JULITO SAGALES v. RUSTAN'S COMMERCIAL CORPORATION - Aggrieved, petitioner filed a complaint for illegal dismissal against respondent.
G.R. NO. 166554; November 27, 2008
FACTS:
- Julito Sagales was employed by respondent Rustan's Commercial Corporation from October
1970 until July 26, 2001, when he was terminated. At the time of his dismissal, he was
occupying the position of Chief Cook at the Yum Yum Tree Coffee Shop located at Rustan's
Supermarket in Ayala Avenue, Makati City
- In the course of his employment, Sagales was a consistent recipient of numerous citations
for his performance. After receiving his latest award on March 27, 2001, Sagales conveyed to
respondent his intention of retiring on October 31, 2001, after reaching 31 years in service.
- Petitioner, however, was not allowed to retire with his honor intact.
- On June 18, 2001, Security Guard Waldo Magtangob, upon instructions from Senior Guard
Bonifacio Aranas, apprehended petitioner in the act of taking out from Rustan's Supermarket
a plastic bag. Upon examination, it was discovered that the plastic bag contained 1.335 kilos
of squid heads worth P50.00. Petitioner was not able to show any receipt when confronted.
Thus, he was brought to the Security Office of respondent corporation for proper
endorsement to the Makati Headquarters of the Philippine National Police. Subsequently,
petitioner was brought to the Makati Police Criminal Investigation Division where he was
detained. Petitioner was later ordered released pending further investigation.
- Petitioner underwent inquest proceedings for qualified theft. Although petitioner admitted
that he was in possession of the plastic bag containing the squid heads, he denied stealing
them because he actually paid for them. As proof, petitioner presented a receipt. The only
fault he committed was his failure to immediately show the purchase receipt when he was
accosted because he misplaced it when he changed his clothes. He also alleged that the
squid heads were already "scraps" as these were not intended for cooking. He bought the
squid heads so that they could be eaten instead of being thrown away. If he intended to
steal from respondent, he could have stolen other valuable items instead of scrap.
- Assistant Prosecutor Pineda believed the version of petitioner and recommended the
dismissal of the case for "lack of evidence."
- Notwithstanding the dismissal of the complaint, respondent, required petitioner to explain in
writing within 48 hours why he should not be terminated in view of the incident. Respondent
also placed petitioner under preventive suspension.
- Petitioner was informed that a formal investigation would be conducted by the Legal
Department.
- Petitioner and his counsel attended the administrative investigation where he reiterated his
defense before the inquest prosecutor. Also in attendance were Aranas and Magtangob, who
testified on the circumstances surrounding the apprehension of petitioner; Samson, the
branch manager to whom petitioner allegedly apologized for the incident; and Zenaida
Castro, cashier, who testified that the squid heads were not paid.
- Respondent did not find merit in the explanation of petitioner. Thus, petitioner was dismissed
from service on July 26, 2001. At that time, petitioner had been under preventive suspension
for one (1) month.
LABOR ARBITER: Complaint dismissed. According to the Labor Arbiter, the nature of the
responsibility of petitioner "was not that of an ordinary employee." It then went on to categorize
petitioner as a supervisor in "a position of responsibility where trust and confidence is inherently
infused." As such, it behooved him "to be more knowledgeable if not the most knowledgeable in
company policies on employee purchases of food scrap items in the kitchen." Per the evidence
presented by respondent, petitioner breached company policy which justified his dismissal.
NLRC: NLRC reversed, it held that the position of complainant is not supervisory covered by the
trust and confidence rule. On the contrary, petitioner is a mere rank-and-file employee. The evidence
is also wanting that petitioner committed the crime charged. The NLRC did not believe that petitioner
would trade off almost thirty-one (31) years of service for P50.00 worth of squid heads.
The NLRC further ruled that petitioner was illegally dismissed as respondent failed to establish a just
cause for dismissal. However, the claim for damages was denied for lack of evidence.
COURT OF APPEALS: CA reversed, it opined that the position of petitioner was supervisory in
nature. The CA also held that the evidence presented by respondent clearly established loss of trust
and confidence on petitioner. Lastly, the CA, although taking note of the long years of service of
petitioner and his numerous awards, refused to award separation pay in his favor. According to the
CA, "the award of separation pay cannot be sustained under the social justice theory" because the
instant case "involves theft of the employer's property."
ISSUE:
1. Whether or not the Court of Appeals committed grave abuse of discretion amounting to lack
of jurisdiction when it concluded that the position of the petitioner being an assistant cook as
a supervisory position for being contradictory to the evidence on record.
2. Whether or not the Court of Appeals committed grave abuse of discretion amounting to lack
of jurisdiction when it concluded that the doctrine of trust and confidence applies against the
petitioner to justify his dismissal from employment for being contradictory to the evidence on
record.
JURISPRUDENCE:
I. The position of petitioner is supervisory in nature which is covered by the trust and
confidence rule.
The nature of the job of an employee becomes relevant in termination of employment
by the employer because the rules on termination of managerial and supervisory
employees are different from those on the rank-and-file.
Managerial employees are tasked to perform key and sensitive functions, and thus are bound by
more exacting work ethics. As a consequence, managerial employees are covered by the trust and
confidence rule. The same holds true for supervisory employees occupying positions of responsibility.
There is no doubt that the position of petitioner as chief cook is supervisory in nature. A chief
cook directs and participates in the preparation and serving of meals; determines timing and
sequence of operations required to meet serving times; and inspects galley and equipment for
cleanliness and proper storage and preparation of food. Naturally, a chief cook falls under the
definition of a supervisor, i.e., one who, in the interest of the employer, effectively
recommends managerial actions which would require the use of independent judgment and
is not merely routinary or clerical.
Change of nomenclature from Chief cook to Asst. cook does not help the petitioner’s case
because in Concorde Hotel v CA the Court ruled that the nature of private respondent's position as
assistant cook places upon him the duty of care and custody of Concorde's property; thus, trust and
confidence rule still applies.
II. The evidence on record is sufficient to conclude that petitioner committed the crime
charged.
Security of tenure is a paramount right of every employee that is held sacred by the Constitution.
The reason for this is that labor is deemed to be "property" within the meaning of constitutional
guarantees.
Necessarily then, the employer bears the burden of proof to show the basis of the
termination of the employee.
In the case at bar, respondent has discharged its onus of proving that petitioner committed the
crime charged.
The Court stresses that for the quantum of proof required for the application of the loss of
trust and confidence rule, it is sufficient that there must only be some basis for the loss of
trust and confidence or that there is reasonable ground to believe, if not to entertain the
moral conviction, that the employee concerned is responsible for the misconduct and that
his participation in the misconduct rendered him absolutely unworthy of trust and
confidence.
It is also of no moment that the criminal complaint for qualified theft against petitioner was
dismissed. It is well settled that the conviction of an employee in a criminal case is not indispensable
to the exercise of the employer's disciplinary authority.
III. The penalty of dismissal is too harsh under the circumstances.
The free will of management to conduct its own business affairs to achieve its purpose cannot be
denied. The only condition is that the exercise of management prerogatives should not be
done in bad faith or with abuse of discretion.
While the employer has the inherent right to discipline, including that of dismissing its
employees, this prerogative is subject to the regulation by the State in the exercise of its
police power.
In this regard, it is a hornbook doctrine that infractions committed by an employee should merit
only the corresponding penalty demanded by the circumstance. The penalty must be commensurate
with the act, conduct or omission imputed to the employee and must be imposed in connection with
the disciplinary authority of the employer.
In the case at bar, petitioner deserves compassion more than condemnation. At the end of the
day, it is undisputed that:
1. Petitioner has worked for respondent for almost 31 years;
2. His tireless and faithful service is attested by the numerous awards he has received from
respondent;
3. The incident on June 18, 2001 was his first offense in his long years of service;
4. The value of the squid heads worth P50.00 is negligible;
5. Respondent practically did not lose anything as the squid heads were considered scrap goods
and usually thrown away in the wastebasket;
6. The ignominy and shame undergone by petitioner in being imprisoned, however momentary,
is punishment in itself; and
7. Petitioner was preventively suspended for one month, which is already a commensurate
punishment for the infraction committed.
Truly, petitioner has more than paid his due.
In any case, it would be useless to order the reinstatement of petitioner, considering that he
would have been retired by now. Thus, in lieu of reinstatement, it is but proper to award petitioner
separation pay computed at one-month salary for every year of service, a fraction of at least six (6)
months considered as one whole year. In the computation of separation pay, the period where
backwages are awarded must be included.
Word of caution. (Not very important but I feel like adding)
We do not condone dishonesty. After all, honesty is the best policy. However, punishment
should be commensurate with the offense committed. The supreme penalty of dismissal is the
death penalty to the working man. Thus, care should be exercised by employers in imposing dismissal
to erring employees. The penalty of dismissal should be availed of as a last resort.
AUTOMATIC APPLIANCES, INC. VS. FRANCIA DEGUIDOY
G.R. NO. 228088, DECEMBER 4, 2019
FACTS:
- Automatic Appliances, Inc. (AAI) hired Francia B. Deguidoy (Deguidoy) as a regular Sales
Coordinator in its Cubao Branch.
- As a sales coordinator, she was tasked with selling merchandise and was required to
maintain a branch sales quota.
- Sometime in 2013, AAI suffered a decline in its sales and experienced economic difficulties
that caused the implementation of cost-cutting measures, which included closing some of its
branches, it also issued a memorandum informing employees of its re-shuffling and re-
assignment to AAI’s various branches.
- As a result, Deguidoy was re-assigned from the Cubao branch to the Tutuban Branch which
she later accepted.
- While at the Tutuban Branch, Deguidoy failed to reach her sales quota and incurred 29 days
of unexplained absences. Her sales performance continued to decline while her co-employees
surpassed their sales quotas.
- Concerned about Deguidoy’s dismal performance at work, the management of AAI urged her
to undergo counseling to improve her performance, during which she explained that her poor
 performance was due to her weight gain, which made it difficult for her to stand and perform
her tasks as a Sales Coordinator.
- AAI then suggested a lateral transfer as a receptionist clerk or invoicing clerk, where she
could work behind a desk which she later on refused.
- Meanwhile, AAI received a letter from the Tutuban Branch Manager, notifying the
management about Deguidoy’s performance.
- Hearing this, AAI conducted a review of Deguidoy’s records and sales outputs which led to
the discovery that she incurred numerous absences and had a low sales output.
- She was then placed under one month suspension and apologized for her shortcomings.
- Upon the end of her suspension, Deguidoy reported back to work where she was verbally
informed about an intended transfer to the Ortigas branch. Dismayed by the news, Deguidoy
left during her lunch break and never returned.
- AAI sent a letter requiring her to explain why she failed to report for work which was ignored
by Deguidoy. AAI then sent another letter but still, the same was unheeded.
- Unknown to AAI, Deguidoy filed a case for illegal dismissal with money claims.
LABOR ARBITER: The Labor Arbiter dismissed the complaint for illegal dismissal based on the
finding that she was not terminated, but was simply being transferred to another branch. However,
the LA ordered the payment of Daguidoy’s proportinate 13th month pay. In view of the LA Decision,
AAI sent Deguidoy a notice to report for work. However, instead of reporting for work, she filed a
Partial Memorandum of Appeal before the NLRC where she changed her cause of action from actual
illegal dismissal to constructive dismissal.
NLRC: The NLRC reversed and set aside the ruling of the LA and held that Deguidoy was
constructively dismissed. Disappointed, AAI filed a Petition for Certiorari before the CA.
COURT OF APPEALS: The CA affirmed the NLRC’s ruling with modification. The CA found that
Deguidoy was constructively dismissed. She was being transferred to the Ortigas branch, which was
on the verge of being closed. Likewise, the evidence presented by AAI was not sufficient to prove that
her transfer was intended to help her achieve a better sales performance. AAI filed a petition for
review on certiorari before the Supreme Court.
ISSUE:
Was Deguidoy constructively dismissed? NO.
JURISPRUDENCE:
Constructive dismissal only exists where there is cessation of work, because
continued employment is rendered impossible, unreasonable or unlikely , as an offer involving
demolition in rank or a diminution in pay and other benefits, which were not present in this case.
The management’s decision to transfer an employee shall not be assailed as a form
of constructive dismissal in the absence of proof that the re-assignment involves a
demotion in rank, diminution in pay, or was an act of discrimination or disdain. The intended
transfer did not involve a demotion in rank or diminution in pay, salaries and benefits. The decision
was spurred by a genuine necessity to streamline the business operations.
It should be noted that, the decision to transfer Deguidoy came after a painstaking
evaluation of her performance at the Tutuban branch, which could not have been necessary if she was
able to perform her work adequately.
Under the doctrine of management prerogative, an employer possesses the
inherent right to regulate, according to its "own discretion and judgment, all aspects of
employment, including hiring, work assignments, working methods, the time, place and
manner of work, work supervision, transfer of employees, lay-off of workers, and
discipline, dismissal, and recall of employees."
Considering that Deguidoy was not constructively dismissed, Deguidoy was ordered to be
reinstated to her former position at the Tutuban branch without any backwages. This is in accordance
with the Court's ruling in Claudia's Kitchen, Inc. v. Tanguin, where it was held that if "the employee
was neither found to have been dismissed nor to have abandoned his/her work, the general course of
action is for the Court to dismiss the complaint, direct the employee to return to work, and order the
employer to accept the employee.
Since AAI did not question the LA’s award of 13th month pay for the year 2013 in favor of
Deguidoy, the same was upheld by the Court.
TELUS INTERNATIONAL PHILIPPINES, INC. AND MICHAELSY v. HARVEY DE GUZMAN
G.R. No. 202676, December 04, 2019
FACTS:
- Harvey De Guzman was a Senior Quality Analyst for DELL After Point of Sale.
- Telus received an escalation complaint from Jeanelyn Flores, Team Captain of DELL APoS,
charging De Guzman of disrespect and ridicule towards a person.
- Flores sent a message to Quality Analysts directing them to do coaching.
- De Guzman was among those who received the message and replied: "that is good, you can
now do your huddle for your team."
- Flores was offended by De Guzman's reply.
- Later on, she chanced upon the IP switch conversation between De Guzman and a fellow
agent, Rally Boy Sy, wherein De Guzman made disrespectful remarks against her.
- De Guzman was then placed under preventive suspension and was directed to submit a
written explanation
- Telus conducted an administrative hearing on the matter. It found De Guzman not liable for
the offenses charged and did not impose any disciplinary sanction against him.
- De Guzman's preventive suspension was lifted and he was fully compensated during the
period.
- Telus, however, decided to remove De Guzman from his current designation and transfer him
to another practice.
 - De Guzman applied for paid vacation leave citing "Personal Reasons”
- De Guzman was placed in a “Floating” status.
- De Guzman was informed of an available position but was told that he needed to pass a
profiling interview
- Believing that he need not undergo such process and that he must be reinstated to his
former position immediately, De Guzman did not report for the interviews.
- Events led to De Guzman's filing of a complaint before the NLRC for constructive dismissal,
money claims and damages against petitioners.
LABOR ARBITER: De Guzman was constructively dismissed
NLRC: overturned the LA ruling, transfer was done in good faith and placing De Guzman in a
floating status was not a form of discrimination
COURT OF APPEALS: De Guzman was illegally dismissed. De Guzman cannot be considered to
have abandoned his job as his acts before and after the cessation of work, especially the filing of the
illegal dismissal complaint negated the same.
ISSUE:
Was the act of Telus in transferring and placing De Guzman in a floating status a valid
exercise of Management prerogative? NO.
JURISPRUDENCE:
The only limitations to the exercise of this prerogative are those imposed by labor
laws and the principles of equity and substantial justice. (LABOR CODE AND CONSTITUTION)
After a judicious review of the facts of the case, this Court finds that De Guzman's security of
tenure was disregarded and his employment was illegally terminated by Telus.
As admitted by Telus, profiling interviews were not a condition precedent to the transfer.
Moreover, as established before the Labor Arbiter, after the lifting of the preventive suspension of De
Guzman by Telus, the company had several job vacancy postings for the position of Quality Analysts,
the very position previously occupied by De Guzman.
Telus should have immediately reinstated De Guzman and should not have required
the profiling interview. By placing him in a floating status, Telus discriminated De Guzman.
REPUBLIC OF THE PHILIPPINES vs. MINERVA M.P. PACHEO
G.R. No. 178021; January 25, 2012
FACTS:
- Pacheo was a Revenue Attorney IV, Assistant Chief of the Legal Division of the BIR in
Revenue Region No. 7, Quezon City.
- The BIR issued Revenue Travel Assignment Order (RTAO) No. 25-2002 ordering the
reassignment of Pacheo to Assistant Chief Legal Division to RR4 in San Fernando, Pampanga.
The exigencies of the revenue service are the basis for the issuance of the said RTAO.
- Pacheo questioned the reassignment to CIR Commissioner Banez. She considered her
transfer from Quezon City to Pampanga as amounting to a constructive dismissal. She
complained that the transfer would mean economic dislocation since she would have to
spend ₱ 200.00 on daily travel expenses. It would also mean physical burden on her part as
she would be compelled to wake up early in the morning for her daily travel from Quezon
City to San Fernando, Pampanga, and to return home late at night from San Fernando,
Pampanga to Quezon City. She was of the view that her reassignment was merely intended
to harass and force her out of the BIR in the guise of exigencies of the revenue service. 
- Pacheo filed a complaint with the CSC-National Capital Region: praying for the nullification of
RTAO No. 25-2002. However, Pacheo’s complaint was denied because Pacheo’s complaint is
an appeal hence the failure to comply the Uniform Rules on Administrative Cases in the Civil
Service.
- BIR (September 13, 2002): The BIR, through its Deputy Commissioner for Legal and
Inspection Group Guevara, denied Pacheo’s protest for lack of merit. Pacheo’s reassignment
could not be considered constructive dismissal as she maintained her position as Revenue
Attorney IV and was designated as Assistant Chief of Legal Division. She could properly be
reassigned from one organizational unit to another within the BIR. Lastly, she could not
validly claim a vested right to any specific station, or a violation of her right to security of
tenure.
- Civil Service Commission: CSC found merit in Pacheo’s contention that her reassignment in
not valid. She should be reinstated but without right to claim back salary. Under Rule III,
Section 6 of CSC Memorandum Circular No. 40, Other Personnel Movements. The following
personnel movements which will not require issuance of an appointment shall nevertheless
require an office order by duly authorized official.
a. Reassignment – Movement of an employee from one organizational unit to another in
the same department or agency which does not involve reduction in rank, status or
salary. If reassignment is done without consent of the employee being reassigned it shall
be allowed for a maximum period of one year. Reassignment is presumed to be regular
and made in the interest of public service unless proven otherwise or it constitutes
constructive dismissal.
Although reassignment is a management prerogative, the same must be done in
the exigency of the service without diminution in rank, status and salary on the part of the
officer or employee being temporarily reassigned. Reassignment of ‘small salaried’ employees,
however is not allowed if it will cause significant financial dislocation to the employee
reassigned. Otherwise the Commission will have to intervene. The primary purpose of emphasizing
‘small salaried employees’ in the foregoing rule is to protect the ‘rank and file’ employees from
possible abuse by the management in the guise of transfer/reassignment. To be embraced in the term
‘small-salaried employees’, the latter must belong to the ‘rank and file’; and, his/her salary would be
significantly reduced by virtue of the transfer/reassignment. 
The facts established on record show that Pacheo belongs to the rank and file receiving an
average monthly salary of ₱ 20,000.00. She has to spend around ₱ 4,000.00 (28% of 14, 000.00) a
month for her transportation expenses as a consequence of her reassignment. Clearly, Pacheo’s
salary shall be significantly reduced as a result of her reassignment.

In ANORE, Ma. Theresa case: The circumstances surrounding Anore’s reassignment is exactly
the kind of reassignment that is being frowned upon by law.’ This Commission rules that the
withholding by the BIR of her salaries is justified as she is not entitled thereto since she is deemed
not to have performed any actual work in the government on the principle of no work no pay.
Pacheo should now be reinstated to her original station without any right to claim back salary
as she did not report to work either at her new place of assignment or at her original station.
COURT OF APPEALS: reversed the CSC Resolution and ruled in favor of Pacheo.  security and tenure of office and make for a inefficient civil service force that sways with every
ISSUE 1:
WON Pacheo was also constructively dismissed (YES)
Constructive dismissal does not always involve forthright dismissal or diminution in rank,
compensation, benefits and privileges. For an act of clear discrimination, insensibility, or disdain by an
employer may become so unbearable on the part of the employee that it could foreclose any choice
by him except to forgo his continued employment.
The management prerogative to transfer personnel must be exercised without grave abuse of
discretion and putting to mind the basic elements of justice and fair play. The employer must be able
to show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee.
In this case, petitioner’s reassignment will result in the reduction of her salary and the physical
burden that she would suffer in waking up early in the morning to travel daily from Quezon City to
San Fernando, Pampanga and in coming home late at night. Clearly, the insensibility of the employer
is deducible from the foregoing circumstances and petitioner may have no other choice but to forego
her continued employment. It must be noted that there is constructive dismissal when the
reassignment of an employee involves a diminution in pay.
ISSUE 2:  Pacheo herself who refused to report for work either in her original station or new place of assignment
WON she is entitled to backwages. (YES)
Pacheo’s Claim: Pacheo, while belonging to the rank-and-file employees, is holding a responsible
position as an Assistant Division Chief, who could not just abandon her duties merely because she
protested her re-assignment and filed an appeal afterwards.
If there is no work performed by the employee there can be no wage or pay, unless of course the
laborer was able, willing and ready to work but was illegally locked out, dismissed or suspended. The
"No work, no pay" principle contemplates a "no work" situation where the employees voluntarily
absent themselves.
In this case, petitioner was forced to forego her continued employment and did not just abandon
her duties. In fact, she lost no time in protesting her reassignment as a form of constructive
dismissal. The filing of the complaint is proof enough of his desire to return to work, thus negating
any suggestion of abandonment.
Republic’s Claim: No one in the Civil Service should be allowed to decide on whether she is going to
accept or not any work dictated upon by the exigency of the service. To uphold the failure of Pacheo
to heed the RTAO would result in chaos.
Security of tenure is a right of paramount value as recognized and guaranteed under Sec. 3, Art.
XIII of the 1987 Constitution: The State shall afford full protection to labor, xxx and promote full
employment and equality of employment opportunities for all. It shall guarantee the rights of all
workers to xxx security of tenure xxx
In Garcia, et al. v. Lejano, et al., the SC rejected the OSG’s opinion that when the transfer is
motivated solely by the interest of the service of such act cannot be considered violative of the
Constitution. To permit circumvention of the constitutional prohibition in question by allowing removal
from office without lawful cause, in the form or guise of transfers from one office to another, without
the consent of the transferee, would blast the hopes of these civil service officials, destroy their
political wind that blows and plays up to whatever political party is in the saddle. Clearly, the principle
of "no work, no pay" does not apply in this case. 
In Neeland v. Villanueva, Jr, the SC states it cannot deny back salaries on the ground that
respondent Clerk of Court did not work. For the principle of "no work, no pay" does not apply when
the employee himself was forced out of job. Thus, to always require complete performance of work
would ultimately leave the dismissal uncompensated no matter how grossly disproportionate the
penalty was. Clearly, it does not serve justice to simply restore the dismissed employee to his position
and deny him his claim for back salaries on these grounds. 
An illegally dismissed government employee who is later ordered reinstated is entitled to
back wages and other monetary benefits from the time of his illegal dismissal up to his
reinstatement. 
ISSUES:
1. Was Pacheo constructively dismissed by reason of her reassignment? (YES)
2. Was Pacheo entitled to full backwages? (NO)
Republic’s claim: argues that constructive dismissal is not applicable in this case because it was
in clear violation of Section 24 (f) of PD No. 807. Citing jurisprudence, the CSC avers that the RTAO is
immediately executory, unless otherwise ordered by the CSC. Therefore, Pacheo should have first
reported to her new place of assignment and then appealed her case to the CSC if she indeed
believed that there was no justification for her reassignment. Since Pacheo did not report for work at
all, she is not entitled to backwages following the principle of "no work, no pay."
Pacheo’s claim: asserts that RTAO No. 25-2002 was solely meant to harass her and force her to
resign. As a result of her invalid reassignment, she was constructively dismissed and, therefore,
entitled to her back salaries and monetary benefits from the time of her illegal dismissal up to her
reinstatement.
JURISPRUDENCE:
I. YES, Pacheo was constructively dismissed by reason of her reassignment. 
While a temporary transfer or assignment of personnel is permissible even without
the employee's prior consent, it cannot be done when the transfer is a preliminary step
toward his removal, or a scheme to lure him away from his permanent position, or when it
is designed to indirectly terminate his service, or force his resignation. Such a transfer would
in effect circumvent the provision which safeguards the tenure of office of those who are in the Civil
Service.
Section 6, Rule III of CSC Memorandum Circular No. 40, series of 1998, defines
constructive dismissal as a situation when an employee quits his work because of the
agency head’s unreasonable, humiliating, or demeaning actuations which render continued
work impossible. Hence, the employee is deemed to have been illegally dismissed. This may occur
although there is no diminution or reduction of salary of the employee. It may be a transfer from one
position of dignity to a more servile or menial job.
It was legally impossible for Pacheo to report to her original place of assignment in Quezon
City considering that the subject RTAO No. 25-2002 also reassigned Amado Pagarigan as Assistant
Chief, Legal Division, from RR4, San Fernando, Pampanga to RR7, Quezon City, the very same
position Pacheo formerly held. The reassignment of Pagarigan to the same position palpably created
an impediment to Pacheo’s return to her original station.
The Court finds Itself unable to agree to CSC’s argument that the subject RTAO was immediately
executory. The Court deems it necessary to distinguish between a detail and reassignment, as they
are governed by different rules. Based on 292, Book V, Title 1, Subtitle A, Chapter 5, Section 26 (6)
(7), the principal distinctions between a detail and reassignment lie in the place where the
employee is to be moved and in its effectivity pending appeal with the CSC.
DETAIL REASSIGNMENT
Requires a movement from ONE AGENCY Requires a MOVEMENT WITHIN THE SAME
TO ANOTHER AGENCY.
Immediately Executory Does not become immediately effective.
In the case at bench, the lateral movement of Pacheo as Assistant Chief, Legal Division from
Quezon City to San Fernando, Pampanga within the same agency is undeniably a reassignment. The
OSG posits that she should have first reported to her new place of assignment and then subsequently
question her reassignment. It is clear, however, from E.O. 292, Book V, Title 1, Subtitle A, Chapter 5,
Section 26 (7) that there is no such duty to first report to the new place of assignment prior to
questioning an alleged invalid reassignment imposed upon an employee. Pacheo was well within her
right not to report immediately to RR4, San Fernando, Pampanga, and to question her reassignment.
Reassignments involving a reduction in rank, status or salary violate an employee’s security of
tenure, which is assured by the Constitution, the Administrative Code of 1987, and the Omnibus Civil
Service Rules and Regulations. Security of tenure covers not only employees removed without
cause, but also cases of unconsented transfers and reassignments, which are tantamount
to illegal/constructive removal.
The authority of the BIR should be prudently exercised in accordance with existing civil service
rules.
II. NO, she is not entitled to back wages
The Court agrees with the CA that she is entitled to reinstatement, but finds itself unable to
sustain the ruling that she is entitled to full back wages and benefits. It is a settled jurisprudence that
an illegally dismissed civil service employee is entitled to back salaries but limited only to a maximum
period of five (5) years, and not full back salaries from his illegal dismissal up to his reinstatement.
ALASKA MILK CORPORATION VS. RUBEN P. PAEZ, et.al.
G.R. No. 237277, November 27, 2019
FACTS:
- Alaska Milk Corporation (Alaska), is a duly organized domestic corporation engaged in the
business of manufacturing dairy products, while Asiapro Multipurpose Cooperative (Asiapro),
is a duly registered cooperative that contracts out the services of its worker-members.
- Respondents worked as production helpers at Alaska's San Pedro, Laguna milk
manufacturing plant (the San Pedro plant). All of them were originally members of Asiapro
until respondents Bate, Combite, and Oliver transferred to 5S Manpower Services (5S).
- Joint Operating Agreements, Asiapro and 5S undertook to provide Alaska with personnel who
could perform "auxiliary functions" at the San Pedro plant.
- As production helpers, the respondents performed various post-production activities. They
prepared raw materials, operated machinery, and monitored the release of defective
products. Additionally, they assisted other workers at the San Pedro plant by packaging
finished milk products for delivery.
- On different dates in 2013, the respondents were informed through separate memoranda
that their respective assignments at Alaska were to be terminated later that year.
- However, before the cooperatives acted on said requests, the respondents filed with the LA
separate complaints for illegal dismissal, regularization, and payment of money claims.
ISSUE
1. Whether or not the respondents were illegally dismissed.
2. Whether or not Asiapro and 5S are engaged in labor-only contracting.
JURISPRUDENCE:
I. LABOR-ONLY CONTRACTING
Labor-only contracting as an arrangement where a person without substantial capital
or investment in the form of tools, equipment, machinery, or work premises, among other
things, supplies workers to an employer, and such workers perform activities directly
related to the principal business of the latter. In agreements of this nature, the contractor
merely acts as an agent in recruiting workers on account of the principal with the intent to circumvent
the constitutional and statutory rights of employees.
DOLE requires contractors to register themselves with the DOLE Regional Office in which they
operate, so as to monitor their compliance with the law's guiding principles. Failure to comply with
the registration requirement gives rise to a presumption that the contractor is engaged in
labor-only contracting.
Asiapro and 5S failed to register in accordance with the exact tenor of the rules.
REGISTRATION:
Evidently, Asiapro failed to show that it was registered with the proper DOLE Regional Office.
In this regard, Asiapro, to show compliance with the registration requirement, presented a certificate
issued by the NCR branch of the DOLE, when it should have instead presented one issued by the
DOLE, Region IV-A office, which exercises territorial jurisdiction over the San Pedro plant. It must be
remembered that the rules require contractors to register themselves in the regional office of
the place where they principally operate. 5S, for its part, faces the same problem. While it was
registered with the proper DOLE Regional Office, its certificate of registration was issued only in 2014,
after the respondents had been separated from Alaska.
SUBSTANTIAL CAPITAL:
Asiapro adequately met the capitalization requirement found in the rules, and, having done
so, it no longer needed to establish that it possessed investments in the form of tools or equipment
that facilitated the performance of the respondents' work with Alaska. Verily, case law dictates that
evidence of substantial capitalization entails that proof of investments in form of tools, equipment,
machineries, or work premises may be dispensed with. 5S, for its part, failed to prove that it
possessed substantial capital or investments, and since it never bothered to appeal the adverse CA
decision, this burden of proof shifted to Alaska. It was never established that the contractor furnished
its worker-members with the tools or equipment necessary to carry out the services of a production
helper at Alaska' milk manufacturing plant.
CONTROL:
Asiapro controlled the means and methods used by its work members (i.e. respondents Paez
and Medrano) in carrying out their duties at the San Pedro plant. The Joint Operating Agreement
between Alaska and Asiapro unequivocally indicates that the latter retained the right to control the
means and methods.
WHO IS THE ILLEGAL CONTRACTOR? 5S
Asiapro was clearly able to substantiate its assertion that it carried on its own independent
business. Aside from its substantial capital, Asiapro showed that its existence began as far back as
1999, and that it has since provided services to a noteworthy clientele. It was not shown that 5S had
clients other than Alaska. Worse, 5S merely has five regular employees, and does not own any tools,
machinery, or equipment that its worker-members can use in the performance of their duties. These,
taken together, make it highly improbable that 5S had the ability to carry on its own independent
business, and are detrimental to the claim that 5S is a legitimate job contractor.
II. ILLEGAL DISMISSAL
Regular employees may only be terminated for just or authorized cause. This applies in
cases of labor-only contracting, where the law creates an employer-employee relationship
between the principal and the employees of the purported contractor
Bate, Combite, and Oliver were terminated from Alaska due to the expiration of their
contracts with 5S, through which they were assigned to render services at the San Pedro plant.
However, because of the finding hat 5S was engaged in labor-only contracting, they are considered as
Alaska's regular employees. Hence, having been terminated without lawful cause, they are
entitled to reinstatement without loss of seniority rights and other privileges, in addition to full
backwages, inclusive of allowances and benefits, pursuant to Article 279 of the Labor Code.
Medrano and Paez were not illegally dismissed. In fact, they were not dismissed at all. As
found by the NLRC, after their contracts with Alaska expired, they refused to report to Asiapro for
reassignment to another client-principal.
SAN MIGUEL FOODS, INC. v. HANNIVAL V. RIVERA, et.al.
G.R. No. 220103, January 31, 2018
FACTS:
- San Miguel Foods Inc., a corporation organized and existing under Philippine laws, engaged
in the feeds, and poultry and meats businesses. Its poultry business involves growing,
breeding, dressing, sale and marketing of poultry products.
- To maximize efficiency and cost effectiveness, SMFI opted to outsource the invoicing
services, which it deems merely ancillary to its business as it simply involved:
1. Witnessing and checking the unloading of chicken products in designated outlets;
2. Preparation of invoice, delivery receipt and other documents required to complete the
delivery in designated outlets;
3. Securing from designated outlets such receiving documents and/or information
necessary for the liquidation and subsequent collection of the delivery; and
4. Submission of reports to the petitioner on actual volumes delivered to designated
outlets.
- In 2005, SMFI forged a 6-month invoicing services contract, from January 17, 2005 to July
16, 2005, with IMSHR Corporate Support, Inc. (ICSI), an independent contractor duly
registered with DOLE and engaged in the business of providing and supplying various
services, like invoicing, to different companies.
- The parties agreed that after the contract term expired and they still want to continue their
relations but without having to execute a written renewal, they shall continue to be governed
by the same contract in its entirety, except for the term, which should subsist on a month-
to-month basis.
- In compliance therewith, ICSI assigned its employees, including the respondents, to SMFI to
perform the invoicing services.
- In 2009, SMFI decided to discontinue its invoicing operations at its head office, where the
respondents were assigned, and set up a new one at its San Fernando, Pampanga, and
Nueva Ecija Plants to standardize its North and South Luzon operations.
- Accordingly, SMFI informed ICSI of this decision and ICSI informed its employees, including
the respondents, of the said development and that all the affected employees shall be
considered for assignment in San Fernando, Pampanga. Those interested to be transferred
were instructed to submit a Request for Transfer on or before July 13, 2009. Of all the
respondents, only one complied with the said directive while the others submitted their
resignation letters, some others continued working and some no longer reported to work.
- Respondents filed their consolidated Complaints for Constructive Dismissal, Regularization,
Underpayment of Salaries and Service Incentive Leave Pay, Non-Payment of 13th Month Pay,
Vacation/Sick Leave, Maternity/Paternity Leave, Refund of Cash Bond, Tax Refund, Illegal
Deduction - Variance Bond, Moral and Exemplary Damages, and Attorney's Fees against
SMFI before the Labor Arbiter.
- Respondents allege that SMFI employed them as invoicers and claimed that they were
performing tasks that are necessary and desirable in SMFI’s usual trade or business. They
also alleged that SMFI is their employer.
- SMFI maintained that it is not the respondents’ employer as it was ICSI who hired and
selected them and that they were simply deployed to SMFI; that ICSI was the one that paid
respondents salaries; that the power to control the means and manner of performance of the
respondents' work rests upon ICSI. Hence, SMFI cannot be answerable to the respondents'
complaints.
- ICSI affirmed the contentions of SMFI.
LABOR ARBITER: dismissed the complaint for lack of merit. The Labor Arbiter ruled that ICSI is a
legitimate service contractor having substantial capital and investment to carry out its business
independently. The right to control the performance of the work of its employees likewise rests upon
it. Even the four-fold test to determine the existence of an employer-employee relationship revealed
that the same exists between ICSI and the respondents, and not between the petitioner and the
respondents.
NLRC: Dismissed the appeal for lack of merit and affirmed the Labor Arbiter’s decision.
 COURT OF APPEALS: Reversed and set aside the NLRC decision and resolution. The CA held that employee relationship between the job contractor; and
an employer-employee relationship exists between SMFI and the respondents; and that ICSI was only contractor and his employees is maintained. 2. the solidary liability of the principal
its agent or intermediary. and the contractor to the employees in
In short, the employer becomes jointly and the event of any violation of the Labor
ISSUE: severally liable with the job contractor but Code.
Whether or not respondents are the employees of SMFI. only for the payment of the employees'
wages whenever the contractor fails to pay
JURISPRUDENCE: the same. Other than that, the employer is
not responsible for any claim made by the
RESPONDENTS ARE EMPLOYEES OF ICSI BECAUSE ICSI IS AN INDEPENDENT AND contractor's employees.
LEGITIMATE CONTRACTOR.

Article 106 of the Labor Code clearly identified and distinguished the relations that may arise SUBSTANTIAL CAPITAL OR INVESTMENT: refers to capital stocks and subscribed
in a situation where there is an employer, a contractor, and employees of the contractor. From this capitalization in the case of corporations, tools, equipment, implements, machineries and work
provision, the two possible relations that may arise among the parties are: (1) the permitted premises, actually and directly used by the contractor or subcontractor in the performance
legitimate job contract; or (2) the prohibited labor-only contracting. or completion of the job, work or service contracted out.

LEGITIMATE JOB CONTRACTING/ LABOR-ONLY CONTRACTING

SUBCONTRACTING
It is an arrangement whereby a principal
agrees to put out or farm out with the
contractor or subcontractor the performance
or completion of a specific job, work, or
service within a definite or predetermined
period, regardless of whether such job,
work, or service is to be performed or
completed within or outside the premises of
the principal.
REQUISITES:
a. The contractor carries on a distinct
and independent business and partakes
the contract work on his account under
his own responsibility according to his
own manner and method, free from the
control and direction of his employer or
principal in all matters connected with
the performance of his work except as
to the results thereof;
b. the contractor has substantial capital
or investment; and
c. the agreement between the principal
and the contractor or subcontractor
assures the contractual employees'
entitlement to all labor and
occupational safety and health
standards, free exercise of the right to
self-organization, security of tenure,
and social welfare benefits.
In legitimate job contracting, the employer-
It is an arrangement where the
contractor not having substantial capital
or investment in the form of tools,
equipment, machineries, work premises,
among others, supplies workers to an
employer and the workers recruited are
performing activities which are directly
related to the principal business of such
employer.
REQUISITES
a. The contractor or subcontractor
does not have substantial capital or
investment which relates to the job,
work or service to be performed and
the employees recruited, supplied or
placed by such contractor or
subcontractor are performing
activities which are directly related
to the main business of the
principal;
b. the contractor does not exercise
the right to control over the
performance of the work of the
contractual employee.
Clearly therefrom, a finding of the
existence of a labor-only contracting
would definitely give rise to:
1. the creation of an employer-employee
relationship between the principal and
the employees of the contractor or sub-
RIGHT OF CONTROL: the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.
Customarily, the contractor is presumed to be a labor-only contractor, unless such contractor
overcomes the burden of proving that it has the substantial capital, investment, tools and the like.
But then, where the principal is the one claiming that the contractor is a legitimate contractor, the
burden to prove the same rests on the principal. In this case, the petitioner successfully proved
that ICSI is truly an independent contractor. Hence, the employer-employee relationship
between ICSI and the respondents is maintained.
ICSI IS AN INDEPENDENT AND LEGITIMATE CONTRACTOR BECAUSE:
1. ICSI has been incorporated and duly registered with the SEC, the BIR, SSS, Philhealth, PAG-
IBIG, and the DOLE with DOLE Certificate of Registration No. NCR-8-0507-236.
2. ICSI has substantial capital. Per its Articles of Incorporation, ICSI has an authorized capital
stock of P4 Million while per an Independent Auditor's Report for the year ended on
December 31, 2008, it has a gross income of P14,192,040 and a total assets amounting to
P30,820,419.34.
3. ICSI also has other A-list clients apart from SMFI during the time that its contract with the
former was subsisting, which is an indication that it carries on a distinct and independent
business.
4. ICSI also has the control on the performance of the work of its employees. It was the officer
or officers of ICSI who has the direct supervision over the respondents. In particular, it was
the ICSI's Base Controller, who gives the respondents their work schedule, while its OIC was
the one who monitors their attendance.
Even with the application of the four-fold test to determine the existence of employer-employee
relationship, it all pointed to ICSI as the respondents' employer. To wit:
1. The selection and engagement of the employee;
2. The payment of wages;
3. The power of dismissal; and
4. The power of control,.
SELECTION AND ENGAGEMENT OF THE EMPLOYEE:
 Respondents applied with and were hired by ICSI. ICSI issued them their individual
identification cards as borne by the records.
PAYMENT OF WAGES:
1. Payment of respondents' wages and other labor standard benefits were also made by ICSI,
as shown by their payrolls and disbursement vouchers.
2. ICSI itself reported the respondents as its employees with the SSS, Philhealth, PAG-IBIG,
and BIR.
3. ICSI was the one that made the necessary deductions on the respondents' salaries for their
contributions (their premium share) thereto, which were all properly remitted to the said
agencies.
POWER OF DISMISSAL AND DISCIPLINE:
Exercised by ICSI. This is evident from the Notice to Explain and Memorandum it issued to
its erring employees who violated its rules and regulations. The controverted letter dated May 22,
2009 issued by the SMFI to ICSI contained no instruction from SMFI to ICSI to transfer or even
terminate the respondents. This Court finds satisfactory the petitioner's explanation that such letter
merely informed ICSI of the changes in their agreement regarding the invoicing services that the
invoicing operations at its head office would be discontinued and would be transferred to San
Fernando, Pampanga. At the same time, SMFI was just reminding ICSI to ensure that in the event
there will be employees unwilling to comply with the new terms and conditions of their agreement,
they should be properly dealt with in accordance with law. Stated differently, the petitioner only
wanted to make sure that ICSI would not renege on its obligations to its employees.
POWER OF CONTROL:
It was ICSI's officers who have direct supervision over the respondents. ICSI's Base
Controller and OIC were the ones who gave the respondents their work schedule and monitored their
attendance, respectively.
Royale Homes Marketing Corporation v. Alcantara, citing Insular Life Assurance Co., Ltd. v. National
Labor Relations Commission:
Not every form of control is indicative of employer-employee relationship. A person who
performs work for another and is subjected to its rules, regulations, and code of ethics does not
necessarily become an employee. As long as the level of control does not interfere with the means
and methods of accomplishing the assigned tasks, the rules imposed by the hiring party on the hired
party do not amount to the labor law concept of control that is indicative of employer-employee
relationship.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. VS. EASTERN TELECOMS EMPLOYEES
UNION
G.R. No. 185665 : February 08, 2012
FACTS:
- Eastern Telecommunications Phils., Inc. (ETPI) is a corporation leasing international date
lines or circuits, regular landlines, internet and data services. Eastern Telecoms Employees
Union (ETEU) is the bargaining agent of the company’s rank and file employees with 147
regular members. It has an existing collective bargaining agreement with the company to
expire in the year 2004.
- The labor dispute arose with the company’s plan to defer payment of the 2003 14th to 16th
month bonuses. The company’s main ground in postponing the payment of bonuses is due to
a deteriorating financial position. The union strongly opposed the deferment in payment of
the bonuses by filing a preventive mediation complaint with the NCMB, the purpose of which
complaint is to determine the date when the bonus should be paid.
- In the conference held at the NCMB, ETPI reiterated its stand that payment of the bonuses
would only be made in April 2004. The company made sudden changes in its position by
declaring that they will no longer pay the bonuses until the issue is resolved through
compulsory arbitration. Thus, on April 26, 2004, ETEU filed a Notice of Strike on the ground
of unfair labor practice for failure of ETPI to pay the bonuses.
- On May 19, 2004, the SOLE certified the labor dispute for compulsory arbitration pursuant to
Article 263 (q) of the Labor Code as amended. A hearing was called wherein the parties have
submitted that the issues for resolution are: (1) unfair labor practice and (2) the grant of
14th, 15th and 16th month bonuses for 2003, and 14th month bonus for 2004.
- The Eastern Telecoms Employees Union (ETEU) claimed that Eastern Telecommunications
Philippines, Inc. (ETPI) had consistently and voluntarily been giving out the bonuses to its
employees from 1975 to 2002 even when it did not realize any net profits. ETEU added that
this practice had been expressly confirmed in the Side Agreements which provided for the
continuous grant of these bonuses in no uncertain terms.
- On the other hand, ETPI in its position paper questioned the authority of the NLRC to take
cognizance of the case and maintained that the complaint for non-payment of bonuses for
2003 and 2004 was bereft of any legal and factual basis. It averred that the bonuses were
not part of wage and the grant thereof was an act of gratuity and generosity.
ISSUE:
Can the bonuses demanded by ETEU demandable as a part of wage or salary or is it a
manifestation of management prerogative which cannot be forced upon the employer? The bonuses
are parts of the wage or salary.
JURISPRUDENCE:
From a legal point of view, a bonus is a gratuity or act of liberality of the giver which
the recipient has no right to demand as a matter of right. The grant of a bonus is basically a
management prerogative which cannot be forced upon the employer who may not be
obliged to assume the onerous burden of granting bonuses or other benefits aside from the
employee’s basic salaries or wages.
HOWEVER, A bonus becomes a demandable or enforceable obligation when it is
made part of the wage or salary or compensation of the employee.
A bonus becomes a part of wage if the employer promised and agreed to give the
bonus without any conditions imposed for its payment. If it is paid only if profits are realized or
if a certain level of productivity is achieved, it cannot be considered part of the wage.
The Court believes that the bonus granted by ETPI to ETEU is a part of wage
because it is established that ETPI and ETEU agreed on the inclusion of a provision for the
grant in the 1998-2001 CBA Side Agreement, as well as in the 2001-2004 CBA Side
Agreement. It is revealed in these agreements that the giving of 14th, 15th and 16th month
bonuses is without qualification. Neither do these agreements state that if the company derives no
profits, no bonuses are to be given to the employees.
The Court also finds that its act of granting the bonus same has become an
established company practice and has become part of the employees’ salary or wage.
To be considered a “regular practice,” however, the giving of the bonus should have
been done over a long period of time, and must be shown to have been consistent and
deliberate. The test or rationale of this rule on long practice requires an indubitable showing that the
employer agreed to continue giving the benefits knowing fully well that said employees are not
covered by the law requiring payment thereof.
The ETPI, aside from complying with the regular 13th month bonus, has been further
giving its employees 14th month bonus every April as well as 15th and 16th month
bonuses every December of the year, without fail, for 27 years whether it earned profits or
not. The considerable length of time ETPI has been giving the special grants to its employees
indicates a unilateral and voluntary act on its part to continue giving said benefits knowing that such
act was not required by law. Accordingly, a company practice in favor of the employees has been
established and the payments made by ETPI pursuant thereto ripened into benefits enjoyed by the
employees.
GUIDE QUESTION:
APPLICABILITY OF MANAGEMENT PREROGATIVE
The grant of a bonus is basically a management prerogative which cannot be forced upon the
employer who may not be obliged to assume the onerous burden of granting bonuses or other
benefits aside from the employee’s basic salaries or wages.
LIMITATIONS TO THE EXERCISE OF MANAGEMENT PREROGATIVE
A bonus, however, becomes a demandable or enforceable obligation when it is made part of
the wage or salary or compensation of the employee.
JAMES ARTHUR DUBONGCO vs COMMISSION ON AUDIT
GR 237813; June 22, 2016
FACTS:
- On November 14, 2002, the Public Sector Labor Management Council (PSLMC) issued
Resolution No. 4, Series of 2002, entitled "Grant of Collective Negotiation Agreement (CNA)
Incentive for National Government Agencies, State Universities and Colleges and Local
Government Units."
- The CNA Incentive is awarded to employees in "recognition of the joint efforts of labor and
management in the achievement of planned targets, programs and services approved in the
budget of the agency at a lesser cost."
- Section 1 of the same Resolution mandates that "only savings generated after the signing of
the CNA may be used for the CNA Incentive." Savings refer to such balances of the agency's
released allotment for the year, free from any obligation or encumbrance and which are no
longer intended for specific purpose/s.
- Administrative Order No. 135, Series of 2005 (A.O. No. 135) issued by former President
Gloria Macapagal-Arroyo, confirmed the grant of CNA Incentive to rank-and-file employees.
- Subsequently, the Department of Budget and Management (DBM) released Budget Circular
No. 2006-1, dated February 1, 2006, to implement A.O. No. 135 and to lay down the
guidelines in the grant of CNA Incentive.
- In 2009 and 2010, the Department of Agrarian Reform-Provincial Office-Cavite (DARPO-
Cavite) released CNA Incentive to its officials and employees in the aggregate amounts of
P1,518,800.00 and P1,176,000.00, respectively. The grant was sourced from the
Comprehensive Agrarian Reform Program (CARP) Fund, or Fund 158.
- The Commission on Audit issued two Notices of Disallowance (NDs) against DARPO-Cavite,
both of which pertain to the CNA Incentive released in 2009 and 2010. It stated that the
utilization of the CARP Fund for the grant of CNA Incentive was illegal because the
appropriation and expenditure of the CARP Fund must be in accordance with the law creating
the CARP.
- Cynthia E. Lapid (Lapid) and Felixberto Q. Kagahastian (Kagahastian), then Provincial
Agrarian Reform Officers II of DARPO-Cavite, appealed the disallowances to the COA
Regional Office No. IV.
- The COA ruled that the grant of CNA Incentive may only be sourced from MOOE savings as
specifically stated in DBM Budget Circular No. 2006-1. It noted that the DBM Circular uses
the word "shall" denoting the mandatory character of the provision.
- Lapid and Kagahastian filed a petition for review before the COA En Banc. The COA En Banc
also held that the grant of CNA from the CARP fund is illegal, as the source was not savings
as mandated. The CARP Fund is a special fund which could only be utilized for the purpose
for which it was created, that is, solely for the implementation of CARP projects
ISSUES AND RULING:
I. Whether or not the CARP fund can be a valid source for the grant of CNA to rank and file
employees. NO
PSLMC Resolution No. 4, Series of 2002, which authorizes the grant of CNA, specifically
provides that "only savings generated after the signing of the CNA may be used for the CNA
Incentive."
A.O. No. 135, which confirmed the grant of CNA, also categorically stated that that the CNA
Incentive shall be sourced only from the savings generated during the life of the CNA.
DBM Budget Circular No. 2006-1, which provides the procedural guidelines and limitations on
the grant of the CNA Incentive also states that “The CNA Incentive shall be sourced solely from
savings from released Maintenance and Other Operating Expenses (MOOE) allotments for the year
under review.”
It is clear that the CARP Fund could not be legally used to finance the grant of the CNA
Incentive.
 Both A.O. No. 135 and DBM Budget Circular No. 2006-01 use the word "shall" when pertaining to
the funds to be used in the CNA Incentive, that is, savings from operating expenses. The word "shall"
is imperative, underscoring the mandatory character of the provisions.
The words of the abovementioned issuances are clear and unambiguous. A cardinal rule
in statutory construction is that when the law is clear and free from any doubt or ambiguity, there is
no room for construction or interpretation. There is only room for application.
Thus, the only logical conclusion is that the CNA Incentive may be awarded to rank-and-file
employees ONLY if there are savings in the agency's operating expenses.
The grant of CNA incentives financed by the CARP Fund is not only illegal but also
inconsiderate of the plight of Filipino farmers for whose benefit the CARP Fund is allocated.
Moreover, it is disconcerting how petitioner could muster the courage to say that there were
savings from the CARP Fund when in reality, agrarian reform funds are more often than not,
insufficient to meet the needs of its beneficiaries.
The Court also noted that as shown by the NDs, DARPO-Cavite awarded CNA Incentive to
superior officers contrary to the explicit mandate of A.O. No. 135 that such incentive is to be given
only to rank-and-file employees.
II. Whether or not the recipients may be held liable for the refund of the disallowed CNA
incentives. YES
Article 22 of the Civil Code on Unjust Enrichment: Every person who, through an act of
performance by another, or any other means, acquires or comes into possession of something at the
expense of the latter without just or legal ground, shall return the same to him.”
Unjust enrichment refers to the result or effect of failure to make remuneration of, or for
property or benefits received under circumstances that give rise to legal or equitable obligation to
account for them. To be entitled to remuneration, one must confer benefit by mistake, fraud,
coercion, or request.
The principle of unjust enrichment requires two conditions:
1. That a person is benefited without a valid basis or justification; and
2. That such benefit is derived at the expense of another.
GUIDE QUESTIONS
o Are there limitations to the exercise of management prerogatives?
YES. In this case, the limitation is set forth by law. The limitation is that the funds must be
sourced from savings.
o Did management validly exercise its prerogatives?
NO. The law is clear in saying the CNA funds must be sourced from savings. There is no
room for interpretation or exercise of prerogatives, only application of the law.
INTEC CEBU INC., ET AL. vs. HON. COURT OF APPEALS
G.R. No. 189851, June 22, 2016
FACTS:
- Intec Cebu Inc. (Intec) is engaged in the manufacture and assembly of mechanical system
and printed circuit board for cassette tape recorder, CD and CD ROM player while the
following respondents were hired by Intec in 1997 and 1998, respectively, as production
workers.
- In 2005, respondents working days were reduced from 6 to 3-4 days.
- Intec explained that reduction in working days was due to lack of job orders. However,
respondents discovered that Intec hired around 188 contractual employees tasked to do the
jobs which respondents were regularly doing.
- On May 17, 2006, respondents claimed that they were effectively terminated from
employment as shown in the Establishment Termination Report submitted to the DOLE. Two
(2) days later, respondents filed a complaint for illegal dismissal.
- Intec’s claims:
1. That the company was established to supply the required materials of Kenwood Precision
Corporation. When Kenwood stopped its operations in the Philippines, Intec's business
operations were severely affected, prompting Intec to set up a new product line
exclusively for Pentax Cebu Phils. Corporation.
2. In December 2005, Intec's job orders from Pentax declined.
3. On January 4, 2006, a memorandum was issued informing the employees that the
working days would be reduced to 3-4 days from the normal 6 day-work week. The
reduced work week policy was extended from April to June 2006.
4. A corresponding memorandum was issued and a copy thereof was submitted to the
DOLE.
5. Intec claims that the reduction of the number of working days was undertaken to
forestall business losses as proven by the audited financial statements of Intec for the
years 2001-2006.
6. Intec insists that the workers they employed from TESDA and Sisters of Mary were on-
the-job trainees and they were already employed prior to the implementation of the
reduced working days policy of the company.
7. Intec insists that the workers they employed from TESDA and Sisters of Mary were on-
the-job trainees and they were already employed prior to the implementation of the
reduced working days policy of the company.
LABOR ARBITER: declared that respondents were illegally dismissed and adjudged Intec and its
officials liable for payment of separation pay and backwages. Labor Arbiter Ay-ad found that Intec
hired casual employees to replace respondents. As regards the other monetary claims of respondents,
Labor Arbiter Ay-ad ruled that Intec was able to prove, by presenting copies of the payroll, that
private respondents were properly paid.
NLRC: set aside the Decision of the Labor Arbiter and held that Intec suffered tremendous
financial losses which justified the reduction of working days.

COURT OF APPEALS: Reversed the NLRC and reinstated the Decision of the Labor Arbiter with
respect to respondents herein.
ISSUE:
Is the reduction of work hours in this case is justified? NO.
JURISPRUDENCE:
INTEC COMMITTED ILLEGAL REDUCTION OF WORKING HOURS.
There is no indication in the financial statements given by Intec, much less an
observation made by the independent auditor, that a reduction in demand would
necessitate a reduction in the employees' work days.
We cannot give weight to the evidence presented by Intec to prove the slump in demand.
First, the two-page delivery data are lacking in specifics. The report did not indicate when it was
prepared. Second, the report was prepared by Intec employees and approved by their President.
Third, the report appeared to be mere projections because it was not supported by corresponding
sales or delivery receipts. The actual sales may vary from the projected demand, thus, the report
cannot be made as basis of a slump in demand or a slow-down.
In addition, the hiring of 188 workers, whether they be trainees or casual
employees, necessarily incurred cost to the company. No proof was submitted that these
newly-hired employees were performing work different from the regular workers.
In sum, there is no reason to implement a cost-cutting measure in the form of
reducing the employees' working days.
Constructive dismissal occurs when there is cessation of work because continued
employment is rendered impossible, unreasonable or unlikely; when there is a demotion in
rank or diminution in pay or both; or when a clear discrimination, insensibility, or disdain by an
employer becomes unbearable to the employee.
Intec's unilateral and arbitrary reduction of the work day scheme had significantly
greatly reduced respondents' salaries thereby rendering it liable for constructive dismissal.
There is no merit to Intec's charge of abandonment against respondents. To
constitute abandonment, there must be clear proof of deliberate and unjustified intent to
sever the employer-employee relationship. Clearly, the operative act is still the employee's
ultimate act of putting an end to his employment. Furthermore, it is a settled doctrine that the filing
of a complaint for illegal dismissal is inconsistent with abandonment of employment. An
employee who takes steps to protest his dismissal cannot logically be said to have
abandoned his work. The filing of such complaint is proof enough of his desire to return to work,
thus negating any suggestion of abandonment.
We affirm the Court of Appeals' finding that there is no proof that respondents committed
unauthorized absences or had otherwise refused to work. The complaint for constructive
dismissal is the best evidence against abandonment because the filing of a complaint for
illegal dismissal is incompatible to abandonment.
CHRISTINE JOY CAPIN-CADIZ v. BRENT HOSPITAL AND COLLEGES
G.R. No. 187417, February 24, 2016
FACTS:
- Christine Joy Capin-Cadiz was a Human Resource Officer of Brent Hospital and Colleges. She
became pregnant out of wedlock by her boyfriend. The unwed pregnancy was regarded as a
form of unprofessionalism and unethical behavior by Brent, therefore as a consequence, the
latter imposed an indefinite suspension against Cadiz. Such suspension will be imposed until
she marries her boyfriend in accordance with the law.
- In connection with this, Cadiz filed before the Labor Arbiter (LA) a compliant for unfair Labor
Practice, constructive dismissal, Non-payment of Wages and Damages with prayer for
Reinstatement.
- The LA ruled that Cadiz was dismissed for a JUST CAUSE. Such act was considered immoral.
This was even magnified into serious misconduct because she was employed by Brent which
is an institution of the Episcopal Church in the Philippines. LA ruled that Cadiz is not entitled
to reinstatement, back wages and vacation/sick leave pay until she remarries her boyfriend.
Brent however, manifested its willingness to pay Cadiz of her 13 th month pay in the amount
of P7,970.11, thus LA, ordered that Cadiz be paid with such pay.
- The NLRC affirmed the decision of the LA.
- The CA dismissed the petition and ruled that NLRC did not commit grave abuse of discretion
amounting to lack or excess of jurisdiction in holding Cadiz’ dismissal valid.
- Hence, Cadiz filed this petition. She argued that NLRC committed grave abuse of discretion
when it held that pregnancy out of wedlock is a ground for termination of employment,
upheld her dismissal on the ground that the indefinite suspension was valid and required her
to enter into marriage first before she can be reinstated to work and when it denied the
claims for backwages, allowances, sickleave pay, maternity pay and moral and exemplary
damages and attorney’s fees. 
- Further, Cadiz contends that getting pregnant out of wedlock is not grossly immoral when
both partners have no legal impediment to marry. Getting married to her boyfriend as a
condition to her reinstatement is a violation of stipulation against marriage under Article 136
of the Labor Code. Finally she also contends that there was substantial compliance with the
rules of procedure, the CA should not have dismissed the petition.
- Brent on the other hand argued that for Cadiz to limit acts of immorality only to extra-
marital affairs is to change the norms, beliefs, teachings and practices of Brent as an
institution of Episcopal Church.
ISSUES:
1. Whether or not the dismissal is a valid exercise of management prerogative.
2. Whether or not getting marriage as a condition of reinstatement is valid.
JURISPRUDENCE:
I. THE TERMINATION OF CADIZ ON ACCOUNT OF HER PREGNANCY OUT OF WEDLOCK IS
NOT A VALID EXERCISE OF MANAGEMENT PREROGATIVE.
 The termination of Cadiz on account of her pregnancy out of wedlock is not a valid exercise of and educational activities among them. Veronica Menguito is St. Vincent's
management prerogative as such act is not immoral.  President/Directress.

Cheryll Santos Leus v. St. Scholastica’s College Westgrove: The determination of whether a - Zaida Inocente was employed as St. Vincent’s Program Officer. Zaida, then single, was
conduct is disgraceful or immoral involves a two-step process:  known as Zaida Febrer Ranido. Zaida's duties as program officer included the following:
1. A consideration of the totality of the circumstances surrounding the conduct; and monitoring and supervising the implementation of the programs of the foundation, providing
2. An assessment of the said circumstances vis-a-vis the prevailing norms of conduct, i.e., what training to the staff and sponsored members, formulating and developing program policies
the society generally considers moral and respectable. for the foundation, facilitating staff meetings, coordinating and establishing linkages with
other resource agencies and persons, as well as preparing St. Vincent's annual program plan
Brent's Policy Manual and Employee's Manual of Policies does not define what constitutes and budget, and year-end reports.
immorality. Jurisprudence has already set the standard of morality with which an act should be
gauged - it is public and secular, not religious.   Whether a conduct is considered disgraceful or - In 2001, Zaida met Marlon D. Inocente. Marlon who was assigned at St. Vincent's sub-
immoral should be made in accordance with the prevailing norms of conduct, which, as stated projects. Zaida and Marlon became close and soon became romantically involved with each
in Leus, refer to those conducts which are proscribed because they are detrimental to conditions upon other.
which depend the existence and progress of human society.  
- St. Vincent adopted the CFCA's Non-Fraternization Policy. While CFCA does not wish to
II. MARRIAGE AS A CONDITION FOR REINSTATEMENT IS NOT VALID. interfere with the off-duty and personal conduct of its employees, to prevent unwarranted
sexual harassment claims, uncomfortable working relationships, morale problems among
other employees, and even the appearance of impropriety, employees who direct and
GENERAL RULE:
coordinate the work of others are strongly discouraged from engaging in consensual
The doctrine of management prerogative gives an employer the right to "regulate,
romantic or sexual relationships with any employee or volunteer of CFCA.
according to his own discretion and judgment, all aspects of employment, including hiring,
work assignments, working methods, the time, place and manner of work, work
- Despite St. Vincent's adoption of the Non-Fraternization Policy, Zaida and Marlon discretely
supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and recall
continued their relationship; they kept their relationship private and unknown to St. Vincent
of employees. 
even after Marlon resigned.
LIMITATION:
- On February 19, 2009, Zaida suffered a miscarriage. While confined at the hospital, Zaida
The management prerogative should not be exercised in violation of the
informed St. Vincent of her situation. Menguito verbally allowed Zaida to go on maternity
Constitutional and Labor Rights of the employees.
leave. Zaida was again confined at the hospital for ectopic pregnancy. Zaida, thereafter,
underwent surgery to have one of her fallopian tubes removed.
The Constitution and 136 of the Labor Code provide that it is unlawful for an employer to
- On May 18, 2009, Zaida received from St. Vincent a letter dated May 14, 2009 and signed by
require as a condition of employment or continuation employment that a woman shall get married. RA
Menguito requiring her to explain in writing why no administrative action should be taken
9710 of Magna Carta for women also provides for the protection of women’s right to freely choose a
against her.
spouse and to enter into marriage with their free and full consent.
- St. Vincent charged her with violation of the CFCA Non-Fraternization Policy and of the St.
While a marriage or no-marriage qualification may be justified as a "bona fide occupational
Vincent's Code of Conduct provisions prohibiting:
qualification," Brent must prove two factors necessitating its imposition, viz: 
1. Acts against agency interest and policy by indulging in immoral and indecent act;
1. That the employment qualification is reasonably related to the essential operation of the job
2. Acts against persons by challenging superiors' authority, threatening and intimidating
involved; 
co-employees, and exerting undue influence on subordinates to gain personal benefit;
2. That there is a factual basis for believing that all or substantially all persons meeting the
and
qualification would be unable to properly perform the duties of the job.
3. Violations within the terms of employment by doing an act offensive to the moral
standard of the Foundation.
Brent has not shown the presence of neither of these factors. Perforce, the Court cannot uphold
- Zaida defended that:
the validity of said condition. Cadiz is entitled to reinstatement plus backwages.
1. Her relationship with Marlon started long before St. Vincent's Non-Fraternization Policy
took effect;
ZAIDA R. INOCENTE v. ST. VINCENT FOUNDATION FOR CHILDREN AND AGING,
2. Marlon was no longer connected with St. Vincent since 2008;
INC./VERONICA MENGUITO
3. Her relationship with Marlon is not immoral as they were both of legal age and with no
G.R. No. 202621, June 22, 2016
impediments to marry;
4. They kept their relationship private and were discreet in their actions;
FACTS:
5. Marlon stayed at her place only to take care of her while she was sick; and
6. They already planned to get married as soon as she recovers and their finances improve.
- St. Vincent Foundation for Children and Aging, Inc. is a non-stock, non-profit foundation
engaged in providing assistance to children and aging people and conducting weekly social
 - Zaida's explanation failed to convince St. Vincent. St. Vincent terminated Zaida's
employment for immorality, gross misconduct and violation of St. Vincent's Code of Conduct.
- Zaida and Marlon were subsequently married on June 23, 2009.
- Zaida filed before the LA her complaint for illegal dismissal, with prayer for reinstatement,
backwages, moral and exemplary damages and litigation expenses.
LABOR ARBITER:
LA dismissed, it found that, despite the implementation of the Non-Fraternization Policy in
2006, Zaida maintained and concealed from St. Vincent her relationship with Marlon. The LA pointed
out that as a program officer, Zaida was under the obligation to observe this Policy and to inform her
employer of her relationship. Her acts, therefore, could be characterized as an act of dishonesty
constituting willful breach of trust and confidence justifying her dismissal.
NLRC:
NLRC denied, it agreed with the LA's findings. It additionally pointed out that Zaida's act of
continuing her intimate relationship with Marlon despite the implementation of the Non-Fraternization
Policy constituted not only immoral conduct; it also prejudiced the interest of St. Vincent as it set a
bad example not only to her subordinates but also to the children-beneficiaries of St. Vincent. Her act,
therefore, amounted to serious misconduct justifying her dismissal.
CA:
CA denied, it agreed that Zaida's dismissal was valid, reiterating that Zaida's act of
continuing her relationship with Marlon despite the implementation of the Non-Fraternization Policy,
and without the benefit of marriage, went against the very policy of promoting Christian values that
she was charged to uphold. Her subsequent marriage to Marlon did not help her situation as, under
the circumstances, it appeared more of an afterthought intended to circumvent St. Vincent's rules and
code of conduct.
ISSUE:
Was the dismissal of Zaida valid? NO.
JURISPRUDENCE::
I. The NLRC's findings of immorality or of committing acts prejudicial to the
interest of St. Vincent are baseless.
The totality of the attendant circumstances must be considered in determining whether an
employee's conduct is immoral. Immorality pertains to a course of conduct that offends the
morals of the community. It connotes conduct or acts that are willful, flagrant or shameless,
and that shows indifference to the moral standards of the upright and respectable
members of the community. Conducts described as immoral or disgraceful refer to those acts that
plainly contradict accepted standards of right and wrong behavior; they are prohibited because they
are detrimental to the conditions on which depend the existence and progress of human society.
In dismissal situations, the sufficiency of a conduct claimed to be immoral must be
judged based on secular, not religious standards.
In this case, both Zaida and Marlon at all times had no impediments to marry each other.
They were adults who met at work, dated, fell in love and became sweethearts. The intimate sexual
relations between them were consensual, borne by their love for one another and which they engaged
in discreetly and in strict privacy. They continued their relationship even after Marlon left St. Vincent
in 2008. They took their marriage vows soon after Zaida recovered from her miscarriage, thus
validating their union in the eyes of both men and God.
The Court thus reiterate that mere private sexual relations between two unmarried
and consenting adults, even if the relations result in pregnancy or miscarriage out of
wedlock and without more, are not enough to warrant liability for illicit behavior. The
voluntary intimacy between two unmarried adults, where both are not under any impediment to
marry, where no deceit exists, and which was done in complete privacy, is neither criminal nor so
unprincipled as to warrant disciplinary action.
How does the relationship affect St. Vincent’s interest? (in relation to management
prerogative)
Since Zaida and Marlon's relationship was not per se immoral based on secular morality
standards, St. Vincent carries the burden of showing that they were engaged in an act
prejudicial to its interest and one that it has the right to protect against. Significantly, St.
Vincent has failed to expound on the interest that is within its own right to protect and uphold. The
respondents did not specify in what manner and to what extent Zaida and Marlon's relationship
prejudiced or would have prejudiced St. Vincent's interest. To be sure, the other employees and
volunteers of St. Vincent know, by now, what had happened to Zaida and the circumstances
surrounding her dismissal. But, the attention which the relationship had drawn could hardly be
imputed to her; if at all, it was the respondents' actions and reactions which should be blamed for the
undesired publicity.
Moreover, aside from the relationship that St. Vincent considered to be immoral, it did not
specify, nor prove any other act or acts that Zaida might have committed to the prejudice of St.
Vincent's interest. A mere allegation that Zaida committed act or acts prejudicial to St. Vincent's
interest, without more, does not constitute sufficient basis for her dismissal.
II. Dismissal on the ground of serious misconduct and willful breach of trust and
confidence
1. Serious misconduct
For an employee to be validly dismissed on the ground of serious misconduct, the employee
must:
1. Have committed misconduct or an improper or wrong conduct;
2. The misconduct or improper behavior is:
a. Serious;
b. Relate to the performance of the employee's duties; and
c. Show that the employee has become unfit to continue working for the
employer.
Zaida's relationship with Marlon is neither illegal nor immoral; it also did not violate the Non-
Fraternization Policy. In other words, Zaida did not commit any misconduct, serious or otherwise, that
would justify her dismissal based on serious misconduct.
2. Breach of trust and confidence
 In Vitarich Corp. v. NLRC, we laid out the guidelines for the application of the doctrine of loss of
confidence, namely:
1. The 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 should 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. In
short, there must be an actual breach of duty which must be established by substantial
evidence.
In the present case, Zaida indeed held a position of trust and confidence. Nonetheless, The Court
cannot support the NLRC's findings that she committed act/s that breached St. Vincent's trust. Zaida's
relationship with Marlon, to reiterate, was not wrong, illegal, or immoral from the perspective of
secular morality; it is also not prohibited by the Non-Fraternization Policy nor is it required, by the
Policy, to be disclosed to St. Vincent's management or officials. In short, Zaida did not commit any act
or misconduct that willfully, intentionally, or purposely breached St. Vincent's trust.
ROLAND RIVERA v. SOLIDBANK CORPORATION
G.R. No. 163269, April 19, 2006
FACTS:
- Roland Rivera been working for Solidbank Corporation since July 1, 1977. Prior to his
retirement, he became the Manager of the Credit Investigation and Appraisal Division of the
Consumer’s Banking Group.
- In December 1994, Solidbank offered two retirement programs to its employees:
a. Ordinary Retirement Program (ORP), under which an employee would receive 85% of his
monthly basic salary multiplied by the number of years in service;
b. Special Retirement Program (SRP), under which a retiring employee would receive 250%
of the gross monthly salary multiplied by the number of years in service.
- Since Rivera was only 45 years old, he was not qualified for retirement under the ORP. Under
the SRP, he was entitled to receive P1,045,258.95 by way of benefits. Deciding to devote his
time and attention to his poultry business in Cavite, Rivera applied for retirement under the
SRP.
- employee within the proscribed one-year period. The alleged defenses of Rivera, the CA declared,
- Solidbank approved the application and Rivera was entitled to receive the net amount of
P963,619.28. This amount included his performance incentive award (PIA), and his unearned
medical, dental and optical allowances in the amount of P1,666.67, minus his total
accountabilities to Solidbank amounting to P106,973.00. Rivera received the amount and
confirmed his separation from Solidbank on February 25, 1995.
- Solidbank required Rivera to sign an undated Release, Waiver and Quitclaim, which was
notarized on March 1, 1995. Rivera acknowledged receipt of the net proceeds of his
separation and retirement benefits and promised that he would not, at any time, in any
manner whatsoever, directly or indirectly engage in any unlawful activity prejudicial to the
interest of Solidbank, its parent, affiliate or subsidiary companies, their stockholders,
officers, directors, agents or employees, and their successors-in-interest and will not disclose
any information concerning the business of Solidbank, its manner or operation, its plans,
processes, or data of any kind.
- Rivera agreed that the bank may bring any action to seek an award for damages resulting
from his breach of the Release, Waiver and Quitclaim, and that such award would include the
return of whatever sums paid to him by virtue of his retirement under the SRP.
- Rivera was likewise required to sign an undated Undertaking as a supplement to the Release,
Waiver and Quitclaim in favor of Solidbank in which he declared that he received in full his
entitlement under the law (salaries, benefits, bonuses and other emoluments), including his
separation pay in accordance with the SRP. In this Undertaking, he promised that "he will not
seek employment with a competitor bank or financial institution within 1 year from February
28, 1995, and that any breach of the Undertaking or the provisions of the Release, Waiver
and Quitclaim would entitle Solidbank to a cause of action against him before the appropriate
courts of law.
- On May 1, 1995, the Equitable Banking Corporation employed Rivera as Manager of its Credit
Investigation and Appraisal Division of its Consumers’ Banking Group.
- Upon discovering this, Solidbank First Vice-President for Human Resources Division (HRD)
Celia J.L. Villarosa wrote a letter dated May 18, 1995, informing Rivera that he had violated
the Undertaking. She likewise demanded the return of all the monetary benefits he received
in consideration of the SRP within 5 days from receipt; otherwise, appropriate legal action
would be taken against him.
- When Rivera refused to return the amount demanded within the given period, Solidbank filed
a complaint for Sum of Money with Prayer for Writ of Preliminary Attachment before the
Regional Trial Court (RTC) of Manila on June 26, 1995.
REGIONAL TRIAL COURT:
Rendered a decision ordering the Rivera to pay to Solidbank the amount of PHP 963,619.28
plus legal interest at 12% per annum until fully paid, and the costs of the suit. According to the RTC,
the prohibition incorporated in the Undertaking was not unreasonable. To allow Rivera to be excused
from his undertakings in said deed and, at the same time, benefit therefrom would be to allow him to
enrich himself at the expense of Solidbank.
COURT OF APPEALS:
It ratiocinated that the agreement between Rivera and Solidbank was the law between them,
and that the interpretation of the stipulations therein could not be left upon the whims of Rivera.
According to the CA, Rivera never denied signing the Release, Waiver, and Quitclaim, including the
Undertaking regarding the employment prohibition. He even admitted joining Equitable as an
could not prevail over the admissions in his pleadings. Moreover, Rivera’s justification for taking the
job with Equitable, "dire necessity," was not an acceptable ground for annulling the Undertaking.
ISSUE:
Whether or not the post-employment ban was against the constitutional provision on full
employment.
JURISPRUDENCE:
Consideration must be given to the employee’s right to earn a living and to his ability to
determine with certainty the area within which his employment ban is restituted. A provision on
territorial limitation is necessary to guide an employee of what constitutes as violation of a restrictive
covenant and whether the geographic scope is co-extensive with that in which the employer is doing
business. In considering a territorial restriction, the facts and circumstances surrounding the case
must be considered.  his height and body structure is from 147 to 166 pounds, the ideal weight being 166 pounds,
In determining whether the contract is reasonable or not, the trial court should consider the
following factors:
a. Whether the covenant protects a legitimate business interest of the employer;
b. Whether the covenant creates an undue burden on the employee;
c. Whether the covenant is injurious to the public welfare;
d. Whether the time and territorial limitations contained in the covenant are reasonable;
and
e. Whether the restraint is reasonable from the standpoint of public policy.
United States Circuit Court of Appeals in Rochester Corporation v. W.L. Rochester,
Jr.: We are not impervious of the distinction between restrictive covenants barring an employee to
accept a post-employment competitive employment or restraint on trade in employment contracts
and restraints on post-retirement competitive employment in pension and retirement plans either
incorporated in employment contracts or in collective bargaining agreements between the employer
and the union of employees, or separate from said contracts or collective bargaining agreements
which provide that an employee who accepts post retirement competitive employment will forfeit
retirement and other benefits or will be obliged to restitute the same to the employer. The strong
weight of authority is that forfeitures for engaging in subsequent competitive employment included in
pension and retirement plans are valid even though unrestricted in time or geography.
A post-retirement competitive employment restriction is designed to protect the
employer against competition by former employees who may retire and obtain retirement
or pension benefits and, at the same time, engage in competitive employment.
The Undertaking and the Release, Waiver and Quitclaim do not provide for the
automatic forfeiture of the benefits petitioner received under the SRP upon his breach of
said deeds. Thus, the post-retirement competitive employment ban incorporated in the Undertaking
of respondent does not appear to be of the same class or genre as that contemplated in Rochester.
It is settled that actual damages or compensatory damages may be awarded for breach of
contracts. Actual damages are primarily intended to simply make good or replace the loss covered by
said breach. They cannot be presumed. Even if petitioner had admitted to having breached the
Undertaking, respondent must still prove that it suffered damages and the amount thereof.
On the assumption that the competitive employment ban in the Undertaking is valid,
petitioner is not automatically entitled to return the P963,619.28 he received from respondent. To
reiterate, the terms of the Undertaking clearly state that any breach by petitioner of his promise
would entitle respondent to a cause of action for protection in the courts of law; as such, restitution of
the P963,619.28 will not follow as a matter of course. Respondent is still burdened to prove its
entitlement to the aforesaid amount by producing the best evidence of which its case is susceptible.
ARMANDO G. YRASUEGUI vs. PHILIPPINE AIRLINES, INC.
G.R. No. 168081; October 17, 2008
FACTS:
- Armando Yrasuegui was employed as an International Flight Steward at the PAL.
- As mandated by the Cabin and Crew Administration Manual, the proper weight for a man of
- In 1984, his weight problem started, which prompted PAL to send him to an extended
vacation until November 1985. He was allowed to return to work once he lost all the excess
weight.
- But the problem recurred. He again went on leave without pay from October 17, 1988 to
February 1989.
- On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight.
- In line with company policy, he was removed from flight duty until July 3, 1989.
- He was formally requested to trim down to his ideal weight and report for weight checks on
several dates. He was also told that he may avail of the services of the company physician
should he wish to do so. He was advised that his case will be evaluated on July 3, 1989.
- On February 25, 1989, petitioner underwent weight check. It was discovered that he gained
weight and weighed 49 pounds beyond the limit.
- Consequently, his off-duty status was retained.
- On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited petitioner at his
residence to check on the progress of his effort to lose weight.
- Petitioner gained 2 pounds from his previous weight.
- Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner
remained overweight .
- On January 3, 1990, he was informed of the PAL decision for him to remain grounded until
such time that he satisfactorily complies with the weight standards. He was directed to report
every two weeks for weight checks, which he failed to comply with.
- On April 17, 1990, petitioner was formally warned that a repeated refusal to report for
weight check would be dealt with accordingly. He was given another set of weight check
dates, which he did not report to
- On November 13, 1992, PAL finally served petitioner a Notice of Administrative Charge for
violation of company standards on weight requirements.
- Petitioner insists that he is being discriminated as those similarly situated were not treated
the same.
- On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain
his ideal weight, “and considering the utmost leniency” extended to him “which spanned a
period covering a total of almost 5 years,” his services were considered terminated “effective
immediately.”
LABOR ARBITER: The LA held that the weight standards of PAL are reasonable in view of the
nature of the job of petitioner. However, the weight standards need not be complied with under pain
of dismissal since his weight did not hamper the performance of his duties.
NLRC: affirmed.
COURT OF APPEALS: CA held that the weight standards of PAL are reasonable. Thus, petitioner
was legally dismissed because he repeatedly failed to meet the prescribed weight standards. It is
obvious that the issue of discrimination was only invoked by petitioner for purposes of escaping the
result of his dismissal for being overweight.
ISSUE:
Was Yrasuegui was validly dismissed? YES.
JURISPRUDENCE:
 A reading of the weight standards of PAL would lead to no other conclusion than
that they constitute a continuing qualification of an employee in order to keep the job. The
dismissal of the employee would thus fall under Article 282(e) of the Labor Code.
In this case, the evidence on record militates against petitioner’s claims that obesity is a
disease. That he was able to reduce his weight from 1984 to 1992 clearly shows that it is
possible for him to lose weight given the proper attitude, determination, and self-
discipline. Indeed, during the clarificatory hearing on December 8, 1992, petitioner himself claimed
that “the issue is could I bring my weight down to ideal weight which is 172, then the answer is yes. I
can do it now.” Petitioner has only himself to blame. He could have easily availed the
assistance of the company physician, per the advice of PAL.
In fine, We hold that the obesity of petitioner, when placed in the context of his
work as flight attendant, becomes an analogous cause under Article 282(e) of the Labor
Code that justifies his dismissal from the service.
His obesity may not be unintended, but is nonetheless voluntary. As the CA correctly puts
it, voluntariness basically means that the just cause is solely attributable to the employee
without any external force influencing or controlling his actions. This element runs through all
just causes under Article 282, whether they be in the nature of a wrongful action or omission. Gross
and habitual neglect, a recognized just cause, is considered voluntary although it lacks the element of
intent found in Article 282(a), (c), and (d).
The dismissal of petitioner can be predicated on the bona fide occupational qualification
defense. Employment in particular jobs may not be limited to persons of a particular sex, religion, or
national origin unless the employer can show that sex, religion, or national origin is an actual
qualification for performing the job. The qualification is called a bona fide occupational
qualification (BFOQ). In short, the test of reasonableness of the company policy is used because it
is parallel to BFOQ. BFOQ is valid provided it reflects an inherent quality reasonably
necessary for satisfactory job performance.
The business of PAL is air transportation. As such, it has committed itself to safely transport
its passengers. In order to achieve this, it must necessarily rely on its employees, most particularly
the cabin flight deck crew who are on board the aircraft. The weight standards of PAL should be
viewed as imposing strict norms of discipline upon its employees. The primary objective of
PAL in the imposition of the weight standards for cabin crew is flight safety.
Separation pay should be awarded in favor of Yrasuegui as an act of social justice or based
on equity. This is so because his dismissal is not for serious misconduct. Neither is it reflective of his
moral character.
COCA-COLA* BOTTLERS PHILIPPINES, INC. v. CCBPI STA. ROSA PLANT EMPLOYEES UNION
G.R. No. 197494; March 25, 2019
FACTS:
- Coca cola bottlers Philippines Inc implemented a policy which limits the total amount of loan
which its employees may obtain from the company and other sources such as the Social
Security System (SSS), PAG-IBIG, and employees' cooperative to 50% of their respective
monthly pay.
- Union interpreted such policy as violative of a provision in the Collective Bargaining
Agreement
- States that petitioner shall process all SSS loans of its employees, in spite of any outstanding
company loan of said employees, subject to SSS rules and regulations.
- VOLUNTARY ARBITRATOR: CBA is clear when it provided that petitioner shall process all SSS
loans, subject only to SSS rules and regulations. As there was no modification of said
stipulation, petitioner was ordered to implement said provision without restrictions.
- COURT OF APPEALS: Affirmed the ruling of the Voluntary Arbitrator
ISSUE:
Whether or not petitioner's company policy which limits the availment of loans depending on
the average take home pay of its employees violates a provision in the CBA.
JURISPRUDENCE:
YES.
We rule that the company policy violated the provision of the CBA as it imposes a
restriction with respect to the right of the employees under the CBA to avail SSS salary
loans. (Hence, not a valid exercise of management prerogative)
The CBA is the law between the parties and they are obliged to comply with its provisions.
As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and
conditions as they may deem convenient provided these are not contrary to law, morals,
good customs, public order, or public policy.
It appears that the qualification of a member-borrower is dependent on:
a. The amount of loan to be taken,
b. Updated payment of his contributions and other loans,
c. Age, which should be below 65 years.
On the other hand, the responsibility of an employer is limited to the collection and
remittance of the employee's amortization to SSS as it causes the deduction of said
amortizations from the employee's salar y.
The 50% net take home pay requirement, in effect, further adds a condition for an
employee to obtain an SSS salary loan, on top of the requirements issued by the SSS.
Hence, when petitioner requires that the employee should have at least 50% net take home
pay before it processes a loan application, the same violates the CBA provision.
AIRBORNE MAINTENANCE AND ALLIED SERVICES, INC. vs. ARNULFO M. EGOS
G.R. No. 222748; April 3, 2019
FACTS:
 - Airborne Maintenance and Allied Services, Inc. and Francis T. Ching (Airborne), a company
engaged in providing manpower services to various clients, hired the services of Arnulfo Egos
as Janitor.
- Almost twenty years thereafter, or on June 30, 2011, the contract between Airborne and
Meralco-Balintawak Branch expired and a new contract was awarded to Landbees
Corporation, and the latter absorbed all employees of Airborne except Egos, who allegedly
had a heart ailment.
- Egos consulted another doctor and, based on the medical result, he was declared in good
health and fit to work.
- He showed the duly issued medical certificate to Airborne but the same was disregarded.
- Egos reported for work but was just ignored by Airborne and was told that there was no work
available for him.
- Feeling aggrieved, he filed a complaint for constructive/illegal dismissal on August 05, 2011.
ISSUE:
1. Are there limitations to the exercise of management prerogatives?
2. Did management validly exercise its prerogatives?
JURISPRUDENCE:
I. LIMITATIONS TO EXERCISE
Suspension of Business Operations; The suspension of employment under Article 301 of
the Labor Code is only temporary and should not exceed 6 months; the employer should notify
the DOLE and the affected employee, at least 1 month prior to the intended date of suspension of
business operations.
The temporary lay-off wherein the employees likewise cease to work should also not last longer
than six months. After six months, the employees should either be recalled to work or
permanently retrenched following the requirements of the law, and that failing to comply
with this would be tantamount to dismissing the employees and the employer would thus
be liable for such dismissal. In implementing this measure, jurisprudence has set that the
employer should notify the DOLE and the affected employee, at least one month prior to the intended
date of suspension of business operations. An employer must also prove the existence of a clear
and compelling economic reason for the temporary shutdown of its business or
undertaking and that there were no available posts to which the affected employee could
be assigned.
II. VALID EXERCISE
Constructive Dismissal: a dismissal in disguise as it is an act amounting to dismissal
but made to appear as if it were not.
Constructive dismissal exists where there is cessation of work because “continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a
demotion in rank or a diminution in pay” and other benefits.
Aptly called a dismissal in disguise or an act amounting to dismissal but made to appear as if it
were not, constructive dismissal may, likewise, exist if an act of clear discrimination,
insensibility, or disdain by an employer becomes so unbearable on the part of the employee
that it could foreclose any choice by him except to forego his continued employment.
Airborne’s acts of:
1. Not informing respondent and the DOLE of the suspension of its operations,
2. Failing to prove the bona fide suspension of its business or undertaking,
3. Ignoring respondent’s follow-ups on a new assignment,
4. Belated sending of letters/notices which were returned to it
were done to make it appear as if respondent had not been dismissed. These acts, however,
clearly amounted to a dismissal, for which petitioner is liable.
Ernesto Galang et al vs. Boie Takeda Chemicals, Inc.
G.R. No. 183834, July 20, 2016
FACTS:
- Respondent pharmaceutical company Boie Takeda Chemicals, Inc. (BTCI) hired petitioners
Ernesto Galang and Ma. Olga Jasmin Chan in August 28, 1975 and July 20, 1983,
respectively. Through the years, petitioners rose from the ranks and were promoted to
Regional Sales Managers in 2000. Petitioners held these positions until their separation from
BTCI on May 1, 2004.
- In 2002, when the National Sales Director position became vacant (after the retirement of
Melchor Barretto), petitioners assumed and shared (with the general manager) the functions
and responsibilities of this higher position, and reported directly to the General Manager.
- In February 2003, the new General Manager, Kazuhiko Nomura (Nomura), asked petitioners
to apply for the position of National Sales Director.10 Simultaneously, Nomura also asked
Edwin Villanueva (Villanueva) and Mimi Escarte, both Group Product Managers in the
marketing depatiment, to apply for the position of Marketing Director. All four employees
submitted themselves to interviews with the management. In the end, Nomura hired an
outsider from Novartis Company as Marketing Director, while the position of National Sales
Director remained vacant.
- Later, however, petitioners were informed that BTCI promoted Villanueva as National Sales
Director effective May 1,2004.12 BTCI explained that the appointment was pursuant to its
management prerogative, and that it arrived at such decision only "after careful assessment
of the situation, the needs of the position and the qualifications of the respective
candidates." The promotion of Villanueva as the National Sales Director caused ill-feelings on
petitioners' part. They believed that Villanueva did not apply for the position; has only three
years of experience in sales; and was reportedly responsible for losses in the marketing
depmiment. Petitioners further resented Villanueva's appointment because they heard that
the appointment was made only because he threatened to leave the office along with the
company's top cardio-medical doctors.
- After Villanueva's promotion, petitioners claimed that Nomura threatened to dismiss them
from office if they failed to perform well under the newly appointed National Sales
Director.17 This prompted petitioners to inquire if they could avail of early retirement
package due to health reasons. Specifically, they requested Nomura if they could avail of the
 early retirement package of 150% plus 120% of monthly salary for every year of service tax
free, and full ownership of service vehicle tax free.
- They claimed that this is the same retirement package given to previous retirees namely,
former Regional Sales Director Jose Sarmiento, Jr. (Sarmiento), and former National Sales
Director Melchor Barretto. Nomura, however, insisted that such retirement package does not
exist and Sarmiento's case was exceptional since he was just a few years shy from the
normal retirement age.
- On April 28, 2004, petitioners intimated their intention to retire in a joint written letter of
resignation22 dated April 28, 2002 (sic) to Nomura, effective on April 30, 2004. Thereafter,
petitioners received their retirement package and other monetary pay from BTCI.
- Upon petitioners' retirement, the positions of Regional Sales Manager were abolished, and a
new position of Operations Manager was created. On October 20, 2004, petitioners filed the
complaint for constructive dismissal and money claims before the NLRC Regional Arbitration
Branch.
LABOR ARBITER: The Labor Arbiter ruled that petitioners were constructively dismissed. The Labor
Arbiter explained that petitioners were forced to retire because Villanueva's appointment constituted
an abuse of exercise of management prerogative; and that subsequent events, such as the abolition
of the positions of Regional Sales Managers and the creation of the position of the Operations
Manager show that petitioners' easing out from service were orchestrated. It also found that
petitioners were discriminated as to their retirement package.
NLRC: The decision reversed and set aside the LA Decision, and dismissed the complaint. In said
decision, the NLRC ruled that petitioners failed to prove that they were constructively dismissed.
COURT OF APPEALS: The CA also found that the March Decision was more in tune with law and
jurisprudence. It reviewed and reassessed the facts and evidence on record and made a finding that
the NLRC did not commit grave abuse of discretion.
ISSUE:
JURISPRUDENCE:
Constructive dismissal has often been defined as a "dismissal in disguise" or "an act
amounting to dismissal but made to appear as if it were not." It exists where there is cessation of
work because continued employment is rendered impossible, unreasonable or unlikely, as an offer
involving a demotion in rank and a diminution in pay. In some cases, while no demotion in rank or
diminution in pay may be attendant, constructive dismissal may still exist when continued
employment has become so unbearable because of acts of clear discrimination, insensibility or disdain
by the employer, that the employee has no choice but to resign. Under these two definitions, what is
essentially lacking is the voluntariness in the employee's separation from employment.
In this case, petitioners were neither demoted nor did they receive a diminution in pay and
benefits. Petitioners also failed to show that employment is rendered impossible, unreasonable or
unlikely.
Petitioners claim that Villanueva was unqualified for the position compared to their
experiences; that Villanueva did not apply for the position of National Sales Director; and that he
lacked the experience for the job. Such arguments only affirm the NLRC and CA's finding that
petitioners' resignation was prompted by their general disagreement with the appointment of
Villanueva, and not by the acts of discrimination by the management.
Our labor laws respect the employer's inherent right to control and manage effectively its
enterprise and do not normally allow interference with the employer's judgment in the conduct of his
business. Management has exclusive prerogatives to determine the qualifications and fitness of
workers for hiring and firing, promotion or reassignment. It is only in instances of unlawful
discrimination, limitations imposed by law and collective bargaining agreement can this prerogative of
management be reviewed.
The reluctance to interfere with management's prerogative in determining who to promote all
the more applies when we consider that the position of National Sales Director is a managerial
position. Managerial positions are offices which can only be held by persons who have the trust of the
corporation and its officers. The promotion of employees to managerial or executive positions rests
upon the discretion of management.
Thus, we have repeatedly reminded that the Labor Arbiters, the different Divisions of the
NLRC, and even courts, are not vested with managerial authority. The employer's exercise of
management prerogatives, with or without reason, does not per se constitute unjust discrimination,
unless there is a showing of grave abuse of discretion. In this case, there is none.
Petitioners did not present any evidence showing BTCI's adopted rules and policies laying out
the standards of promotion of an employee to National Sales Director. They did not present the
qualification standards (which BTCl did not allegedly follow) needed for the position. Petitioners
merely assumed that one of them was better for the job compared to Villanueva. Mere allegations
without proof cannot sustain petitioners' claim. In any case, a perusal of Villanueva's resume shows
that he has combined experiences in both sales and marketing.
The other acts of discrimination complained of by petitioners refer to post-employment
matters, or those that transpired after their retirement. These include payment of alleged "lesser"
retirement package, and the abolition of the positions of Regional Sales Manager. These events
transpired only after they voluntary availed of the early retirement. We stress, however, that the
circumstances contemplated in constructive dismissal cases are clear acts of discrimination,
insensibility or disdain which necessarily precedes the apparent "voluntary" separation from work. If
they happened after the fact of separation, it could not be said to have contributed to employee's
decision to involuntary resign, or in this case, retire.
It is likewise true that in constructive dismissal cases, the employee has the burden to prove
first the fact of dismissal by substantial evidence. Only then when the dismissal is established that the
burden shifts to the employer to prove that the dismissal was for just and/or authorized cause. The
logic is simple-if there is no dismissal, there can be no question as to its legality or illegality.
Petitioners, also, claim that they should have received a larger pay because BTCI has given
more than what they received to previous retirees. In essence, they claim that they were
discriminated against because BTCI did not give them the package of 150% of monthly salary for
every year of service on top of the normal retirement package.
To prove that their claim on the additional grant of 150% of salary, petitioners presented
evidence showing that Anita Ducay, Rolando Arada, Marcielo Rafael, and Sarmiento, received
significantly larger retirement benefits. However, the cases of Ducay, Arada, and Rafael cannot be
used as precedents to prove this specific company practice because these employees were not shown
to be similarly situated in terms of rank, nor are the applicable retirement packages corresponding to
their ranks alike. Also, these employees, including Sarmiento, all retired in the same year of 2001, or
only within a one-year period. Definitely, a year cannot be considered long enough to constitute the
grant of retirement benefits to these employees as company practice.
 SHS PERFORATED MATERIALS INC., v. DIAZ
GR 185814; October 13, 2012
FACTS:
- Manuel F. Diaz was hired by SHS as Manager for Business Development on probationary
status from July 18, 2005 to January 18, 2006.  prerogative to withhold wages temporarily. Petitioners’ averments of respondent’s failure to report to
- During respondent’s employment, Hartmannshenn (President) was often abroad and,
because of business exigencies, his instructions to respondent were either sent by electronic
mail or relayed through telephone or mobile phone. When he would be in the Philippines, he
and the respondent held meetings. As to respondent’s work, there was no close supervision
by him.
- During meetings with the respondent, Hartmannshenn expressed his dissatisfaction over
respondent’s poor performance.
- Respondent allegedly failed to make any concrete business proposal or implement any
specific measure to improve the productivity of the SHS office and plant or deliver sales.
- On November 29, 2005, Hartmannshenn instructed Taguiang (Accounting Services
Department Head) not to release respondent’s salary.
- Later that afternoon, respondent called and inquired about his salary. Taguiang informed him
that it was being withheld and that he had to immediately communicate with
Hartmannshenn. Again, respondent denied having received such directive.
- The next day, on November 30, 2005, respondent served on SHS a demand letter and a
resignation letter. He averred that he is tendering his resignation due to the company’s
illegal and unfair labor practices.
- On December 9, 2005, respondent filed a Complaint against the petitioners for illegal
dismissal; non-payment of salaries/wages and 13th month pay with prayer for reinstatement
and full backwages; exemplary damages, and attorney’s fees, costs of suit, and legal
interest.
- Petitioners contend that withholding respondent’s salary was justified because respondent
was absent and did not show up for work during that period. He also failed to account for his
whereabouts and work accomplishments during said period. When there is an issue as to
whether an employee has, in fact, worked and is entitled to his salary, it is within
management prerogative to temporarily withhold an employee’s salary/wages pending
determination of whether or not such employee did indeed work.
LABOR ARBITER: found that respondent was constructively dismissed because the withholding of
his salary was contrary to Article 116 of the Labor Code as it was not one of the exceptions for
allowable wage deduction by the employer under Article 113 of the Labor Code. He had no other
alternative but to resign because he could not be expected to continue working for an employer who
withheld wages without valid cause.
NLRC: Reversed the LA. The NLRC explained that the withholding of respondent’s salary was a
valid exercise of management prerogative. The act was deemed justified as it was reasonable to
demand an explanation for failure to report to work and to account for his work accomplishments. The
NLRC held that the respondent voluntarily resigned as evidenced by the language used in his
resignation letter and demand letters. Given his professional and educational background, the letters
showed respondent’s resolve to sever the employer-employee relationship, and his understanding of
the import of his words and their consequences.
 
COURT OF APPEALS: Reversed the NLRC. The CA held that withholding respondent’s salary was
not a valid exercise of management prerogative as there is no such thing as a management
work were found to be unsubstantiated allegations not corroborated by any other evidence,
insufficient to justify said withholding and lacking in probative value. The malicious withholding of
respondent’s salary made it impossible or unacceptable for respondent to continue working, thus,
compelling him to resign. The respondent’s immediate filing of a complaint for illegal dismissal could
only mean that his resignation was not voluntary. As a probationary employee entitled to security of
tenure, respondent was illegally dismissed.
ISSUE:
Whether the temporary withholding of respondent’s salary/wages by petitioners was a valid
exercise of management prerogative.
JURISPRUDENCE:
NO.
Management prerogative refers "to the right of an employer to regulate all aspects
of employment, such as the freedom to prescribe work assignments, working methods,
processes to be followed, regulation regarding transfer of employees, supervision of their
work, lay-off and discipline, and dismissal and recall of work." 
Although management prerogative refers to "the right to regulate all aspects of
employment," it cannot be understood to include the right to temporarily withhold
salary/wages without the consent of the employee.
To sanction such an interpretation would be contrary to Article 116 of the Labor Code, which
provides:
ART. 116. Withholding of wages and kickbacks prohibited. – It shall be unlawful for any person,
directly or indirectly, to withhold any amount from the wages of a worker or induce him to give
up any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever
without the worker’s consent.
Any withholding of an employee’s wages by an employer may only be allowed in the form of
wage deductions under the circumstances provided in Article 113 of the Labor Code, as set forth
below:
ART. 113. Wage Deduction. – No employer, in his own behalf or in behalf of any person, shall
make any deduction from the wages of his employees, except:
a. In cases where the worker is insured with his consent by the employer, and the deduction is
to recompense the employer for the amount paid by him as premium on the insurance;
b. For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned; and
c. In cases where the employer is authorized by law or regulations issued by the Secretary of
Labor.

Absent a showing that the withholding of complainant’s wages falls under the exceptions
provided in Article 113, the withholding thereof is thus unlawful.  
Although it cannot be determined with certainty whether respondent worked for the entire period
from November 16 to November 30, 2005, the consistent rule is that if doubt exists between the
evidence presented by the employer and that by the employee, the scales of justice must be tilted in
favor of the latter in line with the policy mandated by Articles 2 and 3 of the Labor Code to afford
protection to labor and construe doubts in favor of labor. For petitioners’ failure to satisfy their
burden of proof, respondent is presumed to have worked during the period in question and
is, accordingly, entitled to his salary. Therefore, the withholding of respondent’s salary by
petitioners is contrary to Article 116 of the Labor Code and, thus, unlawful.
Solas v. Power & Telephone Supply Phils., Inc.: the mere withholding of an employee’s salary
does not by itself constitute constructive dismissal. In the above-cited case, the employee’s salary
was withheld for a valid reason - it was applied as partial payment of a debt due to the employer, for
withholding taxes on his income and for his absence without leave. The partial payment of a debt due
to the employer and the withholding of taxes on income were valid deductions under Article 113
paragraph (c) of the Labor Code. The deduction from an employee’s salary for a due and demandable
debt to an employer was likewise sanctioned under Article 1706 of the Civil Code. As to the
withholding for income tax purposes, it was prescribed by the National Internal Revenue Code.
Moreover, the employee therein was indeed absent without leave.
In this case, the withholding of respondent’s salary does not fall under any of the
circumstances provided under Article 113. Neither was it established with certainty that
respondent did not work from November 16 to November 30, 2005. Hence, the Court agrees
with the LA and the CA that the unlawful withholding of respondent’s salary amounts to constructive
dismissal.
Respondent was constructively dismissed and, therefore, illegally dismissed. Although respondent
was a probationary employee, he was still entitled to security of tenure. Section 3 (2) Article 13 of
the Constitution guarantees the right of all workers to security of tenure. In using the
expression "all workers," the Constitution puts no distinction between a probationary and a
permanent or regular employee. This means that probationary employees cannot be dismissed
except for cause or for failure to qualify as regular employees.
This Court has held that probationary employees who are unjustly dismissed during the
probationary period are entitled to reinstatement and payment of full backwages and other benefits
and privileges from the time they were dismissed up to their actual reinstatement. Respondent is,
thus, entitled to reinstatement without loss of seniority rights and other privileges as well as to full
backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from
the time his compensation was withheld up to the time of actual reinstatement. Respondent,
however, is not entitled to the additional amount for 13th month pay, as it is clearly provided in
respondent’s Probationary Contract of Employment that such is deemed included in his salary.
Respondent’s reinstatement, however, is no longer feasible as antagonism has caused a severe
strain in their working relationship. Under the doctrine of strained relations, the payment of
separation pay is considered an acceptable alternative to reinstatement when the latter option is no
longer desirable or viable. Payment liberates the employee from what could be a highly oppressive
work environment, and at the same time releases the employer from the obligation of keeping in its
employ a worker it no longer trusts. Therefore, a more equitable disposition would be an award of
separation pay equivalent to at least one month pay, in addition to his full backwages, allowances
and other benefits.
MARINA'S CREATION ENTERPRISES AND JERRY B. ALFONSO VS. ROMEO V. ANCHETA
G.R. No. 218333, December 07, 2016
FACTS:
- Marina is engaged in the business of making shoes and bags.
- Marina hired Romeo Ancheta as a sole attacher in Marina.
- In March 2011, Ancheta suffered an intra-cranial hemorrhage (stroke) and was placed under
home care. Ancheta suffered a second stroke and was confined at St. Victoria Hospital in
Marikina City for four days.
- On  26 May 2011, Ancheta filed a Sickness Notification with the Social Security   System
(SSS) . The physician who physically examined Ancheta stated that Ancheta would be fit to
resume work after 90 days or on 12 August 2011. 
- On 13 August 2011, Ancheta reported for work. Marina, however, wanted Ancheta to submit
a new medical certificate before he could resume his work in Marina.
- Ancheta did not comply and was not able to resume his work in Marina.
- On 8 November 2011, Ancheta filed a complaint with the Labor Arbiter against Marina and its
registered owner Jerry B. Alfonso for illegal dismissal and non-payment of separation pay.
- Ancheta’s Contention:
1. After he recovered from his illness he reported for work in Marina but was advised by
Marina to just wait for the company's call and take some rest. 
2. That he was not served a notice for his termination and a subsequent notice for hearing
as mandated by the Labor Code. 
3. He was illegally dismissed by Marina.
- Marina’s Contention:
1. Ancheta was employed on a piece rate basis and was not terminated but instead was
refused job assignments due to his failure to submit a medical clearance showing that he
was fit to resume his work. 
2. That the medical certificate was a precautionary measure imposed by the company to
avoid any incident that could happen to Ancheta who already had a pre-existing medical
condition. 
3. Marina alleged that Ancheta did not present any evidence to prove that he was illegally
dismissed.
LABOR ARBITER: Dismissed Ancheta's complaint for illegal dismissal and non-payment of
separation pay. Rationale: Ancheta failed to convincingly prove that he was illegally dismissed. The
Labor Arbiter found no positive or overt act on the part of Marina that would support Ancheta's claim
of illegal dismissal.
NLRC: Affirmed the ruling of the Labor Arbiter. Rationale: Ancheta was not able to establish
the fact that he was dismissed by Marina. Marina's requirement of having Ancheta to submit another
medical certificate before he could resume work was reasonable. Marina cannot be faulted for refusing
to admit Ancheta back to work in the absence of a new medical certificate because it was in the
mutual interest of Ancheta and Marina that Ancheta would be medically found capable of withstanding
the rigors of work.
COURT OF APPEALS: Reversed the decision of the NLRC. Ancheta was illegally dismissed by
Marina. Rationale: Ancheta's dismissal was established through Marina's own admission in its position
paper that the company had refused to give Ancheta job assignments due to Ancheta's failure to
submit a medical certificate. The absence of a medical certificate did not justify Marina's refusal to
furnish Ancheta work assignments. The CA considered the certification by Ancheta's examining
physician attached to Ancheta's SSS Sickness Notification as proof that Ancheta was fit to resume his
work in Marina on 12 August 2011. The CA held that according to the Implementing Rules of the
Labor Code, it was Marina and not Ancheta who had the burden of proving that Ancheta's disease
could not be cured within a period of at least six months in order to justify Ancheta's dismissal.
Finally, the CA ruled since Ancheta was illegally dismissed, Ancheta was entitled to backwages and
separation pay from Marina.
ISSUES:
1. Was Ancheta a regular employee? YES.
2. Requiring Ancheta to undergo a medical examination and to submit a medical certificate was
a valid exercise of management prerogative? NO.
3. Was Ancheta illegally dismissed? YES.
JURISPRUDENCE:
I. ANCHETA WAS A REGULAR EMPLOYEE
Article 280 of the Labor Code provides for the two types of regular employees, to wit:
1. Employees who have been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, and
2. Employees who have rendered at least one year of service, whether such service is
continuous or broken, with respect to the activity in which they are employed.
Applying Article 280 of the Labor Code, Ancheta was a regular employee of Marina.
Ancheta, who was working in Marina as a sole attacher, was performing work that was usually
necessary or desirable in the usual business or trade of Marina which was engaged in the business of
making shoes and bags.
Moreover, Ancheta had been performing work as a sole attacher in Marina since January 2010
up to March 2011 when he suffered his first stroke. Thus, Ancheta had acquired regular
employment status by performing work in Marina for at least one year.
II. REQUIRING ANCHETA TO UNDERGO A MEDICAL EXAMINATION AND TO SUBMIT A
MEDICAL CERTIFICATE WAS NOT A VALID EXERCISE OF MANAGEMENT PREROGATIVE.
Article 279 of the Labor Code provides: "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."
Since Ancheta was a regular employee of Marina, Ancheta's employment can only be terminated
by Marina based on just or authorized causes provided in the Labor Code.
In its position paper, Marina admitted that the company had refused to give Ancheta
work assignments until Ancheta submitted a new medical certificate. It is Marina's position
that Ancheta's employment would not continue if Ancheta would not submit a new medical certificate.
Marina's action in refusing to accept Ancheta notwithstanding the medical certificate
attached to Ancheta's SSS Sickness Notification stating that Ancheta was physically fit to
resume his work in Marina on 12 August 2011 amounts to an illegal dismissal of Ancheta.
III. YES, ANCHETA WAS ILLEGALLY DISMISSED.
Book VI, Rule I, Section 8 of the Implementing Rules of the Labor Code provides:
Section 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 the employee to his former position
immediately upon the restoration of his normal health.
The Implementing Rules of the Labor Code impose upon the employer the duty not
to terminate an employee until there is a certification by a competent public health
authority that the employee's disease is of such nature or at such a stage that it cannot be
cured within a period of six months even with proper medical treatment.
In this case, Marina terminated Ancheta from employment without seeking a prior
certification from a competent public health authority that Ancheta's disease is of such nature or at
such a stage that it cannot be cured within a period of six months even with proper medical
treatment. Hence, Ancheta was illegally dismissed by Marina.