age Graphics,
Inc.101 is instructive on this matter, to wit:
The totality of infractions or the number of violations committed during the period of employment shall
be considered in determining the penalty to be imposed upon an erring employee. The offenses
committed by petitioner should not be taken singly and separately. Fitness for continued employment
cannot be compartmentalized into tight little cubicles of aspects of character, conduct and ability
separate and independent of each other. While it may be true that petitioner was penalized for his previous
infractions, this does not and should not mean that his employment record would be wiped clean of his
infractions. After all, the record of an employee is a relevant consideration in determining the penalty that
should be meted out since an employee's past misconduct and present behavior must be taken together in
determining the proper imposable penalty[.] Despite the sanctions imposed upon petitioner, he continued to
commit misconduct and exhibit undesirable behavior on board. Indeed, the employer cannot be compelled
to retain a misbehaving employee, or one who is guilty of acts inimical to its interests. 102 (Emphases and
underscoring supplied)
On a final point, the Court notes that Carbonilla, Jr.'s award of unpaid salaries and 13th month pay were
validly offset by his accountabilities to CPMPC in the amount of P129,455.00.103 Pursuant to Article 1278104 in
relation to Article 1706105 of the Civil Code and Article 113 (c)106 of the Labor Code, compensation can take
place between two persons who are creditors and debtors of each other.107 Considering that Carbonilla, Jr.
had existing debts to CPMPC which were incurred during the existence of the employer-employee
relationship, the amount which may be due him in wages was correctly deducted therefrom.
WHEREFORE, the petition is GRANTED. The Decision dated June 25, 2013 and the Resolution dated March
17, 2014 of the Court of Appeals in CA-G.R. CEB SP No. 05403 are hereby REVERSED and SET ASIDE.
Accordingly, the Decision dated April 29, 2010 and the Resolution dated June 30, 2010 of the National Labor
Relations Commission in NLRC Case No. VAC-10-000977-2009 declaring respondent Nicerato E. Carbonilla,
Jr. to have been validly dismissed by petitioner Cebu People's Multi-Purpose Cooperative are REINSTATED.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice
iii.
SECOND DIVISION
 [G.R. No. 117453. June 26, 1998]
AUTOBUS WORKERS UNION (AWU) and RICARDO ESCANLAR, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and MR. ROBERT ONG, respondents.
DECISION
MARTINEZ, J.:
This petition for certiorari and prohibition assails the Resolution dated July 12, 1994 of the respondent
National Labor Relations Commission which affirmed the decision of the Labor Arbiter, the dispositive portion
of which reads:
CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered finding complainants dismissal valid
and in accordance with procedural due process.
As financial assistance, however, respondents are hereby ordered to give complainant the sum of P5,000.00.
SO ORDERED.[1]
and the Resolution dated October 3, 1994 denying the motion for reconsideration of petitioner.
Petitioner Ricardo E. Escanlar worked with Autobus Industries, Inc. (Autobus for brevity) as a Cutting
Machine Operator since January 8, 1981 with a salary of P162.16 per day. He was the recipient of two (2)
Plaques of Appreciation as Model Employee in 1987 and as Valuable Employee in 1988. He was later elected
President of the Autobus Workers Union (AWU), the union for the rank and file employees.
On January 29, 1993, Engr. Zosimo Prospero Chavez, Production Manager of Autobus, received a
handwritten report[2] from one Reynaldo T. Andres, a supervisor, pertinent portions of which are quoted
hereunder:
1. That in the morning of January 29, 1993, Mr. Andres told the herein complainant, together with another
employee of the company their reassignment to the other section of the company as these latter sections
lack manpower; that herein complainant shall be reassigned to the `Washer Section while the other to the
`Painting Section;
2. That despite being told of the reason for his transfer, Mr. Escanlar questioned his transfer to the `Washer
Section;
3. That on the way to his assigned section, herein complainant asked for an eye goggle to be used in his
work; that a certain Mr. Andres told complainant that there was one goggle in the section where he is
assigned;
4. That herein complainant refused to use the goggles saying that it might have some `ketong in it; that no
new goggles were issued to the complainant; that the latter was given instructions by Mr. Andres; that Mr.
Andres proceeded to the `Painting Section;
5. That at around 6:55 a.m. while on his way back to the `Washer Section, Mr. Andres saw herein complainant
talking to a certain Odelon Gamora; that the two talked for about two (2) minutes; that after their
conversation, Mr. Andres approached the complainant; that at this instance Mr. Escanlar told Mr. Andres that
he (complainant) did not like the way Mr. Andres chose personnel to go on overtime; that complainant went
on further saying that Mr. Andres chose only persons who are close to him and from those who treat him for a
drink; that Mr. Andres told complainant to ask a certain Mr. Tomas Marahit who was near if the complainants
allegations were true;
6. That thereafter, herein complainant answered back by saying `Gago Ka to Mr. Andres; that the latter told
the former that they should talk later at his (Mr. Andres) office but the complainant again called him (Mr.
Andres) `Gago Ka;
7. That at this juncture, Mr. Andres deemed it proper to leave complainant; that while Mr. Andres was already
in the Seam Weld Section of the company, complainant continued to stare at him without doing his job; that
Mr. Andres decided to ask complainant what his problem was; that herein complainant retorted by
saying: `BAKIT ANONG GUSTO MO, TANG INA MO; Mr. Andres just left him (complainant);
8. That at about 8:30 a.m. of the same day, while Mr. Andres was on his way to the canteen, herein
complainant approached him (Mr. Andres) asking what he told the office regarding the incident between
them; that Mr. Andres told the complainant to just ask the management about the matter; that complainant
said `Panapanahon lang yan, panahon mo ngayon;
9. That at 3:08 p.m. of the same day, complainant approached Mr. Andres in the canteen and said `Patunayan
mong minura kita at kung hindi, tandaan mo yan.
On February 5, 1993, Engr. Chavez issued a memorandum[3] to petitioner Escanlar requiring the latter to
explain in writing within 48 hours from receipt thereof why no disciplinary action should be taken against him
pursuant to the companys Code of Discipline, for addressing Reynaldo T. Andres, his supervisor, in profane or
obscene language and for threatening him.
On February 6, 1993, Reynaldo Andres wrote a memorandum[4] to Engr. Chavez that petitioner Escanlar
had again threatened him the previous day at the basketball court of the company premises.
On February 8, 1993, petitioner Escanlar submitted a written explanation[5] to Engr. Chavez. On the same
day, Engr. Chavez through a memorandum[6] informed petitioner Escanlar of the scheduled hearing of the
January 29 incident on February 17, 1993. The hearing was continued on March 12, 1993.
After the administrative investigation, petitioner Escanlar was served a Notice of Termination [7] dated
April 19, 1993, for gross misconduct, i.e., uttering unsavory remarks and threatening his supervisor with
physical harm.
On April 21, 1993, petitioner filed a complaint for illegal dismissal against Autobus. After the submission
by the parties of their respective position papers, the case was deemed submitted for resolution. On October
29, 1993, Labor Arbiter Melquiades Sol D. Del Rosario rendered a decision finding the dismissal of petitioner
valid, pertinent portions of which are quoted hereunder:
Subjecting the evidence on record to a close scrutiny, this Arbitration Branch notes that the immediate cause
of the row was the order of transfer given by the Supervisor, Mr. Andres to complainant and Julieto Anober
from the Cutting Section to the Washer and Painting Sections, respectively. Complainant felt that being a
machine operator and union president at that, his transfer to the washer section is without legal and
justifiable basis and this constituted harassment. The records discloses, however, that the very Collective
Bargaining Agreement, signed by the union headed by complainant and respondent provides for such
transfer as management prerogative of respondent. Article VI of the C.B.A. (Annex 1, Respondents Rejoinder
to Reply to Position Paper), reads:
The union hereby recognizes the companys right x x x to transfer employees from one job to another; and to
make changes in the duties of employees as the company may consider fit and proper to the conduct of its
business and to exercise the inherent and customary prerogative and functions of management.
With this blanket grant of management prerogative, complainant who headed the union panel that
concluded the C.B.A. with respondent company is now estopped to question his transfer of work. Further, the
reason given for the transfer is the lack of manpower to the two (2) sections and there is no showing that the
transfer is permanent. There is no evidence on record that showed complainants transfer as permanent. If at
all it was done by respondent to meet the exigencies of the situation on account of a dearth in
manpower. Finally, complainants transfer and subsequent dismissal can not be termed unfair labor practice
on account of union busting because complainant failed to show by concrete proof that all the other officers
of the union have been removed or are on the verge of being so. As it appears on records, the union has been
in existence prior to complainants ascendancy as president of the union and even with complainant at the
helm of the union as president, respondent company readily concluded a Collective Bargaining Agreement
with the union. If union busting has been the agenda of respondent, complainant would not find himself all
alone in his present predicament but his co-union officers likewise; but this is not the picture obtaining.
In fine, this Arbitration Branch does not find any unfair labor practice committed by respondents as an
aftermath of complainants dismissal.
With regard to the issue of illegal dismissal, there is evidence on record that complainant violated Sec. 6 of
Rule No. 28 of the Code of Discipline of respondent company, which provides:
Seksiyon 6- ASAL AT KILOS pag-insulto o panghihiya, pagbanta ng pananakit o pagpakita ng anumang
sinasadyang di paggalang sa isang superbisor o sino mang opisyal ng kumpanya.
The transfer of complainant from the cutting section to the washer section has undoubtedly bruised
complainants ego, and created a rancor in his heart not only because he has been assigned for quite
sometime to operate a machine but also because he is the president of the workers union in the company. He
had therefore a reason to commit the acts complained of by respondents. This Arbitration Branch therefore
gives more weight and credence to the supervisors complaint that on four (4) occasions on January 29, 1993,
complainant committed acts that violated said rule. These acts are:
That at around 6:55 a.m. when complainant uttered against his supervisor gago ka (twice) when the latter
was accused with playing favorites in the choosing of employees for overtime work, when the supervisor
pointed to one Tomas Marahit who can deny the charge of favoritism; that the complainant uttered the
words bakit, anong gusto mo, tang ina mo upon being approached by the supervisor to ask what the problem
is because complainant was not doing his work but merely staring at him; that at 8:30 a.m., when the
supervisor on his way to the canteen was threatened by complainant when he said, panapanahon lang iyan,
panahon mo ngayon when not told about the contents of the supervisors report to management concerning
the incident that transpired between the two (2) of them; and that at 3:08 of the same day, again at the
canteen when complainant approached his supervisor and uttered the following words: Patunayan mong
minura kita at kung hindi, tandaan mo iyan.
To these claims of the supervisor, complainant could only give a general denial. As between a positive
averment and a mere denial the former should be accorded more weight and belief.Moreover, in
complainants attempt to twist facts, he claims that it was the supervisor who uttered profane language but
during the investigation of February 17, 1993, he admitted that he did not hear the supervisor uttered any bad
word. Rather it was his co-worker Julieto Anober who told him about it not at the time the statement was
uttered but in the afternoon when said co-worker was about to go home. This would constitute an after
thought not worthy of credence. Furthermore, the contents of Julieto Anobers affidavit did not mention
during the investigation by the fact finding committee on March 12, 1993 said bad words but only the word
gago as having been uttered by the supervisor and relayed to complainant in the afternoon when he was
about to go home (Annex G-5, Respondents Rejoinder to Reply to Position Paper). He simply said, iyan lang
ang sinabi ko kay Ric (Complainant) nuong kinahapunan x x x pauwi na ako (Annex G-6, Supra).
The utterance of complainant are four-square with the violated rule aforecited. As there is legal cause and
procedural due process accorded to complainant, this Arbitration Branch so holds and declares complainants
dismissal to be valid.[8]
On appeal, the decision was affirmed by respondent National Labor Relations Commission in its
Resolution[9] dated July 12, 1994.
Dissatisfied with the NLRC decision, petitioner has come to this Court via this petition for certiorari and
prohibition, contending that respondent NLRC acted with grave abuse of discretion in affirming the decision
of the labor arbiter.
 Petitioner asserts that there are questions of fact which have been overlooked and misconstrued by the
labor arbiter and the NLRC.
It is well-settled in this jurisdiction that factual findings of the NLRC, particularly when they coincide with
those of the Labor Arbiter, are accorded respect, even finality, and will not be disturbed for as long as such
findings are supported by substantial evidence.[10] In the instant case, we have no reason to deviate from this
policy as petitioner failed to convince us that the findings of the labor arbiter as affirmed by the NLRC are
devoid of basis or are otherwise capricious or arbitrary.[11]
Petitioner was dismissed by respondent Autobus for violation of Section 6 (B) of the companys Code of
Discipline, to wit:
B. SEKSIYON 6. ASAL AT KILOS
24. Pag-insulto o panghihiya, pagbabanta ng pananakit o pagpapakita ng anumang sinasadyang di-
paggalang sa isang superbisor o sino mang opisyal ng kumpanya.
Takdang Parusa: Suspensiyon hanggang sa pagtitiwalag, ayon sa bigat ng pagkakasala.[12]
which is considered as an act of gross misconduct and is a valid ground for terminating an employee pursuant
to Article 282 of the Labor Code.
Misconduct is improper or wrong conduct. It is the transgression of some established and definite rule of
action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error
in judgment. The misconduct must be of such a grave and aggravated character and not merely trivial or
unimportant.[13] The charge of serious misconduct finds ample support in the record. Petitioner failed to
satisfactorily rebut this accusation, his only defense being self-serving denials.
The repeated utterances by petitioner of obscene, insulting or offensive words against a superior were not
only destructive of the morale of his co-employees and a violation of the company rules and regulations, but
also constitute gross misconduct which is one of the grounds provided for by law to terminate the services of
an employee.[14] His attitude toward his supervisor, Reynaldo T. Andres, amounted to insubordination and
conduct unbecoming of an employee which merited the penalty of dismissal.[15]
Suffice it to state that an employee may be validly dismissed for violation of a reasonable company rule or
regulation adopted for the conduct of the companys business.[16] It is the recognized prerogative of the
employer to transfer and reassign employees according to the requirements of its business. For indeed,
regulation of manpower by the company clearly falls within the ambit of management prerogative. A valid
exercise of management prerogative is one which, among others, covers: work assignment, working methods,
time, supervision of workers, transfer of employees, work supervision, and the discipline, dismissal and recall
of workers. Except as provided for, or limited by special laws, an employer is free to regulate, according to his
own discretion and judgment, all aspects of employment.[17]
Then petitioner makes the farfetched claim that his dismissal is by reason of his being the union president,
thus Autobus is allegedly guilty of unfair labor practice. This contention is devoid of any legal foundation. We
agree with the observation of the respondent NLRC that:
x x x. The records are devoid of any substantial evidence that would establish the theory that the dismissal of
herein complainant was entirely and exclusively motivated by the employees union activities or affiliations
nor brought about by a clear discriminatory motive.[18]
Finally, petitioner assails the proceedings during the administrative investigation claiming violation of due
process. We are not convinced.
The twin requirements of notice and hearing constitute the essential elements of due process. Due process
of law simply means giving opportunity to be heard before judgment is rendered. In fact, there is no violation
of due process even if no hearing was conducted, where the party was given a chance to explain his side of the
controversy. What is frowned upon is the denial of the opportunity to be heard.[19]
A perusal of the record reveals that petitioner was duly notified of the charges against him and given the
opportunity to defend himself via a written explanation and thereafter, to adduce evidence on his behalf during
a formal hearing where he was represented by a counsel of his own choice.
A formal trial-type hearing is not even essential to due process. It is enough that the parties are given a fair
and reasonable opportunity to explain their respective sides of the controversy and to present supporting
evidence on which a fair decision can be based.[20] This type of hearing is not even mandatory in cases of
complaints lodged before the Labor Arbiter.[21]
WHEREFORE, the petition is DISMISSED. The resolution of respondent NLRC affirming the decision of
the Labor Arbiter is AFFIRMED.
SO ORDERED.
Regalado, Melo, Puno and Mendoza, JJ., concur.

iv.
SECOND DIVISION
[G.R. No. 142007. March 28, 2001]
MANUEL C. FELIX, petitioner, vs. ENERTECH SYSTEMS INDUSTRIES, INC. and COURT OF
APPEALS, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision[1] of the respondent Court of Appeals, dated January
6, 2000, affirming the decision of the National Labor Relations Commission (NLRC), dated June 17, 1998,
declaring the dismissal of petitioner Manuel C. Felix to be legal, although granting his claim for 13th month pay,
and the appeals courts resolution, dated February 18, 2000, denying petitioners motion for reconsideration.
The facts, as found by the Court of Appeals, are as follows:
Respondent Enertech System Industries, Incorporated is engaged in the manufacture of boilers and
tanks. Petitioner Manuel C. Felix worked as a welder/fabricator in respondent company. On August 5, 1994,
petitioner and three other employees, namely, Dante Tunglapan, Hilario Lamog, and Emerson Yanos, were
assigned to install a smokestack at the Big J Feedmills in Sta. Monica, Bulacan. During the entire period they
were working at the Big J Feedmills, petitioner and his companions accomplished daily time records
(DTRs). Petitioner wrote in his DTR that he had worked eight hours a day on the basis of which his wages were
computed.
The work was estimated to be completed within seven days, but it actually took the workers until August
17, 1994, or about two weeks, before it was finished. On that day, petitioner and his three co-employees were
each given notice by respondent, which read in part:
Reports came to our office that for the past few days you were reporting at [the] Big J jobsite at around
eleven oclock in the morning and you were leaving said site at two oclock.
We would like to inform you that said act constitutes Abandonment of Work which is [a] violation of our
Company Code on Employees Discipline that warrants a penalty of DISMISSAL.
Therefore, you are hereby given 24 hours to explain your side on the said matter.[2]
The next day, August 18, 1994, petitioner and his co-workers were placed under preventive suspension for
seven working days. On August 26, 1994, respondent, through its personnel assistant, Ma. Imelda E. Samson
(MIES), and in the presence of two union officers, Armando B. Tumamao (ABT) and Jessie T. Yanos (JTY),
interviewed Johnny F. Legaspi (JFL), who owned the Big J Feedmills, and his engineer, Juanito Avena. The
transcript of their interview reads:
MIES: Anong oras ho ba nagtatrabaho ang mga tao naming nai-assign dito?
JFL: Madalas nagsisimula sila ng alas-diyes ng umaga at minsan naman alas-onse ng umaga; mula ng nag-
umpisa sila dito hindi pa sila naka-buo ng apat na oras na trabaho mag-hapon.
MIES: Bakit ho, anong oras ba sila dumarating?
JFL: Hindi pare-pareho, may alas-otso ng umaga, minsan 9:00, minsan 9:30 ng umaga, pero hindi sila sabay-
sabay na dumarating ha. Madalas pa nga mag-aalas-diyes na sila dumarating, pag kumpleto na silang
apat saka pa lang sila magsisimulang magtrabaho.
ABT: May mga araw ho nagdadaan sila sa Shop namin para pumick-up ng gamit baka ito ho iyong
tinatanghali sila ng dating?
JFL: Iyon nga ang sabi nila eh, kaya daw sila tinatanghali kasi nga kumukuha sila ng gamit sa shop ninyo,
pero hindi naman sila sabay-sabay kumukuha ng gamit o suweldo, di ba? Saka nagpapapirma sila ng
delivery receipt kay Engr. Avena at isa-isa lang naman ang nagpupunta sa Shop ninyo, yung naiiwan
dito sa Shop hindi agad nagtatrabaho, hinihintay pa nila yung kasama nila.
ABT: May dumarating ho ba ng alas-siyete ng umaga?
JFL: Wala nga eh, tanghali na nga sila dumarating, pagdating magtatabraho sandali tapos titigil para kumain
sa tindahan wala pang alas-dose kumakain na sila kasi baka maubusan sila ng ulam o kakainin, tapos
alas-dose magpapahinga na sila, matutulog doon sa may boiler bago pa lamang mag-alas-kuatro
umaalis na sila kaya wala talagang otso oras ang trabaho nila.
JTY: Paano nyo ho nalalaman kung nagtratrabaho sila o hindi?
JFL: Alam ninyo, galing ako sa sakit; kailangan ko ng pahinga pero imbes na sa loob ako nagpapahinga dito
na lang ako sa labas, umagang-umaga pa lang, nandito na ako. Kita niyo naman mula dito nakikita ko
ang lumalabas at pumapasok dito, saka makikita mo kung may tao doon sa bubong saka doon sa may
boiler at maririning mo rin kung nag-we-welding o may nag-pupukpok.
Lumalapit nga itong si Manuel sa amin at nagpapagawa ng sulat na nagpapatunay na pumapasok sila ng 7
to 4 pero hindi ako pumayag kasi lalabas na nagsisinungaling na ako. Gusto lang naman namin lumagay
sa tama, kung ano yung totoo iyon na iyon, noong minsan nag-report kami sa opisina ninyo na nag half-
day sila, yun pala natutulog lang sila sa ilalim ng boiler sa may skid. Kaya naman gumawa kami agad ng
sulat para ipaalam sa inyo na hindi pala sila umuwi, nandoon pa pala sila, natutulog.[3]
 These statements were corroborated by the affidavit[4] of petitioners co-employee, Emerson G. Yanos,
who stated that petitioner and his co-worker Dante Tunglapan usually arrived for work at the Big J Feedmills
between 9:30 to 10:00 a.m., stopped working at 12:00 noon, then resumed work at 1:00 p.m., continuing until
3:00 p.m. Before going home, they had snacks.
Reynaldo Tapiru, petitioners co-employee and neighbor in Sitio Kabanatuan, Valenzuela, also stated in an
affidavit[5] that he had seen petitioner either in his house or within their compound on August 6, 7, 8, and 14,
1994, between 3 and 4 oclock in the afternoon, when he was supposed to be working at the Big J Feedmills in
Bulacan at that time.
On September 9, 1994, respondent required petitioner to report to the company lawyer on September 13,
1994 for investigation.[6] Then, on October 17, 1994, it issued a memorandum[7] placing petitioner under
preventive suspension for 30 days. Finally, on November 21, 1994, respondent sent petitioner a memorandum
terminating his employment on the following grounds:
SECTION 7. DISHONESTY
6. Falsifying time cards or any other timekeeping records, or drawing salary/allowance by virtue of
falsified time cards.
SECTION 8. INSUBORDINATION
4. Willful holding back, slowing down, hindering, or limiting work output.
5. Encouraging, coercing, inciting, bribing, or otherwise inducing any employee to engage in any
practice in violation of the Companys work rules.[8]
Petitioner filed a complaint for illegal dismissal against respondent before the Arbitration Branch of the
NLRC. On June 19, 1997, Labor Arbiter Arthur Amansec rendered a decision finding petitioner to have been
illegally dismissed and ordering respondent as follows:
WHEREFORE, complainant Manuel Felix is hereby found to have been illegally DISMISSED from employment
and concomitantly respondent is hereby ordered to reinstate complainant with backwages and pay his
proportionate 13th month pay for 1994.
Other claims are hereby ordered DISMISSED for lack of merit. The Complaint of Dante Tungpalan should be
as it is hereby DISMISSED by reason of settlement.
SO ORDERED.[9]
Respondent appealed to the NLRC. Pending appeal, a writ of execution was issued on September 23, 1997
directing respondent to reinstate petitioner either physically or in the payroll.
On October 10, 1997, respondent filed an omnibus motion[10] arguing that reinstatement was no longer
possible as the violations of company rules committed by petitioner had caused strained relations between
petitioner and itself. Respondent further alleged that because of petitioners falsification of his daily time
records which enabled him to collect his full salary, it could no longer trust him. Respondent prayed that the
writ of execution be recalled and that a new order be issued allowing it to pay petitioner separation pay in lieu
of reinstatement.
 On June 17, 1998, the NLRC rendered a decision reversing the labor arbiters decision and dismissing
petitioners complaint for illegal dismissal for lack of merit. The NLRC found sufficient evidence to prove that
petitioner put in less than the required eight hours daily work during his detail at the Big J Feedmills and,
therefore, held that his dismissal was in accordance with the Company Code of Discipline and the Labor
Code.[11]
Petitioner filed a motion for reconsideration, but the same was denied.[12] He appealed to the Court of
Appeals which, on January 6, 2000, affirmed the dismissal of petitioner although it granted his claim for
13th month pay. In its resolution of February 18, 2000, the Court of Appeals denied reconsideration of its
decision. Hence this present petition.
Petitioner assails the decision of the Court of Appeals in not ordering the award of backwages by reason
of respondent corporations refusal to reinstate him pending appeal of the case. He argues that the omnibus
motion filed by respondent during the pendency of the appeal should have been treated as respondents
admission of liability for reinstatement or, in lieu thereof, for separation pay.
First. Petitioner prays that the Court reinstate the labor arbiters decision finding respondent corporation
guilty of illegal dismissal. The labor arbiter held as doubtful the statement of Johnny Legaspi and petitioners
two co-employees to the effect that petitioner and his co-workers put in only four hours; that the statements
of Legaspi and Yanos were inaccurate as there was no timekeeper at the job site to monitor the arrivals and
departures of employees; and that the delay in the completion of the project could be due to an erroneous
estimate on duration of work, lack of materials, or lack of work coordination.[13]
Petitioners argument has no merit. The Court of Appeals, taking into account the findings of the NLRC,
the interview with Johnny Legaspi and his engineer, and the affidavits of Yanos and Tapiru, correctly concluded
that there was substantial evidence presented showing that petitioner did not really work eight hours a day, as
he had stated in his time cards.[14]
Indeed, the validity of petitioners dismissal is a factual question. It is not for the reviewing court to weigh
the conflicting evidence, determine the credibility of witnesses, or otherwise substitute its own judgment for
that of the administrative agency. Well-settled is the rule that the findings of fact of quasi-judicial agencies,
like the NLRC, are accorded not only respect but at times even finality if such findings are supported by
substantial evidence.[15] This is especially so in this case, in which the findings of the NLRC were affirmed by the
Court of Appeals. The findings of fact made therein can only be set aside upon a showing of grave abuse of
discretion, fraud, or error of law.[16] There is no such showing of grave abuse of discretion in this case.
For this reason, we find petitioners dismissal to be in order. Falsification of time cards constitutes serious
misconduct and dishonesty or fraud,[17] which are just causes for the termination of employment under Art.
282(a) and (c) of the Labor Code which provides:
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;
....
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(Emphasis added)
As to the labor arbiters observation that a timekeeper should have been assigned to the Big J Feedmills,
we think the Court of Appeals correctly disposed of the same, thus:
Employees are hired in order to foster the employers business, and company rules and regulations are part of
such goal. If we adhere to the labor arbiters view that a timekeeper should have been placed by private
respondent or to commission the latters client to act as timekeeper, it would be an additional burden not only
on the part of private respondent but also on its client. It would be contrary to every business motto that
clients should be given utmost satisfaction and convenience. Moreover, if every time an assignment is given
to an employee, the employer will send out someone to spy, the atmosphere of harmonious relationship
between the employer and its employees will be beclouded, thundering forth suspicion and distrust among
themselves.[18]
Second. Petitioner contends that the omnibus motion filed by respondent on October 10, 1997 during the
pendency of the appeal is an admission that it is liable for reinstatement or, in lieu thereof, for separation pay.
The contention has no merit. No such inference can be derived from a reading of the omnibus motion filed
by respondent. To the contrary, respondent in fact vehemently opposed the implementation of the writ of
execution issued by the labor arbiter.20 Thus, respondent said:
2. That reinstatement can no longer be made or is no longer possible considering the nature of the offense or
violation (although an issue under appeal) which the complainant committed. This offense or violation has
caused serious and severe strained relationship between the complainant and the respondent employer;
3. That it must be recalled, and as the records of the case will confirm, complainant committed a virtual
criminal act of falsifying his daily time records based on which he collected his salary. Due to the seriousness
of this offense, there is no way by which respondent employer can trust complainant again and place the
future and welfare of the company to shenanigans who try to defraud it;21
Respondent appears merely to have been mistaken about the options open to it upon promulgation of the
labor arbiters decision. As to the question of whether separation pay in lieu of his reinstatement may be
awarded to petitioner, it is settled that such can be done only upon finality of judgment, that is, when the
judgment is no longer appealable, hence final and executory, and where reinstatement can no longer be
effected, as when the position previously held by the employee no longer exists or when strained relations
result in the loss of trust and confidence.22
Rather, with the labor arbiters decision still pending appeal in the NLRC, what is applicable is Art. 223 of
the Labor Code, which in part provides:
[T]he decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall
either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the
employer shall not stay the execution for reinstatement provided herein.
 If at all, therefore, respondent should have reinstated petitioner in the payroll, instead of offering him
separation pay. Be that as it may, the omnibus motion filed by respondent cannot be construed as an admission
of its liability for reinstatement.
Third. Anent petitioners claim that he is entitled to backwages from the time the labor arbiter rendered a
decision in his favor until said decision was reversed by the NLRC, this issue should have been raised earlier in
the Court of Appeals and not only now in the present petition. Hence, this matter cannot be considered by the
Court.22
WHEREFORE, the decision of the Court of Appeals is AFFIRMED for lack of showing that it committed a
reversible error.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.

v.
Landmark Case: CHUA – QUA vs. CLAVE G.R. No. L-49549 August 30, 1990 (Case Digest)
A truly remarkable case wherein the Supreme Court ruled in favor of “love”. The setting of the case was
in when marriage between minors was still legal, way before the Family Code. In this case, a 30 year old teacher
had married her student which prompted the school to terminate her. And against all odds the Supreme Court
Ruled in favor of her, hence, creating this Landmark Case. “truism that the heart has reasons of its own which
reason does not know.”

CHUA – QUA vs. CLAVE G.R. No. L-49549 August 30, 1990
Digested Case

A Landmark Case

FACTS:

This would have been just another illegal dismissal case were it not for the controversial and unique situation
that the marriage of herein petitioner, then a classroom teacher, to her student who was fourteen (14) years
her junior, was considered by the school authorities as sufficient basis for terminating her services.

The case was about an affair and marriage of 30 years old teacher Evelyn Chua in Tay Tung High School in
Bacolod City to her 16 years old student. The petitioner teacher was suspended without pay and was
terminated of his employment “for Abusive and Unethical Conduct Unbecoming of a Dignified School Teacher”
which was filed by a public respondent as a clearance for termination.

ISSUE:

Was her dismissal valid?

Whether or not there is substantial evidence to prove that the antecedent facts which culminated in the
marriage between petitioner and her student constitute immorality and or grave misconduct?

RULING:

The Supreme Court declared the dismissal illegal saying:

“Private respondent [the school] utterly failed to show that petitioner [30-year old lady teacher] took
advantage of her position to court her student [16-year old]. If the two eventually fell in love, despite the
disparity in their ages and academic levels, this only lends substance to the truism that the heart has
reasons of its own which reason does not know. But, definitely, yielding to this gentle and universal emotion
is not to be so casually equated with immorality. The deviation of the circumstances of their marriage from the
usual societal pattern cannot be considered as a defiance of contemporary social mores.”

Finding that there is no substantial evidence of the imputed immoral acts, it follows that the alleged violation
of Code of Ethics governing school teachers would have no basis. Private respondent utterly failed to show that
petitioner took advantage of her position to court her student. The deviation of the circumstances of their
marriage from the usual societal pattern cannot be considered as a defiance of contemporary social mores.

vi.

SECOND DIVISION

TECHNOL EIGHT PHILIPPINES G.R. No. 187605

CORPORATION,
Petitioner,
- versus -
NATIONAL LABOR RELATIONS
COMMISSION AND DENNIS
AMULAR,
Respondents

DECISION

BRION, J.:

For resolution is the present Petition for Review on Certiorari[1] addressing the decision[2] and resolution[3] of
the Court of Appeals (CA) of November 18, 2008 and April 17, 2009, respectively, in CA-G.R. SP No. 100406.[4]

THE ANTECEDENTS
The facts are summarized below.

The petitioner Technol Eight Philippines Corporation (Technol), located at 127 East Main Avenue, Laguna
Technopark, Bian, Laguna, manufactures metal parts and motor vehicle components. It hired the respondent
Dennis Amular (Amular) in March 1998 and assigned him to Technols Shearing Line, together with Clarence P.
Ducay (Ducay).Rafael Mendoza (Mendoza) was the lines team leader.

On April 16, 2002 at about 5:30 p.m., Mendoza went to the Surf City Internet Caf in Balibago, Sta. Rosa,
Laguna. As Mendoza was leaving the establishment, he was confronted by Amular and Ducay who engaged
him in a heated argument regarding their work in the shearing line, particularly Mendozas report to Avelino S.
De Leon, Jr. (De Leon), Technols Production Control and Delivery (PCD) assistant supervisor, about Amulars
and Ducays questionable behavior at work. The heated argument resulted in a fistfight that required the
intervention of the barangay tanods in the area.

Upon learning of the incident, Technols management sent to Amular and Ducay a notice of preventive
suspension/notice of discharge dated May 18, 2002[5] advising them that their fistfight with Mendoza violated
Section 1-k of Technols Human Resource Department (HRD) Manual. The two were given forty-eight (48) hours
to explain why no disciplinary action should be taken against them for the incident. They were placed under
preventive suspension for thirty (30) days, from May 19, 2002 to June 17, 2002 for Ducay, and May 21, 2002 to
June 20, 2002 for Amular. Amular submitted a written statement on May 20, 2002.[6]

Thereafter, Amular received a notice dated June 8, 2002[7] informing him that Technol management will
conduct an administrative hearing on June 14, 2002. He was also given two (2) days to respond in writing to the
statements attached to and supporting the notice. A day before the hearing or on June 13, 2002, Amular filed
a complaint for illegal suspension/constructive dismissal with a prayer for separation pay, backwages and
several money claims, against Technol. Amular failed to attend the administrative hearing. On July 4, 2002,
Technol sent him a notice of dismissal.[8]

Before the Labor Arbiter, Amular alleged that in the afternoon of April 16, 2002, while he and his co-employee
Ducay were walking around the shopping mall in Balibago, Sta. Rosa, Laguna, they incidentally saw Mendoza
with whom they wanted to discuss some personal matters. When they approached Mendoza, the latter raised
his voice and asked what they wanted from him; Amular asked Mendoza what the problem was
because Mendoza appeared to be always angry at him (Amular). Mendoza instead challenged Amular and
Ducay to a fistfight and then punched Amular who punched Mendoza in return. Thereafter, a full-blown
fistfight ensued until the barangay tanods in the area pacified the three.

Amular further alleged that he was asked by his immediate supervisor to submit a report on the incident, which
he did on April 18, 2002.[9] Subsequently, Amular, Mendoza and Ducay were called by Technol management to
talk to each other and to settle their differences; they agreed and settled their misunderstanding.

THE COMPULSORY ARBITRATION DECISIONS

On November 18, 2003, Executive Labor Arbiter Salvador V. Reyes rendered a decision[10] finding that Amulars
preventive suspension and subsequent dismissal were illegal.He ruled that Amulars preventive suspension was
based solely on unsubscribed written statements executed by Mendoza, Rogelio R. Garces and Mary Ann
Palma (subscribed only on August 8, 2002) and that Mendoza, Amular and Ducay had settled their differences
even before Amular was placed under preventive suspension. With respect to Amulars dismissal, the Arbiter
held that Technol failed to afford him procedural due process since he was not able to present his side because
he had filed a case before the National Labor Relations Commission (NLRC) at the time he was called to a
hearing; Technol also failed to substantiate its allegations against Amular; the fistfight occurred around 200 to
300 meters away from the work area and it happened after office hours. Arbiter Reyes awarded Amular
separation pay (since he did not want to be reinstated), backwages, 13th month pay, service incentive leave pay
and attorneys fees in the total amount of P158,987.70.

Technol appealed to the NLRC. In its decision promulgated on March 30, 2005,[11] the NLRC affirmed the labor
arbiters ruling. It found that Amular was unfairly treated and subjected to discrimination because he was the
only one served with the notice to explain and placed under preventive suspension; his co-employee Ducay
who was also involved in the incident was not. Technol moved for reconsideration, but the NLRC denied the
motion in a resolution rendered on May 30, 2007.[12] Technol thereafter sought relief from the CA through a
petition for certiorari under Rule 65 of the Rules of Court.[13]

THE CA DECISION

In its decision promulgated on November 18, 2008, the CA found no grave abuse of discretion on the part of
the NLRC when it affirmed the labor arbiters ruling that Amular was illegally dismissed. While the appellate
court noted that Amular was dismissed on the ground of serious misconduct, a just cause for employee
dismissal under the Labor Code,[14] it opined that Technol failed to comply with the jurisprudential guidelines
that misconduct warranting a dismissal: (1) must be serious; (2) must relate to the performance of the
employees duties; and (3) must show that the employee has become unfit to continue working for the
employer.[15]

The appellate court pointed out that the mauling incident occurred outside the company premises and after
office hours; it did not in any manner disrupt company operations nor pose a threat to the safety or peace of
mind of Technol workers; neither did it cause substantial prejudice to the company. It explained that although
it was not condoning Amulars misconduct, it found that the penalty of dismissal imposed by Technol on Amular
was too harsh and evidently disproportionate to the act committed.[16] The CA denied the motion for
reconsideration Technol subsequently filed;[17] hence, the present petition.[18]
THE PETITION

Technol posits that the CA gravely erred in ruling that Amular was illegally dismissed, contending that Amular
was discharged for violation of Section 1-k of its HRD Manual which penalizes the commission of a crime
against a co-employee. It submits that Section 1-k of the HRD Manual is a reasonable company rule issued
pursuant to its management prerogative. It maintains that the case should have been examined from the
perspective of whether the company rule is reasonable and not on the basis of where and when the act was
committed, or even whether it caused damage to the company. It adds that the manual does not distinguish
whether the crime was committed inside or outside work premises or during or after office hours. It insists that
if the rule were otherwise, any employee who wishes to harm a co-employee can just wait until the co-
employee is outside the company premises to inflict harm upon him, and later argue that the crime was
committed outside work premises and after office hours. It submits that the matter assumes special and
utmost significance in this case because Amular inflicted physical injuries on a supervisor. In any event, Technol
argues that even if the misconduct was committed outside company premises, the perpetrator can still be
disciplined as long as the offense was work-related, citing Oania v. NLRC[19] and Tanala v. NLRC[20] in support
of its position.

Technol bewails the CAs appreciation of the implication of Amulars misconduct in the workplace, especially
the courts observation that it did not cause damage to the company because it did not disrupt company
operation, that it did not create a hostile environment inside the company, and that the fight was nipped in the
bud by the timely intervention of those who saw the incident.[21] Technol insists that it had to order Amulars
dismissal in order to uphold the integrity of the company rules and to avoid the erosion of discipline among its
employees. Also, it disputes the CAs conclusion that the fact that Amulars liability should be mitigated because
the fight was nipped in the bud. It submits that Mendoza had already sustained grave injuries when the mauling
was stopped.

Further, Technol maintains that the CA gravely erred in going beyond the issues submitted to it, since the NLRC
decision only declared Amulars dismissal illegal on the ground that he was the only one subjected to disciplinary
action and that the company merely relied on the written statements of Amulars co-employees.

On the rejection by the CA of the statements of Amulars co-employees regarding the incident, Technol
contends that the statements of the witnesses, together with Amulars admission, constitute substantial
evidence of guilt. It points out that the statement of Mendoza on the matter submitted during the company
investigation and before the labor arbiter was not a stand alone statement; Mendozas statement was
corroborated by the statements of Rogelio R. Garces and Mary Ann Palma, verified under oath in the reply[22]it
submitted to the arbiter. The statements were all in their handwriting, indicating that they were not pro
forma or prepared on command; a medical certificate[23] and a barangay report[24] were likewise submitted.

Technol likewise disputes the NLRCs conclusion that Amular was discriminated against and unfairly treated
because he was the only one preventively suspended after the mauling incident. It maintains that from the
records of the case and as admitted by Amular himself in his position paper,[25] his co-employee Ducay was also
preventively suspended.[26] That Mendoza was not similarly placed under preventive suspension was
considered by Technol as an exercise of its management prerogative, since the circumstances surrounding the
incident indicated the existence of a reasonable threat to the safety of Amulars co-employees and that
Mendoza appeared to be the victim of Amulars and Ducays assault.

THE CASE FOR AMULAR

In his Comment filed on August 12, 2009,[27] Amular asks that the petition be dismissed for utter lack of
merit. He admits that the mauling incident happened, but claims however that on April 18, 2002, the Technols
management called Mendoza, Ducay, and him to a meeting, asked them to explain their sides and thereafter
requested them to settle their differences; without hesitation, they agreed to settle and even shook hands
afterwards. He was therefore surprised that on May 18, 2002, he received a memorandum from Technols HRD
charging him and his co-employee Ducay for the incident. Without waiting for an explanation, Technols
management placed him under preventive suspension, but not Ducay. Adding insult to injury, when Amular
followed up his case while on preventive suspension, he was advised by the HRD manager to simply resign and
accept managements offer of P22,000.00, which offer was reiterated during the mandatory conference before
the labor arbiter.

Amular particularly laments that his employment was terminated while the constructive dismissal case he filed
against the company was still pending. He posits that his employment was terminated first before he was
informed of the accusations leveled against him an indication of bad faith on the part of Technol.

Amular asks: if it were true that the mauling incident was a serious offense under company policy, why did it
take Technol a month to give him notice to explain the mauling incident? He submits that the memorandum
asking him to explain was a mere afterthought; he was dismissed without giving him the benefit to be informed
of the true nature of his offense, thus denying him his right to be heard.

Finally, Amular questions the propriety of the present petition contending that it only raises questions of fact,
in contravention of the rule that only questions of law may be raised in a petition for review on certiorari.[28] He
points out that the findings of facts of the labor tribunals and the CA are all the same and therefore must be
given respect, if not finality.[29]

THE RULING OF THE COURT

The Procedural Issue

We find no procedural impediment to the petition. An objective reading of the petition reveals that Technol
largely assails the correctness of the conclusions drawn by the CA from the set of facts it considered. The
question therefore is one of law and not of fact, as we ruled in Cucueco v. Court of Appeals.[30] Thus, while there
is no dispute that a fight occurred between Amular and Ducay, on the one hand, and Mendoza, on the other,
the CA concluded that although Amular committed a misconduct, it failed to satisfy jurisprudential standards
to qualify as a just cause for dismissal the conclusion that Technol now challenges. We see no legal problem,
too, in wading into the factual records, as the tribunals below clearly failed to properly consider the evidence
on record. This is grave abuse of discretion on the part of the labor tribunals that the CA failed to appreciate.
The Merits of the Case

The CA misappreciated the true nature of Amulars involvement in the mauling incident. Although it
acknowledged that Amular committed a misconduct, it did not consider the misconduct as work-related and
reflective of Amulars unfitness to continue working for Technol. The appellate courts benign treatment of
Amulars offense was based largely on its observation that the incident happened outside the company
premises and after working hours; did not cause a disruption of work operations; and did not result in a hostile
environment in the company. Significantly, it did not condone Amulars infraction, but it considered that
Amulars dismissal was a harsh penalty that is disproportionate with his offense. It found support for this liberal
view from the pronouncement of the Court in Almira v. B.F. Goodrich Philippines, Inc.,[31] that where a penalty
less punitive would suffice, whatever missteps may be committed by labor ought not to be visited with a
consequence so severe.

The record of the case, however, gives us a different picture. Contrary to the CAs perception, we find a work-
connection in Amular's and Ducays assault on Mendoza. As the CA itself noted,[32] the underlying reason why
Amular and Ducay confronted Mendoza was to question him about his report to De Leon Technols PCD
assistant supervisor regarding the duos questionable work behavior. The motivation behind the confrontation,
as we see it, was rooted on workplace dynamics as Mendoza, Amular and Ducay interacted with one another
in the performance of their duties.

The incident revealed a disturbing strain in Amular's and Ducays characters the urge to get even for a perceived
wrong done to them and, judging from the circumstances, regardless of the place and time. The incident could
very well have happened inside company premises had the two employees found time to confront Mendoza in
the workplace as they intimated in their written statements.[33] Having been the subject of a negative report
regarding his work must have rankled on Amular that he resolved to do something about it; thus, he
confronted Mendoza.

From the records, Ducay appeared to have cooperated with Amular in the violent confrontation
with Mendoza. Ducay, however, resigned on June 7, 2002 a week before the filing of the complaint.[34] Hence,
Technol did not act against him a move that is within its prerogative to make.
In an obvious effort to mitigate his involvement in the mauling incident, Amular claimed in the administrative
proceedings that while he and Ducay were walking around the shopping mall in Balibago, Sta. Rosa, Laguna,
they incidentally saw their co-employee Mendoza with whom they wanted to clear some personal
matters.[35] We find this claim a clear distortion of what actually happened. Again, based on their written
statements,[36] Amular and Ducay purposely set out for the Balibago commercial area on April 16, 2002 looking
for Mendoza. It was not an incidental or casual encounter. They sought Mendoza out and confronted him
regarding what they perceived as Mendozas negative attitude towards them
[37]
or pamamarako as Mendoza described it. Considering the subject Amular and Ducay raised with Mendoza,
it is not surprising that they had a heated verbal exchange (mostly between Amular and Mendoza) that
deteriorated into a fistcuff fight, with Mendoza at the losing end as he suffered injuries from the blows he
received.
Amular and Ducay point to Mendoza as the proximate cause of the fight because he challenged them to a one-
on-one (isa-isa lang) bout.[38] Looking back at the reason why Amular and Ducay were at the mall in the first
place, this attributed causation hardly makes sense. To reiterate, they were purposely there to
confront Mendoza about their work-related problem. They waited for him at the place where they expected
him to be. When Mendoza appeared, they accosted him and put into motion the entire sorry incident.
Under these circumstances, Amular undoubtedly committed a misconduct or exhibited improper behavior that
constituted a valid cause for his dismissal under the law[39] and jurisprudential standards.[40] The circumstances
of his misdeed, to our mind, rendered him unfit to continue working for Technol; guilt is not diminished by his
claim that Technols management called the three of them to a meeting, and asked them to explain their sides
and settle their differences, which they did.[41] Mendoza significantly denied the alleged settlement,
maintaining that while they were summoned by De Leon after the incident, he could not shake hands and settle
with Amular and Ducay since they did not even apologize or ask forgiveness for what they did. [42] We do not
find Mendozas denial of Amulars claim unusual as Mendoza would not have stood his ground in this case if a
settlement had previously been reached. That a meeting had taken place does not appear disputed, but a
settlement cannot be inferred simply because a meeting took place.
Neither do we believe that Amular was discriminated against because he was not the only one preventively
suspended. As the CA itself acknowledged, Ducay received his notice of preventive suspension/notice of
charge[43] on May 19, 2002 while Amular received his on May 21, 2002. These notices informed them that they
were being preventively suspended for 30 days from May 19, 2002 to June 17, 2002 for Ducay, and May 21, 2002
for Amular.[44]
Thus, Amular was not illegally dismissed; he was dismissed for cause.

The Due Process Issue

The labor arbiter ruled that Technol failed to afford Amular procedural due process, since he was not able to
present his side regarding the incident; at the time he was called to a hearing, he had already filed the illegal
dismissal complaint.[45] The NLRC, on the other hand, held that the memorandum terminating Amulars
employment was a mere formality, an afterthought designed to evade company liability since Amular had
already filed an illegal dismissal case against Technol.[46]

We disagree with these conclusions. The notice of preventive suspension/notice of discharge served on Amular
and Ducay required them to explain within forty-eight (48) hours why no disciplinary action should be taken
against them for their involvement in the mauling incident.[47] Amular submitted two written statements: the
first received by the company on May 19, 2002[48] and the other received on May 20, 2002.[49] On June 8, 2002,
Technol management sent Amular a memorandum informing him of an administrative hearing on June 14,
2002 at 10:00 a.m., regarding the charges against him.[50] At the bottom left hand corner of the memorandum,
the following notation appears:accept the copy of notice but refused to receive, he will study first. A day before
the administrative hearing or on June 13, 2002, Amular filed the complaint for illegal
suspension/dismissal[51] and did not appear at the administrative hearing. On July 4, 2002, the company sent
Amular a notice of dismissal.[52]
What we see in the records belie Amulars claim of denial of procedural due process. He chose not to present
his side at the administrative hearing. In fact, he avoided the investigation into the charges against him by filing
his illegal dismissal complaint ahead of the scheduled investigation. Under these facts, he was given the
opportunity to be heard and he cannot now come to us protesting that he was denied this opportunity. To
belabor a point the Court has repeatedly made in employee dismissal cases, the essence of due process is
simply an opportunity to be heard; it is the denial of this opportunity that constitutes violation of due process
of law.[53]
In view of all the foregoing, we find the petition meritorious.
WHEREFORE, premises considered, we hereby GRANT the petition. The assailed decision and resolution of
the Court of Appeals are REVERSED and SET ASIDE. The complaint for illegal dismissal is DISMISSED for lack
of merit. Costs against respondent AMULAR.
SO ORDERED.

vii.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 111110 August 2, 1994
ZENCO SALES, INC. and/or ZENCO FOOTSTEP, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FIFTH DIVISION, CAGAYAN DE ORO CITY, and
ANASTACIO C. YAP, respondents.
Rebolos Valmorida and Associates for petitioner.
Rodulfo Uy for private respondent.

DAVIDE, JR., J.:

This is a special civil action under Rule 65 to nullify the resolution 1 of the public respondent of 12 May 1993 in
NLRC CA No. M-001029-92 which affirmed, with modification, the decision 2 of the Executive Labor Arbiter,
Hon. Benjamin Pelaez, of 26 August 1992 in NLRC RABX Case No.
10-06-00351-91, entitled "Anastacio C. Yap vs. Zenco Sales, Inc. and/or Zenco Footstep." The Labor Arbiter had
dismissed the private respondent's complaint for illegal dismissal, profit sharing, commission for 1990, and
damages. The public respondent affirmed the decision of the Labor Arbiter but awarded "separation pay
based on social justice."
In dismissing the complaint, the Labor Arbiter noted and held:
Anent the issue of illegal dismissal, We find for Respondent. The Internal Audit Report clearly
established Complainant's misfeasance and malfeasance in the performance of his duty as
Branch Manager which resulted to a loss of substantial amount of money and an act inimical to
the interest of Respondent corporation. Complainant is guilty of misfeasance for his failure to
closely monitor and control the sales transactions of salesman Chua and malfeasance because
he used Respondent corporation's properties, equipments and personnel in connection with
his personal business of buy and sell of used sacks. These acts of Complainant constitute gross
neglect in the performance of duty and serious misconduct resulting to loss of trust and
confidence which under Article 292 [should be 282] of the Labor Code, as amended, are
ground [sic] to terminate an employment.
We further noted that Complainant failed to dispute the findings of the Internal Auditors of
Respondent corporation. However, he contended lack of due process in effecting the
termination of employment. On the contrary, We find otherwise. Complainant was duly
confronted by the findings of the auditors during the investigation conducted by Mr. Lino Sy,
Assistant Vice-President for Sales in Mindanao, at De Luxe Hotel on 1 April 1991. 3
In its resolution of 12 May 1993, the public respondent, acting on the complainant's appeal from the aforesaid
decision, found the appeal "devoid of merit," declared that the Labor Arbiter's findings that the private
respondent "is guilty of misfeasance and malfeasance is substantially supported by the facts and evidence on
record," and sustained the Labor Arbiter's conclusion that the complainant was validly dismissed for cause. It
specifically stated that the acts of the private respondent "constitute gross neglect in the performance of
duty and serious misconduct resulting to loss of trust and confidence which under Article 292 [sic] of the
Labor Code, as amended, are ground [sic] to terminate an employment." Nevertheless, it modified the
decision by granting the complainant separation pay at the rate of one month's salary for every year of
service. Its justification therefor reads:
Considering, however, that the infractions of complainant which involved violations of
company policies does not constitute a depraved act or those reflecting on his moral character
and taking into further account his ten (10) years of unblemished service, except for the instant
case, We find justifiable basis in awarding his separation pay based on social justice fixed at the
rate of one (1) month salary for every year of service (See PLDT vs. NLRC, 164 SCRA 671
[1988]). 4
Its motion to reconsider the modification having been denied by the public respondent in the resolution of 17
June 1993, 5 the petitioner filed this special civil action imputing upon the public respondent "patent abuse of
discretion amounting to lack of jurisdiction and/or excess of jurisdiction in modifying the decision . . . of the
Labor Arbiter." It maintains that giving the complainant (private respondent) separation pay "in the interest
of social justice as an act of compassion is unwarranted under the given set of facts" and his ten years of
service "cannot be given any premium to justify the award." 6
In his comment posted on 28 September 1993, the private respondent defends the modification because the
same finds justification under the Constitutional provision "for the improvement of the lot of the workers"
and the ruling in Philippine Long Distance Telephone Co. vs. National Labor Relations Commission, 7 and asserts
that the infraction he committed did not, as correctly held by the public respondent, involve a depraved act or
those reflecting on his moral character. 8 It was, he claims, the petitioner's saleswoman, Ms. Chua, who was
directly responsible for the losses it sustained."
In its Manifestation in Lieu of Comment, 9 the Office of the Solicitor General submits "that there is merit in
petitioner's contention that since, as found by the Labor Arbiter and the NLRC, private respondent was guilty
of committing acts which 'constitute gross neglect in the performance of duty and serious misconduct
resulting to loss of trust and confidence,' the award of separation pay to private respondent was improper,"
and legally indefensible for it contravenes Section 7, Rule 1, Book VI of the Omnibus Rules Implementing the
Labor Code. It argues that the only cases where separation pay shall be granted although the employee was
lawfully dismissed are when the cause of termination was not attributable to the employee's fault but due to
the following reasons: (1) the installation of labor-saving devices, (2) redundancy, (3) retrenchment, (4)
cessation of the employer's business, or (5) when the employee is suffering from a disease and his continued
employment is prohibited by law or is prejudicial to his health and to the health of his co-employees. 10 It cites
this Court's decisions in Eastern Paper Mills, Inc. vs. NLRC, 11 Philippine Long Distance Telephone Co. vs.
NLRC, 12 and Baguio Country Club Corp. vs. NLRC. 13
The Office of the Solicitor General then concludes that from the established facts in this case, "it is clear that
private respondent was validly dismissed not only because he committed neglect in the performance of his
duties and serious misconduct but that his acts of using petitioner's equipment and personnel for his personal
use and benefit constitutes an offense involving dishonesty."
In the resolution of 1 December 1993, 14 copy of which was received by the public respondent on 20 December
1993, this Court granted the prayer of the Office of the Solicitor General to give the public respondent a new
period to file its own comment. Despite three extensions of thirty days each, the last of which, with warning,
expired on 20 June 1994, the public respondent did not file the required comment.
The Court then resolved to decide this case on the merits without the public respondent's comment.
We rule for the petitioner.
The public respondent affirmed the findings of the Labor Arbiter that the private respondent "is guilty of
misfeasance for his failure to closely monitor and control the sales transactions of salesman Chua and
malfeasance because he used respondent corporation's properties, equipments and personnel in connection
with his personal business of buy and sale of used sacks," which, when brought within the ambit of Article 282
(not Article 292) of the Labor Code "constitute gross neglect in the performance of duty and serious
misconduct resulting to loss of trust and confidence."
A reading of Articles 279 and 282 of the Labor Code and Section 7, Rule I, Book V of the Omnibus Rules
Implementing the Labor Code 15 reveals that an employee who is dismissed for cause under Article 282 after
appropriate proceedings in compliance with the due process requirements 16 is not entitled to an award of
separation pay. Under Articles 283 and 284 of the Labor Code, separation pay is authorized only in cases of
dismissals due to the following reasons: (a) the installation of labor-saving devices, (b) redundancy, (c)
retrenchment, (d) cessation of the employer's business, and (e) when the employee is suffering from a
disease and his continued employment is prohibited by law or is prejudicial to his health and to the health of
his
co-employees. 17
In the 23 August 1988 Decision in Philippine Long Distance Telephone Co. vs. NLRC, 18 however, this Court,
speaking through Mr. Justice Isagani A. Cruz, recognized an exception.
Strictly speaking, however, it is not correct to say that there is no express justification for the
grant of separation pay to lawfully dismissed employees other than the abstract consideration
of equity. The reason is that our Constitution is replete with positive commands for the
promotion of social justice, and particularly the protection of the rights of the workers. The
enhancement of their welfare is one of the primary concerns of the present charter. In fact,
instead of confining itself to the general commitment to the cause of labor in Article II on the
Declaration of Principles and State Policies, the new Constitution contains a separate article
devoted to the promotion of social justice and human rights with a separate sub-topic for
labor. Article XIII expressly recognizes the vital role of labor, hand in hand with management,
in the advancement of the national economy and the welfare of the people in general. The
categorical mandates in the Constitution for the improvement of the lot of the workers are
more than sufficient basis to justify the award of separation pay in proper cases even if the
dismissal be for cause. 19
Nevertheless, the Court re-examined the previous cases which granted separation pay in cases of
dismissals for cause in the light of their lack of consistency as to the justification for the grant thereof
and the amount or rate of such award, and, thereafter, laid down the following doctrine and its
rationale:
We hold that henceforth separation pay shall be allowed as a measure of social justice only in
those instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where the reason for the valid dismissal
is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit
sexual relations with a fellow worker, the employer may not be required to give the dismissed
employee separation pay, or financial assistance, or whatever other name it is called, on the
ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather
than punishing the erring employee for his offense. And we do not agree that the punishment
is his dismissal only and that the separation pay has nothing to do with the wrong he had
committed. Of course it has. Indeed, if the employee who steals from the company is granted
separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar
offense in his next employment because he thinks he can expect a like leniency if he is again
found out. This kind of misplaced compassion is not going to do labor in general any good as it
 will encourage the infiltration of its ranks by those who do not deserve the protection and
concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not
condone the offense. Compassion for the poor is an imperative of every humane society but
only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot
be permitted to be refuge of scoundrels any more than can equity be an impediment to the
punishment of the guilty. Those who invoke social justice may do so only if their hands are
clean and their motives blameless and not simply because they happen to be poor. This great
policy of our Constitution is not meant for the protection of those who have proved they are
not worthy of it, like the workers who have tainted the cause of labor with the blemishes of
their own character. 20
In the instant case, the private respondent was found guilty of gross misconduct for having used his
employer's (petitioner's) "properties, equipments and personnel in connection with his personal business of
buy and sale of used sacks." His acts involve gross dishonesty deliberately done for his personal advantage.
The doctrine laid down in Philippine Long Distance Telephone Co. that separation pay, as a measure of social
justice, shall be allowed only where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character is applicable.
The public respondent acted with grave abuse of discretion in awarding the private respondent separation
pay despite its affirmance in toto of the findings and conclusions of the Labor Arbiter.
WHEREFORE, the petition is GRANTED. The challenged resolution of public respondent National Labor
Relations Commission of 12 May 1993 in NLRC CA No. M-001029-92 (Case No. RAB-10-06-00351-91) is
MODIFIED by deleting the award of separation pay.
No pronouncement as to costs.
SO ORDERED.
Cruz, Quiason and Kapunan, JJ., concur.
Bellosillo, J., is on leave.
viii.
FIRST DIVISION
[G.R. No. 122468. September 3, 1998]
SENTINEL SECURITY AGENCY, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
ADRIANO CABANO, JR., VERONICO C. ZAMBO, HELCIAS ARROYO, RUSTICO ANDOY, and
MAXIMO ORTIZ, respondents.
[G.R. No. 122716. September 3, 1998]
PHILIPIPPINE AMERICAN LIFE INSURANCE COMPANY, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, VERONICO ZAMBO, HELCIAS ARROYO, ADRIANO CABANO, MAXIMO ORTIZ,
and RUSTICO ANDOY, respondents.
DECISION
PANGANIBAN, J.:
 The transfer of an employee involves a lateral movement within the business or operation of the employer,
without demotion in rank, diminution of benefits or, worse, suspension of employment even if temporary. The
recall and transfer of security guards require reassignment to another post and are not equivalent to their
placement on floating status. Off-detailing security guards for a reasonable period of six months is justified
only in bona fide cases of suspension of operation, business or undertaking.
The Case

This is the rationale used by the Court in dismissing the two consolidated petitions for certiorari before us,
seeking the reversal of the Decision dated August 25, 1995, and the Resolution date October 24, 1995, both
promulgated by the National Labor Relations Commission[1] in NLRC Case No. V-0317-94 (RAB VII-01-0097-94,
RAB VII-020173-94, and RAB VII-01-0133-94).
In the action for illegal dismissal and payment of salary differential, service incentive leave pay and
separation pay filed by private respondents, Labor Arbiter Dominador A. Almirante rendered a Decision, which
disposed:[2]
WHEREFORE, premises considered[,] judgment is hereby rendered ordering xxx Sentinel Security Agency,
Inc. jointly and severally with xxx Philamlife, Cebu Branch, to pay complainants the total amount of [s]ixty
[t]housand [o]ne [h]undred [t]welve [p]esos and 50/100 (P60,112.50) in the concept of 13th month pay and
service incentive leave benefits as computed by our Labor Arbitration Associate whose computation is hereto
attached and forming part thereof.[3]
On appeal, the NLRC modified the labor arbiters Decision. The dispositive portion of the NLRC
Decision[4]reads:
WHEREFORE, the assailed Decision is hereby MODIFIED in so far as the award of 13th month pay for the
previous years which is hereby excluded. Further, xxx Sentinel Security Agency, Inc. is hereby ORDERED to
pay complainants separation pay at the rate of month pay for every year of service and for both xxx Philippine
American Life Insurance, Inc. and Sentinel Security Agency, Inc. and/or Daniel Iway to pay to the
[complainants] jointly and severally their backwages from January 16, 1994 to January 15, 1995 and the
corresponding 13th month pay for the said year. The monetary awards hereby granted are broken down as
follows [into separation pay, back wages, 13th month pay and service incentive leave pay]:
x x x x x x x x x.[5]
The challenged Resolution denied reconsideration for lack of merit.[6]
The Facts

The undisputed factual backdrop is narrated by Respondent Commission as follows:[7]

The complainants were employees of Sentinel [Security Agency, Inc. hereafter referred to as the Agency]
since March 1, 1966 in the case of Veronico Zambo; October 27, 1975 in the case of Helcias Arroyo;
September 20, 1985 in the case of Adriano Cabano; February 1, 1990 in the case of Maximo Ortiz; and Ortiz
and November 1, 1967 in the case of Rustico Andoy. They were assigned to render guard duty at the premises
of [Philippine American Life Insurance Company] at Jones Avenue, Cebu City. On December 16, 1993
Philippine American Life Insurance Company [the Client, for brevity], through Carlos De Pano, Jr., sent notice
to all concerned that the [Agency] was again awarded the contract of [s]ecurity [s]ervices together with a
request to replace all the security guards in the companys offices at the cities of Cebu, Bacolod, Cagayan de
Oro, Dipolog and Ilagan. In compliance therewith, [the Agency] issued on January 12, 1994, a Relief and
Transfer Order replacing the complainants as guards [of the Client] and for then to be re-assigned [to] other
clients effective January 16, 1994. As ordered, the complainants reported but were never given new
assignments but instead they were told in the vernacular, gui-ilisa mo kay mga tigulang naman mo which
when translated means, you were replace[d] because you are already old. Precisely, the complainants lost no
time but filed the subject illegal dismissal cases on January 18, January 26 and February 4, 1994 and prayed
for payment of separation pay and other labor standard benefits.
[The Client and the Agency] maintained there was no dismissal on the part of the complainants, constructive
or otherwise, as they were protected by the contract of security services which allows the recall of security
guards from their assigned posts at the will of either party. It also advanced that the complainants
prematurely filed the subject cases without giving the [Agency] a chance to give them some assignments.
On the part of [the Client], it averred further that there [was] no employer-employee relationship between it
and the complainants as the latter were merely assigned to its Cebu Branch under a job contract; that [the
Agency] ha[d] its own separate corporate personality apart from that of [the Client]. Besides, it pointed out
that the functions of the complainants in providing security services to [the Clients] property [were] not
necessary and desirable to the usual business or trade of [the Client], as it could still operate and engage in its
life insurance business without the security guards. In fine, [the Client] maintains that the complainants have
no cause of action against it.
Ruling of Respondent Commission

Respondent Commission ruled that the complainants were constructively dismissed, as the recall of the
complainants from their long time post[s] at [the premises of the Client] without any good reason is a scheme
to justify or camouflage illegal dismissal.
It ruled Superstar Security Agency, Inc. vs. National Labor Relations Commission[8] and A Prime Security
Services, Inc. vs. national Labor Relations Commission[9] were not applicable to the case at bar. In the former,
the security guard was placed on temporary off-detail due to his poor performance and lack of elementary
courtesy and tact, and to the cost-cutting program of the agency. In the latter, the relief of the security guard
was due to his sleeping while on duty and his repeated refusal to resume work despite notice.
In the present case, the complainants case, the complainants were told by the Agency that they lost their
assignment at the Clients premises because they were already old, and not because they had committed any
infraction or irregularity. The NLRC applied RA 7641,[10] which gives retirement benefits of one-half month pay
per year of service to retirable employees, viz.:
xxx As stated earlier xxx, the complainants were in the service of [the Client] for nearly twenty (20) years in
the cases of Helcias Arroyo and for more than twenty (20) years in the cases of Veronico Zambo and Rustico
Andoy, which long years of service [appear] on record to be unblemished. The complainants were then
confronted with an impending sudden loss of earning for while the order of [the Agency] to immediately
report for reassignment momentarily gave them hope, there was in fact no immediate reinstatement. While
it could have been prudent for the complainants to wait, they were set unstable and were actually threatened
by the statement of the personnel in charge of [the Agency] that they were already old, that was why they
were replaced.
Against these glaring facts is the new Retirement Law, R.A. 7641 which took effect on January 7, 1993 giving
retirement benefits of month pay per year of service to an employee upon reaching retirement age to be paid
by the employer, in this case at quiet a sizeable amount and in not so long due time as some of the
complainants were described as already old.
As complainants were illegally dismissed, the NLRC ruled that they were entitled to the twin remedies of
back wages for one (1) year from the time of their dismissal on January 15, 1994, payable by both the Client and
the Agency, and separation pay one-half month pay for every year of service payable only by the
Agency. Reinstatement was not granted due to the resulting antipathy and resentment among the
complainants, the Agency and the Client.
Hence, this petition.[11]
The Issues

In their memoranda, the Agency poses this question:[12]

xxx [W]hether xxx Sentinel is guilty of illegal dismissal[,]
On the other hand, the Client raises the following issues:[13]
Whether xxx [the complainants] were illegally dismissed by their employer, Sentinel Security Agency, Inc.,
and in holding petitioner to be equally liable therefor.
Whether xxx petitioner is jointly and severally liable with Sentinel Security Agency, Inc., in the latters
payment of backwages, 13th month pay and service incentive leave pay to its employees xxx.
In sum, the resolution of these consolidated petitions hinges on (1) whether the complainants were illegally
dismissed, and (2) whether the Client is jointly and severally liable for their thirteenth-month and service
incentive leave pays.
The Courts Ruling

The petition is partly meritorious.

First Issue: Illegal Dismissal

The private respondents transfer, according to Respondent Commission, was affected to circumvent the
mandate of Republic Act 7641 (New Retirement Law), which by then had already taken effect, in view of the
fact that the complainants had worked for both the Client and the Agency for 10 to 20 years and were nearing
retirement age. With this premise, the NLRC concluded that the guards were illegally dismissed. The
complainants add that the findings of the Commission match the remarks of the personnel manager of the
Agency, Feliciano Marticion; that is, that they were being replaced because they were already old. They insist
that their service records are unblemished; hence, they could not have been dismissed by reason of any just
cause.
We agree that the security guards were illegally dismissed, but not for the reasons given by the public
respondent. The aforecited contentions of the NLRC are speculative and unsupported by the evidence on
record. As the solicitor general said in his Manifestation in Lieu of Comment, the relief and transfer order was
akin to placing private respondents on temporary off-detail.
 Being sidelined temporarily is a standard stipulation in employment contracts, as the availability of
assignment for security guards is primarily dependent on the contracts entered into by the agency with third
parties. Most contracts for security services, as in this case, stipulate that the client may request the
replacement of the guards assigned to it. In security agency parlance, being placed off detail or on floating
status means waiting to be posted.[14] This circumstance is not equivalent to dismissal, so long as such status
does not continue beyond reasonable time.[15]
In the case at bar, the relief and transfer order per se did not sever the employment relationship between
the complainants and the Agency. Thus, despite the fact that complainants were no longer assigned to the
Client, Article 287 of the Labor Code, as amended by RA 7641, still binds the Agency to provide them upon their
reaching the retirement age of sixty to sixty-five years retirement pay or whatever else was established in the
collective bargaining agreement or in any other applicable employment contract. On the other hand, the Client
is not liable to the complainants for their retirement pay because of the absence of an employer-employee
relationship between them.
However, the Agency claims that the complainants, after being placed off-detail, abandoned their
employ. The solicitor general, siding with the Agency and the labor arbiter, contends that while abandonment
of employment is inconsistent with the filing of a complaint for illegal dismissal, such rule is not applicable
where [the complainant] expressly rejects this relief and asks for separation pay instead.
The Court disagrees. Abandonment, as a just and valid cause for termination, requires a deliberate and
unjustified refusal of an employee to resume his work, coupled with a clear absence of any intention of
returning to his or her work.[16] That complainants did not pray for reinstatement is not sufficient proof of
abandonment. A strong indication of the intention of complainants to resume work is their allegation that on
several dates they reported to the Agency for reassignment, but were not given any. In fact, the contention of
complainant is that the Agency constructively dismissed them. Abandonment has recently been ruled to be
incompatible with constructive dismissal. We, thus, rule that complainants did not abandon their jobs.[17] We
will now demonstrate why we believe complainants were illegally dismissed.
In several cases, the Court has recognized the prerogative of management to transfer an employee from
one office to another within the same business establishment, as the exigency of the business may require,
provided that the said transfer does not result in a demotion in rank or a diminution in salary, benefits and other
privileges of the employee;[18] or is not unreasonable, inconvenient or prejudicial to the latter;[19]or is not used
as a subterfuge by the employer to rid himself of an undesirable worker.[20]
A transfer means a movement (1) from one position to another of equivalent rank, level or salary, without
a break in the service;[21] and (2) from one office to another within the same business establishment. [22] It is
distinguished from a promotion in the sense that it involves a lateral change as opposed to a scalar ascent.[23]
In this case, transfer of the complainants implied more than a relief from duty to give them time to rest a
mere changing of the guards. Rather, their transfer connoted a reshuffling or exchange of their posts, or their
reassignment to other posts, such that no security guard would be without an assignment.
However, this legally recognized concept of transfer was not implemented. The agency hired new security
guards to replace the complainants, resulting in a lack of posts to which the complainants could have been
reassigned. Thus, it refused to reassign Complainant Andoy when he reported for duty on February 2, 4 and 7,
1994; and merely told the other complainants on various dates from January 25 to 27, 1994 that they were
already too old to be posted anywhere.
The Agency now explains that since, under the law, the Agency is given a period of not more than six
months to retain the complainants on floating status, the complaint for illegal dismissal is premature.This
contention is incorrect.
A floating status requires the dire exigency of the employers bona fide suspension of operation, business
or undertaking. In security services, this happens when the clients that do not renew their contracts with a
security agency are more than those that do and the new ones that the agency gets. However, in the case at
bar, the Agency was awarded a new contract by the Client. There was no surplus of security guards over
available assignments. If there were, it was because the Agency hired new security guards. Thus, there was no
suspension of operation, business or undertaking, bona fide or not, that would have justified placing the
complainants off-detail and making them wait for a period of six months. If indeed they were merely
transferred, there would have been no need to make them wait for six months.
The only logical conclusion from the foregoing discussion is that the Agency illegally dismissed the
complainants. Hence, as a necessary consequence, the complainants are entitled to reinstatement and back
wages.[24] However, reinstatement is no longer feasible in this case. The Agency cannot reassign them to the
Client, as the former has recruited new security guards; the complainants, on the other hand, refuse to accept
other assignments.Verily, complainants do not pray for reinstatement; in fact, they refused to be
reinstated. Such refusal is indicative of strained relations.[25] Thus, separation pay is awarded in lieu of
reinstatement.[26]
Second Issue:

Clients Liability

The Client did not, as it could not, illegally dismiss the complainants. Thus, it should not be held liable for
separation pay and back wages. But even if the Client is not responsible for the illegal dismissal of the
complainants, it is jointly and severally liable with the Agency for the complainants service incentive leave
pay. In Rosewood Processing, Inc. vs. National Labor Relations Commission,[27] the Court explained that,
notwithstanding the service contract between the client and the security agency, the two are solidarily liable
for the proper wages prescribed by the Labor Code, pursuant to Article 106, 107 and 109 thereof, which we
quote hereunder:
ART. 106. Contractor or subcontractor.Whenever an employer enters into a contract with another person for
the performance of the former[s] work, the employees of the contractor and of the latter[s] subcontractor, if
any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to
protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations within
these types of contracting and determine who among the parties involved shall be considered the employer
for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.
xxx In such cases [labor-only contracting], the person or intermediary shall be considered merely as an agent
of the employer who shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him.
ART. 107. Indirect employer.The provisions of the immediately preceding Article shall likewise apply to any
person, partnership, association or corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project.
ART. 109. Solidary liability.The provisions of existing laws to the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his contractor or subcontractor for any violation of any
provision of this Code. For purpose of determining the extent of their civil liability under this Chapter, they
shall be considered as direct employers.
Under these provisions, the indirect employer, who is the Client in the case at bar, is jointly and severally
liable with the contractor for the workers wages, in the same manner and extent that it is liable to its direct
employees. This liability of the Client covers the payment of the service incentive leave pay of the complainants
during the time they were posted at the Cebu branch of the Client. As service had been rendered, the liability
accrued, even if the complainants were eventually transferred or reassigned.
The service incentive leave is expressly granted by these pertinent provisions of the Labor Code:
ART. 95. Right to service incentive leave.(a) Every employee who has rendered at least one year of service shall
be entitled to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those
enjoying vacation leave with pay of at least five days and those employed in establishments regularly
employing less than ten employees or in establishments exempted from granting this benefit by the
Secretary of Labor after considering the viability or financial condition of such establishment.
(c) The grant of benefit in excess of that provided herein shall not be made a subject of arbitration or any
court [or] admnistrative action.
Under the Implementing Rules and Regulations of the Labor Code, an unused service incentive leave is
commutable to its money equivalent, viz.:
Sec. 5. Treatment of Banefit. - The service incentive leave shall be commutable to its money equivalent if not
used or exhausted at the end of the year.
The award of the thirteenth-month pay is deleted in view of the evidence presented by the Agency that
such claim has already been paid to the complainants. Obviously then, the award of such benefit in the
dispositive portion of the assailed Decision is merely an oversight, considering that Respondent Commission
itself deleted it from the main body of the said Decision.
WHEREFORE, the petition is DISMISSED and the assailed Decision and Resolution are hereby AFFIRMED,
but the award of the thirteenth-month pay is DELETED. Costs against petitioners.
SO ORDERED.
 Davide, Jr., (Chairman), Bellosillo, Vitug, and Quisumbing, JJ., concur.

ix.
SECOND DIVISION
[G.R. No. 121621. May 3, 1999]
WESTIN PHILIPPINE PLAZA HOTEL, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION
(THIRD DIVISION) and LEN RODRIGUEZ, respondents.
DECISION
QUISUMBING, J.:
Petitioner seeks to annul the Decision[1] of the Third Division of the National Labor Relations Commission
dated March 29, 1995 in NLRC NCR Case No. 00-07-04820-93, and its Resolution dated June 22, 1995 denying
petitioners motion for reconsideration.
Private respondent was continuously employed by petitioner in various capacities from July 1, 1977 until
his dismissal on February 16, 1993. Initially hired as pest controller, he was later posted as room attendant. Next
he served as bellman, until he was finally assigned as doorman in November, 1981, and stayed in that position
until his employment was terminated by petitioner.
On December 28, 1992, private respondent received a memorandum from the management transferring
him from doorman to linen room attendant in the Housekeeping Department effective December 29, 1992.
The position of doorman is categorized as guest-contact position while linen room attendant is a non-guest
contact position. The transfer was allegedly taken because of the negative feedback on the manner of
providing service to hotel guests by private respondent. This assessment was primarily based on the report of
professional shoppers engaged by petitioner to evaluate and review the various services of the hotel and its
personnel. Earlier, private respondent had figured in altercations with drivers of taxicabs servicing petitioners
guests.
Instead of accepting his new assignment, private respondent went on vacation leave from December 29,
1992, to January 16, 1993. In the meantime, the President of the National Union of Workers in Hotels,
Restaurants and Allied Industries (NUWHRAIN) appealed to management concerning private respondents
transfer. In her response, Ms. Merceditas Santos, petitioners director for human resources development,
clarified that private respondents transfer is merely a lateral movement. She explained that management
believed that private respondent was no longer suited to be in a guest-contact position, but there was no
demotion in rank or pay.
When private respondent reported back to work, he still did not assume his post at the linen room.
Notwithstanding several reminders from the personnel department and even his union, private respondent
refused to report to his new work station.
Thus, on February 11, 1993, private respondent was served with a memorandum asking him to explain in
writing why no disciplinary action should be taken against him for insubordination. The memorandum noted
that while private respondent regularly came to the hotel everyday, he just stayed at the union office. Private
respondent was again reminded to report to his new job otherwise he would be clearly defying a lawful order.
In his reply private respondent, however, merely questioned the validity of his transfer without giving the
required explanation.
On February 16, 1993, petitioner terminated private respondents employment on the ground of
insubordination. Feeling aggrieved, private respondent filed with the Department of Labor and Employment
which later indorsed to the NLRC for appropriate action a complaint for illegal dismissal against petitioner. In
a decision dated June 16, 1994, the labor arbiter declared that the dismissal was legal. Accordingly, the
complaint was dismissed for lack of merit.
On appeal, public respondent reversed the judgment of the labor arbiter. In its decision, it declared that
the intended transfer was in the nature of a disciplinary action.[2] It held that there was no just cause in
dismissing private respondent and disposed of the case as follows:
WHEREFORE, premises considered, the appealed decision is hereby VACATED and a new one entered with
the following dispositions:
a) Respondent is hereby ordered to pay backwages from February 16, 1993 to the date of this decision; and
b) To pay complainant separation pay equivalent to one (1) month pay for every year of service, in lieu of
reinstatement.
All other claims are dismissed for lack of merit.
SO ORDERED.[3]
Its motion for reconsideration having been denied, petitioner filed this instant petition.
The fundamental issue to be resolved in this case is whether or not public respondent gravely abused its
discretion in ruling that there was no just and valid cause for dismissing private respondent. And the pivotal
query is whether private respondent was guilty of insubordination or not?
Petitioner contends that private respondents continued refusal to report to his new work assignment
constituted gross insubordination. It avers that the transfer of private respondent was a valid exercise of its
management prerogative.
The contention of petitioner is meritorious. The labor arbiters decision, dated June 16, 1994, is amply
supported by substantial evidence and prevailing jurisprudence. It is error as well as grave abuse of discretion
on public respondents part to hold otherwise.
Under Article 282 (a) of the Labor Code, as amended, an employer may terminate an employment for
serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work. But disobedience to be a just cause for dismissal envisages the
concurrence of at least two (2) requisites: (a) the employees assailed conduct must have been willful or
intentional, the willfulness being characterized by a wrongful and perverse attitude; and, (b) the order violated
must have been reasonable, lawful, made known to the employee and must pertain to the duties which he has
been engaged to discharge.[4]
In the present case, the willfulness of private respondents insubordination was shown by his continued
refusal to report to his new work assignment. Thus, upon receipt of the order of transfer, private respondent
simply took an extended vacation leave. Then, when he reported back to work, he did not discharge his duties
as linen room attendant despite repeated reminders from the personnel office as well as his union. Worse, while
he came to the hotel everyday, he just went to the union office instead of working at the linen room. More than
that, when he was asked to explain why no disciplinary action should be taken against him, private respondent
merely questioned the transfer order without submitting the required explanation. Based on the foregoing
facts, private respondents intransigence was very evident.
On the issue of legality and reasonableness of the order of transfer, it must be emphasized that this Court
has recognized and upheld the prerogative of management to transfer an employee from one office to another
within the business establishment, provided that there is no demotion in rank or a diminution of his salary,
benefits and other privileges. This is a privilege inherent in the employers right to control and manage its
enterprise effectively.[5] Besides, it is the employers prerogative, based on its assessment and perception of its
employees qualifications, aptitudes and competence, to move him around in the various areas of its business
operations in order to ascertain where the employee will function with utmost efficiency and maximum
productivity or benefit to the company. An employees right to security of tenure does not give him such a
vested right in his position as would deprive the company of its prerogative to change his assignment or
transfer him where he will be most useful.[6]
Indeed, petitioner is justified in reassigning private respondent to the linen room. Petitioners right to
transfer is expressly recognized in the collective bargaining agreement between the hotel management and
the employees union as well as in the hotel employees handbook. The transfer order was issued in the exercise
of petitioners management prerogative in view of the several negative reports vis--vis the performance of
private respondent as doorman. It was a lateral movement as the positions of doorman and linen room
attendant are equivalent in rank and compensation. It was a reasonable relocation from a guest contact area
to a non-guest contact area. Thus, public respondents observation that private respondent was demoted
because the position of doorman is more glamorous than that of a linen room attendant is pure conjecture.
Public respondents conclusion that the transfer was punitive in character could not be sustained for lack of
substantial basis.
Finally it must be stressed that to sanction the disregard or disobedience by employees of a reasonable
rule or order laid down by management would be disastrous to the discipline and order within the enterprise. It
is in the interest of both the employer and the employee to preserve and maintain order and discipline in the
work environment. Deliberate disregard of company rules or defiance of management prerogative cannot be
countenanced. This is not to say that the employees have no remedy against rules or orders they regard as
unjust or illegal. They can object thereto, ask to negotiate thereon, bring proceedings for redress against the
employer. But until and unless the rules or orders are declared to be illegal or improper by competent authority,
the employees ignore or disobey them at their peril.[7] In the case at bar, private respondent was repeatedly
reminded not only by management but also by his union to report to his work station but to no avail. His
continued refusal to follow a legal order brought on the fit consequence of dismissal from his position for which
management could not be justly faulted.
WHEREFORE, the petition is hereby GRANTED. The assailed decision of the National Labor Relations
Commission is hereby SET ASIDE. The decision of the Labor Arbiter dated June 16, 1994, is REINSTATED. No
pronouncement as to costs.
SO ORDERED.
Bellosillo (Chairman), Puno, Mendoza, and Buena, JJ., concur.
b) Gross and Habitual Neglect by the employee of his duties
i
G.R. No. 127718 March 2, 2000
NATIONAL FEDERATION OF LABOR, et.al., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (5th Division), PATALON COCONUT ESTATE and/or
CHARLIE REITH as General Manager and SUSIE GALLE REITH, as owner, respondents.

FACTS: Petitioners are bona fide members of the National Federation of Labor (NFL), a legitimate labor
organization duly registered with the Department of Labor and Employment. They were employed by private
respondents Charlie Reith and Susie Galle Reith, general manager and owner, respectively, of the 354-hectare
Patalon Coconut Estate located at Patalon, Zamboanga City. Patalon Coconut Estate was engaged in growing
agricultural products and in raising livestock.
In 1988, Congress enacted into law Republic Act (R.A.) No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law (CARL), which mandated the compulsory acquisition of all covered agricultural lands for
distribution to qualified farmer beneficiaries under the so-called Comprehensive Agrarian Reform Programme
(CARP).
Pursuant to R.A. No. 6657, the Patalon Coconut Estate was awarded to the Patalon Estate Agrarian Reform
Association (PEARA), a cooperative accredited by the Department of Agrarian Reform (DAR), of which
petitioners are members and co-owners.
As a result of this acquisition, private respondents shut down the operation of the Patalon Coconut Estate and
the employment of the petitioners was severed on July 31, 1994. Petitioners did not receive any separation pay.
Subsequently, the cooperative took over the estate. Being beneficiaries of the Patalon Coconut Estate
pursuant to the CARP, the petitioners became part-owners of the land.
Petitioners, thereafter, filed individual complaints before the Regional Arbitration Branch (RAB) of the National
Labor Relations Commission (NLRC) in Zamboanga City, praying for their reinstatement with full backwages
on the ground that they were illegally dismissed.
RAB dismissed the complaints for lack of merit. However, ordered respondents thru [sic] its owner-manager or
its duly authorized representative to pay complainants’ separation pay in view of the latter’s cessation of
operations or forced sale, and for 13th month differential pay.
NLRC on appeal, set aside the decision of RAB ordering respondents to pay separation pay and 13th month
differentials stating that, the severance of employer-employee relationship between the parties came about
INVOLUNTARILY, as a result of an act of the State. MR Denied. Hence, this petition.
ISSUE: whether or not an employer that was compelled to cease its operation because of the compulsory
acquisition by the government of its land for purposes of agrarian reform, is liable to pay separation pay to its
affected employees
HELD: NO
Petitioners contend that they are entitled to separation pay citing Article 283 of the Labor Code (see codal)
It is clear that Article 283 of the Labor Code applies in cases of closures of establishment and reduction of
personnel.1âwphi1 The peculiar circumstances in the case at bar, however, involves neither the closure of an
establishment nor a reduction of personnel as contemplated under the aforesaid article. When the Patalon
Coconut Estate was closed because a large portion of the estate was acquired by DAR pursuant to CARP, the
ownership of that large portion of the estate was precisely transferred to PEARA and ultimately to the
petitioners as members thereof and as agrarian lot beneficiaries. Hence, Article 283 of the Labor Code is not
applicable to the case at bench.
In other words, Article 283 of the Labor Code does not contemplate a situation where the closure of the
business establishment is forced upon the employer and ultimately for the benefit of the employees.
Capital and management sectors must also be protected under a regime of justice and the rule of law.
PETITION DENIED.

ii.
THIRD DIVISION
[G.R. NO. 178236 : June 27, 2008]
OLIGARIO SALAS, Petitioner, v. ABOITIZ ONE, INC., and SABIN ABOITIZ, Respondents.
DECISION
NACHURA, J.:
Petitioner Oligario Salas (Salas) appeals by certiorari the January 31, 2007 Decision1 of the Court of Appeals
(CA) in CA-G.R. SP No. 93947 and CA-G.R. SP No. 94145, and its June 13, 2007 Resolution2denying his motion
for reconsideration.
Salas was hired as assistant utility man by respondent Aboitiz One, Inc. (Aboitiz) on May 11, 1993, and was
initially assigned at the Maintenance Department-Manila Office. He rose from the ranks and became material
controller on February 22, 2000 under the Materials Management & Operations Team. As material controller,
Salas was tasked with monitoring and maintaining the availability and supply of Quickbox needed by Aboitiz
in its day-to-day operations.
On June 4, 2003, Salas had run out of Large Quickbox, hampering Aboitiz's business operation. The following
day, June 5, 2003, Aboitiz wrote Salas a memorandum requiring the latter to explain in writing within seventy-
two (72) hours why he should not be disciplinarily dealt with for his (i) failure to monitor the stock level of Large
Quickbox which led to inventory stock out; and (ii) failure to report to [his] immediate superior the Large
Quickbox problem when the stock level was already critical, when the Large Quickbox level was near stock out,
and the stock level had a stock out.3
On June 10, 2003, an administrative hearing was conducted to give Salas ample opportunity to explain his side.
Salas' explanation, however, was not convincing because on July 2, 2003, Aboitiz sent him a decision notice4
which reads:
Dear Mr. Salas:
In connection with the administrative investigation conducted on June 10, 2003 related to your alleged gross
negligence of duties and responsibilities, the following are the findings during the said investigation:
1. Although you repeatedly made follow-up to the [supplier], you failed to elevate the critical situation to the
attention of your leaders resulting to the stock out of a critical stock;
2. Your case was aggravated by your tampering of the Bin Card by changing the date of stock from May 31 to
June 2, 2003 to cover up your negligence and mislead the investigating team;
3. The stock out incident had a negative impact to the company in terms of revenue and goodwill to clients.
Your position as Warehouseman is vested with trust and confidence by the company for the reason that you
are in-charge of safekeeping and monitoring of the company's operational supplies and ensuring that these are
available anytime.
In consideration of the results of the investigation you are hereby terminated from the company for loss of trust
and confidence effective July 15, 2003.
Accordingly, you are hereby directed to report to the Human Resource Office for your final clearance of money
and property accountabilities, and obligations.
For your information and compliance.
Sincerely yours
(Signed)
PAUL HAMOY
Team Leader, Purchasing
Aboitiz One, Inc.
Salas thereafter sent a letter to Mr. Hamoy requesting reconsideration of the management's decision stating:
Sir,
I would like to appeal for humanitarian reason on the decision of the management terminating me from service.
1. I would like to ask if I could avail of the early retirement plan since I was able to work for the company for 10
years, it is very hard for me that I be terminated after working for that long years in A1, the money I will get
from retirement plan will be use[d] for my family expenses for at least a couple of months until I got a new job,
pls. spare my family.
2. If you can't grant #1 appeal can you please allow me to tender my resignation instead of being terminated
by the company;
3. If I can stay up to July 31, 2003, so I can have enough time to look for another job and I can earn enough
money to support my family [for] at least another month in our everyday expenses.
thanks, ohlee salas.5
Mr. Hamoy replied via electronic mail (e-mail) denying Salas' request to avail himself of the retirement plan or
tender his resignation. He reasoned that the company's table of discipline provides the penalty of dismissal for
the offenses he committed. Salas was, however, granted an extension of one (1) month or until August 15, 2003
to work with the company, if he so desired.6
Claiming termination without cause, Salas filed with the Labor Arbiter a complaint against Aboitiz and its
president Sabin Aboitiz for illegal dismissal with prayer for reinstatement, and for payment of full backwages,
moral and exemplary damages, as well as attorney's fees.
Aboitiz responded that there was valid termination. It asserted that Salas was dismissed for just cause and with
due process. It claimed Salas willfully breached his duty when Aboitiz ran out of Large Quickbox, justifying the
termination of his employment.7
On February 19, 2004, the Labor Arbiter rendered a Decision8 sustaining the validity of Salas' dismissal. The
Arbiter agreed with Aboitiz that Salas had been remiss in his duty as material controller when he ran out of
Large Quickbox on June 4, 2003. The Arbiter further declared that Aboitiz was justified in imposing the ultimate
penalty of dismissal, considering Salas' previous infractions.
On appeal, the National Labor Relations Commission (NLRC) reversed the Labor Arbiter. But noting that Salas
was not entirely faultless, the NLRC denied his prayer for backwages, and ordered the payment of separation
pay instead of reinstatement. The NLRC ratiocinated, thus:
Under the Labor Code, gross negligence is a valid ground for an employer to terminate an employee. Gross
negligence characterized by want of even slight care acting or omitting to act in a situation where there is a
duty to act, not inadvertently but willfully and intentionally with a conscious indifference to consequence
insofar as other persons may be affected (Tres Reyes v. Maxim's Tea House, 398 SCRA 288). It is for this reason
that We disagree with the finding of the Labor Arbiter that [Salas] is guilty of gross negligence because [Salas]
did his duty to make proper requisition in advance. If there is anyone to blame for failure to deliver to the
requisitioner [Salas], the requisitioned items, it should be the purchasing officer who should have made the
corresponding explanation, and to bear the consequences if his explanation is implausible. If ever [Salas] failed
to follow-up, it does not follow that he is remiss in his duty, as the duty to deliver the requisitioned items is
already on the purchasing officer. Moreover, [Salas] explained during the hearing that he made follow-ups.
What puzzles Us is, why did not the management require the Circle Team and the Purchasing Officer to explain.
Such omission, to Our mind, indicates discrimination against [Salas].

Past infractions of the same nature can be used to evaluate the sufficiency of the last offense for termination
of employment. Considering that We see no gross negligence on [Salas] for which his employment was
terminated, consideration of past infractions become immaterial. Moreover, with his ten years of service in the
company, he was charged twice, about the alleged sale of used eight units of air conditioner and refusal to
assist in the loading at the fuel depot of refueler truck, for which he was penalized by suspension x x x. These
past offenses are not of the same nature as the alleged gross negligence that prompted [Aboitiz] to dismiss
[Salas] and, therefore, cannot be used as additional justification with the last offense.

However, We find [Salas] guilty of negligence, not because the quick box ran out of stock as of 02 June 2003
but because he failed to monitor and properly document, the stocks in his custody. As he admitted during the
administrative hearing, there were those which are even missing. Worst, he tampered the records to show that
the stock on 31 May 2003 is for 02 June 2003. While there is no intention to defraud the company, that indicates
an act that deserve (sic) disciplinary sanction.

Dismissal is too harsh a penalty for his negligence and act of tampering. This is especially true because he
readily admitted the same during the administrative hearing. Considering his length of service, and adhering
to the compassionate justice observed in labor cases, deletion of backwages, but with reinstatement, is
sufficient penalty. Nonetheless, it appears that strained relations has (sic) already set between the parties that
precludes harmonious working relationship. In such case, jurisprudence has laid out the solution by ordering
payment of separation pay at one (1) month for every year of service in lieu of reinstatement.

The alleged failure of [Salas] to account for alleged unused accountable forms in the amount of P57,850.00
cannot be used as justification for [Salas'] dismissal. This charge came out after Salas' dismissal for which
[Salas] was not surely given an opportunity to be heard. Additionally, [no] substantial evidence was presented
to establish such charge. by mere certification of Pablo Osit (sic). How Mr. Osit arrived at such figure is not even
explained.9
Aboitiz filed a motion for reconsideration, while Salas sought partial reconsideration of the decision, both of
which were denied by the NLRC on January 24, 2006.
Salas and Aboitiz thereupon filed their respective petitions for certiorari with the Court of Appeals (CA),
docketed as CA-G.R. SP No. 93947 and CA-G.R. SP No. 94145, respectively. Salas questioned the denial of his
prayer for backwages and other monetary benefits, and the order directing payment of separation pay instead
of reinstatement. Upon the other hand, Aboitiz faulted the NLRC for not sustaining the validity of Salas'
dismissal.

By decision of January 31, 2007, the CA, which priorly consolidated the petitions of both parties, sustained
Salas' dismissal. Reversing the NLRC, it held that:

[t]hree valid grounds attended the dismissal of Salas: (1) Serious misconductunder Art. 282 (a), Labor Code, for
his tamper(ing) the records to show that the stock on 31 May 2003 is for 02 June 2003" even if he is to be
considered as an ordinary employee; (2) Gross and habitual neglect under Art. 282 (b), Labor Code, as the NLRC
no less admits that "for the nth time" Salas repeatedly "demonstrated laxity in the performance of his duty";
and (3) willful breach by Salas of the trust reposed on him by Aboitiz, under Art. 282 (c) of the Labor Code,
because as "warehouseman", and therefore a confidential employee, Salas concededly tampered company
records to hide his gross and habitual neglect [of duty] and worse, unauthorizedly sold the company's eight
units of used airconditioners. There, thus, is no basis here for an award of reinstatement and full backwages
under Art. 279 of the Labor Code, nor of any financial assistance due to strained relation between the parties.10
The CA disposed, thus:

WHEREFORE, the petition of Aboitiz One, Inc. is GRANTED. The NLRC's decision dated September 21, 2005
and resolution dated January 24, 2006, are SET ASIDE and the complaint below is DISMISSED for being without
merit.
SO ORDERED.11
Salas filed a motion for reconsideration, but the CA denied it on June 13, 2007.
Aggrieved by the resolutions of the CA, Salas comes to this Court positing that:
THE HON. COURT OF APPEALS SERIOUSLY ERRED IN LAW AND COMMITTED MISAPPREHENSION OF
FACTS IN REVERSING THE NLRC DECISION INSTEAD OF MODIFYING IT TO INCLUDE BACKWAGES ON
MERE GROUND OF A SINGLE AND SIMPLE NEGLIGENCE WHICH IS NOT A GROUND FOR DISMISSAL.
SIMILARLY, THIS CANNOT BE THE BASIS OF DISMISSAL ON GROUND OF LOSS OF TRUST AND
CONFIDENCE.12

The Court shall deal first with the procedural issue.

Commenting on the petition, Aboitiz argues that the petition suffers from procedural infirmities which warrant
its dismissal. It asserts that no duplicate original or certified true copy of the assailed decision and resolution,
and material portions of the record were appended to the petition. It also alleged that the petition did not
indicate the material dates to show that it was filed on time. Finally, it argues that the certification of non-
forum shopping is defective.

Contrary to Aboitiz's assertion, the petition substantially complies with the requirements set forth by the Rules
of Court. Salas submitted a duplicate original of the assailed Decision13 and Resolution14 of the CA, as well as
copies of the material portions of the record referred to in the petition.15
Likewise, he indicated in his petition the material dates showing that the petition was filed on time. He alleged
that he received the assailed CA Decision on February 9, 2007 and filed a motion for reconsideration on
February 19, 2007, which was denied by the CA in its June 13, 2007 Resolution. The Resolution denying his
motion for reconsideration was received on June 15, 2007.16
There is also no dispute that Salas had complied with the requirement of the rules on the certification of non-
forum shopping. Salas certifies that he did not commence any case based on similar cause of action before any
Court, quasi-judicial body or tribunal. He also averred that:
[t]here is no pending case similar to this case before the Supreme Court, the Court of Appeals (or any of its
Division) quasi-judicial bodies or any tribunal, and should I thereafter learn, that the same or similar action or
claim has been filed or is pending, I shall report that fact within five (5) days therefrom to this Hon. Court of
Appeals wherein this initiatory pleading has been filed pursuant to Section 5, Rule 7 paragraph (c) of the Revised
Rules of Court.17

Obviously, Salas committed a typographical error in stating "this Hon. Court of Appeals" instead of "this
Honorable Court where this initiatory pleading (petition) has been filed." This innocuous oversight did not
render the certification defective, and thus, would not warrant the outright dismissal of the petition.

Besides, it has been our consistent holding that the ends of justice are better served when cases are determined
on the merits - after all, parties are given full opportunity to ventilate their causes and defenses - rather than
on technicality or some procedural imperfections.18 Aboitiz's plea for the outright dismissal of the petition
cannot, therefore, be sustained.
Having resolved the procedural issue, we proceed to the merits of the case.
As stated in the decision notice,19 Salas was terminated for neglect of duty and willful breach of trust. Gross
negligence connotes want or absence of or failure to exercise slight care or diligence, or the entire absence of
care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them. To warrant
removal from service, the negligence should not merely be gross, but also habitual.20

Undoubtedly, it was Salas' duty, as material controller, to monitor and maintain the availability and supply of
Quickbox needed by Aboitiz in its day-to-day operations, and on June 4, 2003, Aboitiz had run out of Large
Quickbox. However, records show that Salas made a requisition for Quickbox as early as May 21, 2003; that he
made several follow-ups with Eric Saclamitao regarding the request; and that he even talked to the supplier to
facilitate the immediate delivery of the Quickbox.21 It cannot be gainsaid that Salas exerted efforts to avoid a
stock out of Quickbox. Accordingly, he cannot be held liable for gross negligence.

If there is anything that Salas can be faulted for, it is his failure to promptly inform his immediate supervisor,
Mr. Ed Dumago, of the non-delivery of the requisitioned items. Nevertheless, such failure did not amount to
gross neglect of duty or to willful breach of trust, which would justify his dismissal from service.

The CA also justified Salas' dismissal on ground of willful breach of trust. It lent credence to Aboitiz's posture
that Salas was a warehouseman holding a position of trust and confidence, and that he tampered with the bin
card to cover up [his] negligence and [to] mislead the investigating team.
We disagree.
A position of trust and confidence was explained in Panday v. NLRC,22 viz.:
The case of Lepanto Consolidated Mining Co. v. Court of Appeals 1 SCRA 1251 (1961), provides us with a
definition of a "position of trust and confidence." It is one where a person is "entrusted with confidence on
delicate matters," or with the custody, handling, or care and protection of the employer's property.

A few examples were given by the Court in the case of Globe-Mackay Cable and Radio Corporation v. National
Labor Relations Commission and Imelda Salazar, G.R. No. 82511, March 3, 1992, to illustrate the principle:
x x x where the employee is a Vice-President for Marketing and as such, enjoys the full trust and confidence of
top management (Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]); or is the Officer-In-Charge
of the extension office of the bank where he works (Citytrust Finance Corp. v. NLRC, 157 SCRA 87 [1988]); or is
an organizer of a union who was in a position to sabotage the union's efforts to organize the workers in
commercial and industrial establishments (Bautista v. Inciong, 158 SCRA 665 [1988]); or is a warehouseman of
a non-profit organization whose primary purpose is to facilitate and maximize voluntary gifts by foreign
individuals and organizations to the Philippines (Esmalin v. NLRC, 177 SCRA 537 [1989]); or is a manager of its
Energy Equipment Sales (Maglutac v. NLRC, 189 SCRA 767 [1990])."

In fact, the classification of a Credit and Collection Supervisor by management as managerial/supervisory was
sustained by this Court in the case of Tabacalera Insurance Co. v. National Labor Relations Commission, 152
SCRA 667 [1987]. The reasons for a similar ruling apply to the position of branch accountant which the
petitioner was then holding.

Evidently, Salas as material controller was tasked with monitoring and maintaining the availability and supply
of Quickbox. There appears nothing to suggest that Salas' position was a highly or even primarily confidential
position, so that he can be removed for loss of trust and confidence by the employer.

Notably, in Manila Memorial Park Cemetery, Inc. v. Panado,23 we held that:

[T]he term "trust and confidence" is restricted to managerial employees or those who are vested with powers
or prerogatives to lay down and execute management policies and/or to hire transfer, suspend, lay-off, recall,
discharge, assign or discipline employees or to effectively recommend such managerial actions.

Besides, as we review the records before us, we do not see any semblance of willful breach of trust on the part
of Salas. It is true that there was erasure or alteration on the bin card. Aboitiz, however, failed to demonstrate
that it was done to cover up Salas' alleged negligence. Other than the bin card and Aboitiz's barefaced
assertion, no other evidence was offered to prove the alleged cover-up. Neither was there any showing that
Salas attempted to mislead the investigating team. The CA, therefore, erred in adopting Aboitiz's
unsubstantiated assertion to justify Salas' dismissal.
Indeed, an employer has the right, under the law, to dismiss an employee based on fraud or willful breach of
the trust bestowed upon him by his employer or the latter's authorized representative. However, the loss of
trust must be based not on ordinary breach but, in the language of Article 282(c) of the Labor Code, on willful
breach. A breach is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as
distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. It must rest on substantial
grounds and not on the employer's arbitrariness, whims, caprices or suspicion; otherwise, the employee would
eternally remain at the mercy of the employer. It should be genuine and not simulated; nor should it appear as
a mere afterthought to justify an earlier action taken in bad faith or a subterfuge for causes which are improper,
illegal or unjustified. It has never been intended to afford an occasion for abuse because of its subjective nature.
There must, therefore, be an actual breach of duty committed by the employee which must be established by
substantial evidence.24 In this case, Aboitiz utterly failed to establish the requirements prescribed by law and
jurisprudence for a valid dismissal on the ground of breach of trust and confidence.

Neither can Aboitiz validate Salas' dismissal on the ground of serious misconduct for his alleged failure to
account for unused accountable forms amounting to P57,850.00.

As aptly found by the NLRC, the charge came only after Salas' dismissal. We also note that the subject
accountable forms were issued to Salas in 2001. Inexplicably, this alleged infraction was never included as
ground in the notice of termination. It was only on November 23, 2003 or three (3) months after the filing of the
complaint for illegal dismissal that Aboitiz asserted that Salas failed to account for these unused accountable
forms amounting to P57,850.00. It is clear that such assertion of serious misconduct was a mere afterthought
to justify the illegal dismissal.

Similarly, before the Labor Arbiter, NLRC, and CA, Aboitiz's arguments zeroed in on Salas' alleged neglect of
duty and breach of trust. It was, therefore, error for the CA to include serious misconduct, which had never
been raised in the proceedings below, as ground to sustain the legality of Salas' dismissal.
The CA also cited another infraction allegedly committed by Salas as additional ground for his dismissal. It
declared that Salas unauthorizedly sold the company's eight units of used air-conditioners. Yet, we note that
Salas had never been charged or suspended for this alleged unauthorized sale of used air-conditioners during
his employment with Aboitiz. The infraction for which Salas had been penalized by suspension of five (5) days
was his failure to meet the security requirements of the company.25Accordingly, there is no basis for the CA to
include unauthorized sale of used air-conditioners as ground to sustain Salas' dismissal.

Aboitiz's reliance on the past offenses of Salas for his eventual dismissal is likewise unavailing. The correct rule
has always been that such previous offenses may be used as valid justification for dismissal from work only if
the infractions are related to the subsequent offense upon which the basis of termination is decreed.26 While
it is true that Salas had been suspended on June 1, 2000 for failure to meet the security requirements of the
company,27 and then on July 20, 2001 for his failure to assist in the loading at the fuel depot,28 these offenses
are not related to Salas' latest infraction, hence, cannot be used as added justification for the dismissal.

Furthermore, Salas had already suffered the corresponding penalties for these prior infractions. Thus, to
consider these offenses as justification for his dismissal would be penalizing Salas twice for the same offense.
As the Court ruled in Pepsi-Cola Distributors of the Philippines, Inc. v. National Labor Relations Commission,29
and recently in Coca-Cola Bottlers, Philippines, Inc. v. Kapisanan ng Malayang Manggagawa sa Coca Cola-
FFW:30

Moreover, private respondent was already penalized with suspensions in some of the infractions imputed to
him in this case, like sleeping while on route rides, incomplete accomplishment of sales report and his failure
to achieve sales commitments. He cannot again be penalized for those misconduct. The foregoing acts cannot
be added to support the imposition of the ultimate penalty of dismissal which must be based on clear and not
on ambiguous and ambivalent ground.

Undoubtedly, no just cause exists to warrant Salas' dismissal. Consequently, he is entitled to reinstatement to
his former position without loss of seniority rights, and to payment of backwages.31
However, we limit the award of backwages because we find that Salas was not entirely faultless. As earlier
adverted to, Salas failed to promptly inform his immediate superior of the non-delivery of the requisitioned
items. Had Salas promptly informed Ed Dumago of the non-delivery, the incident complained of would have
been avoided. Although such negligence would not justify Salas' termination from employment in view of the
stringent condition imposed by the Labor Code on termination of employment due to gross and habitual
neglect, the same cannot be condoned, much less tolerated.

In PLDT v. National Labor Relations Commission,32 this Court sustained the award of backwages in favor of an
employee who was found not to be entirely faultless, but only from the date of the NLRC's promulgation of the
decision.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP
No. 93947 and CA-G.R. SP No. 94145, are REVERSED and SET ASIDE. Aboitiz One, Inc. is ordered to
REINSTATE Oligario Salas to his former position without loss of seniority rights, with payment of backwages
computed from September 21, 2005, up to the time of reinstatement.
No pronouncement as to costs.

c) Fraud or Willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative
i.
G.R. No. 100749 April 24, 1992
GT PRINTERS and/or TRINIDAD G. BARBA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (4TH DIVISION) and EDWIN RICARDO, respondents.

GRIÑO-AQUINO, J.:
The private respondent, Edwin Ricardo, was employed in 1968 as an apprentice of GT Printers, a single
proprietorship owned by Mrs. Trinidad Barba of East Capitol Site, Cebu City. Having gained enough experience
and expertise in the printing business and after undergoing special schooling in Manila at company expense,
Ricardo was promoted to the position of production manager of GT Printers. In 1978, he became general
manager after the untimely demise of the owner's husband, who held that position. Ricardo earned a monthly
basic salary of P1,680, an ECOLA of P485, representation allowance of P1,000 and or top of these, a three (3%)
per cent share in the gross receipts of the business.
In February, 1985, Ricardo's wife established Insta Printers, a rival printing press, with Edwin Ricardo himself as
consultant and owner. Since the establishment of Insta Printers, Ricardo became a habitual absentee from his
job at GT Printers. He neglected his duties and responsibilities, and became lax in directing and supervising the
work force, resulting in numerous major printing errors and failure to meet printing specifications leading to
the rejection of several job orders from regular customers.
Mrs. Barba noticed that Ricardo not only used GT Printers' bookcloth and other printing materials for his Insta
Printers, but he also gave specific instructions to the production staff to give priority to book and magazine job
orders for Insta Printers. Eventually, the regular customers of GT Printers were pirated by Insta Printers.
Ricardo also manipulated price quotations during the canvassing of bids to favor his own outfit instead of GT
Printers.
Because of those irregularities, GT Printers suspended Ricardo as general manager for 30 days. Effective June
18, 1986, Richard Barba was designated to take his place. Contracts concluded by respondent Ricardo
thereafter were no longer honored. However, he continued to be a sales agent for GT Printers, hence, he
continued to receive commissions. Notices of his investigation scheduled on July 24, 1986 and August 13, 1986
were sent to him but he did not appear at the investigation. He stopped reporting for work and soon after filed
a complaint for illegal dismissal in the Regional Arbitration Branch No. VII, of the Department of Labor and
Employment in Cebu City, entitled "Edwin Ricardo vs. GT Printers and/or Trinidad G. Barba." (NLRC Case No.
RAB-VII-0398-86)
The case was heard by Labor Arbiter Bonifacio Tumanak who rendered a decision on January 4, 1990 finding
that Ricardo was lawfully dismissed from employment. Nevertheless, the Labor Arbiter ordered the payment
to him of separation pay equivalent to one-half month pay for every year of service (pp. 28-42, Rollo).

Ricardo appealed that decision to the NLRC which on April 18, 1991 (pp. 43-51, Rollo), set aside the labor
arbiter's decision and entered a new one, finding Ricardo's dismissal illegal and ordering his reinstatement with
backwages. However, aware that strained relations had developed between the parties, the Commission
ordered GT Printers to pay Ricardo backwages for three (3) years and separation pay of one month for every
year of service in lieu of reinstatement.

GT Printers filed a motion for reconsideration but it was denied. Hence, this petition for review on certiorari,
with a prayer for the issuance of a writ of preliminary injunction or temporary restraining order. On July 29,
1991, the Court issued a temporary restraining order upon petitioner's filing a P100,000 bond enjoining the
respondents to desist from enforcing the NLRC decision during the pendency of this action.

The petition for review is premised on the petitioner's contention that grave abuse of discretion was committed
by the NLRC —
1. in disregarding the labor arbiter's findings of fact;
2. in finding that Ricardo was denied due process before being dismissed on July 18, 1986;
3. in finding that Ricardo was dismissed without just cause; and
4. in reversing the decision of the labor arbiter and ordering Ricardo's reinstatement with payment of back
wages and separation pay.
The petition has merit.

The twin requirements of a valid termination: due process and just cause — were met substantially for Ricardo
was given ample opportunity to appear at the two scheduled investigations in order to present his side, but he
chose to boycott the investigation. Even at the hearing before the Labor Arbiter, he waived, through counsel,
the presentation and cross-examination of witnesses.

Due process does not necessarily mean or require a hearing, but simply an opportunity or right to be heard
(Hian vs. CTA, 59 SCRA 110; Azul vs. Castro, 133 SCRA 271). The affidavits, testimonies and other documentary
evidence presented by the petitioner stand uncontroverted and are therefore entitled to full credit. It is well-
settled that this Court is not a trier of facts, so we defer to the superior opportunity of the lower courts or
administrative bodies to test the credibility of the witnesses and to examine the authenticity of the
documentary evidence directly before them (Mapa vs. Arroyo, 175 SCRA 76; Dagupan Bus Co., Inc. vs. NLRC,
191 SCRA 328).

The security of tenure accorded to labor under the Constitution does not embrace infractions of accepted
company rules amounting to breach of trust and loss of confidence (Rosello, Jr. vs. NLRC, 190 SCRA 779). The
right of an employer to dismiss a managerial employee for breach of trust and loss of confidence, as in this
case, cannot be doubted. As a measure of self-preservation against acts inimical to its interests, an employer
has the right to dismiss an employee found committing acts of dishonesty and disloyalty. The employer may
not be compelled to continue to employ such a person whose continuance in the service would patently be
inimical to his employer's interest (Colgate Palmolive Phils. Inc. vs. Ople, 163 SCRA 323). The dismissal of a
dishonest employee is in the best interest not only of management but also of labor for the law never intended
to impose an unjust situation on either labor or management (Coca-Cola Bottlers Phils. Inc. vs. NLRC, 172 SCRA
751).
Reinstatement would be ill-advised and incompatible with the labor arbiter's finding that "from those
documentary evidences presented by respondent, it can be safely conclude[d] that . . . there exist visible
conflict of interest amounting to willful breach of trust and confidence repose (sic) upon him by his employer, .
. . as well as (b) habitual neglect of his duties . . ." (pp. 216-217, Rollo). The reinstatement of erring managers
may not be ordered with the same ease and liberality as rank and file workers (Pacific Cement Co., Inc. vs.
NLRC, 173 SCRA 192).

WHEREFORE, the assailed decision of the NLRC is hereby reversed and set aside. As the complainant (herein
private respondent), Edwin Ricardo, was lawfully dismissed for dishonesty and serious misconduct, his
complaint for illegal dismissal is DISMISSED for lack of merit.
SO ORDERED.
Narvasa, C.J., Cruz and Medialdea, JJ., concur.
Bellosillo, J., is on leave.

ii.
SECOND DIVISION

G.R. No. 88268 June 2, 1992

SAN MIGUEL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FRANCISCO DIVINAGRACIA, respondents.

NARVASA, C.J.:
The basic facts from which the controversy at bar has arisen are not in dispute. They are summarized in the
challenged decision of the respondent National Labor Relations Commission (NLRC) of November 25, 1988 as
follows.
1. Francisco Divinagracia "started working with . . . (San Miguel Corporation) on November 16, 1977 as
accounting clerk. On July 24, 1982 he held the position of Regional Cashier of Bacolod Beer Region with basic
monthly salary of P2,200. His job entailed the receiving of cash remittances from route salesmen, preparing
vouchers for disbursement and keeping funds inside the vault."

2. On January 31, 1985 at 5:00 in the afternoon, complainant sought and was granted permission by the
Regional Accountant (Remus Banogon) to leave the office to attend to personal matter (to buy some milk for
his infant child). When he returned to the office after an hour, he proceeded to work and discovered a shortage
of P10,004.56. He relayed the matter to the security guard and to his supervisor, the Regional Accountant, the
following morning. Together with the General Accounting Clerk, complainant and the Regional Accountant
counted and reviewed the transactions of the previous day but could not account for the shortage. This matter
was reported to the Operations Manager.
3. Due to this incident complainant was grounded and an investigation ensued. After the investigation, . . . (the
employer, San Miguel Corporation) demanded payment of the shortage from . . . (Divinagracia). On May 31,
1985 . . . (the latter) was dismissed. . . . (He later) instituted.
. . . an action on December 23, 1985 for illegal dismissal.
Divinagracia's action resulted in a judgment by the Labor Arbiter dated March 29, 1980. The Arbiter concluded
that Divinagracia had indeed been illegally dismissed and directed his reinstatement with full back wages. The
Arbiter believed Divinagracia's claim that "he formally turned over the funds to the Regional Accountant
(Remus Banogon) before he took a temporary leave of absence on January 31, 1985;" that when he returned an
hour or so later, " the Accountant had (already) left the office;" and that since "the latter had duplicate keys to
the cashier's (Divinagracia's) booth and knew the combination of the vault safe," Banogon was as likely a
suspect as he (Divinagracia) himself was, yet Banogon was never investigated, much less disciplined.

On appeal by San Miguel Corporation, the NLRC sustained the Arbiter's conclusion that Divinagracia's
employment had in truth been unlawfully terminated. It however modified the Arbiter's judgment by directing
that the reinstatement of Divinagracia thereby decreed be "without backwages for he is not totally blameless."

Nullification of this decision of the NLRC, rendered on November 25, 1988, is what is sought in this special civil
action initiated in this Court by San Miguel Corporation (SMC). SMC contends that the following findings in
that decision were arrived at with grave abuse of discretion, to wit:
1) there had been a formal turn-over of funds from Divinagracia to his immediate superior — Regional
Accountant Remus Banogon — at the time that, with the latter's permission, Divinagracia went out of his office
on a personal errand;
2) Banogon might have taken some of the money left by Divinagracia in the vault inside his booth, since
Banogon had duplicate keys to that booth and knew the combination of the vault; and
3) the testimony of Accounting Clerk Jocelyn B. Longno is undeserving of credit.
At the administrative investigation conducted by SMC respecting Divinagracia's shortage, as well as in the
proceedings before the Labor Arbiter, evidence was given by the persons who were with Divinagracia at the
time of the incident: Remus Banogon and Jocelyn Longno.
Banogon pertinently deposed that —
1) although he really did have a key to the Cashier's office and knew the combination of the vault lock, he never
entered the cashier's booth on January 31, 1985, when the shortage supposedly happened; moreover, he did
not have a key to the drawer of the Cashier's table where some of the remittances were supposedly placed; and
2) It is not true that there was a turn-over of the Cashier's funds, booth or vault to him; such a turn-over not
being "done in absences of short duration like Divinagracia's absence from 5:30 p.m. to 6:45 p.m.
Jocelyn B. Longno testified that —
1) as shown in two (2) sketches of the Accounting Office in which she was at the time working together with
Remus Banogon, Francisco Divinagracia and others, Divinagracia's Cashier's booth "is situated in such a way
that I would be able to see if someone should enter it . . . (and) Remus Banogon's table was just next to my table
. . . (such that). I would surely notice if he left his table;"
2) she did not leave her table inside the Accounting Office from the time that Divinagracia left at about 5:30
P.M. until she went home at about 6:45 P.M.; "(n)either Remus Banogon nor anybody else entered the Cashier's
Booth on that period that Francisco Divinagracia III was out . . . (and in fact) Remus Banogon did not leave his
table until 6:30 P.M. when he was already going home;" and
3) she herself left the Accounting Office at about 6:45 P.M. and locked its door; and as she was going out of the
gate, she met Divinagracia coming back.
From the foregoing evidence, the NLRC drew the conclusion that Divinagracia's "failure to account could not
be solely attributable to him since other persons have similar access to the company funds," and his
complainant's function is lodged, was likewise in the performance of his duty."
What in effect the NLRC is saying is that since both Divinagracia and Banogon had no access to the former's
office and the vault therein, it is not possible to hold only Divinagracia liable for the shortage in his funds, since
Banogon might himself have surreptitiously gone inside Divinagracia's booth, opened the vault and made off
with some of the money lying there. The evidence, however, is that while Banogon indeed had access to
Divinagracia's office and its vault, Banogon had not gone into that office at all at any time during the hour that
Divinagracia was away. What the NLRC has done is to make a selective acceptance of Banogon's testimony,
according credit to such part thereof as was consistent with obscuration of Divinagracia's liability for the
shortage, and conveniently ignoring so much of it as was inconsistent. It accorded credit to Banogon's
statement that he had a key to Divinagracia's office and knew the combination to the vault, but it rejected his
declaration, forming part of the same testimony, that he had never entered Divinagracia's booth on the day in
question. That rejection cannot in the circumstances be regarded as otherwise than whimsical, capricious, even
irrational. No reason whatsoever has been given by NLRC for that rejection, or why Banogon is deemed a
credible witness in part and branded as undeserving of belief in another, specially when Banogon's statements
are corroborated in their entirety by the other evidence on record, Jocelyn B. Longno's testimony and the
unchallenged sketches of Divinagracia's Cashier's Booth in relation to the adjacent or surrounding working
areas.
Neither does the NLRC cite any cause to disbelieve the evidence given by Longno, basically to the effect that
Banogon had never entered the office of Divinagracia while the latter was out on personal business. This lack
of justification is attempted to be cured by the NLRC's counsel by such arguments as —
1) . . . (while it) may be true that she had no ill-motive as to falsely testify against . . . (Divinagracia), (h)owever,
she had to protect her employment with petitioner (SMC); and
2) . . . while Longno was rendering overtime work, her concern and attention were focused on her work. It was
unnatural for her to have noticed that Banogon never left his desk while she was concentrating on her work.
Longno then biased and cannot be relied upon on this point.
The first argument is unintelligible. Its import is that while Longno had "no ill-motive" to testify falsely against
Divinagracia, she nevertheless did so "to protect her employment with petitioner." Why her employment would
be imperilled by her testifying otherwise than she actually did (e.g., that Divinagracia was faultless, or it was
some other employee who had taken the money, etc.) is not explained. The second argument is cut from the
same bolt. It insists that Longno could not have noticed what Banogon was doing at all since she was
concentrated on her work, despite Longno's positive declaration that she would surely have noticed if Bagonon
had entered the booth of Divinagracia while the later was out for an hour and fifteen minutes because her desk
was right beside Bagonon's and she was so situated that Divinagracia's booth was within her view at any given
moment. Why stark speculation or plain guessing should be preferred to affirmative testimony is also not
explained.
In any event, it is clear that the NLRC's conclusions regarding the evidence have nothing to support them and
hence must be struck down, as already stated, for being whimsical and capricious, arrived at with grave abuse
of discretion.
WHEREFORE, the petition is GRANTED. The Decision of the respondent National Labor Relations Commission
of November 25, 1988 is NULLIFIED AND SET ASIDE, and the complaint of illegal dismissal is DISMISSED,
without pronouncement as to costs.
SO ORDERED.
Paras and Regalado, JJ., concur.
Padilla, J., took no part.
Nocon, J., is on leave.

ii.
G.R. No. L-65706 December 11, 1992
TOP FORM MFG. CO., INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JULIANA MALUBAY, respondents.

MELO, J.:
Before Us is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the decision
of respondent National Labor Relations Commission (NLRC), in its NCR Case No. AB-1-9943-81 entitled,
"Juliana Malubay vs. Top Form Manufacturing (Phils.), Incorporated" which ordered wherein petitioner to
reinstate private respondent Juliana Malubay to her former position, without loss of seniority rights and other
privileges appertaining thereto with one (1) year backwages without deduction.
The antecedent facts of this case are as follows:
Private respondent Jualiana Malubay began her employment with the petitioner Top Form Manufacturing
(Phils.), Incorporated in March, 1979, as Plant Supervisor, with a starting salary of P1,200.00 per month. She
was initially assigned to supervise a factory line of sixty machine operators. One month thereafter, she was
given one more factory line, also with sixty workers, to supervise. Sometime in August, 1979, she was given a
salary adjustment of P300.00 a month and in February of the following year, another increment in salary was
received by her in the amount of P150.00 per month. Moreover, in October, 1980 she was promoted to the
position of Over-All Quality Supervisor in the first shift, from 5:45 a.m. to 1:45 p.m. with a corresponding
increase in salary of P350.00 a month. As such Head Supervisor, she had control and supervision over the entire
first shift consisting of 120 machine operators and some six line-in-charge. She was also responsible not only
for the production and output but also for the quality of products. In addition to her functions, she was likewise
given the task of training newly-hired factory workers and of supervising the repair group composed of several
employees.

On January 10, 1981, a Saturday, at about 2:00 o'clock in the afternoon, private respondent and her co-
supervisors were called to a meeting at the conference room by Dickson Chan, Production Manager. During
the conference, Dickson Chan reviewed and examined as usual the production report for the day and he
declared the he was not satisfied with the production output, berating private respondent and the other
supervisors, thus:

You Filipinos are lazy people, and your Philippine laws are no good, even your government is no good. In
Hongkong, factory workers can buy the most expensive foods and clothes in the world, but, here, you Filipinos
are like beggars, it is just because you are all lazy.
Thereafter, he crumpled the production report and again threw invectives at private respondent and her co-
supervisors, to wit:

You are bullshits, you Filipinos, get out, you are all lazy, you are like pigs, all of you go home. I do not want to
see your face again.

Not satisfied and contended with what he had said. Dickson Chan picked up the stapler on his desk and, but for
some better impulse, would have thrown the same at private respondent and her companions who, frightened,
as they were, dispersed.

As a result of this unfortunate incident, private respondent told and instructed her co-supervisors, "Huwag
pumasok sa lunes para matauhan si Dickson." Thus, on the next working day, January 12, 1981, a Monday, they
absented themselves from work. However, on January 13, 1981, she and her companions reported for work.
On January 16, 1981, petitioner filed an application for clearance to terminate the services of private
respondent on the ground of "Loss of Management Confidence". Meanwhile, private respondent was placed
under preventive suspension leading to her termination effective January 13, 1981.
Thereafter, on January 19, 1981, private respondent filed a complaint for illegal dismissal against herein
petitioner before the Ministry of Labor and Employment, National Capital Region, Arbitration Branch in
Manila.

On May 29, 1981, Labor Arbiter Conrado O. Lasquite rendered a decision dismissing private respondent's
complaint. However, upon elevation of the matter to the NLRC, said body, in a decision dated December 29,
1982, reversed the Arbiter and accordingly disposed:
WHEREFORE. in view of the foregoing considerations, the Decision appealed from is hereby set aside and
another one entered, directing the respondent company, thru its responsible officials, to reinstate complainant
to her former position, without loss of seniority rights and other privileges appertaining thereto with one (1)
year backwages without deduction considering that complainant is not entirely blameless.

SO ORDERED. (p. 8. NLRC's Decision; p. 23, Rollo.)

On March 2, 1983, petitioner filed a motion for reconsideration of the aforementioned decision of the NLRC
but the same was denied on October 12, 1983, for lack of merit.
Hence, the instant petition.

Very simply, the crux of the matter to be resolved in the petition is whether or not private respondent's services
may be terminated for loss of trust and confidence.
Petitioner argues that respondent Malubay committed willfull breach of trust and confidence reposed upon her
when she agitated and led the boycott against petitioner. It is further averred that private respondent was not
merely a participant in the drama but the leader of the maverick group of supervisors who staged the boycott;
that Malubay, as a managerial employee, being Head Supervisor of the entire first shift consisting of 120
machine operators, her powers and functions are central to the effective operation of the company which
entails the conferment of the highest degree of trust and confidence, but because of what she did, she had
shown her unworthiness to continue in the employ of the company.
On the other hand, private respondent submits that the contentions of the petitioner are devoid of merit.
Private respondent claims that she cannot be dismissed for loss of trust and confidence if said prerogative of
the employer is abusively and whimsically exercised. As a matter of fact, according to private respondent, it
was Dickson Chan who was at fault when the latter vituperated against private respondent and the other
supervisors present at the conference. Private respondent further asserts that Chan maligned not only the
employees but also the entire Filipino people, the laws and the government of this Republic, so that the
company should have understood her feelings and actions.
The petition is well-taken.
The employer has a distinct prerogative to dismiss an employee if the former has ample reason to distrust the
latter or if there is sufficient evidence to show that the employee has been guilty of breach of trust. This
authority of the employer to dismiss an employee cannot be denied whenever acts of violation are noted by
the employer. The law does not require proof beyond reasonable doubt of the employee's misconduct before
the employer can invoke such justification. It is sufficient that there is some basis for the loss of trust or that
the employer has reasonable grounds to believe that the employee is responsible for the misconduct and that
the nature of the employee's action renders the employee unworthy of the trust and confidence demanded of
the position (Valladolid vs. Inciong. 121 SCRA 205 [1983]; DOLE Philippines, Inc. vs. NLRC, 123 SCRA 673 [1983];
Ocean Terminal Services, Inc. vs. NLRC, 197 SCRA 491 [1991]; Baguio Country Club Corporation vs. NLRC and
GENOVE, G.R. No. 102397, September 4, 1992).

It is an inherent right of the employer to dismiss an employee for loss of confidence. We have a plethora of
decisions that supports and recognizes this authority of the employer to cut its relationship with the employee.
In the case at bar, it is an admitted fact that private respondent is an employee occupying a high managerial
position which entails great responsibility. Thus, petitioner was justified in terminating the employment of the
private respondent when she committed acts inimical to her employer's interest. We shall not belabor the time-
honored tenet that while the law protects the rights of the employee, it cannot authorize the oppression or
self-destruction of the employer. As We ruled in Almira vs. B.F. Goodrich Philippines, Inc.(58 SCRA 120 [1974]),
through then Chief Justice Enrique Fernando:
. . . The basic doctrine underlying the provisions of the Constitution so solicitous of labor as well as the
applicable statutory norms is that both the working force and the management are necessary components of
the economy. The right of labor has been expanded. Concern is evident for its welfare. The advantages thus
conferred, however, call for attendant responsibilities. The ways of the law are not to be ignored. Those who
seek comfort from the shelter that it affords should be the last to engage in activities which negate the very
concept of a legal order as antithetical to force and coercion . . . It is even more important that reason and not
violence should be its milieu. (at pp. 131-132.)
In the present petition. We cannot condone the act of private respondent in inciting her co-supervisors and
leading them in the boycott and wildcat strike. As aptly observed by the Labor Arbiter:
Even assuming that complainant was berrated by the Production Manager due to under par production output,
her remedy is not to sabotage or boycott company operations; she should have gone to higher management
levels in order to redress her grievances against her abusive immediate supervisor. Getting even with the
company for the misdeed of only one person, the Production Manager, is totally uncalled for. (p. 4, Labor
Arbiter's Decision; p. 14, Rollo.)
Further, We have laws to protect her and her co-supervisors from oppressive foreigners. She should not have
taken the laws in her own hands. Private respondent should have viewed the incident between her and the
Production Manager from a professional point of view. However, due to her precipitate and irrational action,
she hurt the company instead.
The Labor Code, specifically Article 283, acknowledges the right of the employer to put an end to the covenant
with the employee, thus:
Termination by employer. — An employer may terminate an employee for any of the following just causes:
a. x x x
b. x x x
c. Fraud and willfull breach by the employee of the trust reposed in him by his employer or his duly authorized
agent.
It cannot be gainsaid, in this regard, that the act of private respondent in initiating and leading the boycott,
thereby disrupting and impairing company operations, is sufficient reason for petitioner to lose its trust and
confidence on private respondent, considering that the latter is a managerial employee of the company whose
position carries the corresponding highest degree of responsibility in improving and upholding the interests of
the employer and in exemplifying the utmost standard of discipline and good conduct among her co-
employees. Withal, the termination of her employment is justified.
In the light of the foregoing, We are of the opinion, and so hold, that respondent NLRC acted with grave abuse
of discretion in ordering the reinstatement of Malubay because Top Form Mfg. (Phil.). Inc. had just cause to
dispense with services of private respondent. Nonetheless, considering that Juliana Malubay had worked with
the company, as the record shows, with zeal, competence and dedication with no known previous bad record,
the ends of social and compassionate justice would be well served if she is paid full separation pay (National
Steel Corporation vs. Leogardo, Jr., 130 SCRA 502 [1984]: Engineering Equipment, Inc. vs. NLRC, 133 SCRA 752
[1984]; Firestone Tire and Rubber Co. of the Phils. vs. Lariosa, 148 SCRA 187 [1987]).
ACCORDINGLY, the petition is GRANTED. The decision of the National Labor Relations Commission dated
December 29, 1982 is REVERSED and SET ASIDE. Petitioner Top Form Manufacturing (Phils.), Incoporated is
directed to pay private respondent Juliana Malubay separation pay to which she may be entitled under the law,
or any collective bargaining agreement or company rules or practice, whichever is higher.
SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr., and Romero, JJ., concur.
FIRST DIVISION
[G.R. No. 111639. July 29, 1996]
MIDAS TOUCH FOOD CORPORATION, WILSON CHU & RAMON T. LUY, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION and IRIS FE ISAAC, respondents.
DECISION
HERMOSISIMA, JR., J.:

This is a petition seeking the reversal of the decision of the National Labor Relations Commission which
declared the dismissal of private respondent Iris Fe B. Isaac illegal.
Petitioner Midas Touch Foods Corp. (Midas) is a company which owns and operates the chain of West Villa
Restaurants and other mini outlets in various department stores throughout Metro Manila,[1] while petitioner
Wilson Chu is its Chairman of the Board of Directors and Ramon Luy its President and Chief Executive Officer.
On September 16, 1986, private respondent Iris Fe B. Isaac was hired by petitioner Midas as its Operations
Manager, next in rank to the President. As such, her task was to establish an efficient management scheme for
the fast-food chain of West Villa Dimsum and Noodles, and the formulation of company policies on recruitment
and training of personnel, planning and expansion of business, purchasing of goods and other related activities.
She was given a free hand in all aspects of the operation and was allowed to bring in Alice Te to act as the
Commissary Manager, and part of the management team, since the company has a centralized commissary.
Respondent Isaac continued her functions as Operations Manager until she received a letter, dated June 15,
1987, terminating her services as decided by the Executive Committee for alleged lack of confidence. On July
7, 1987, she was informed by petitioner Luy that the Executive Committee had decided to recall the termination
letter. She was allowed thereby to continue to act as the Operations Manager.
Sometime in October, 1987, Alice Te was investigated for allegedly stealing food supplies which were
supposedly delivered to another restaurant, named Food Center, located at the Port Area. This led to the
eventual resignation of Alice Te on November 3, 1987. On the same day, petitioner Luy claims that respondent
Isaac admitted to him in one conversation they had that she owns the Food Center. In view of this admission,
petitioner Luy, through a letter, dated November 6, 1987, terminated the services of respondent Isaac on the
ground of loss of confidence. A portion of the said letter reads:[2]
"Among other considerations, you have admitted last Tuesday (November 3, 1987) in my presence, to owning
the 'canteen' located near the Port Area and spending two days operating it. Further, your commissary
Manager, MS. ALICE TE, admitted Wednesday (Nov. 4, 1987) in my presence and in the presence of other
witnesses that she uses company premises and facilities in purchasing and transporting for your 'canteen'
(Records, p. 34)."
On March 9, 1988, respondent Isaac filed a complaint with the Labor Arbiter for illegal dismissal against
petitioners.
On November 23, 1990, the Labor Arbiter rendered judgment, the dispositive portion of which we quote
hereinbelow:[3]
"WHEREFORE, finding the dismissal of complainant Iris Fe B. Isaac to be valid and justified, this case,
impugning the legality of the same, should be, as it is hereby DISMISSED. However, respondent Midas Touch
Foods Corporation and its chairman of the Board, Wilson Chu and President Ramon T. Luy, for reason afore-
discussed, are hereby ordered to pay said complainant the total amount of P52,682.10, comprising her one (1)
month separation pay, proportionate 13th month pay, unpaid wages from November 1 to 6, 1987 and her sick
and vacation leave."

Petitioners and respondent Isaac appealed the aforequoted decision to the NLRC. Petitioners questioned the
award of separation pay. Wilson Chu and Ramon Luy asked that they be relieved of personal liabilities.
Respondent Isaac, on the other hand, argued that the Labor Arbiter committed an error in relying on the
undocumented, self-serving and hearsay evidence which were gathered only after she was terminated. She
further stressed that there was lack of investigation prior to her termination. Petitioners failed to present their
witnesses during the hearing of the case.[4]

In its decision, rendered on July 20, 1993, the NLRC reversed the Labor Arbiter and decided:[5]
"WHEREFORE, premises considered, the appealed decision is modified by declaring the complainant as having
been illegally dismissed. Consequently, respondents are ordered to pay complainant the following amounts: 1)
backwages for three years from November 7, 1987; 2) separation pay in lieu of reinstatement equivalent to one
month pay for every year of service, which is to be computed as to include the period of three years she was
awarded backwages; 3) proportionate 13th month pay for 1987; and 4) unpaid wages from November 1 to 6,
1987. All other claims of the complainant are dismissed for lack of merit."

Petitioners now come before us assailing the decision of the NLRC, without filing any motion for
reconsideration. While a motion for reconsideration under the Rules of Court is required before a petition for
certiorari is filed, the rules admit of certain exceptions, among which is the finding that under the circumstances
of the case, a motion for reconsideration would be useless.[6]

In this case, the NLRC had reversed the decision of the Labor Arbiter and no new issues were raised in this
appeal. We find it quite impossible for the NLRC to reverse itself under the foregoing facts and so, a motion for
reconsideration will be deemed useless. Hence, by reason of justice and equity, we resolve to settle the issues
on the merits in order to avoid further delay.

We believe that the contrariety of views between the Labor Arbiter and the NLRC mandates us to consider the
legality of the dismissal of respondent Isaac as the primary issue to be resolved. In doing so, it is but appropriate
that we lay the legal basis for the conclusions we are to espouse in respect to the petition at hand.

The requisites of a valid dismissal are (1) the dismissal must be for any of the causes expressed in Article 282 of
the Labor Code, and (2) the employee must be given an opportunity to be heard and to defend himself.[7]
Among the valid causes specified in Article 282 of the Labor Code is loss of trust and confidence of an employee,
which is the basis of the termination of the respondent. Nevertheless the substantive and procedural laws must
be strictly complied with before a worker can be dismissed from his employment[8] because what is at stake is
not only the employee's position but his livelihood.[9]
The acts committed by respondent Isaac, which resulted in her employer's loss of confidence were enumerated
by petitioners as follows:[10]
(a) Respondent Isaac and her partner in crime, Alice Te, used their highly confidential positions to occasionally
convert the company's stockroom as their personal supermarket to stuff their canteen, for free.
(b) Because of an apparent conflict in interest, Respondent Isaac who had a full and free control of the
company's operations, never expanded the company's operations to the Ermita portion of Manila, as she even
admitted spending two days operating her canteen.
(c) Company properties were used by the partnership of respondent Isaac and Alice Te, not for the company's
use, but for their own Food Center:
(1) The company's service jeep, reported to have made deliveries to their Food Center, was used for more than
the time ordinarily consumed for official company use, with the permission of Alice Te and concurrence of
respondent Isaac.
(2) Respondent Isaac, as the Operations Manager of petitioner company, signed a contract for lighted
signboard whose size and color specification (brown) correspond with that of her Food Center, which is
irreconciliably different from respondent company's color specification of white and green, at the expense of
the company, who never benefited therefrom.
These accusations were not established by evidence in a fair and impartial hearing.

Indeed, an employee cannot be separated from his employment without according to him his constitutional
right of due process, consisting of proper notice and hearing, whether he be a rank and file or a managerial
employee. Due process is wanting in the case at bench. Respondent Isaac was not given notice of her
impending dismissal, not even the chance to explain her side. The essence of due process is that a party be
afforded a reasonable opportunity to be heard and to submit any evidence he may have in support of his
defense.[11] The notice required actually consist of two parts to be separately served on the employee, to wit;
1) notice to apprise the employee of the particular acts or omission for which his dismissal is sought; and 2)
subsequent notice to inform him of the employer's decision to dismiss him.[12] The letter given by petitioner
Luy, dated November 6, 1987, terminating respondent Isaac's services was made effective immediately. Even
if no hearing is conducted, the requirement of due process would have been met where a chance to explain a
party's side of the controversy had been accorded him.[13] Failure to observe this procedure is fatal for this
could raise doubt to the petitioner's claim that the termination was for just cause. The want of due process may
be clearly construed based on the termination letter given to respondent Isaac, to quote:
"Acting in my capacity as President, I am hereby terminating your services as Operations Manager effective
immediately on the ground of loss of confidence."[14] (Italics Supplied)

Considering the foregoing facts, we hold that respondent Isaac was denied procedural due process.
The right of security of tenure cannot be eroded, let alone forfeited except upon a clear and convincing showing
of a just and lawful cause.[15] No less than the Constitution itself has guaranteed the State's protection to labor
and its assurance to workers of security of tenure in their employment.[16] The application of this rule
encompasses both the rank and file as well as the managerial employees. It is in this light that we are inclined
to examine the validity of respondent Isaac's dismissal from employment, loss of confidence being the rationale
therefor.

While Art. 282 of the Labor Code enumerates loss of confidence as one of the just causes for termination of an
employee, it must nonetheless rest on an actual breach of duty committed by the employee and not on the
employer's caprices.[17] The guidelines for the doctrine of loss of confidence to apply are:[18]
"(1) loss of confidence should not be simulated;
(2) it should not be used as a subterfuge for causes which are improper, illegal, or unjustified;
(3) it may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and
(4) it must be genuine, not a mere afterthought to justify earlier action taken in bad faith."
While proof beyond reasonable doubt is not required, still substantial evidence is vital and the burden rests on
the employer to establish it.
In reversing the decision of the Labor Arbiter, the NLRC ruled, thus:[19]
"In the instant case, respondent Ramon T. Luy allegedly personally confronted the complainant about the
ownership of a canteen and her use of company personnel and facilities in operating the same.According to
respondent Luy, complainant admitted to him about her ownership of the canteen and the use of certain
employees, among them Alice Te, in the purchasing of supplies for the said canteen.

But complainant denies this and explained that the truth of the matter is that the canteen is owned by her
cousin and her sister and that respondent Luy knew that she was helping her sister operate. Had there been an
investigation made, the truth could have come out.

Assuming that complainant indeed owned the canteen, it has not been shown however, that because of this,
she neglected her work as Operations Manager of the respondent corporation, the same has not been
established. As to the fact that complainant was engaged in a business in competition with that of the
respondents. We also noted that respondents' restaurants were located in Makati, Quezon City and in San Juan,
Metro Manila. The canteen being referred to as owned by the complainant is located in Port Area, Manila. We
can not see our way clear how the canteen can compete with the business of the respondents, considering their
different locations. For this reason, we believe that there was no sufficient basis for the respondents to lose
their trust and confidence on the complainant. As to the use of the corporation's personnel in delivering
supplies to the canteen, this has not been sufficiently established either."

We agree with the NLRC.

The written statements of witnesses Tierry G. Jaymalin[20] and Marcial Manacop[21] in support of all the
allegations of the petitioners against respondents Isaac were unverified. These witnesses were not presented
before the Labor Arbiter to testify in order to give respondent a chance to cross-examine them. Those exhibits
therefore, were hearsay and of no probative value. At any rate, allegations in the affidavit[22] executed by
petitioner Luy were unsubstantiated. Neither was petitioner Luy presented before the Labor Arbiter to testify
on the truth of the allegations written therein. Furthermore, those so called statements and affidavit were
executed only after the termination of respondent in an obvious attempt to circumvent the law, depriving her
of the opportunity to defend herself and present evidence in her defense. It has to be emphasized that this
Court has held in innumerable cases, the case of People's Bank and Trust Company v. Leonidas[23] in particular,
that, where the adverse party is deprived of the opportunity to cross-examine the affiants, affidavits are
generally rejected for being hearsay, unless the affiant themselves are placed on the witness stand to testify
thereon.

With respect to the alleged involvement of respondent Isaac in the purported pilferage of goods in the
company, the same has not likewise been established by petitioners. If, indeed, this be true, it is but proper for
the petitioners to conduct a thorough investigation in order to determine the persons actually liable therefor,
instead of wantonly dismissing employees out of mere suspicion.

Anent the personal liabilities of petitioners Ramon Luy and Wilson Chu, it is their contention that they cannot
be held jointly or solidarily liable for the simple reason that they are not respondent's employers.
Indeed, no less than the public respondent, NLRC, in its Comment[24] admitted that petitioners are correct by
stating that:
"The present petition disputes the fact that petitioners Chu and Luy were held jointly and severally liable with
petitioner corporation in the payment of the monetary awards to private respondent on the ground that said
individual petitioners, being only the president (Luy) and chairman of the board of directors (Chu) of petitioner
corporation, are not the employers of the private respondent.
It is submitted that petitioners' contention is correct. The individual petitioners cannot be held to be personally
liable since they are not the employers of private respondent."

As we have held in the case of Tramat Mercantile, Inc. vs. Court of Appeals,[25] personal liability of a corporate
director, trustee or officer along (although not necessarily) with the corporation may so validly attach, as a rule,
only when 1. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross negligence
in directing its affairs, or (c) for conflict of interest, resulting in damages to the corporation, its stockholders or
other persons; x x x.
Moreover, Section 31 of the Corporation Code provides that:

"SEC. 31. Liability of directors, trustees or officers. Directors or trustees who willfully and knowingly vote for or
assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing
the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such
directors, or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other persons." (Italics supplied)
A corporate officer is not personally liable for the money claims of discharged corporate employees unless he
acted with evident malice and bad faith in terminating their employment.[26] No bad faith can be attributed
to both petitioners Luy and Chu. Neither were they employers of respondent Isaac. Hence, they should not be
made liable for the payment of damages to respondent.

WHEREFORE, the Decision of the National Labor Relations Commission is AFFIRMED, BUT WITH THE
MODIFICATION that only petitioner corporation should be made solely liable for all the monetary awards
considering that petitioners Luy and Chu were not the employers but merely the President and Chairman of
the Board respectively.
Costs against petitioner corporation.
SO ORDERED.
Padilla, (Chairman), Bellosillo, Vitug, and Kapunan, JJ., concur.

iv.
G.R. No. 97196 January 22, 1993
CHINA CITY RESTAURANT CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MONICO DIETO and JUNILITO CABLAY, respondents.
Federico C. Leynes for petitioner.
Corazon Agustin-Ongbueco for private respondent.

CAMPOS, JR., J.:

Petitioner seeks to annul the Resolutions ** of the National Labor Relations Commission (NLRC) dated
November 29, 1990 in NLRC NCR AC No. 00057 (NLRC NCR CASE No. 00-06-02857-69) entitled "Monico T.
Dieto and Junilito Cablay vs. China City Restaurant" which affirmed the decision rendered by Labor Arbiter
Eduardo Magno declaring the dismissal of private respondents illegal, but with the modification that instead
of reinstatement private respondents be granted separation pay with full backwages.
The antecedent facts are as follows:
Petitioner China City Restaurant (petitioner, for brevity) employed private respondents Monico Dieto and
Julinito Cablay (private respondents, for brevity) as chief steamer and roasting helper, respectively.

Sometime in 1988, the China City Employees Union, with Monico Dieto as President, was organized and
thereafter demanded recognition from petitioner.
On October 17, 1988, Abe Fuentes, a steamer helper at petitioner's restaurant, was detained at the Makati
Municipal Jail for allegedly stealing dried scallops worth two thousand pesos (P2,000.00) belonging to the
petitioner. On January 20, 1989, after posting bail paid by the petitioner, Abe Fuentes gave a statement at the
Intelligence and Special Operations Group, SPD, implicating the private respondents.

Abe Fuentes alleged that as early as April 1988, he, in conspiracy with private respondents, had been bringing
out from the restaurant dried scallops wrapped in plastic, by mixing them with leftovers thrown into the thrash
can. They were sold at Ongpin, Binondo, Manila. They would then divide the proceeds among themselves, with
the private respondents getting the lion's share. A criminal charge for qualified theft was thereafter filed
against the private respondents.

On March 27, 1989, an amended information was filed to include private respondents as co-accused in the
qualified theft case filed against Abe Fuentes. Later, Abe Fuentes turned state witness.
On March 22, 1989, petitioner, through a memorandum, terminated the services of the private respondents on
the ground of loss of trust and confidence.

Thereafter a complaint for illegal dismissal was filed by the private respondents against the petitioner with the
Department of Labor and Employment.

Private respondents professed ignorance of the crime exposed by Abe Fuentes. They claimed that when they
visited Abe Fuentes at his detention cell, the latter allegedly told them that Jose Polotan, the restaurant
administrator, was forcing him to name the private respondents as his co-conspirators but that he allegedly
refused. Later, however, private respondents were surprised to learn that Abe Fuentes was released on bail at
the instance of the petitioner. They vigorously claimed that they were implicated in the theft incident because
of their being union members.
On January 17, 1990, after investigation and submission by the parties of their respective evidence and position
papers, the Labor Arbiter promulgated his decision, the dispositive portion of which is quoted hereunder as
follows:
Wherefore, judgment is hereby rendered declaring the dismissal of the complainants as illegal. Respondent is
hereby ordered to immediately reinstate complainants to their former positions without loss of seniority rights
with full backwages from May 20, 1989 until reinstatement plus attorney's fees equivalent to 10% of the
amount recoverable by the complainants.
The claim for moral and exemplary damages are (sic) hereby dismissed for lack of factual and legal basis.
SO ORDERED.1
Dissatisfied with the decision, petitioner appealed to the NLRC.
In its Resolution dated November 29, 1990, the NLRC affirmed the decision of the Labor Arbiter with the
modification of granting private respondents the alternative relief of separation pay plus backwages instead of
reinstatement.
Petitioner filed a motion for reconsideration of the NLRC resolution on January 4, 1991, but the same was
denied on January 22, 1991.2
Hence, this petition.
The grounds relied upon by the petitioner for the issuance of the writ are the following:
1
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN HOLDING THAT THE PETITIONER FAILED TO OBSERVE DUE PROCESS IN DISMISSING
THE PRIVATE RESPONDENTS WHEN, IN TRUTH AND IN FACT, AND AS ENUNCIATED IN BLTBCo vs. NLRC,
166 SCRA 721, THEY WERE FULLY ACCORDED THEIR RIGHT TO DUE PROCESS OF LAW BECAUSE THEIR
DISMISSAL WAS EFFECTED ON THE BASIS OF THE PRELIMINARY INVESTIGATION FINDINGS OF THE CITY
FISCAL WHICH FOUND THEM TO BE
CO-CONSPIRATORS IN THE CRIME QUALIFIED THEFT.
2
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN DECLARING THE DISMISSAL OF PRIVATE RESPONDENTS ILLEGAL ON THE PREMISE
THAT THEY WERE NOT ACCORDED DUE PROCESS AND IN CONSEQUENTLY AWARDING THE UNDULY
HARSH RELIEF OF SEPARATION PAY WITH BACKWAGES IN COMPLETE DISREGARD OF THE CASE OF
WENPHIL CORPORATION vs. NLRC, 170 SCRA 69, WHICH MERELY GRANTED A P1,000.00 SANCTION TO
AN EMPLOYEE DISMISSED WITHOUT DUE PROCESS.3
Meanwhile, on March 25, 1991, private respondents were acquitted by the Regional Trial Court of the charge
of qualified theft on the ground of reasonable doubt.4

The issue in this petition is whether or not public respondent committed grave abuse of discretion in holding
the dismissal of private respondents illegal for lack of due process of the law, and in ordering petitioner to pay
them separation pay plus backwages.
It is the petitioner's contention that the preliminary investigation conducted by the City Fiscal on the qualified
theft charge against private respondents were sufficient compliance with the due process requirement of the
law. Invoking Batangas Laguna Tayabas Bus Co. (BLTBCo.) vs. NLRC,5 it contends that an employee can be
dismissed on the basis of the findings of the City Fiscal during the preliminary investigation of the criminal
complaint. Petitioner claims that in such case due process does not require the employer to conduct a separate
investigation as this would only be a duplication of the City Fiscal's investigation upon which the employer has
a right to rely on.6

The NLRC maintains otherwise, stating that they were not afforded the formal investigation required and that
the fiscal's investigation could not legally take its place.7
Due process of law simply means giving opportunity to be heard before judgment is rendered. "Due process of
law is a law which hears before it condemns, which proceeds upon inquiry and renders judgment only after
trial".8 In fact, this Court has held that there is no violation of due process even if no hearing was conducted,
where the party was given a chance to explain his side of the controversy. What is frowned upon is the denial
of the opportunity to be heard.9 As a general rule, the preliminary investigation conducted by the City Fiscal is
sufficient compliance with procedural due process because the accused is given ample opportunity to be heard.
As stated in the BLTBCo case:10

. . . the criminal charges initiated by the company against private respondents and the finding after preliminary
investigation of prima facie guilt of the offense charged constitute substantial evidence sufficient to warrant a
finding by the Labor Tribunal of the existence of a just cause for their termination based on loss of trust and
confidence. . . .
. . . For the company to conduct its own investigation would only be a duplication of the JAGO's and later, the
city fiscal's investigation, . . . said officials being the persons charged with this special function.
However, the petitioner cannot seek refuge in the BLTBCo case to support its petition. As correctly observed
by the Solicitor General, in that case there was a mass fraud covering a period of ten months involving thirty-
six (36) employees and volumes of documentary evidence. The City Fiscal's finding of a prima facie case of
estafa against the employees was based on the affidavits of witnesses and on the voluminous documentary
evidence. There was, therefore, basis for the company to dismiss the employees for loss of confidence without
necessarily conducting a formal investigation separate from the preliminary investigation. 11

In the present case, however, the fiscal's finding of prima facie case of qualified theft against private
respondents was based solely on the affidavit executed by the original accused-turned state witness, Abe
Fuentes, to the effect that he conspired with the private respondents in the theft of dried scallops. The only
connection of the private respondents to the charge is the implication made by Abe Fuentes. It is therefore
necessary to scrutinize this implication. The Regional Trial Court which acquitted the private respondents of
the crime of qualified theft doubted the veracity of Abe Fuentes' testimony against them because: (a) the
implication was made more than three (3) months after Abe Fuentes' arrest and after a series of talks with
petitioner's representatives; (b) the bond for his (Abe Fuentes') temporary release was put up by petitioner
upon his assurance that he would cooperate with petitioner; (c) the implicatory testimony of Abe Fuentes was
not substantiated by some other evidence, thus rendering it of no provative value; (d) the private respondents
are officers of the union with whom petitioner is at odds. 12

Aside from Abe Fuentes' affidavit and the criminal complaint/information, there is no other evidence shown by
petitioner positively linking private respondents to the alleged theft committed.
Due process in administrative proceedings requires that "evidence must be substantial, and substantial
evidence means evidence that a reasonable mind might accept as adequate to support a conclusion".13

The information for qualified theft, based solely on the affidavit of Abe Fuentes, implicating the private
respondents is not the substantial evidence which a reasonable mind would as sufficient to conclude that
private respondents are not trustworthy, and thus can be legally dismissed for loss of trust. Moreover, the
circumstances found by the trial court as leading to Abe Fuentes' implication of the private respondents tend
to show that the basis for the latter's dismissal was not petitioner's loss of trust and confidence but rather its
retaliation against them for their union activities.
Furthermore, even the Labor Arbiter found that "A close scrutiny of the facts and evidences attached to the
record will reveal that the implication of the complainants by Abe Fuentes in the commission of the crime of
qualified theft is not enough basis for the respondent to terminate them. . Since they failed to establish
sufficient basis for concluding that the complainants were really in connivance with Abe Fuentes in the
commission of the qualified theft, the dismissal becomes illegal".14

The findings of the lower court in the theft case and the decision of the Labor Arbiter that no sufficient basis
exists to justify a dismissal on the ground of loss of confidence deserves Our consideration. The factual findings
of the lower court and the Labor Arbiter with respect to this point are conclusive upon this Court.

Although the BLTBCo. case held that the preliminary investigation is sufficient compliance with due process
without needing separate formal investigation to be conducted by the company for dismissal of erring
employees, We do not find the ruling in said case as all embracing because as held in San Miguel Corporation
vs. NLRC, 15 the requirements for due process are two-fold: and We quote:
Under the Labor Code, as amended, the requirements for the lawful dismissal of an employee by his employer
are two-fold: the substantive and the procedural. Not only must the dismissal be for a valid or authorized cause
as provided by law [Arts. 279, 281, 282-284], but the rudimentary requirements of due process — notice and
hearing — must also be observed before an employee may be dismissed [Art. 277(b)]. One cannot go without
the other, for otherwise the termination would, in the eyes of the law, be illegal.
In this case, there is no sufficient basis to support the belief that a just and lawful cause exists. The just and
lawful cause constitutes the substantive aspect of due process. Lack of just causes render the dismissal illegal.
In a long line of cases, this Court stressed that the right of an employer to dismiss employees on the ground
that it has lost its trust and confidence in them must not be exercised arbitrarily and without just cause; that
although the dropping of a criminal prosecution for an employee's alleged misconduct does not bar his
dismissal and proof beyond reasonable doubt is not necessary to justify the same, still the basis thereof must
be clearly and convincingly established.16 Although the power to dismiss is a normal prerogative of the
employer, the same is not without limitations. The right of the employer must not be exercised arbitrarily and
without just cause. Otherwise, the constitutional mandate of security of tenure of the workers would be
rendered nugatory.17
In General Bank and Trust Co. vs. Court of Appeals, 18 this Court set forth the guidelines for the doctrine of loss
of confidence to apply, to wit:
. . . However, loss of confidence should not be simulated. It should not be used as a subterfuge for causes which
are improper, illegal, or unjustified. Loss of confidence may not be arbitrarily asserted in the face of
overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify earlier action
taken in bad faith.
In this case, the only basis for charging the private respondents with qualified theft is the affidavit of Abe
Fuentes implicating them. There is no evidence on record to support or show any connection of the private
respondents to the charge of qualified theft. As found by the trial court, Abe Fuentes implicated the private
respondents only after a series of conferences with petitioner's representatives, and after petitioner facilitated
his release from jail through the former's answering for his bail bond.
For loss of trust and confidence to be a valid ground for the dismissal of employees, it must be substantial and
not arbitrary, whimsical, capricious or concocted.
Irregularities or malpractice should not be allowed to escape the scrunity of this Court. Solicitude for the
protection of the rights of the working class are of prime importance. Although this is not license to disregard
the rights of management, still the Court must be wary of the ploys of management to get rid of employees it
considers as undesirable.
Petitioner goes on to contend that even if private respondents were dismissed without due process the award
of separation pay with backwages is unduly harsh. It cites the case of Wenphil, 19 where an indemnity of only
P1,000.00 was awarded to the private respondent as compensation for the failure of petitioner to give formal
notice and to conduct investigation. We find the Wenphil case not applicable to the case at bar because in the
former case (Wenphil case) the company was able to conclusively show that the dismissed employee was guilty
of grave misconduct and insubordination which We do not find in this case.

Employees who are illegally dismissed from work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to their full backwages.20
However, when reinstatement to their former positions is not possible under the circumstances, an award
equivalent to three years backwages plus separation pay to compensate for their illegal separation is thus
proper. 21

The circumstances prevailing in this case do not warrant the reinstatement of the illegally dismissed private
respondents. Antagonism and imputations of bad faith caused a severe strain in the relationship between
petitioner and private respondents, that a more equitable disposition would be an award of separation pay, in
lieu of reinstatement, plus backwages for not more than three years without qualification and deduction.

IN VIEW OF THE FOREGOING, the petition is DISMISSED. The Resolution of the National Labor Relations
Commission dated November 29, 1990 is hereby AFFIRMED in toto with the modification that the amount of
backwages be reckoned from the actual date of dismissal up to the date of this decision which in no case should
exceed three (3) years. With costs.
SO ORDERED.
Narvasa, C.J., Feliciano, Regalado and Nocon, JJ., concur.

d) Commision 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
i.
G.R. No. 78491 March 16, 1989
STARLITE PLASTIC INDUSTRIAL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and EDGAR GOMEZ, respondents.
Iñigo S. Fojas for petitioner.
The Solicitor General for public respondent.

CORTES, J.:
Petitioner Starlite Plastic Industrial Corporation (STARLITE) seeks to set aside the 18 February 1987 decision of
the National Labor Relations Commission (NLRC) ordering the reinstatement of private respondent Edgar
Gomez (GOMEZ) with full backwages, and its Resolution dated 21 April 1987 denying petitioner's motion for
reconsideration.
The antecedents of the case are as follows:

Private respondent GOMEZ was employed as a factory worker by STARLITE sometime in March 1981. On 22
June 1984, STARLITE dismissed him on the ground that he was caught attempting to steal one ballast costing
P80.00. STARLITE reported the matter to the police on 19 July 1984, after grievance meetings failed to resolve
the controversy. A criminal complaint was filed against GOMEZ, but the investigating fiscal dismissed the same
saying that STARLITE failed to establish a prima facie case against GOMEZ. On 13 August 1983, private
respondent GOMEZ filed a complaint for illegal dismissal against STARLITE. After the parties submitted their
respective position papers, the Labor Arbiter rendered his decision on 15 January 1985 dismissing the complaint
for lack of merit. GOMEZ appealed the decision to the public respondent NLRC which in a decision dated 18
February 1987 reversed the ruling of the Labor Arbiter.

In contending that the decision of the public respondent NLRC was rendered in grave abuse of discretion
petitioner argues that the act of dishonesty of GOMEZ led petitioner to lose its trust and confidence in him and
is more than sufficient to justify his dismissal.

In his position paper, GOMEZ averred that he started working as laborer in petitioner's factory sometime in
March 1981. In the course of his employment, he joined and later became a board member of the labor union
KAMPIL, and participated in a strike against STARLITE. On 22 June 1984, STARLITE summarily dismissed him
on the claim of having attempted to steal one ballast costing P80.00.

STARLITE's version of the events which led it to dismiss GOMEZ, is as follows:

. . . That on 22 June 1984, at about 12:43 p.m. complainant was about to go out of the factory; that he was about
7 to 12 meters from the gate where the Security Guard was posted when he suddenly turned back and
proceeded to the back of the office. He took something in the front part of his pants and place (sic) the same
in the pile of woods (sic). These unusual incident (sic) was witnessed by the security guard because he was
alone. Being suspicious, the guard could have followed him and look (sic) at what he put in the pile of woods
(sic) but he was not able to do so as he was talking with an office secretary who instructed him to put off the
switch of the water pump. That on the same time and date, Bonnie Alvarez, a Delivery Checker was at the toilet
and actually saw Edgar Gomez put in the pile of woods (sic) a ballast. That he immediately reported this matter
to Mr. Tan Chi Thian Jr. the Production Supervisor Manager and he was instructed to get the said ballast and
bring the same to the office. Immediately Edgar Gomez was called to the office and was asked to explain why
he took the said ballast. When he replied that he does (sic) not know anything about the said ballast, Mr. Tan
asked him to wait for a while and asked one of the office secretary (sic) to prepare a memorandum for Edgar
Gomez to answer. That complainant refused to acknowledge receipt of the memorandum and asked Mr. Tan
if it would be possible to call Mr. Arsenio Campos, Union Vice-President and Oscar Raymundo another Union
Officer. When the two Union Officers were appraised of the incident, they talked with the complainant and
later told Mr. Tan that Edgar Gomez could not accept the said memorandum. At this juncture, Mr. Tan told
them that he would just refer the matter to the police authority for proper disposition. When the two Union
Officers heard this, they requested Mr. Tan that they be allowed to call up Mr. Reynaldo Capa, President of the
KAMPIL, the Federation wherein the local union was affiliated. Mr. Capa of the KAMPIL requested Mr. Tan not
to take the matter to the police and he will just instruct Edgar Gomez to receive the memorandum and they
will just submit the corresponding explanation. Complainant submitted his explanation on June 25, 1984,
vehemently denying the imputed charge against him. After a perusal of the incident, the management deemed
it proper to place complainant Edgar Gomez under preventive suspension pending the filing of the
corresponding criminal charge against him. That the criminal charge was not immediately filed because of the
request of the President of the KAMPIL. In the two grievance meetings between the Union and Management,
this case is (sic) always included in the agenda. In the meeting/conference at the National Capital Region in the
office of Conciliator Apron Mangabat, this matter was also taken up but did not reach any point of settlement.
Finally, on July 19, 1984, the company deemed it proper to report the matter to the police station. [Labor
Arbiter Decision, pp. 1-3; Rollo, pp. 17-19].

GOMEZ, on the other hand, claimed that the theft charge was a "frame up" as shown by the resolution of the
investigating fiscal dated 31 August 1984, dismissing the criminal complaint filed by STARLITE, as it failed to
present the quantum of proof to establish a prima facie case against GOMEZ. The resolution is attached as
Annex "A" of GOMEZ's position paper.

GOMEZ's version of the incident leading to his dismissal as culled from his reply to the memorandum given to
him the day of the incident, attached as Annex "1" of his position paper, is as follows:
At 12:05 p.m. he went out to buy viand as instructed by a certain Nellie. He arrived five minutes later and soon
after, took his own lunch. At around 12:30 p.m. he went out of the compound to buy candy and three minutes
later, he went with Rando to the parking area to rest and chat. At around 12:45 p.m., a certain Elmer joined
them and they conversed while waiting for the company bell to ring [Record p. 15].

GOMEZ denied the accusation against him arguing that if he was indeed seen attempting to take a ballast, why
didn't the security guard or Alvarez apprehend him immediately. He admitted going to Rando Tamondong's
department at around 11:55 a.m. to use the compressor to clean himself of sawdust, but claimed that he stayed
there only for a while and then went back to his post, without taking anything.

This version of GOMEZ was corroborated by Rando Tamondong who, in a statement submitted to the
investigating fiscal, attached as Annex "3" of GOMEZ's position paper, said that he was not aware of any
missing ballast in his department and that he had no knowledge of whether GOMEZ took anything from his
department. Arsenio Biong also executed an affidavit stating that he saw Bonifacio Alvarez, Assistant
Production Manager, personally bring out one canopy containing one ballast from the painter's room and that
he was surprised to learn that GOMEZ was accused of stealing the ballast that Mr. Alverez had taken [Annex
"4", Record, p. 18].

STARLITE filed a supplemental position paper disputing the resolution of the investigating fiscal, contending
that it never received any subpoena or summons nor was there any hearing called for or conducted regarding
the case before the investigating fiscal. Petitioner also attached the recanting affidavits of Rando Tamondong
and Arsenio Biong, executed about three months after they made their previous statements [Record, pp. 32-
34].

The Labor Arbiter then rendered his decision dated 15 January 1985, dismissing the complaint for lack of merit,
finding that, "except for his flat denial that he did not take the ballast, private respondent GOMEZ failed to
present an iota of evidence to prove his innocence" [Rollo, p. 20].
Private respondent GOMEZ appealed the decision to public respondent NLRC which, on 18 February 1987,
reversed the ruling of the Labor Arbiter, holding that the facts on record did not support the Labor Arbiter's
conclusion. In its decision the NLRC stated thus:
We see no reason why the Labor Arbiter should disregard the findings of the City Fiscal as they are entitled to
great weight, and We quote:
Tan Chi Thian Jr., Production Manager of the Starlite Plastics and Industrial Corporation, avers that on June 22,
1984, he received a report that at about 12:40 p.m. of the same date, respondent Edgar Gomez, a factory helper
in the said firm for about three years, was seen inserting an OSRAM ballast valued at P80.00 into a pile of wood
near the gate of the said firm. A memorandum was later sent to said respondent to shed light on the matter.
Respondent Gomez countered that the charged of Attempted Qualified Theft against him was a mere
fabrication intended to justify his dismissal from the said company because of his participation in the strike
against the company by their union of which he was a member of the board of directors.
After carefully evaluating the evidence on record, the undersigned finds the explanation and/or defenses
interposed by respondent Gomez to be meritorious particularly on the following points:
1. the statement of Rando Tamondong that he was not aware of any missing ballast from his department and
that he did not know whether respondent Gomez took anything from his department.
2. the fact that he was not immediately placed under custody considering that he was actually allegedly seen
in the act of committing the crime.
3. the statement of Arsenio Biong that he saw Bonifacio Alvarez, Assistant Production Manager of the firm,
bringing out by himself one (1) canopy containing one ballast from the painter's room. Mr. Alvarez allegedly
saw from the window of a comfort room where respondent Gomez was inserting the missing ballast into the
pile of wood.
The Labor arbiter therefore erred in finding that "complainant failed to present an iota of evidence to prove his
innocence" as there were persons who testified in his favor and whose statements are now part of the record.
Thus, complainant presented the following arguments for the Labor Arbiter's perusal:
a. Counter-affidavit of Mr. Edgar Gomez showing that complainant did not commit the offense of Attempted
qualified theft as corroborated by Mr. Rando Tamondong and Mr. Arsenio Biong.
b. In the signed statement of Mr. Tamondong (Annex B-3) he exonerated complainant thus:
Tungkol sa tinatanong ninyo sa nawawalang ballast sa aking departamento ay wala po akong nalalaman at
tungkol naman sa tao sa aking departamento ay dadalawa lang po kami, ako at si Mr. Elapes may taong
pumunta roon si Mr. Gomez pero wala akong alam na kinuha niya.
c. In the affidavit executed by Mr. Biong, (Annex B-4) he has this to say:
... That sometime on June 22, 1984 my co-worker Mr. Edgar Gomez at around 11:45 to 12:00 noon, came to our
place at the painters room to purposely cleanse himself of sawdust.
That immediately right after, I saw him went (sic) out of the room without bringing everything (sic) from our
room;
That, however, when Mr. Gomez was already out of our sight, Mr. Bonnie Alvarez went inside and asked me
what the former did inside the room; that when told that Mr. Gomez cleaned himself of sawdust in his body,
Mr. Alvarez went out bringing along with him the canopy containing the ballast;
That I was surprised to hear after Mr. Gomez was already accused of stealing the ballast which Mr. Alvarez had
taken personally from the painter's room.
The above statement was never denied by respondent including Mr. Bonnie Alvarez, himself.
WHEREFORE, the appealed Decision should be as it is hereby REVERSED. Respondent is hereby ordered to
immediately reinstate the complainant to his former position without loss of seniority rights and benefits and
with full backwages from the time he was dismissed until actually reinstated.
The claim for moral damages is hereby denied for being unsupported by evidence.
SO ORDERED.
[NLRC Decision, pp. 2-5; Rollo, pp. 12-15.]
The NLRC denied STARLITE's motion for reconsideration hence, the instant petition for certiorari was filed on
30 May 1987, with a prayer for the issuance of a writ of preliminary injunction or a temporary restraining order.
The Court issued a temporary restraining order on 10 June 1987 enjoining the NLRC from enforcing its decision
and the petition was given due course on 4 November 1987.
Petitioner mainly contends that it was justified in dismissing GOMEZ since it had lost its trust and confidence
in him for his act of attempting to steal the ballast and public respondent NLRC therefore committed grave
abuse of discretion amounting to lack of jurisdiction when it ordered the reinstatement of GOMEZ with full
backwages.
Petitioner argues that even if the fiscal dismissed the charges against GOMEZ, still it has reasonable ground to
believe that GOMEZ was responsible for the theft of the ballast and that such act of dishonesty justifies his
dismissal on the ground of loss of confidence.
The Court finds petitioner's contentions unmeritorious.
At the outset, the Court finds it necessary to emphasize that contrary to the tenor of the Labor Arbiter's
decision, a dismissed employee is not required to prove his innocence of the charges levelled against him by
his employer. The Court has laid down the rule that in termination cases, the burden of proving the just cause
of dismissing an employee rests on the employer and his failure to do so would result in a finding that the
dismissal is unjustified [Polymedic General Hospital v. NLRC, G.R. No. 64190, January 31, 1985, 134 SCRA 420;
Egyptair v. NLRC, G.R. No. 63185, February 27, 1987, 148 SCRA 125; Asphalt and Cement Pavers, Inc. v.
Leogardo, G.R. No. 74563, June 20, 1988].
There is no dispute that loss of confidence, when adequately proven, constitutes a valid ground for dismissing
an employee [Manila Midtown Commercial Corporation v. Nuwhrain G.R. No. L-57268, March 25, 1988, 159
SCRA 212] and proof beyond reasonable doubt is not required to terminate him on this charge [Gatmaitan v.
MRR, G.R. No. L-19892, September 25, 1967, 21 SCRA 191]. It is sufficient that there is some basis for such loss
of confidence [Galsim v. PNB, G.R. No. L-23921, August 29, 1969, 29 SCRA 293; Central Textile Mills v. NLRC,
G.R. No. 50150, May 3, 1979, 90 SCRA 9] and that the employer has reasonable ground to believe or entertain
the moral conviction that the employee concerned is responsible for the misconduct and that the nature of his
participation therein would render him absolutely unworthy of the trust and confidence demanded of his
position [Nevans v. CIR, G.R. No. L-21510, June 29, 1968, 23 SCRA 1321]. The doctrine goes on further to include
the basic rule that the conviction of an employee in a criminal case is not indispensable to warrant his dismissal
by his employer and that the fact that a criminal complaint against the employee has been dropped by the city
fiscal is not binding and conclusive upon a labor tribunal [Sea Land Service Inc. v. NLRC, G.R. No. 68212, May
24, 1985, 136 SCRA 544].
The Court, however, has time and again stressed that the right of an employer to dismiss employees on the
ground that it has lost its trust and confidence in him must not be exercised arbitrarily and without just cause;
that although the dropping of a criminal prosecution for an employee's alleged misconduct does not bar his
dismissal and proof beyond reasonable doubt is not necessary to justify the same, still the basis thereof must
be clearly and convincingly established [Acda v. Minister of Labor, G.R. No. 51607, December 15, 1982, 119
SCRA 326; Philippine Long Distance Telephone Co. v. NLRC, G.R. No. 58004, May 30, 1983, 122 SCRA 601].
Thus, the Court in General Bank and Trust Co. v. CA [G.R. No. L-42724, April 9, 1985, 135 SCRA 569] laid down
the following guidelines in the applicability of the doctrine of loss of confidence, to wit:
... However, loss of confidence should not be simulated. It should not be used as a subterfuge for causes which
are improper, illegal or unjustified. Loss of confidence may not be arbitrarily asserted in the face of
overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify earlier action
taken in bad faith. [General Bank, supra, at p. 578 cited in D.M. Consunji, Inc. v. NLRC,G.R. No. 71459, July 30,
1986, 143 SCRA 204, 211].
Applying the foregoing legal precepts to the pertinent facts, the Court finds that there was utter failure here to
establish or substantiate the theft charge against GOMEZ. The public respondent NLRC found, amply
supported by the record, that contrary to the Labor Arbiter's findings that GOMEZ "failed to present an iota of
evidence to prove his innocence," GOMEZ indeed presented exculpatory evidence consisting of the statements
of his co-employees Rando Tamondong and Arsenio Biong, the former attesting that he was not aware of any
missing ballast from his department and the latter claiming that it was in fact Bonifacio Alvarez who brought
out a canopy containing a ballast, which GOMEZ was accused of stealing. Although STARLITE subsequently
submitted the recanting affidavits of said witnesses, said recanting affidavits did not inspire belief and the
NLRC disregarded the same. The NLRC also found that the findings of the fiscal exonerating GOMEZ from the
theft charge was entitled to great weight as these findings reveal at once that the theft charge which is the
basis for the dismissal of GOMEZ was not clearly and convincingly established by petitioner.
Moreover, the Court is guided by the well-known principle that findings of facts of quasi-judicial agencies, like
the NLRC, are generally accorded great respect and will not be disturbed absent a showing that the findings
are unsubstantiated by evidence [St. Luke's Hospital v. NLRC, G.R. Nos. 54068 & 54142, August 30, 1982, 116
SCRA 240; Manila Mandarin Employees Union v. NLRC, G.R. No. 76989, September 29, 1987, 154 SCRA 368].
The NLRC's findings having support in the statements of GOMEZ and his witnesses [Record, pp. 11-20,] no
cogent reasons exist for the Court to digress from the settled rule.
Petitioner next contends that GOMEZ submitted the alleged statements of his witnesses when the case was
already submitted to the investigating fiscal for resolution without furnishing a copy to petitioner. Petitioner
thus was not able to rebut the same, and that in any case, these alleged witnesses cannot be expected to tell
the truth because they were the close friends of GOMEZ [Rollo, p. 7].
Petitioner's argument instead of buttressing its claim dooms it. Granting that petitioner was not furnished a
copy of the affidavits of GOMEZ's witnesses during the proceedings before the investigating fiscal, still, as
aforestated, the same affidavits were attached with the fiscal's resolution to GOMEZ's position paper, and
STARLITE had the opportunity to assail the same, as it in fact did in its supplemental position paper, attaching
the recanting affidavits of GOMEZ's own witnesses. STARLITE's allegation that it had no opportunity to rebut
said affidavits is thus unfounded.
Consequently, the theft charge not having been established, the dismissal of GOMEZ on the ground of loss of
trust and confidence cannot be sustained.
In view of the finding that GOMEZ was dismissed illegaly, STARLITE is obligated to reinstate GOMEZ to his
former position or one reasonably equivalent thereto without loss of seniority rights, and to pay backwages for
three years, without qualification or deduction [Mercury Drug v. CIR, G.R. No. L-23357, April 30, 1974, 56 SCRA
694; PAL, Inc. v. NLRC, G.R. No. 64809, November 29, 1983, 126 SCRA 223; Lepanto Consolidated Mining Co.
v. Olegario, G.R. No. 77437, June 23, 1988]. In the event such reinstatement is no longer feasible, or if GOMEZ
decides not to be reinstated, STARLITE shall pay him separation pay in lieu of reinstatement such separation
pay to be computed according to the formula used in the cases of: Santos v. National Labor Relations
Commission, G.R. No. 76721, September 21, 1987, 154 SCRA 116; Soriano v. National Labor Relations
Commission, G.R. No. 75510, October 27, 1987, 155 SCRA 124; and, Manila Midtown Commercial Corporation
v. Nuwhrain, G.R. No. L-57268, March 25, 1988, 159 SCRA 212.
WHEREFORE, the petition for certiorari is DISMISSED. The Decision of public respondent NLRC is hereby
AFFIRMED, subject to the modification that (1) petitioner shall pay private respondent GOMEZ three (3) years
backwages without qualification and deduction and (2) STARLITE shall reinstate GOMEZ to his former position
or one reasonably equivalent thereto or if such reinstatement is no longer feasible or should GOMEZ not accept
reinstatement, STARLITE shall pay him separation pay to be computed as above indicated. The Temporary
Restraining Order issued on 10 June 1987 is hereby LIFTED.
SO ORDERED.
Fernan C.J., Gutierrez, Jr., and Bidin, JJ., concur.
Feliciano, J., is on leave.
ii.
G.R. No. 84302 August 10, 1989
ANGELITO HERNANDEZ, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION (FIFTH DIVISION), HI-LINE TIMBER CORPORATION
and/or JAIME MATCHOKA respondents.
Armando San Antonio for petitioner.
Antonio B. Abad for respondents.

GANCAYCO, J.:
This petition for certiorari seeks to annul the decision of the Fifth Division of the National Labor Relations
Commission (NLRC), on the ground that the same was rendered with grave abuse of discretion amounting to
lack or in excess of jurisdiction. 1 The assailed decision is a reversal of the findings of Labor Arbiter Ireneo B.
Bernardo2that herein petitioner Angelito Hernandez was illegally dismissed from employment.

The facts leading to this petition are as follows:

On September 23,1985, petitioner Angelito Hernandez filed a complaint for illegal dismissal against private
respondents Hi-Line Timber Corporation (HI-LINE) and/or Jaime Matchoka docketed as Case No. 9-2409-85
with the San Fernando, Pampanga Regional Office of the then Ministry of Labor and Employment.
In his position paper, petitioner alleges that he was hired as a truck driver by respondent HI-LINE in 1952 until
1954 when he resigned. In 1979, he was rehired by HI-LINE to work as a driver and utility man, i.e., kiln, drier,
fixer, welder but was summarily dismissed from his employment on August 30,1985.

Petitioner, for his part, relates the events leading to his dismissal as follows:
On August 28, 1985 at about 8:30 A.M. complainant and Jose Mendoza, Jr. an employee assigned at the
respondent's of fire caused the vulcanizing of the tires of the ten-wheeler truck being operated by him in
hauling wood. At about 1:00 in the afternoon, Johnny Matchoka, a foreman, instructed some of his men to load
kiln, dried mayapis wood to the truck to be transported to Luzon Mahogany Corp. at Malinta, Valenzuela,
Metro Manila. (After the cargo was unloaded in Malinta), the truck was filled anew with wet mayapis wood but
after the same was loaded with four bundles, complainant noticed that one of its differential tires bulged out
and advised the foreman in charge thereat to limit his charge to five bundles only.

When he reached the company's compound at Wakas, Bocaue, Bulacan he found out that another differential
tire installed at the left rear was flat and called the attention of the foreman so that he can effect the necessary
repair of the same ... .
On August 28,1985, . . . he was summoned by Mr. Matchoka. . . to pay the two tires for P 7,000.00 each
otherwise he will be dismissed. That being the sole breadwinner for seven (7) persons . . .he pleaded that the
amount be just deducted from as salary regularly but the manager turned deaf ears, and told him to get his
13th month pay . . . plus his pay for the trip and salary unpaid. That he was required by the manager's secretary
Perseveranda Natividad to sign a document confessing that he replaced the tires with used ones and when he
refused, another paper was prepared stating that he voluntarily resigned and that he has been paid all his
benefits. 3

On the other hand, private respondents submit the following version as their statement of facts:
On 26 August 1985, his (complainant's) co-employee Danilo Vergara noticed something unusual in the
appearance of one tire on the rear left side of the ten-wheeler truck with plate No. NJE-216 (T-Pil. '85) assigned
to the complainant. Vergara saw a smaller and older tire attached to the differential. He found out also that its
serial no. was already erased. Vergara reported the matter to the management.. . .
On 27 August 1985, complainant was given a letter by management to appear on 30 August 1985 at 2:00 PM at
the office of the manager to explain his side and hear the witnesses against him. Complainant refused to receive
and acknowledge this letter.

Prior thereto, the manager confronted the complainant with the report, at first, the latter denied the charge
but later on admitted his guilt and requested that the amount of the tire be deducted from his salary.

On 29 August 1985, the complainant requested the corporation to pay him incentive eave pay and 13th month
pay as he was leaving the company already. . . .
Complainant did not report for duty anymore. He also intentionally did not appear anymore at the hearing
scheduled by respondent's manager in the latter's office on 30 August 1985 at 2:00 PM. It was taken as a waiver
of his right to such investigation.
Thereafter, in a letter which the complainant likewise refused to receive and acknowledge, his services was
severed. . . .
On 30 August 1985, the matter was reported to the Bocaue Police Station . . ..
As a consequence, Criminal Case No. 6924 for Qualified Theft was filed by the Station Commander with the
Municipal Trial Court of Bocaue, Bulacan. 4
In assailing the decision of the NLRC, petitioner argues that there is no substantial evidence to support the
conclusion reached by the said Commission. Petitioner contends that the decision is anchored mainly on
speculations and suspicions.5 The issue thus raised is whether or not there is substantial evidence to warrant
the dismissal of petitioner from employment without infringing his right to security of tenure.

We are inclined to rule in favor of petitioner.

A careful review of the decision rendered by the NLRC, readily discloses that in upholding the legality of the
dismissal of herein petitioner, the Commission relied on the following:
(a) the criminal complaint for qualified theft filed by private respondents against petitioner;6
(b) the affidavits executed by Jose Mendoza, Jr., Danilo Vergara and Perseveranda Natividad all employees of
respondent HI-LINE; 7 plus
(c) the fact that petitioner had easy access to the tire loss since the ten-wheeler truck to which the same was
attached was assigned to him. 8
On the basis of the foregoing, the NLRC concluded that private respondent HI-LINE has a valid reason to
terminate petitioner's employment on the ground of breach of trust and/or loss of confidence. Thus, it ruled:

Loss of confidence as a ground for dismiss does not entail proof beyond reasonable doubt of the employee's
misconduct. It is enough that there be some basis for such loss of confidence or that the employer has
reasonable grounds to believe, if not to entertain the moral conviction, that the employee concerned is
responsible for the misconduct and that the nature of his participation therein rendered am absolutely
unworthy of the trust and confidence demanded by his position. 9
Loss of confidence" constitutes a "just cause" for terminating an employer-employee relationship. However, in
the case at bar, it is Our opinion that private-respondent was not able to establish a sufficient basis upon which
"loss of confidence" can be sustained. As adverted to earlier, the decision of the NLRC is premised heavily on
the affidavits executed by three of its employees attesting to the fact of loss or replacement of the rear left tire
of the ten-wheeler truck assigned to petitioner. Aside from these affidavits and the criminal complaint for
qualified theft-filed almost two months after petitioner had instituted a complaint before the Regional Office
of the NLRC for illegal dismissal-no other relevant evidence was presented by private respondents reasonably
acceptable or adequate enough to support the conclusion that petitioner probably caused the unauthorized
replacement of the tire in question. Even the supposed admission of guilt made by the accused is of doubtful
veracity. A reading of petitioner's position paper shows that there is a probability that petitioner might have
been forced by circumstances to settle for a compromise. Petitioner is the sole breadwinner of seven persons
(six children plus his wife) and the settlement is more acceptable than to lose his job totally. 10

The burden of proof rests upon the employer that the dismissal is for cause, and the failure of the employer to
do so would mean that the dismissal is not justified. 11
The record is bare of any showing positively linking petitioner to the alleged theft committed. The affidavits
executed by private respondents' employees failed to establish a reasonable basis to attribute the loss directly
upon petitioner. The affiants attested only to the fact of the unauthorized replacement of a tire attached to the
truck assigned to petitioner. This is an accepted and established fact, but to positively link petitioner to the
unauthorized replacement on this fact alone is highly speculative. Surely, this would be negating the special
emphasis laid down by the Constitution on the protection of working men. 12 Thus, this Court has ruled that
"[t]he constitutional guaranty of security of tenure is of paramount importance. It is a right so highly ranked
that it should not lightly be denied on conjectures, surmises or speculations. 13

Additionally, there is much to be desired in the investigation supposedly conducted by Jose Mendoza, Jr.,
checker/tool keeper of HI-LINE. The investigation did not establish or help in any manner in the proper
determination of the alleged involvement of petitioner. Private respondents did not even present evidence on
the nature and extent of the investigation supposedly conducted. If at all, private respondents relied only on
what they alleged as the deliberate failure of petitioner to attend the confrontation and investigation they
conducted on August 30, 1985, four days after the incident. 14 But even this assertion will fail in the absence of
conclusive proof that petitioner was, in fact, notified of the said proceedings.

Thus, the conclusion and eventual decision of HI-LINE finding petitioner guilty of theft and terminating his
employment therefrom are erroneous.

For dismissal for loss of confidence to be warranted, there should naturally be some basis therefor. 15 Stated
elsewise, unsupported by sufficient proof, "loss of confidence' is without basis and may not be successfully
invoked as a ground for dismissal.
Finally, in the words of this Court:

Loss of confidence" as a ground for dismissal has never been intended to afford an occasion for abuse by the
employer of its prerogative, as it can easily be subject to abuse because of its subjective nature. 16
Inasmuch as the charge against petitioner has not been substantiated, the inevitable result is that this Court
must declare the dismissal as unwarranted and, therefore, illegal. Considering, however, that the relationship
between petitioner and private respondent has been severely strained by reason of their respective
imputations of bad faith against each other, this Court believes that to order reinstatement at this juncture will
no longer serve any prudent purpose.
WHEREFORE, the petition is GRANTED. The questioned decision of the National Labor Relations Commission
dated April 21, 1988 is hereby SET ASIDE, while the decision of the labor arbiter dated October 26,1987 is
hereby affirmed with the modification that petitioner be paid backwages not exceeding three (3) years without
any deduction and that petitioner be paid his separation pay in the amount of one (1) month for every year of
service. No pronouncement as to costs.
SO ORDERED.
Narvasa, Cruz, Griñ;o-Aquino and Medialdea, JJ., concur.
G.R. No. 73735 August 31, 1987
WARLITO PIEDAD, petitioner
vs.
LANAO DEL NORTE ELECTRIC COOPERATIVE, INC., (LANECO). and its General Manager, RUPERTO O.
LASPINAS, respondents.

GUTIERREZ, JR., J.:

This is a petition to set aside the decision of the National Labor Relations Commission (NLRC) promulgated on
November 15, 1985, which reversed the decision of Executive Labor Arbiter Ildefonso G. Agbuya and dismissed
the petitioner's complaint. The legality of the petitioner's dismissal is at issue.

The petitioner was employed with the respondent company from December 5, 1974 up to January 4, 1984, first
as a house wiring estimator, then as a bill collector.

On December 20, 1983, Mr. Piedad was found short of P300.00 in his collections in an audit conducted by Sycip,
Gorres and Velayo, a private auditing firm. On January 4, 1984, he was suspended from his work on account of
such shortage. On February 1, 1984 his services were finally terminated by the private respondents.

On February 10, 1984, the petitioner filed a complaint with the Ministry of Labor and Employment in Iligan City
for "Illegal Suspension and Dismissal with Prayers for Reinstatement, Payment of Backwages, Allowances,
Benefits, and Damages. "

On February 22, 1985, Executive Labor Arbiter Ildefonso G. Agbuya of the Regional Arbitration Branch No. X
of the National Labor Relations Commission in Cagayan de Oro City, rendered a decision on the basis of the
respective position papers and other supporting proofs submitted by the parties. 'The dispositive portion of his
decision reads:

WHEREFORE, judgment is hereby entered ordering Respondent Lanao del Norte Electric Cooperative, Inc.,
(LANECO for short) and Atty. Ruperto Las Pinas, General Manager to immediately reinstate Complainant
Warlito Piedad to his former position without loss of seniority right with backwages and all benefits
appurtenant to his position from the time he was illegally dismissed until his reinstatement.
All the other issues are dismissed for lack of merit. (p. 28, Rollo)
On April 29, 1985, the private respondent appealed the aforequoted ruling.
On November 15, 1985, public respondent NLRC reversed the Labor Arbiter's decision and dismissed the
petitioner's complaint for lack of merit.,

Hence, this petition.

Very simply, the NLRC in its decision states the crux of the matter to be "whether or not complainant herein
got short of his electric bill collections on December 20, 1983 to warrant his dismissal."
The records show that on December 20, 1983, a regular audit of respondent company was made by the firm's
auditor. As part of such auditing procedures, a cash count of remittances of the company's bill collectors was
conducted. The count revealed a shortage in the petitioner's cash collections in the amount of P299.99 which
shortage was acknowledged by petitioner. Such fact was brought to the attention of management and
reflected in the auditor's report with a statement that "the above shortage was explained by the Collector as
used by him." The report was certified to and signed by the petitioner.

Sometime later in the same day, the petitioner remitted the amount of P299.99 to the firm's cashier/teller
Lorlesela A. Sanchez, who issued Official Receipt No. 011862 for the amount.
Thereafter, on January 4, 1984, the petitioner was suspended and required to show cause why his employment
should not be terminated. The order of suspension was then followed by an order of termination, dated
February 1, 1984, on the ground of petitioner's "failure to show cause within a reasonable period why you
should not be terminated for incurring a cash shortage of P300.00 ... "
The public respondent, in its decision, summarizes the contentions of both parties as follows:
... the alleged cash shortage discovered and reported by a certain Mr. Romeo L. Bato controverted by the
Official Receipts N o. 011861 and 011862 all dated December 20, 1983. These are telling evidences that
Complainant was not short in his December, 1983 Collections. To bolster Complainant's defenses he submitted
Affidavit of Lorlesela A. Sanchez admitting that it was she who received Complainant's remitted collections
and who in turn issued the necessary receipts duly marked as Annexes "A" and "B" to Complainant's position.
In fine, we hold the dismissal of Complainant without just and valid cause.

Taking exception to the above findings, respondent averred in its appeal that:
At this juncture, it is very vital and significant to mention that the Honorable Executive Labor Arbiter lost sight
of the fact that the kind of Official Receipts marked as Annexes "A" and "B" in the case at bar is neither evidence
for shortages nor basis of establishing accountability or accountable personnel particularly collections for the
Respondent-Appellant but rather it is an evidence of remittance of any collection or money. In other words,
possession or issuance of such kind of Official Receipts for the Respondent-Appellant thru Lorlesela Alquizola
does not mean in any way that Warlito Piedad did not incur shortages in the cash count examination conducted
on December 20,1983 by the SGV and Co., auditor.

Respondent went on to elucidate its stand:

To clarify matters on shortages, it is necessary to state that in order to establish collector's shortage, our auditor
conducts a cash count examination by requiring the collector to produce all his total collection and count the
same. The total actual cash counted is recorded and constitute his total collection. The auditor/examiner
proceeds to establish the collector's accountability by adding all the paid official electric bill receipts (DEBRS)
in his custody or possession. By the way, the DEBR is an official receipt entrusted by the Bill Controller to the
collector which is entirely different from the Official Receipt (OR) entrusted to cashier or teller or any person
authorized to issue the same. The total sum of all the paid Official Electric Bill Receipt constitutes the whole
accountability of the collector. The examiner then proceeds to compare the actual total cash counted and
recorded to the total sum of paid DEBR or accountability. Total cash counted and recorded should equal to the
sum of paid DEBR If the cash is less than the paid DEBR then shortage is clearly being establish. (sic) (pp. 20-
21, Rollo)
From the foregoing, it is clear that a shortage was indeed incurred by the petitioner. The total cash remitted by
petitioner Piedad was less than the paid electric bill receipts evidencing the collector's total liability. The
auditor's report "certified to" and signed by the petitioner, states: "The above shortage was explained by the
Collector as usedby him. " The petitioner neither refutes nor contests this fact. The failure to deny the same
becomes an admission. Qui non negat fatetur Subsequent remittance by the petitioner of the sum in question
can no longer erase as fact the shortage already incurred.

The petitioner argues, however, that in view of the absence of loss or damage caused to the respondent
cooperative, by reason of the immediate return of the amount in question, the petitioner's dismissal does not
appear warranted under the circumstances. Mr. Piedad cites his "nine (9) years of unblemished service" marked
by awards as "Collector of the Year" for three consecutive years, 1975, 1976 and 1977.

Perhaps, viewed by itself as an isolated incident in the petitioner's service, a shortage in the amount of P299.99,
appropriated then immediately returned by the erring employee, does not warrant so severe a penalty as
dismissal. However, the shortage is not an isolated circumstance in the petitioner's career with the cooperative.
Unrebutted evidence on record shows that the petitioner had been remiss in his duties as collector. He had
been warned and reprimanded for not visiting all points in his route, inefficiency, insufficient collections, and
cash shortage in the past. (pp. 104-106, Rollo). As a matter of fact, in a "frank, honest and determined"
admission against interest, the petitioner in a written response to Memorandum Order GM No. 07283, dated
September 12, 1983, reprimanding him for shortage of collection, essayed to explain the matter and we quote:
l. Whenever and in any means I remain a collector, I cannot and can never guarantee that I cannot use some
amount of my collection considering the fact that surrounds us-the economic crisis thus putting me liable for
policy No. 37.
2. I feel forced to lax in my work due to the system manipulated by the billing division, too much bureaucracy,
thus putting collectors away from reporting exact time in the field or area of responsibility.
3. I feel so nervous to work for the very obvious reason determined by the memorandum for the second offense
of which I am liable thru accident or just a mere oversight, especially changes of which collectors feel but natural
between collection, yet putting us much liability for Policy Bulletin No. 37. (p. 107, Rollo)
xxx xxx xxx
For the above reason, the petitioner was requesting a transfer. However, in an act of generosity, the respondent
cooperative chose to give him a clean slate and maintained him as collector.
Taking the employer's reaction, as a signal that his explanations were sufficient to justify his acts, the petitioner
duplicated the infraction for which his services were finally terminated.
Clearly, it was neither without rhyme nor reason that the petitioner was dismissed from employment. His acts
need not result in material damage or prejudice before his dismissal on grounds of loss of confidence may be
effected. Being charged with the handling of company funds, the petitioner's position, though generally
described as menial, is, nonetheless, a position of trust and confidence. No company can afford to have
dishonest bin collectors.
Loss of confidence is established as a valid ground for the dismissal of an employee. The law does not require
proof beyond reasonable doubt of the employee's misconduct to invoke such a justification. It is sufficient that
there is some basis for the loss of trust or that the employer has reasonable grounds to believe that the
employee is responsible for the misconduct and his participation therein renders him unworthy 6f the trust and
confidence demanded of his position (Valladolid v. Inciong, 121 SCRA 2053; see also Dole Philippines, Inc. v.
National Labor Relations Commission, 123 SCRA 673; and San Miguel Corporation v. National Labor Relations
Commission, 115 SCRA 329).

Indeed, an employer may dismiss an employee for breach of trust in the handling of funds inspite of his having
been acquitted in the course of a criminal prosecution. Conviction for a crime involving the loss of such funds is
not necessary before the employee may be dismissed. (San Miguel Corporation v. National Labor Relations
Commission, 128 SCRA 180). There is more reason for dismissal where the acts of misconduct and willfull
breach of trust are repeatedly comitted by an employee (Philippine Long Distance Telephone v. National Labor
Relations Commission, 122 SCRA 618).
Fitness for continued employment cannot be compartmentalized into tight little cubicles of aspects of
character, conduct, and ability separate and independent of each other. A series of irregularities when put
together may constitute serious misconduct, which under Article 283 of the Labor Code, is a just cause for
dismissal (National Service Corporation v. Leogardo, Jr., 130 SCRA 502).

The precedents on the issue before us are clear. Dismissal of a dishonest employee is to the best interest not
only of management but also of labor (International Hardwood and Veneer Co. of the Phils. v. Leogardo, Jr.,
117 SCRA 967). As a measure of self-protection against acts inimical to its interest, a company has the right to
dismiss its erring employees (Dole Phils. Inc. v. National Labor Relations Commission, supra). An employer
cannot be compelled to continue in employment an employee guilty of acts inimical to its interest, justifying
loss of confidence in him (Internati•nal Hardwood and Veneer Co., of the Phils. v. Leogardo, Jr., supra. National
Service Corporation v. Leogardo, Jr. supra. Engineering Equipment, Inc. v. National Labor Relations
Commission, supra). The law does not impose unjust situations on either labor or management.

In a further attempt to support his case, the petitioner presents as evidence the affidavits of Lorlesela J.
Alquizola, (Now Lorlesela A. Sanchez) posting clerk and teller and Eddie Sabayan, bill collector. These
documents instead bolster the respondent's cause. Unrebutted evidence presented by respondent LANECO
effectively impeach the affidavits' credibility and reveal a concerted scheme by the respondent's employees of
appropriating company funds for personal use and covering up the same until said amounts are paid for or
returned. The respondent cooperative's Annex "13" Memorandum Order GM No. 07183 dated September 12,
1983 to Lorlesela Alquizola requiring a written explanation for cash shortage incurred by her, Annex "14"
(Alquizola's Answer to Memorandum GM No. 07183), and Annex "15" (Memorandum Order No. GM No. 07683
dated September 2,1983 to Alquizola warning her not to commit the same offense in the future) are telling
evidences of the situation with which respondent cooperative had to cope. We quote Annex "14 " in full:
In compliance with memorandum order #07183 dated 12 September 1983, I am submitting my explanation
where my alleged offenses are concerned.

1. That my cash shortage of P256.81 was justified by those vales of my co-employees specifically those of
collectors. I was always caught between two hot fires during remittances of collectors because oftentimes
there were always shortages in their collections. Inasmuch as I have tried to follow closely your order not to
grant personal advances to my co- employees but I just could not refuse them for I believe they could be
reimbursed the following payday.
2. I also believe that if I would not grant petty cash to those collectors in lieu of their cash shortages, and since
their collection would remain in their hands, their sh shortage would accumulate and again, it would be another
headache on the part of the management. But with the present system implemented after the audit, these
problems are already minimized.
3. Prior to the August 3-31, 1983 audit, our practice is to issue official receipts for the day's collections the next
day or the next working day. I have not received any memorandum or office order requiring me to issue official
receipts for the day's collections on that very same day.
4. According to my file in Daily Collection Report, the collections of August 29, 1983 amounting to P1,499.38
was deposited on the very next day, August 30, 1983. Mrs. Chenlen Salimbangon's collection on August 27,
Saturday, amounting to P5,151.78 was deposited on that very day.
5. Petty cash amounting to P69.80 was taken in personal money and I was reimbursed after my petty cash
replenishment.
6. My previous cash shortage would have been paid immediately from my personal money but I was not able
to withdraw from personal account for I was not able to bring my savings passbook that day. It was the advice
of the Office Manager at that time that I pay my shortage at that very day. I was able to pay Mrs. Salimbangon
on the very next day.
I hope for your kindest consideration on aforementioned situation.
Very sincerely yours,
(SGD.) LORLESELA J. ALQUIZOLA
(p. 115, Rollo)
Anent the alleged lack of clearance from the Ministry of Labor and Employment to terminate the petitioner,
such a technicality cannot be allowed at this time to prevent the petitioner's dismissal in the face of strong and
compelling reasons to warrant the same. The National Labor Relations Commission, the arbitration branch of
the Ministry of Labor and Employment, has granted the clearance to terminate the petitioner's employment
and we concur. It is important to take note of the intent behind such provision of the Labor Code. It was
designed to insure that the employer's prerogative to dismiss or lay-off an employee is exercised without abuse
of discretion or arbitrariness. The proceedings before the Labor Arbiter and the National Labor Relations
Commission have upheld this guarantee. The petitioner's rights have been effectively safeguarded. We have
given him no less, even as we uphold the private respondent's cause.
There has been no denial of due process. Generously, respondent LANECO has given the petitioner the benefit
of the doubt, allowing him several opportunities to correct himself and to prove his worth. Sadly, the records
show that the petitioner failed. We can do no more for him.
WHEREFORE in view of the foregoing, the petition is DISMISSED for lack of merit. The decision appealed from
is hereby AFFIRMED.
SO ORDERED.
Fernan, Feliciano, Bidin and Cortes, JJ., concur.

Article 298 (283) – Closure of Establishments and Reduction of Personnel

I.

G.R. No. L-2028 April 28, 1949

PHILIPPINE SHEET METAL WORKERS' UNION (CLO), petitioner,
vs.
THE COURT OF INDUSTRIAL RELATIONS, PHILIPPINE CAN COMPANY, and LIBERAL LABOR
UNION,respondents.
Lazatin & Caballero for petitioners.
Juan R. Maralit for respondent Court of Industrial Relations.
REYES, J.:
This is a petition for certiorari to review an order of the Court of Industrial Relations on the ground that the
same was rendered in excess of jurisdiction and with grave abuse of discretion.
The said order was issued in case No. 37-V (2) of said court involving an industrial dispute between the
respondent company (a corporation engaged in the manufacture of tin plates, aluminum sheets, etc.) and its
laborers some of whom belong to the Philippine Sheet Metal Workers' Union (CLO) and some to the Liberal
Labor Union. The dispute was over certain demands made upon the company by the laborers, one of the
demands (No. 13th in the list) being for the recall of eleven workers who had been laid off. Temporarily taken
back on certain conditions pending final determination of the controversy, these eleven workers were in the
end ordered retained in the decision handed down by the court on February 19, 1947, which disposed of this
part of the case as follows:
The petitioner tried to prove that the 11 laborers were laid off by the respondent company due to their union
activities. As a matter of fact, of the 11 workers laid off, there are included officers and members of the
petitioning union, namely, the president, Pablo Sicat; the vice-president, Generoso Villanueva; and the
secretary, Marcos Eugenio. The respondent company proved that the laying off of these eleven workers was
due to lack of materials. With regard to this contention, the examining division of this Court was ordered to
investigate the availability of materials used in connection with the work performed by these eleven laborers,
the volume of business and the work performed by these workers during Sundays, legal holidays, and night
shift.

After considering the evidence, both testimonial and documentary and the response of the chief of the
examining division of this Court, we are of the opinion that there was really lack of materials at the time of the
laying off of these 11 laborers. However, there is also sufficient evidence to the effect that the respondent
company, in reducing the number of its personnel, selected workers that belonged to the petitioning union.
This is discrimination and the same can not be tolerated. The right to reduce personnel must not be abused and
must not be taken advantage of to dismiss laborers with whom the management is displeased due to their
union activities. In the present case, it is the opinion of the Court that the management of the company selected
these 11 workers because they organized a labor union. Although the company has the right to reduce its
personnel, the said company erred in abusing this right. It is, therefore, ordered that these 11 workers be
retained in the respondent company until the occurrence of facts that may give rise to a just cause of their
laying off or dismissal, or there is evidence of sufficient weight to convince the Court that their conduct is not
satisfactory. As a consequence, the company is ordered to pay their corresponding wages from the date of
their lay-off to the date of their temporary read-mission in the company.

As a separate incident from the above, the company, on February 10, 1947, that is, nine days before the decision
came down, filed a motion in the case, asking for authority to lay off at least 15 workers in its can department
on the ground that the installation and operation of nine new labor-saving machines in said department had
rendered the services of the said workers unnecessary. The Philippine Sheet Metal Workers' Union (CLO)
opposed the motion, alleging that there was more than sufficient work in the company to keep all its workers
busy, and, on the further allegation that the company had hired without the authority of the courts some ten
new laborers pending resolution of the principal case, it in turn asked that the company be declared guilty of
contempt of court. About a year later, the court, after due hearing and investigation, rendered an order, dated
February 5, 1948, granting the company's motion to lay off 15 workers and denied the petition to have the
company declared in contempt of court. This order is the one now before us for review.

The fifteen laborers slated for dismissal had each of them a bad record according to the list submitted by the
company, which reads as follows:
1. Pablo Sicat, coppersmith, por haber abandonado por mucho tiempo su trabajo;
2. Manuel Pajarillo, making the handles of the cans, por frecuentes ausencias;
3. Marcos Eugenio, solderer, por haber estado saliendo a menudo en horas de trabajo y dejado el servicio sin
causa razonable ni permiso;
4. Miguel Magcalin, solderer, por haber abandonado definitivamente el trabajo;
5. Juanito Villanueva, solderer, por ineficiencia;
6. Melitona Basilio, solderer, por haber estado saliendo a menudo en horas de trabajo sin causa razonable;
7. Felicidad Villanueva, painting rubber, por ineficiencia;
8. Conchita Basilio, painting rubber, por ser perezosa y salidas a menudo en horas de trabajo;
9. Soledad del Rosario, painting rubber, por no tener interes en el trabajo y salidas a menudo en horas de labor;
10. Fortunata Angelo, painting rubber, por ser ineficiente y desobediente;
11. Segundina San Juan, painting rubber, por ineficiencia e inobediencia; todos miembros de la union
recurrente;
12. Fermino Tiozon, can maker, por ser perezoso;
13. Genaro Galvez, general helper, por ser perezoso;
14. Leonardo Soliman, operator-messenger, por ineficiencia, por haber estado llegando tarde a la fabrica y
durmiendo en horas de trabajo; miembros de la union terceristas; y
15. Ho Ching Sing, laborer, por haber abandonado el trabajo sin previa notificacion; no unionista.
And the order complained of is based upon the following conclusions of fact of the court below:
1. La compania tiene instalada y en operacion en su fabrica, ademas de las maquinas antiguas, trece (13) nuevas
unidades de 'labor saving machines', entre similares y enteramente diferentes, que llegaron de los Estados
Unidos de America en distintas fechas, desde el agosto de 1946 hasta el junio de 1947.
2. Dichas nuevas maquinas ahorran obra de mano y tiempo, hacen mas faciles y rapidos los trabajos y
aumentan el volumen de la produccion.
3. En su fabrica la compania tiene ochenta y cinco (85) obreros, y el propuesto despido de los quince (15)
obreros, entre hombres y mujeres, se debe principalmente a que sus servicios son ya innecesarios porque sus
trabajos han sido absorbidos por las nuevas maquinas.
4. En la seleccion de dichos quince (15) obreros la compania, mediante un grupo o comite de tres (3) de sus
funcionarios y empleados de confianza, con el gerente de la misma a la cabeza, se baso en los servicios y la
conducta de cada obrero.
5. El comite de seleccion no se guio por la afiliacion de los obreros a ninguna de las dos uniones obreras
existentes en el seno de la fabrica, y solamente tuvo en cuenta al verificar la seleccion estos (a) Abandono del
trabajo, sin aviso o justa causa; (b) Frecuentes ausencias injustificadas en la (el) servicio; (c) Salidas a menudo
durante las horas de labor, sin causa razonable; y (d) ineficiencia, negligencia o falta de interes en el
cumplimiento del deber.
6. Lot obreros cuyo despido esta propuesto por la compania han incurrido en las faltas que se atribuyen por la
misma a cada uno de ellos.
7. La compañia no ha aceptado nuevos obreros y si ha hecho trabajar algunas veces a ciertos obreros o
mecanicos suyos en exceso de las ocho horas, ha sido en interes de la eficiencia o por exigencias del servicio y
no por haber tenido mucho volumen de trabajo en su fabrica.
Indudablemente, la compañia abrigando el deseo laudable de desarrollar su negocio y aumentar su produccion,
ha introducido importantes cambios y mejoras en la elaboracion de sus productos, recurriendo al empleo de
maquinarias modernas para atender debidamente y satisfacer mejor las demandas del publico consumidor. El
proposito de la compania merece aplausos, el medio de que se vale para realizarlo es digno de encomio y su
objetivo significa desenvolvimiento progresivo en la solucion de los problemas industriales para el beneficio de
la comunidad. Todo paso o medida que tienda a favorecer el interes publico y con miras a dar impulso a la
mecanizacion de las industrias, contribuye a la mejora de la economia y la ansiada rehabilitacion del pais; y por
lo tanto, no debe ser obstruido sino, por el contrario, fomentado.
It appearing that there has been fair hearing and that there is ample evidence to support the conclusions of fact
of the lower court, we would have no grounds for interfering with those conclusions. And these make it clear
that there was real justification for reducing the number of workers in respondent company's factory, such a
measure having been made necessary by the introduction of machinery in the manufacture of its products, and
that the company cannot be charged with discrimination in recommendating the dismissal of the fifteen
laborers named in the above list since their selection was made by a committee composed of both officers and
employees who took no account of the laborers' affiliation to the unions and only considered their proven
record.
There can be no question as to the right of the manufacturer to use new labor-saying devices with a view to
effecting more economy and efficiency in its method of production. As the lower court observes in its order,
No se puede detener el curso de los tiempos. Si se quiere sobrevivir y prosperar, la unica alternativa es
adaptarse a las exigencias del presente mundo moderno. No se puede cerrar los ojos a la realidad. No se puede
depender de metodos antiguos, hay que recurrir a metodos mas eficientes y avanzados. La produccion no solo
debe ser de elevada calidad sino ilimitada y su costo al alcance de todos. Debe seguirse el ejemplo de otros
paises.

The right to reduce personnel should, of course, not be abused. It should not be made a pretext for easing out
laborers on account of their union activities. But neither should it be denied when it is shows that they are not
discharging their duties in a manner consistent with good discipline and the efficient operation of an industrial
enterprise. We, therefore, approve of the following pronouncement of the court below:

La compañia tiene derecho de despedir a sus empleados u obreros. Si bien este derecho esta sujeto a la
regulacion del Estado, en su normal ejercicio no se inmiscuye la ley. El patrono paga el jornal de sus obreros por
su trabajo, y es logico y justo que el mismo tenga derecho a esperar de los mismos lealtad y fiel cumplimiento
de sus obligaciones. No es el proposito de la ley obligar al principal a retener en su servicio a un obrero cuando
no recibe de este trabajo adecuado, deligencia (diligencia) y buen comportamiento, o cuando su continuacion
en el empleo es claramente opuesta a los intereses de su patrono, porque la ley al proteger los derechos del
obrero no autoriza la opresion ni la destruccion del principal.
The petitioner contends that the order complained of was made with grave abuse of discretion and in excess
of jurisdiction in that it is contrary to the pronouncement made by the lower court in its decision in the main
case where it disapproved of the dismissal of eleven workers "with whom the management is displeased due
to their union activities." It appears, however, that the pronouncement was made upon a distinct set of facts,
which are different from those found by the court in connection with the present incident, and that very
decision, in ordering the reinstatement of the eleven laborers, qualifies the order by saying that those laborers
are to be retained only "until the occurrence of facts that may give rise to a just cause of their laying off or
dismissal, or there is evidence of sufficient weight to convince the Court that their conduct is not satisfactory."
After a careful review of the record, we find that the Court of Industrial Relations has neither exceeded its
jurisdiction nor committed grave abuse of discretion in rendering the order complained of. The petition for
certiorari is, therefore, denied, but without costs against the petitioner for the reasons stated in its motion to
litigate as pauper.
Moran, C.J., Paras, Feria, Pablo, Perfecto, Bengzon, Briones, Tuason and Montemayor, JJ., concur.

FIRST DIVISION
[G.R. No. 120009. September 13, 2001]
DOLE PHILIPPINES, INC., THOMAS W. OLIVER, MANUEL LOPEZ, ELIEZER TANLAPCO and JOEL
BATISLAONG, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (FIFTH DIVISION), JUAN A.
BARRANCO, ADELA DE LARA, ZENAIDA V. VALLAGANAS, MAXIMO A. CRUZ, TERESITA A. PELAEZ,
ADELAIDA C. PENIG, ROBERTO P. LA-AB, JESUS B. MARITORIA, LILIA B. BALUCANAG, PANFILO
PUEBLA, DELIA B. PUEBLA, RODOLFO ANTONIO, ROGELIO E. DIZON, DEMOCRITO LLOREN, FELIZA
PERALES, EULALIO TEJERO, SILVESTRE PERALES, FRANCISCO ACEDO, DEMETRIO ASUQUE,
LEONIDES ABUSEJO, and AIDA ARPILLEDA, respondents.
DECISION
KAPUNAN, J.:

At issue in this case is the validity of petitioner companys redundancy program pursuant to which the
respondent employees were dismissed.
Petitioner Dole Philippines, Inc., is a corporation organized and existing under Philippine laws. It is engaged in
the business of growing, canning, processing and manufacturing pineapples and other allied products. The
other petitioners were Dole corporate officers at the time the cases were instituted.[1]
Private respondents were Doles employees of different ranks and positions.
The petition alleges that in 1990 and 1991, Dole carried out a massive manpower reduction and restructuring
program aimed at reducing the total workforce and the number of positions in the companys table of
organization. Dole intimates that the 1990-1991 reduction was a continuation of previous efforts to restructure
its organization. Previously, in 1982, Dole reduced its manpower by 509 workers but prolonged collective
bargaining negotiations, which ended in 1990, prevented the company from proceeding with its
restructuring.[2]

Among the factors considered by the company in undertaking the reduction program was the high
absenteeism rate, which in 1989 accounted for 16% of total man hours. The high absenteeism rate translated
to higher paid sick leaves, higher operating costs for medical facilities, and higher transportation costs due to
under-filled and late hauls.[3] Dole also cites the exacerbation of operating cost problems due to factors
beyond [its] control, i.e., the Gulf War, oil price increases, mandated wage increases, the 9% import levy, power
rate hikes, [and] increased land rentals, existing at that time. Furthermore, the bloody December 1989 coup
detat shook investor confidence and put in doubt the continued economic progress of the country.[4]

Pursuant to its restructuring efforts, Dole abolished the positions of foremen, bargaining capataces and
foreladies. Employees occupying these positions were either promoted or were dismissed on grounds of
redundancy.[5]

To address the surplus of manpower relative to its operations, Dole also decided to reduce the number of
employees company-wide.[6] In 1990, the company offered a Special Voluntary Resignation (SVR) program of
which many employees, including a number of private respondents, availed.
Upon approval of the applications, notices of termination[7] were sent to the employees who availed of the
SVR. These employees received the following benefits under the redundancy program:
1. 40 days for every year of service;
2. cash conversion of any earned/unused and accrued vacation leave credits;
3. proportionate 13th month pay;
4. one month extra pay in lieu of one month prior written notice; and
5. relocation assistance of P3,000.00[8]
After receiving the benefits, said employee-applicants executed a Release[9] stating that the employee had no
claims against Dole in connection with his or her employment. Subsequently, the dismissed employees
executed another Release of Claim[10] in favor of Dole.
A total of 2,357 hourly and monthly salaried employees were separated from Dole during this period.[11]
After assessing the outcome of the SVR, Dole found that it could still do with lesser employees, and proceeded
to dismiss more of them in March 1991.[12] Separated were employees who applied for the SVR in 1990 but
whose applications were still pending as well as those determined by the Company to be redundant owing to
excess manpower of a surplus of employees relative to the jobs needed to be accomplished.[13] The employees
dismissed during this second phase totaled 435,[14] all of whom received the following benefits:
1. 40 days for every year of service;
2. Cash conversion of accrued vacation leave credits;
3. Proportionate 13th month pay;
4. One month extra pay; and
5. Relocation assistance of P3,000.00.[15]
Overall, 2,792 employees were separated under the SVR Program. A total of P298,199,000.00 in benefits were
paid by Dole to the separated employees.[16]
On October 22, 1991, a Complaint[17] for illegal dismissal, docketed as RAB-11-10-50401-91, was filed against
petitioners before the Sub-Regional Arbitration Branch of the National Labor Relations Commission in General
Santos City. Named as complainants in the caption of the complaint were Adela L. De Lara, Roberto Laab, Sr.,
Teresita Pelaez, Jesus Maritoria, Maximo Cruz, Arcadio Gomera, Adelaida Penig and others.[18]
On September 18, 1992, another Complaint[19] against Dole, docketed as RAB-11-09-40318-92, was also filed
before the Sub-Regional Arbitration of General Santos City. The caption of the complaint named Lilia
Balucanag, Democrito Lloren, Rogelio Dizon, Felisa Perales, Selvestra Perales, Eulalio Tejero, Panfilo Puebla,
Delia Puebla, Florencia Pedroso, Rodulfo Antonio, and others as complainants. The complaint contained
similar allegations as the complaint in RAB-11-09-50318-92.
RAB-11-10-50401-91 and RAB-11-09-50318-92 were subsequently consolidated. On 5 November 1993, Labor
Arbiter Amado M. Solano rendered a decision dismissing the complaints for lack of merit.The dispositive
portion of the decision reads:
WHEREFORE, IN THE LIGHT OF ALL THE FOREGOING, judgment is hereby rendered.
1. Declaring the dismissal of the above-named complainants in the instant cases, as valid and lawful;
2. The claims for reinstatement with full backwages, damages and attorneys fees are hereby dismissed for lack
of merit.
SO ORDERED.[20]

Private respondents appealed to the National Labor Relations Commission (NLRC). On 29 November 1994, the
NLRC issued a Resolution reversing the decision of the Labor Arbiter as follows:
WHEREFORE, the decision appealed from is hereby Reversed and Set Aside and a new one entered declaring
the dismissal of complainants illegal. Accordingly, respondent company is hereby ordered to reinstate herein
complainants to their respective former positions or equivalent positions without loss of seniority rights and to
pay complainants backwages effective from the date of their termination up to the time they are actually
reinstated but not exceeding three (3) years, less the amounts they received as separation pay.

In addition, respondent company is ordered to pay complainants moral and exemplary damages fixed in the
sum of P15,000.00 and P10,000.00 each, respectively and attorneys fees equivalent to ten (10%) percent of the
aggregate monetary award, subject to computation by the Arbitration Branch of origin at the execution stage.
SO ORDERED.[21]

Petitioners filed a motion for reconsideration but this was denied by the NLRC in an Order[22] issued on
January 30, 1995.

Private respondents belatedly filed an opposition to petitioners motion for reconsideration[23] on February 2,
1995, which the NLRC received on February 15, 1995. In said opposition, private respondents also asked for a
clarification concerning the actual number of complainants referred to in the Resolution of November 29, 1994.
Private respondents alleged that the complaints filed with the Labor Arbiter were in the nature of a class suit;
hence, the judgment award should not be limited to 21 complainants but should extend to the other
complainants, numbering about 1,407.
Meanwhile, on May 16, 1995, petitioners came to this Court praying for the annulment of the NLRC Resolution
and the issuance of a writ of preliminary injunction and/or temporary restraining order to enjoin its execution.

On July 3, 1995, the NLRC issued a Resolution granting private respondents motion for clarification, holding:
There is merit to the contention of complainants that the word complainants in the dispositive portion of the
resolution of the Commission dated November 19, 1994 should not refer exclusively to the named 21
complainants but to all the 1,413 [later corrected to 1,407] complainants. It is very evident from the records that
the names and signatures of other complainants have been specified and that during the arbitration
proceedings, additional lists of complainants were submitted by complainants/movants herein x x x.[24]

The dispositive portion of the July 3, 1995 NLRC Resolution reads:

WHEREFORE, the instant motion for clarification is granted. Accordingly, the complaints referred in the
dispositive portion of the resolution of this Commission dated November 29, 1994 are the employees
numbering about 1,407 (as corrected) whose names are listed in Annexes A, A-1 to A-14 and B, B-1 to B-9 and
forming an integral part of this resolution.
SO ORDERED.[25]

In reaction to the adverse resolution, petitioners filed on August 14, 1995 in this Court a supplement to their
petition for certiorari, assailing the July 3, 1995 Resolution of the NLRC and reiterating their prayer for a
preliminary injunction and/or temporary restraining order.
On August 21, 1995, this Court issued a Resolution[26] granting the temporary restraining order prayed for.
The issues for this Courts resolution are:
I
WHETHER OR NOT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
WANT OR ABSENCE OF JURISDICTION IN SUBSTITUTING ITS OWN JUDGMENT ON WHETHER OR NOT
THERE WAS A NECESSITY FOR THE REDUNDANCY PROGRAM IN PETITIONER FIRM.
II
WHETHER OR NOT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THE
RELEASE OF CLAIMS SIGNED BY THE DISMISSED EMPLOYEES TO BE OF NO LEGAL EFFECT.
III
WHETHER OF NOT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN ORDERING THE
REINSTATEMENT OF THE EMPLOYEES WHO WERE DISMISSED UNDER A VALID REDUNDANCY
PROGRAM.
IV
WHETHER OR NOT PUBLIC RESPONDENT COMMITED GRAVE ABUSE OF DISCRETION IN HOLDING THAT
THE REDUNDANCY PROGRAM WAS INVALID FOR WANT OF THE NECESSARY NOTICE TO THE DOLE.
V
WHETHER OR NOT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT ISSUED
THE CLARIFICATORY ORDER DECLARING 1,407 PERSONS AS NEW COMPLAINANTS.
VI
WHETHER OR NOT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN AWARDING
MORAL AND EXEMPLARY DAMAGES AS WELL AS ATTORNEYS FEES TO PRIVATE RESPONDENT.[27]
We shall examine the first assigned error, which involves the validity of petitioners redundancy program.

Redundancy is one of the authorized causes for the dismissal of an employee.[28] In the leading case of
Wiltshire File Co. Inc., vs. NLRC,[29] we explained the nature of redundancy as an authorized cause for
dismissal:

x x x redundancy in an employers personnel force necessarily or even ordinarily refers to duplication of work.
That no other person was holding the same position that private respondent held prior to the termination of
his services, does not show that his position had not become redundant. Indeed, in any well-organized business
enterprise, it would be surprising to find duplication of work and two (2) or more people doing the work of one
person. We believe that redundancy, for purposes of the Labor Code, exists where the services of an employee
are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a
position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of
a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular
product line or service activity previously manufactured or undertaken by the enterprise.

We held, moreover, that the characterization of an employees services as no longer necessary or sustainable,
and, therefore, properly terminable, is an exercise of business judgment on the part of the employer. The
wisdom or soundness of such characterization or decision is not subject to discretionary review provided, of
course, that violation of law or arbitrary or malicious action is not shown.
Doles redundancy program does not appear to be tainted by bad faith. The petition alleges that the redundancy
program is part of a wide-scale restructuring of the company. This purported restructuring is supported by the
companys undisputed history towards these ends, which culminated in the abolition of certain positions and
the Special Voluntary Resignation program in 1990-1991. Among the avowed goals of such restructuring is the
reduction of absenteeism in the company. The harsh economic and political climate then prevailing in the
country also emphasized the need for cost-saving measures.

Reorganization as a cost-saving device is acknowledged by jurisprudence. An employer is not precluded from

adopting a new policy conducive to a more economical and effective management,[30] and the law does not
require that the employer should be suffering financial losses before he can terminate the services of the
employee on the ground of redundancy.[31]
Private respondents submit, however, that the subsequent hiring of casual employees to replace the dismissed
regular employees is an indication of bad faith. Petitioner does not deny that they hired casual employees after
the implementation of the redundancy program. Petitioner explains, however, that it has always hired casuals
to augment the companys manpower requirements in accordance with the demands of the industry. Petitioner
further asserts that the number of casuals remained relatively constant after the implementation of the
redundancy program, as shown by the graph appended as Annex J[32] of its supplement to the motion for
reconsideration before the NLRC. The Court finds the foregoing explanation sufficient to negate the
allegations of bad faith by its former employees.

Private respondents also point to references in petitioners studies of the redundancy program to the
elimination of undesirables, abusers and worst performers as another indicia of petitioners bad faith. The Court
is not too keen on attaching such a sinister significance to these allusions, however. It may be argued that the
elimination of the so-called undesirables was merely incidental to the redundancy program or that past
transgressions could have been part of the criteria in determining who among the redundant employees is to
be dismissed.

Private respondents harp on the fact that petitioners desire to save on labor costs was the motivation for the
redundancy program. The law, however, does not prevent employers from saving on labor costs. This Court
has recognized such right. In International Macleod, Inc. vs. Intermediate Appellate Court, supra, this Court
found that the appointment by the company to the International Heavy Equipment Corporation as its dealer
with the government rendered redundant the position of Government Relations Officer held by the private
respondent therein. It was held that the determination of the need for the phasing out of a department as a
labor and cost saving device because it was no longer economical to retain said department is a management
prerogative, with which the courts will not interfere.

In De Ocampo vs. National Labor Relations Commission,[33] the Court similarly ruled that [t]he reduction of
the number of workers in a company made necessary by the introduction of the services of Gemac Machineries
in the maintenance and repair of its industrial machinery is justified. There can be no question as to the right of
the company to contract the services of Gemac Machineries to replace the services rendered by the terminated
mechanics with a view to effecting more economic and efficient methods of production. So long as the
undertaking to save on labor costs is not attended by malice, arbitrariness, or intent on the part of the employer
to circumvent the law, as in this case, the Court will not interfere with such endeavor.

The lack of notice to the Department of Labor and Employment (DOLE) does not render the redundancy
program void. Petitioner accurately invokes International Harvester, Inc. vs. NLRC.[34]
x x x if an employee consented to his retrenchment or voluntarily applied for retrenchment with the employer
due to the installation of labor-saving devices, redundancy, closure or cessation of operation or to prevent
financial losses to the business of the employer, the required previous notice to the DOLE is not necessary as
the employee thereby acknowledged the existence of a valid cause for termination of his employment.

Here, most of the private respondents even filled up application forms to be considered for the redundancy
program and thus acknowledged the existence that their services were redundant.
In any case, private respondents executed two releases in favor of petitioner company. Not all quitclaims are
per se invalid or against public policy. But those (1) where there is clear proof that the waiver was wangled from
an unsuspecting or gullible person or (2) where the terms of settlement are unconscionable on their face are
invalid. In these cases, the law will step in to annul the questionable transaction.[35] There is no showing here
that private respondents are unsuspecting or gullible persons. Neither are the terms of the settlement
unconscionable. Indeed, private respondents received a generous separation package, as set out in the
narration of facts above.
WHEREFORE, the petition is GRANTED and the decision of the NLRC ANNULLED and SET ASIDE. The
temporary restraining order issued by this Court on August 21, 1995 is LIFTED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Pardo, and Ynares-Santiago, JJ., concur.
Puno, J., on official leave.

III.
G.R. No. 165594 April 23, 2007
FRANCISCO SORIANO, JR., Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE LONG DISTANCE TELEPHONE
COMPANY, INCORPORATED, Respondents.

DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, petitioner Francisco Soriano Jr.
seeks to set aside the Decision dated 29 April 20042 and Resolution dated 4 October 20043 of the Court of
Appeals in CA-G.R. SP No. 75152, affirming the Decision and Resolution of the National Labor Relations
Commission (NLRC) dated 20 August 20024 and 28 October 2002,5 respectively, in NLRC-CA No. 024050-
2000. In its Decision and Resolution, the NLRC affirmed the Decision of Labor Arbiter Joel S. Lustria (Labor
Arbiter Lustria) dated 23 March 2000 in NLRC-NCR Case No. 00-08-05259-966 dismissing the petitioner’s
complaint for illegal dismissal against respondent Philippine Long Distance Telephone Company,
Incorporated.

The factual antecedents of the petition at bar are as follows:

In 1980, petitioner and certain individuals namely Sergio Benjamin (Benjamin), Maximino Gonzales (Gonzales),
and Noel Apostol (Apostol) were employed by the respondent as Switchman Helpers in its Tondo Exchange
Office (TEO). After participating in several trainings and seminars, petitioner, Benjamin, and Gonzales were
promoted as Switchmen. Apostol, on the other hand, was elevated to the position of Frameman. One of their
duties as Switchmen and Frameman was the manual operation and maintenance of the Electronic Mechanical
Device (EMD) of the TEO.7
In November 1995, respondent PLDT implemented a company-wide redundancy program.8 In its "Notice of
Separation Due to Redundancy" dated 27 November 1995 to the Director of the Department of Labor and
Employment, National Capital Region (DOLE-NCR),9 respondent PLDT cited the following reasons for the
aforesaid redundancy program:
a) Technological changes where new technologies necessitate reduction in workforce, e.g., conversion of
electro-mechanical switches; outmoded electronic switches to modern digital switches.
b) Position declared redundant due to collapsing/merging of functions where the required number of personnel
became less, i.e. rehoming of toll centers or centralization of toll centers.
c) Non-replacement of function upon retirement of executive where attached staffs with the executive are no
longer needed – Staff Assistant, Secretary, Clerk.
d) Process Improvements and Automation of functions which render the positions as redundant since the new
process or Automation require less personnel.
e) Functions or positions which are affected adversely by market forces, thereby necessitating reduction of
current workforce to match the reduction of workload, i.e., Traffic – due to decreasing number of handled calls.
Subsequently, the respondent PLDT gave separate letters dated 15 July 1996 to petitioner, Benjamin,
Gonzales, and Apostol informing them that their respective positions were deemed redundant due to the
above-cited reasons and that their services will be terminated on 16 August 1996.10 They requested the
respondent PLDT for transfer to some vacant positions but their requests were denied since all positions were
already filled up. Hence, on 16 August 1996, respondent PLDT dismissed the four from employment.11

On 20 August 1996, Benjamin received an amount of ₱315,435.04 from the respondent PLDT as separation
pay,12while Apostol and Gonzales received on 2 September 1996 their separation pay from the respondent
PLDT in the amounts of ₱486,484.95 and ₱472,897.08, respectively.13 Likewise, petitioner received on 21
October 1996 an amount of ₱644,194.64 from the respondent PLDT as his separation pay.14 All four of them
executed a document entitled, "Receipt, Release and Quitclaim" in favor of the respondent PLDT;15 they,
however, placed a note of "Under Protest" beside their signatures in the said document.16

Thereafter, petitioner, Benjamin, Gonzales, and Apostol filed a joint complaint for illegal dismissal against
respondent PLDT.17 On 23 March 2000, Labor Arbiter Lustria rendered his Decision dismissing the complaint
for lack of merit. He stated that the respondent PLDT legitimately exercised its management prerogative in
terminating the services of petitioner, Benjamin, Gonzales, and Apostol, on the ground of a valid redundancy
program. He was also convinced that the respondent PLDT complied with the requirements for dismissing an
employee for redundancy under Article 283 of the Labor Code.18

Further, Labor Arbiter Lustria opined that respondent PLDT’s redundancy program was effected in good faith
as the reduction of the latter’s employees was brought about by its adoption of the latest communication
technology equipment which can be operated by computers alone. This undertaking was also done pursuant
to the demand of the public for clearer signal, faster service and digital features. He found no ill-motive or bad
faith on the part of the respondent PLDT in implementing the redundancy program and noted that petitioner,
Benjamin, Gonzales and Apostol had already received their respective separation pay and had executed release
and quitclaim in favor of respondent PLDT. In conclusion, Labor Arbiter Lustria held:

Finally, we have often stressed that it has always been an avowed policy of this Arbitration Branch that in
carrying out and interpreting the provisions of the Labor Code and its Implementing Rules and Regulations, the
working man’s welfare should be the paramount and primordial consideration. In protecting the working class,
however, we could not simply close our eyes to the rule that justice is in every case for the deserving, to be
dispensed in the light of the established facts and the applicable law and doctrine. This, is so, for while we favor
the cause of the working class in his conflict with management, we likewise have to consider the rights and
interest of the employers, which are equally entitled to legal protection.

WHEREFORE, foregoing premises considered, judgment is hereby rendered dismissing the instant complaint
for lack of merit.19
Petitioner, Benjamin, Gonzales, and Apostol appealed to the NLRC. On 20 August 2002, the NLRC
promulgated its Decision dismissing the appeal and affirming in toto the decision of Labor Arbiter Lustria. It
ruled that the findings, conclusions and legal bases of Labor Arbiter Lustria were supported by the evidence on
record. In parting, it ruled:
Needless to state, not having been illegally dismissed, as comprehensively discussed above, Complainants-
Appellants are therefore not entitled to reinstatement to their former positions without loss of seniority right
and privileges and to payment of full back wages.
WHEREFORE, premises considered, the Appeal is hereby DISMISSED for lack of merit. Accordingly, the
Decision appealed from is sustained in toto.20

Petitioner, Benjamin, Gonzales, and Apostol filed a Motion for Reconsideration of the NLRC Decision but the
same was denied for lack of compelling reason in the Resolution dated 28 October 2002.
Thereafter, the four dismissed employees assailed the NLRC Decision and Resolution, dated 20 August 2002
and 28 October 2002, respectively, via a Petition for Certiorari to the Court of Appeals. On 29 April 2004, the
Court of Appeals dismissed the Petition and found no grave abuse of discretion on the part of the NLRC in
rendering its assailed Decision and Resolution. Pertinent portions of the said decision read:

At any rate, grave abuse of discretion, the ground invoked to support the petition at bench, has been defined
as "such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or, x x x where
the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must
be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law. It is not in fact sufficient that a tribunal, in the exercise of its
power, abused its discretion; (the) abuse must be grave.
Noting that no such abuse of discretion as defined attended the assailed resolutions, We have no choice but to
dismiss the petition.

WHEREFORE, the petition for certiorari is DISMISSED.21

Petitioner, Benjamin, Gonzales, and Apostol filed a Motion for Reconsideration but the same was denied by
the Court of Appeals in its Resolution dated 4 October 2004.
On 24 November 2004, petitioner, Benjamin, Gonzales, and Apostol filed before this Court a Petition for
Review on Certiorari of the Court of Appeals Decision and Resolution, dated 29 April 2004 and 4 October 2004,
respectively. In our Resolution dated 24 January 2005, we denied the Petition for failure of Benjamin, Gonzales,
and Apostol to sign the attached verification and certificate of non-forum shopping, thus:

In accordance with Rule 45 and other related provisions of the 1997 Rules of Civil Procedure, as amended,
governing appeals by certiorari to the Supreme Court, only petitions which are accompanied by or comply
strictly with the requirements specified therein shall be entertained. On the basis thereof, the Court Resolves
to DENY the petition for review on certiorari dated 24 November 2004 assailing the decision and resolution of
the Court of Appeals for petitioners’ failure to submit a valid certification of non-forum shopping in accordance
with Section 4 (e), Rule 45 in relation to Section 5, Rule 7, Section 2, Rule 42, and Sections 4 and 5 (d), Rule 56,
the attached verification and certification of non-forum shopping having been signed by only one (1) of four (4)
petitioners.22
On 28 February 2004, petitioner filed a Motion for Reconsideration alleging therein that:

Since the cause of action of each petitioner is independent of the other three, petitioner SORIANO, JR. could
validly proceed with his own petition for review on certiorari without the intervention of his co-petitioners.
Consequently, he should not be prejudiced by the failure of his co-petitioners to verify the petition and submit
a valid certification of non-forum shopping.
Petitioner SORIANO, JR. signed the verification and certificate of non-forum shopping in the petition for review
on certiorari. Hence, as far as he is concerned, his petition has complied with Section 4 (e), Rule 45 in relation
to Section 5, Rule 7, Section 2, Rule 42, and Sections 4 and 5 (d), Rule 56 of the 1997 Rules of Civil Procedure.
The petition in regard to him should not have been dismissed by this Honorable Court.23
Hence, we reinstated the Petition but excluded Benjamin, Gonzales, and Apostol as petitioners.24
Petitioner raises the following issues for our consideration:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS RULED CONTRARY TO LAW AND EXISTING
JURISPRUDENCE IN REFUSING TO REVIEW THE FACTUAL FINDINGS OF THE NLRC.
II.
WHETHER OR NOT THE FINDING OF THE NLRC THAT PETITIONER WAS LAWFULLY TERMINATED FROM
EMPLOYMENT IS SUPPORTED BY SUBSTANTIAL EVIDENCE.
III.
WHETHER OR NOT PETITIONER’S ACCEPTANCE OF SEPARATION BENEFITS AMOUNTS TO A WAIVER OF
HIS RIGHT TO QUESTION THE VALIDITY OF HIS DISMISSAL.25

Apropos the first issue, petitioner argues that the Court of Appeals may review the findings of fact of the NLRC
in a petition for certiorari under Rule 65 even if the factual findings of the Labor Arbiter and the NLRC do not
conflict with each other; that the reliance of the Court of Appeals on the case of Gonzales v. National Labor
Relations Commission26 was contrary to law and jurisprudence; that our ruling in Gonzales v. National Labor
Relations Commission, to wit: "Only when the factual findings and conclusion of the Labor Arbiter and NLRC
are clearly in conflict with each other is this Court behooved to give utmost attention to and thoroughly
scrutinize the records of the case, more particularly the evidence presented, to arrive at a correct decision," is
not absolute; that the aforecited ruling is only a general rule and is only binding if the factual findings of the
Labor Arbiter and the NLRC are supported by substantial evidence; and that in the case of Maya Farms
Employees Organization v. National Labor Relations Commission,27 this Court held that findings of fact of the
NLRC, even though these do not conflict with the findings of the Labor Arbiter, may be reviewed on certiorari
when these findings are made in disregard of the evidence on record.28

We reject these contentions.

As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the appellate court does not
assess and weigh the sufficiency of evidence upon which the Labor Arbiter and the NLRC based their
conclusion. The query in this proceeding is limited to the determination of whether or not the NLRC acted
without or in excess of its jurisdiction or with grave abuse of discretion in rendering its decision. However, as
an exception, the appellate court may examine and measure the factual findings of the NLRC if the same are
not supported by substantial evidence.29

In the case at bar, the Court of Appeals was correct in limiting its determination to the issue of whether there
was grave abuse of discretion on the part of the NLRC, and in refusing to review the factual findings of the said
administrative body, since its factual findings and conclusions are anchored on substantial evidence.

The Labor Arbiter, the NLRC, and the Court of Appeals all found that substantial evidence supports the absence
of illegal dismissal in the present case.

Article 283 of the Labor Code provides that an employer may dismiss from work an employee by reason of
redundancy. The same provision also states the procedural requirements for the validity of the dismissal, viz:

ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. – The employer may also
terminate the employment of any employee due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on
the worker and the Ministry of Labor and Employment at least one (1) month before the intended date thereof.
In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereof
shall be entitled to a separation pay equivalent to at least his one month pay or to at least one (1) month pay
for every year of service, whichever is higher. (Emphases supplied.)

In upholding the legality of petitioner’s dismissal from work, the NLRC relied on the documents submitted by
the respondent PLDT showing compliance with the requirements abovestated, to wit: 1) a letter notifying the
Director of the DOLE-NCR of the impending termination from work of the petitioner by reason of redundancy
and stating the grounds/reasons for the implementation of the redundancy program;30 2) a letter apprising the
petitioner of his dismissal from employment due to redundancy;31 3) a receipt certifying that the petitioner
had already received his separation pay from the respondent PLDT;32 4) a release/waiver/quitclaim executed
by the petitioner in favor of the respondent PLDT;33 and 5) affidavits executed by the officers of the respondent
PLDT explaining the reasons and necessities for the implementation of the redundancy program.34 Petitioner
failed to question, impeach or refute the existence, genuineness, and validity of these documents.

It is clear that the foregoing documentary evidence constituted substantial evidence to support the findings of
Labor Arbiter Lustria and the NLRC that petitioner’s employment was terminated by respondent PLDT due to
a valid or legal redundancy program since substantial evidence merely refers to that amount of evidence which
a reasonable mind might accept as adequate to support a conclusion.35

With regard to petitioner’s allegation that the NLRC committed grave abuse of discretion in affirming the
validity of his dismissal from work, it should be borne in mind that an act of a court or tribunal may constitute
grave abuse of discretion when the same is performed in a capricious or whimsical exercise of judgment
amounting to lack of jurisdiction. The abuse of discretion must be so patent and gross as to amount to an
evasion of positive duty, or to a virtual refusal to perform a duty enjoined by law, as where the power is
exercised in an arbitrary and despotic manner because of passion or personal hostility.36

As earlier discussed, the ruling of the NLRC was premised on substantial evidence comprising of documentary
proofs submitted by the respondent PLDT showing compliance with the requirements of law for terminating
petitioner’s employment due to redundancy. This obviously negates any capriciousness or arbitrariness in the
exercise of judgment of the NLRC. Thus, no grave abuse of discretion can be ascribed to the NLRC for
promulgating its Decision dated 20 August 2002.

Petitioner’s reliance on the case of Maya Farms Employees Organization v. National Labor Relations
Commission37is misplaced. We did not make a categorical statement in the said case that the Court of Appeals
may review the findings of fact of the NLRC in a petition for certiorari under Rule 65 of the Rules of Court even
if the factual findings of the Labor Arbiter and the NLRC do not conflict with each other. What we stated therein
was that findings of fact of administrative agencies and quasi-judicial bodies which have acquired expertise
because their jurisdiction is confined to specific matters are generally accorded not only respect but even
finality and are binding upon this Court unless there is a showing of grave abuse of discretion, or where it is
clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record.38

In Maya Farms, this Court deemed it necessary to look into the factual findings of the NLRC to determine
whether there was grave abuse of discretion on the part of the latter. Even then, we found substantial evidence
to support the NLRC decision and, thus, we held that there was no grave abuse of discretion on the part of the
latter.
Moreover, the circumstances in Maya Farms are different from the instant case. The facts and issues of Maya
Farms were initially referred to the Secretary of the DOLE which, subsequently, endorsed these to the NLRC.
Thereafter, the said case was immediately elevated to this Court by a petition for certiorari under Rule 65 of
the Rules of Court. On the other hand, the present case was initially referred to the Labor Arbiter, whose
findings were affirmed by the NLRC. From the NLRC, the instant case was appealed to the Court of Appeals
through a petition for certiorari under Rule 65 of the Rules of Court. Finding that the NLRC did not commit
grave abuse of discretion, the Court of Appeals denied the petition. Thereafter, this case was brought before
this Court by way of Petition for Review on Certiorari under Rule 45 of the Rules of Court.

The jurisdiction of this Court in petitions for review on certiorari under Rule 45 of the Rules of Court is limited
to reviewing errors of law, not of fact.39 Nevertheless, this Court may review the facts where: (1) the findings
and conclusions of the Labor Arbiter, on one hand, and the NLRC and the Court of Appeals, on the other, are
inconsistent on material and substantial points; (2) the findings of the NLRC and the Court of Appeals are
capricious and arbitrary; and (3) the Court of Appeals’ findings that are premised on a supposed absence of
evidence are in fact contradicted by the evidence on record.40 None of the foregoing exceptions to our limited
power to review the facts is present in the case at bar.
Anent the second issue, petitioner contends that there was no substantial evidence showing that the position
of Switchman had become redundant; that the affidavits of the respondent PLDT’s officers have no probative
value and should not have been considered by the NLRC because the said officers are not competent to testify
on the technical aspects and effects of respondent PLDT’s adoption of new technology; that the existence of
redundancy was belied by the respondent PLDT’s acts of employing outside plant personnel as Switchmen and
Framemen, and of hiring contractual employees to perform the functions of Switchmen; and that the
respondent PLDT did not present proof of the method and criteria it used in determining the Switchman to be
terminated from work.41

Petitioner further avers that he passed several qualifying exams and received awards for outstanding work;
that by reason of his qualifications and exemplary work, he should have been among the last Switchmen to be
laid-off; that the respondent PLDT violated its Collective Bargaining Agreement with the petitioner’s union,
Manggagawa ng Komunikasyon sa Pilipinas, when it terminated his job; that the respondent PLDT did not
undertake sincere efforts and actual measures to avoid loss of employment due to its adoption of new
technology; that at the time he was dismissed from work, there were 163 vacant positions for which he was
qualified; that he timely applied for transfer to these positions; and that the respondent PLDT denied his
applications without showing any evidence that the said positions were already filled up.42

Redundancy exists when the service capability of the workforce is in excess of what is reasonably needed to
meet the demands of the business enterprise. A position is redundant where it is superfluous, and superfluity
of a position or positions may be the outcome of a number of factors such as over-hiring of workers, decrease
in volume of business, or dropping a particular product line or service activity previously manufactured or
undertaken by the enterprise.43

The records show that respondent PLDT had sufficiently established the existence of redundancy in the
position of Switchman. In his affidavit dated 27 September 1999, Roberto D. Lazam (Lazam), Senior Manager
of GMM Network Surveillance Division of respondent PLDT, explained:
17. The work, on the other hand, of all the complainants as switchmen is to MAINTAIN ALL the strowger
switches in an exchange. The exchange is the center of an area’s telephone network. PLDT, thus, have a Sta.
Mesa Exchange that houses the switchtrains servicing the Sta. Mesa, Manila and its neighboring areas while it
has exchanges in other areas like the Quezon City exchange, Parañaque, etc., that house the switchtrains of
the telephones in the said respective territories.
18. To maintain a single strowger switch, the following are performed according to a regular schedule:
a. Spring Gauging – it is the adjusting of stationary springs to ensure that they open enough to break circuits
when they should, and so "stationary" springs, "follow" moving springs to exert pressure in break contracts
when the relay is unoperated, and makes contact when operated.
b. Margining – it is the measuring of moving spring tension by checking response of the armature and specific
electrical limits. It measures the total mechanical resistance to the operation of the armature due to the tension
of the springs.

c. Stroke – is the normal armature air gap and is adjusted by bending the armature backstop.
d. Routine – it is a periodic check of the functioning of telephone apparatus to detect faults.
The foregoing are some of the duties and work of a switchman. Considering the number of strowger switches
in a single switchtrain and considering further the number of switchtrains in an exchange (bearing in mind the
ratio of 30 switchtrains is to 200 subsribers), certainly, the use of a step-by-step automatic telephone system
necessitates intensive maintenance costs and procedures, not to mention the big number of people needed to
perform the maintenance work.

19. With the advent, however, of new technology that is, feature for feature, more advanced than the step-by-
step automatic telephone system, the company decided to upgrade its system and abandon the use of the old
system.

20. One of the features of the digital technology is that it does not make use of switches every step of
connection. Instead, a single card studded with microchips is issued for each telephone number so that if a
caller wishes to call another, the microchips in the assigned card do all the work and in a speed of light gets in
contact with the microchips of the called party’s card. These "cards" are stored in a "bookshelf like" structure
and practically requires zero maintenance because if a card or a chip in the card is defective, a computer that
monitors the entire exchange will automatically inform the computer operator of a defect, the card involved,
its exact location and the specific "bookshelf." All the computer operator has to do then is to rise up from his
chair, proceed to the computer identified bookshelf, locate the card, pull out the card from the "bookshelf",
throw it in the waste-can, and put in a new card programmed of course with the telephone number.
Programming a card, upon the other hand, is a fairly simple procedure that it is almost similar to the
programming of the PIN number of an ATM card.

21. With the utter simplicity of the above system, albeit ultimately hi-tech, a lot of tedious tasks have been
done away with. Where before a big number of switchmen were required to keep the system in shape and
where before every strowger switch was scrutinized and measured, the new system requires only one human
being to ensure that an exchange servicing a million subscribers is in tip top shape. To illustrate, consider an
exchange serving 50,000 subscribers. Such an exchange, using the old system, would need 100 personnel
working in 3 8-hour shifts to perform preventive and corrective switch maintenance. On the other hand, an
exchange using the new system would need only one man working from 8 a.m. to 5 p.m. to take care of switch
maintenance.

22. In addition to the simplicity of maintenance another advantage of the digital technology is the added
services never before known by ordinary Filipinos. These are to name a few:
(a) The call waiting feature
(b) Terminal Portability
(c) Direct dialing long distance features (International and Domestic)
(d) Do not disturb feature
(e) Automatic Recall
(f) Redial gadgets
(g) Call forwarding facilities
(h) Conference call capacity
23. The new technology simply rendered the position of switchmen redundant. And since there is no other
position available and suited for their qualifications, the company had no other option but to terminate their
employment under a redundancy program.
24. With the features of the new system, it certainly cannot be said that the company’s decision and
implementation of the redundancy program was arbitrary or whimsical.44
It is evident from the foregoing facts that respondent PLDT’s utilization of high technology equipment in its
operation such as computers and digital switches necessarily resulted in the reduction of the demand for the
services of a Switchman since computers and digital switches can aptly perform the function of several
Switchmen. Indubitably, the position of Switchman has become redundant.
As to whether Lazam was competent to testify on the effects of respondent PLDT’s adoption of new
technology vis-à-vis the petitioner’s position of Switchman, the records show that Lazam was highly qualified
to do so. He is a licensed electrical engineer and has been employed by the respondent PLDT since 1971. He
was a Senior Manager for Switching Division in several offices of the respondent PLDT, and had attended
multiple training programs on Electronic Switching Systems in progressive countries. He was also a training
instructor of Switchmen in the respondent’s office.45
The fact that respondent PLDT hired contractual employees after implementing its redundancy program does
not necessarily negate the existence of redundancy. As amply stated by the respondent PLDT, such hiring was
intended solely for winding up operations using the old system.

The respondent PLDT, as employer, has the recognized right and prerogative to select the persons to be hired
and to designate the work as well as the employee or employees to perform it.46 This includes the right of the
respondent PLDT to determine the employees to be retained or discharged and who among the applicants are
qualified and competent for a vacant position. The rationale for this principle is that respondent PLDT is in the
best position to ascertain what is proper for the advancement of its interest. Thus, this Court cannot interfere
in the wisdom and soundness of the respondent PLDT’s decision as to who among the Switchmen should be
retained or discharged or who should be transferred to vacant positions, as long as such was made in good faith
and not for the purpose of curbing the rights of an employee.47 Since the respondent PLDT determined that
petitioner’s services are no longer necessary either as a Switchman or in any other position, and such
determination was made in good faith and in furtherance of its business interest, the petitioner’s contention
that he should be the last switchman to be laid-off by reason of his qualifications and outstanding work must
fail.
Coming now to the third issue, petitioner asseverates that his acceptance of separation pay from the
respondent PLDT does not bar the filing of his complaint for illegal dismissal against the latter, nor does it imply
that he had already waived his right to question the validity of his dismissal; that he accepted the separation
pay only after the lapse of two months from the time he filed an illegal dismissal case against respondent PLDT;
that he had no intention of accepting the separation pay; that he was only forced to accept the separation pay
when his parent fell ill and, thus, needed a large amount of money to cover the expenses for treatment; and
that he was compelled to execute a quitclaim in favor of respondent PLDT since this was the only way he could
avail himself of the necessary amount for the treatment of his parent.48

Generally, deeds of release, waiver or quitclaims cannot bar employees from demanding benefits to which they
are legally entitled or from contesting the legality of their dismissal since quitclaims are looked upon with
disfavor and are frowned upon as contrary to public policy.49 Where, however, the person making the waiver
has done so voluntarily, with a full understanding thereof, and the consideration for the quitclaim is credible
and reasonable, the transaction must be recognized as being a valid and binding undertaking.50
The requisites for a valid quitclaim are: 1) that there was no fraud or deceit on the part of any of the parties; 2)
that the consideration for the quitclaim is credible and reasonable; and 3) that the contract is not contrary to
law, public order, public policy, morals or good customs or prejudicial to a third person with a right recognized
by law.51

It cannot be gainfully said that the petitioner did not fully understand the consequences of signing the "Receipt,
Release, and Quitclaim" dated 15 August 1996. Petitioner is not an illiterate person who needs special
protection. He held responsible positions in the office of the respondent PLDT and had attended and passed
various training courses for his position. It is thus assumed that he comprehended the contents of the "Receipt,
Release, and Quitclaim" which he signed on 15 August 1996. There is also no showing that the execution
thereof was tainted with deceit or coercion. By his own admission, petitioner signed the quitclaim voluntarily,
compelled by personal circumstances, rather than by respondent PLDT. He had received his separation pay
and benefited therefrom. Certainly, it would result in unjust enrichment on the part of the petitioner if he is
allowed to question the legality of his dismissal from work.

Further, the petitioner received separation pay from the respondent PLDT, the amount of which was more than
the amount required under Article 283 of the Labor Code.52 Indeed, there was a credible and reasonable
consideration for his separation from work.

Given the foregoing circumstances, the "Receipt, Release, and Quitclaim" dated 15 August 1996 should be
considered as legal and binding on petitioner. It is settled that a legitimate waiver which represents a voluntary
and reasonable settlement of a worker’s claim should be respected as the law between the parties.53 Thus, the
petitioner is bound by the "Receipt, Release and Quitclaim" dated 15 August 1996 and, as such, he is already
precluded from assailing the validity of his dismissal.
Finally, it should be noted that the ruling of Labor Arbiter Lustria sustaining the validity of petitioner’s dismissal
from work by reason of a valid redundancy program was affirmed by the NLRC and the Court of Appeals. As
heretofore discussed, their findings were predicated on the evidence on records and prevailing jurisprudence.
It is well-established that the findings of the Labor Arbiter, the NLRC and the Court of Appeals, when in
absolute agreement, are accorded not only respect but even finality as long as they are supported by
substantial evidence.54 We find no compelling reason to depart from this principle.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
75152 dated 29 April 2004 and 4 October 2004, respectively, are hereby AFFIRMED. No costs.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
IV.
G.R. No. 181738 : January 30, 2013
GENERAL MILLING CORPORATION, Petitioner, v. VIOLETA L. VIAJAR, Respondent.
DECISION
REYES, J.:

This is a Petition1 for Review on Certiorari under Rule 45 of the Rules of Court filed by petitioner General Milling
Corporation (GMC), asking the Court to set aside the Decision2 dated September 21, 2007 and the Resolution3
dated January 30, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 01734; and to reinstate the Decision4
dated October 28, 2005 and Resolution5 dated January 31, 2006 of the National Labor Relations Commission
(NLRC) in NLRC Case No. V-000416-05.
The antecedent facts are as follows:cralawlibrary
GMC is a domestic corporation with principal office in Makati City and a manufacturing plant in Lapu-Lapu City.

In October 2003, GMC terminated the services of thirteen (13) employees for redundancy, including herein
respondent, Violeta Viajar (Viajar). GMC alleged that it has been gradually downsizing its Vismin (Visayas-
Mindanao) Operations in Cebu where a sizeable number of positions became redundant over a period of
time.6?r?l1

On December 2, 2003, Viajar filed a Complaint7 for Illegal Dismissal with damages against GMC, its Human
Resource Department (HRD) Manager, Johnny T. Almocera (Almocera), and Purchasing Manager, Joel Paulino
before the Regional Arbitration Branch (RAB) No. VII, NLRC, Cebu City.
In her Position Paper,8 Viajar alleged that she was employed by GMC on August 6, 1979 as Invoicing Clerk.
Through the years, the respondent held various positions in the company until she became Purchasing Staff.

On October 30, 2003, Viajar received a Letter-Memorandum dated October 27, 2003 from GMC, through
Almocera, informing her that her services were no longer needed, effective November 30, 2003 because her
position as Purchasing Staff at the Purchasing Group, Cebu Operations was deemed redundant. Immediately
thereafter, the respondent consulted her immediate superior at that time, Thaddeus Oyas, who told her that
he too was shocked upon learning about it.9?r?l1

When Viajar reported for work on October 31, 2003, almost a month before the effectivity of her severance
from the company, the guard on duty barred her from entering GMCs premises. She was also denied access to
her office computer and was restricted from punching her daily time record in the bundy clock.10?r?l1

On November 7, 2003, Viajar was invited to the HRD Cebu Office where she was asked to sign certain
documents, which turned out to be an "Application for Retirement and Benefits." The respondent refused to
sign and sought clarification because she did not apply for retirement and instead asserted that her services
were terminated for alleged redundancy. Almocera told her that her signature on the Application for
Retirement and Benefits was needed to process her separation pay. The respondent also claimed that between
the period of July 4, 2003 and October 13, 2003, GMC hired fifteen (15) new employees which aroused her
suspicion that her dismissal was not necessary.11 At the time of her termination, the respondent was receiving
the salary rate of P19,651.41 per month.12?r?l1

For its part, the petitioner insisted that Viajars dismissal was due to the redundancy of her position. GMC
reasoned out that it was forced to terminate the services of the respondent because of the economic setbacks
the company was suffering which affected the companys profitability, and the continuing rise of its operating
and interest expenditures. Redundancy was part of the petitioners concrete and actual cost reduction
measures. GMC also presented the required "Establishment Termination Report" which it filed before the
Department of Labor and Employment (DOLE) on October 28, 2003, involving thirteen (13) of its employees,
including Viajar. Subsequently, GMC issued to the respondent two (2) checks respectively amounting to
P440,253.02 and P21,211.35 as her separation pay.13?r?l1

On April 18, 2005, the Labor Arbiter (LA) of the NLRC RAB No. VII, Cebu City, rendered a Decision, the decretal
portion of which reads:cralawlibrary
WHEREFORE, foregoing considered, judgment is hereby rendered declaring that respondents acted in good
faith in terminating the complainant from the service due to redundancy of works, thus, complainants refusal
to accept the payment of her allowed separation pay and other benefits under the law is NOT JUSTIFIED both
in fact and law, and so, therefore complainants case for illegal dismissal against the herein respondents and so
are complainants monetary claims are hereby ordered DISMISSED for lack of merit.

SO ORDERED.14
The LA found that the respondent was properly notified on October 30, 2003 through a Letter-Memorandum
dated October 27, 2003, signed by GMCs HRD Manager Almocera, that her position as Purchasing Staff had
been declared redundant. It also found that the petitioner submitted to the DOLE on October 28, 2003 the
"Establishment Termination Report." The LA even faulted the respondent for not questioning the companys
action before the DOLE Regional Office, Region VII, Cebu City so as to compel the petitioner to prove that
Viajars position was indeed redundant. It ruled that the petitioner complied with the requirements under Article
283 of the Labor Code, considering that the nation was then experiencing an economic downturn and that GMC
must adopt measures for its survival.15?r?l1

Viajar appealed the aforesaid decision to the NLRC. On October 28, 2005, the NLRC promulgated its decision,
the dispositive portion of which reads:cralawlibrary
WHEREFORE, premises considered, the Decision of the Labor Arbiter declaring the validity of complainants
termination due to redundancy is hereby AFFIRMED. Respondent General Milling Corporation is hereby
ordered to pay complainants separation pay in the amount of P461,464.37.
SO ORDERED.16

The NLRC, however, stated that it did not agree with the LA that Viajar should be faulted for failing to question
the petitioners declaration of redundancy before the DOLE Regional Office, Region VII, Cebu City. It was not
imperative for Viajar to challenge the validity of her termination due to redundancy.17Notwithstanding, the
NLRC affirmed the findings of the LA that Viajars dismissal was legal considering that GMC complied with the
requirements provided for under Article 283 of the Labor Code and existing jurisprudence, particularly citing
Asian Alcohol Corporation v. NLRC.18 The NLRC further stated that Viajar was aware of GMCs "reduction
mode," as shown in the GMC Vismin Manpower Complement, as follows:cralawlibrary
Year Manpower Profile No. of Employees
Terminated (Redundancy)
2000 795
2001 782
2002 736 41
2003 721 24
2004 697 16
2005 696 (As of June 2005) 0619

The NLRC stated that the characterization of positions as redundant is an exercise of the employers business
judgment and prerogative. It also ruled that the petitioner did not exercise this prerogative in bad faith and that
the payment of separation pay in the amount of P461,464.37 was in compliance with Article 283 of the Labor
Code.20?r?l1
Respondent Viajar filed a Motion for Reconsideration which was denied by the NLRC in its Resolution dated
January 31, 2006.
Undaunted, Viajar filed a petition for certiorari before the CA. In the now assailed Decision dated September
21, 2007, the CA granted the petition, reversing the decision of the NLRC in the following manner:cralawlibrary
WHEREFORE, premises considered, this Petition for Certiorari is GRANTED. The Decision, dated 28 October
2005, and Resolution, dated 31 January 2006 respectively, of public respondent National Labor Relations
Commission-Fourth Division, Cebu City, in NLRC Case No. V-000416-05 (RAB VII-12-2495-03) are SET ASIDE.
A new judgment is entered DECLARING the dismissal ILLEGAL and ordering respondent to reinstate petitioner
without loss of seniority rights and other privileges with full backwages inclusive of allowances and other
benefits computed from the time she was dismissed on 30 November 2003 up to the date of actual
reinstatement. Further, moral and exemplary damages, in the amount of Fifty Thousand Pesos ([P]50,000.00)
each; and attorneys fees equivalent to ten percent (10%) of the total monetary award, are awarded.
Costs against respondent.

SO ORDERED.21?r?l1

Aggrieved by the reversal of the NLRC decision, GMC filed a motion for reconsideration. However, in its
Resolution dated January 30, 2008, the CA denied the same; hence, this petition.
The petitioner raises the following issues, to wit:cralawlibrary
I. THE DECISION OF SEPTEMBER 21, 2007 AND THE RESOLUTION OF JANUARY 30, 2008 OF THE COURT OF
APPEALS ARE CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE.
II. THE DECISION OF SEPTEMBER 21, 2007 AND THE RESOLUTION OF JANUARY 30, 2008 OF THE COURT
OF APPEALS VIOLATE THE LAW AND ESTABLISHED JURISPRUDENCE ON THE OBSERVANCE OF RESPECT
AND FINALITY TO FACTUAL FINDINGS OF THE NATIONAL LABOR RELATIONS COMMISSION.
III. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ITS DECISION OF SEPTEMBER
21, 2007 AND RESOLUTION OF JANUARY 30, 2008 AS THE SAME ARE CONTRARY TO THE EVIDENCE ON
RECORD.22
The petition is denied.

The petitioner argues that the factual findings of the NLRC, affirming that of the LA must be accorded respect
and finality as it is supported by evidence on record. Both the LA and the NLRC found the petitioners evidence
sufficient to terminate the employment of respondent on the ground of redundancy. The evidence also shows
that GMC has complied with the procedural and substantive requirements for a valid termination. There was,
therefore, no reason for the CA to disturb the factual findings of the NLRC.23?r?l1

The rule is that factual findings of quasi-judicial agencies such as the NLRC are generally accorded not only
respect, but at times, even finality because of the special knowledge and expertise gained by these agencies
from handling matters falling under their specialized jurisdiction.24 It is also settled that this Court is not a trier
of facts and does not normally embark in the evaluation of evidence adduced during trial.25 This rule, however,
allows for exceptions. One of these exceptions covers instances when the findings of fact of the trial court, or
of the quasi-judicial agencies concerned, are conflicting or contradictory with those of the CA. When there is a
variance in the factual findings, it is incumbent upon the Court to re-examine the facts once again.26?r?l1

Furthermore, another exception to the general rule is when the said findings are not supported by substantial
evidence or if on the basis of the available facts, the inference or conclusion arrived at is manifestly
erroneous.27 Factual findings of administrative agencies are not infallible and will be set aside when they fail
the test of arbitrariness.28 In the instant case, the Court agrees with the CA that the conclusions arrived at by
the LA and the NLRC are manifestly erroneous.

GMC claims that Viajar was validly dismissed on the ground of redundancy which is one of the authorized
causes for termination of employment. The petitioner asserts that it has observed the procedure provided by
law and that the same was done in good faith. To justify the respondents dismissal, the petitioner presented:
(i) the notification Letter-Memorandum dated October 27, 2003 addressed to the respondent which was
received on October 30, 2003;29 (ii) the "Establishment Termination Report" as prescribed by the DOLE;30 (iii)
the two (2) checks issued in the respondents name amounting to P440,253.02 and P21,211.35 as separation
pay;31 and (iv) the list of dismissed employees as of June 6, 2006 to show that GMC was in a "reduction
mode."32 Both the LA and the NLRC found these sufficient to prove that the dismissal on the ground of
redundancy was done in good faith.
The Court does not agree.

Article 283 of the Labor Code provides that redundancy is one of the authorized causes for dismissal. It
reads:cralawlibrary
Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installment of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a written notice on the worker and
the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business losses or reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
(Emphasis supplied)

From the above provision, it is imperative that the employer must comply with the requirements for a valid
implementation of the companys redundancy program, to wit: (a) the employer must serve a written notice to
the affected employees and the DOLE at least one (1) month before the intended date of retrenchment; (b) the
employer must pay the employees a separation pay equivalent to at least one month pay or at least one month
pay for every year of service, whichever is higher; (c) the employer must abolish the redundant positions in
good faith; and (d) the employer must set fair and reasonable criteria in ascertaining which positions are
redundant and may be abolished.33?r?l1
In Smart Communications, Inc., v. Astorga,34 the Court held that:cralawlibrary
The nature of redundancy as an authorized cause for dismissal is explained in the leading case of Wiltshire File
Co., Inc. v. National Labor Relations Commission, viz:cralawlibrary
"x x x redundancy in an employers personnel force necessarily or even ordinarily refers to duplication of work.
That no other person was holding the same position that private respondent held prior to termination of his
services does not show that his position had not become redundant. Indeed, in any well organized business
enterprise, it would be surprising to find duplication of work and two (2) or more people doing the work of one
person. We believe that redundancy, for purposes of the Labor Code, exists where the services of an employee
are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a
position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of
a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular
product line or service activity previously manufactured or undertaken by the enterprise.”

The characterization of an employees services as superfluous or no longer necessary and, therefore, properly
terminable, is an exercise of business judgment on the part of the employer. The wisdom and soundness of
such characterization or decision is not subject to discretionary review provided, of course, that a violation of
law or arbitrary or malicious action is not shown.35 (Emphasis supplied and citations omitted)

While it is true that the "characterization of an employees services as superfluous or no longer necessary and,
therefore, properly terminable, is an exercise of business judgment on the part of the employer,"36the exercise
of such judgment, however, must not be in violation of the law, and must not be arbitrary or malicious. The
Court has always stressed that a company cannot simply declare redundancy without basis. To exhibit its good
faith and that there was a fair and reasonable criteria in ascertaining redundant positions, a company claiming
to be over manned must produce adequate proof of the same.

We reiterate what was held in Caltex (Phils.), Inc. v. NLRC:37?r?l1

In Asufrin, Jr. v. San Miguel Corporation, we ruled that it is not enough for a company to merely declare that it
has become overmanned (sic). It must produce adequate proof of such redundancy to justify the dismissal of
the affected employees.

In Panlilio v. National Labor Relations Commission, we held that evidence must be presented to substantiate
redundancy such as but not limited to the new staffing pattern, feasibility studies/proposal, on the viability of
the newly created positions, job description and the approval by the management of the restructuring.38
(Emphasis supplied and citations omitted)

In the instant case, the Court agrees with the CA when it held that the petitioner failed to present substantial
proof to support GMCs general allegations of redundancy. As shown from the records, the petitioner simply
presented as its evidence of good faith and compliance with the law the notification letter to respondent
Viajar;39 the "Establishment Termination Report" it submitted to the DOLE Office;40 the two (2) checks issued
in the respondents name amounting to P440,253.02 and P21,211.35;41 and the list of terminated employees as
of June 6, 2006.42 We agree with the CA that these are not enough proof for the valid termination of Viajars
employment on the ground of redundancy.

The letter-memorandum which contains general allegations is not enough to convince this Court that Viajars
termination of employment due to redundancy was warranted under the circumstances. There is no showing
that GMC made an evaluation of the existing positions and their effect to the company. Neither did GMC exert
efforts to present tangible proof that it was experiencing business slow down or over hiring. The "Establishment
Termination Report" it submitted to the DOLE Office did not account for anything to justify declaring the
positions redundant. The Court notes that the list of terminated employees presented by GMC was a list taken
as of June 6, 2006 or almost three years after the respondent was illegally dismissed and almost a year after
the LA promulgated its decision. While the petitioner had been harping that it was on a "reduction mode" of its
employees, it has not presented any evidence (such as new staffing pattern, feasibility studies or proposal,
viability of newly created positions, job description and the approval of the management of the
restructuring,43 audited financial documents like balance sheets, annual income tax returns and others)44
which could readily show that the companys declaration of redundant positions was justified. Such proofs, if
presented, would suffice to show the good faith on the part of the employer or that this business prerogative
was not whimsically exercised in terminating respondents employment on the ground of redundancy.
Unfortunately, these are wanting in the instant case. The petitioner only advanced a self-serving general claim
that it was experiencing business reverses and that there was a need to reduce its manpower complement.

On the other hand, the respondent presented proof that the petitioner had been hiring new employees while
it was firing the old ones,45 negating the claim of redundancy. It must, however, be pointed out that in
termination cases, like the one before us, the burden of proving that the dismissal of the employees was for a
valid and authorized cause rests on the employer. It was incumbent upon the petitioner to show by substantial
evidence that the termination of the employment of the respondent was validly made and failure to discharge
that duty would mean that the dismissal is not justified and therefore illegal.46?r?l1

Furthermore, the Court cannot overlook the fact that Viajar was prohibited from entering the company
premises even before the effectivity date of termination; and was compelled to sign an "Application for
Retirement and Benefits." These acts exhibit the petitioners bad faith since it cannot be denied that the
respondent was still entitled to report for work until November 30, 2003. The demand for her to sign the
"Application for Retirement and Benefits" also contravenes the fact that she was terminated due to
redundancy. Indeed, there is a difference between voluntary retirement of an employee and forced termination
due to authorized causes.

In Quevedo v. Benguet Electric Cooperative, Incorporated,47 this Court explained the difference between
retirement and termination due to redundancy, to wit:cralawlibrary
While termination of employment and retirement from service are common modes of ending employment,
they are mutually exclusive, with varying juridical bases and resulting benefits. Retirement from service is
contractual (i.e. based on the bilateral agreement of the employer and employee), while termination of
employment is statutory (i.e. governed by the Labor Code and other related laws as to its grounds, benefits
and procedure). The benefits resulting from termination vary, depending on the cause. For retirement, Article
287 of the Labor Code gives leeway to the parties to stipulate above a floor of benefits.
xxx
The line between voluntary and involuntary retirement is thin but it is one which this Court has drawn.
Voluntary retirement cuts employment ties leaving no residual employer liability; involuntary retirement
amounts to a discharge, rendering the employer liable for termination without cause. The employees intent is
the focal point of analysis. In determining such intent, the fairness of the process governing the retirement
decision, the payment of stipulated benefits, and the absence of badges of intimidation or coercion are relevant
parameters.48 (Emphasis supplied and citations omitted)
Clearly, the instant case is not about retirement since the term has its peculiar meaning and is governed by
Article 287 of the Labor Code. Rather, this is a case of termination due to redundancy under Article 283 of the
Labor Code. Thus, the demand of GMC for the respondent to sign an "Application for Retirement and Benefits"
is really suspect.
Finally, the Court agrees with the CA that the award of moral and exemplary damages is proper. The Court has
awarded moral damages in termination cases when bad faith, malice or fraud attend the employees dismissal
or where the act oppresses labor, or where it was done in a manner contrary to morals, good customs or public
policy.49 We quote with favor the findings of the CA:cralawlibrary
We also award moral and exemplary damages to petitioner. While it is true that good faith is presumed, the
circumstances surrounding the dismissal of petitioner negate its existence. Moral damages may be recovered
only where the dismissal of the employee was tainted by bad faith or fraud, or where it constituted an act
oppressive to labor, and done in a manner contrary to morals, good customs or public policy while exemplary
damages are recoverable only if the dismissal was done in a wanton, oppressive, or malevolent manner. To
reiterate, immediately after receipt of her termination letter which was effective on 30 November 2003,
petitioner was no longer treated as an employee of respondent as early as the 31st of October 2003; she was
already barred from entering the company premises; she was deprived access to her office computer; and she
was excluded from the bandy [sic] clock. She was also made to sign documents, including an "APPLICATION
FOR RETIREMENT AND BENEFITS" in the guise of payment of her separation pay. When petitioner confronted
her immediate superior regarding her termination, the latters shock aggravated her confusion and suffering.
She also learned about the employment of a number of new employees, several of whom were even employed
in her former department. Petitioner likewise suffered mental torture brought about by her termination even
though its cause was not clear and substantiated.50 (Citations omitted)
WHEREFORE, the petition is DENIED. The Decision dated September 21, 2007 of the Court of Appeals, as well
as its Resolution dated January 30, 2008 in CA-G.R. SP No. 01734, are hereby AFFIRMED.
SO ORDERED.

V.
SECOND DIVISION
[G.R. No. 131108. March 25, 1999]
ASIAN ALCOHOL CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
FOURTH DIVISION, CEBU CITY and ERNESTO A. CARIAS, ROBERTO C. MARTINEZ, RAFAEL H. SENDON,
CARLOS A. AMACIO, LEANDRO O. VERAYO and ERENEO S. TORMO, respondents.
DECISION
PUNO, J.:
Contending that the dismissal of private respondents Ernesto A. Carias, Roberto C. Martinez, Rafael H. Sendon,
Carlos A. Amacio, Leandro O. Verayo and Ereneo S. Tormo, was valid on the twin grounds of redundancy and
retrenchment to prevent business losses, petitioner Asian Alcohol Corporation (hereinafter referred to as Asian
Alcohol) filed this petition for certiorari. Asian Alcohol ascribes grave abuse of discretion to public respondents
National Labor Relations Commission[1] (hereinafter referred to as NLRC) when, on May 30, 1997, it set
aside[2] the decision[3] of the Executive Labor Arbiter dismissing the illegal termination complaints filed by
private respondents.
We first unfurl the facts.
In September, 1991, the Parsons family, who originally owned the controlling stocks in Asian Alcohol, were
driven by mounting business losses to sell their majority rights to prior Holdings, Inc. (hereinafter referred to
as Prior Holdings). The next month, Prior Holdings took over its management and operation.[4]
To thwart further losses, Prior Holdings implemented a reorganizational plan and other cost-saving measures.
Some one hundred seventeen (117) employees out of a total workforce of three hundred sixty (360) were
separated. Seventy two (72) of them occupied redundant positions that were abolished. Of these positions,
twenty one (21) were held by union members and fifty one (51) by non-union members.
The six (6) private respondents are among those union members[5] whose positions were abolished due to
redundancy. Private respondents Carias, Martinez, and Sendon were water pump tenders; Amacio was a
machine shop mechanic; Verayo was a briquetting plant operator while Tormo was a plant helper under him.
They were all assigned at the Repair and Maintenance Section of the Pulupandan plant.[6]
In October, 1992, they received individual notices of termination effective November 30, 1992.[7] They were
paid the equivalent of one month salary for every year of service as separation pay, the money value of their
unused sick, vacation, emergency and seniority leave credits, thirteenth (13th) month pay for the year 1992,
medicine allowance, tax refunds, and goodwill cash bonuses for those with at least ten (10) years of service.[8]
All of them executed sworn releases, waivers and quitclaims.[9] Except for Verayo and Tormo, they all signed
sworn statements of conformity to the company retrenchment program.[10] And except for Martinez, they all
tendered letters of resignation.[11]
On December 18, 1992, the six (6) private respondents files with the NLRC Regional Arbitration Branch VI,
Bacolod City, complaints for illegal dismissal with a prayer for reinstatement with backwages, moral damages
and attorneys fees. They alleged that Asian Alcohol used the retrenchment program as a subterfuge for the
union busting. They claimed that they were singled out for separation by reason for their active participation
in the union. They also asseverated that Asian Alcohol was not bankrupt as it has engaged in an aggressive
scheme of contractual hiring.
The Executive Labor Arbiter dismissed the complaints. He explained, thus:
The fact that respondents AAC incurred losses in its business operations was not seriously challenged by the
complainants. The fact that it incurred substantial losses in its business operations prior to the implementation
of its retrenchment program is amply supported by the documents on records, (sic) namely: (1) Balance Sheet
of AAC as of December 31, 1991 x x x, (2) Statement of Income and Deficit for the year ended December 31,
1991 x x x, (3) Income Tax Return for Fiscal Year ending September 30, 1989 x x x, (4) Income Tax Return for the
Fiscal Year ending December 31, 1989 x x x, (5) Income Tax Return for Fiscal Year ending December 31, 1990 x
x x, and (6) Income Tax Return for the Fiscal Year ending December 31, 1991 x x x, indicating an accumulated
deficit of P26,117,889.00.
It has to be emphasized that the law allows an employer to retrench some of its employees to prevent losses.
In the case of respondent AAC, it implemented its retrenchment program not only to prevent losses but to
prevent further losses as it was then incurring huge losses in its operations.
Complainants would want us to believe that their positions were abolished because they are union members,
and that they were replaced by casual employees. Complainants pretense is rather untenable. For one thing,
the retrenchment program of AAC affected not only union members but also the non-union members. As
earlier said, there were 117 employees of AAC who were affected by the reorganization. Of the 117 positions,
72 positions were abolished due to redundancy, 21 of which were occupied by union members, while 51 were
held by non-union members. Thus, the theory of complainants that they were terminated from work on ground
of their union membership is far from the truth.
On the contrary, we find that complainants Ernesto Carias, Roberto Martinez and Rafael Sendon who were all
Water Pump Tenders assigned to AACs water wells in Ubay, Pulupandan, Negros Occidental which were drilled
and operated before under the old management by virtue of right-of-way with the landowner, were retrenched
as an offshoot to the termination of the lease agreement as the water thereunder had become salty due to
extensive prawn farming nearby, so that AAC could no longer use the water for its purpose. As a consequence,
the services of Ernesto Carias, Roberto Martinez and Rafael Sendon had become unnecessary, redundant and
superfluous.
As regards complainants Leandro Verayo and Ereneo Tormo, the grounds cited by respondent AAC in support
of its decision to retrench them are too convincing to be ignored. Accordingly to respondent AAC, its boiler
before was 100% coal fired. The boiler was manned by a briquetting plant operator in the person of Leandro
Verayo and three (3) briquetting helpers, namely, Ereneo Tormo, Eriberto Songaling, Jr. and Rudy Javier, Jr.
Since AAC had shifted to the use of bunker fuel by about 70% to fire its boiler, its usage of coal had been
drastically reduced to only 30% of its total fuel usage in its production plant, thereby saving on fuel cost. For
this reason, there was no more need for the position of briquetting plant operator and the services for only two
briquetting helpers were determined to be adequate for the job of briquetting coal. Of the three (3) briquetting
helpers, Ereneo Tormo was the oldest, being already 41 years old, the other two, Javier and Songaling, being
only 28 and 35 respectively.Considering the manual nature of the work of coal briquetting, younger workers
are always preferred for reasons of efficiency [sic]. Hence the abolition of the position of Ereneo Tormo. We
have to stress that Eriberto Songaling, Jr. and Rudy Javier, Jr. are also union members. x x x
With respect to Carlos Amacio, he was retrenched not because of his being a union member but because of his
poor health condition which greatly affect[ed] his work efficiency. Records show that Carlos Amacio was
among the ten machine shop mechanics employed by respondent AAC. Under AACs reorganization plan, it
needs only nine mechanics.
xxx
On the whole, therefore, the dismissal of complainants on ground of redundancy/retrenchment was perfectly
valid or legal.[12]
Private respondents appealed to the NLRC.
On May 30, 1997, the NLRC rendered the challenged decision. It rejected the evidence proffered by Asian
Alcohol to prove its business reversals. It ruled that the positions of private respondents were not redundant
for the simple reason that they were replaced by casuals. The NLRC essayed this explanation:
In this case, [that] the respondent terminated complainants to protect the company from future losses, does
not create an impression of imminent loss. The company at the time of retrenchment was not then in the state
of business reverses. There is therefore no reason to retrench. x x x
The alleged deficits of the corporations did not prove anything for the respondent. The financial status as
shown in the Statement of Income and Deficits and Income Tax Returns from 1989 to 1991, submitted by
respondent was before the respondent, new management of Prior Holdings, Inc., took over the operation and
management of the corporation in October, 199[1]. This is no proof that on November 30, 1992 when the
termination of complainant[s] took effect the company was experiencing losses or at least imminent losses.
Possible future losses do not authorize retrenchment.
Secondly in the case of REDUNDANCY.
Redundancy exist where the service[s] of x x x employee[s] are in excess of what is reasonably demanded by
the actual requirements of the enterprise. The evidence, however, proved that, in truth and in fact, the
positions of the complainants were not redundant for the simple reason that they were replaced by casuals.
xxx
Admittedly, from the testimonies of Engr. Palmares, the wells of the respondent were operated by contractors.
Otherwise stated, complainant[s] who are regular workers of the respondent, performing jobs necessary and
desirable to the business of the company, were eased out in the guise of retrenchment or redundancy [so that]
their jobs [will] be performed by workers belonging to a contractor.
In summation, retrenchment and/or redundancy not having been proved, complainants, therefore, were
illegally dismissed.[13]
The dispositive portion of the decision of the NLRC provides as follows:
WHEREFORE, premises considered, the Decision appealed from is hereby ordered SET ASIDE and VACATED
and in lieu thereof, the respondent Asian Alcohol Corporation is hereby ordered to reinstate complainants with
full backwages from the time they were dismissed on November 30, 1992 and up to actual reinstatement. Plus
10% attorneys fees.
SO ORDERED.[14]
On July 2, 1997, Asian Alcohol moved for reconsideration of the foregoing decision. On September 25, 1997,
the NLRC denied the motion.[15]
On January 12, 1998, Asian Alcohol filed in this Court a petition for certiorari assailing both the decision of the
NLRC and the resolution denying its reconsideration. It invoked the following grounds:
6. GROUNDS FOR THE PETITION
6.1 Public respondent has committed, as hereinafter shown, a manifest grave abuse of discretion amounting
to lack or excess of jurisdiction in declaring in its assailed Decision x x x and Resolution x x x that the termination
of the employment of private respondents by the petitioner herein is illegal and ordering their reinstatement
with full backwages from the time they were dismissed on November 30, 1992 up to their actual reinstatement,
plus 10% attorneys fees, said Decision and Resolution of the public respondents being contrary to the
established facts of the case, well-settled jurisprudence and the law on the matter.
6.2 Public respondent has likewise committed, as hereinafter shown, a manifest grave abuse of discretion
amounting to lack or excess of jurisdiction by totally disregarding and refusing to consider the factual findings
of the Executive Labor Arbiter with respect to the circumstances which rendered the positions of the private
respondents unnecessary, redundant and superfluous, thereby justifying the termination of their employment.
6.3 Public respondents has furthermore committed, as hereinafter shown, a manifest grave abuse of discretion
amounting to lack or excess of jurisdiction in giving full credit to the oral testimonies quoted in its assailed
Decision x x x and taking them as conclusive proof of the alleged replacement of the private respondents with
casual workers despite the fact that said quoted testimonies clearly amount to nothing but speculations,
surmises and conjectures.[16]
On March 25, 1998, we issued a Temporary Restraining Order[17] enjoining the NLRC from enforcing its
Decision and Resolution dated May 30, 1997 and September 25, 1997, respectively.
We find the petition meritorious.
Out of its concern for those with less privilege in life, this Court has inclined towards the worker and upheld his
cause in his conflicts with the employer.[18] This favored treatment is directed by the social justice policy of
the Constitution.[19] But while tilting the scales of justice in favor of workers, the fundamental law also
guarantees the right of the employer to reasonable returns from his investments.[20]Corollarily, the law allows
an employer to downsize his business to meet clear and continuing economic threats.[21] Thus, this Court has
upheld reductions in the work force to forestall business losses or stop the hemorrhaging of capital.[22]
The right of management to dismiss workers during periods of business recession and to install labor saving
devices to prevent losses is governed by Art. 283 of the Labor Code, as amended. It provides, viz.:
Art. 283. Closure of establishment and reduction of personnel.--The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment to prevent losses and in case of closures or
cessation of operations of establishment or undertaking not due to serious business losses or financial reverses,
the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year
of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole
year.[emphasis ours]
Under the foregoing provisions, retrenchment and redundancy are just causes for the employer to terminate
the services of workers to preserve the viability of the business. In exercising its right, however, management
must faithfully comply with the substantive and procedural requirements laid down by law and
jurisprudence.[23]
The requirements for valid retrenchment which must be proved by clear and convincing evidence are: (1) that
the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are
not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent
as perceived objectively and in good faith by the employer;[24] (2) that the employer served written notice
both to the employees and to the Department of Labor and Employment at least one month prior to the
intended date of retrenchment;[25] (3) that the employer pays the retrenched employees separation pay
equivalent to one month pay or at least month pay for every year of service, whichever is higher;[26] (4) that
the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest
and not to defeat or circumvent the employees right to security of tenure;[27] and (5) that the employer used
fair and reasonable criteria[28] in ascertaining who would be dismissed and who would be retained among the
employees, such as status (i.e., whether they are temporary, casual, regular or managerial employees),
efficiency, seniority,[29] physical fitness, age, and financial hardship for certain workers.[30]
The condition of business losses is normally shown by audited financial documents like yearly balance sheets
and profit and loss statements as well as annual income tax returns.[31] It is our ruling that financial statements
must be prepared and signed by independent auditors.[32] Unless duly audited, they can be assailed as self-
serving documents.[33] But it is not enough that only the financial statements for the year during which
retrenchment was undertaken, are presented in evidence. For it may happen that while the company has
indeed been losing, its losses may be on a downward trend, indicating that business is picking up and
retrenchment, being a drastic move, should no longer be resorted to.[34] Thus, the failure of the employer to
show its income or loss for the immediately preceding year or to prove that it expected no abatement of such
losses in the coming years, may bespeak the weakness of its cause.[35] It is necessary that the employer also
show that its losses increased through a period of time and that the condition of the company is not likely to
improve in the near future.[36]
In the instant case, private respondents never contested the veracity of the audited financial documents
proffered by Asian Alcohol before the Executive Labor Arbiter. Neither did they object their admissibility. They
show that petitioner has accumulated losses amounting to P306,764,349.00 and showing nary sign of abating
in the near future. The allegation of union busting is bereft of proof. Union and non-union members were
treated alike. The records show that the positions of fifty one (51) other non-union members were abolished
due to business losses.
In rejecting petitioners claim of business losses, the NLRC stated that the alleged deficits of the corporation did
not prove anything for the [petitioners][37] since they were incurred before the take over of Prior Holdings.
Theorizing that proof of losses before the take over is no proof of losses after the take over, it faulted Asian
Alcohol for retrenching private respondent on the ground of mere possible future losses[38].
We do not agree. It should be observed that Article 283 of the Labor Code uses the phrase retrenchment to
prevent losses. In its ordinary connotation, this phrase means that retrenchment must be undertaken by the
employer before losses are actually sustained.[39] We have, however, interpreted the law to mean that the
employer need not keep all his employees until after his losses shall have materialized.[40] Otherwise, the law
could be vulnerable to attack as undue taking of property for the benefit of another.[41]
In the case at bar, Prior Holdings took over the operations of Asian Alcohol in October 1991. Plain to see, the
last quarter losses in 1991 were already incurred under the new management. There were no signs that these
losses would abate. Irrefutable was the fact that losses have bled Asian Alcohol incessantly over a span of
several years. They were incurred under the management of the Parsons family and continued to be suffered
under the new management of Prior Holdings. Ultimately, it is Prior Holding that will absorb all the losses,
including those incurred under the former owners of the company. The law gives the new management every
right to undertake measures to save the company from bankruptcy.
We find that the reorganizational plan and comprehensive cost-saving program to turn the business around
were nor designed to bust the union of the private respondent. Retrenched were one hundred seventeen (117)
employees. Seventy two (72) of them including private respondent were separated because their positions had
become redundant. In this context, what may technically be considered as redundancy may verily be
considered as retrenchment measures.[42] Their positions had to be declared redundant to cut losses.

Redundancy exist when the service capability of the work is in excess of what is reasonably needed to meet the
demands on the enterprise. A redundant position is one rendered superfluous by any number of factors, such
as overhiring of workers, decreased volume of business, dropping of a particular product line previously
manufactured by the company or phasing out of a service activity priorly undertaken by the business.[43] Under
these conditions, the employer has no legal obligation to keep in its payroll more employees than are necessary
for the operation of its business.[44]

For the implementation of a redundancy program to be valid, the employer must comply with the following
requisites: (1) written notice served on both the employees and the Department of Labor and Employment at
least one moth prior to the intended date of retrenchment;[45] (2) payment of separation pay equivalent to at
least one month pay or at least one month pay for every year of service whichever is higher; (3) good faith in
abolishing the redundant positions;[46] and (4) fair and reasonable criteria in ascertaining what positions are
to be declared redundant and accordingly abolished.[47]
In the case at bar, private respondent Carias, Martinez and Sendon were water pump tenders. They tended the
water wells of Asian Alcohol located in Ubay, Pulupandan, Negros Occidental. However, Asian Alcohol did not
own the land where the wells stood. It only leased them.

In 1992, the lease contract which also provided for a right of way leading to the site of the wells, was terminated.
Also, the water from the wells had become salty due to extensive prawn farming nearby and could no longer
be used by Asian Alcohol for its purpose. The wells had to be closed and needless to say, the services of Carias,
Martinez and Sendon had to be terminated on the twin grounds of redundancy and retrenchment.

Private respondent Verayo was the briquetting plant operator in charge of the coal-fired boiler. Private
respondent Tormo was one of the three briquetting helpers. To enhance production efficiency, the new
management team shifted to the use of bunker fuel by about seventy percent (70%) to fire its boiler. The shift
meant substantial fuel cost savings. In the process, however the need for a briquetting plant operator ceased
as the services of only two (2) helpers were all that was necessary to attend to the much lesser amount of coal
required to run the boiler. Thus, the positions of private respondent Verayo had to be abolished. Of the three
(3) briquetting helpers, Tormo, was the oldest, being already 41 years old. The other two, Rudy Javier Jr. and
Eriberto Songaling, Jr., were younger, being only 28 and 35, respectively. Age, with the physical strength that
comes with it, was particularly taken into consideration by the management team in deciding whom to
separate. Hence, it was private respondent Tormo who was separated from service. The management choice
rested on a rational basis.

Private respondent Amacio was among the ten (10) mechanics who manned the machine shop at the plant site.
At their current production level, the new management found that it was more cost efficient to maintain only
nine (9) mechanics. In choosing whom to separate among the ten (10) mechanics, the management examined
employment records and reports to determine the least efficient among them. It was private respondent
Amacio who appeared the least efficient because of his poor health conditions.
Not one of the private respondents refuted the foregoing facts. They only contend that the new management
should have followed the policy of first in, last out in choosing which positions to declare as redundant or whom
to retrench to prevent further business losses. No law mandates such a policy. And the reason is simple enough.
A host of relevant factors come into play in determining cost efficient measures and in choosing the employees
who will be retained or separated to save the company from closing shop. In determining these issues,
management has to enjoy a pre-eminent role. The characterization of positions as redundant is an exercise of
business judgment on the part of the employer.[48] It will be upheld as long as it passes the test of
arbitrariness.[49]

Private respondents call our attention to their allegation that casuals were hired to replace Carias, Martinez
and Sendon as water pump tenders at the Ubay wells. They rely on the testimony of Engr. Federico Palmares,
Jr., the head of the Mechanical Engineering Department who admitted the engagement of independent
contractors to operate the wells. A reading of the testimony of Engr. Palmares, however, will reveal that he
referred not to the Ubay wells which were tended by private respondents Carias, Martinez and Sendon, but to
the Laura wells. Thus, he declared in cross examinations:
ATTY. YMBALLA: (cross-examination of respondent witness, Federico Palmares)
Q But in the Laura well?
WITNESS:
A Mansteel was hired as contractor.
ATTY. YMBALLA:
Q In other words, the persons mentioned are all workers of independent contractors?
WITNESS:
A I am not sure, maybe.[50]
In any event, we have held that an employers good faith in implementing a redundancy program is not
necessarily destroyed by availment of the services of an independent contractor to replace the services of the
terminated employees. We have previously ruled that the reduction of the number of workers in a company
made necessary by the introduction of the services of an independent contractor is justified when the latter is
undertaken in order to effectuate more economic and efficient methods of production.[51] In the case at bar,
private respondent failed to proffer any proof that the management acted in a malicious or arbitrary manner
in engaging the services of an independent contractor to operate the Laura wells. Absent such proof, the Court
has no basis to interfere with the bona fide decision of management to effect more economic and efficient
methods of production.
Finally, private respondents now claim that they signed the quitclaims, waivers and voluntary resignation
letters only to get their separation package. They maintain that in principle, they did not believe that their
dismissal was valid.

It is true that this court has generally held that quitclaims and releases are contrary to public policy and
therefore, void. Nonetheless, voluntary agreements that represents a reasonable settlement are binding on
the parties and should not later be disowned. It is only where there is clear proof that the waiver was wangled
from an unsuspecting or gullible person, or the terms of settlement are unconscionable, that the law will step
in to bail out the employees. While it is our duty to prevent the exploitation of employees, it is also behooves
us to protect the sanctity of contracts that do not contravene our laws.

In the case at bar, there is no showing that the quitclaims, waivers and voluntary resignation letters were
executed by the private respondents under force or duress. In truth, the documents embodied separation
benefits that were well beyond what the company was legally required to give private respondents. We note
that out of more than one hundred workers that were retrenched by Asian Alcohol, only these six (6) private
respondents were not impressed by the generosity of their employer. Their late complaints have no basis and
deserve our scant consideration.
IN VIEW WHEREOF, the petition is GRANTED. The Decision of the National Labor Relations Commission dated
May 30, 1997 and its Resolution dated September 25, 1997 are ANNULED AND SET ASIDE. The Decision of the
Executive Labor Arbiter dated January 10, 1996 in RAB Case No. 06-12-10893-92 is ORDERED REINSTATED.
The complaints for illegal dismissal filed by private respondents against Asian Alcohol Corporation are hereby
ORDERED DISMISSED FOR LACK OF MERIT. No cost.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena , JJ., concur.

VI.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 82249 February 7, 1991
WILTSHIRE FILE CO., INC., petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and VICENTE T. ONG, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Jose R. Millares & Associates for private respondent.

FELICIANO, J.:
Private respondent Vicente T. Ong was the Sales Manager of petitioner Wiltshire File Co., Inc. ("Wiltshire") from
16 March 1981 up to 18 June 1985. As such, he received a monthly salary of P14,375.00 excluding commissions
from sales which averaged P5,000.00 a month. He also enjoyed vacation leave with pay equivalent to P7,187,50
per year, as well as hospitalization privileges to the extent of P10,000.00 per year.
On 13 June 1985, upon private respondent's return from a business and pleasure trip abroad, he was informed
by the President of petitioner Wiltshire that his services were being terminated. Private respondent maintains
that he tried to get an explanation from management of his dismissal but to no avail. On 18 June 1985, when
private respondent again tried to speak with the President of Wiltshire, the company's security guard handed
him a letter which formally informed him that his services were being terminated upon the ground of
redundancy.
Private respondent filed, on 21 October 1985, a complaint before the Labor Arbiter for illegal dismissal alleging
that his position could not possibly be redundant because nobody (save himself) in the company was then
performing the same duties. Private respondent further contended that retrenching him could not prevent
further losses because it was in fact through his remarkable performance as Sales Manager that the Company
had an unprecedented increase in domestic market share the preceding year. For that accomplishment, he
continued, he was promoted to Marketing Manager and was authorized by the President to hire four (4) Sales
Executives five (5) months prior to his termination.
In its answer, petitioner company alleged that the termination of respondent's services was a cost-cutting
measure: that in December 1984, the company had experienced an unusually low volume of orders: and that it
was in fact forced to rotate its employees in order to save the company. Despite the rotation of employees,
petitioner alleged; it continued to experience financial losses and private respondent's position, Sales Manager
of the company, became redundant.
On 2 December 1986, during the proceedings before the Labor Arbiter, petitioner, in a letter1 addressed to the
Regional Director of the then Ministry of Labor and Employment, notified that official that effective 2 January
1987, petitioner would close its doors permanently due to substantial business losses.
In a decision dated 11 March 1987, the Labor Arbiter declared the termination of private respondent's services
illegal and ordered petitioner to pay private respondent backwages in the amount of P299,000.00, unpaid
salaries in the amount of P22,352.11, accumulated sick and vacation leaves in the amount of P12,543.91,
hospitalization benefit package in the amount of P10,000.00, unpaid commission in the amount of P57,500,00,
moral damages in the amount of P100,000.00 and attorney's fees in the amount of P51,639.60.

On appeal by petitioner Wiltshire, the National Labor Relations Commission ("NLRC") affirmed in toto on 9
February 1988 the decision of the Labor Arbiter. The NLRC held that:
The termination letter clearly spelled out that the main reason in terminating the services of complainant is
REDUNDANT and not retrenchment.
The supposed duplication of work of herein complainant and Mr. Deliva, the Vice-President is absent that
would justify redundancy. . . .

On the claim for moral damages, the NLRC pointed out that the effective date of private respondent's
termination was 18 July 1985, although it was only 18 June 1985 that he received the letter of termination, and
concluded that he was not given any opportunity to explain his position on the matter. The NLRC held that the
termination was attended by malice and bad faith on the part of petitioner, considering the manner of private
respondent was ordered by the President to pack up and remove his personal belongings from the office.
Private respondent was said to have been embarrassed before his immediate family and other acquaintance
due to his inability to explain the reasons behind the termination of his services.

In this Petition for Certiorari, it is submitted that private respondent's dismissal was justified and not illegal.
Petitioner maintains that it had been incurring business losses beginning 1984 and that it was compelled to
reduce the size of its personnel force. Petitioner also contends that redundancy as a cause for termination does
not necessarily mean duplication of work but a "situation where the services of an employee are in excess of
what is demanded by the needs of an undertaking . . ."

Having reviewed the record of this case, the Court has satisfied itself that indeed petitioner had serious financial
difficulties before, during and after the termination of the services of private respondent. For one thing, the
audited financial statements of the petitioner for its fiscal year ending on 31 July 1985 prepared by a firm of
independent auditors, showed a net loss in the amount of P4,431,321.00 and a total deficit or capital
impairment at the end of year of P6,776,493.00.2

In the preceding fiscal year (1983-1984), while the company showed a net after tax income of P843,506.00, it
actually suffered a deficit or capital impairment of P2,345,172.00. Most importantly, petitioner Wiltshire finally
closed its doors and terminated all operations in the Philippines on January 1987, barely two (2) years after the
termination of private respondent's employment. We consider that finally shutting down business operations
constitutes strong confirmatory evidence of petitioner's previous financial distress. The Court finds it very
difficult to suppose that petitioner Wiltshire would take the final and irrevocable step of closing down its
operations in the Philippines simply for the sole purpose of easing out a particular officer or employee, such as
the private respondent.
Turning to the legality of the termination of private respondent's employment, we find merit in petitioner's
basic argument. We are unable to sustain public respondent NLRC's holding that private respondent's dismissal
was not justified by redundancy and hence illegal. In the first place, we note that while the letter informing
private respondent of the termination of his services used the word "redundant", that letter also referred to the
company having "incur[red] financial losses which [in] fact has compelled [it] to resort to retrenchment to
prevent further losses".3

Thus, what the letter was in effect saying was that because of financial losses, retrenchment was necessary,
which retrenchment in turn resulted in the redundancy of private respondent's position.
In the second place, we do not believe that redundancy in an employer's personnel force necessarily or even
ordinarily refers to duplication of work. That no other person was holding the same position that private
respondent held prior to the termination of his services, does not show that his position had not become
redundant. Indeed, in any well-organized business enterprise, it would be surprising to find duplication of work
and two (2) or more people doing the work of one person. We believe that redundancy, for purposes of our
Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the
actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and
superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise.4

The employer has no legal obligation to keep in its payroll more employees than are necessarily for the
operation of its business.
In the third place, in the case at bar, petitioner Wiltshire, in view of the contraction of its volume of sales and in
order to cut down its operating expenses, effected some changes in its organization by abolishing some
positions and thereby effecting a reduction of its personnel. Thus, the position of Sales Manager was abolished
and the duties previously discharged by the Sales Manager simply added to the duties of the General Manager,
to whom the Sales Manager used to report.

It is of no legal moment that the financial troubles of the company were not of private respondent's making.
Private respondent cannot insist on the retention of his position upon the ground that he had not contributed
to the financial problems of Wiltshire. The characterization of private respondent's services as no longer
necessary or sustainable, and therefore properly terminable, was an exercise of business judgment on the part
of petitioner company. The wisdom or soundness of such characterization or decision was not subject to
discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or
merely arbitrary and malicious action is not shown. It should also be noted that the position held by private
respondent, Sales Manager, was clearly managerial in character. In D.M. Consunji, Inc. v. National Labor
Relations Commission,5 the Court held:

An employer has a much wider discretion in terminating the employment relationship of managerial personnel
as compared to rank and file employees. However, such prerogative of management to dismiss or lay off an
employee must be made without abuse of discretion, for what is at stake is not only the private respondent's
position but also his means of livelihood . . . .6
The determination of the continuing necessity of a particular officer or position in a business corporation is
management's prerogative, and the courts will not interfere with the exercise of such so long as no abuse of
discretion or merely arbitrary or malicious action on the part of management is shown.7
On the issue of moral damages, petitioner assails the finding of the NLRC that the dismissal was done in bad
faith. Petitioner argues that it had complied with the one-month notice required by law; that there was no need
for private respondent to be heard in his own defense considering that the termination of his services was for
a statutory or authorized cause; and that whatever humiliation might have been suffered by private respondent
arose from a lawful cause and hence could not be the basis of an award of moral damages.
Termination of an employee's services because of retrenchment to prevent further losses or redundancy, is
governed by Article 283 of the Labor Code which provides as follows:

Art. 283. Closure of establishment and reduction of personnel. –– The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business losses or financial reverses,
the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every of
service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

Termination of services for any of the above described causes should be distinguished from termination of
employment by reason of some blameworthy act or omission on the part of the employee, in which case the
applicable provision is Article 282 of the Labor Code which provides as follows:

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 representative; and
(e) Other causes analogous to the foregoing.
Sections 2 and 5 of Rule XIV entitled "Termination of Employment:" of the "Rules to Implement the Labor Code"
read as follows:
Sec. 2. Notice of dismissal. –– Any employer who seeks to dismiss a worker shall furnish him a written notice
stating the particular acts or omission constituting the grounds for his dismissal. In cases of abandonment of
work, the notice shall be served at the worker's last known address.
xxx xxx xxx
Sec. 5. Answer and hearing. –– The worker may answer the allegations stated against him in the notice of
dismissal within a reasonable period from receipt of such notice. The employer shall afford the worker ample
opportunity to be heard and to defend himself with the assistance of his representative if he so desires.
(emphasis supplied)
We note that Section 2 of Rule XIV quoted above requires the notice to specify "the particular acts or omissions
constituting the ground for his dismissal", a requirement which is obviously applicable where the ground for
dismissal is the commission of some act or omission falling within Article 282 of the Labor Code. Again, Section
5 gives the employee the right to answer and to defend himself against "the allegations stated against him in
the notice of dismissal". It is such allegations by the employer and any counter-allegations that the employee
may wish to make that need to be heard before dismissal is effected. Thus, Section 5 may be seen to envisage
charges against an employee constituting one or more of the just causes for dismissal listed in Article 282 of
the Labor Code. Where, as in the instant case, the ground for dismissal or termination of services does not
relate to a blameworthy act or omission on the part of the employee, there appears to us no need for an
investigation and hearing to be conducted by the employer who does not, to begin with, allege any
malfeasance or non-feasance on the part of the employee. In such case, there are no allegations which the
employee should refute and defend himself from. Thus, to require petitioner Wiltshire to hold a hearing, at
which private respondent would have had the right to be present, on the business and financial circumstances
compelling retrenchment and resulting in redundancy, would be to impose upon the employer an unnecessary
and inutile hearing as a condition for legality of termination.

This is not to say that the employee may not contest the reality or good faith character of the retrenchment or
redundancy asserted as grounds for termination of services. The appropriate forum for such controversion
would, however, be the Department of Labor and Employment and not an investigation or hearing to be held
by the employer itself. It is precisely for this reason that an employer seeking to terminate services of an
employee or employees because of "closure of establishment and reduction of personnel", is legally required
to give a written notice not only to the employee but also to the Department of Labor and Employment at least
one month before effectivity date of the termination. In the instant case, private respondent did controvert
before the appropriate labor authorities the grounds for termination of services set out in petitioner's letter to
him dated 17 June 1985.

We hold, therefore, that the NLRC's finding that private respondent had not been accorded due process, is
bereft of factual and legal bases. The award of moral damages that rests on such ground must accordingly fall.

While private respondent may well have suffered personal embarrassment by reason of termination of his
services, such fact alone cannot justify the award of moral damages. Moral damages are simply a species of
damages awarded to compensate one for injuries brought about by a wrongful act.8 As discussed above, the
termination of private respondent's services was not a wrongful act. There is in this case no clear and convincing
evidence of record showing that the termination of private respondent's services, while due to an authorized
or statutory cause, had been carried out in an arbitrary, capricious and malicious manner, with evident personal
ill-will. Embarrassment, even humiliation, that is not proximately caused by a wrongful act does not constitute
a basis for an award of moral damages.

Private respondent is, of course, entitled to separation pay and other benefits under Act 283 of the Labor Code
and petitioner's letter dated 17 June 1985.
ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Certiorari. The Resolutions of the
National Labor Relations Commission dated 9 February 1988 and 7 March 1988 are hereby SET ASIDE and
NULLIFIED. The Temporary Restraining Order issued by this Court on 21 March 1988 is hereby made
PERMANENT. No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur.

VII.

G.R. No. 100092 December 29, 1995

CENTRAL AZUCARERA DE LA CARLOTA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, CEBU CITY and REYNALDO
DECREPITO, respondents.

KAPUNAN, J.:
This petition for certiorari under Rule 65 of the Revised Rules of Court seeks to set aside the decision of the
National Labor Relations Commission promulgated on 24 January 1991 in NLRC-RAB-VI-06-09-10344-89
reversing the decision of Labor Arbiter Cesar P. Sideno dated 27 March 1989 and the resolution dated 14 March
1991 denying petitioner's motion for reconsideration thereof.
Derived from the record are the antecedent facts:

Private respondent Reynaldo Decrepito began his employment with petitioner in April 1981 and worked his
way up to his present position as Accounting Clerk II, earning a monthly salary of P1,801.00.1

On 31 March 1987 petitioner's Board of Directors passed a resolution authorizing its Vice President-Resident
Manager to undertake and implement a comprehensive cost reduction program to address petitioner's
financial difficulties "on account of huge financial losses suffered due to a big production shortfall (in the) last
crop year (which) was further aggravated by the reduction of areas planted to cane in the district and the recent
dry spell."2

Subsequently, petitioner apprised Reynaldo Decrepito of his dismissal due to retrenchment through a
memorandum dated 18 June 1987 terminating his services effective 23 June 1987.3
Decrepito received P2,622.00 as retrenchment pay and on 27 July 1987 he executed a Release and Quitclaim
absolving petitioner from any and all claims or liabilities.4

Alleging that the retrenchment program resorted to by petitioner was not based on valid grounds, on 16
September 1988, private respondent Decrepito filed a complaint against petitioner for reinstatement with
backwages, moral damages and attorney's fees.

On 27 March 1989, Labor Arbiter Cesar D. Sideno dismissed the case for lack of merit. He opined that private
respondent freely accepted the retrenchment and its concomitant effects as evidenced by his receipt of
separation pay and the release and quitclaim he voluntarily signed. He was, therefore, estopped from
questioning the same. The Labor Arbiter, likewise, ruled that petitioner was not precluded from hiring qualified
persons to technical and sensitive positions, observing that private respondent failed to prove that he was
qualified to fill up said positions.5

On appeal, the NLRC, in its assailed decision dated 24 January 1991, reversed the decision of the Labor Arbiter
on grounds that petitioner failed to comply with both the substantive and procedural requirements of a valid
retrenchment. The dispositive portion reads thus:

WHEREFORE, in view of all the foregoing, the decision appealed from is REVERSED and SET ASIDE and a new
one entered finding the dismissal of complainant illegal. Respondent is hereby ordered to reinstate the
complainant to his former position or substantially equivalent position without loss of seniority and to pay his
backwages for three (3) years without qualification or deduction.
The attorney's fees is hereby fixed at P2,500.00.
The amount of P2,622.00 received by the complainant as separation pay and his acknowledged debt of
P11,737.00 less payment he may have made on said account, if any, shall be deducted from the award of
backwages herein.
All other claims are dismissed.
SO ORDERED.6
Aggrieved, petitioner challenged the aforementioned decision on the following grounds:
A
The Respondent Commission whimsically and capriciously disregarded petitioner's clear and unrebutted
evidence that there was justifiable and legal basis for retrenchment.
B
The Respondent Commission whimsically and capriciously concluded that the petitioner has the propensity to
abuse the privilege granted the employees under Article 283 of the Labor Code.
C
The Respondent Commission whimsically and capriciously concluded that the petitioner has no criterion in the
implementation of retrenchment process.
D
The Respondent Commission whimsically and capriciously required the petitioner to prove losses in order to
validly adopt and implement retrenchment of employees.
E
The Respondent Commission totally disregarded and whimsically ignored the findings of the Honorable Labor
Arbiter that respondent Decrepito fully and voluntarily accepted his retrenchment, with full knowledge of its
effects and consequences.
F
The Respondent Commission ordered reinstatement with backwages, notwithstanding the fact that the
retrenchment of respondent Decrepito was for just causes and voluntarily accepted by the private respondent.7
The petition has no merit and we deny the same.
The controversy may be narrowed down to two main issues:
a) Whether or not the dismissal of private respondent due to retrenchment was valid and justified, and;
b) Whether or not private respondent was estopped from questioning his dismissal on the basis of the release
and quitclaim he allegedly freely signed.

We shall resolve the issues sequentially.

Art. 283 of the Labor Code8 allows employers to dismiss employees on economic grounds and retrenchment,
to avoid or minimize business losses, is one such ground.

Retrenchment is a management prerogative, a means to protect and preserve the employer's viability and
ensure his survival. When confronted by trying times, this Court should respect and uphold such prerogative,
subject, however, to faithful compliance by management with the substantive and procedural requirements
laid down by law and jurisprudence.

On the substantive aspect, the employer should comply with the so-called "four standards of retrenchment" as
enumerated and elucidated in the case of Lopez Sugar Corporation v. Federation of Free Workers:9

xxx xxx xxx

We consider it may be useful to sketch the general standards in terms of which the acts of petitioner employer
must be appraised. Firstly, the losses expected should be substantial and not merely de minimis in extent. If
the loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and
inconsequential in character, the bonafide nature of the retrenchment would appear to be seriously in question.
Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can be perceived
objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency for
the retrenchment, which is after all a drastic recourse with serious consequences for the livelihood of the
employees retired or otherwise laid-off. Because of the consequential nature of retrenchment, it must, thirdly,
be reasonably necessary and likely to effectively prevent the expected losses. The employer should have taken
other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs than labor costs. An
employer who, for instance, lays off substantial numbers of workers while continuing to dispense fat executive
bonuses and perquisites or so-called "golden parachutes", can scarcely claim to be retrenching in good faith to
avoid losses. To impart operational meaning to the constitutional policy of providing "full protection" to labor,
the employer's prerogative to bring down labor costs by retrenching must be exercised essentially as a measure
of last resort, after less drastic means — e.g., reduction of both management and rank-and-file bonuses and
salaries, going on reduced time, improving manufacturing efficiencies, trimming of marketing and advertising
costs, etc. — have been tried and found wanting.

Lastly, but certainly not the least important, alleged losses if already realized, and the expected imminent
losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason for requiring
this quantum of proof is readily apparent: any less exacting standard of proof would render too easy the abuse
of this ground for termination of services of employees. (Emphasis ours.)
xxx xxx xxx
In the case at bench, petitioner dismally failed to present adequate, credible and persuasive evidence that it
was in dire financial straits and indeed suffering, or will imminently suffer, from drastic business losses.

A litany of woes, from a labor strike way back in 1982 to the various crises endured by the sugar industry,
droughts, the 1983 assassination of former Senator Benigno Aquino, Jr., high crop loan interests, spiralling
prices of fertilizers and spare parts, the depression of sugar prices in the world market, cutback in the U.S. sugar
quota, abandonment of productive areas because of the insurgency problem and the absence of fair and
consistent government policies may have contributed to the unprecedented decline in sugar production in the
country,10 but there is no solid evidence that they translated into specific and substantial losses that would
necessitate retrenchment. Just exactly what negative effects were borne by petitioner as a result, petitioner
failed to underscore.
In the case of Indino v. NLRC, we held thus:

It is almost an inflexible rule that employers who contemplate terminating the services of their workers cannot
be so arbitrary and ruthless as to find flimsy excuses for their decisions. This must be so considering that the
dismissal of an employee from work involves not only the loss of his position but more important, his means of
livelihood. Applying this caveat to the case at bar, it was therefore incumbent for respondent DISC, before
putting into effect any retrenchment process on its work force, to show by convincing evidence that it was
being wrecked by serious financial problems. Simply stating its state of insolvency or its impending doom will
not be sufficient. To do so would render the security of tenure of workers and employees illusory. In a grander
scale, to hold as valid and legal the respondent DISC's act would be disastrous to labor. Any employer desirous
of ridding itself of its employees could then easily do so without need to adduce proof in support of its action.
We can not countenance this. Security of tenure is a right guaranteed to employees and workers by the
Constitution and should not be denied on the basis of mere speculation. 11 (Emphasis ours.)
We give little consideration to the certification issued by the Sugar Regulatory Administration illustrating the
decline in petitioner's sugar production. A similar allegation was made by Lopez Sugar Corporation against the
Federation of Free Workers and we answered in this wise:
xxx xxx xxx
The submissions made by petitioner in this respect are basically that from the crop year 1975-1976 to the crop
year 1980-1981, the amount of cane deliveries made to petitioner Central was declining and that the degree of
utilization of the mill's capacity and the sugar recovery from the cane actually processed, were similarly
declining. . . .
The principal difficulty with petitioner's case as above presented was that no proof of actual declining gross
and net revenues were submitted. No audited financial statements showing the financial condition of
petitioner corporation during the above mentioned crop years were submitted. Since financial statements
audited by independent external auditors constitute the normal method of proof of the profit and loss
performance of a company, it is not easy to understand why petitioner should have failed to submit such
financial statements.
Moreover, while petitioner made passing reference to cost reduction measures it had allegedly undertaken, it
was, once more, a fairly conspicuous failure to specify the cost-reduction measures actually undertaken in good
faith before resorting to retrenchment. . . . .12 (Emphasis ours.)
xxx xxx xxx
As fairly observed by the Office of the Solicitor General:
Petitioner has not shown that alleged decrease in its production has correspondingly reduced its income
resulting in serious business losses. It has likewise failed to show how the dismissal of an office clerk, like private
respondent, would effectively avert further losses and improve its financial condition.13
Petitioner, in the case at bench, even admitted that it did not present evidence to prove its business losses. Its
rationale that "because of the timely retrenchments to prevent losses, these losses were avoided and therefore
cannot be proven to have been incurred" 14 is simply absurd. We have always emphasized that:
. . . (I)t is essentially required that the alleged losses in business operations must be prove(n). (National
Federation of Labor Unions [NAFLU] vs. Ople, 143 SCRA 124 [1986]). Otherwise, said ground for termination
would be susceptible to abuse by scheming employers who might be merely feigning business losses or
reverses in their business ventures in order to ease out employees.15
Petitioner, likewise, failed to comply with the procedural requisites of Art. 283 of the Labor Code. The law
mandatorily requires that written notice be given to both the employee concerned and the DOLE at least one
(1) month prior to the intended date of retrenchment to enable the former to find other employment and the
latter to determine the validity of said retrenchment.16
True, petitioner sent private respondent a memorandum 17 regarding the retrenchment. However, this was
given only five (5) days before the effectivity of said retrenchment. Worse, the notice of retrenchment was
received by the Department of Labor and Employment (DOLE) only on 1 July 1987 or after private respondent
was dismissed.18Such perfunctory "compliance" cannot be countenanced for it defeats the purpose of
requiring notice in the first place.
On the issue of estoppel, it will suffice to reiterate our ruling in Lourdes Marcos, et al. v. NLRC:19
We have heretofore explained that the reason why quitclaims are commonly frowned upon as contrary to
public policy, and why they are held to be ineffective to bar claims for the full measure of the workers' legal
rights, is the fact that the employer and the employee obviously do not stand on the same footing. The
employer drove the employee to the wall. The latter must have to get hold of money. Because, out of job, he
had to face the harsh necessities of life. He thus found himself in no position to resist money proffered. His,
then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent on their
claim. They pressed it. They are deemed not have waived any of their rights.
WHEREFORE, the petition for certiorari is hereby DISMISSED and the decision of the NLRC is hereby
AFFIRMED.
SO ORDERED.
Padilla, Davide, Jr., Bellosillo and Hermosisima, Jr., JJ., concur.

VIII.
FIRST DIVISION

G.R. No. 106256 December 28, 1994

MAYA FARMS EMPLOYEES ORGANIZATION, MAYA REALTY AND LIVESTOCK SUPERVISORY UNION,
MAYA FARMS EMPLOYEES ASSOCIATION, and MAYA FARMS, INC. SUPERVISORY UNION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MAYA REALTY & LIVESTOCK, INC., MAYA FARMS, INC.,
and LIBERTY FLOUR MILLS, INC., respondents.
Paterno D. Menzon Law Office for petitioners.
Angara, Abello, Concepcion, Regala & Cruz for private respondents.

KAPUNAN, J.:
This petition for review on certiorari seeks to set aside the decision of public respondent National Labor
Relations Commission (NLRC) which upheld the legality of the separation of sixty-six (66) employees who are
members of petitioner unions, thereby dismissing petitioners' complaint against private respondents for
violation of collective bargaining agreement (CBA) and unfair labor practice.
Private respondents Maya Farms, Inc. and Maya Realty and Livestock Corporation belong to the Liberty Mills
group of companies whose undertakings include the operation of a meat processing plant which produces ham,
bacon, cold cuts, sausages and other meat and poultry products.
Petitioners, on the other hand, are the exclusive bargaining agents of the employees of Maya Farms, Inc. and
the Maya Realty and Livestock Corporation.
On April 12, 1991, private respondents announced the adoption of an early retirement program as a cost-
cutting measure considering that their business operations suffered major setbacks over the years. The
program was voluntary and could be availed of only by employees with at least eight (8) years of service.1
Dialogues were thereafter conducted to give the parties an opportunity to discuss the details of the program.
Accordingly, the program was amended to reduce the minimum requirement of eight (8) years of service to
only five (5) years.
However, the response to the program was nil. There were only a few takers. To avert further losses, private
respondents were constrained to look into the companies' organizational set-up in order to streamline
operations. Consequently, the early retirement program was converted into a special redundancy program
intended to reduce the work force to an optimum number so as to make operations more viable.
In December 1991, a total of sixty-nine (69) employees from the two companies availed of the special
redundancy program.
On January 17, 1992, the two companies sent letters to sixty-six (66) employees informing them that their
respective positions had been declared redundant. The notices likewise stated that their services would be
terminated effective thirty (30) days from receipt thereof. Separation benefits, including the conversion of all
earned leave credits and other benefits due under existing CBAs were thereafter paid to those affected.
On January 24, 1992, a notice of strike was filed by the petitioners which accused private respondents, among
others, of unfair labor practice, violation of CBA and discrimination. Conciliation proceedings were held by the
National Conciliation and Mediation Board (NCMB) but the parties failed to arrive at a settlement.

On February 6, 1992, the two companies filed a petition with the Secretary of Labor and Employment asking
the latter to assume jurisdiction over the case and/or certify the same for compulsory arbitration. Thus, on
February 12, 1992, the then Acting Labor Secretary (now Secretary) Nieves Confesor certified the case to herein
public respondent for compulsory arbitration.
On March 4, 1992, the parties were called to a hearing to identify the issues involved in the case. Thereafter,
they were ordered to submit their respective position papers.
In their position paper, petitioners averred that in the dismissal of
sixty-six (66) union officers and members on the ground of redundancy, private respondents circumvented the
provisions in their CBA, more particularly, Section 2, Article III thereof. Said provision reads:

Sec. 2. LIFO RULE. — In all cases of lay-off or retrenchment resulting in termination of employment in the line
of work, the
Last-In-First-Out (LIFO) Rule must always be strictly observed.
Petitioners also alleged that the companies' claim that they were in economic crisis was fabricated because in
1990, a net income of over 83 million pesos was realized by Liberty Flour Mills Group of Companies.2
Furthermore, with the termination of the sixty-six (66) employees pursuant to the special redundancy program,
the remaining work force, especially the drivers, became overworked and overburdened so much so that they
found themselves doing overtime work and reporting for duty even during rest days.

Invoking the workers' constitutional right to security of tenure, petitioners prayed for the reinstatement of the
sixty-six (66) employees and the payment of attorney's fees as they were constrained to hire the services of
counsel in order to protect the workers' rights.
On their part, private respondents contend that their decision to implement a special redundancy program was
an exercise of management prerogative which could not be interfered with unless it is shown to be tainted with
bad faith and ill motive. Private respondents explained that they had no choice but to reduce their work force,
otherwise, they would suffer more losses. Furthermore, they denied that the program violated CBA provisions.

On June 29, 1992, public respondent rendered a decision, 3 the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered confirming the legality of the separation
of the 66 employees of management thereby dismissing the charges of violation of CBA and unfair labor
practice on the part of management. Accordingly, Maya Farms Incorporated and Maya Realty and Livestocks
Inc. are hereby ordered to comply with its (sic) undertaking per the notice of termination dated January 17,
1992 issued to the remaining fifty three (53) employees paying them their respective separation benefits as
listed in the attached sheet considered part of this Decision. Said awards (sic) is in addition to other benefits as
extended by the companies in the letter of termination.

SO ORDERED.4
Not satisfied with the above-quoted decision, petitioners interposed the instant petition.
Petitioners maintain that public respondent grossly erred and gravely abused its discretion when it ruled that:
(a) the termination of the sixty-six (66) employees was in accordance with the LIFO rule in the CBA; (b) the
termination of the sixty-six (66) employees was in accordance with Article 283 of the Labor Code; and (c) the
payment or offer of payment can substitute for the 30-day required notice prior to termination.5
A close scrutiny of these assigned errors however, shows that the same primarily deal with the factual findings
of public respondent which we are not at liberty to set aside in the absence of grave abuse of discretion
amounting to lack or in excess of jurisdiction.

This Court has consistently ruled that findings of fact of administrative agencies and quasi-judicial bodies which
have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not
only respect but even finality6 and are binding upon this Court unless there is a showing of grave abuse of
discretion,7 or where it is clearly shown that they were arrived at arbitrarily or in disregard of the evidence on
record.8

Nevertheless, we will look into the factual findings of public respondent if only to determine whether there was
grave abuse of discretion amounting to lack or in excess of jurisdiction.
The termination of the sixty-six employees was done in accordance with Article 283 of the Labor Code. The
basis for this was the companies' study to streamline operations so as to make them more viable. Positions
which overlapped each other, or which are in excess of the requirements of the service, were declared
redundant.

Article 283 provides:

Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the
employment of any employee due to the installation of labor-saving devises, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing in the provisions of this title, by serving a written notice on the workers and
the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of
retrenchment to prevent losses of operations of establishment or undertaking not due to serious business
losses or financial reverses, the one (1) month pay or at least zone-half (1/2) pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
We fully agree with the findings and conclusions of the public respondent on the issue of termination, to wit:

We sustain the companies' prerogative to adopt the alleged redundancy/retrenchment program to minimize if
not, to avert losses in the conduct of its operations. This has been recognized in a line of cases. (Wiltshire File
Co. vs. NLRC, G.R. No. L-82249, February 7, 1991). However, the companies' decision on this matter is not
absolute. The basis for such an action must be far from being whimsical and the same must be proved by
substantial evidence. In addition, the implementation of such a decision or policy must be in accordance with
existing laws, rules and procedure and provisions of the CBA between the parties, if there be any. Short of any
of these conditions, management policy to pursue and terminate its employees allegedly to avert losses, must
fail.

In subject case, the 66 complaining employees were separated from service as a result of the decision of
management to limit its operations and streamline positions and personnel requirements.
In the case of Maya Farms, Inc. its meat processing department, prior to the adoption of special redundancy
program had four (4) sections each of which is headed by an assistant superintendent. These 3 sections are: (a)
meat processing; (b) slaughterhouse; (c) packing. With the implementation of the decision of management to
limit meat processing with sausages as the only output, only one position for assistant superintendent was
retained that of Asst. Superintendent for meat processing held by Lydia Bandong. (Plantilla attached to the
letter of May 24, 1992; also Exh. "E." Likewise, positions of slicer/seater operator, debonner/skinner, ham and
bacon operative, were scrapped. Similarly, positions for packers were decreased retaining only five positions
out of 21 packers. Also affected were the positions of egg sorters/stockers as only 4 positions were retained out
of ten (10) positions.

A close examination of the positions retained by management show that said positions such as egg sorter,
debonner were but the minimal positions required to sustain the limited functions/operations of the meat
processing department. In the absence of any evidence to prove bad faith on the part of management in
arriving at such decision, which records on hand failed to show in instant case, the rationality of the act of
management in this regard must be sustained. While it may be true that the Liberty Flour Mills Group of
Companies as a whole posted a net income of P83.3 Million, it is admitted that with respect to operations of
the meat processing and livestock which were undertaken by herein companies sustained losses in the sum of
P2,257,649.88 (Exh. "3"). This is the reason, as advanced by management, for its decision to streamline
positions resulting in the reduction of manpower compliment (sic).9

In Abbott Laboratories (Phils.) Inc. vs. NLRC, 10 we had occasion to uphold the employer in its exercise of what
are clearly management prerogatives, thus:

The hiring, firing, transfer, demotion, and promotion of employees has been traditionally, identified as a
management prerogative subject to limitations found in law, a collective bargaining agreement or general
principles of fair play and justice. This is a function associated with the employer's inherent right to control and
manage effectively its enterprise. Even as the law is solicitous of the welfare of the employees, it must also
protect the right of an employer to exercise what are clearly management prerogatives. The free will of
management to conduct its own business affairs to achieve its purpose cannot be denied (see Dangan vs.
National Labor Relations Commission, 127 SCRA 706).
The rule is well-settled that labor laws discourage interference with an employer's judgment in the conduct of
his business. Even as the law is solicitous of the welfare of employees, it must also protect the right of an
employer to exercise what are clearly management prerogatives. As long as the company's exercise of the
same is in good faith to advance its interest and not for the purpose of defeating or circumventing the rights of
employees under the laws or valid agreements, such exercise will be upheld. 11

The NLRC correctly held that private respondents did not violate the LIFO rule under Section 2, Article III of the
CBA which provides:

Sec. 2. LIFO RULE. In all cases of lay-off or retrenchment resulting in termination of employment in the line of
work, the
Last-in-First-Out (LIFO) Rule must always be strictly observed.
It is not disputed that the LIFO rule applies to termination of employment in the line of work. 12 Verily, what is
contemplated in the LIFO rule is that when there are two or more employees occupying the same position in
the company affected by the retrenchment program, the last one employed will necessarily be the first to go.
Moreover, the reason why there was no violation of the LIFO rule was amply explained by public respondent in
this wise:
. . . . The LIFO rule under the CBA is explicit. It is ordained that in cases of retrenchment resulting in termination
of employment in line of work, the employee who was employed on the latest date must be the first one to go.
The provision speaks of termination in the line of work. This contemplates a situation where employees
occupying the same position in the company are to be affected by the retrenchment program. Since there
ought to be a reduction in the number of personnel in such positions, the length of service of each employees
is the determining factor, such that the employee who has a longer period of employment will be retained.
In the case under consideration, specifically with respect to Maya Farms, several positions were affected by the
special involuntary redundancy program. These are packers, egg sorters/stockers, drivers. In the case of
packers, prior to the involuntary redundancy program,
twenty-one employees occupied the position of packers. Out of this number, only 5 were retained. In this group
of employees, the earliest date of employment was October 27, 1969, and the latest packer was employed in
1989. The most senior employees occupying the position of packers who were retained are as follows:
Santos, Laura C. Oct. 27, 1969
Estrada, Mercedes Aug. 20, 1970
Hortaleza, Lita June 11, 1971
Jimenez, Lolita April 25, 1972
Aquino, Teresita June 25, 1975
All the other packers employed after June 2, 1975 (sic) were separated from the service.
The same is true with respect to egg sorters. The egg sorters employed on or before April 26, 1972 were
retained. All those employed after said date were separated.
With respect to the position of drivers, there were eight drivers prior to the involuntary redundancy program.
Thereafter only 3 positions were retained. Accordingly, the three drivers who were most senior in terms of
period of employment, were retained. They are: Ceferino D. Narag, Efren Macaraig and Pablito Macaraig.
The case of Roberta Cabrera and Lydia C. Bandong, Asst. Superintendent for packing and Asst. Superintendent
for meat processing respectively was presented by the union as an instance where the LIFO rule was not
observed by management. The union pointed out that Lydia Bandong who was retained by management was
employed on a much later date than Roberta Cabrera, and both are Assistant Superintendent. We cannot
sustain the union's argument. It is indeed true that Roberta Cabrera was employed earlier (January 28, 1961)
and (sic) Lydia Bandong (July 9, 1966). However, it is maintained that in meat processing department there
were 3 Asst. Superintendents assigned as head of the 3 sections thereat. The reason advanced by the company
in retaining Bandong was that as Asst. Superintendent for meat processing she could "already take care of the
operations of the other sections." The nature of work of each assistant superintendent as well as experience
were taken into account by management. Such criteria was not shown to be whimsical nor carpricious (sic).
13(Emphasis supplied).
Finally, contrary to petitioners' contention, there is nothing on record to show that the 30-day notice of
termination to the workers was disregarded and that the same substituted with separation pay by private
respondents. As found by public respondent, written notices of separation were sent to the employees on
January 17, 1992. The notices expressly stated that the termination of employment was to take effect one
month from receipt thereof. Therefore, the allegation that separation pay was given in lieu of the 30-day notice
required by law is baseless.
WHEREFORE, finding no grave abuse of discretion amounting to lack or in excess of jurisdiction on the part of
public respondent, the instant petition is hereby DISMISSED.
SO ORDERED.
Padilla, Davide, Jr., Bellosillo and Quiason, JJ., concur.

IX.
SECOND DIVISION
[G.R. No. 122876. February 17, 2000]
CHENIVER DECO PRINT TECHNICS CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION (SECOND DIVISION), CFW-MAGKAKAISANG LAKAS NG MGA MANGGAGAWA SA
CHENIVER DECO PRINT TECHNIC CORPORATION, EDGARDO VIGUESILLA, respondents.
DECISION

QUISUMBING, J.:
This special civil action for certiorari seeks to annul the resolution of public respondent promulgated on May
31, 1995, in NLRC NCR CA 007946-94, and its resolution dated August 14, 1995, which denied petitioners
motion for reconsideration.
Petitioner is a duly organized corporation operating its printing business in Visita St., Barangay Sta. Cruz,
Makati. Private respondent CFW-Magkakaisang Lakas ng mga Manggagawa sa Cheniver Deco Print Technic
Corporation is a registered labor union affiliated with the Confederation of Free Workers (CFW). Private
respondent Edgardo Viguesilla and twenty-two (22) others are members of aforesaid union and former
employees of petitioner.
The records disclose that on June 5, 1992, petitioner informed its workers about the transfer of the company
from its site in Makati to Sto. Tomas, Batangas. Petitioner decided to relocate its business in view of the
expiration of the lease contract on the premises it occupied in Makati and the refusal of the lessor to renew the
same. Earlier, the local authorities also took action to force out petitioner from Makati because of the alleged
hazards petitioners plant posed to the residents nearby.
In view of the impending transfer, petitioner gave its employees up to the end of June 1992 to inform
management of their willingness to go with petitioner, otherwise, it would hire replacements. On June 27,
1992, petitioner reminded its workers of the following schedule to be followed:
June 29, 1992 - last day of operation in Makati
July 1-31, 1992 - temporary shutdown to give way to transfer of operation
August 1, 1992 - start of operation at new site in Sto. Tomas, Batangas.
On August 4, 1992, petitioner wrote its employees to report to the new location within seven days, otherwise,
they would be considered to have lost interest in their work and would be replaced. Five days later, the union
advised petitioner that its members are not willing to go along with the transfer to the new site. Nonetheless,
petitioner gave its workers additional time within which to report to the new work place. Later on, the labor
federation informed petitioner that the employees decided to continue working for petitioner. However, not
one reported for work at petitioners new site. It appears that several employees namely, Edgar Paquit, Dexter
Mitschek, Nicanor Quebec, Maricris Polvorosa, Vicente Solis, Eugene De la Cruz, Rodel Gomez, Marylin
Macaraig, Diomedis Poblio, Albert Pimentel, Marieta Ramos, Gilbert Saquibal, Marlon Tafalla, Eduardo
Jolbitado, Solitario Andres, Maria Cecilia Perez and Wilfredo Flores, decided not to work at the new site but
just opted to be paid financial assistance offered by petitioner.
On the other hand, the remaining workers (private respondents herein) filed a complaint against petitioner for
unfair labor practice, illegal dismissal, underpayment of wages, non-payment of legal holiday pay, 13th month
pay, incentive leave pay and separation pay. On October 27, 1994, the labor arbiter rendered a decision
declaring the transfer of petitioners operation valid and absolving petitioner of the charges of unfair labor
practice and illegal dismissal. However, the labor arbiter directed petitioner to pay private respondents their
separation pay and other money claims as well as attorneys fees, decreeing as follows:
"WHEREFORE, premises considered, judgment is hereby rendered:
1. Declaring respondent company not guilty of unfair labor practice. (ULP);
2. Declaring respondent company not guilty of illegal dismissal and illegal lay-off but directing it to pay the
individual complaints their separation pay, to wit:
a) Adeser, Tarcisio ----------- P 20,280.00
b) Albino, Silveria ----------- 36,816.00
c) Arizala, Imelda ----------- 18,408.00
d) Canares, Danilo ----------- 36,816.00
e) Carin, Elena ---------- 12,272.00
f) Cabanatan, Lourdes ----------- 9,204.00
g) Dizon, Juanito ----------- 12,272.00
h) Domingo, Salome -------- 24,544.00
i) Esguerra, Bonifacio ---------- 21,476.00
j) Famillaran, Benjamin ----------- 27,612.00
k) Gabucan, Amelia ------------ 15,340.00
l) Ibardolaza, Hadjie ------------- 21,476.00
m) Jores, Nelita ------------- 18,408.00
n) Largadas, Mario ------------- 9,204.00
o) Mitschek, Dexter ------------- 33,748.00
p) Paquit, Edgar ------------- 15,340.00
q) Panotes, Roel ------------- 12,272.00
r) Pedrigosa, Lerma ------------- 18,408.00
s) Pedrigosa, Liza ------------- 18,408.00
t) Ulzoron, Yolanda ------------- 9,204.00
u) Viguesilla, Edgardo ------------ 21,476.00
v) Viray, Ruel ---------------- 9,204.00
_____________
P 422,188.00
3. Directing respondent company to pay complainants the sum of P280,010.00 as to their other money claims
aforestated, distributed as follows:
a) Adeser, Tarcisio ---------------- P 5,330.00
b) Albino, Silveria -------------- 13,080.00
c) Arizala, Imelda -------------- 13,080.00
d) Canares, Danilo -------------- 13,080.00
e) Carin, Elena -------------- 13,080.00
f) Cabanatan, Lourdes ------------- 13,080.00
g) Dizon, Juanito -------------- 13,080.00
h) Domingo, Salome -------------- 13,080.00
i) Esguerra, Bonifacio ------------- 13,080.00
j) Famillaran, Benjamin ----------- 13,080.00
k) Gabucan, Amelia -------------- 13,080.00
l) Ibardolaza, Hadjie -------------- 13,080.00
m) Jores, Nelita -------------- 13,080.00
n) Largadas, Mario -------------- 13,080.00
o) Mitschek, Dexter -------------- 13,080.00
p) Paquit, Edgar -------------- 13,080.00
q) Panotes, Roel -------------- 13,080.00
r) Pedrigosa, Lerma -------------- 13,080.00
s) Pedrigosa, Liza -------------- 13,080.00
t) Ulzoron, Yolanda -------------- 13,080.00
u) Viguesilla, Edgardo ------------ 13,080.00
v) Viray, Ruel -------------- 13,080.00
______________
P 280,010.00
4. Directing respondent company to pay complainants attorneys fees of ten (10%) percent based on the totality
of the monetary award.
Other claims are hereby dismissed for lack of factual and legal basis.
SO ORDERED."[1]
On appeal, respondent NLRC affirmed with modification the decision of the labor arbiter by deleting the award
of attorneys fees, thus:
"For all of the foregoing the decision appealed from is hereby AFFIRMED with modification that the award of
attorneys fees be deleted for lack of legal and factual basis.
SO ORDERED."[2]
Its motion for reconsideration having been denied, petitioner filed the instant petition alleging that public
respondent committed grave abuse of discretion in:
"I
AFFIRMING THE LABOR ARBITERS AWARD OF SEPARATION PAY TO PRIVATE RESPONDENTS;
II
AFFIRMING THE AWARD OF OTHER MONEY CLAIMS TO PRIVATE RESPONDENTS WITHOUT BASIS IN
FACT AND [IN] LAW AS SHOWN BY LACK OF COMPUTATION OF THE SAME."[3]
Petitioner contends that the transfer of its business is neither a closure nor retrenchment, hence, separation
pay should not be awarded to the private respondents. It also avers that private respondents were not
terminated from the service but they resigned from their job because they find the new work site too far from
their residences.
The foregoing contention lacks factual and legal basis, hence, bereft of merit.
Broadly speaking, there appears no complete dissolution of petitioners business undertaking but the relocation
of petitioners plant to Batangas, in our view, amounts to cessation of petitioners business operations in Makati.
It must be stressed that the phrase "closure or cessation of operation of an establishment or undertaking not
due to serious business losses or reverses" under Article 283 of the Labor Code includes both the complete
cessation of all business operations and the cessation of only part of a companys business.[4] In Philippine
Tobacco Flue-Curing & Redrying Corp. vs. NLRC,[5] a company transferred its tobacco processing plant in
Balintawak, Quezon City to Candon, Ilocos Sur. The company therein did not actually close its entire business
but merely relocated its tobacco processing and redrying operations to another place. Yet, this Court
considered the transfer as closure not due to serious business losses for which the workers are entitled to
separation pay.
There is no doubt that petitioner has legitimate reason to relocate its plant because of the expiration of the
lease contract on the premises it occupied. That is its prerogative. But even though the transfer was due to a
reason beyond its control, petitioner has to accord its employees some relief in the form of severance pay.
Thus, in E. Razon, Inc. vs. Secretary of Labor and Employment,[6] petitioner therein provides arrastre services
in all piers in South Harbor, Manila, under a management contract with the Philippine Ports Authority. Before
the expiration of the term of the contract, the PPA cancelled the said contract resulting in the termination of
employment of workers engaged by petitioner. Obviously, the cancellation was not sought, much less desired
by petitioner. Nevertheless, this Court required petitioner therein to pay its workers separation pay in view of
the cessation of its arrastre operations.
Now, let it be noted that the termination of employment by reason of closure or cessation of business is
authorized under Article 283 of the Labor Code which provides:
"ART. 283. Closure of establishment and reduction of personnel. -- The employer may terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month pay or at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business losses or financial reverses,
the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year
of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year."
Consequently, petitioner herein must pay his employees their termination pay in the amount corresponding to
their length of service. Since the closure of petitioners business is not on account of serious business losses,
petitioner shall give private respondents separation pay equivalent to at least one (1) month or one-half (1/2)
month pay for every year of service, whichever is higher.
Petitioners contention that private respondents resigned from their jobs, does not appear convincing. As public
respondent observed, the subsequent transfer of petitioner to another place hardly accessible to its workers
resulted in the latters untimely separation from the service not to their own liking, hence, not construable as
resignation.[7] Resignation must be voluntary and made with the intention of relinquishing the office,
accompanied with an act of relinquishment.[8] Indeed, it would have been illogical for private respondents
herein to resign and then file a complaint for illegal dismissal. Resignation is inconsistent with the filing of the
said complaint.[9]
As to petitioners assertion that private respondents resorted to forum shopping, the same deserves scant
consideration. As noted by the Solicitor General, private respondents claims in this case are based on
underpayment of wages, legal holiday pay, service incentive leave pay and 13th month pay. On the other hand,
the other cases separately filed in different fora by Danilo Canares, Aurelia Gabucan, Dexter Mitschek and Ruel
Viray involved different issues which are distinct and have no bearing on the case at bar.[10] The case pursued
by Canares is for diminution of salary on account of his demotion which was decided in his favor with finality
by this Court;[11] Gabucans case involves reinstatement to her job; Mitscheks case pertains to diminution of
his salary; and Virays complaint was dismissed without prejudice for failure to prosecute. Thus, there is no basis
for petitioners forum shopping charge as the instant case and the others do not raise identical causes of action,
subject matter and issues.[12]
Lastly, petitioner alleges that claims of other private respondents have already been paid upon the
enforcement of the order dated February 26, 1992 in case number NRC-00-9112-CI-001. This is not correct. As
correctly pointed out by the Solicitor General, the aforesaid order refers to the enforcement of Wage Order
No. NCR-02 mandating P2.00 wage increase.[13] Certainly, the wage differential received by private
respondents by virtue of the mandated wage increase is different from the monetary benefits herein being
claimed by private respondents. Hence, public respondent cannot be faulted for grave abuse of discretion on
this score.
WHEREFORE, the instant petition is DENIED, and the assailed RESOLUTIONS of public respondent are
AFFIRMED. Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, and De Leon, Jr., JJ., concur.
Buena, J., on official leave.

Article 299 (284) – Disease as Grounds for Termination

I.
FIRST DIVISION

MANLY EXPRESS INC. G.R. No. 167462

and SIU ENG T. CHING,
Petitioners, Present:
Davide, Jr., C.J. (Chairman),
- versus - Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
ROMUALDO PAYONG, JR.,
Respondent. Promulgated:

This petition for review on certiorari under Rule 45 of the Rules of Court assails the November 22, 2004 Decision
of the Court of Appeals[1] in CA-G.R. SP No. 83800, as well as the February 28, 2005 Resolution[2] denying the
motion for partial reconsideration.

The facts as found by the Court of Appeals are as follows:

The simple relevant facts of the case show that petitioners Hercules Balena and Romualdo Payong, Jr. were
employed by Manly Express, Inc. and/or Siy Eng T. Ching on different dates, as tour coordinator (dispatcher)
and welder, respectively.

Balena alleged that during his employment, he demanded from his employer the payment of correct
employees benefits. Nevertheless, every time he made the demand, he was told not to report for work
anymore if he is not contented with the wages he was receiving. Then, herein private respondents called
Balenas attention on his tardiness in work. As a result, on May 16, 2000, Balena commenced a case for
constructive dismissal, payment of salaries, overtime pay, holiday pay, back wages, leave pay, 13th month pay
and attorneys fees.

Petitioner Romualdo Payong, Jr. has another story to tell. Sometime in December 1999, he was complaining
of eyesight problems. Brought to an eye specialist by private respondent Ching, he was diagnosed to be
suffering from eye cataract. Despite having the cataract removed in January of 2000, he was disallowed to
return to his work by Ching. Much later, on August 1, 2000, he was given a letter of termination of
employment.[3]

The full text of the termination letter[4] reads:

01 August 2000

Dear Mr. Romualdo Payong Jr.,

Our company has been severely affected by the prevailing poor business climate. There is a reduced demand
for our bus services both for shuttle and city operations and this has substantially reduced our income. At the
same time, our operating costs have increased, leaving us with a difficult cash position.

In order to survive, the company has decided to check on the performance of all its employees to determine
productivity. Unfortunately, it has been noticed that due to your partial blindness, you can no longer work in
the position that you are presently employed for.

In view of the above and the fact that despite the proper medical treatment for more than six months now, the
company is constrained to terminate your employment effective immediately. In line with this, you are given a
grace period of 15 days to remove all your personal belongings from the company premises counted from this
date.

In behalf of the company, I would like to express my gratitude for the services that you have rendered our
company. Kindly see the undersigned to coordinate the payment of your financial assistance and other
benefits.

Thank you.

(Sgd.)
Charles Malvin Ching
Operations Manager
Thus, a complaint for illegal dismissal with money claims was filed against Manly, which was consolidated with
the complaint of two other employees, namely Francisca Adsuara and Flor Palisoc, also for illegal dismissal.

On July 31, 2001, the Labor Arbiter rendered judgment the dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, the complaint of Hercules Balena is hereby DISMISSED for want of
cause of action. Furthermore, respondent company is hereby ordered to pay complainants Payong, Adsuara
and Palisoc the total amount of SEVENTY-FIVE THOUSAND NINE HUNDRED PESOS (P75,900.00), as
discussed above.

SO ORDERED.[5]
The National Labor Relations Commission (NLRC) modified the decision of the labor arbiter, thus:

WHEREFORE, premises considered, the Decision of July 31, 2001 is hereby MODIFIED. Respondents are
directed to pay the following:

Hercules Balena - P3,750.00 Service incentive leave pay

22, 500.00 13th month pay
P26,250.00

Romualdo Payong - P3,352.00 Service incentive leave pay

20,115.00 13th month pay
P23,467.00

Flor Palisoc 20,115.00 13th month pay

The other findings stand affirmed.

SO ORDERED.[6]

With the denial of their motion for reconsideration,[7] Balena and Payong elevated the case before the Court
of Appeals, which rendered on November 22, 2004 a Decision, the dispositive portion of which reads:

IN VIEW OF ALL THE FOREGOING, the instant petition is hereby DENIED, in so far as petitioner Hercules
Balena is concerned and the NLRC Decision, as to him, is AFFIRMED. However, as to petitioner Romualdo
Payong, Jr., We resolve to GRANT the petition and declare his dismissal from employment by the private
respondents to be unlawful and should therefore be entitled to reinstatement and separation pay, if
reinstatement is no longer viable and backwages. No pronouncement as to costs.

SO ORDERED.[8]

The Court of Appeals found that Balena prematurely filed the complaint for illegal dismissal considering that
at the time of its filing, he was still gainfully employed by Manly. The appellate court noted that he failed to
mention the details of the alleged dismissal or to prove the severance of his employment. It held that the
managements statement that he quit his job if he is not contented with the salary he is receiving is not
equivalent to constructive dismissal.

As regards Payong, the appellate court observed that considering that the termination was based on his alleged
partial blindness, Manly should have presented a certification by a competent public health authority that
Payong was suffering from such a disease and his continued employment is prejudicial to his health and that
of his co-employees. Without the certification, the dismissal was illegal.

Manlys motion for partial reconsideration was denied, hence, this petition.

The petition lacks merit.

Article 284 of the Labor Code authorizes an employer to terminate an employee on the ground of disease, thus:

Art. 284. Disease as ground for termination. An employer may terminate the services of an employee who has
been found to be suffering from any disease and whose continued employment is prohibited by law or is
prejudicial to his health as well as to the health of his co-employees: .
However, in order to validly terminate employment on this ground, Section 8, Rule I, Book VI of the Omnibus
Rules Implementing the Labor Code requires:

Sec. 8. Disease as a ground for dismissal. Where the employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer
shall not terminate his employment unless there is a certification by a competent public health authority that
the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even
with proper medical treatment. If the disease or ailment can be cured within the period, the employer shall not
terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee
to his former position immediately upon the restoration of his normal health.

The rule is explicit. For a dismissal on the ground of disease to be considered valid, two requisites must concur:
(a) the employee suffers from a disease which cannot be cured within six months and his continued
employment is prohibited by law or prejudicial to his health or to the health of his co-employees, and (b) a
certification to that effect must be issued by a competent public health authority.

In the present case, there was no proof that Payongs continued employment was prohibited by law or
prejudicial to his health and that of his co-employees. No medical certificate by a competent public health
authority was submitted that Payong was suffering from a disease that cannot be cured within a period of six
months. In the absence of such certification, Payongs dismissal must necessarily be declared illegal.
Manlys contention that the requirement for a medical certification does not apply in the instant case since it
was Payong who refused to undergo medical treatment and his resignation from work was of his own free will,
is untenable. Manly has not established Payongs refusal to undergo a medical examination or that he resigned
from work on his own accord. On the contrary, the termination letter dated August 1, 2000 showed that it was
Manly who initiated the termination in view of the prevailing poor business climate and Payongs partial
blindness. Moreover, evidence shows that even before the termination letter was served on Payong, he was no
longer allowed to work which shows Manlys intent to dismiss him from work.

The burden of proving the validity of the dismissal rests on the employer. As such, the employer must prove
that the requisites for a valid dismissal due to a disease have been complied with. In the absence of the required
certification by a competent public health authority, this Court has ruled against the validity of the employees
dismissal.[9]

In Triple Eight Integrated Services, Inc. v. NLRC,[10] we held that:

The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with;
otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent
of the employees illness and thus defeat the public policy on the protection of labor....

We also note that Manly failed to comply with the procedure for terminating an employee. In dismissing an
employee, the employer has the burden of proving that the employee has been served two notices: (1) one to
apprise him of the particular acts or omissions for which his dismissal is sought, and (2) the other to inform him
of his employers decision to dismiss him. The first notice must state that dismissal is sought for the act or
omission charged against the employee, otherwise, the notice cannot be considered sufficient compliance with
the rules.[11]

All told, Payongs dismissal did not comply with both the substantive and procedural aspects of due process.
Clearly, his dismissal is tainted with invalidity.[12]
WHEREFORE, the petition is DENIED. The November 22, 2004 Decision of the Court of Appeals in CA-G.R. SP
No. 83800 and its February 28, 2005 Resolution, are AFFIRMED.

SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR:

HILARIO G. DAVIDE, JR.

Chief Justice

LEONARDO A. QUISUMBING ANTONIO T. CARPIO

Associate Justice Associate Justice

ADOLFO S. AZCUNA
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts
Division.

HILARIO G. DAVIDE, JR.

Chief Justice
II.
THIRD DIVISION
[G.R. No. 129584. December 3, 1998]
TRIPLE EIGHT INTEGRATED SERVICES, INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, HON. LABOR ARBITER POTENCIANO S. CANIZARES, JR. and ERLINDA R. OSDANA,
respondents.

DECISION
ROMERO, J.:
In this petition for certiorari now before us, petitioner Triple Eight Integrated Services Inc. seeks to annul the
decision[1] of public respondent National Labor Relations Commission (First Division, Quezon City) dated
March 11, 1997 affirming the August 20, 1996 decision[2] of Labor Arbiter Potenciano Canizares. Petitioner was
ordered to pay private respondent Erlinda Osdana her salaries for the unexpired portion of her employment
contract, unpaid salaries, salary differential, moral and exemplary damages, as well as attorneys fees. On April
28, 1997, the NLRC denied petitioners motion for reconsideration.[3]
The antecedent facts follow.
Sometime in August 1992, private respondent Osdana was recruited by petitioner for employment with the
latters principal, Gulf Catering Company (GCC), a firm based in the Kingdom of Saudi Arabia. Under the original
employment contract, Osdana was engaged to work as Food Server for a period of thirty-six (36) months with
a salary of five hundred fifty Saudi rials (SR550).

Osdana claims she was required by petitioner to pay a total of eleven thousand nine hundred fifty pesos
(P11,950.00) in placement fees and other charges, for which no receipt was issued.She was likewise asked to
undergo a medical examination conducted by the Philippine Medical Tests System, a duly accredited clinic for
overseas workers, which found her to be Fit of Employment.

Subsequently, petitioner asked Osdana to sign another Contractor-Employee Agreement[4] which provided
that she would be employed as a waitress for twelve (12) months with a salary of two hundred eighty US dollars
($280). It was this employment agreement which was approved by the Philippine Overseas Employment
Administration (POEA).

On September 16, 1992, Osdana left for Riyadh, Saudi Arabia, and commenced working for GCC. She was
assigned to the College of Public Administration of the Oleysha University and, contrary to the terms and
conditions of the employment contract, was made to wash dishes, cooking pots, and utensils, perform
janitorial work and other tasks which were unrelated to her job designation as waitress. Making matters worse
was the fact that she was made to work a gruelling twelve-hour shift, from six oclock in the morning to six
oclock in the evening, without overtime pay.

Because of the long hours and the strenuous nature of her work, Osdana suffered from numbness and pain in
her arms. The pain was such that she had to be confined at the Ladies Villa, a housing facility of GCC, from June
18 to August 22, 1993, during which period, she was not paid her salaries.
After said confinement, Osdana was allowed to resume work, this time as Food Server and Cook at the Hota
Bani Tameem Hospital, where she worked seven days a week from August 22 to October 5, 1993. Again, she
was not compensated.

Then, from October 6 to October 23, 1993, Osdana was again confined at the Ladies Villa for no apparent
reason. During this period, she was still not paid her salary.

On October 24, 1993, she was re-assigned to the Oleysha University to wash dishes and do other menial tasks.
As with her previous assignment at the said University, Osdana worked long hours and under harsh conditions.
Because of this, she was diagnosed as having Bilateral Carpal Tunnel Syndrome, a condition precipitated by
activities requiring repeated flexion, pronation, and supination of the wrist and characterized by excruciating
pain and numbness in the arms.[5]

As the pain became unbearable, Osdana had to be hospitalized. She underwent two surgical operations, one
in January 1994, another on April 23, 1994. Between these operations, she was not given any work assignments
even if she was willing and able to do light work in accordance with her doctors advice. Again, Osdana was not
paid any compensation for the period between February to April 22, 1994.

After her second operation, Osdana was discharged from the hospital on April 25, 1994. The medical report
stated that she had very good improvement of the symptoms and she was discharged on the second day of the
operation.[6]

Four days later, however, she was dismissed from work, allegedly on the ground of illness. She was not given
any separation pay nor was she paid her salaries for the periods when she was not allowed to work.
Upon her return to the Philippines, Osdana sought the help of petitioner, but to no avail. She was thus
constrained to file a complaint before the POEA against petitioner, praying for unpaid and underpaid salaries,
salaries for the unexpired portion of the employment contract, moral and exemplary damages and attorneys
fees, as well as the revocation, cancellation, suspension and/or imposition of administrative sanctions against
petitioner.

Pursuant to Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of
1995, the case was transferred to the arbitration branch of the NLRC and assigned to Labor Arbiter Canizares.
In a decision dated August 20, 1996, the labor arbiter ruled in favor of Osdana. The dispositive portion of the
decision follows:

Wherefore, the respondent is hereby ordered to pay the complainant US$2,499.00 as salaries for the unexpired
portion of the contract, and US$1,076.00 as unpaid salary and salary differential, or its equivalent in Philippine
Peso.
The respondent is likewise ordered to pay the complainant P50,000 moral damages, and P20,000 exemplary
damages.
The respondent is further ordered to pay the complainant 10% of the monetary award as attorneys fee.
Other claims are hereby dismissed for lack of sufficient evidence.

SO ORDERED.
Aggrieved by the labor arbiters decision, petitioner appealed to the NLRC, which affirmed the decision in
question on March 11, 1997. Petitioners motion for reconsideration was likewise denied by the NLRC in its order
dated April 28, 1997.
Hence, this petition for certiorari.

Petitioner alleges grave abuse of discretion on the part of the public respondents for the following reasons: (a)
ruling in favor of Osdana even if there was no factual or legal basis for the award and, (b) holding petitioner
solely liable for her claims despite the fact that its liability is joint and several with its principal, GCC.

At the outset, petitioner argues that public respondent Labor Arbiter gravely abused his discretion when he
rendered the questioned decision dated August 20, 1996 without stating the facts and the law where he derived
his conclusions.[7] In support of this argument, petitioner cites the first paragraph of Article VIII, Section 14 of
the Constitution: No decision shall be rendered by any court without expressing therein clearly and distinctly
the facts and the law on which it is based.

On this point, it is enough to note that the decisions of both the labor arbiter and the NLRC were based mainly
on the facts and allegations in Osdanas position paper and supporting documents. We find these sufficient to
constitute substantial evidence to support the questioned decisions. Generally, findings of facts of quasi-
judicial agencies like the NLRC are accorded great respect and, at times, even finality if supported by
substantial evidence. Substantial evidence is such amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion.[8]

Moreover, well-settled is the rule that if doubts exist between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter. Thus, in controversies between a worker
and her employer, doubts reasonably arising from the evidence or in the interpretation of agreements should
be resolved in favor of the former.
Petitioner, for its part, was given the same opportunity to file its own position paper but instead, it opted to file
a two-page Answer With Special And Affirmative Defenses, denying generally the allegations of the
complaint.[9]

As observed by the labor arbiter, The record shows the complainant filed complaint (sic), position paper, and
supporting documents, and prosecuted her case diligently; while the respondent merely tried to settle the case
amicably, failing even to file its position paper.[10] The present case being one for illegal dismissal, it was
incumbent upon petitioner employer to show by substantial evidence that the termination was validly made.
In termination cases, the burden of proof rests on the employer to show that the dismissal is for a just cause.[11]
Having failed to file its position paper and to support its denials and affirmative defenses in its answer,
petitioner cannot now fault the labor arbiter and the NLRC for relying on the facts as laid down by Osdana in
her position paper and supported by other documents. The essence of due process is that a party be afforded
reasonable opportunity to be heard and to submit any evidence he may have in support of his defense,[12] and
this is exactly what petitioner was accorded, although it chose not to fully avail thereof.

This Court, therefore, upholds the finding of herein public respondents that the facts and the evidence on
record adduced by Osdana and taken in relation to the answer of petitioner show that indeed there was breach
of the employment contract and illegal dismissal committed by petitioners principal.
Petitioner claims that public respondents committed grave abuse of discretion when they ruled that Osdana
had been illegally dismissed by GCC. It maintains that the award for salaries for the unexpired portion of the
contract was improper because Osdana was validly dismissed on the ground of illness.
The argument must fail.

In its Answer, Memorandum of Appeal,[13] Petition for Certiorari,[14] and Consolidated Reply,[15] petitioner
consistently asserted that Osdana was validly repatriated for medical reasons, but it failed to substantiate its
claim that such repatriation was justified and done in accordance with law.
Article 284 of the Labor Code is clear on the matter of termination by reason of disease or illness, viz:
Art. 284. Disease as a ground for termination An employer may terminate the services of an employee who has
been found to be suffering from any disease and whose continued employment is prohibited by law or
prejudicial to his health as well as the health of his co-employees: x x x.

Specifically, Section 8, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code provides:
Sec. 8. Disease as a ground for dismissal Where the employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer
shall not terminate his employment unless there is a certification by competent public authority that the
disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months with proper
medical treatment. If the disease or ailment can be cured within the period, the employer shall not terminate
the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his
former position immediately upon the restoration of his normal health. (Underscoring supplied)

Viewed in the light of the foregoing provisions, the manner by which Osdana was terminated was clearly in
violation of the Labor Code and its implementing rules and regulations.

In the first place, Osdanas continued employment despite her illness was not prohibited by law nor was it
prejudicial to her health, as well as that of her co-employees. In fact, the medical report issued after her second
operation stated that she had very good improvement of the symptoms. Besides, Carpal Tunnel Syndrome is
not a contagious disease.
Petitioner attributes good faith on the part of its principal, claiming that It was the concern for the welfare and
physical well being (sic) of private respondent that drove her employer to take the painful decision of
terminating her from the service and having her repatriated to the Philippines at its expense. The employer did
not want to risk the aggravation of the illness of private respondent which could have been the logical
consequence were private respondent allowed to continue with her job.[16]

The Court notes, however, that aside from these bare allegations, petitioner has not presented any medical
certificate or similar document from a competent public health authority in support of its claims.
On the medical certificate requirement, petitioner erroneously argues that private respondent was employed
in Saudi Arabia and not here in the Philippines. Hence, there was a physical impossibility to secure from a
Philippine public health authority the alluded medical certificate that public respondents illness will not be
cured within a period of six months.[17]
Petitioner entirely misses the point, as counsel for private respondent states in the Comment.[18] The rule
simply prescribes a certification by a competent public health authority and not a Philippine public health
authority.

If, indeed, Osdana was physically unfit to continue her employment, her employer could have easily obtained
a certification to that effect from a competent public health authority in Saudi Arabia, thereby heading off any
complaint for illegal dismissal.

The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with;
otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent
of the employees illness and thus defeat the public policy on the protection of labor. As the Court observed in
Prieto v. NLRC,[19] 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 to which they are subjected by their foreign employers, who
probably feel they can do as they please in their country. While these 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 own land, the
protection of our own laws cannot be extended to them in full measure for the redress of their grievances.

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 to make 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, petitioners 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 forums public policy.[20] Here in 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 self-organization, 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. They shall also participate in policy and
decision-making processes affecting their rights and benefits as may be provided by law.
x x x x x x x x x.
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 pre-termination of employment contracts.
As regards the monetary award of salaries for the unexpired portion of the employment contract, unpaid
salaries and salary differential granted by public respondents to Osdana, petitioner assails the same for being
contrary to law, evidence and existing jurisprudence, all of which therefore constitutes grave abuse of
discretion.

Although this contention is without merit, the award for salaries for the unexpired portion of the contract must,
however, be reduced. Paragraph 5, Section 10 of R.A. No. 8042, applies in this case, thus:

In case of termination of overseas employment without just, valid or authorized cause as defined by law or
contract, the worker shall be entitled to the full reimbursement of his placement fee with interest at twelve
percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3)
months for every year of the unexpired term, whichever is less.
In the case at bar, while it would appear that the employment contract approved by the POEA was only for a
period of twelve months, Osdanas actual stint with the foreign principal lasted for one year and seven-and-a-
half months. It may be inferred, therefore, that the employer renewed her employment contract for another
year. Thus, the award for the unexpired portion of the contract should have been US$1,260 (US$280 x 4
months) or its equivalent in Philippine pesos, not US$2,499 as adjudged by the labor arbiter and affirmed by
the NLRC.

As for the award for unpaid salaries and differential amounting to US$1,076 representing seven months unpaid
salaries and one month underpaid salary, the same is proper because, as correctly pointed out by Osdana, the
no work, no pay rule relied upon by petitioner does not apply in this case. In the first place, the fact that she had
not worked from June 18 to August 22, 1993 and then from January 24 to April 29, 1994, was due to her illness
which was clearly work-related. Second, from August 23 to October 5, 1993, Osdana actually worked as food
server and cook for seven days a week at the Hota Bani Tameem Hospital, but was not paid any salary for the
said period. Finally, from October 6 to October 23, 1993, she was confined to quarters and was not given any
work for no reason at all.

Now, with respect to the award of moral and exemplary damages, the same is likewise proper but should be
reduced. Worth reiterating is the rule that moral damages are recoverable where the dismissal of the employee
was attended by bad faith or fraud or constituted an act oppressive to labor, or was done in a manner contrary
to morals, good customs, or public policy.[21]Likewise, exemplary damages may be awarded if the dismissal
was effected in a wanton, oppressive or malevolent manner.[22]

According to the facts of the case as stated by public respondent, Osdana was made to perform such menial
chores, as dishwashing and janitorial work, among others, contrary to her job designation as waitress. She was
also made to work long hours without overtime pay. Because of such arduous working conditions, she
developed Carpal Tunnel Syndrome. Her illness was such that she had to undergo surgery twice. Since her
employer determined for itself that she was no longer fit to continue working, they sent her home posthaste
without as much as separation pay or compensation for the months when she was unable to work because of
her illness. Since the employer is deemed to have acted in bad faith, the award for attorneys fees is likewise
upheld.
Finally, petitioner alleges grave abuse of discretion on the part of public respondents for holding it solely liable
for the claims of Osdana despite the fact that its liability with the principal is joint and several.

Petitioner misunderstands the decision in question. It should be noted that contrary to petitioners
interpretation, the decision of the labor arbiter which was affirmed by the NLRC did not really absolve the
foreign principal.

Petitioner was the only one held liable for Osdanas monetary claims because it was the only respondent named
in the complaint and it does not appear that petitioner took steps to have its principal included as co-
respondent. Thus, the POEA, and later the labor arbiter, did not acquire jurisdiction over the foreign principal.

This is not to say, however, that GCC may not be held liable at all. Petitioner can still claim reimbursement or
contribution from it for the amounts awarded to the illegally-dismissed employee.
WHEREFORE, in view of the foregoing, the instant petition is DISMISSED. Accordingly, the decisions of the
labor arbiter dated August 20, 1996, and of the NLRC dated March 11, 1997, are AFFIRMED with the
MODIFICATION that the award to private respondent Osdana should be one thousand two hundred sixty US
dollars (US$1,260), or its equivalent in Philippine pesos, as salaries for the unexpired portion of the employment
contract, and one thousand seventy six US dollars (US$1,076), or its equivalent in Philippine pesos, representing
unpaid salaries for seven (7) months and underpaid salary for one (1) month, plus interest.

Petitioner is likewise ordered to pay private respondent P30,000.00 in moral damages, P10,000.00 in
exemplary damages and 10% attorneys fees.

This decision is without prejudice to any remedy or claim for reimbursement or contribution petitioner may
institute against its foreign principal, Gulf Catering Company. No pronouncement as to costs.
SO ORDERED.
Kapunan, Purisima, and Pardo JJ., concur

Article 301 (286) – When Employment Not Deemed Terminated

I.
THIRD DIVISION
G.R. No. 194649, August 10, 2016
SOLIMAN SECURITY SERVICES, INC. AND TERESITA L. SOLIMAN, Petitioners, v. IGMEDIO C.
SARMIENTO, JOSE JUN CADA AND ERVIN R. ROBIS, Respondents.
DECISION
PEREZ, J.:

This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, assailing the Decision2dated 27
August 2010 and the Resolution3 dated 25 November 2010 of the Court of Appeals in CA-G.R. SP No. 110905,
which affirmed the 2 June 2009 Decision4 of the National Labor Relations Commission (NLRC) declaring
respondents Igmedio C. Sarmiento (Sarmiento), Jose Jun Cada (Cada), and Ervin R. Robis (Robis) to have been
illegally dismissed from employment.
The Antecedent Facts

This case stemmed from a complaint filed by respondents against petitioners Soliman Security Services, Inc.
(the agency) and Teresita L. Soliman (Teresita) for illegal dismissal; underpayment of salaries, overtime pay
and premium pay for holiday and rest day; damages; attorney's fees; illegal deduction and non-payment of
ECOLA.

Respondents were hired as security guards by petitioner Soliman Security Services, Inc. and were assigned to
Interphil Laboratories, working seven (7) days a week for twelve (12) straight hours daily. Respondents alleged
that during their employment - from May 1997 until January 2007 for Robis and from May 2003 until January
2007 for Sarmiento and Cada � they were paid only P275.00 a day for eight (8) hours of work or P325.00 for
twelve (12) hours of work but were not paid ECOLA, night shift differentials, holiday pay, as well as rest day
premiums. For cash bond and mutual aid contributions, the amounts of P400.00 and P100.00, respectively,
were deducted from their salaries per month. Respondents claimed that they sought a discussion of the
nonpayment of their benefits with petitioner Teresita Soliman but the latter refused to take heed and told them
to tender their resignations instead. According to respondents, on 21 January 2007, they received an order
relieving them from their posts and since then, they were not given any assignments.

On the other hand, the agency's version of the story hinges on an alleged placement of the respondents under
a "floating status." The agency admitted relieving the respondents from duty on 20 January 2007 but insists
that the same was only done pursuant to its contract with client Interphil Laboratories. To support this claim,
petitioners presented a standing contract5 with Astrazeneca Pharmaceuticals, Interphil's predecessor-in-
interest. The contract contained stipulations pertaining to the client's policy of replacing guards on duty every
six (6) months without repeat assignment. The agency further posits that respondent guards were directed
several times to report to the office for their new assignments but they failed to comply with such directives.

A review of the records reveals the following timeline: (1) on 20 January 2007, the agency sent respondents
notices informing them that they were being relieved from their current posts pursuant to a standing contract
with Interphil Laboratories6 with directives for respondents to report to the office for their new assignments;
(2) on 7 February 2007, the agency sent another letter addressed to Robis, directing him to report to the office
for his new assignment;7 (3) on 22 February 2007, the first complaint for illegal dismissal was filed with the
Labor Arbiter;8 (4) on 26 March 2007, a hearing before the Executive Labor Arbiter was conducted, where
petitioner agency's representative presented respondents an offer to return to work;9 (5) the agency sent
respondents letters dated 2410 and 2611April 2007, directing them to clarify their intentions as they have not
been reporting to seek new assignments; (6) on 3 August 2007, respondents filed a Supplemental Complaint,12
the purpose of which was to anticipate the possibility that the agency might set up the defense of pre-maturity
of filing of the constructive dismissal complaint; (7) respondents executed their respective complaint affidavits
on 8 August 2007;13 (8) and finally after the parties submitted their respective position papers, the Executive
Labor Arbiter rendered a decision on 4 January 2008.14chanrobleslaw

Finding that respondents' failure to comply with the Memoranda amounted to abandonment, the Labor
Arbiter dismissed the complaint.15 The Labor Arbiter concluded that there can be no dismissal to speak of,
much less an illegal dismissal. On appeal, the NLRC reversed the 4 January 2008 decision of the the Executive
Labor Arbiter, ultimately finding respondents to have been illegally dismissed. The NLRC ruled that the letters
directing respondents to "clarify their intentions" were not in the nature of return-to-work orders, which may
effectively interrupt their floating status. The NLRC observed that the Memoranda received by respondents
were but mere afterthoughts devised after the case for illegal dismissal was filed. The NLRC also put the agency
to task for failing to traverse the guards' averment that there were other employee-guards who stayed with
the same client beyond the six-month term imposed.

Aggrieved, the petitioners brought the case to the Court of Appeals, asking the court to issue an extraordinary
writ of certiorari to reverse the NLRC decision. Reiterating that the agency had no legitimate reasons for
placing respondents on prolonged floating status, the appellate court affirmed the decision of the NLRC. The
dispositive portion of the NLRC decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, the decision of the Executive Labor Arbiter Fatima Jambaro-Franco dated
4 January 2008 is reversed and set aside and a new one is rendered ordering [petitioners] to pay [respondents]
the following:

chanRoblesvirtualLawlibrary1. Backwages from 21 January 2007 until finality of this Decision;

2. Separation pay equivalent to one-month salary for every year of service from the date of employment as
appearing in the complaint also up to finality of this Decision; and cralawlawlibrary

3. Salary differentials for the period not yet barred by prescription.

All other claims are dismissed for lack of merit.16chanroblesvirtuallawlibrary

Petitioners sought a reconsideration of the decision but the appellate court denied the same. Hence, this
Petition for Review on Certiorari.
Our Ruling

After a careful evaluation of the records of the case, this Court finds no reversible error in the NLRC decision as
affirmed by the Court of Appeals. The petition is denied for lack of merit.

Placement on floating status as a management prerogative

The Court is mindful of the fact that most contracts for services stipulate that the client may request the
replacement of security guards assigned to it.17 Indeed, the employer has the right to transfer or assign its
employees from one area of operation to another, "provided there is no demotion in rank or diminution of
salary, benefits, and other privileges, and the transfer is not motivated by discrimination or bad faith, or
effected as a form of punishment or demotion without sufficient cause."18 During that period of time when
they are in between assignments or when they are made to wait for new assignments after being relieved from
a previous post, guards are considered on temporary "off-detail" or under "floating status". It has long been
recognized by this Court that the industry practice of placing security guards on floating status does not
constitute dismissal, as the assignments primarily depend on the contracts entered into by the agency with
third parties19 and the same is a valid exercise of management prerogative. However, such practice must be
exercised in good faith and courts must be vigilant in assessing the different situations, especially considering
that the security guard does not receive any salary or any financial assistance provided by law when placed on
floating status.20chanrobleslaw

Constructive Dismissal

Though respondents were not per se dismissed on 20 January 2007 when they were ordered relieved from their
posts, we find that they were constructively dismissed when they were not given new assignments. As
previously mentioned, placing security guards under floating status or temporary off-detail has been an
established industry practice. It must be emphasized, however, that they cannot be placed under floating
status indefinitely; thus, the Court has applied Article 29221 (formerly Article 286) of the Labor Code by analogy
to set the specific period of temporary off-detail to a maximum of six (6) months.22 It must also be clarified
that such provision does not entitle agencies to retain security guards on floating status for a period of not more
than six (6) months for whatever reason. Placing employees on floating status requires the dire exigency of the
employer's bona fide suspension of operation. In security services, this happens when there is a surplus of
security guards over available assignments as when the clients that do not renew their contracts with the
security agency are more than those clients that do.23chanrobleslaw

The crux of the controversy lies in the consequences of the lapse of a significant period of time without
respondents having been reassigned. Petitioner agency faults the respondents for their repeated failure to
comply with the directives to report to the office for their new assignments. To support its argument, petitioner
agency submitted in evidence notices addressed to respondents, which read:ChanRoblesVirtualawlibrary
You are directed to report to the undersigned to clarify your intentions as you have not been reporting to seek
a new assignment after your relief from Interphil.

To this date, we have not received any update from you neither did you update your government requirements
xxx

We are giving you up to May 10, 2007 to comply or we will be forced to drop you from our roster and terminate
your services for abandonment of work and insubordination.

Consider this our final warning.24 (Emphasis ours)

As for respondents, they maintain that the offers of new assignments were mere empty promises.
Respondents claim that they have been reporting to the office for new assignments only to be repeatedly
turned down and ignored by petitioner's office personnel.25cralawredchanrobleslaw

We rule that such notices were mere afterthoughts. The notices were allegedly sent to respondents on 24 and
26 April 24 2007, a month after the hearing before the Executive Labor Arbiter. By the time the notices were
sent, a complaint for illegal dismissal with a prayer for reinstatement was already filed. In fact, the agency,
through its representative, already had the chance to discuss new assignments during the hearing before the
Labor Arbiter. Instead of taking the opportunity to clarify during the hearing that respondents were not
dismissed but merely placed on floating status and instead of specifying details about the available new
assignments, the agency merely gave out empty promises. No mention was made regarding specific details of
these pending new assignments. If respondent guards indeed had new assignments awaiting them, as what
the agency has been insinuating since the day respondents were relieved from their posts, the agency should
have identified these assignments during the hearing instead of asking respondents to report back to the office.
The agency's statement in the notices - that respondents have not clarified their intentions because they have
not reported to seek new assignments since they were relieved from their posts - is specious at best. As
mentioned, before these notices were sent out, a complaint was already filed and a hearing before the Labor
Arbiter had already been conducted. The complaint clarified the intention of respondents. Indeed,
respondents' complaint for illegal dismissal with prayer for reinstatement is inconsistent with the agency's
claim that respondents did not report for reassignment despite the notices directing them to do so. It is evident
that the notices sent by the agency were mere ostensible offers for new assignments. It was intended to cover
the illegality of the termination of respondents' employment.

Lack of service agreement for a continuous period of 6 months as an authorized cause for termination

It is significant to note that had the reason for such failure to reassign respondents been the lack of service
agreements for a continuous period of six (6) months, petitioner agency could have exercised its right to
terminate respondents for an authorized cause upon compliance with the procedural requirements.

On this score, Department Order No. 14, Series of 200126 (DO 14-01) of the Department of Labor and
Employment is instructive. Section 9.3 of the same provides:ChanRoblesVirtualawlibrary
9.3 Reserved status - x x x
xxxx

If after a period of 6 months, the security agency/employer cannot provide work or give assignment to the
reserved security guard, the latter can be dismissed from service and shall be entitled to separation pay as
described in subsection 6.5

xxxx
In relation thereto, Section 6.5 of DO 14-01 treats such lack of service assignment for a continuous period of six
(6) months as an authorized cause for termination of employment entitling the security guard to separation
pay, to wit:ChanRoblesVirtualawlibrary
6.5 Other Mandatory Benefits. In appropriate cases, security guards/similar personnel are entitled to the
mandatory benefits as listed below, although the same may not be included in the monthly cost distribution in
the contracts, except the required premiums form their coverage:
a. Maternity benefit as provided under SS Law;
b. Separation pay if the termination of employment is for authorized cause as provided by law and as
enumerated below:
Half-Month Pay Per Year of Service, but in no case less than One Month Pay if separation pay is due to:
1. Retrenchment or reduction of personnel effected by management to prevent serious losses;
2. Closure or cessation of operation of an establishment not due to serious losses or financial reverses;
3. Illness or disease not curable within a period of 6 months and continued employment is prohibited by
law or prejudicial to the employee's health or that of co-employees;
4. Lack of service assignment for a continuous period of 6 months. (Emphasis and underlining supplied)
xxxx
It bears stressing that the only time a prolonged floating status is considered an authorized cause for dismissal
is when the security agency experiences a surplus of security guards brought about by lack of clients.27 We
quote with approval the pertinent portion of the NLRC's decision as affirmed by the appellate court, to
wit:ChanRoblesVirtualawlibrary
Being placed on floating status is only legitimate when guaranteed by bona fide business exigencies. In security
services, this happens when there is a surplus of security guards over available assignments as when the clients
that do not renew their contracts with the security agency are more than those clients that do x x
x.28chanroblesvirtuallawlibrary
Otherwise stated, absent such justification, the placing of a security guard on floating status is tantamount to
constructive dismissal. And, when the floating status is justified, the lapse of a continuous period of six (6)
months results in an authorized cause for termination of employment, the security guard being entitled,
however, to separation pay.

As for the procedural aspect, employer agencies must be reminded that to validly terminate a security guard
for lack of service assignment for a continuous period of six months, the agency must comply with the
provisions of Article 289 (previously Art. 283) of the Labor Code,29 "which mandates that a written notice
should be served on the employee on temporary off-detail or floating status and to the DOLE one (1) month
before the intended date of termination."30 Sec. 9.2 of DO 14-01 provides for a similar procedure, to
wit:ChanRoblesVirtualawlibrary
9.2 Notice of Termination - In case of termination of employment due to authorized causes provided in Article
283 and 284 of the Labor Code and in the succeeding subsection, the employer shall serve a written notice on
the security guard/personnel and the DOLE at least one (1) month before the intended date thereof.
It cannot be denied that the placement of security guards on floating status may be subject to abuse by
agencies, considering that they are not obliged to pay the security guards while placed on floating status.
Recognizing the jurisprudence elaborating on the application of DO 14-01, we now provide a summary as
follows:

chanRoblesvirtualLawlibraryThe floating status period, wherein the security guards are not paid, should not
last longer than six (6) months as provided by law. Before the lapse of six (6) months, the agency should have
recalled the security guard for a new assignment. If the agency failed to do so due to the lack of service
agreements for a continuous period of six (6) months, an authorized cause for dismissal as per DO 14-01, the
security guard may be considered permanently retrenched and validly dismissed upon compliance with the
procedural requirements laid down by the Department Order and the Labor Code.31 It must be emphasized
however, that in order for the dismissal to be valid and in order for the employer agency to free itself from any
liability for illegal dismissal, the justification for the failure to reassign should be the lack of service agreements
for a continuous period of six (6) months, aside from the other authorized causes provided by the Labor Code.
Corollarily, placing the security guard on floating status in bad faith, as when there is failure to reassign despite
the existence of sufficient service agreements will make the employer agency liable for illegal dismissal. In such
cases, there is no bona fide business exigency which calls for the temporary retrenchment or laying-off of the
security guards. Lastly, if six (6) months have already lapsed and the employer agency failed to either (a)
reassign the security guard or (b) validly dismiss and give him/her the corresponding separation pay, the
security guard may be considered to have been constructively dismissed.32chanrobleslaw

On the finding that respondents are entitled to their money claims

In its decision, the Court of Appeals discussed how the NLRC might have erred in its computations of the wages
received by the private respondents. However, despite such observation, the appellate court dismissed the
petition for certiorari, ultimately holding that the NLRC based its decision on all the evidence presented, with
nary an abuse of the exercise of its discretion. The appellate court found that petitioners failed to discharge
their burden of showing at least an abuse of discretion on the part of the NLRC, when the latter found that the
security guards were underpaid. Petitioners now fault the appellate court for affirming the NLRC decision
declaring them liable for private respondents' monetary claims.

Petitioners' contention is bereft of merit

In petitioners' Motion for Reconsideration of the NLRC decision, they invested heavily in the argument about
the validity of the dismissal, stating only briefly in the penultimate paragraph their manifestation to reserve a
purported right to submit additional evidence in a supplemental pleading, if necessary to strengthen their
arguments regarding the award of monetary claims. The Court of Appeals correctly ruled that such scheme
subverts the reglementary periods established by law and more significantly, the NLRC would no longer have
the opportunity to correct itself, assuming errors, since the Motion for Reconsideration filed before it did not
detail the computations regarding monetary benefits. Said computations were only subsequently raised in
their petition before the appellate court.

In the Court of Appeals, petitioners adopted a similar scheme. In their Petition for Certiorari, they did not
anymore dispute the NLRC's determinations as to the monetary aspects. Instead, their arguments on the
alleged issue of monetary awards were inserted in their Reply to Comment pleading. The Court of Appeals
correctly ruled that such scheme contradicts elementary due process as the arguments raised were not dealt
with in the comment the Reply supposedly responds to.

From the foregoing, it is quite obvious that the NLRC may not be faulted for relying on the evidence presented
before it when it made its computations for underpayment. Neither may the appellate court be faulted for
declaring that the NLRC did not abuse its discretion. The task of resolving the issue on monetary claims, purely
factual, properly pertains to the NLRC as the quasi-judicial appellate body to which these documents were
presented to review the arbiter's ruling.33 The appellate court correctly ruled that the usual appeal in labor
cases is exhausted after the NLRC has decided. Petitioner cannot fault the Court of Appeals in affirming the
NLRC decision despite the alleged computational error as the special civil action of certiorari is a remedy to
correct errors of jurisdiction and not mere errors of judgment. Consequently, an error of judgment that the
court may commit in the exercise of its jurisdiction is not correctable through the original civil action of
certiorari.

The present petition is a Rule 45 petition reviewing a Rule 65 ruling of the Court of Appeals. This Court's
jurisdiction is thus limited to errors of law which the appellate court might have committed in its Rule 65
ruling.34 In essence, in ruling for legal correctness, "we have to view the CA's decision in the same context that
the petition for certiorari it ruled upon was presented to it; we have to examine the CA decision from the prism
of whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC decision
before it, not on the basis of whether the NLRC decision on the merits of the case, was correct."35 After a
meticulous review of the facts of the case, the records, relevant laws and jurisprudence, we rule that the Court
of Appeals correctly determined that the NLRC did not abuse its discretion when it held that respondents were
constructively dismissed and entitled to their monetary claims.

WHEREFORE, the petition is DENIED. The assailed 27 August 2010 Decision and 25 November 2010 Resolution
of the Court of Appeals in CA-G.R. SP No. 110905 are AFFIRMED. Accordingly, petitioners Soliman Security
Services, Inc. and Teresita L. Soliman are hereby ORDERED to pay respondents Igmedio C. Sarmiento, Jose
Jun Cada, and Ervin R. Robis, to wit:
1. Backwages from 21 January 2007 until finality of this decision;
2. Separation pay equivalent to one-month salary for every year of service from the date of employment
as appearing in the complaint also up to finality of this decision; and cralawlawlibrary
3. Salary differentials for the period not yet barred by prescription.
All other claims are dismissed for lack of merit.

SO ORDERED.chanRoblesvirtualLawlibrary

Velasco, Jr., (Chairperson), Peralta, Reyes, and Jardeleza, JJ., concur.

II.
THIRD DIVISION
G.R. No. 197852, October 19, 2015
PASIG AGRICULTURAL DEVELOPMENT AND INDUSTRIAL SUPPLY CORPORATION AND CELESTINO E.
DAMIAN, Petitioners, v. WILSON NIEVAREZ, ALBERTO HALINA, GLORY VIC NUEVO, RICKY TORRES
AND CORNELIO BALLE, Respondent.
DECISION
PERALTA, J.:

For this Court's resolution is a petition for review on certiorari dated August 10, 2011 of petitioners Pasig
Agricultural Development and Industrial Supply Corporation (PADISCOR) and Celestino E. Damian assailing
the Decision1 dated January 25, 2011 and Resolution2 dated July 21, 2011 of the Court of Appeals (CA), which
affirmed with modification the Resolutions dated August 24, 2007 and October 31, 2007 of the National Labor
Relations Commission (NLRC) and declared that the temporary suspension of respondents Wilson Nievarez,
Alberto Halina, Glory Vic Nuevo, Ricky Torres and Cornelio Balle as illegal.

The antecedents follow:chanRoblesvirtualLawlibrary

Petitioner Pasig Agricultural Development and Industrial Supply Corporation (PADISCOR) is a domestic
corporation organized and existing under the Philippine laws. Petitioner Celestino E. Damian is the general
manager of PADISCOR.3

Respondents Wilson Nievarez, Alberto Halina, Glory Vic Nuevo, Ricky Torres and Cornelio Balle are regular
employees of PADISCOR. They were hired as machinist, tool keeper/timer, helper, welder, and maintenance
worker with a daily wage of P350.00.4

On June 17, 2006, PADISCOR, through its administrative officer, sent notices to Nievarez, Torres and Nuevo
informing them that they were temporarily laid off from employment for a period of six (6) months from July
30, 2006 to January 30, 2007. It cited that it can no longer pay their wages and other benefits due to financial
losses and lack of capital. It also mentioned other factors which further burdened its efforts, such as undesirable
personnel misconduct like unauthorized absences, habitual tardiness, negligence, dishonesty and others.5

In a Memorandum dated June 24, 2006, PADISCOR required Nievarez to submit a written explanation why a
disciplinary action should not be imposed against him for his unjustified refusal to perform assigned tasks.6
The following day, June 25, 2006, Nievarez submitted his explanation expounding on his need to receive a
memorandum before he be assigned to a task as protection from unfounded accusations, and demanded an
additional wage.7

PADISCOR dismissed the explanations and demands of Nievarez for being ridiculous and baseless. PADISCOR
denied that Nievarez was transferred to another place of work or was demoted to a lesser job category. It also
rejected his presumption that he was promoted. Hence, it suspended Nievarez from work for fifteen (15) days
for insubordination.

On September 5, 2006, Balle and Halina received notices similar from the other respondents informing them
of their temporary lay-off from employment from October 7, 2006 to April 6, 2007.8

Consequently, respondents filed complaints for illegal suspension, illegal lay-off, non-payment of service
incentive leave and paternity leave, damages and attorney's fees against PADISCOR and Damian.9

For their part, respondents claimed that as regular employees of PADISCOR, they are entitled to security of
tenure and cannot be laid off without just cause.10 They also averred that the temporary lay-off by PADISCOR
is equivalent to illegal dismissal.11 Respondents alleged that their service incentive leave pay were not paid,
while Nievarez and Nuevo further claimed that their paternity benefits were also not paid. They alleged that
assuming that PADISCOR was suffering financial losses, they were still entitled to separation pay.12

Petitioners, in their position paper, asserted that the suspension of Nievarez was valid since he was guilty of
insubordination and misconduct which was a repetition of a previous offense.13 They further alleged that
Nievarez made ridiculous conditions such as written memorandum defining his duties, and a promotion or a
raise in wage before he completes his assigned task.14

PADISCOR maintained that the six (6) months temporary lay-off of respondents was valid due to economic
reasons.15 It also alleged that it gave one-month prior notice to respondents regarding the temporary
retrenchment and filed Establishment Termination Reports16 on June 20, 2006 and September 5, 2006 with
the Department of Labor and Employment (DOLE). It averred that there was no dismissal since the lay-off was
merely temporary, thus, respondents are not entitled to separation pay.17

PADISCOR alleged that the claim for paternity benefit by Nievarez and Nuevo has already prescribed since the
youngest son of Nievarez was born in 1993 while Nuevo's youngest child was born in 2001. There was no record
that they claimed or filed for the said benefit.18

In the Decision19 dated November 30, 2006, the Labor Arbiter (LA) dismissed the complaint for illegal lay-off
and illegal suspension for lack of merit but awarded the payment of service incentive leave in favor of
respondents. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered ordering [petitioners] to pay [respondents]'s service incentive
leave for the last three (3) years in the following amounts:chanRoblesvirtualLawlibrary
NAME SERVICE INCENTIVE LEAVE PAY
� 2003 TO 2005
�
1. WILSON N1EVAREZ P3,875.00
2. JOSEPH NUEVO P3,875.00
3. GLORY VIC NUEVO P3,875.00
4. RICKY TORRES P3,875.00
5. CORNELIO BALLE P3,875.00
6. ALBERTO HALINA P3,875.00

The complaint for illegal lay-off, illegal suspension, and other monetary claims are hereby DISMISSED for lack
of merit.

SO ORDERED.20ChanRoblesVirtualawlibrary
The LA held that the power to instill discipline in the workplace is part of petitioner PADISCOR's management
prerogative.21 The LA also held that respondents were merely temporarily laid-off for a period of six (6) months
and that such was valid since the corresponding notices to the respondents and to the DOLE were duly
complied with by the petitioners.22 The money claims of respondents were denied but they were awarded
payment of service incentive leaves for the years 2003 to 2005,23

Respondents filed a memorandum of partial appeal, to which the NLRC, in its Resolution24 dated August 24,
2007, ruled against them. The dispositive portion of the resolution reads:
ACCORDINGLY, premises considered, the decision appealed from is AFFIRMED and the instant partial appeal
DISMISSED for lack of merit.

SO ORDERED.25ChanRoblesVirtualawlibrary
The NLRC rejected the respondents' allegations that they were pre�selected among employees because of
union formation due to absence of substantial evidence to support such claim.26 The NLRC held that the law
has imposed a limitation of six (6) months to temporary layoff such that exceeding that period will be treated
as constructive dismissal.27 Thus, absent any evidence to the contrary, the NLRC agreed with the findings of
the LA that the temporary lay-off of respondents was valid.

In a Resolution28 dated October 31, 2007, the NLRC dismissed the Motion for Reconsideration filed by the
respondents for not finding compelling reason to modify its resolution.
Respondents filed before the CA a petition for certiorari under Rule 65. The CA ruled that the LA and the NLRC
committed grave abuse of discretion in sustaining respondents' temporary suspension from work. The fallo of
the decision states:
WHEREFORE, the petition is partly Granted. The assailed Resolutions, dated August 24, 2007 and October 31,
2007 of the Public Respondent National Labor Relations Commission, in NLRC CA No. 051705-07 are Affirmed
with Modification in that [Respondents'] temporary suspension from services are declared illegal.

This case is remanded to the Labor Arbiter [a] quo for the computation of [Respondents'] backwages due to
said temporary lay-off of service.

SO ORDERED.29ChanRoblesVirtualawlibrary
The CA held that petitioners failed to prove its claim of financial losses through convincing evidence like
financial statements. Thus, the said temporary lay-off of respondents was declared as illegal.30

Upon the denial by the CA of their Motion for Reconsideration, petitioners filed the instant petition and raised
the sole issue for the resolution of this Court:
IT IS RESPECTFULLY SUBMITTED THAT THE HONORABLE COURT OF APPEALS ERRED IN ISSUING THE
DECISION DATED 25 JANUARY 2011 AND THE RESOLUTION DATED 21 JULY 2011, IN HOLDING THAT
PETITIONERS' EXERCISE OF ITS MANAGEMENT PREROGATIVE TO TEMPORARILY LAY-OFF EMPLOYEES
IS ILLEGAL IN VIEW OF ITS FAILURE TO PRESENT FINANCIAL STATEMENTS TO EVIDENCE ITS FINANCIAL
LOSSES. CONTRARY TO PREVAILING JURISPRUDENCE THAT PRESENTATION OF FINANCIAL
STATEMENTS IS NOT A REQUISITE FOR A VALID TEMPORARY LAY-OFF.31ChanRoblesVirtualawlibrary
This Court finds the present petition without merit.

Petitioners alleged that the CA gravely erred in ruling that the proof of losses is a condition sine qua nonto a
valid temporary lay-off. They insisted that the respondents were temporarily laid off for a period of six (6)
months in accordance with Article 28632 (now Article 301) of the Labor Code; thus, the requirements for
retrenchment laid down in Article 28333 (now Article 298) cannot be applied in the present case. Furthermore,
petitioners averred that they acted in good faith when they implemented the temporary lay-off of respondents
and that it was due to economic and non-economic reasons and not because of anti-unionism acts.

Lay-off is defined as the severance of employment, through no fault of and without prejudice to the employee,
resorted to by management during the periods of business recession, industrial depression, or seasonal
fluctuations, or during lulls caused by lack of orders, shortage of materials, conversion of the plant to a new
production program or the introduction of new methods or more efficient machinery, or of automation.
However, a lay�off would be tantamount to a dismissal only if it is permanent. Hence, when a lay-off is only
temporary, the employment status of the employee is not deemed terminated, but merely suspended.34

The case of Industrial Timber Corporation v. NLRC35 is instructive to the nature of lay-off, even a temporary
one, as a management prerogative, to wit:
Closure or cessation of operations for economic reasons is, therefore, recognized as a valid exercise of
management prerogative. The determination to cease operations is a prerogative of management which the
State does not usually interfere with, as no business or undertaking must be required to continue operating at
a loss simply because it has to maintain its workers in employment. Such an act would be tantamount to a
taking of property without due process of law.36ChanRoblesVirtualawlibrary
There is no specific provision of law which treats of a temporary retrenchment or lay-off and provides for the
requisites in effecting it or a period or duration therefor. These employees cannot forever be temporarily laid-
off. To remedy this situation or fill the hiatus, Article 286 (now Article 301) of the Labor Code may be applied
but only by analogy to set a specific period that employees may remain temporarily laid-off or in floating
status.37

Pursuant to Article 286 (now Article 301), the suspension of the operation of business or undertaking in a
temporary lay-off situation must not exceed six (6) months. Within this six-month period, the employee should
either be recalled or permanently retrenched. Otherwise, the employee would be deemed to have been
dismissed, and the employee held liable therefor.38

In the case at bar, PADISCOR asserts that respondents were temporarily laid-off from work on July 30, 2006
and October 7, 2006 for a period of six months since it can no longer pay their wages and other benefits due to
financial losses and lack of capital. To support its claim, it presented the following pieces of evidence: (a)
Notices39 of temporary lay�off to respondents, dated June 17, 2006 and September 5, 2006, and (b) Copies
of Establishment Termination Report40 on June 20, 2006 and September 5, 2006 evidencing the respondents'
lay-off.

The LA and the NLRC gave credence to the foregoing and thus, denied the complaint for illegal suspension,
illegal lay-off, non-payment of service incentive leave and paternity leave, damages and attorney's fees by the
respondents against petitioner PADISCOR. However, the CA ruled that the pieces of evidence are insufficient
to prove that PADISCOR has indeed suffered from financial losses and lack of capital which led to respondents
being temporarily laid off.

As allegation is not evidence, it is settled that the burden of evidence lies with the party who asserts the
affirmative of an issue.41 This Court is not impressed with petitioners' bare claim of financial losses to justify
the temporary lay-off of respondents. The documents they presented are scant to substantiate its claim. While
the law and jurisprudence acknowledge that the closure or suspension of operations of employers due to
economic reasons is a valid exercise of management prerogative, it does not exempt employers from
complying with the requirements laid down by the law.

Jurisprudence, in both a permanent and a temporary lay-off, dictates that the one-month notice rule to both
the DOLE and the employee under Article 283 (now Article 298) is mandatory.42 Also, in both cases, the
lay�off, as an exercise of the employer's management prerogative, must be exercised in good faith - that is,
one which is intended for the advancement of employers' interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements.43

In light of the well-entrenched rule that the burden to prove the validity and legality of the termination of
employment falls on the employer44 and the requisites provided by Article 286 (now Article 301) of the Labor
Code, PADISCOR should have established the bona fide suspension of its business operations or undertaking
that would have resulted in the temporary lay-off of the respondents for a period not exceeding six (6) months
in accordance with the Labor Code.

In the present case, PADISCOR failed to prove its compliance with the said requisites. In invoking such article
in the Labor Code, the paramount consideration should be the dire exigency of the business of the employer
that compels it to put some of its employees temporarily out of work.45 This means that the employer should
be able to prove that it is faced with a clear and compelling economic reason which reasonably forces it to
temporarily shut down its business operations or a particular undertaking, incidentally resulting to the
temporary lay-off of its employees.46
Contrary to petitioners' claim, the CA did not rule that the presentation of financial statements of the company
showing such financial difficulties is a condition sine qua non to a valid temporary lay-off. Instead, the CA ruled
that petitioners failed to substantiate their claim that PADISCOR was suffering from financial losses and lack
of capital which compelled it to temporarily lay-off the respondents from employment.

We held in the case of Lambert Pawnbrokers and Jewelry Corporation v. Binamira,47 that the normal method
of discharging the burden in proving by sufficient and convincing evidence the claim of losses is by the
submission of financial statements duly audited by independent external auditors.48 The CA aptly observed
that no financial statements or documents were presented to support PADISCOR's claim of loss. Instead,
petitioners argued that the fact that they advised respondents to immediately resume employment is evidence
of their good faith. The financial statements or documents could have established that the temporary lay-off
from employment of respondents is indeed bona fide in character, but the petitioners failed to present any.

Therefore, we rule that although PADISCOR complied with the one-month notice rule to the DOLE and the
employees, it failed to prove that such temporary lay-off, as exercise of its management prerogative, was made
in good faith. Due to the grim consequences to the employee such that he or she does not receive any salary
or financial benefit provided by law during the period of temporary lay-off,49 this Court holds that the
employer should have sufficiently proven through clear and convincing evidence the existence of the dire
exigency of its business that compels it to put some of its employees temporarily out of work before a
temporary lay�off be considered as valid.

Verily, PADISCOR cannot conveniently suspend the work of any of its employees in the guise of a temporary
lay-off when it has failed to show compliance with the legal parameters under Article 286 (now Article 301) of
the Labor Code. With PADISCOR being unsuccessful to prove such compliance, the resulting legal conclusion
is that respondents had been constructively dismissed; however, we note that the respondents, with the
exception of Balle who had already found another employment, have already resumed employment with
PADISCOR. Therefore, respondents are entitled to payment of full backwages and other benefits for the period
that they were laid-off from employment.50

WHEREFORE, the petition for review on certiorari dated August 10, 2011 of petitioners Pasig Agricultural
Development and Industrial Supply Corporation (PADISCOR) and Celestino E. Damian is hereby DENIED. The
Decision dated January 25, 2011 and Resolution dated July 21, 2011 of the Court of Appeals are hereby
AFFIRMED.

Velasco, Jr., (Chairperson), Villarama, Jr., Reyes, and Jardeleza, JJ., concur.

Article 302 (287) - Retirement

SECOND DIVISION
G.R. No. 214961, September 16, 2015
BANCO DE ORO UNIBANK, INC., Petitioner, v. GUILLERMO C. SAGAYSAY, Respondent.

DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set aside the March 31, 2014 Decision1and the
October 8, 2014 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 126586, which reversed and set
aside the February 29, 2012 Decision3 and the June 25, 2012 Resolution4 of the National Labor Relations
Commission (NLRC) and reinstated the July 19, 2011 Decision5 of the Labor Arbiter (LA) in NLRC Case No. RAB
II 02-0067-11.

The Facts

On May 16, 2006, respondent Guillermo Sagaysay (Sagaysay) was hired by petitioner Banco De Oro Unibank,
Inc., (BDO) as Senior Accounting Assistant 5 in its San Jose, Nueva Ecija, branch as a result of a merger with
United Overseas Bank (UOB), with BDO as the surviving bank. Sagaysay was previously employed in UOB from
2004 to 2006 or for two (2) years. Prior thereto, he worked for Metropolitan Bank and Trust Co. (Metrobank)
from 1976 to 2004 for a period of twenty-eight (28) years.

In a letter,6 dated January 8, 2010, BDO informed Sagaysay that, pursuant to the retirement policy of the bank
which mandated its retirement age to be sixty (60), he would be formally retired effective September 1, 2010,
a few days after his 60th birthday. The normal or compulsory retirement age of the bank was based on its
retirement plan7 which was implemented on July 1, 1994, Section 1, Article V of which reads:
Section 1. Normal Retirement

The Normal Retirement Date of each member shall be the first day of the month coincident with or next
following his sixtieth (60th) birthday. The Member's Normal Retirement Benefit shall be a sum determined in
accordance with the Retirement Benefit Schedule stated in Section 4 of this Article as of his retirement date.8
In an e-mail,9 dated July 27, 2010, Sagaysay wrote that, although the time had come that the BDO Retirement
Program would be implemented to those reaching the age of sixty (60), he requested that his services be
extended because he had an outstanding loan and his children were still in college. He assured BDO that he
was healthy and could still perform his duties in the branch. BDO denied Sagaysay's request.

In another e-mail,10 dated August 19, 2010, Sagaysay appealed to BDO to extend his service for 8.5 months or
up to May 16, 2011 so that he could render at least five (5) years of employment which would entitle him to 50%
of his basic pay for every year of service upon his retirement. BDO denied Sagaysay's appeal and retired him
on September 1, 2010. As of his last day of work, he was earning a monthly salary of P28,048.00.

Sagaysay then signed Release, Waiver and Quitclaim11 (quitclaim), dated October 22, 2010, for and in
consideration of P98,376.14. The quitclaim stated, among others, that in consideration of the foregoing
payment, Sagaysay released and discharged the bank, its affiliates and its subsidiaries from any action, suit,
claim or demand in connection with his employment.

On January 10, 2011, Sagaysay filed a complaint12 for illegal dismissal with prayer for reinstatement and
payment of backwages, moral damages, exemplary damages, and attorney's fee against BDO before the Labor
Arbiter (LA). He claimed that despite his appeal, BDO compulsory retired him on September 1, 2010. As a result,
he and his family suffered damages in the amount of P2,225,403.00 which he would have received if he was
made to retire at the age of sixty-five (65).

For its part, BDO countered that after the bank denied Sagaysay's request for extension of services, he was
paid the amount of P98,376.14 representing the full and final settlement of his compensation, allowances,
benefits and other emoluments. BDO stressed that he was not dismissed but was retired from the service.

The LA Ruling

In a decision, dated July 19, 2011, the LA ruled that Sagaysay was illegally dismissed because he was forced to
avail of an optional retirement at the age of sixty (60) which was contrary to the provisions of Article 287 of the
Labor Code.13 The LA opined that he was terminated on the basis of a provision in a retirement plan to which
he did not freely assent. BDO took advantage of his predicament and made him sign a quitclaim in exchange
for a small consideration. The decretal portion of the LA decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered declaring that complainant GUILLERMO
C. SAGAYSAY was illegally dismissed from work. Hence, respondent BDO UNIBANK, INC. is ordered to
REINSTATE complainant to his former position as Senior Accounting Assistant 5 without loss of seniority rights
and privileges and to pay him backwages in the sum of P280,480.00 as of July 7, 2011, plus ten percent (10%)
thereof as attorney's fees or a total of P308,528.00.

The reinstatement aspect is immediately executory, even pending appeal. Respondent is hereby ordered to
show proof that it complied with the reinstatement of complainant within ten (10) calendar days from receipt
hereof.

Respondents [are] also ordered to pay complainant P50,000.00 each as moral and exemplary damages.

SO ORDERED.14
Aggrieved, BDO appealed to the NLRC arguing chiefly that Sagaysay freely assented to its retirement plan.

The NLRC Ruling

On February 29, 2012, the NLRC reversed and set aside the ruling of the LA. The NLRC explained that BDO's
retirement plan, which mandated a normal or compulsory retirement date at the age of sixty (60), was effective
as early as June 1, 1994. The plan was renamed Banco de Oro Multiemployer Retirement Plan on July 1, 2004,
but the compulsory retirement age of sixty (60) was preserved. When Sagaysay was employed on May 16,
2006, the retirement plan was already in full force and effect. Thus, the NLRC concluded that when he accepted
his employment with BDO, he assented to the provisions of the retirement plan.

The NLRC found it difficult to believe that Sagaysay started his employment with BDO without familiarizing
himself with the bank's retirement policy considering that he had previously retired from two (2) other banks.
Further, the NLRC stated that a more concrete proof of his acceptance of BDO's retirement plan was his
execution of a quitclaim where he declared that he had no cause of action against the bank and its agents. The
dispositive portion of the NLRC decision states:
WHEREFORE, the appeal is GRANTED. The Decision of Labor Arbiter Ma. Lourdes R. Baricaua dated July 19,
2011 is REVERSED and SET ASIDE and a new one entered DISMISSING the complaint.

SO ORDERED.15
Sagaysay filed a motion for reconsideration, but it was denied by the NLRC in its Resolution, dated June 25,
2012.

Undaunted, Sagaysay filed a petition for certiorari16 before the CA contending that it was neither stated in his
employment contract nor stipulated in the collective bargaining agreement (CBA) between BDO and its
employees that the compulsory retirement age was sixty (60) years old.

The CA Ruling

On March 31, 2014, the CA rendered the assailed decision which reversed the NLRC ruling. The appellate court
explained that while the cases of Pantranco North Express, Inc., v. NLRC17 and Philippine Airlines v. Airline
Pilots Association of the Philippines18 affirmed that the employer may provide an earlier retirement age, the
retirement plans therein were the result of negotiations and agreement between employer and employee. The
CA continued that, in this case, the retirement plan was not a result of a mutual agreement of employer and
employee. This was affirmed by the BDO Memorandum,19 dated June 1, 2009, stating that the retirement plan
was to be implemented in the merged bank. Citing Cercado v. UNIPROM Inc.20 (Cercado), the CA ruled that a
retirement plan with no voluntary acquiescence on the part of the employee was ineffective.

The CA stated that Sagaysay was forced to participate in the retirement plan. Equally, the quitclaim he
executed was not given credence because his subsequent filing of a complaint for illegal dismissal manifested
that he had no intention to relinquish his employment. Nonetheless, the CA deleted the awards of moral and
exemplary damages for lack of basis. The appellate court disposed the case in this wise:
WHEREFORE, the petition is GRANTED. The Decision dated February 29, 2012 and the Resolution dated June
25, 2012 of the National Labor Relations Commission are REVERSED and SET ASIDE. The July 19, 2011 Decision
of the Labor Arbiter is REINSTATED, with MODIFICATION that the awards of moral and exemplary damages
are DELETED for lack of basis.

SO ORDERED.21
BDO moved for reconsideration, but the motion was denied by the CA in the assailed resolution, dated October
8, 2014.

Hence, this petition.

The issues presented can be summarized as follows:

I

WHETHER THE RETIREMENT PLAN IS VALID AND EFFECTIVE AND, CONSEQUENTLY, THE MANDATORY
RETIREMENT AGE OF 60 YEARS OLD IS ALSO BINDING.
II

WHETHER THE EXECUTION OF A RELEASE, WAIVER AND QUITCLAIM BY RESPONDENT IS VALID.

BDO principally argues that the retirement plan has been valid and effective since June 1, 1994; that having
been in place for such a long period, the retirement plan is deemed to have been written into Sagaysay's
employment contract, executed on May 16, 2006; that he even asked for an extension to become eligible to
avail of the benefits under the same retirement plan; and that the 2005-2010 CBA stated, "[t]he Bank shall
continue to grant retirement pay," showing that the CBA likewise recognized the existing retirement plan.

BDO also contends that the CA erred in citing Cercado because in that case, the retirement plan was executed
only after the employment of petitioner therein. Moreover, Sagaysay, as a veteran banker, fully knew the
effects of the release, waiver and quitclaim when he signed it.

In his Comment,22 Sagaysay countered that he was retired by BDO against his will; that there was no provision
in any CBA that employees who reached sixty (60) years of age could be compulsorily retired; that there was
no agreement either between Sagaysay and BDO that he would be retired upon reaching sixty (60); and that
the quitclaim was invalid because BDO took undue advantage of his situation and dire financial problems to
obtain his signature therein.

In its Reply,23 BDO reiterated that the retirement plan was not forced upon Sagaysay; and that at the time he
was employed by BDO in 2006, he had every opportunity to refuse employment if he disagreed with the
retirement policy of the bank.
The Court's Ruling
The Court finds the petition meritorious.

The petition essentially centers on whether the June 1, 1994 retirement plan is valid and effective against
Sagaysay. To resolve this issue, a review of the relevant laws and jurisprudence regarding the compulsory
retirement age is warranted.

Laws and jurisprudence on early age of retirement

Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer and the
employee whereby the latter, after reaching a certain age, agrees to sever his or her employment with the
former.24 Article 287 of the Labor Code is the primary provision which governs the age of retirement and
states:
Art. 287. Retirement. xxx

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65)
years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month
salary for every year of service, a fraction of at least six (6) months being considered as one whole year.
[Emphasis Supplied]
Doubtless, under this provision, the retirement age is primarily determined by the existing agreement or
employment contract. Only in the absence of such an agreement shall the retirement age be fixed by law, which
provides for a compulsory retirement age at 65 years, while the minimum age for optional retirement is set at
60 years.25cralawred

Retirement plans allowing employers to retire employees who have not yet reached the compulsory retirement
age of 65 years are not per se repugnant to the constitutional guaranty of security of tenure. By its express
language, the Labor Code permits employers and employees to fix the applicable retirement age at 60 years
or below, provided that the employees' retirement benefits under any CBA and other agreements shall not be
less than those provided therein.26

Jurisprudence is replete with cases discussing the employer's prerogative to lower the compulsory retirement
age subject to the consent of its employees. In Pantranco North Express, Inc. v. NLRC,27 the Court upheld the
retirement of the private respondent therein pursuant to a CBA allowing the employer to compulsorily retire
employees upon completing 25 years of service to the company. Interpreting Article 287, the Court held that
the Labor Code permits employers and employees to fix the applicable retirement age lower than 60 years of
age. The Court also stressed that "[p]roviding in a CBA for compulsory retirement of employees after twenty-
five (25) years of service is legal and enforceable so long as the parties agree to be governed by such CBA."28

In Progressive Development Corporation v. NLRC,29 the retirement plan, which allowed the employer to retire
employees who had rendered more than 20 years of service, was declared valid and enforceable even though
it was not embodied in a CBA. In that case, the Court concluded that the employees, who were hired before
the execution of the employer's retirement plan on April 1, 1980, were bound by it because the retirement plan
was expressly made known and accepted by them.

In contrast, the case of Jaculbe v. Silliman University30 did not allow the application of a lower retirement age.
The petitioner in the said case was employed sometime in 1958 while the retirement plan, which automatically
retired its members upon reaching the age of 65 or after 35 years of uninterrupted service to the university,
came into being in 1970. The said retirement plan was not applied to the petitioner because there was no
agreement to which the latter assented.

Similarly, the case of Cercado, which was heavily relied on by the CA, involved a non-contributory retirement
plan which provided that any employee with twenty (20) years of service, regardless of age, may be retired at
his option or at the option of the company. The said plan was adopted on April 1, 1980 while the petitioner
therein was employed earlier on December 15, 1978. When respondent UNIPROM retired the petitioner
pursuant to its retirement plan, the latter objected stating that she did not consent to it. The Court ruled in
favor of the petitioner because there was no voluntary acquiescence to UNIPROM's early retirement age option
on her part. It elucidated that:chanRoblesvirtualLawlibrary

Acceptance by the employees of an early retirement age option must be explicit, voluntary, free, and
uncompelled. While an employer may unilaterally retire an employee earlier than the legally permissible ages
under the Labor Code, this prerogative must be exercised pursuant to a mutually instituted early retirement
plan. In other words, only the implementation and execution of the option may be unilateral, but not the
adoption and institution of the retirement plan containing such option. For the option to be valid, the
retirement plan containing it must be voluntarily assented to by the employees or at least by a majority of them
through a bargaining representative.31

On the other hand, in Obusan v. Philippine National Bank32 (Obusan), the petitioner therein, who was hired by
PNB in 1979, was deemed covered by its retirement plan adopted on December 22, 2000. It mandated that the
employee should retire when he attained the age of sixty (60), regardless of his length of service, or when he
had rendered thirty (30) years of service, regardless of age, whichever of the said conditions came first.
Considering that on February 21, 2001, PNB had informed all of its officers and employees about the said
retirement plan, the said plan was then registered with the B1R and was later recognized by the Philnabank
Employees Association in its CBA. Despite the proper dissemination of information, no one questioned the
retirement plan. Hence, the Court deemed it valid and effective as due notice of the employer's decision to
retire an employee was adequately provided.

A scrutiny of the above-discussed cases reveals that the retirement plan was adopted after the employees were
hired by their employer. This is in stark contrast with the case at bench wherein the adoption of the retirement
plan came before the hiring of Sagaysay. Thus, the present petition portrays a unique predicament on whether
a retirement plan adopted before the employment of an employee is deemed binding on the latter.

Sagaysay was sufficiently informed of the retirement plan

After a judicious study of records, the Court is convinced that Sagaysay was undeniably informed and had
consented to the retirement plan of BDO before his compulsory retirement on September 1, 2010 based on the
following:chanRoblesvirtualLawlibrary

First, the retirement plan was established as early as July 1, 1994. The purpose of the plan was to create a BDO
employee's retirement trust fund which would provide for retirement and other benefits for all employees of
the bank. It was also intended to support the funding of the benefits indicated in the CBA.33 The retirement
plan provided several retirement options such as normal retirement, early retirement, late retirement, and
disability retirement. Normal or compulsory retirement was mandated at the first day of the month following
the employee's sixtieth (60th) birthday, while early or optional retirement age was pegged at the age of fifty
(50) with at least 10 years of credited service. It also discussed the different benefits that an employee could be
entitled to upon retirement, resignation or separation.
It was renamed on June 1, 2004, but its provision on the normal retirement age was retained. Twelve (12) years
after the adoption of the retirement plan, Sagaysay was employed by the bank. From its inception until his
hiring, no employee had earnestly questioned the retirement plan. By then, it was unquestionably an
established policy within the BDO, applied to each and every worker of the bank.

Second, by accepting the employment offer of BDO, Sagaysay was deemed to have assented to all existing
rules, regulations and policy of the bank, including the retirement plan. Likewise, he consented to the CBA34
between BDO and the National Union of Bank Employees Banco De Oro Chapter. Section 2 of Article XVII of
the CBA provides that "[t]he Bank shall continue to grant retirement/gratuity pay xxx." Notably, both the
retirement plan and the CBA recognize that the bank has a continued and existing practice of granting the
retirement pay to its employees.

Third, on June 1, 2009, BDO issued a memorandum35 regarding the implementation of its retirement program,
reiterating that the normal retirement date was the first day of the month following the employee's sixtieth
(60th) birthday. Similar to the case of Obusan, the memorandum was addressed to all employees and officers.
By that time, Sagaysay was already an employee and he did not deny being informed of such memorandum.

For four years, from the time he was employed until his retirement, and having actual knowledge of the BDO
retirement plan, Sagaysay had every opportunity to question the same, if indeed he knew it would not be
beneficial to him. Yet, he did not express his dissent. As observed in Obusan, "[t]his deafening silence
eloquently speaks of [his] lack of disagreement with its provisions."36

Lastly, perhaps the most telling detail indicative of Sagaysay's assent to the retirement plan was his e-mails to
the bank, dated July 27, 2010 and August 19, 2010. In these communications, albeit having been informed of
his upcoming retirement, Sagaysay never opposed the company's compulsory age of retirement. In fact, he
recognized that "the time has come that BDO Retirement Program will be implemented to those reaching the
age of sixty (60)."37

Glaringly, he even requested that his services be extended, at least until May 16, 2011, so that he could render
five (5) years of service.38 Sagaysay's request reflects the late retirement option where an employee may be
allowed by the bank to continue to work on a yearly extension basis beyond his normal retirement date.39 The
late retirement option is embodied in the same retirement plan, of which, ironically, he claimed to be unaware.
With such inconsistent stance, the Court can only conclude that Sagaysay was indeed notified and had
accepted the provisions of the retirement plan. It was only when his request for late retirement was denied that
he suddenly became oblivious to the said plan.

The case of Cercado is not applicable

The case of Cercado is not applicable in the present case as it has a different factual milieu. First, in Cercado,
the petitioner was employed on December 15, 1978, which was almost two (2) years before the adoption of the
employer's retirement plan on April 1, 1980. The Court explained that, logically, her employment contract did
not include the retirement plan, much less the early retirement age option contained therein.

In the case at bench, Sagaysay was employed on May 16, 2006, which was almost twelve (12) years after the
adoption of retirement plan on July 1, 1994. Accordingly, from the moment that Sagaysay accepted his
employment, he was deemed to have consented to all existing company rules and regulations, including the
policy on the early age retirement.
Second, in Cercado, the retirement plan was implemented when the petitioner therein was already employed.
The Court held that because of the automatic application of the retirement plan to the current employees
without their voluntary conformity, "[p]etitioner was forced to participate in the plan, and the only way she
could have rejected the same was to resign or lose her job." Necessarily, it undermined the petitioner's security
of tenure.

The ruling in Cercado cannot be applied to this case as Sagaysay was not yet employed when the retirement
plan was adopted. When he was offered employment by the bank in 2006, the established retirement plan was
not forced upon him. Sagaysay had the free will whether to undertake the employment and accept the bank's
corresponding policies or look for a job elsewhere. Corollarily, no security of tenure had yet attached at that
specific moment.

In other words, the evil sought to be prevented in Cercardo does not exist in the present case as Sagaysay was
given the opportunity to accept or reject the lower retirement age policy.

Third, the petitioner in Cercado refused the early retirement package in the amount of P171,982.90 from her
employer. From the very beginning, she was adamant that she did not consent to the retirement plan of her
employer.

The opposite cam be observed in the present case. It has been uncontroverted that Sagaysay earlier
acknowledged the retirement program of BDO and even requested for an extension of service. Moreover, he
signed a quitclaim for and in consideration of P98,376.14 which discharged the bank, its affiliates and its
subsidiaries from any action, suit, claim or demand in connection with his employment.

Generally, a quitclaim is frowned upon. As an exception, a quitclaim, with clear and unambiguous contents and
executed for a valid consideration received in full by the employee who signed the same, cannot be later
invalidated because its signatory claims that he was pressured into signing it on account of his dire financial
need. When it is shown that the person executing the waiver did so voluntarily, with full understanding of what
he was doing, and the consideration for the quitclaim was credible and reasonable, the transaction must be
recognized as a valid and binding undertaking.40

Here, the Court is of the view that the quitclaim was validly executed. For the consideration of the quitclaim,
Sagaysay received the amount of P98,376.14. As admitted by him, the amount was based on a liquidation data
sheet which showed the computation of benefits and emoluments of a rank and file employee.41
Understandably, the amount given would not reflect the retirement benefits he demanded because he did not
qualify under the retirement plan of BDO for he had not completed five (5) years of service upon his compulsory
retirement. Thus, the consideration provided in the quitclaim was justified and reasonable.

Further, it has been duly proven that Sagaysay was a seasoned banker, spending thirty-four (34) years of his
career in different banking establishments. He was learned in his profession and even experienced separation
from his previous employments. Consequently, it cannot be said that he was naive in dealing with his employer
and that he failed to exercise his free and voluntary will when faced with the documents relating to his
retirement. Not an iota of evidence showed that BDO exerted undue influence against him to acquire his
consent. In fine, absent any doubt to the contrary, his quitclaim must stand.

Extension of service

Finally, on Sagaysay's request to extend his length of service despite the compulsory retirement age of sixty
(60) which was denied by BDO and eventually sparked the present controversy, the Court holds that BDO had
the management prerogative to deny the extension of service. It is important to state that upon the compulsory
retirement of an employee or official in the public or private service his employment is deemed terminated.
The matter of extension of service of such employee or official is addressed to the sound discretion of the
employer. It is a privilege only the employer can grant.42

Although the Court has, more often than not, been inclined towards the plight of the workers and has upheld
their cause in their conflicts with the employers, such inclination has not blinded it to the rule that justice is in
every case for the deserving, to be dispensed in the light of the established facts and applicable law and
doctrine.43chanroblesvirtuallawlibrary

WHEREFORE, the petition is GRANTED. The March 31, 2014 Decision and the October 8, 2014 Resolution of
the Court of Appeals in CA-G.R. SP No. 126586 are REVERSED and SET ASIDE, and the February 29, 2012
Decision and the June 25, 2012 Resolution of the National Labor Relations Commission in NLRC LAC No. 08-
002069-11 are REINSTATED.

SO ORDERED.chanroblesvirtuallawlibrary

Carpio, (Chairperson), Del Castillo, Perez,* and Leonen, JJ., concur.