REVIEW MATERIAL IN LABOR RELATIONS

BY:

ATTY. VON LOVEL D. BEDONA

I. LABOR PROVISIONS IN THE 1987 PHILIPPINE CONSTITUTION:

The 1987 Constitution has specific provisions on labor. These are Articles II (Sections 9,
10 and 18), Article III (Sections 1 and 8) and Article 13 (Section 3).

1. Section 10 Article II of the Constitution provides:

The State shall promote social justice in all phases of national development.

The social justice, in the sense – it is used in the Constitution, simply means the
equalization of economic, political, and social opportunities with special emphasis on the duty of
the state to tilt the balance of social forces by favoring the disadvantage in life. “In the
shibboleth of the 1973 Convention, those who have less in life must have more in law.”

Articles 4 and 110 of the Labor Code provide:

“All doubts in the implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in favor of labor.” (Article 4)

“In the event of bankruptcy or liquidation of an employer's business, his workers shall
enjoy first preference as regards their wages and other monetary claims, any provisions of law
to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full
before claims of the government and other creditors may be paid.” (Article 110)

2. Section 1, Article III of the Constitution simply provides for security of tenure in
relation to Article 279 of the Labor Code. It states:

“No person shall be deprived of life, liberty or property without due process of law, nor shall any
person be denied of the equal protection of laws.”

This practically deals with due process. The essence of due process is simply an
opportunity to be heard. In Asuncion v. NLRC, 362 SCRA 56 the Supreme Court has ruled that
“A worker’s employment is property in constitutional sense-he cannot be deprived of his
work without due process.”

Although the power to dismiss is a normal prerogative of the employer, the same is not
without limitations. The right of the employer must not be exercised arbitrarily and without just
cause. Otherwise, the constitutional mandate of security of tenure of the workers would be
rendered nugatory.

Under the Labor Code, there are twin requirements to justify a valid dismissal from
employment:  (a) the dismissal must be for any of the causes provided in Article 282 of the
Labor Code (substantive aspect) and (b) the employee must be given an opportunity to be

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 heard and defend himself (procedural aspect).  As to procedural aspect, two notices are
required:  (a) written notice containing a statement of the cause for termination, to afford the
employee an opportunity to be heard and defend himself with the assistance of his
representative, if he desires; and (b) if the employer decides to terminate the services of the
employee, written notice must be given to the employee stating clearly the reason
therefore. (New Ever Marketing, Inc. vs. CA, G.R. No. 140555, July 14, 2005.)                                                     

The essence of due process is simply an opportunity to be heard. (Planters

Products, Inc. v. National Labor Relations Commission, G.R. No. 78524, January 20, 1989)

3. Section 8, Article III of the Constitution provides:

The right of the people, including those employed in the public and private sectors, to
form unions, associations or societies for purpose not contrary to law shall not be abridged.

4. Section 3, Article XIII of the Constitution provides for the following:

a. Protection to labor, local and overseas, organized and unorganized and promote full
employment and equality of employment opportunities for all.

b. Guarantee of the rights of all workers to self-organization, collective bargaining and

negotiation, and peaceful and concerted activities, including the right to strike in accordance
with law.

c. Security of tenure.

d. Humane conditions of work and a living wage.

e. Participation in policy and decision-making processes affecting their rights and benefits as
maybe provided by law.

f. Promotion of the shared responsibility between workers and employers and the preferential
use of voluntary modes of settling disputes, including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace.

g. Regulation of the relations between workers and employers, recognizing the right of labor to
its just share in the fruits of production and the right of enterprises to reasonable returns on
investments, and to expansion and growth.

II. EMPLOYER-EMPLOYEE RELATIONSHIP:

1. General Application:

In the absence of specific provision in the Labor Code that defines the “employer-
employee relationship”, the Supreme Court, sets the guideline in the determination of employer-
employee relationship. The elements of the existence of an employer-employee relationship
are: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of
wages by whatever means; and (4) the power to control the workers’ conduct, with the latter
assuming primacy in the overall consideration. (Jo vs. NLRC, 324 SCRA 437)

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 The power of control refers to the existence of the power and not necessarily to the
actual exercise thereof. It is not essential, in other words, for the employer to actually supervise
the performance of duties of the employee; it is enough that the former has the right to wield
that power. (Equitable Banking Corporation v. NLRC, 273 SCRA 352)

When there is no employer-employee relationship between the parties, there could be

no cause of action for illegal dismissal and damages. (Wack Wack Golf and Country Club vs.
NLRC, G.R. No. 149793, April 15, 2005.)

2. Job Contracting and Labor Only Contracting:

The management cannot be denied the faculty of promoting efficiency and attaining
economy by a study of what units are essential for its operations- it has the ultimate
determination of whether services should be performed by its personnel or contracted to outside
agencies. (Meralco vs. Quisumbing, 326 SCRA 172)

Labor-only contracting, a prohibited act, is an arrangement where the contractor or sub-

contractor merely recruits, supplies, or places workers to perform a job, work or service for the
principal. If only documentary evidence would be required to demonstrate the existence of an
employer-employee relationship, no scheming employer would ever be brought before the bar
of justice. (Vinoya vs. NLRC, 324 SCRA 469)

Job (independent) contracting is present if the following conditions are met: (a) the
contractor carries on an independent business and undertakes the contract work on his own
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 the work except to the result thereof; and (b) the contractor has substantial capital or
investments in the form of tools, equipment, machineries, work premises and other materials
which are necessary in the conduct of his business. Absent these requisites, what exists is a
"labor only" contract under which the person acting as contractor is considered merely as an
agent or intermediary of the principal who is responsible to the workers in the same manner and
to the same extent as if they had been directly employed by him.

In labor-only contracting, an employer-employee relationship between the principal

employer and the employees of the "labor-only" contractor is created. Accordingly, the principal
employer is responsible to the employees of the "labor only" contractor as if such employees
had been directly employed by the principal employer.

Labor only contracting is prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him.

The finding that a contractor was a "labor-only" contractor is equivalent to a finding that
an employer-employee relationship existed between the owner (principal contractor) and the
"labor-only" contractor including the latter's workers. For this reason, employers shall be liable
for the damages caused by their employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in any business or industry.
(National Power Corporation vs. CA and PHESCO Incorporated, G.R. No. 119121, August 14,
1998 – Justice Romero)

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 3. Relationship between the Jeepney Operators and Drivers:

The relationship between jeepney owners/operators on the one hand and jeepney
drivers on the other under boundary system is that of employer-employee and not of lessor-
lessee. (Jardin vs. NLRC, 326 SCRA 299)

4. Distinction Between Farm Employer-Farm Worker Relationship From

Agricultural Tenancy Relationship:

Only agricultural lessees/tenants get their share of the produce after harvest. Laborers
receive wages regularly on a weekly, bi-monthly or monthly basis, depending on the number of
days they reported for work. In the case of De Los Reyes vs. Espineli, 30 SCRA 574 the
Supreme Court cited the basic difference between a farm employer-farm worker relationship
and an agricultural tenancy relationship, thus:

“Both of course, are lessees, but there the similarity ends. In the former, the lease is one
of labor, with the agricultural laborer as the lessor of the services, and the farm employer as the
lessee thereof. In the latter, it is the landowner who is the lessor, and the sharehold tenant is
the lessee of agricultural land. As lessee he has the possession of the leased premises. But the
relationship is more than a mere lease. It is a special kind of lease, the law referring to it as 'joint
undertaking.' For this reason, not only the tenancy laws are applicable, but also in a suppletory
way, the law on leases, the customs of the place and the civil code provision on partnership.
The share tenant works for the joint venture. The agricultural laborer works for the farm
employer, and for his labor he receives a salary or wage, regardless of whether the employer
makes a profit. On the other hand, the share tenant participates in the agricultural produce. His
share is necessarily dependent on the amount of the harvest.”

5. Persons Working Purely On Commission Basis:

In AFP Mutual Benefit Association, Inc. vs. NLRC and Eutiquio Bustamante, G.R. No.
102199, January 28, 1997, the Supreme Court again applied the "four-fold" test in determining
the existence of employer-employee relationship. This test considers the following elements: (1)
the power to hire; (2) the payment of wages, (3) the power to dismiss; and (4) the power to
control, the last being the most important element. Applying this “four-fold” test the Court has
ruled that:

“The significant factor in determining the relationship of the parties is the presence or
absence of supervisory authority to control the method and the details of performance of the
service being rendered, and the degree to which the principal may intervene to exercise such
control. The presence of such power of control is indicative of an employment relationship,
while absence thereof is indicative of independent contractorship. In other words, the test to
determine the existence of independent contractorship is whether one claiming to be an
independent contractor has contracted to do the work according to his own methods and
without being subject to the control of the employer except only as to the result of the work.
Such is exactly the nature of the relationship between petitioner and private respondent.

6. Relationship Between a Television and Radio Station and its Talents:

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 For the first time, on June 10, 2004, the Supreme Court has resolved the nature of
relationship between a television and radio station and one of its talents. In Jose Y. SONZA vs.
ABS-CBN Boadcasting Corporation, G.R. No. 138051, June 10, 2004, the Supreme Court
admitted that:

“Although Philippine labor laws and jurisprudence define clearly the elements of an
employer-employee relationship, this is the first time that the Court will resolve the nature of the
relationship between a television and radio station and one of its "talents." There is no case law
stating that a radio and television program host is an employee of the broadcast station.”

In finding that SONZA is not an employee but considered an independent contractor the
Supreme Court relied on Alerty-Velez case, Vaughan v. Warner case, and on the “control test”
which is the most important test our courts apply in distinguishing an employee from an
independent contractor since this test is based on the extent of control the hirer exercises over a
worker. The greater the supervision and control the hirer exercises, the more likely the worker is
deemed an employee. The converse holds true as well — the less control the hirer exercises,
the more likely the worker is considered an independent contractor.

In Vaughan, et al. v. Warner, et al., the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the
right to delete objectionable features in their shows. Since the management did not have control
over the manner of performance of the skills of the artists, it could only control the result of the
work by deleting objectionable features.

A radio broadcast specialist who works under minimal supervision is an independent

contractor. One’s work as television and radio program host required special skills and talent
and in utilizing the talent and skills does not need a greater supervision and control.

Not all rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former. The Supreme Court finds that these general rules are merely
guidelines towards the achievement of the mutually desired result, which are top-rating
television and radio programs that comply with standards of the industry. Further, not every form
of control that a party reserves to himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of establishing an employer-employee
relationship.

The Vaughan case also held that one could still be an independent contractor although
the hirer reserved certain supervision to insure the attainment of the desired result. The hirer,
however, must not deprive the one hired from performing his services according to his own
initiative. The hiring of exclusive talents is a widespread and accepted practice in the
entertainment industry. This practice is not designed to control the means and methods of work
of the talent, but simply to protect the investment of the broadcast station. The broadcast station
normally spends substantial amounts of money, time and effort "in building up its talents as well
as the programs they appear in and thus expects that said talents remain exclusive with the
station for a commensurate period of time." Normally, a much higher fee is paid to talents who
agree to work exclusively for a particular radio or television station. In short, the huge talent fees
partially compensates for exclusivity.

The right of labor to security of tenure as guaranteed in the Constitution arises only if
there is an employer-employee relationship under labor laws. Not every performance of services
for a fee creates an employer-employee relationship. To hold that every person who renders

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services to another for a fee is an employee — to give meaning to the security of tenure clause
— will lead to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer their services
as independent contractors. The right to life and livelihood guarantees this freedom to contract
as independent contractors. The right of labor to security of tenure cannot operate to deprive an
individual, possessed with special skills, expertise and talent, of his right to contract as an
independent contractor. An individual like an artist or talent has a right to render his services
without any one controlling the means and methods by which he performs his art or craft. The
Supreme Court will not interpret the right of labor to security of tenure to compel artists and
talents to render their services only as employees. If radio and television program hosts can
render their services only as employees, the station owners and managers can dictate to the
radio and television hosts what they say in their shows. This is not conducive to freedom of the
press.

III. DEFINITION OF IMPORTANT TERMS

Article 212 of the Labor Code and Department of Labor and Employment Order No. 40-
03 issued on February 17, 2003 which amended the Implementing Rules of Book V of the Labor
Code provide for the definition of the following important terms:

"Employer" includes any person acting in the interest of an employer, directly or indirectly. The
term shall not include any labor organization or any of its officers or agents except when acting
as employer.

"Employee" includes any person in the employ of an employer. The term shall not be limited to
the employees of a particular employer, unless this Code so explicitly states. It shall include any
individual whose work has ceased as a result of or in connection with any current labor dispute
or because of any unfair labor practice if he has not obtained any other substantially equivalent
and regular employment.

"Labor organization" means any union or association of employees which exists in whole or in
part for the purpose of collective bargaining or of dealing with employers concerning terms and
conditions of employment.

"Legitimate labor organization" means any labor organization duly registered with the
Department of Labor and Employment, and includes any branch or local thereof.

"Company union" means any labor organization whose information, function or administration
has been assisted by any act defined as unfair labor practice by this Code.

"Bargaining representative" means a legitimate labor organization or any officer or agent of

such organization whether or not employed by the employer.

"Unfair labor practice" means any unfair labor practice as expressly defined by this Code.

"Labor dispute" includes any controversy or matter concerning terms or conditions of

employment or the association or representation of persons in negotiating, fixing, maintaining,
changing or arranging the terms and conditions of employment, regardless of whether, the
disputants stand in the proximate relation of employer and employee.

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"Managerial employee" is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign
or discipline employees. Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment. All employees not
falling within any of the above definitions are considered rank-and-file employees for purposes
of this Book.

"Voluntary Arbitrator" means any person accredited by the Board as such, or any person named
or designated in the collective bargaining agreement by the parties to act as their voluntary
arbitrator, or one chosen, with or without the assistance of the National Conciliation and
Mediation Board, pursuant to a selection procedure agreed upon in the collective bargaining
agreement, or any official that may be authorized by the Secretary of Labor and Employment to
act as voluntary arbitrator upon the written request and agreement of the parties to a labor
dispute.

"Strike" means any temporary stoppage of work by the concerted action of employees as a
result of an industrial or labor dispute.

"Lockout" means the temporary refusal of an employer to furnish work as a result of an

industrial or labor dispute.

"Internal union dispute" includes all disputes or grievances arising from any violation of or
disagreement over any provision of the constitution and by-laws of a union, including, any
violation of the rights and conditions of union membership provided for in this Code.

"Strike-breaker" means any person who obstructs, impedes, or interferes with by force,
violence, coercion, threats or intimidation any peaceful picketing by employees during any labor
controversy affecting wages, hours or conditions of work or in the exercise of the right of self-
organization or collective bargaining.

"Strike area" means the establishment, warehouses, depots, plants or offices, including the
sites or premises used as runaway shops, of the employer struck against, as well as the
immediate vicinity actually used by picketing strikers in moving to and fro before all points of
entrance to and exit from said establishment.

"Bargaining Unit" refers to a group of employees sharing mutual interests within a given
employer unit, comprised of all or less than all of the entire body of employees in the employer
unit or any specific occupational or geographical grouping within such employer unit.

"Certification Election" or "Consent Election" refers to the process of determining

through secret ballot the sole and exclusive representative of the employees in an appropriate
bargaining unit for purposes of collective bargaining or negotiation. A certification election is
ordered by the Department, while a consent election is voluntarily agreed upon by the parties,
with or without the intervention by the Department.

"Collective Bargaining Agreement" or "CBA" refers to the contract between a legitimate

labor union and the employer concerning wages, hours of work, and all other terms and
conditions of employment in a bargaining unit.

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 "Election Proceedings" refer to the period during a certification election, consent or run-
off election and election of union officers, starting from the opening to the closing of the polls,
including the counting, tabulation and consolidation of votes, but excluding the period for the
final determination of the challenged votes and the canvass thereof.

"Exclusive Bargaining Representative" refers to a legitimate labor union duly recognized

or certified as the sole and exclusive bargaining representative or agent of all the employees in
a bargaining unit.

"Grievance" refers to any question by either the employer or the union regarding the
interpretation or implementation of any provision of the collective bargaining agreement or
interpretation or enforcement of company personnel policies.

"Improved Offer Balloting" refers to a referendum by secret ballot involving union

members on the improved offer of the employer on or before the 30th day of a strike.

"Inter-Union Dispute" refers to any conflict between and among legitimate labor unions
involving representation questions for purposes of collective bargaining or to any other conflict
or dispute between legitimate labor unions.

"Legitimate Workers' Association" refers to an association of workers organized for

mutual aid and protection of its members or for any legitimate purpose other than collective
bargaining registered with the Department in accordance with Rule III, Sections 2-C and 2-D of
these Rules.

"National Union" or "Federation" refers to a group of legitimate labor unions in a private

establishment organized for collective bargaining or for dealing with employers concerning
terms and conditions of employment for their member unions or for participating in the
formulation of social and employment policies, standards and programs, registered with the
Bureau in accordance with Rule III, Section 2-B of these Rules.

"Organized Establishment" refers to an enterprise where there exists a recognized or

certified sole and exclusive bargaining agent.

"Preventive Mediation Cases" refer to labor disputes which are the subject of a formal or
informal request for conciliation and mediation assistance sought by either or both parties or
upon the initiative of the Board.

"Rank-and-File Employee" refers to an employee whose functions are neither

managerial nor supervisory in nature.

"Related Labor Relations Dispute" refers to any conflict between a labor union and the
employer or any individual, entity or group that is not a labor union or workers' association.

"Run-off Election" refers to an election between the labor unions receiving the two (2)
highest number of votes in a certification or consent election with three (3) or more choices,
where such a certified or consent results in none of the three (3) or more choices receiving the
majority of the valid votes cast; provided that the total number of votes for all contending unions
is at least fifty percent (50%) of the number of votes cast.

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 "Strike Vote Balloting" refers to the secret balloting undertaken by the members of the
union in the bargaining unit concerned to determine whether or not to declare a strike in
meetings or referenda called for that purpose.

"Supervisory Employee" refers to an employee who, in the interest of the employer,

effectively recommends managerial actions and the exercise of such authority is not merely
routinary or clerical but requires the use of independent judgment.

"Union" refers to any labor organization in the private sector organized for collective
bargaining and for other legitimate purposes.

"Voluntary Arbitrator" refers to any person accredited by the Board as such, or any
person named or designated in the collective bargaining agreement by the parties to act as their
voluntary arbitrator, or one chosen by the parties, with or without the assistance of the Board,
pursuant to a selection procedure agreed upon in the collective bargaining agreement.

"Voluntary Recognition" refers to the process by which a legitimate labor union is

recognized by the employer as the exclusive bargaining representative or agent in a bargaining
unit, reported with the Regional Office in accordance with Rule VII, Section 2 of these Rules.
"Workers' Association" refers to an association of workers organized for the mutual aid
and protection of its members or for any legitimate purpose other than collective bargaining.

IV. THE NATIONAL LABOR RELATIONS COMMISSION:

Try to know and understand the functions of the National Labor Relations Commission,
its composition, the appointment and qualifications of the commissioners and labor arbiters.
(Articles 213-216, Labor Code)

V. JURISDICTION OF THE LABOR ARBITER AND APPELLATE JURISDICTION OF

THE NLRC:

The Labor Arbiter has original and exclusive jurisdiction on the following:

(1) Unfair labor practice cases;

(2) Termination disputes;

(3) If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of employment;

(4) Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;

(5) Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and

(6) Except claims for employees compensation, social security, medicare and
maternity benefits, all other claims arising from employer-employee relations, including those of
persons in domestic or household service involving an amount exceeding five thousand pesos
(P5,000), whether or not accompanied with a claim for reinstatement.

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 The Commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters.

Cases arising from the interpretation or implementation of collective bargaining

agreements and those arising from the interpretation or enforcement of company personnel
policies shall be disposed by the Labor Arbiter by referring the same to the grievance machinery
and voluntary arbitration as may be provided in said agreements.

Presently, and as amended by R.A. 6715, the jurisdiction of Labor Arbiters and the NLRC in
Article 217 is comprehensive enough to include claims for all forms of damages “arising from
the employer-employee relations. Article 217 should apply with equal force to the claim of an
employer for actual damages against its dismissed employee, where the basis for the claim
arises from or is necessarily connected with the fact of termination, and should be entered as a
counterclaim in the illegal dismissal case. Article 217 (a) of the Labor Code as amended,
clearly bestows upon the Labor Arbiter original and exclusive jurisdiction over claims for
damages arising from employer-employee relations – other words, the Labor Arbiter has
jurisdiction to award not only the reliefs provided by labor laws, but also damages governed by
the Civil Code. (Bebiano M. Banes versus Hon. Downey C. Valdevilla, 331 SCRA 584) A rule
that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite
is that the jurisdiction of a court over the subject matter of the action is a matter of law and may
not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may
be raised at any stage of the proceedings, even on appeal. It is neither fair nor legal to bind a
party by the result of a suit or proceeding which was taken cognizance of in a court which lacks
jurisdiction over the same irrespective of the attendant circumstances. (Norma Maligalig et al.
vs. Hon. Edelwina Catubig Pastoral et al., G.R. No. 143951, October 25, 2005.) In Bañez v.
Valdevilla, the Supreme Court held: Presently, and as amended by R.A. 6715, the jurisdiction of
Labor Arbiters and the NLRC in Article 217 is comprehensive enough to include claims for all
forms of damages "arising from the employer-employee relations." Whereas the Supreme Court
in a number of occasions had applied the jurisdictional provisions of Article 217 to claims of
damages filed by employees, it held by the designating clause "arising from the employer-
employee relations" Article 217 should apply with equal force to the claim of an employer for
actual damages against its dismissed employee, where the basis for the claim arises from or is
necessarily connected with the fact of termination, and should be entered as a counterclaim in
the illegal dismissal case. Bañez case is in accord with paragraph 6 of Article 217(a), which
covers "all other claims, arising from employer-employee relations," viz: “6.Except claims for
Employees Compensation, Social Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement. Claim for illegal dismissal and prayer for
reinstatement, payment of full backwages inclusive of allowances, 14th month pay, sick and
vacation leaves, share in the profits, moral and exemplary damages and attorney's fees are
causes of action clearly fall within the jurisdiction of the Labor Arbiter, specifically under
paragraphs 2, 3 and 4 of Article 217(a). (Roberto T. Domondon vs. NLRC and Van Melle
Phils., Inc., G.R. No. 154376, September 30, 2005.)

Under the prevailing law, jurisdiction over claims arising out of any law or contract involving
overseas Filipino workers, whether land-based or sea-based, is now vested in the NLRC,
pursuant to Section 10 of Republic Act No. 8042, otherwise known as the “Migrant Workers and
Overseas Filipinos Act of 1995,” which took effect on July 15, 1995.  (Norma Hermogenes vs.
Osco Shipping Services, Inc., G.R. 141505, Aug. 18, 2005)

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 VII. POWER OF THE NLRC:

Take note of the provisions of Articles 218, 219 and 220.

VIII. TECHNICAL RULES NOT BINDING AND PRIOR RESORT TO AMICABLE

SETTLEMENT:

ARTICLE 221 of the Labor Code provides:

“In any proceeding before the Commission or any of the Labor Arbiters, the rules of
evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and
intention of this Code that the Commission and its members and the Labor Arbiters shall use
every and all reasonable means to ascertain the facts in each case speedily and objectively and
without regard to technicalities of law or procedure, all in the interest of due process. In any
proceeding before the Commission or any Labor Arbiter, the parties may be represented by
legal counsel but it shall be the duty of the Chairman, any Presiding Commissioner or
Commissioner or any Labor Arbiter to exercise complete control of the proceedings at all
stages.
“Any provision of law to the contrary notwithstanding, the Labor Arbiter shall exert all
efforts towards the amicable settlement of a labor dispute within his jurisdiction on or before the
first hearing. The same rule shall apply to the Commission in the exercise of its original
jurisdiction.”

The NLRC, like the Labor Arbiter, is authorized to decide cases based on the position papers
and other documents, without resorting to technical rules of evidence. (Sevillana v. I.T.
(International) Corporation, 356 SCRA 451)

In resolving the case of PATERNO S. MENDOZA, JR. vs. SAN MIGUEL FOODS, INC. and
INSTAFOOD CORPORATION OF THE PHILIPPINES, G.R. No. 158684, May 16, 2005, the
Supreme Court relied on Article 221 of the Labor Code when it ruled that the Court of Appeals
correctly ruled that the NLRC did not commit grave abuse of its discretion in considering the
position paper of the respondents and its appendages in resolving the latter's appeal. Indeed,
the NLRC merely acted in accord with Article 221 of the Labor Code of the Philippines.

As the Supreme Court held in Megascope General Services v. NLRC: “As regards petitioner's
contention that a hearing has to be conducted to fully ventilate the issues in the case, suffice it
to state that nonverbal devices such as written explanations, affidavits, position papers or other
pleadings can establish just as clearly and concisely an aggrieved party's defenses. Petitioner
was amply provided with the opportunity to present evidence that private respondents were not
its employees. Indeed, it was petitioner's failure to present substantial evidence to buttress its
claims that worked to its disadvantage and not the absence of a full-blown hearing before the
public respondent.”

While it is correct to say that quitclaims are commonly frowned upon for being contrary to public
policy, there are, however, legitimate waivers that represent a voluntary and reasonable
settlement of a worker's claim which should be respected by the courts as the law between the
parties. Where the person making the waiver has done so voluntarily, with a full understanding
thereof, and the consideration for the quitclaim is credible and reasonable, the transaction must
be recognized as being a valid and binding undertaking. Not all quitclaims are per se invalid or

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against policy, except (1) where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or (2) where the terms of settlement are unconscionable on
their face; in these cases, the law will step in to annul the questionable transaction.

In Land and Housing Development Corporation et al. vs. Margarito C. Esquillo, G.R. No.
152012, September 30, 2005, the Supreme Court has ruled that:

“Quitclaims, releases and other waivers of benefits granted by laws or contracts in favor of
workers should be strictly scrutinized to protect the weak and the disadvantaged.  The waivers
should be carefully examined, in regard not only to the words and terms used, but also the
factual circumstances under which they have been executed.

“The fact that employees have signed a release and/or quitclaim does not necessarily result in
the waiver of their claims.  The law strictly scrutinizes agreements in which workers agree to
receive less compensation than what they are legally entitled to.  That document does not
always bar them from demanding benefits to which they are legally entitled. The reason for this
policy was explained, inter alia, in Marcos v. National Labor Relations Commission, which we
quote:
 
“We have heretofore explained that the reason why quitclaims are commonly frowned upon as
contrary to public policy, and why they are held to be ineffective to bar claims for the full
measure of the workers’ legal rights, is the fact that the employer and the employee obviously
do not stand on the same footing.  The employer drove the employee to the wall.  The latter
must have to get hold of money.  Because, out of a job, he had to face the harsh necessities of
life.  He thus found himself in no position to resist money proffered.  His, then, is a case of
adherence, not of choice.  One thing sure, however, is that petitioners did not relent on their
claim.  They pressed it.  They are deemed not [to] have waived any of their rights.

“We have pointed out in Veloso, et al. vs. Department of Labor and Employment, et al., that:
 
‘While rights may be waived, the same must not be contrary to law, public order, public policy,
morals or good customs or prejudicial to a third person with a right recognized by law.
 
‘Article 6 of the Civil Code renders a quitclaim agreement void ab initio where the quitclaim
obligates the workers concerned to forego their benefits while at the same time exempting the
employer from any liability that it may choose to reject.  This runs counter to Art. 22 of the Civil
Code which provides that no one shall be unjustly enriched at the expense of another.’”
 
 “In Periquet v. NLRC, this Court set the guidelines and the current doctrinal policy regarding
quitclaims and waivers, as follows:
 
“Not all waivers and quitclaims are invalid as against public policy.  If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the parties and
may not later be disowned simply because of a change of mind.  It is only where there is clear
proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of
settlement are unconscionable on its face, that the law will step in to annul the questionable
transaction.  But where it is shown that the person making the waiver did so voluntarily, with full
understanding of what he was doing, and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as a valid and binding undertaking.”
 

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“Hence, quitclaims in which employees voluntarily accept a reasonable amount or consideration
as settlement are deemed valid. These agreements cannot be set aside merely because the
parties have subsequently changed their minds.  Consistent with this doctrine, a tribunal has the
duty of scrutinizing quitclaims brought to its attention by either party, in order to determine their
validity. 

“To stress, “in case of doubt, laws should be interpreted to favor the working class -- whether in
the government or in the private sector -- in order to give flesh and vigor to the pro-poor and
pro-labor provisions of our Constitution.”
 
IX. APPEAL:

Article 223 of the Labor Code provides for the grounds and procedure of appeal.

a. The appeal to the NLRC must be made within ten (10) calendar days from receipt of
such decisions, awards, or orders of the Labor Arbiter.

b. The grounds of the appeal are:

- Prima facie evidence of abuse of discretion on the part of the Labor Arbiter;
- The decision, order or award was secured through fraud or coercion, including graft and
corruption;
- Purely on questions of law; and
- Serious errors in the findings of facts are raised which would cause grave or irreparable
damage or injury to the appellant.

c. Requirements for perfection of appeal:

- In case of a judgment involving a monetary award, posting of a cash or surety bond issued by
a reputable bonding company duly accredited by the Commission in the amount equivalent to
the monetary award in the judgment appealed from.
- Filing of memorandum on appeal within ten (10) days. - Payment of appeal fee.

d. Reinstatement aspect:

Insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending
appeal. The employee shall either be admitted back to work under the same terms and
conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely
reinstated in the payroll.

e. The appellant shall furnish the appellee with the copy of the memorandum on appeal
and the latter has ten (10) days to answer.

f. On the Perfection of Appeal:

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Sections 4(a) and 6 of Rule VI of the NLRC Rules of Procedure, as amended by Resolution No.
01-02, Series of 2002, provides the requisites for perfection of appeal.

In case of surety bond, the same shall be issued by a reputable bonding company duly
accredited by the Commission or the Supreme Court, and shall be accompanied by:

a)  a joint declaration under oath by the employer, his counsel, and the bonding
company, attesting that the surety bond posted is genuine, and shall be in effect until final
disposition of the case;
b)  a copy of the indemnity agreement between the employer-appellant and bonding
company; and
 
c)  a copy of security deposit or collateral securing the bond.  
 
A certified true copy of the bond shall be furnished by the appellant to the appellee who shall
verify the regularity and genuineness thereof and immediately report to the Commission any
irregularity.
 
Upon verification by the Commission that the bond is irregular or not genuine, the Commission
shall cause the immediate dismissal of the appeal.
 
No motion to reduce bond shall be entertained except on meritorious grounds and upon the
posting of a bond in a reasonable amount in relation to the monetary award.
 
The filing of the motion to reduce bond without compliance with the requisites in the preceding
paragraph shall not stop the running of the period to perfect an appeal.
 
 
The necessary import of the foregoing sections, as the Supreme Court held in Imperial Textile
Mills, Inc. vs. NLRC, is that “the perfection of an appeal in the manner and within the period
prescribed by law is not only mandatory but jurisdictional, and failure to conform to the rules will
render the judgment sought to be reviewed final and unappealable.” (Philippine Scout Veterans
Security and Investigation Agency vs. Jose Pascua, G.R. No. 154002, Aug. 19, 2005.)

Art. 223 of the Labor Code provides that in case of a judgment involving a monetary award, an
appeal by the employer may be perfected only upon the posting of a cash or surety bond issued
by a reputable bonding company duly accredited by the Commission in the amount equivalent
to the monetary award.  We have ruled that the word only makes it perfectly clear that the
lawmakers intended that the posting of the bond is the exclusive means by which an employer’s
appeal may be perfected.  The filing of a supersedeas bond, which is actually a security
required from an appellant to ensure payment of the adjudged monetary award in case the
appeal fails, is indispensable to the perfection of the appeal.  The posting of a cash or surety
bond for the perfection of an appeal is jurisdictional, without which the NLRC does not have the
authority to review and revise the judgment of the labor arbiter.

As a general rule, non-compliance with this legal requirement is fatal and has the effect of
rendering the appealed judgment final and executory.  In some cases, however, the Supreme
Court relaxed the requirement of posting a supersedeas bond for the perfection of an appeal. 

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The decisions in these exceptional cases were justified by the fact that there was substantial
compliance with the rule.

In Your Bus Lines vs. NLRC, the Court excused the appellant for its failure to post the bond
because it relied on the notice of the decision which, while stating the requirements for
perfecting an appeal, did not mention that a bond must be filed.  In Blancaflor vs. NLRC, it was
noted that the failure of appellant to post a bond was in part due to the failure of the Labor
Arbiter to state the exact amount of back wages and separation pay due; thus, no basis exists
for the computation of the amount of the bond to be filed.  In Cabalan Pastulan Negrito Labor
Association vs. NLRC, the Court granted petitioner-appellant’s plea to give due course to its
appeal despite non-posting of a supersedeas bond on account of its insolvency and poverty. 
Petitioner-appellant is an association of Negritos performing trash sorting services in the
American naval base in Subic Bay.  Further, the existence of an employer-employee
relationship between petitioner-appellant and private respondent was not established.  In
UERM-Memorial Medical Center vs. NLRC, the appellant-employer was allowed to post a
property bond in lieu of a cash or surety bond.  In this case, the judgment involved more than
P17M and its precipitate execution could adversely affect the existence of the employer medical
center. It also appeared that the real property bond was worth more than P102M, hence, the
posting of a real property bond was sufficient compliance with the requirements of Art. 223.

The NLRC Rules state that in cases where the decision of the labor arbiter involves a monetary
award, an appeal by the employer shall be perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the NLRC or by the Supreme
Court in an amount equivalent to the monetary award, exclusive of moral and exemplary
damages and attorney’s fees. The obvious purpose of an appeal bond is to ensure, during the
period of appeal, against any occurrence that would defeat or diminish recovery by the
aggrieved employees under the judgment if subsequently affirmed. In Biogenerics Marketing
and Research Corp. vs. NLRC, the NLRC, upon motion of the appellant to reduce the appeal
bond, ordered appellant to post an additional cash or surety bond in the amount of
P1,950,000.00.  It found no justification for a substantial reduction of the bond.  Appellant
initially posted a cash bond of P50,000.00 for a monetary award totaling P2,200,000.00.  The
NLRC, as well as the Supreme Court rejected the additional “bond” filed by appellant which was
denominated as an “Irrevocable Bank Guarantee” in the amount of P1,950,000.00 and entered
into by and between appellant and Hongkong and Shanghai Banking Corporation Limited.  It
was held that the bank guarantee cannot be a substitute for the cash or surety bond
contemplated under Article 223 of the Labor Code.

The right to appeal is a statutory right.  A party who wants to avail of it must comply with the
requirements set by the law.  Rules of Procedure exist for a purpose, and to disregard such
rules in the guise of liberal construction would be to defeat such purpose. (Emma Cordova et al.
vs. Keysa’s Boutique et al., G.R. No. 156379, September 16, 2005)

The NLRC Rules, akin to the Rules of Court, promulgated by authority of law, have the force
and effect of law; and such NLRC rules prescribing the time within which certain acts must be
done, or certain proceedings taken, are considered absolutely indispensable to the prevention
of needless delays and to the orderly and speedy discharge of judicial business. Thus, the
appeal must be perfected in the manner and within the period permitted by law and failure to do
so renders the judgment of the Labor Arbiter final and executory. (Corporate Inn Hotel vs.
Jennevie H. Lizo, G.R. No. 148279. May 27, 2004.)

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Article 223 of the Labor Code, as amended, is explicit that "an appeal by the employer may be
perfected only upon the posting of a cash or surety bond". As the Supreme Court said in Viron
Garments Manufacturing Co., Inc. vs NLRC: “The intention of the lawmakers to make the bond
an indispensable requisite for the perfection of an appeal by the employer is clearly limned in
the provision that an appeal by the employer may be perfected "only upon the posting of a cash
or surety bond". The word 'only' makes it perfectly clear, that the lawmakers intended that the
posting of a cash or surety bond by the employer to be the exclusive means by which an
employer's appeal may be perfected. The non-payment of the appeal bond within the ten-day
period provided for by law follows that the judgment of the labor arbiter has passed to the realm
of finality. The right to appeal is merely statutory and one who seeks to avail of it must comply
with the statute or rules. The requirements for perfecting an appeal within the reglementary
period specified in the law must be strictly followed as they are considered indispensable
interdictions against needless delays. (Mary Abigails Food Services, Inc. vs. CA, G.R. No.
140294. May 9, 2005.)

While the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to
the perfection of an appeal, there is a plethora of jurisprudence recognizing exceptional
instances wherein the Court relaxed the bond requirement as a condition for perfecting the
appeal. Thus, while the requirements for perfecting an appeal must be strictly followed as they
are considered indispensable interdictions against needless delays and for orderly discharge of
judicial business, the law does admit of exceptions when warranted by the circumstances. It is
correct to say that technicality should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties but while the Court may relax the
observance of reglementary periods and technical rules to achieve substantial justice, it should
not give due course to any petition and make a pronouncement on the weighty issue until the
law has been duly complied with and the requisite appeal bond duly paid. (Orozco vs. CA G.R.
No. 155207, April 29, 2005.)

If there was no appeal bond filed together with the Appeal Memorandum within the ten (10)-day
period provided by law for the perfection of appeal, it follows that no appeal from the decision of
the Labor Arbiter had been perfected. Accordingly, the Decision of the Labor Arbiter became
final and executory upon the expiration of the reglementary period. (Borja Estate vs. Spouses
Rotillo Ballad and Rosita Ballad, G.R. No. 152550, June 8, 2005.)

g. Technicalities and Relaxation of Rules:

While it is true that this Court has relaxed the application of the rules on appeal in labor cases, it
has only done so where the failure to comply with the requirements for perfection of appeal was
justified or where there was substantial compliance with the rules. Hence, the Supreme Court
has allowed tardy appeals in judicious cases, e.g., where the presence of any justifying
circumstance recognized by law, such as fraud, accident, mistake or excusable negligence,
properly vested the judge with discretion to approve or admit an appeal filed out of time; where
on equitable grounds, a belated appeal was allowed as the questioned decision was served
directly upon petitioner instead of her counsel of record who at the time was already dead.

The period to appeal is strictly not extendible. When the last day falls on Saturday, appeal
maybe filed on Monday if the latter day is not holiday. An appeal filed one day late was allowed
because the appellant was able to show that on the last day to appeal there was a typhoon and
the post office was closed. (Surigao del Norte Electric Cooperative vs. NLRC, 309 SCRA 233)

16
While the Supreme Court may have sidestepped the rule on the statutory or reglementary
period for filing an appeal, yet, it emphasized this caveat: "we cannot respond with alacrity to
every clamor of injustice and bend the rules to placate a vociferous protestor crying and
claiming to be a victim of a wrong. It is only in highly meritorious cases that this Court opts not to
strictly apply the rules and thus prevent a grave injustice from being done."

The National Labor Relations Commission is not precluded from receiving evidence on appeal,
provided that there was plausible reason for the delay in their submission. (Favila vs. National
Labor Relations Commission, 308 SCRA 303.) But evidence on appeal will be rejected if the
party cannot show a valid reason why the evidence was not presented below. A party has no
right to present evidence at any stage of the proceedings. He is mandated to observe the rules
of procedure and to show that he has exercised due diligence and effort to comply with the
same before he can claim denial of due process. (Villa v. NLRC, 303 SCRA 481)

The policy of our judicial system is to encourage full adjudication of the merits of an appeal. In
the exercise of its equity jurisdiction, this Court may reverse the dismissal of appeals that are
grounded merely on technicalities. Moreover, procedural niceties should be avoided in labor
cases in which the provisions of the Rules of Court are applied only in suppletory manner.
Indeed, rules of procedure may be relaxed to relieve a part of an injustice not commensurate
with the degree of noncompliance with the process required. (Garcia vs. PAL, Inc., G.R. No.
160798, June 8, 2005.)

h. Remedies Available When NLRC Decided the Appealed Case:

The power of the CA to review NLRC decisions via a Rule 65 petition is now a settled issue. As
early as St. Martin Funeral Homes v. NLRC, the Supreme Court definitively ruled that the
proper remedy to ask for the review of a decision of the NLRC is a special civil action for
certiorari under Rule 65 of the Rules of Court, and that such petition should be filed with the CA
in strict observance of the doctrine on the hierarchy of courts. Moreover, it has already been
explained that under Section 9 of Batas Pambansa (BP) 129, as amended by Republic Act
7902, the CA — pursuant to the exercise of its original jurisdiction over petitions for certiorari —
was specifically given the power to pass upon the evidence, if and when necessary, to resolve
factual issues.

Likewise settled is the rule that when supported by substantial evidence, factual findings made
by quasi-judicial and administrative bodies are accorded great respect and even finality by the
courts. These findings are not infallible, though; when there is a showing that they were arrived
at arbitrarily or in disregard of the evidence on record, they may be examined by the courts.
Hence, when factual findings of the NLRC are contrary to those of the labor arbiter, the
evidentiary facts may be reviewed by the appellate court.

The Supreme Court asserted the power to pass upon the decisions and discretionary acts of the
NLRC as well as the Secretary of Labor in the face of the contention that no judicial review is
provided by the Labor Code. (National Federation of Labor (NFL) vs. Laguesma, 304 SCRA
405.) The implementing Rules of National Labor Relations Commission are unequivocal in
requiring that a motion for reconsideration of the order, resolution or decision of the Commission
should be seasonably filed as a precondition for pursuing any further or subsequent recourse,
otherwise, the order, resolution or decision would become final and executory after ten (10)
calendar days from receipt thereof.” (Biogenerics Marketing and Research Corporation vs.
NLRC, 313 SCRA 748) A second motion for reconsideration is a prohibited pleading. (Jardin v.

17
NLRC, G. R. 119268, Jan. 23, 2000) However, a second motion for reconsideration maybe filed
on the decision of the NLRC to correct “patent” errors. (Ramos v. NLRC, 296 SCRA 225)

There are three material dates that must be stated in a petition for certiorari brought under Rule
65. First, the date when notice of the judgment or final order or resolution was received; second,
the date when a motion for new trial or for reconsideration when one such was filed; and third,
the date when notice of the denial thereof was received. (Rebecca Gutierez vs. The Secretary
of the DOLE, G.R. No. 142248, December 16, 2004.)

A petition for certiorari must be based on jurisdictional grounds because, as long as the
respondent court acted within its jurisdiction, any error committed by it will amount to nothing
more than an error of judgment which may be corrected or reviewed only by appeal. (Tomas
Claudio vs. CA, G.R. No. 152568, February 16, 2004.)

Factual findings of labor officials who are deemed to have acquired expertise in matters within
their respective jurisdiction are generally accorded not only respect but even finality and bind
the Supreme Court when supported by substantial evidence.”(Associated Labor Unions-TUCP
vs. National Labor Relations Commission, 302 SCRA 708 and C. Planas Commercial vs.
National Labor Relations Commission, 303 SCRA 49.) However, in the case of Anflo Mgt.
versus Rodolfo Bolanio, G.R. NO. 141608, October 4, 2002, the Court likewise ruled that: “We
must emphasize that while the findings of fact of the NLRC are generally accorded not only
respect but also, at times, even the stamp of finality, the rule is equally settled that this Court will
not uphold erroneous conclusions of the NLRC if the Court finds that it committed grave abuse
of discretion or if the NLRC’s findings of fact on which its conclusions are based are not
supported by substantial evidence. Substantial evidence, which is the quantum of evidence
required to establish a fact in cases before administrative or quasi-judicial bodies, is that level of
relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.”
But in Libres vs. National Labor Relations Commission, 307 SCRA 675 the Court has ruled that:
“Resort to judicial review of the decision of the National Labor Relations Commission under
Rule 65 of the Rules of Court does not include an inquiry on the correctness on the evaluation
of evidence.”
In certiorari proceedings, judicial review does not go as far as to examine and assess the
evidence of the parties and to weigh the probative value thereof. Such questions are proper only
in an ordinary appeal either by writ of error from the judgment or final order of the trial court, or a
petition for review under Rule 43 of the Rules of Court from a decision or final order of a quasi-
judicial body. Indeed, a certiorari proceeding is limited in scope and narrow in character.
However, in Ong v. People, the Supreme Court ruled that certiorari can be properly resorted to
where the factual findings complained of are not supported by the evidence on record. In Gutib
v. Court of Appeals, the Court emphasized: “[I]t has been said that a wide breadth of discretion
is granted a court of justice in certiorari proceedings. The cases in which certiorari will issue
cannot be defined, because to do so would be to destroy its comprehensiveness and
usefulness. So wide is the discretion of the court that authority is not wanting to show that
certiorari is more discretionary than either prohibition or mandamus. In the exercise of our
superintending control over inferior courts, we are to be guided by all the circumstances of each
particular case "as the ends of justice may require." So it is that the writ will be granted where
necessary to prevent a substantial wrong or to do substantial justice.” (Adam Garcia vs. NLRC,
G.R. No. 147427, February 7, 2005.)

i. Reinstatement Aspect of the Decision of Labor Arbiter:

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 The reinstatement aspect of the Labor Arbiter’s decision is now self-executory. The
employer must notify the Labor Arbiter and the employee his option to reinstate actually or in the
payroll seasonably. (Pioneer Texturizing Corp. vs. NLRC, 280 SCRA 806)

X. EXECUTION:

Article 224 of the Labor Code is about the Execution of decisions, orders, or awards of
the Secretary of Labor and Employment or any Regional Director, the Commission or any Labor
Arbiter, or med-arbiter, or voluntary arbitrator.

A writ of execution cannot alter or vary the terms of the dispositve portion of a final and
executory decision even if there appears to be a mistake. Where the dispositive portion does
not indicate that the liability of the several respondents is “solidary”, said liability should be
considered “joint”. (INIMACO v. NLRC, G.R. 101723, May 11, 2000) Execution of money
judgment against a corporation may be stayed if the corporation has been placed under
rehabilitation or receivership. Once liquidation is directed, the claims must be filed with the
liquidator. (Alemar’s v. NLRC, G.R. No. 100518, Jan. 24, 2000)

Once a case is decided with finality, the controversy is settled and the matter is laid to rest. The
prevailing party is entitled to enjoy the fruits of his victory while the other party is obliged to
respect the court’s verdict and to comply with it. In Sacdalan v. Court of Appeals the Supreme
Court ruled:

“…well-settled is the principle that a decision that has acquired finality becomes immutable and
unalterable and may no longer be modified in any respect even if the modification is meant to
correct erroneous conclusions of fact or law and whether it will be made by the court that
rendered it or by the highest court of the land.” 

The reason for this is that litigation must end and terminate sometime and somewhere, and it is
essential to an effective and efficient administration of justice that, once a judgment has become
final, the winning party be not deprived of the fruits of the verdict. Courts must guard against any
scheme calculated to bring about that result and must frown upon any attempt to prolong the
controversies. The only exceptions to the general rule are the correction of clerical errors, the
so-called nunc pro tunc entries which cause no prejudice to any party, void judgments, and
whenever circumstances transpire after the finality of the decision rendering its execution unjust
and inequitable. (Mariano Y. Siy vs. NLRC, G. R. No. 158971, Aug. 25, 2005.) 

XI. CONTEMPT POWER OF THE SECRETARY OF LABOR:

Article 225 of the Labor Code grants the Secretary of Labor and employment contempt
powers and may hold any person in direct or direct and impose the appropriate penalties
therefor.

XII. THE BUREAU OF LABOR RELATIONS AND LABOR RELATIONS DIVISION:

1. The Bureau of Labor Relations and the Labor Relations Division in the regional offices of the
Department of Labor shall have original and exclusive authority to act, at their own initiative or
upon request of either or both parties, on all inter-union and intra-union conflicts, and all
disputes, grievances or problems arising from or affecting labor-management relations in all

19
workplaces whether agricultural or non-agricultural, except those arising from the
implementation or interpretation of collective bargaining agreements which shall be the subject
of grievance procedure and/or voluntary arbitration.

The Bureau shall have fifteen (15) calendar days to act on labor cases before it, subject to
extension by agreement of the parties.

The authority of the BLR in assuming jurisdiction over a certification election, or any inter-union
or intra-union conflicts, is found in Article 226 of the Labor Code of the Philippines. It is
quite clear from this provision that BLR has the original and exclusive jurisdiction on all inter-
union and intra-union conflicts. An intra-union conflict would refer to a conflict within or inside a
labor union, and an inter-union controversy or dispute, one occurring or carried on between or
among unions. The election of the officers and members of the board of the union is, clearly, an
intra-union conflict, being within or inside a labor union. It is well within the powers of the BLR to
act upon. Executive Order No. 180 (1987), particularly Section 16 thereof, is completely lucid as
to the settlement of disputes involving government employees, viz: SEC. 16. The Civil
Service and labor laws and procedures, whenever applicable, shall be followed in the resolution
of complaints, grievances and cases involving government employees.

Since Article 226 of the Labor Code has declared that the BLR shall have original and exclusive
authority to act on all inter-union and intra-union conflicts, then there should be no more doubt
as to its jurisdiction. (GENARO BAUTISTA vs. CA, G.R. No. 123375, February 28, 2005.)

The appellate jurisdiction of the Secretary of Labor and Employment is limited only to a review
of cancellation proceedings decided by the Bureau of Labor Relations in the exercise of its
exclusive and original jurisdiction. The Secretary of Labor and Employment has no jurisdiction
over decisions of the Bureau of Labor Relations rendered in the exercise of its appellate power
to review the decision of the Regional Director in a petition to cancel the union’s certificate of
registration, said decisions being final and inappealable. (Abbot Laboratories Philippines, Inc.
vs. Abbot Laboratories Employees Union, 323 SCRA 392)

2. Any compromise settlement, including those involving labor standard laws, voluntarily agreed
upon by the parties with the assistance of the Bureau or the regional office of the Department of
Labor, shall be final and binding upon the parties. The National Labor Relations Commission or
any court shall not assume jurisdiction over issues involved therein except in case of non-
compliance thereof or if there is prima facie evidence that the settlement was obtained through
fraud, misrepresentation, or coercion. (Article 227)

A waiver or quitclaim is a valid and binding agreement between the parties, provided that it
constitutes a credible and reasonable settlement and the one accomplishing it has done so
voluntarily and with a full understanding of its import.   As the waivers and quitclaims executed
by individual respondents who had been given their separation pay were duly notarized, the
certificate of acknowledgement in each of them serves as prima facie evidence of their due
execution. Not one of individual respondents who executed the waivers or quitclaims has come
forward to challenge the reasonableness of the settlement and/or voluntariness of the execution
of the documents. (Alabang Country Club Inc. et al. vs. NLRC et al., G.R. No. 157611, August
9, 2005)
 
Rights may be waived through a compromise agreement, notwithstanding a final judgment that
has already settled the rights of the contracting parties. To be binding, the compromise must be
shown to have been voluntarily, freely and intelligently executed by the parties, who had full

20
knowledge of the judgment. Furthermore, it must not be contrary to law, morals, good customs
and public policy. (Felipe O. vs. Rizalino Uy, G.R. No. 161003, May 6, 2005.)
         
3. There is no more endorsement of cases from Regional Director of the DOLE to the Labor
Arbiter as previously provided in Article 228. If the Regional Director has no jurisdiction over the
dispute, he will advise the complainant to file the necessary complaint with the Labor Arbiter.

4. The Bureau shall keep a registry of legitimate labor organizations and file of Collective
Bargaining Agreements and other related agreements and records of settlement of labor
disputes, and copies of orders, and decisions of voluntary arbitrators. (Article 231)

Within thirty (30) days from the execution of a Collective Bargaining Agreement, the parties shall
submit copies of the same directly to the Bureau or the Regional Offices of the Department of
Labor and Employment for registration accompanied with verified proofs of its posting in two
conspicuous places in the place of work and ratification by the majority of all the workers in the
bargaining unit. The Bureau or Regional Offices shall act upon the application for registration of
such Collective Bargaining Agreement within five (5) days from its submission.

The Bureau shall also maintain a file, and shall undertake or assist in the publication, of all final
decisions, orders and awards of the Secretary of Labor and Employment, Regional Directors
and the Commission.

The Bureau shall not entertain any petition for certification election or any other action which
may disturb the administration of existing collective bargaining agreements affecting the parties
except under Articles 253, 253-A and 256 of this Code. (These exception pertain to the freedom
period which is sixty days before the expiration of the CBA)

XIII. LABOR ORGANIZATIONS-REGISTRATION AND CANCELLATION:

1. The legal personality of the labor organization, association or of unions or workers is acquired
upon the issuance of certificate of registration.

2. The requirements for registration are as follows:

(a) Fifty-pesos (P50.00) registration fee;

(b) The names of its officers, their addressees, the principal address of the labor
organization, the minutes of the organizational meetings and the list of the workers who
participated in such meetings;
(c) The names of all its members comprising at least twenty percent (20%) of all the
employees in the bargaining unit where it seeks to operate;
(d) If the applicant union has been in existence for one or more years, copies of its annual
financial reports; and
(e) Four (4) copies of the constitution and by-laws of the applicant union, minutes of its
adoption or ratification, and the list of the members who participated in it.

3. All requisite documents and papers shall be certified under oath by the secretary or the
treasurer of the organization, as the case may be, and attested to by its president. The Bureau
shall act on all applications for registration within thirty (30) days from filing. The applicant union
has 10 days to appeal the denial of application.

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4. If the applicant for registration is a federation or a national union, it shall, in addition to the
requirements of the preceding Articles submit the following:

(a) Proof of the affiliation of at least ten (10) locals or chapters, each of which must be a
duly recognized collective bargaining agent in the establishment or industry in which it operates,
supporting the registration of such applicant federation or national union; and
(b) The names and addresses of the companies where the locals or chapters operate and
the list of all the members in each company involved.

5. The federation or national union which meets the requirements and conditions herein
prescribed may organize the affiliate locals and chapters without registering such locals or
chapters with the Bureau. Locals or chapters shall have the same rights and privileges as if they
were registered in the Bureau, provided that such federation or national union organizes such
locals or chapters within its assigned organizational field of activity as may be prescribed by the
Secretary of Labor.

6. The Bureau shall see to it that federations and national unions shall only organize locals and
chapters within a specific industry or region.

7. The certificate of registration of any legitimate labor organization, whether national or local,
shall be cancelled by the Bureau if it has reason to believe, after due hearing, that the said labor
organization no longer meets one or more of the requirements herein prescribed. (Article 238) It
is very important for you to be prepared on grounds for cancellation of union registration.

XIV. RIGHTS AND CONDITIONS OF MEMBERSHIP

1. The rights and conditions of membership in a labor organization are provided in Article 241
of the Labor Code.

2. The members of the union shall directly elect their officers in the local union, as well as the
national officers in the national union of federation to which they or their local union is affiliated,
by secret ballot at intervals of five (5) years.

3. Any action involving the funds of the organization shall prescribe after three (3) years from
the date of submission of the annual financial report to the Department of Labor and
Employment or from the date the same should have been submitted as required by law,
whichever comes earlier.

Any violation of the above rights and conditions of membership shall be a ground for
cancellation of union registration or expulsion of an officer from office, whichever is appropriate.
At least thirty percent (30%) of all the members of a union or any member or members
specifically concerned may report such violation to the Bureau. The Bureau shall have the
power to hear and decide any reported violation to mete the appropriate penalty. Criminal and
civil liabilities arising from violations of the above rights and conditions of membership shall
continue to be under the jurisdiction of ordinary courts.

In ERNESTO C. VERCELES ET AL., petitioners, vs. BUREAU OF LABOR RELATIONS-

DEPARTMENT OF LABOR AND EMPLOYMENT ET AL., respondents. G. R. No. 152322,
February 15, 2005, the Supreme Court has ruled that:

22
“On the matter concerning the 30% support requirement needed to report violations of rights
and conditions of union membership, as found in the last paragraph of Article 241 of the Labor
Code, must be strictly observed.

The Supreme Court had already made its pronouncement in the case of Rodriguez v. Director,
Bureau of Labor Relations that the 30% requirement is not mandatory. In this case, the Court,
speaking through Chief Justice Andres R. Narvasa, held in part:

“The respondent Director's ruling, however, that the assent of 30% of the union membership,
mentioned in Article 242 of the Labor Code, was mandatory and essential to the filing of a
complaint for any violation of rights and conditions of membership in a labor organization (such
as the arbitrary and oppressive increase of union dues here complained of), cannot be affirmed
and will be reversed. The very article relied upon militates against the proposition. It states that
a report of a violation of rights and conditions of membership in a labor organization may be
made by "(a)t least thirty percent (30%) of all the members of a union or any member or
members specially concerned." The use of the permissive "may" in the provision at once
negates the notion that the assent of 30% of all the members is mandatory. More decisive is the
fact that the provision expressly declares that the report may be made, alternatively by "any
member or members specially concerned." And further confirmation that the assent of 30% of
the union members is not a factor in the acquisition of jurisdiction by the Bureau of Labor
Relations is furnished by Article 226 of the same Labor Code, which grants original and
exclusive jurisdiction to the Bureau, and the Labor Relations Division in the Regional Offices of
the Department of Labor, over "all inter-union and intra-union conflicts, and all disputes,
grievances or problems arising from or affecting labor management relations," making no
reference whatsoever to any such 30%-support requirement. Indeed, the officials mentioned are
given the power to act "on all inter-union and intra-union conflicts (1) "upon request of either or
both parties" as well as (2) "at their own initiative."

Prompt compliance in rendering financial reports together with the holding of regular meetings
with the submission of the minutes thereon with the BLR-DOLE and DOLE-NCR will negate any
suspicion of dishonesty on the part of UEEA's officers. This is not only true with UEEA, but
likewise with other unions/associations, as this matter is imbued with public interest.
Undeniably, transparency in the official undertakings of union officers will bolster genuine trade
unionism in the country.

XV. RIGHTS OF LEGITIMATE LABOR ORGANIZATIONS:

1. Article 242 of the Labor Code defines and enumerates the rights of legitimate labor
organizations. These rights are as follows:

(a) To act as the representative of its members for the purpose of collective bargaining;
(b) To be certified as the exclusive representative of all the employees in an appropriate
collective bargaining unit for purposes of collective bargaining;
(c) To be furnished by the employer, upon written request, with his annual audited financial
statements, including the balance sheet and the profit and loss statement within thirty (30)
calendar days from the date of receipt of the request, after the union has been duly recognized
by the employer or certified as the sole and exclusive bargaining representative of the

23
employees in the bargaining unit, or within sixty (60) calendar days before the expiration of the
existing collective bargaining agreement, or during the collective bargaining negotiation;
(d) To own property, real or personal for the use and benefit of the labor organization and its
members;
(e) To sue and be sued in its registered name; and
(f) To undertake all other activities designed to benefit the organization and its members,
including cooperative, housing welfare and other projects not contrary to law.

Notwithstanding any provision of a general or special law to the contrary, the income and the
properties of legitimate labor organizations, including grants, endowments, gifts, donations and
contributions they may receive from fraternal and similar organizations, local or foreign, which
are actually, directly and exclusively used for their lawful purposes, shall be free from taxes,
duties and other assessments. The exemptions provided herein may be withdrawn only by a
special law expressly repealing this provision.

One important right of the legitimate labor organization is to be certified as the exclusive
representative of all the employees in an appropriate collective bargaining unit for purposes of
collective bargaining. For this reason a better understanding of the term bargaining unit is
needed. The implementing rules of Book V of the Labor Code defines "Bargaining Unit" as a
group of employees sharing mutual interests within a given employer unit, comprised of all or
less than all of the entire body of employees in the employer unit or any specific occupational or
geographical grouping within such employer unit. In an elaborate manner the Supreme Court
has defined a “bargaining unit” as a group of employees of a given employer, comprised of all or
less than all of the entire body of employees, consistent with equity to the employer indicate to
be the best suited to serve the reciprocal rights and duties of the parties under the collective
bargaining provisions of the law." The factors in determining the appropriate collective
bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the
employees' interest, such as substantial similarity of work and duties, or similarity of
compensation and working conditions (Substantial Mutual Interests Rule); (3) prior collective
bargaining history; and (4) similarity of employment status. The basic test of an asserted
bargaining unit's acceptability is whether or not it is fundamentally the combination which will
best assure to all employees the exercise of their collective bargaining rights.
(INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE) vs. HON. LEONARDO A.
QUISUMBING, G.R. No. 128845, June 1, 2000.)

XVI. COVERAGE OF EMPLOYEES’ RIGHT TO SELF-ORGANIZATION:

1. All persons employed in commercial, industrial and agricultural enterprises and in religious,
charitable, medical or educational institutions whether operating for profit or not, shall have the
right to self-organizations and to form, join, or assist labor organizations of their own choosing
for purposes of collective bargaining. Ambulant, intermittent and itinerant workers, self-
employed people, rural workers and those without any definite employers may form labor
organizations for their mutual aid and protection. (Article 243)

2. Employees of government corporations established under the Corporation Code shall have
the right to organize and to bargain collectively with their respective employers. All other
employees in the civil service shall have the right to form associations for purposes not contrary
to law.

24
3. Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in a labor organization of the rank-
and-file employees but may join, assist or form separate labor organizations of their own.
(Article 245)

4. It shall be unlawful for any person to restrain, coerce, discriminate against or unduly interfere
with employees and workers in their exercise of the right to self-organization. Such right shall
include the right to form, join, or assist labor organizations for the purpose of collective
bargaining through representatives of their own choosing and to engage in lawful concerted
activities for the same purpose or for their mutual aid and protection, subject to the provisions of
Article 264 of this Code.(Article 246)

XVII. UNFAIR LABOR PRACTICE:

1. Unfair labor practices violate the constitutional right of workers and employees to self-
organization, are inimical to the legitimate interests of both labor and management, including
their right to bargain collectively and otherwise deal with each other in an atmosphere of
freedom and mutual respect, disrupt industrial peace and hinder the promotion of healthy and
stable labor-management relations.

2. Consequently, unfair labor practices are not only violations of the civil rights of both labor and
management but are also criminal offenses against the State which shall be subject to
prosecution and punishment as herein provided.

3. Recovery of civil liability in the administrative proceedings shall bar recovery under the Civil
Code.

4. No criminal prosecution may be instituted without a final judgment, finding that an unfair labor
practice was committed, having been first obtained in the administrative proceeding referred to
in the preceding paragraph. The final judgment in the administrative proceedings shall not be
binding in the criminal case nor be considered as evidence of guilt but merely as proof of
compliance of the requirements therein set forth.

5. Article 248 enumerates the unfair labor practices committed by the employer. These are
more of interference in the employee’s exercise of the right to self-organization.

6. It is unfair labor practice to contract out services or functions being performed by union
members when such will interfere with, restrain or coerce employees in the exercise of their
rights to self-organization.

7. It is ULP to violate a collective bargaining agreement. However, under the present law and
jurisprudence, violation of CBA is only unfair labor practice when the violation was gross and
malicious and the violated provisions are economic provisions of the CBA.

8. Only the officers and agents of corporations, associations or partnerships who have actually
participated in, authorized or ratified unfair labor practices shall be held criminally liable.

9. Labor organizations, its officers, agents or representatives can commit unfair labor practice if
they violate Article 249 of the Labor Code.

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10. Violation of the Duty to Bargain Collectively is Unfair Labor Practice.

The law mandates that the representation provision of a CBA should last for five-years. The
relation between labor and management should be undisturbed until the last 60 days of the fifth
year. For refusing to send a counter-proposal to the union and to bargain anew on the economic
terms of the CBA, the company committed an unfair labor practice under Article 248 of the
Labor Code. There is no per se test of good faith in bargaining. Good faith or bad faith is an
inference to be drawn from the facts. The effect of an employer's or a union's actions
individually is not the test of good-faith bargaining, but the impact of all such occasions or
actions, considered as a whole. Both the company and the union are required to perform their
mutual obligation to meet and convene promptly and expeditiously in good faith for the purpose
of negotiating an agreement. The procedure in collective bargaining prescribed by the Labor
Code is mandatory because of the basic interest of the state in ensuring lasting industrial peace.
The refusal to make a counter-proposal to the union's proposal for CBA negotiation is an
indication of bad faith. Where the employer did not even bother to submit an answer to the
bargaining proposals of the union, there is a clear evasion of the duty to bargain collectively.
Failure of the employer to comply with the mandatory obligation to submit reply to the union’s
proposals is a violation of the duty to bargain collectively making it unfair labor practice.

In Kiok Loy vs. NLRC, the Court found that petitioner therein, Sweden Ice Cream Plant, refused
to submit any counter proposal to the CBA proposed by its employees' certified bargaining
agent. It ruled that the former had thereby lost its right to bargain the terms and conditions of the
CBA. Thus, the Court did not hesitate to impose on the erring company the CBA proposed by its
employees' union — lock, stock and barrel.

Likewise, in Divine Word University of Tacloban vs. Secretary of Labor and Employment,
petitioner therein, Divine Word University of Tacloban, refused to perform its duty to bargain
collectively. Thus, the Court upheld the unilateral imposition on the university of the CBA
proposed by the Divine Word University Employees Union.

Under ordinary circumstances, it is not obligatory upon either side of a labor controversy to
precipitately accept or agree to the proposals of the other. But an erring party should not be
allowed to resort with impunity to schemes feigning negotiations by going through empty
gestures. Thus, by imposing on the employer the provisions of the draft CBA proposed by the
union, the interests of equity and fair play were properly served and both parties regained equal
footing, which was lost when the employer thwarted the negotiations for new economic terms of
the CBA. (GENERAL MILLING CORPORATION vs. CA, G.R. No. 146728, February 11, 2004.)

Discrimination [Article 248 (e)]:

In the pursuit of its legitimate business interests, management has the prerogative to transfer or
assign employees from one office or area of operation to another — provided there is no
demotion in rank or diminution of salary, benefits, and other privileges; and the action is not
motivated by discrimination, made in bad faith, or effected as a form of punishment or demotion
without sufficient cause. Discrimination is the unequal treatment of employees, which is
proscribed as an unfair labor practice by Article 248(e) of the Labor Code. It is the failure to treat
all persons equally when no reasonable distinction can be found between those favored and
those not favored. Bad faith has been defined as a state of mind affirmatively operating with
furtive design or with some motive of self-interest or ill will or for an ulterior purpose. It implies a
conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.

26
(THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE CO. vs. ANGELITA S.
GRAMAJE, G.R. No. 156963, November 11, 2004.

XVIII. COLLECTIVE BARGAINING AND ADMINISTRATION OF AGREEMENTS:

1. Article 250 provides for the procedure in the collective bargaining, to wit:

(a) When a party desires to negotiate an agreement, it shall serve a written notice upon the
other party with a statement of its proposals. The other party shall make a reply thereto not later
than ten (10) calendar days from receipt of such notice;
(b) Should differences arise on the basis of such notice and reply, either party may request
for a conference which shall begin not later than ten (10) calendar days from the date of
request;
(c) If the dispute is not settled, the Board shall intervene upon request of either or both
parties or at its own initiative and immediately call the parties to conciliation meetings. The
Board shall have the power to issue subpoenas requiring the attendance of the parties to such
meetings. It shall be the duty of the parties to participate fully and promptly in the conciliation
meetings the Board may call;
(d) During the conciliation proceedings in the Board, the parties are prohibited from doing
any act which may disrupt or impede the early settlement of the disputes; and
(e) The Board shall exert all efforts to settle disputes amicably and encourage the parties to
submit their case to a voluntary arbitrator.

2. It is important to know the meaning of the duty to bargain collectively in the absence of
collective bargaining agreement and when there exist a collective bargaining agreement.
(Articles 251 and 253)

3. The duty to bargain collectively means the performance of a mutual obligation to meet and
convene promptly and expeditiously in good faith for the purpose of negotiating an agreement
with respect to wages, hours of work and all other terms and conditions of employment including
proposals for adjusting any grievances or questions arising under such agreements and
executing a contract incorporating such agreements if requested by either party, but such duty
does not compel any party to agree to a proposal or to make any concession. (Article 252)

4. Article 253 mentions about the freedom period. This freedom period is 60 days before the
expiration of the CBA.

5. The representation aspect of the CBA is five (5) years. All other provisions of the Collective
Bargaining Agreement shall be renegotiated not later than three (3) years after its execution.

6. If the new CBA is entered into within six (6) months from the date of expiry of the term shall
retroact to the day immediately following such date. If agreement is entered beyond six (6)
months the parties shall agree on the duration of retroactivity thereof.

7. Any doubt or ambiguity in the contract between management and the union members should
be resolved in the light of Article 1702 of the Civil Code which provides: "(I)n case of doubt, all
labor legislation and all labor contracts shall be construed in favor of the safety and decent living
for the laborer. The terms and conditions of a collective bargaining contract constitute the law
between the parties. Those who are entitled to its benefits can invoke its provisions. In the event
that an obligation therein imposed is not fulfilled, the aggrieved party has the right to go to court

27
for redress. (MINDANAO STEEL CORPORATION vs. MINSTEEL FREE WORKERS
ORGANIZATION, G.R. No. 130693, March 4, 2004.)

8. No temporary or permanent injunction or restraining order in any case involving or growing

out of Labor disputes shall be issued by any court or other entity, except as otherwise provided
in Articles 218 and 264 of this Code.

9. The labor organization designated or selected by the majority of the employees in an

appropriate collective bargaining unit shall be the exclusive representative of the employees in
such unit for the purpose of collective bargaining. However, an individual employee or group of
employees shall have the right at any time to present grievances to their employer.

10. Workers have the right to participate in policy and decision-making processes of the
establishment where they are employed insofar as said processes will directly affect their rights,
benefits and welfare. For this purpose, workers and employers may form labor-management
councils and the representatives of the workers in such labor management councils shall be
elected by at least the majority of all employees in said establishment.

11. Representation issue in organized establishments.

a. A verified petition questioning the majority status of the incumbent bargaining agent must be
filed within the freedom period and supported by the written consent of at least 25% of all
employees in the appropriate bargaining unit.

b. To have a valid election, at least majority of all eligible voters in the unit must have cast their
votes.

c. The labor union receiving the majority of the valid votes cast shall be certified as the exclusive
bargaining agent of all the workers in the unit.

d. When an election which provides for three or more choices results in no choice receiving a
majority of the valid votes cast, a run-off election shall be conducted between the labor unions
receiving the two highest number of votes: Provided, That the total number of votes for all
contending unions is at least fifty percent (50%) of the number of votes cast.

e. At the expiration of the freedom period, the employer shall continue to recognize the majority
status of the incumbent bargaining agent where no petition for certification election is filed.

f. In any establishment where there is no certified bargaining agent, a certification election shall
automatically be conducted by the Med-Arbiter upon the filing of a petition by a legitimate labor
organization.

g. Unless it has filed a petition for a certification election pursuant to Article 258 of the Labor
Code, an employer has no standing to question such election or to interfere therein. Being the
sole concern of the workers, the election must be free from the influence or reach of the
company. (Notre Dame of Greater Manila vs. Hon. Laguesma, G.R. No. 149833, June 29,
2004)

h. False statements made by union officers before and during a certification election — that the
union is independent and not affiliated with a national federation — are material facts likely to
influence the election results. This principle finds application in the present case in which the

28
majority of the employees clearly wanted an independent union to represent them. Thus, after
the members learned of the misrepresentation, and after a majority of them disaffiliated
themselves from the union and formed another one, a new certification election should be held
to enable them to express their true will. (DHL PHILIPPINES CORPORATION UNITED RANK
AND FILE ASSOCIATION-FEDERATION OF FREE WORKERS (DHL-URFA-FFW),
petitioner, vs. BUKLOD NG MANGGAGAWA NG DHL PHILIPPINES CORPORATION,
respondent. G.R. No. 152094, July 22, 2004.)

The late filing of the Petition for a new election can be excused under the peculiar facts of this
case, considering that the employees concerned did not sleep on their rights, but promptly acted
to protect their prerogatives. Petitioner should not be permitted to use legal technicalities to
perpetrate the betrayal foisted by its officers upon the majority of the employees. Procedural
technicalities should not be allowed to suppress the welfare of labor.

i. In SMC QUARRY 2 WORKERS UNION — FEBRUARY SIX MOVEMENT (FSM) LOCAL

CHAPTER NO. 1564 (for and in behalf of its members), petitioner, vs. TITAN MEGABAGS
INDUSTRIAL CORPORATION, respondent, G.R. No. 150761, May 19, 2004, the Supreme
Court held:

“We have held that "in certification elections, the employer is a bystander, it has no right or
material interest to assail the certification election." Thus, when a petition for certification
election is filed by a legitimate labor organization, it is good policy of the employer not to have
any participation or partisan interest in the choice of the bargaining representative. While
employers may rightfully be notified or informed of petitions of such nature, they should not,
however, be considered parties thereto with an inalienable right to oppose it.”

j. LAGUNA AUTOPARTS MANUFACTURING CORPORATION, petitioner, vs. OFFICE OF THE

SECRETARY, DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) and LAGUNA
AUTOPARTS MANUFACTURING CORPORATION OBRERO PILIPINO-LAMCOR CHAPTER,
respondents, G.R. No. 157146, April 29, 2005 the Supreme Court has ruled that:.

“Indeed, a local or chapter need not be independently registered to acquire legal personality.
Section 3, Rule VI of the Implementing Rules of Book V, as amended by D.O. No. 9 clearly
states —
SEC. 3. Acquisition of legal personality by local/chapter. — A local/chapter constituted in
accordance with Section 1 of this Rule shall acquire legal personality from the date of filing of
the complete documents enumerated therein. Upon compliance with all documentary
requirements, the Regional Office or Bureau shall issue in favor of the local/chapter a certificate
indicating that it is included in the roster of legitimate labor organizations.

“The discussion of the Secretary of Labor and Employment on this point is also enlightening,
thus:
. . . Section 5, Rule V of D.O. 9 is instructive on the matter. It provides that the legal personality
of a union cannot be the subject of collateral attack in a petition for certification election, but may
be questioned only in an independent petition for cancellation of union registration. This has
been the rule since NUBE v. Minister of Labor, 110 SCRA 274 (1981). What applies in this case
is the principle that once a union acquires legitimate status as a labor organization, it continues
as such until its certificate of registration is cancelled or revoked in an independent action for
cancellation.

29
“Equally important is Section 11, Paragraph II, Rule IX of D.O. 9, which provides for the
dismissal of a petition for certification election based on the lack of legal personality of a labor
organization only in the following instances: (1) appellant is not listed by the Regional Office or
the BLR in its registry of legitimate labor organizations; or (2) appellant's legal personality has
been revoked or cancelled with finality. Since appellant is listed in the registry of legitimate labor
organizations, and its legitimacy has not been revoked or cancelled with finality, the granting of
its petition for certification election is proper.

“The choice of a collective bargaining agent is the sole concern of the employees. The only
exception to this rule is where the employer has to file the petition for certification election
pursuant to Article 258 of the Labor Code because it was requested to bargain collectively,
which exception finds no application in the case before us. Its role in a certification election has
aptly been described in Trade Unions of the Philippines and Allied Services (TUPAS) v. Trajano,
as that of a mere bystander. It has no legal standing in a certification election as it cannot
oppose the petition or appeal the Med-

k. In ME-SHURN CORPORATION AND SAMMY CHOU, petitioners, vs. ME-SHURN

WORKERS UNION-FSM AND ROSALINA * CRUZ, respondents, G.R. No. 156292, January
11, 2005 the Supreme Court has ruled that:

“The DOLE would not have entertained the Petition if the union were not a legitimate labor
organization within the meaning of the Labor Code. Under this Code, in an unorganized
establishment, only a legitimate union may file a petition for certification election. Hence, while it
is not clear from the record whether respondent union is a legitimate organization, we are not
readily inclined to believe otherwise, especially in the light of the pro-labor policies enshrined in
the Constitution and the Labor Code.

“Verily, the union has the requisite personality to sue in its own name in order to challenge the
unfair labor practice committed by petitioners against it and its members. "It would be an
unwarranted impairment of the right to self-organization through formation of labor associations
if thereafter such collective entities would be barred from instituting action in their representative
capacity."

“Finally, in view of the discriminatory acts committed by petitioners against respondent union
prior to the holding of the certification election on September 27, 2000 — acts that included their
immediate grant of exclusive recognition to another union as a bargaining agent despite the
pending Petition for certification election — the results of that election cannot be said to
constitute a repudiation by the affected employees of the union's right to represent them in the
present case.

l. The employer may file petition when requested to bargain collectively. If there is no existing
certified collective bargaining agreement in the unit, the Bureau shall, after hearing, order a
certification election. All certification cases shall be decided within twenty (20) working days.
The Bureau shall conduct a certification election within twenty (20) days in accordance with the
rules and regulations prescribed by the Secretary of Labor.

m. Any party to an election may appeal the order or results of the election as determined by the
Med-Arbiter directly to the Secretary of Labor and Employment on the ground that the rules and
regulations or parts thereof established by the Secretary of Labor and Employment for the

30
conduct of the election have been violated. Such appeal shall be decided within fifteen (15)
calendar days.

XIX. GRIEVANCE MACHINERY AND VOLUNTARY ARBITRATION:

1. The parties to a Collective Bargaining Agreement shall include therein provisions that will
ensure the mutual observance of its terms and conditions. They shall establish machinery for
the adjustment and resolution of grievances arising from the interpretation or implementation of
their Collective Bargaining Agreement and those arising from the interpretation or enforcement
of company personnel policies.

2. All grievances submitted to the grievance machinery which are not settled within seven (7)
calendar days from the date of its submission shall automatically be referred to voluntary
arbitration prescribed in the Collective Bargaining Agreement.

3. The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those arising from the interpretation
or enforcement of company personnel policies.

4. Accordingly, violations of a Collective Bargaining Agreement, except those which are gross in
character, shall no longer be treated as unfair labor practice and shall be resolved as
grievances under the Collective Bargaining Agreement. To constitute unfair labor practice, gross
violations of Collective Bargaining Agreement shall mean flagrant and/or malicious refusal to
comply with the economic provisions of such agreement.

5. The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of the parties,
shall also hear and decide all other labor disputes including unfair labor practices and
bargaining deadlocks.

6. Appeals:

Sections 1, 3 and 4, Rule 43 of the 1997 Rules of Civil Procedure, as amended, provide:

"SECTION 1. Scope. — This Rule shall apply to appeals from judgments or final orders of the
Court of Tax Appeals and from awards, judgments, final orders or resolutions of or authorized
by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these
agencies are the . . ., and voluntary arbitrators authorized by law.
xxx xxx xxx
SECTION 3. Where to appeal. — An appeal under this Rule may be taken to the Court of
Appeals within the period and in the manner therein provided, whether the appeal involves
questions of fact, of law, or mixed questions of fact and law.

SECTION 4. Period of appeal. — The appeal shall be taken within fifteen (15) days from
notice of the award, judgment, final order or resolution, or from the date of its last publication, if
publication is required by law for its effectivity, or of the denial of petitioner's motion for new trial
or reconsideration duly filed in accordance with the governing law of the court or agency a
quo . . ."

31
Upon receipt of a copy of the Voluntary Arbitrator's Decision, petitioner should have filed with
the Court of Appeals, within the 15-day reglementary period, a petition for review, not a petition
for certiorari, which is not a substitute for a lapsed appeal.

XX. STRIKES AND LOCKOUTS:

1. Workers shall have the right to engage in concerted activities for purposes of collective
bargaining or for their mutual benefit and protection. The right of legitimate labor organizations
to strike and picket and of employers to lockout, consistent with the national interest, shall
continue to be recognized and respected. However, no labor union may strike and no employer
may declare a lockout on grounds involving inter-union and intra-union disputes.

2. In cases of bargaining deadlocks, the duly certified or recognized bargaining agent may file a
notice of strike or the employer may file a notice of lockout with the Department at least thirty
(30) days before the intended date thereof.

3. In cases of unfair labor practice, the period of notice shall be fifteen (15) days and in the
absence of a duly certified or recognized bargaining agent, the notice of strike may be filed by
any legitimate labor organization in behalf of its members.

4. In case of dismissal from employment of union officers duly elected in accordance with the
union constitution and by-laws, which may constitute union busting where the existence of the
union is threatened, the 15-day cooling-off period shall not apply and the union may take action
immediately.

5. Should the dispute remain unsettled until the lapse of the requisite number of days from the
mandatory filing of the notice, the labor union may strike or the employer may declare a lockout.

6. A decision to declare a strike must be approved by a majority of the total union membership
in the bargaining unit concerned, obtained by secret ballot in meetings or referenda called for
that purpose. A decision to declare a lockout must be approved by a majority of the board of
directors of the corporation or association or of the partners in a partnership, obtained by secret
ballot in a meeting called for that purpose. The decision shall be valid for the duration of the
dispute based on substantially the same grounds considered when the strike or lockout vote
was taken.

7. The Department may at its own initiative or upon the request of any affected party, supervise
the conduct of the secret balloting. In every case, the union or the employer shall furnish the
Department the results of the voting at least seven days before the intended strike or lockout,
subject to the cooling-off period herein provided.

8. When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout
in an industry indispensable to the national interest, the Secretary of Labor and Employment
may assume jurisdiction over the dispute and decide it or certify the same to the Commission for
compulsory arbitration. Such assumption or certification shall have the effect of automatically
enjoining the intended or impending strike or lockout as specified in the assumption or
certification order. If one has already taken place at the time of assumption or certification, all
striking or locked out employees shall immediately return to work and the employer shall
immediately resume operations and readmit all workers under the same terms and conditions
prevailing before the strike or lockout.

32
9. In line with the national concerns for and the highest respect accorded to the right of patients
to life and health, strikes and lockouts in hospitals, clinics and similar medical institutions shall,
to every extent possible, be avoided, and all serious efforts, not only by labor and management
but government as well, be exhausted to substantially minimize, if not prevent, their adverse
effects on such life and health, through the exercise, however legitimate, by labor of its right to
strike and by management to lockout. In labor disputes adversely affecting the continued
operation of such hospitals, clinics or medical institutions, it shall be the duty of the striking
union or locking out employer to provide and maintain an effective skeletal workforce of medical
and other health personnel, whose movement and services shall be unhampered and
unrestricted, as are necessary to insure the proper and adequate protection of the life and
health of its patients, most especially emergency cases, for the duration of the strike or lockout.
In such cases, therefore, the Secretary of Labor and Employment may immediately assume,
within twenty four (24) hours from knowledge of the occurrence of such a strike or lockout,
jurisdiction over the same or certify it to the Commission for compulsory arbitration. For this
purpose, the contending parties are strictly enjoined to comply with such orders, prohibitions
and/or injunctions as are issued by the Secretary of Labor and Employment or the Commission,
under pain of immediate disciplinary action, including dismissal or loss of employment status or
payment by the locking-out employer of backwages, damages and other affirmative relief, even
criminal prosecution against either or both of them.

10. The foregoing notwithstanding, the President of the Philippines shall not be precluded from
determining the industries that, in his opinion, are indispensable to the national interest, and
from intervening at any time and assuming jurisdiction over any labor dispute in such industries
in order to settle or terminate the same.

11. Before or at any stage of the compulsory arbitration process, the parties may opt to submit
their dispute to voluntary arbitration.

12. The Secretary of Labor and Employment, the Commission or the voluntary arbitrator or
panel of voluntary arbitrators shall decide or resolve the dispute within thirty (30) calendar days
from the date of the assumption of jurisdiction or the certification or submission of the dispute,
as the case may be. The decision of the President, the Secretary of Labor and Employment, the
Commission or the voluntary arbitrator or panel of voluntary arbitrators shall be final and
executory ten (10) calendar days after receipt thereof by the parties.

13. Procedural Requirements for a Valid Strike:

In ROSENDO PIÑERO ET AL., vs. NLRC G.R. No. 149610, August 20, 2004, the Supreme
Court has ruled that:

In the case at bar, DUCACOFSA-NAFTEU failed to prove that it obtained the required strike-
vote among its members and that the results thereof were submitted to the DOLE. The strike
was therefore correctly declared illegal, for non-compliance with the procedural requirements of
Article 263 of the Labor Code, and Piñero properly dismissed from service.

14. In BUKLURAN NG MANGGAGAWA SA CLOTHMAN KNITTING CORPORATION —

SOLIDARITY OF UNIONS IN THE PHILIPPINES FOR EMPOWERMENT AND REFORMS
(BMC-SUPER) ET AL, petitioners, vs. COURT OF APPEALS (Former Fifteenth Division),
NATIONAL LABOR RELATIONS COMMISSION (Second Division), and CLOTHMAN

33
KNITTING CORPORATION, respondents, G.R. No. 158158, January 17, 2005, the Court has
ruled that:

“Clearly, the petitioner union, its officers, members and supporters staged a strike. In order for a
strike to be valid, the following requirements laid down in paragraphs (c) and (f) of Article 263 of
the Labor Code must be complied with: (a) a notice of strike must be filed; (b) a strike-vote must
be taken; and (c) the results of the strike-vote must be reported to the DOLE. It bears stressing
that these requirements are mandatory, meaning, non-compliance therewith makes the strike
illegal. The evident intention of the law in requiring the strike notice and strike-vote report is to
reasonably regulate the right to strike, which is essential to the attainment of legitimate policy
objectives embodied in the law.”

15. Aside from the mandatory notices embedded in Article 263, paragraphs (c) and (f) of the
Labor Code, a union intending to stage a strike is mandated to notify the NCMB of the meeting
for the conduct of strike vote, at least twenty-four (24) hours prior to such meeting. Unless the
NCMB is notified of the date, place and time of the meeting of the union members for the
conduct of a strike vote, the NCMB would be unable to supervise the holding of the same, if and
when it decides to exercise its power of supervision. In National Federation of Labor v. NLRC,
the Court enumerated the notices required by Article 263 of the Labor Code and the
Implementing Rules, which include the 24-hour prior notice to the NCMB:

1) A notice of strike, with the required contents, should be filed with the DOLE, specifically
the Regional Branch of the NCMB, copy furnished the employer of the union;
2) A cooling-off period must be observed between the filing of notice and the actual
execution of the strike thirty (30) days in case of bargaining deadlock and fifteen (15) days in
case of unfair labor practice. However, in the case of union busting where the union's existence
is threatened, the cooling-off period need not be observed.
xxx xxx xxx
4) Before a strike is actually commenced, a strike vote should be taken by secret balloting,
with a 24-hour prior notice to NCMB. The decision to declare a strike requires the secret-ballot
approval of majority of the total union membership in the bargaining unit concerned.—is it not
majority of votes cast?1-21-13ilr

5) The result of the strike vote should be reported to the NCMB at least seven (7) days
before the intended strike or lockout, subject to the cooling-off period.

A strike vote report submitted to the NCMB at least seven days prior to the intended date of
strike ensures that a strike vote was, indeed, taken. In the event that the report is false, the
seven-day period affords the members an opportunity to take the appropriate remedy before it is
too late. The 15 to 30 day cooling-off period is designed to afford the parties the opportunity to
amicably resolve the dispute with the assistance of the NCMB conciliator/mediator, while the
seven-day strike ban is intended to give the DOLE an opportunity to verify whether the projected
strike really carries the imprimatur of the majority of the union members.

The requirement of giving notice of the conduct of a strike vote to the NCMB at least 24 hours
before the meeting for the said purpose is designed to (a) inform the NCMB of the intent of the
union to conduct a strike vote; (b) give the NCMB ample time to decide on whether or not there
is a need to supervise the conduct of the strike vote to prevent any acts of violence and/or
irregularities attendant thereto; and (c) should the NCMB decide on its own initiative or upon the
request of an interested party including the employer, to supervise the strike vote, to give it
ample time to prepare for the deployment of the requisite personnel, including peace officers if

34
need be. Unless and until the NCMB is notified at least 24 hours of the union's decision to
conduct a strike vote, and the date, place, and time thereof, the NCMB cannot determine for
itself whether to supervise a strike vote meeting or not and insure its peaceful and regular
conduct. The failure of a union to comply with the requirement of the giving of notice to the
NCMB at least 24 hours prior to the holding of a strike vote meeting will render the subsequent
strike staged by the union illegal.

“Conformably to Article 264 of the Labor Code of the Philippines and Section 7, Rule XXII of
the Omnibus Rules Implementing the Labor Code, no labor organization shall declare a strike
unless supported by a majority vote of the members of the union obtained by secret ballot in a
meeting called for that purpose. The requirement is mandatory and the failure of a union to
comply therewith renders the strike illegal. The union is thus mandated to allege and prove
compliance with the requirements of the law.” (CAPITOL MEDICAL CENTER, INC., petitioner,
vs. NATIONAL LABOR RELATIONS COMMISSION, ET AL., respondents, G.R. No. 147080,
April 26, 2005.)

16. Assumption of Jurisdiction or Certification for Compulsory Arbitration:

In MANILA DIAMOND HOTEL EMPLOYEES' UNION, petitioner, vs. THE HON. COURT OF
APPEALS, THE SECRETARY OF LABOR AND EMPLOYMENT, and THE MANILA DIAMOND
HOTEL, respondents. G.R. No. 140518, December 16, 2004, the Supreme Court has ruled:

“It is, therefore, evident from the foregoing that the Secretary's subsequent order for mere
payroll reinstatement constitutes grave abuse of discretion amounting to lack or excess of
jurisdiction. Indeed, this Court has always recognized the "great breadth of discretion" by the
Secretary once he assumes jurisdiction over a labor dispute. However, payroll reinstatement in
lieu of actual reinstatement is a departure from the rule in these cases and there must be
showing of special circumstances rendering actual reinstatement impracticable, as in the UST
case aforementioned, or otherwise not conducive to attaining the purpose of the law in providing
for assumption of jurisdiction by the Secretary of Labor and Employment in a labor dispute that
affects the national interest. None appears to have been established in this case. Even in the
exercise of his discretion under Article 263(g), the Secretary must always keep in mind the
purpose of the law. Time and again, this Court has held that when an official by-passes the law
on the asserted ground of attaining a laudable objective, the same will not be maintained if the
intendment or purpose of the law would be defeated.”

17. In the UNIVERSITY OF IMMACULATE, CONCEPCION, INC. vs. HONORABLE

SECRETARY OF LABOR, ET AL. G.R. NO. 151379, January 14, 2005, the Supreme Court
has ruled that:

“In Metrolab Industries, Inc. v. Roldan-Confessor, this Court declared that it recognizes the
exercise of management prerogatives and it often declines to interfere with the legitimate
business decisions of the employer. This is in keeping with the general principle embodied in
Article XIII, Section 3 of the Constitution, which is further echoed in Article 211 of the Labor
Code. However, as expressed in PAL v. National Labor Relations Commission, this privilege is
not absolute, but subject to exceptions. One of these exceptions is when the Secretary of Labor
assumes jurisdiction over labor disputes involving industries indispensable to the national
interest under Article 263(g) of the Labor Code. This provision states:
(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or
lockout in an industry indispensable to the national interest, the Secretary of Labor and
Employment may assume jurisdiction over the dispute and decide it or certify the same to the

35
Commission for compulsory arbitration. Such assumption or certification shall have the effect of
automatically enjoining the intended or impending strike or lockout as specified in the
assumption or certification order. If one has already taken place at the time of assumption or
certification, all striking or locked out employees shall immediately return to work and the
employer shall immediately resume operations and readmit all workers under the same terms
and conditions prevailing before the strike or lockout. . . .

When the Secretary of Labor ordered the UNIVERSITY to suspend the effect of the termination
of the individual respondents, the Secretary did not exceed her jurisdiction, nor did the
Secretary gravely abuse the same. It must be pointed out that one of the substantive evils which
Article 263(g) of the Labor Code seeks to curb is the exacerbation of a labor dispute to the
further detriment of the national interest. In her Order dated March 28, 1995, the Secretary of
Labor rightly held:

It is well to remind both parties herein that the main reason or rationale for the exercise of the
Secretary of Labor and Employment's power under Article 263(g) of the Labor Code, as
amended, is the maintenance and upholding of the status quo while the dispute is being
adjudicated. Hence, the directive to the parties to refrain from performing acts that will
exacerbate the situation is intended to ensure that the dispute does not get out of hand, thereby
negating the direct intervention of this office.

The University's act of suspending and terminating union members and the Union's act of filing
another Notice of Strike after this Office has assumed jurisdiction are certainly in conflict with
the status quo ante. By any standards these acts will not in any way help in the early resolution
of the labor dispute. It is clear that the actions of both parties merely served to complicate and
aggravate the already strained labor-management relations.

Indeed, it is clear that the act of the UNIVERSITY of dismissing the individual respondents from
their employment became the impetus for the UNION to declare a second notice of strike. It is
not a question anymore of whether or not the terminated employees, the individual respondents
herein, are part of the bargaining unit. Any act committed during the pendency of the dispute
that tends to give rise to further contentious issues or increase the tensions between the parties
should be considered an act of exacerbation and should not be allowed.

With respect to the Secretary's Order allowing payroll reinstatement instead of actual
reinstatement for the individual respondents herein, an amendment to the previous Orders
issued by her office, the same is usually not allowed. Article 263(g) of the Labor Code
aforementioned states that all workers must immediately return to work and all employers must
readmit all of them under the same terms and conditions prevailing before the strike or lockout.
The phrase "under the same terms and conditions" makes it clear that the norm is actual
reinstatement. This is consistent with the idea that any work stoppage or slowdown in that
particular industry can be detrimental to the national interest.

In ordering payroll reinstatement in lieu of actual reinstatement, then Acting Secretary of Labor
Jose S. Brillantes said:

Anent the Union's Motion, we find that superseding circumstances would not warrant the
physical reinstatement of the twelve (12) terminated employees. Hence, they are hereby
ordered placed under payroll reinstatement until the validity of their termination is finally
resolved.

36
As an exception to the rule, payroll reinstatement must rest on special circumstances that
render actual reinstatement impracticable or otherwise not conducive to attaining the purposes
of the law.

The "superseding circumstances" mentioned by the Acting Secretary of Labor no doubt refer to
the final decision of the panel of arbitrators as to the confidential nature of the positions of the
twelve private respondents, thereby rendering their actual and physical reinstatement
impracticable and more likely to exacerbate the situation. The payroll reinstatement in lieu of
actual reinstatement ordered in these cases, therefore, appears justified as an exception to the
rule until the validity of their termination is finally resolved. This Court sees no grave abuse of
discretion on the part of the Acting Secretary of Labor in ordering the same. Furthermore, the
issue has not been raised by any party in this case.

In TRANS-ASIA SHIPPING LINES, ET AL., petitioners, vs. COURT OF APPEALS and TRANS-
ASIA SHIPPING LINES, INC., respondents, G.R. No. 145428, July 7, 2004 the Court has ruled:

“A cursory reading of the above provision shows that when the Secretary of Labor assumes
jurisdiction over a labor dispute in an industry indispensable to national interest or certifies the
same to the NLRC for compulsory arbitration, such assumption or certification shall have the
effect of automatically enjoining the intended or impending strike or lockout. Moreover, if one
had already taken place, all striking workers shall immediately return to work and the employer
shall immediately resume operations and readmit all workers under the same terms and
conditions prevailing before the strike or lockout.

The powers granted to the Secretary of Labor under Article 263(g) of the Labor Code have been
characterized as an exercise of the police power of the State, with the aim of promoting public
good:

. . . [I]t must be noted that Articles 263(g) and 264 of the Labor Code have been enacted
pursuant to the police power of the State, which has been defined as the power inherent in a
government to enact laws, within constitutional limits, to promote the order, safety, health,
morals and general welfare of the society. The police power, together with the power of eminent
domain and the power of taxation, is an inherent power of government and does not need to be
expressly conferred by the Constitution . . .

When the Secretary exercises these powers, he is granted "great breadth of discretion" in order
to find a solution to a labor dispute. The most obvious of these powers is the automatic
enjoining of an impending strike or lockout or the lifting thereof if one has already taken place.
Assumption of jurisdiction over a labor dispute, or as in this case the certification of the same to
the NLRC for compulsory arbitration, always co-exists with an order for workers to return to
work immediately and for employers to readmit all workers under the same terms and conditions
prevailing before the strike or lockout.

18. (a) No labor organization or employer shall declare a strike or lockout without first having
bargained collectively in accordance with Title VII of this Book or without first having filed the
notice required in the preceding Article or without the necessary strike or lockout vote first
having been obtained and reported to the Department.

No strike or lockout shall be declared after assumption of jurisdiction by the President or

the Secretary or after certification or submission of the dispute to compulsory or voluntary
arbitration or during the pendency of cases involving the same grounds for the strike or lockout.

37
 Any worker whose employment has been terminated as a consequence of an unlawful
lockout shall be entitled to reinstatement with full backwages. Any union officer who knowingly
participates in illegal strike and any worker or union officer who knowingly participates in the
commission of illegal acts during a strike may be declared to have lost his employment status:
Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient
ground for termination of his employment, even if a replacement had been hired by the
employer during such lawful strike.

(b) No person shall obstruct, impede, or interfere with by force, violence, coercion,
threats or intimidation any peaceful picketing by employees during any labor controversy or in
the exercise of the right of self-organization or collective bargaining, or shall aid or abet such
obstruction or interference.

(c) No employer shall use or employ any strike-breaker, nor shall any person be
employed as a strike-breaker.

(d) No public official or employee, including officers and personnel of the New Armed
Forces of the Philippines or the Integrated National Police, or armed person, shall bring in,
introduce or escort in any manner any individual who seeks to replace strikers in entering or
leaving the premises of a strike area, or work in place of the strikers. The police force shall keep
out of the picket lines unless actual violence or other criminal acts occur therein: Provided, That
nothing herein shall be interpreted to prevent any public officer from taking any measure
necessary to maintain peace and order, protect life and property, and/or enforce the law and
legal order.

(e) No person engaged in picketing shall commit any act of violence, coercion or
intimidation or obstruct the free ingress to or egress from the employer's premises for lawful
purposes, or obstruct public thoroughfares.

19. In ELIZABETH C. BASCON and NOEMI V. COLE, petitioners, vs. HONORABLE COURT
OF APPEALS, METRO CEBU COMMUNITY
HOSPITAL, INC., and GREGORIO IYOY, respondents, G.R. No. 144899, February 5, 2004, the
Court ruled:

Article 264(a) of the Labor Code provides in part that:

. . . Any union officer who knowingly participates in illegal strike and any worker or union officer
who knowingly participates in the commission of illegal acts during a strike may be declared to
have lost his employment status . . .

Thus, while a union officer can be terminated for mere participation in an illegal strike, an
ordinary striking employee, like petitioners herein, must have participated in the commission of
illegal acts during the strike (emphasis supplied). There must be proof that they committed
illegal acts during the strike. But proof beyond reasonable doubt is not required. Substantial
evidence, which may justify the imposition of the penalty of dismissal, may suffice.

The law, obviously solicitous of the welfare of the common worker, requires, before termination
may be considered, that an ordinary union member must have knowingly participated in the
commission of illegal acts during a strike.

38
Wearing armbands and putting up placards to express one's views without violating the rights of
third parties, are legal per se and even constitutionally protected.

Not every case of willful disobedience by an employee of a lawful work-connected order of the
employer may be penalized with dismissal. There must be reasonable proportionality between,
on the one hand, the willful disobedience by the employee and, on the other hand, the penalty
imposed therefor. Wearing armbands to signify union membership and putting up placards to
express their views cannot be of such great dimension as to warrant the extreme penalty of
dismissal, especially considering the long years of service rendered and the fact that they have
not heretofore been subject of any disciplinary action in the course of their employment.

While the right to strike is specifically granted by law, it is a remedy which can only be availed of
by a legitimate labor organization. Absent a showing as to the legitimate status of the labor
organization, said strike would have to be considered as illegal.
xxx xxx xxx

Indeed, the right to strike, while constitutionally recognized, is not without legal restrictions. The
Labor Code regulates the exercise of said right by balancing the interests of labor and
management in the light of the overarching public interest. Thus, paragraphs (c) and (f) of
Article 263 mandate the following procedural steps to be followed before a strike may be
staged: filing of notice of strike, taking of strike vote, and reporting of the strike vote result to the
Department of Labor and Employment. It bears stressing that these requirements are
mandatory, meaning, non-compliance therewith makes the strike illegal. The evident intention of
the law in requiring the strike notice and strike-vote report is to reasonably regulate the right to
strike, which is essential to the attainment of legitimate policy objectives embodied in the law.

Article 264 of the Labor Code, in providing for the consequences of an illegal strike, makes a
distinction between union officers and members who participated thereon. Thus, knowingly
participating in an illegal strike is a valid ground for termination from employment of a union
officer. The law, however, treats differently mere union members. Mere participation in an illegal
strike is not a sufficient ground for termination of the services of the union members. The Labor
Code protects an ordinary, rank-and-file union member who participated in such a strike from
losing his job, provided that he did not commit an illegal act during the strike. Thus, absent any
clear, substantial and convincing proof of illegal acts committed during an illegal strike, an
ordinary striking worker or employee may not be terminated from work.

With respect to union officers, however, there is no dispute they could be dismissed for
participating in an illegal strike. Union officers are dutybound to guide their members to respect
the law. Nonetheless, as in other termination cases, union officers must be given the required
notices for terminating an employment, i.e., notice of hearing to enable them to present their
side, and notice of termination, should their explanation prove unsatisfactory. Nothing in Article
264 of the Labor Code authorizes an immediate dismissal of a union officer for participating in
an illegal strike. The act of dismissal is not intended to happen ipso facto but rather as an option
that can be exercised by the employer and after compliance with the notice requirements for
terminating an employee.

xxx xxx xxx

If the employee's separation is without cause, instead of being given separation pay, he should
be reinstated. In either case, whether he is reinstated or only granted separation pay, he should
be paid full backwages if he has been laid off without written notice at least 30 days in advance.

39
20. A strike is a powerful weapon of the working class. But like a sensitive explosive, it must be
handled carefully, lest it blows up in the workers’ own hands. Thus, the right to strike has to be
pursued within the bounds of law.

In National Federation of Labor vs. NLRC the Court said that “with the enactment of Republic
Act No. 6715 which took effect on March 21, 1989, the rule now is that such requirements as
the filing of a notice of strike, strike vote, and notice given to the Department of Labor are
mandatory in nature. Thus, even if the union acted in good faith in the belief that the company
was committing an unfair labor practice, if no notice of strike and a strike vote were conducted,
the said strike is illegal.”

In Telefunken Semiconductors Employees Union-FFW vs. Secretary of Labor and Employment,

the Court explained:

“The effects of such illegal strikes, outlined in Article 265 (now Article 264) of the Labor Code,
make a distinction between workers and union officers who participate therein.

“A union officer who knowingly participates in an illegal strike and any worker or union officer
who knowingly participates in the commission of illegal acts during a strike may be declared to
have lost their employment status. An ordinary striking worker cannot be terminated for mere
participation in an illegal strike. There must be proof that he committed illegal acts during a
strike. A union officer, on the other hand, may be terminated from work when he knowingly
participates in an illegal strike, and like other workers, when he commits an illegal act during a
strike.”

In International Pharmaceuticals, Inc. v. Secretary of Labor and Employment, the Court held:

‘. . . [T]he Secretary was explicitly granted by Article 263 (g) of the Labor Code the authority to
assume jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an
industry indispensable to the national interest, and decide the same accordingly. Necessarily,
this authority to assume jurisdiction over the said labor dispute must include and extend to all
questions and controversies arising therefrom, including cases over which the Labor Arbiter has
exclusive jurisdiction’.

“In the same manner, when the Secretary of Labor and Employment certifies the labor dispute
to the NLRC for compulsory arbitration the latter is concomitantly empowered to resolve all
questions and controversies arising therefrom including cases otherwise belonging originally
and exclusively to the Labor Arbiter.”

21. In an effort to settle a strike, the Department of Labor and Employment shall conduct a
referendum by secret balloting on the improved offer of the employer on or before the 30th day
of the strike. When at least a majority of the union members votes to accept the improved offer,
the striking workers shall immediately return to work and the employer shall thereupon readmit
them upon the signing of the agreement.

In case of a lockout, the Department of Labor and Employment shall also conduct a referendum
by secret balloting on the reduced offer of the union on or before the 30th day of the lockout.
When at least a majority of the board of directors or trustees or the partners holding the

40
controlling interest in the case of a partnership vote to accept the reduced offer, the workers
shall immediately return to work and the employer shall thereupon readmit them upon the
signing of the agreement.

22. Except on grounds of national security and public peace, or in case of commission of a
crime, no union members or union organizers may be arrested or detained for union activities
without previous consultations with the Secretary of Labor.

XXI. PROHIBITION AGAINST ALIENS:

Aliens working in the country with valid permits issued by the Department of Labor and
Employment, may exercise the right to self-organization and join or assist a labor organizations
of their own choosing for purposes of collective bargaining; Provided, further, That said aliens
are nationals of a country which grants the same or similar rights to Filipino workers.

XXII. VISITORIAL POWER/MISCELLANEOUS

1. The Secretary of Labor and Employment or his duly authorized representative is

hereby empowered to inquire into the financial activities of legitimate labor organizations upon
the filing of a complainant under oath and duly supported by the written consent of at least
twenty per cent (20%) of the total membership of the labor organization concerned and to
examine their books of accounts and other records to determine compliance or non-compliance
with the law and to prosecute any violations of the law and the union constitution and by-laws:
Provided, That such inquiry or examination shall not be conducted during the sixty (60)-day
freedom period nor within thirty (30) days immediately preceding the date of election of union
officials.

2. All unions are authorized to collect reasonable membership fees, union dues, assessments
and fines and other contributions for labor education and research, mutual death and
hospitalization benefits, welfare fund, strike fund and credit and cooperative undertakings.

3. Any employee, whether employed for a definite period or not, shall, beginning on his first day
of service, be considered an employee for purposes of membership in any labor union.

Burden of Proof: always on the E.

It is an oft-repeated rule that in termination disputes, the burden of proof is always on the
employer to prove that the dismissal was for a just and valid cause. Taking into account the
character of the charges and the penalty meted to an employee, the employer is bound to
adduce clear, accurate, consistent and convincing evidence to prove the same. Invariably, a
company’s management prerogatives are upheld so long as they are exercised in good faith for
the advancement of the employer’s interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements. (BPI
vs. Ramon A. Uy, G.R. No. 156994, August 31, 2005)

41
 XXIII. TERMINATION OF EMPLOYMENT AND SECURITY OF TENURE:

1. Burden of Proof:

It is an oft-repeated rule that in termination disputes, the burden of proof is always on the
employer to prove that the dismissal was for a just and valid cause. Taking into account the
character of the charges and the penalty meted to an employee, the employer is bound to
adduce clear, accurate, consistent and convincing evidence to prove the same. Invariably, a
company’s management prerogatives are upheld so long as they are exercised in good faith for
the advancement of the employer’s interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements. (BPI
vs. Ramon A. Uy, G.R. No. 156994, August 31, 2005)

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

3. Due Process:

a. The due process prescribed in Article 277 (b) of the Labor Code, as amended, and in
(Implementing Rules of Book V), are mandatory. Two notices should be sent to the employee.
The first notice apprises the employee of the particular acts or omissions for which his dismissal
is sought; while the second informs the employee of the employer's decision to dismiss him. The
latter must come after the employee is given a reasonable period from receipt of the first notice
within which to answer the charge, and ample opportunity to be heard and defend himself with
the assistance of his representative, if he so desires. (CAINGAT vs. NLRC, G.R. No. 154308,
March 10, 2005.) This same issue was resolved by the Supreme Court one day later when it
decided the case of Glaxo Wellcome Philippines vs. Nagkakaisang Empleyado Ng Wellcome-
DFA, G.R. No. 149349. March 11, 2005, and ruled that: “To effect a termination of employment
based on just causes defined in Article 282 of the Labor Code, the employer is required to give
a first notice disclosing the grounds therefor. Thereafter, the employees concerned are to be
given the opportunity to defend themselves personally or by counsel of their choice. Finally, the
employer must serve the employees concerned a second notice informing them of the fact of
their dismissal. The notices need not be couched in any prescribed form. Provided they
sufficiently appraise the respondents of the specific acts they are being made to account for and
give them ample opportunity to respond, the notices satisfy the due process requirement.”

With regard to contract workers, in cases arising before the effectivity of RA 8042 (the Migrant
Workers and Overseas Filipinos Act), it is settled that if “the contract is for a fixed term and the
employee is dismissed without just cause, he is entitled to the payment of his salaries
corresponding to the unexpired portion of his contract.” (Land and Housing Development
Corporation et al. vs. Marianito Esquillo, G.R. 152012, Sept. 30, 2005)

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b. When there are Just Causes (Art. 282) or Authorized Causes (Art. 283) but Without Due
Process:

Before the Supreme Court decided the case of Wenphil Corporation vs. NLRC in 1989, the rule
was that termination of employee without notice is illegal. Prior to 1989, the rule was that a
dismissal or termination is illegal if the employee was not given any notice. When the decision in
Wehphil case came out which became known as Wenphil or Belated Due Process Rule the rule
was that the dismissed employee based on Article 282, although not given any notice and
hearing, was not entitled to reinstatement and backwages. Under the circumstances, the
dismissal of the employee for just cause should be maintained. He has no right to return to his
former employment. However, employer must nevertheless be held to account for failure to
extend to the employee his right to an investigation before causing his dismissal. The dismissal
of an employee must be for just or authorized cause and after due process. But for its failure of
the employer to give a formal notice and conduct an investigation as required by law before
dismissing the employee from employment the former must indemnify the latter the amount of
P1,000. The Supreme Court, however, was cautious in stating that the measure of the award
depends on the facts of each case and the gravity of the omission committed by the employer.

On January 27, 2000, (Ruben Serrano case) the rule on the extent of the sanction was
changed. The Court held that the violation by the employer of the notice requirement in
termination for just or authorized causes was not a denial of due process that will nullify the
termination. However, the dismissal is ineffectual and the employer must pay full backwages
from the time of termination until it is judicially declared that the dismissal was for a just or
authorized cause.

The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant
number of cases involving dismissals without requisite notices. The Court concluded that the
imposition of penalty by way of damages for violation of the notice requirement was not serving
as a deterrent and for which reason it required payment of full backwages from the time of
dismissal until the time the Court finds the dismissal was for a just or authorized cause.
Serrano doctrine was confronting the practice of employers to "dismiss now and pay later" by
imposing full backwages. Unlike the Wenphil doctrine which lasted for nearly eleven years, the
Serrano doctrine lasted only for five years. On November 17, 2004 the Supreme Court came
out with a ruling in JENNY M. AGABON and VIRGILIO C. AGABON, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC. and
VICENTE ANGELES, respondents G.R. No. 158693 November 17, 2004. The Court ruled:

“We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279
of the Labor Code.

“The termination is illegal only if it is not for any of the justified or authorized causes provided by
law. Payment of backwages and other benefits, including reinstatement, is justified only if the
employee was unjustly dismissed.

“The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent
has prompted us to revisit the doctrine.

“Due process under the Labor Code, like Constitutional due process, has two aspects:
substantive, i.e., the valid and authorized causes of employment termination under the Labor
Code; and procedural, i.e., the manner of dismissal. Procedural due process requirements for
dismissal are found in the Implementing Rules of P.D. 442, as amended, otherwise known as

43
the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department Order
Nos. 9 and 10. Breaches of these due process requirements violate the Labor Code. Therefore
statutory due process should be differentiated from failure to comply with constitutional due
process.

“Constitutional due process protects the individual from the government and assures him of his
rights in criminal, civil or administrative proceedings; while statutory due process found in the
Labor Code and Implementing Rules protects employees from being unjustly terminated without
just cause after notice and hearing.

“In Sebuguero v. National Labor Relations Commission, the dismissal was for a just and valid
cause but the employee was not accorded due process. The dismissal was upheld by the Court
but the employer was sanctioned. The sanction should be in the nature of indemnification or
penalty, and depends on the facts of each case and the gravity of the omission committed by
the employer.

“In Nath v. National Labor Relations Commission, it was ruled that even if the employee was not
given due process, the failure did not operate to eradicate the just causes for dismissal. The
dismissal being for just cause, albeit without due process, did not entitle the employee to
reinstatement, backwages, damages and attorney's fees.

“After carefully analyzing the consequences of the divergent doctrines in the law on employment
termination, we believe that in cases involving dismissals for cause but without observance of
the twin requirements of notice and hearing, the better rule is to abandon the Serrano doctrine
and to follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on
the employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing
so, this Court would be able to achieve a fair result by dispensing justice not just to employees,
but to employers as well.

“The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but
not complying with statutory due process may have far-reaching consequences.

“The constitutional policy to provide full protection to labor is not meant to be a sword to oppress
employers. The commitment of this Court to the cause of labor does not prevent us from
sustaining the employer when it is in the right, as in this case. Certainly, an employer should not
be compelled to pay employees for work not actually performed and in fact abandoned.

“The employer should not be compelled to continue employing a person who is admittedly guilty
of misfeasance or malfeasance and whose continued employment is patently inimical to the
employer. The law protecting the rights of the laborer authorizes neither oppression nor self-
destruction of the employer.

“An employee who is clearly guilty of conduct violative of Article 282 should not be protected by
the Social Justice Clause of the Constitution. Social justice, as the term suggests, should be
used only to correct an injustice. As the eminent Justice Jose P. Laurel observed, social justice
must be founded on the recognition of the necessity of interdependence among diverse units of
a society and of the protection that should be equally and evenly extended to all groups as a
combined force in our social and economic life, consistent with the fundamental and paramount
objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing
about "the greatest good to the greatest number."

44
“We have repeatedly stressed that social justice — or any justice for that matter — is for the
deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in
case of reasonable doubt, we are to tilt the balance in favor of the poor to whom the Constitution
fittingly extends its sympathy and compassion. But never is it justified to give preference to the
poor simply because they are poor, or reject the rich simply because they are rich, for justice
must always be served for the poor and the rich alike, according to the mandate of the law.

“Justice in every case should only be for the deserving party. It should not be presumed that
every case of illegal dismissal would automatically be decided in favor of labor, as management
has rights that should be fully respected and enforced by this Court. As interdependent and
indispensable partners in nation-building, labor and management need each other to foster
productivity and economic growth; hence, the need to weigh and balance the rights and welfare
of both the employee and employer.

“Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process
should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should
indemnify the employee for the violation of his statutory rights, as ruled in Reta v. National Labor
Relations Commission. The indemnity to be imposed should be stiffer to discourage the
abhorrent practice of "dismiss now, pay later," which we sought to deter in the Serrano ruling.
The sanction should be in the nature of indemnification or penalty and should depend on the
facts of each case, taking into special consideration the gravity of the due process violation of
the employer.

Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him.

“The violation of the petitioners' right to statutory due process by the private respondent
warrants the payment of indemnity in the form of nominal damages. The amount of such
damages is addressed to the sound discretion of the court, taking into account the relevant
circumstances. 40 Considering the prevailing circumstances in the case at bar, we deem it
proper to fix it at P30,000.00. We believe this form of damages would serve to deter employers
from future violations of the statutory due process rights of employees. At the very least, it
provides a vindication or recognition of this fundamental right granted to the latter under the
Labor Code and its Implementing Rules.

c. In SUNRISE MANNING AGENCY, INC., petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and RUEL ZARASPE, respondents, G.R. No. 146703, November 18, 2004, the
Court has ruled that:

“The essence of due process is simply an opportunity to be heard, or as applied to

administrative proceedings, an opportunity to explain one's side or an opportunity to seek a
reconsideration of the action or ruling complained of. A formal or trial type hearing is not at all
times and in all instances essential. The requirements are satisfied when the parties are
afforded fair and reasonable opportunity to explain their side of the controversy at hand. What is
frowned upon is the absolute lack of notice or hearing.”

d. Under the existing law, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights. It must be emphasized, though, that the Court has
declared that there are specific circumstances obtaining where reinstatement is not a

45
practicable remedy, as when the relations between the employer and employee have been so
severely strained that it is no longer fitting to order reinstatement or when the employee decides
not to be reinstated. It must be stressed that the petitioner was charged by the respondent
spouses with qualified theft and was even coerced into withdrawing the labor case against
them. No other conclusion may be deduced other than the categorical fact that antagonism
already caused a severe strain in the relationship between the respondent spouses and
petitioner. Separation pay is the amount that an employee receives at the time of his severance
from the service and is designed to provide the employee with the wherewithal during the period
that he is seeking another employment. The grant of separation pay does not impede an award
for backwages as the latter represents the amount of earnings lost by reason of unjustified
dismissal. A more equitable settlement, therefore, would be an award of separation pay
equivalent to at least one month pay for every year of service in addition to his full backwages,
allowances and other benefits.

“The difference between Agabon and the instant case is that in the former, the dismissal was
based on a just cause under Article 282 of the Labor Code while in the present case,
respondents were dismissed due to retrenchment, which is one of the authorized causes under
Article 283 of the same Code. (JAKA FOOD PROCESSING CORPORATION, petitioner, vs.
DARWIN PACOT, ROBERT PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL
LESCANO and JONATHAN CAGABCAB, respondents, G.R. No. 151378, March 28, 2005.)

“Verily, respondent who was illegally dismissed from work is entitled to reinstatement without
loss of seniority rights, full backwages, inclusive of allowances, and other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.

However, the circumstances obtaining in this case do not warrant the reinstatement of
respondent. Aside from the fact that antagonism caused a severe strain in the parties'
employer-employee relationship, petitioner company has "completely ceased its tire
manufacturing and marketing operations effective November 11, 1994," as evidenced by its
Notice of Indefinite Suspension of Manufacturing Operations dated November 10, 1994 9 to the
Security and Exchange Commission and its Application for Business Retirement dated February
22, 1996 filed with the Business Permits & Licensing Office of the City of Muntinlupa. Thus, a
more equitable disposition would be an award of separation pay equivalent to at least one
month pay, or one month pay for every year of service, whichever is higher, (with a fraction of at
least six (6) months being considered as one (1) whole year), in addition to his full backwages,
allowances and other benefits.” (PHILTREAD TIRE & RUBBER CORPORATION, petitioner, vs.
ALBERTO VICENTE, respondent, G.R. No. 142759, November 10, 2004.)

XXIV. PROTECTIVE RIGHTS OF LABOR:

1. In the case of PAMPLONA PLANTATION COMPANY, INC. and/or JOSE LUIS BONDOC,
petitioners, vs. RODEL TINGHIL ET AL., respondents, G.R. No. 159121, February 3, 2005, the
Court has ruled that:

“To protect the rights of labor, two corporations with identical directors, management, office and
payroll should be treated as one entity only. A suit by the employees against one corporation
should be deemed as a suit against the other. Also, the rights and claims of workers should not

46
be prejudiced by the acts of the employer that tend to confuse them about its corporate identity.
The corporate fiction must yield to truth and justice.”

2. To protect labor's security of tenure, we emphasize that the doctrine of "strained relations"
should be strictly applied so as not to deprive an illegally dismissed employee of his right to
reinstatement. Every labor dispute almost always results in "strained relations" and the phrase
cannot be given an overarching interpretation, otherwise, an unjustly dismissed employee can
never be reinstated.

The Court is cognizant of management's right to select the people who will manage its business
as well as its right to dismiss them. However, this right cannot be abused. Its exercise must
always be tempered with compassion and understanding. As former Chief Justice Enrique
Fernando eloquently put it:

“Where a penalty less severe would suffice, whatever missteps may be committed by labor
ought not to be visited with consequence so severe. It is not only because of the law's concern
for the workingmen. There is, in addition, his family to consider. Unemployment brings untold
hardships and sorrows on those dependent on the wage-earner. The misery and pain attendant
on the loss of jobs then could be avoided if there be acceptance of the view that under all the
circumstances of a case, the workers should not be deprived of their means of livelihood. Nor is
this to condone what has been done by them.

To reinstate respondent is not to condone his "misstep" since his participation in the "internal
arrangement" was not sufficiently established to warrant his dismissal from PLDT which he
served faithfully for 23 years.

3. The rule providing for the entitlement of an illegally dismissed employee to only three years
backwages "without deduction or qualification" to obviate the need for further proceedings in the
course of execution, otherwise known as the "Mercury Drug Rule," has long been abandoned.

“Obviously, the principle of "strained relations" cannot be applied indiscriminately. Otherwise,

reinstatement can never be possible simply because some hostility is invariably engendered
between the parties as a result of litigation. That is human nature.

“Besides, no strained relations should arise from a valid and legal act of asserting one's right;
otherwise an employee who shall assert his right could be easily separated from the service, by
merely paying his separation pay on the pretext that his relationship with his employer had
already become strained.

“To protect labor's security of tenure, we emphasize that the doctrine of "strained relations"
should be strictly applied so as not to deprive an illegally dismissed employee of his right to
reinstatement. Every labor dispute almost always results in "strained relations" and the phrase
cannot be given an overarching interpretation, otherwise, an unjustly dismissed employee can
never be reinstated.

XXV. TERMINATION OF OFW WITHOUT CAUSE OF OFW:

In PHIL. EMPLOY SERVICES and RESOURCES, INC., petitioner, vs. JOSEPH PARAMIOET
AL. respondents. G.R. No. 144786, April 15, 2004, the Supreme Court has ruled:

47
“In Skippers Pacific, Inc. v. Mira, we ruled that an overseas Filipino worker who is illegally
terminated shall be entitled to his salary equivalent to the unexpired portion of his employment
contract if such contract is less than one year. However, if his contract is for a period of at least
one year, he is entitled to receive his salaries equivalent to the unexpired portion of his contract,
or three months' salary for every year of the unexpired term, whichever is lower.

“In Marsaman Manning Agency, Inc. v. NLRC, involving Section 10 of Rep. Act No. 8042, we
held:

. . . [W]e cannot subscribe to the view that private respondent is entitled to three (3) months
salary loan only. A plain reading of Sec. 10 clearly reveals that the choice of which amount to
award an illegally dismissed overseas contract worker, i.e., whether his salaries for the
unexpired portion of his employment contract or three (3) months salary for every year of the
unexpired term, whichever is less, comes into play only when the employment contract
concerned has a term of at least one (1) year or more.

“This is evident from the words "for every year of the unexpired term" which follows the words
"salaries . . . for three months." To follow petitioners' thinking that private respondent is entitled
to three (3) months salary only simply because it is the lesser amount is to completely disregard
and overlook some words used in the statute while giving effect to some. This is contrary to the
well-established rule in legal hermeneutics that interpreting a statute, care should be taken that
every part or word thereof be given effect since the lawmaking body is presumed to know the
meaning of the words employed in the statute and to have used them advisedly. Ut res magis
valeat quam pereat.

XXVI. REGULAR EMPLOYMENT:

1. Article 280 provides for the regular and casual employment. An employment shall be
deemed to be regular where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the employee or where the work
or services to be performed is seasonal in nature and the employment is for the duration of the
season.

2. Project Employees:

“Without a valid cause, the employment of project employees cannot be terminated prior to
expiration. Otherwise, they shall be entitled to reinstatement with full back wages. However, if
the project or work is completed during the pendency of the ensuing suit for illegal dismissal, the
employees shall be entitled only to full back wages from the date of the termination of their
employment until the actual completion of the project or work. The employment of project
employees for ten years in various projects did not ipso facto make them regular employees,
considering that the definition of regular employment in Article 280 of the Labor Code makes a
specific exception with respect to project employment. The mere rehiring of project employees
on a project-to-project basis did not confer upon them regular employment status. The practice
was dictated by the practical consideration that experienced construction workers are more
preferred. It did not change their status as project employees. (FILIPINAS PRE-FABRICATED
BUILDING SYSTEM vs. ROGER D. PUENTE, G.R. No. 153832, March 18, 2005.)

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In Tomas Lao Construction v. NLRC the Supreme Court held that the principal test in
determining whether an employee is a “project employee” or “regular employee,” is, whether he
is assigned to carry out a “specific project or undertaking,” the duration (and scope) of which are
specified at the time the employee is engaged in the project “Project” refers to a particular job or
undertaking that is within the regular or usual business of the employer, but which is distinct and
separate and identifiable from the undertakings of the company.  Such job or undertaking
begins and ends at determined or determinable times.

In a work pool, the workers do not receive salaries and are free to seek other employment
during temporary breaks in the business.  They are like regular seasonal workers insofar as the
effect of temporary cessation of work is concerned.  This arrangement is beneficial to both the
employer and employee for it prevents the unjust situation of “coddling labor at the expense of
capital” and at the same time enables the workers to attain the status of regular employees.
Nonetheless, the pattern of re-hiring and the recurring need for his services are sufficient
evidence of the necessity and indispensability of such services to petitioner’s business or trade.

In Maraguinot, Jr. v. NLRC the Court ruled that once a project or work pool employee has been:
(1) continuously, as opposed to intermittently, re-hired by the same employer for the same tasks
or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual
business or trade of the employer, then the employee must be deemed a regular employee.

The test to determine whether employment is regular or not is the reasonable connection
between the particular activity performed by the employee in relation to the usual business or
trade of the employer.  Also, if the employee has been performing the job for at least one year,
even if the performance is not continuous or merely intermittent, the law deems the repeated
and continuing need for its performance as sufficient evidence of the necessity, if not
indispensability of that activity to the business.  Thus, the Court held that where the employment
of project employees is extended long after the supposed project has been finished, the
employees are removed from the scope of project employees and are considered regular
employees.

While length of time may not be the controlling test for project employment, it is vital in
determining if the employee was hired for a specific undertaking or tasked to perform functions
vital, necessary and indispensable to the usual business or trade of the employer. Where from
the circumstances it is apparent that periods have been imposed to preclude the acquisition of
tenurial security by the employee, they should be struck down as contrary to public policy,
morals, good customs or public order. Policy Instructions No. 20 requires employers to submit a
report of an employee’s termination to the nearest public employment office every time his
employment was terminated due to a completion of a project.  The failure of the employer to file
termination reports is an indication that the employee is not a project employee. Department
Order No. 19 superseding Policy Instructions No. 20 also expressly provides that the report of
termination is one of the indications of project employment. (Integrated Contractor and
Plumbing Works, Inc. vs. NLRC, G.R. No. 152427, Aug. 9, 2005)

4. “Term Employment” Not Contrary to Article 280:

Is voluntary agreement on a fixed term or period would be valid where the employee "has been
engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer?" The definition seems non sequitur. From the premise — that the duties
of an employee entail "activities which are usually necessary or desirable in the usual business
or trade of the employer" — the conclusion does not necessarily follow that the employer and

49
employee should be forbidden to stipulate any period of time for the performance of those
activities. There is nothing essentially contradictory between a definite period of an employment
contract and the nature of the employee's duties set down in that contract as being "usually
necessary or desirable in the usual business or trade of the employer." The concept of the
employee's duties as being "usually necessary or desirable in the usual business or trade of the
employer" is not synonymous with or identical to employment with a fixed term. Logically, the
decisive determinant in term employment should not be the activities that the employee is called
upon to perform, but the day certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain being understood to be "that which
must necessarily come, although it may not be known when." Seasonal employment, and
employment for a particular project are merely instances of employment in which a period, were
not expressly set down, is necessarily implied.

Some familiar examples may be cited of employment contracts which may be neither for
seasonal work nor for specific projects, but to which a fixed term is an essential and natural
appurtenance: overseas employment contracts, for one, to which, whatever the nature of the
engagement, the concept of regular employment with all that it implies does not appear ever to
have been applied, Article 280 of the Labor Code notwithstanding; also appointments to the
positions of dean, assistant dean, college secretary, principal, and other administrative offices in
educational institutions, which are by practice or tradition rotated among the faculty members,
and where fixed terms are a necessity without which no reasonable rotation would be possible.

Accordingly, and since the entire purpose behind the development of legislation culminating in
the present Article 280 of the Labor Code clearly appears to have been, as already observed, to
prevent circumvention of the employee's right to be secure in his tenure, the clause in said
article indiscriminately and completely ruling out all written or oral agreements conflicting with
the concept of regular employment as defined therein should be construed to refer to the
substantive evil that the Code itself has singled out: agreements entered into precisely to
circumvent security of tenure. It should have no application to instances where a fixed period of
employment was agreed upon knowingly and voluntarily by the parties, without any force,
duress or improper pressure being brought to bear upon the employee and absent any other
circumstances vitiating his consent, or where it satisfactorily appears that the employer and
employee dealt with each other on more or less equal terms with no moral dominance whatever
being exercised by the former over the latter. Unless, thus, limited in its purview, the law would
be made to apply to purposes other than those explicitly stated by its framers; it thus becomes
pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended
consequences. (Brent School vs. Sec. Zamora)

5. Seafarers are not Regular Employees:

The Supreme Court made the ruling in Coyoca v. NLRC and declared that a seafarer, not being
a regular employee, is not entitled to separation or termination pay. In this connection, it is
important to note that neither does the POEA standard employment contract for Filipino seamen
provide for such benefits. A Filipino seaman, is governed by the Rules and Regulations
Governing Overseas Employment and the said Rules do not provide for separation or
termination pay. In the July 29, 2002 the Supreme Court issued a resolution in Millares v.
NLRC and it reiterated its ruling that seafarers are contractual employees and, as such, not
covered by Article 280 of the Labor Code of the Philippines. From the foregoing cases, it is
clear that seafarers are considered contractual employees. They cannot be considered as
regular employees under Article 280 of the Labor Code. Their employment is governed by the

50
contracts they sign every time they are rehired and their employment is terminated when the
contract expires. Their employment is contractually fixed for a certain period of time. They fall
under the exception of Article 280 whose employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
engagement of the employee or where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season. We need not depart from the
rulings of the Court in the two aforementioned cases which indeed constitute stare decisis with
respect to the employment status of seafarers.

Moreover, it is an accepted maritime industry practice that employment of seafarers are for a
fixed period only. Constrained by the nature of their employment which is quite peculiar and
unique in itself, it is for the mutual interest of both the seafarer and the employer why the
employment status must be contractual only or for a certain period of time. Seafarers spend
most of their time at sea and understandably, they can not stay for a long and an indefinite
period of time at sea. Limited access to shore society during the employment will have an
adverse impact on the seafarer. The national, cultural and lingual diversity among the crew
during the COE is a reality that necessitates the limitation of its period.

In Pentagon International Shipping, Inc. v. William B. Adelantar, the Court cited its rulings in
Millares and Coyoca and reiterated that a seafarer is not a regular employee entitled to
backwages and separation pay: Therefore, Adelantar, a seafarer, is not a regular employee as
defined in Article 280 of the Labor Code. Hence, he is not entitled to full backwages and
separation pay in lieu of reinstatement as provided in Article 279 of the Labor Code. As the
Supreme Court held in Millares, Adelantar is a contractual employee whose rights and
obligations are governed primarily by [the] Rules and Regulations of the POEA and, more
importantly, by R.A. 8042, or the Migrant Workers and Overseas Filipinos Act of 1995.

In Marcial Gu-Miro v. Rolando C. Adorable and Bergesen D.Y. Manila the Court reaffirmed yet
again its rulings that a seafarer is employed only on a contractual basis. Clearly, petitioner
cannot be considered as a regular employee notwithstanding that the work he performs is
necessary and desirable in the business of respondent company. As expounded in the above-
mentioned Millares Resolution, an exception is made in the situation of seafarers. The
exigencies of their work necessitates that they be employed on a contractual basis. Continued
re-hiring and assignment in different vessels should be interpreted not as a basis for
regularization but rather a series of contract renewals sanctioned under the doctrine set down
by the Millares case. If at all, a particular seafarer was preferred because of practical
considerations — namely, his experience and qualifications. However, this does not alter the
status of his employment from being contractual. (ROBERTO RAVAGO vs. ESSO EASTERN
MARINE, LTD., G.R. No. 158324, March 14, 2005.)

6. Seasonal Employment:

In JOSEFINA BENARES, petitioner, vs. JAIME PANCHO, RODOLFO PANCHO, JR.,

JOSELITO MEDALLA, PAQUITO MAGALLANES, ALICIA MAGALLANES, EVELYN
MAGALLANES, VIOLETA VILLACAMPA, MARITESS PANCHO, ROGELIO PANCHO AND
ARNOLFO PANCHO, respondents, G.R. No. 151827, April 29, 2005, the Supreme Court has
ruled:

51
“The main question raised by the present petition is whether respondents are regular employees
of Hacienda Maasin and thus entitled to their monetary claims. Related to this is the issue of
whether respondents were illegally terminated.

“The law provides for three kinds of employees: (1) regular employees or those who have been
engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer; (2) project employees or those whose employment has been fixed for a
specific project or undertaking, the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season; and (3) casual
employees or those who are neither regular nor project employees.

“In Mercado v. NLRC, the Court ruled that seasonal workers do not become regular employees
by the mere fact that they have rendered at least one year of service, whether continuous or
broken, because the proviso in the second paragraph of Article 280 demarcates as "casual"
employees, all other employees who do not fall under the definition of the preceding paragraph.
It deems as regular employees those "casual" employees who have rendered at least one year
of service regardless of the fact that such service may be continuous or broken.

“Citing jurisprudence, the Court, in Hacienda Fatima, condensed the rule that the primary
standard for determining regular employment is the reasonable connection between the
particular activity performed by the employee vis-à-vis the usual trade or business of the
employer. This connection can be determined by considering the nature of the work performed
and its relation to the scheme of the particular business or trade in its entirety. If the employee
has been performing the job for at least a year, even if the performance is not continuous and
merely intermittent, the law deems repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of that activity to the business. Hence,
the employment is considered regular, but only with respect to such activity and while such
activity exists.

7. Retainer:

Deeply embedded in our jurisprudence is the rule that courts may not construe a statute that is
free from doubt. Where the law is clear and unambiguous, it must be taken to mean exactly
what it says, and courts have no choice but to see to it that the mandate is obeyed. As it is,
Article 157 of the Labor Code clearly and unequivocally allows employers in non-hazardous
establishments to engage "on retained basis" the service of a dentist or physician. Nowhere
does the law provide that the physician or dentist so engaged thereby becomes a regular
employee. The very phrase that they may be engaged "on retained basis", revolts against the
idea that this engagement gives rise to an employer-employee relationship.

With the recognition of the fact that petitioner consistently engaged the services of respondent
on a retainer basis, as shown by their various "retainership contracts", so can petitioner put an
end, with or without cause, to their retainership agreement as therein provided.

8. “The primary standard for determining regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual trade or
business of the employer. There is no doubt that the respondents were performing work
necessary and desirable in the usual trade or business of an employer. Hence, they can
properly be classified as regular employees.” (HACIENDA BINO/HORTENCIA STARKE,

52
INC./HORTENCIA L. STARKE, petitioners, vs. CANDIDO CUENCA ET AL., respondents, G.R.
No. 150478, April 15, 2005.)

“The two kinds of regular employees under the law are (1) those engaged to perform activities
which are necessary or desirable in the usual business or trade of the employer; and (2) those
casual employees who have rendered at least one year of service, whether continuous or
broken, with respect to the activities in which they are employed. The primary standard to
determine a regular employment is the reasonable connection between the particular activity
performed by the employee in relation to the business or trade of the employer. The test is
whether the former is usually necessary or desirable in the usual business or trade of the
employer. If the employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the repeated and
continuing need for its performance as sufficient evidence of the necessity, if not indispensability
of that activity to the business of the employer. Hence, the employment is also considered
regular, but only with respect to such activity and while such activity exists. The law does not
provide the qualification that the employee must first be issued a regular appointment or must
be declared as such before he can acquire a regular employee status.”

9. In Brent School, Inc. v. Zamora, the Court ruled that seamen and overseas contract workers
are not covered by the term "regular employment" as defined in Article 280 of the Labor Code.
The Court said in that case:

“There is nothing essentially contradictory between a definite period of an employment contract

and the nature of the employee's duties set down in that contract as being "usually necessary or
desirable in the usual business or trade of the employer." The concept of the employee's duties
as being "usually necessary or desirable in the usual business or trade of the employer" is not
synonymous with or identical to employment with a fixed term. Logically, the decisive
determinant in term employment should not be the activities that the employee is called upon to
perform, but the day certain agreed upon by the parties for the commencement and termination
of their employment relationship, a day certain being understood to be "that which must
necessarily come, although it may not be known when." Seasonal employment, and
employment for a particular project are merely instances of employment in which a period, were
not expressly set down, is necessarily implied.

xxx xxx xxx

Some familiar examples may be cited of employment contracts which may be neither for
seasonal work nor for specific projects, but to which a fixed term is an essential and natural
appurtenance: overseas employment contracts, for one, to which, whatever the nature of the
engagement, the concept of regular employment with all that it implies does not appear ever to
have been applied, Article 280 of the Labor Code notwithstanding; also appointments to the
positions of dean, assistant dean, college secretary, principal, and other administrative offices in
educational institutions, which are by practice or tradition rotated among the faculty members,
and where fixed terms are a necessity without which no reasonable rotation would be possible. .
. . xxx xxx xxx

“The Court ruled that the employment of seafarers for a fixed period is not discriminatory against
seafarers and in favor of foreign employers. As explained by this Court in its July 29, 2002
Resolution in Millares:

53
“Moreover, it is an accepted maritime industry practice that employment of seafarers are for a
fixed period only. Constrained by the nature of their employment which is quite peculiar and
unique in itself, it is for the mutual interest of both the seafarer and the employer why the
employment status must be contractual only or for a certain period of time. Seafarers spend
most of their time at sea and understandably, they can not stay for a long and an indefinite
period of time at sea. Limited access to shore society during the employment will have an
adverse impact on the seafarer. The national, cultural and lingual diversity among the crew
during the COE is a reality that necessitates the limitation of its period.

“In Pentagon International Shipping, Inc. v. William B. Adelantar, the Court cited its rulings in
Millares and Coyoca and reiterated that a seafarer is not a regular employee entitled to
backwages and separation pay:

“Therefore, Adelantar, a seafarer, is not a regular employee as defined in Article 280 of the
Labor Code. Hence, he is not entitled to full backwages and separation pay in lieu of
reinstatement as provided in Article 279 of the Labor Code. As we held in Millares, Adelantar is
a contractual employee whose rights and obligations are governed primarily by [the] Rules and
Regulations of the POEA and, more importantly, by R.A. 8042, or the

XXVII. PROBATIONARY EMPLOYEE:

Probationary employment shall not exceed six (6) months from the date the employee started
working, unless it is covered by an apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a probationary basis may be terminated for
a just cause or when he fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his engagement. An
employee who is allowed to work after a probationary period shall be considered a regular
employee.

“An employer, in the exercise of its management prerogative, may hire an employee on a
probationary basis in order to determine his fitness to perform work. Under Article 281 of the
Labor Code, the employer must inform the employee of the standards for which his employment
may be considered for regularization. Such probationary period, unless covered by an
apprenticeship agreement, shall not exceed six (6) months from the date the employee started
working. The employee's services may be terminated for just cause or for his failure to qualify as
a regular employee based on reasonable standards made known to him. Applying Article 13 of
the Civil Code, the probationary period of six (6) months consists of one hundred eighty (180)
days. This is in conformity with paragraph one, Article 13 of the Civil Code, which provides that
the months which are not designated by their names shall be understood as consisting of thirty
(30) days each. The number of months in the probationary period, six (6), should then be
multiplied by the number of days within a month, thirty (30); hence, the period of one hundred
eighty (180) days. As clearly provided for in the last paragraph of Article 13, in computing a
period, the first day shall be excluded and the last day included.” (Mitsubishi Motors Philippines
Corporation vs. Chrysler Philippines Labor Union, G.R. No. 148738, June 29, 2004.)

It can be gleaned from Article 281 of the Labor Code that there are two grounds to legally
terminate a probationary employee. It may be done either: a) for a just cause or b) when
employee fails to qualify as a regular employee in accordance with reasonable standards made
known by the employer to the employee at the start of the employment. However, the rudiments
of due process demand that an employee should be apprised beforehand of the conditions of
his employment and the basis for his advancement. In Secon Philippines Ltd. v. NLRC, the

54
dismissal of the employee was declared illegal by the Court because the employer did not prove
that the employee was properly apprised of the standards of the job at the time of his
engagement and, naturally, the employer could not show that the employee failed to meet such
standards. (Aberdeen Court, Inc. vs. Mateo C. Agustin, Jr., G.R. No. 149371, April 13, 2005.)

XXVIII. TERMINATION OF EMPLOYMENT:

An employer may terminate an employment for any of the following just causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representative; and

(e) Other causes analogous to the foregoing. (Article 282 of Labor Code)

1. Serious Misconduct of Willful Disobedience:

“Misconduct" has been defined as "the transgression of some established and definite rule of
action, a forbidden act, a dereliction of duty”. (Procter and Gamble Philippines, vs. Edgardo
Bondesto, G.R. No. 139847, March 5, 2004.)

“Willful disobedience” entails the concurrence of at least two (2) requisites: the employee's
assailed conduct has been willful or intentional, the willfulness being characterized by a
"wrongful and perverse attitude;" and the order violated must have been reasonable, lawful,
made known to the employee and must pertain to the duties which he had been engaged to
discharge. (ACESITE Corporation, et al., vs. NLRC, G.R. No. 152308 and G.R. No. 152321,
January 26, 2005; Coca-Cola Bottlers, Phils. Vs. Kapisanan Ng Malayang Manggagawa sa
Coca-Cola- FFW, G.R. No. 148205. February 28, 2005.)

While it is well recognized that an employee's violation of lawful and reasonable company rules
or regulations constitutes a just cause for his dismissal, it is also true that the application of such
company rules must be done without abuse of discretion, for what is at stake is not only his
position, but also his means of livelihood. (Coca-Cola Bottlers Philippines, Inc. vs. Dominic E.
Vital, G.R. No. 154384. September 13, 2004.)

Not every case of willful disobedience by an employee of a lawful work-connected order of the
employer may be penalized with dismissal. There must be reasonable proportionality between,
on the one hand, the willful disobedience by the employee and, on the other hand, the penalty
imposed therefore. Wearing armbands to signify union membership and putting up placards to
express their views cannot be of such great dimension as to warrant the extreme penalty of
dismissal, especially considering the employees’ long years of service rendered and when they
have not been subjected to any disciplinary action in the course of their employment with their
employer. (Elizabeth C. Bascon et al., vs. CA et al., respondents. G.R. No. 144899. February
5, 2004.)

55
In the old case of Radio Communications of the Philippines, Inc. v. NLRC, the Court considered
the dismissed employee's act of hurling invectives at a co-employee as a minor offense. The
Court therein ruled that the termination of an employee on account of a minor misconduct is
illegal because Article 282 of the Labor Code mentions "serious misconduct" as a cause for
cessation of employment. Misconduct has been defined as improper or wrong conduct. It is the
transgression of some established and definite rule of action, a forbidden act, a dereliction of
duty, willful in character, and implies wrongful intent and not mere error of judgment. The
misconduct to be serious must be of such grave and aggravated character and not merely trivial
and unimportant. Such misconduct, however serious, must nevertheless be in connection with
the employee's work to constitute just cause for his separation. Thus, for misconduct or
improper behavior to be a just cause for dismissal, (a) it must be serious; (b) must relate to the
performance of the employee's duties; and (c) must show that the employee has become unfit
to continue working for the employer. Indeed, an employer may not be compelled to continue to
employ such person whose continuance in the service would be patently inimical to his
employer's interest.

In Norkis Trading Co., Inc. vs. NLRC, G. R. No. 168159, August 19, 2005, the Supreme
Court held that: “Concededly, employers are allowed, under the broad concept of management
prerogative, to regulate all aspects of personnel administration including hiring, work
assignments, working methods, time, place and manner of work, tools to be used, processes to
be followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay-off of workers, and the dismissal and recall of workers. Particularly on the
matter of transfer of personnel, this Court, in the case of Philippine Japan Active Carbon
Corporation v. National Labor Relations Commission, held that:
 

“It is the employer’s prerogative, based on its assessment and perception of its employees’
qualifications, aptitudes, and competence, to move them around in the various areas of its
business operations in order to ascertain where they will function with maximum benefit to the
company.  An employee’s right to security of tenure does not give him such a vested right in his
position as would deprive the company of its prerogative to change his assignment or transfer
him where he will be most useful.  When his transfer is not unreasonable, nor inconvenient, nor
prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries,
benefits, and other privileges, the employee may not complain that it amounts to a constructive
dismissal.”
 
 
“The management’s right to transfer or re-assign its personnel, however, is not absolute as it is
subject to limitations imposed by law, collective bargaining agreements, and general principles
of fair play and justice.  The employer must, therefore, muster the test for determining the
validity of the transfer of employees as enunciated in the case of Blue Dairy Corporation v.
National Labor Relations Commission, to wit:

“. . . The managerial prerogative to transfer personnel must be exercised without grave abuse of
discretion, bearing in mind the basic elements of justice and fair play.  Having the right should
not be confused with the manner in which that right is exercised.  Thus, it cannot be used as a
subterfuge by the employer to rid himself of an undesirable worker.  In particular, the employer
must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the
employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and
other benefits.  Should the employer fail to overcome this burden of proof, the employee’s

56
transfer shall be tantamount to constructive dismissal, which has been defined as a quitting
because continued employment is rendered impossible, unreasonable or unlikely; as an offer
involving a demotion in rank and diminution in pay.  Likewise, constructive dismissal exists
when an act of clear discrimination, insensibility or disdain by an employer has become so
unbearable to the employee leaving him with no option but to forego with his continued
employment.”

In Standard Electric Manufacturing Corporation vs. Rogelio Javier et al., G.R. No. 166111,
August 25, 2005, the Supreme Court ruled that:

“Respondent Javier’s absence from August 9, 1995 cannot be deemed as an abandonment of

his work.  Abandonment is a matter of intention and cannot lightly be inferred or legally
presumed from certain equivocal acts.  To constitute as such, two requisites must concur: first,
the employee must have failed to report for work or must have been absent without valid or
justifiable reason; and second, there must have been a clear intention on the part of the
employee to sever the employer-employee relationship as manifested by some overt acts, with
the second element being the more determinative factor.  Abandonment as a just ground for
dismissal requires clear, willful, deliberate, and unjustified refusal of the employee to resume his
employment.  Mere absence or failure to report for work, even after notice to return, is not
tantamount to abandonment.
 
“Moreover, respondent Javier’s acquittal for rape makes it more compelling to view the illegality
of his dismissal.  The trial court dismissed the case for “insufficiency of evidence,” and such
ruling is tantamount to an acquittal of the crime charged, and proof that respondent Javier’s
arrest and detention were without factual and legal basis in the first place.
 
“The petitioner acted with precipitate haste in terminating respondent Javier’s employment on
January 30, 1996, on the ground that he had raped the complainant therein.  Respondent Javier
had yet to be tried for the said charge.  In fine, the petitioner prejudged him, and preempted the
ruling of the RTC.  The petitioner had, in effect, adjudged respondent Javier guilty without due
process of law.  While it may be true that after the preliminary investigation of the complaint,
probable cause for rape was found and respondent Javier had to be detained, these cannot be
made as legal bases for the immediate termination of his employment.
 
“Finally, in line with the rulings of this Court in Magtoto and Pedroso on the matter of
backwages, respondent Javier is not entitled to any salary during the period of his detention. 
His entitlement to full backwages commenced from the time the petitioner refused his
reinstatement.  In the instant case, when respondent Javier was freed on May 24, 1996 by
virtue of the judgment of acquittal dated May 17, 1996, he immediately proceeded to the
petitioner but was not accepted back to work; hence, the reckoning point for the grant of
backwages started therefrom.”

  2. Gross or Habitual Neglect:

Gross negligence under Article 282 of the Labor Code, as amended, connotes want of care in
the performance of one's duties, while habitual neglect implies repeated failure to perform one's
duties for a period of time, depending upon the circumstances. (Dennis Chua vs. NLRC, G.R.
No. 146780, March 11, 2005.)

Under the Labor Code, to be a valid ground for dismissal, the negligence must be gross and
habitual. Gross negligence has been defined as the want or absence of even slight care or

57
diligence as to amount to a reckless disregard of the safety of the person or property. It evinces
a thoughtless disregard of consequences without exerting any effort to avoid them. Put
differently, gross negligence is characterized by want of even slight care, acting or omitting to
act in a situation where there is a duty to act, not inadvertently, but willfully and intentionally with
a conscious indifference to consequences insofar as other persons may be affected. (Anvil
Ensembles Garment vs. CA and NLRC, G.R. No. 155037, April 29, 2005.)

Serious misconduct and habitual neglect of duties are among the just causes for terminating an
employee under the Labor Code of the Philippines. Gross negligence connotes want of care in
the performance of one's duties. Habitual neglect implies repeated failure to perform one's
duties for a period of time, depending upon the circumstances. Habitual absenteeism and
tardiness constitute gross and habitual neglect of duties that justifies termination of employment
provided that they are sufficiently supported by evidence on record. Repeated acts of absences
without leave and employee’s frequent tardiness reflect his indifferent attitude to and lack of
motivation in his work. More importantly, repeated and habitual infractions, committed despite
several warnings, constitute gross misconduct. In Rene Valiao vs. CA and NLRC, G.R. No.
146621, July 30, 2004, the Supreme Court has held that habitual absenteeism without leave
constitute gross negligence and is sufficient to justify termination of an employee.

To warrant removal from service, the negligence should not merely be gross but also habitual.
Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or
the entire absence of care. It evinces a thoughtless disregard of consequences without exerting
any effort to avoid them. But it must be sufficiently shown that the employee had willfully
disobeyed the company rules and regulation. The bare fact that the employee incurred
excusable and unavoidable absences does not amount to an abandonment of his employment
and a ground for termination of his employment. (Union Motor Corporation vs. NLRC, G.R. No.
159738, December 9, 2000.)

c. Fraud or Willful Breach of Trust:

To constitute a valid cause to terminate employment, loss of trust and confidence must be
proven clearly and convincingly by substantial evidence. To be a just cause for terminating
employment, loss of confidence must be directly related to the duties of the employee to show
that he or she is woefully unfit to continue working for the employer. (Philippine National
Construction Corporation vs. Rolando Matias G.R. No. 156283, May 6, 2005.)

The term "trust and confidence" is restricted to managerial employees. To be a valid ground for
dismissal, loss of trust and confidence must be based on a willful breach of trust and founded on
clearly established facts. A breach is willful if it is done intentionally, knowingly and purposely,
without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,
heedlessly or inadvertently. It must rest on substantial grounds and not on the employer's
arbitrariness, whims, caprices or suspicion; otherwise, the employee would eternally remain at
the mercy of the employer. Loss of confidence must not be indiscriminately used as a shield by
the employer against a claim that the dismissal of an employee was arbitrary. And, in order to
constitute a just cause for dismissal, the act complained of must be work-related and shows that
the employee concerned is unfit to continue working for the employer. It bears stressing that in
termination cases, the employer bears the onus of proving that the dismissal was for just cause.
Indeed, a condemnation of dishonesty and disloyalty cannot arise from suspicions spawned by
speculative inferences. Because of its subjective nature, this Court has been very scrutinizing in
cases of dismissal based on loss of trust and confidence because the same can easily be

58
concocted by an abusive employer. Thus, when the breach of trust or loss of confidence
theorized upon is not borne by clearly established facts, such dismissal on the ground of loss of
confidence cannot be allowed. Moreover, the fact that one is a managerial employee does not
by itself exclude him from the protection of the constitutional guarantee of security of tenure.
(Fujitsu Computer Products Corporation vs. CA, G.R. No. 158232, March 31, 2005.)

It is fairly well-settled that loss of trust and confidence can constitute a just and valid cause for
an employee's dismissal. In fact, Article 282 of the Labor Code provides the basis for the right of
an employer to dismiss his/her employee based on loss of trust and confidence. Proof beyond
reasonable doubt is not needed to justify the loss. It is sufficient that there be some basis for the
same, or that the employer has reasonable ground to believe that the employee is responsible
for the misconduct and his participation therein renders him unworthy of the trust and
confidence demanded of his position. Nonetheless, the right of an employer to dismiss
employees on the ground of loss of trust and confidence, however, must not be exercised
arbitrarily and without just cause. Unsupported by sufficient proof, loss of confidence is without
basis and may not be successfully invoked as a ground for dismissal. Loss of confidence as a
ground for dismissal has never been intended to afford an occasion for abuse by the employer
of its prerogative, as it can easily be subject to abuse because of its subjective nature, and the
loss must be founded on clearly established facts sufficient to warrant the employee's
separation from work. In Tiu and/or Conti Pawnshop v. NLRC and Ancheta, the Supreme Court
held that the language of Article 282(c) of the Labor Code states that the loss of trust and
confidence must be based on willful breach of the trust reposed in the employee by his
employer. Ordinary breach will not suffice; it must be willful. Such breach is willful if it is done
intentionally, knowingly, and purposely, without justifiable excuse, as distinguished from an act
done carelessly, thoughtlessly, heedlessly or inadvertently. It must be based on substantial
evidence and not on the employer's whims or caprices or suspicions otherwise, the employee
would eternally remain at the mercy of the employer. (P.J. Lhuillier, Inc. vs. NLRC, G.R. No.
158758, April 29, 2005.)

Law and jurisprudence have long recognized the right of employers to dismiss employees by
reason of loss of trust and confidence. More so, in the case of supervisors or personnel
occupying positions of responsibility, loss of trust justifies termination. Loss of confidence as a
just cause for termination of employment is premised from the fact that an employee concerned
holds a position of trust and confidence. This situation holds where a person is entrusted with
confidence on delicate matters, such as the custody, handling, or care and protection of the
employer's property. But, in order to constitute a just cause for dismissal, the act complained of
must be "work-related" such as would show the employee concerned to be unfit to continue
working for the employer.

The degree of proof required in labor cases is not as stringent as in other types of cases. It must
be noted, however, that recent decisions of the Supreme Court have distinguished the treatment
of managerial employees from that of rank-and-file personnel, insofar as the application of the
doctrine of loss of trust and confidence is concerned. Thus, with respect to rank-and-file
personnel, loss of trust and confidence as ground for valid dismissal requires proof of
involvement in the alleged events in question, and that mere uncorroborated assertions and
accusations by the employer will not be sufficient. But as regards a managerial employee, the
mere existence of a basis for believing that such employee has breached the trust of his
employer would suffice for his dismissal. Hence, in the case of managerial employees, proof
beyond reasonable doubt is not required, it being sufficient that there is some basis for such
loss of confidence, such as when the employer has reasonable ground to believe that the
employee concerned is responsible for the purported misconduct, and the nature of his

59
participation therein renders him unworthy of the trust and confidence demanded by his
position. (Vicente C. Etcuban, Jr. vs. Sulpicio Lines, Inc. G.R. No. 148410, January 17, 2005.)

Recent decisions of this Court distinguish the treatment of managerial from that of rank-and-file
personnel insofar as the application of the doctrine of loss of trust and confidence is concerned.
Thus, with respect to rank-and-file personnel, loss of trust and confidence as ground for valid
dismissal requires proof of involvement in the alleged events in question and that mere
uncorroborated assertions and accusations by the employer will not suffice. But as regards a
managerial employee, mere existence of a basis for believing that such employee has breached
the trust of his employer would suffice for his dismissal. (Dr. Ernesto I. Maquiling vs. Philippine
Tuberculosis Society, Inc., G.R. No. 143384, February 4, 2005.)

The bank owes great fidelity to the public it deals with, its operation being essentially imbued
with public interest. In turn, it cannot be compelled to continue in its employ a person in whom it
has lost trust and confidence and whose continued employment would patently be inimical to
the bank's interest. The law, in protecting the rights of labor, authorizes neither oppression nor
self-destruction of an employer company, which itself is possessed of rights that must be
entitled to recognition and respect.

The position of Assistant Bank Manager carries the authority for the exercise of independent
judgment and discretion characteristic of sensitive posts in corporate hierarchy where wide
latitude could be supposed in setting up stringent standards for continued employment.
However, even in the termination of assistant bank manager the employer has still the burden of
proving the legality of the dismissal. The bank must prove by substantial evidence the bases of
the breach of trust or serious misconduct levelled against him. Substantial evidence has been
defined as "that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion." It is such amount of evidence as to induce a belief that the
employee is responsible for misconduct and that participation therein renders him unworthy of
the trust and confidence demanded by the job. (Philippine Commercial Industrial Bank vs.
Pedro Cabrera, G.R. No. 160368, March 31, 2005.)

To validly dismiss an employee on the ground of loss of trust and confidence, the confluence of
the following requisites must be established: (a) the loss of confidence must not be simulated;
(b) it should not be used as a subterfuge for causes which are illegal, improper or unjustified; (c)
it may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; (d) it
must be genuine, not a mere afterthought, to justify earlier action taken in bad faith; and (e) the
employee involved holds a position of trust and confidence. While proof beyond
reasonable doubt is not required, still, substantial evidence is vital and the burden rests on the
employer to establish it. Any other rule would place the employee eternally at the mercy of the
employer.  Moreover, the term trust and confidence is restricted to managerial employees only.
(BPI vs. Ramon A. Uy, G.R. No. 156994, August 31, 2005.)

In Equitable PCI Bank vs. Generosa A. Caquioa, G.R. 159170, August 12, 2005, the Supreme
Court ruled:

“The leniency sought by respondent on the basis of her 35 years of service to the bank must be
weighed in conjunction with the other considerations raised by petitioners.  As that service has
been amply compensated, her plea for leniency cannot offset her dishonesty.  Even government
employees who are validly dismissed from the service by reason of timely discovered offenses
are deprived of retirement benefits.  Treating respondent in the same manner as the loyal and
code-abiding employees, despite the timely discovery of her Code violations, may indeed have

60
a demoralizing effect on the entire bank.  Be it remembered that banks thrive on and endeavor
to retain public trust and confidence, every violation of which must thus be accompanied by
appropriate sanctions.” 

Inefficiency should have a factual basis to be a ground of loss of trust and confidence on
managerial employee.  Inefficiency may be unmasked either by:  (a) comparing it with efficiency
or (b) by showing its effects on the company. (Rosemarie Balba vs. Peak Development, G. R.
No. 148288, Aug. 12, 2005)
 
XXIX. AUTHORIZED CUASES OF TERMINATION:

The employer may also terminate the employment of any employee due to the installation of
labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and the
Department of Labor and Employment at least one (1) month before the intended date thereof.
In case of termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (Article 283)

a. Retrenchment:

In  Trendline  Employees  Association-Southern Philippines Federation of Labor vs. NLRC, the
Supreme Court enumerated the requisites of retrenchment, thus:
 
“To be valid, three requisites must concur, as provided in Article 283 of the Labor Code, as
amended, namely: (1) The retrenchment is necessary to prevent losses and the same is
proven; (2) Written notice to the employees and to the DOLE at least one month prior to the
intended date thereof; and           (3) Payment of separation pay equivalent to one month pay
or at least ½ month pay for every year of service, whichever is higher.”
 
The condition of business losses is normally shown by audited financial documents, like yearly
balance sheets and profit and loss statements as well as annual income tax returns. (Stanley
Garments Specialist vs. George Gomez et al., G.R. No. 154818, Aug. 11, 2005) 
 
Our Court is not oblivious of the significant role played by the corporate sector in the country's
economic and social progress. Implicit in turn in the success of the corporate form in doing
business is the ethos of business autonomy which allows freedom of business determination
with minimal governmental intrusion to ensure economic independence and development in
terms defined by businessmen. Yet, this vast expanse of management choices cannot be an
unbridled prerogative that can rise above the constitutional protection to labor. Employment is
not merely a lifestyle choice to stave off boredom. Employment to the common man is his very
life and blood which must be protected against concocted causes to legitimize an otherwise

61
irregular termination of employment. Imagined or undocumented business losses present the
least propitious scenario to justify retrenchment.

Retrenchment is the termination of employment initiated by the employer through no fault of the
employees and without prejudice to the latter, resorted to by management during periods of
business recession, industrial depression, or seasonal fluctuations or during lulls occasioned by
lack of orders, shortage of materials, conversion of the plant for a new production program or
the introduction of new methods or more efficient machinery, or of automation. Retrenchment is
a valid management prerogative. It is, however, subject to faithful compliance with the
substantive and procedural requirements laid down by law and jurisprudence.

There are three (3) basic requisites for a valid retrenchment to exist, to wit: (a) the retrenchment
is necessary to prevent losses and such losses are proven; (b) written notice to the employees
and to the DOLE at least one (1) month prior to the intended date of retrenchment; and (c)
payment of separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher.

Jurisprudential standards to justify retrenchment have been reiterated by the Supreme Court in
a long line of cases to forestall management abuse of this prerogative, viz:

Firstly, the losses expected should be substantial and not merely de minimis in extent. If the
loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial
and inconsequential in character, the bonafide nature of the retrenchment would appear to be
seriously in question. Secondly, the substantial loss apprehended must be reasonably
imminent, as such imminence can be perceived objectively and in good faith by the employer.
There should, in other words, be a certain degree of urgency for the retrenchment, which is after
all a drastic recourse with serious consequences for the livelihood of the employees retired or
otherwise laid-off. Because of the consequential nature of retrenchment, it must, thirdly, be
reasonably necessary and likely to effectively prevent the expected losses. The employer
should have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut
other costs than labor costs. An employer who, for instance, lays off substantial numbers of
workers while continuing to dispense fat executive bonuses and perquisites or so-called "golden
parachutes", can scarcely claim to be retrenching in good faith to avoid losses. To impart
operational meaning to the constitutional policy of providing "full protection" to labor, the
employer's prerogative to bring down labor costs by retrenching must be exercised essentially
as a measure of last resort, after less drastic means — e.g., reduction of both management and
rank-and-file bonuses and salaries, going on reduced time, improving manufacturing
efficiencies, trimming of marketing and advertising costs, etc. — have been tried and found
wanting. Lastly, but certainly not the least important, alleged losses if already realized, and the
expected imminent losses sought to be forestalled, must be proved by sufficient and convincing
evidence. The reason for requiring this quantum of proof is readily apparent: any less exacting
standard of proof would render too easy the abuse of this ground for termination of services of
employees.

Retrenchment is one of the economic grounds to dismiss employees. It is resorted to by an

employer primarily to avoid or minimize business losses. The law recognizes this under Article
283 of the Labor Code. However, the employer bears the burden to prove his allegation of
economic or business reverses. The employer's failure to prove it necessarily means that the
employee's dismissal was not justified.

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It is essentially required that the alleged losses in business operations must be proven.
Otherwise, said ground for termination would be susceptible to abuse by scheming employers
who might be merely feigning business losses or reverses in their business ventures in order to
ease out employees. The employer bears the burden of proving the existence or the imminence
of substantial losses with clear and satisfactory evidence that there are legitimate business
reasons justifying a retrenchment. Should the employer fail to do so, the dismissal shall be
deemed unjustified.

The law looks with disfavor upon quitclaims and releases by employees pressured into signing
by unscrupulous employers minded to evade legal responsibilities. As a rule, deeds of release
or quitclaim cannot bar employees from demanding benefits to which they are legally entitled or
from contesting the legality of their dismissal. The acceptance of those benefits would not
amount to estoppel. The amounts already received by the retrenched employees as
consideration for signing the quitclaims should, however, be deducted from their respective
monetary awards. It is well-settled that when a person is illegally dismissed, he is entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages. In
the event, however, that reinstatement is no longer feasible, or if the employee decides not to
be reinstated, the employer shall pay him separation pay in lieu of reinstatement. Such a rule is
likewise observed in the case of a strained employer-employee relationship or when the work or
position formerly held by the dismissed employee no longer exists. In sum, an illegally
dismissed employee is entitled to: (1) either reinstatement if viable or separation pay if
reinstatement is no longer viable, and (2) backwages. (F.F. Marine Corporation et al. vs. NLRC
et al., G.R. No. 152039, April 8, 2005; Blucor Minerals Corporation, G.R. No. 161217. May 4,
2005; EMCO Plywood Corporation vs. Perferio Abelgas et al. G.R. No. 148532, April 14, 2004.)

It is neither the function of the law nor its intent to supplant the prerogative of management in
running its business, such as, to compel the latter to operate at a continuing loss simply
because it has to maintain its workers in employment. Such an act would be tantamount to a
taking of property without due process of law. However, the burden of proving that the
termination was for a valid or authorized cause rests on the employer who must comply with
certain substantive and procedural requirements. For instance, the requirements for a valid
retrenchment which must be proved by clear and convincing evidence are: (1) that retrenchment
is reasonably necessary and likely to prevent business losses which, if already incurred, are not
merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably
imminent as perceived objectively and in good faith by the employer; (2) that the employer
served written notice both to the employees and to the Department of Labor and Employment at
least one month prior to the intended date of retrenchment; (3) that the employer pays the
retrenched employees separation pay equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher; (4) that the employer exercises its
prerogative to retrench employees in good faith for the advancement of its interest and not to
defeat or circumvent the employees' right to security of tenure; and (5) that the employer used
fair and reasonable criteria in ascertaining who would be dismissed and who would be retained
among the employees, such as status, efficiency, seniority, physical fitness, age, and financial
hardship for certain workers.

The condition of business losses justifying retrenchment is normally shown by audited financial
documents like yearly balance sheets and profit and loss statements as well as annual income
tax returns. Financial statements must be prepared and signed by independent auditors.
Otherwise, they may be assailed as self-serving. Since the losses incurred must be substantial
and actual or reasonably imminent, it is necessary that the employer show that the losses

63
increased through a period of time and that the condition of the company is not likely to improve
in the near future.

The same evidence is generally required when the termination of employees is by reason of
closure of the establishment or a division thereof for economic reasons, although the more
overriding consideration is, of course, good faith. The employer must prove that the cessation of
or withdrawal from business operations was bona fide in character and not impelled by a motive
to defeat or circumvent the tenurial rights of employees. Parenthetically, if the business losses
that justify the closure of the establishment are duly proved, the right of affected employees to
separation pay is lost for obvious reasons. Otherwise, the employer closing his business is
obligated to pay his employees their separation pay. (Danzas International, Inc. et al., vs. Henry
M. Daguman et al., G.R. No. 154368, April 15, 2005.)

In Somerville Stainless Steel Corporation v. NLRC the Supreme Court held:

“Considering the severe consequences occasioned by retrenchment on the livelihood of the

employee(s) to be dismissed, and the avowed policy of the State — under Sec. 3, Art. XIII of the
Constitution, and Art. 3 of the Labor Code — to afford full protection to labor and to assure the
employee's right to enjoy security of tenure, the Court reiterates that "not every loss incurred or
expected to be incurred by a company will justify retrenchment. The losses must be substantial
and the retrenchment must be reasonably necessary to avert such losses. Settled is the rule
that the employer bears the burden of proving this allegation of the existence or imminence of
substantial losses, which by its nature is an affirmative defense. It is the duty of the employer to
prove with clear and satisfactory evidence that legitimate business reasons exist to justify
retrenchment. Failure to do so "inevitably results in a finding that the dismissal is unjustified."
And the determination of whether an employer has sufficiently and successfully discharged this
burden of proof "is essentially a question of fact for the Labor Arbiter and the NLRC to
determine." Otherwise, such ground for termination would be susceptible to abuse by scheming
employers who might be merely feigning business losses or reverses in their business ventures
to ease out employees.

The burden of proving the validity of the dismissal of the employee rests on the employer. It is
therefore incumbent upon him to prove by the quantum of evidence required by law that the
dismissal of an employee is not illegal; otherwise, the dismissal would be unjustified. (Bolinao
Security and Investigation Service Inc. vs. Arsenio M. Toston, G.R. No. 139135 January 29,
2004.)

For the retrenchment to be valid, three requisites must concur, as provided in Article 283 of the
Labor Code, as amended, namely: (1) The retrenchment is necessary to prevent losses and the
same is proven; (2) Written notice to the employees and to the DOLE at least one month prior to
the intended date thereof; and (3) Payment of separation pay equivalent to one month pay or at
least 1/2 month pay for every year of service, whichever is higher. The standard of proof of a
company's financial standing is its financial statements duly audited by independent and
credible external auditors. Financial statements audited by an independent external auditor
constitute the normal method of proof of profit and loss performance of a company.

Article 283 (quoted earlier) entails, among others, only a situation where there is "retrenchment
to prevent losses." The phrase "to prevent losses" means that retrenchment or termination from
the service of some employees is authorized to be undertaken by the employer sometime
before the losses anticipated are actually sustained or realized. Evidently, actual losses need
not set in prior to retrenchment.

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Procedurally, if the dismissal is based on authorized causes under Articles 283 and 294, the
employer must give the employee and the Department of Labor and Employment written notices
days prior to the effectivity of his separation. The violation of the worker’s right to statutory due
process warrants the payment of indemnity in the form of nominal damages. The amount of
such damages is addressed to the sound discretion of the court, taking into account the relevant
circumstances. Usually the Supreme Court fixes the amount of nominal damages at thirty
thousand pesos (P30,000.00). (Benedicto A. Cajucom VII vs. TPI Philippines Cement
Corporation, G.R. No.149090, February 11, 2005.)

From the foregoing, in order that retrenchment due to serious business losses may be validly
exercised, the following requisites must concur: (a) necessity of the retrenchment to prevent
losses, and proof of such losses; (b) written notice to the employees and to the DOLE at least
one (1) month prior to the intended date of retrenchment; and (c) payment of separation pay
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher.

It must be stressed, however, that compliance with the one-month notice rule is mandatory
regardless of whether the retrenchment is temporary or permanent. This is so because Article
283 itself does not speak of temporary or permanent retrenchment; hence, there is no need to
qualify the term. Ubi lex non distinguit nec nos distinguere debemus (when the law does not
distinguish, we must not distinguish).

However, the employer's failure to comply with the one month notice requirement prior to
retrenchment does not render the termination illegal; it merely renders the same defective,
entitling the dismissed employee to payment of indemnity in the form of nominal damages.
Based on prevailing jurisprudence, the amount of indemnity is pegged at P30,000.00.
(Philippine Telegraph and Telephone Corporation, vs. NLRC et al., G.R. No. 147002, April 15,
2005.)

The requirements for retrenchment are: (1) it is undertaken to prevent losses, which are not
merely de minimis, but substantial, serious, actual, and real, or if only expected, are reasonably
imminent as perceived objectively and in good faith by the employer; (2) the employer serves
written notice both to the employees and the DOLE at least one month prior to the intended date
of retrenchment; and (3) the employer pays the retrenched employees separation pay
equivalent to one month pay or at least ½ month pay for every year of service, whichever is
higher. The Court later added the requirements that the employer must use fair and reasonable
criteria in ascertaining who would be dismissed and who would be retained among the
employees and that the retrenchment must be undertaken in good faith. Except for the written
notice to the affected employees and the DOLE, non-compliance with any of these requirements
renders the retrenchment illegal. (Roberto Ariola et al. vs. Philex Mining Corporation, G. R. No.
147756, August 9, 2005.)

b. Redundancy:

“Redundancy” in an employer’s personnel force necessarily or even ordinarily refers to

duplication of work. Redundancy, for purposes of the Labor Code, exists where the services of
an employee are in excess of what is reasonably demanded by the actual requirements of the
enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a
position or positions may be the outcome of a number of factors, such as overhiring of workers,

65
decreased volume of business, or dropping of a particular product line or service activity
previously manufactured or undertaken by the enterprise.

The determination that employee’s services are no longer necessary or sustainable and,
therefore, properly terminable is an exercise of business judgment of the employer. The wisdom
or soundness of this judgment is not subject to discretionary review of the Labor Arbiter and the
NLRC, provided there is no violation of law and no showing that it was prompted by an arbitrary
or malicious act. In other words, it is not enough for a company to merely declare that it has
become overmanned. It must produce adequate proof that such is the actual situation to justify
the dismissal of the affected employees for redundancy. In selecting employees to be
dismissed, a fair and reasonable criteria must be used, such as but not limited to (a) less
preferred status, e.g. temporary employee; (b) efficiency; and (c) seniority. It is not difficult for
employers to abolish positions in the guise of a cost-cutting measure, which too often reduce to
near nothing what is left of the rubble of rights of the exploited workers.

To quote what has been aptly stated by former Governor General Leonard Wood in his
inaugural message before the 6th Philippine Legislature on October 27, 1922 “labor is neither a
chattel nor a commodity, but human and must be dealt with from the standpoint of human
interest.” As has been said: “We do not treat our workers as merchandise and their right to
security of tenure cannot be valued in precise peso-and-centavo terms. It is a right which cannot
be allowed to be devalued by the purchasing power of employers who are only too willing to
bankroll the separation pay of their illegally dismissed employees to get rid of them.” This right
will never be respected by the employer if we merely honor it with a price tag. The policy of
“dismiss now and pay later” favors moneyed employers and is a mockery of the right of
employees to social justice. (Bonifacio Asufrin, Jr. vs. San Miguel Corporation and CA, G.R. No.
156658, March 10, 2004.)

In ruling the case of Lopez Sugar Corporation, G.R. No. 148195, May 16, 2005 the Supreme
Court reiterated its ruling in the case of Asian Alcohol Corporation vs. NLRC and held that it is
the burden of the employer to prove the factual and legal basis for the dismissal of its
employees on the ground of redundancy.

In Asian Alcohol Corporation v. National Labor Relations Commission, the Court ruled that
redundancy exists when the service capability of the work force is in excess of what is
reasonably needed to meet the demands on the enterprise. The Court proceeded to expound,
as follows:

“A redundant position is one rendered superfluous by any number of factors, such as over-hiring
of workers, decreased volume of business, dropping of a particular product line previously
manufactured by the company or phasing out of a service activity priorly undertaken by the
business. Under these conditions, the employer has no legal obligation to keep in its payroll
more employees than are necessary for the operation of its business.”

Redundancy exists when the service capability of the workforce is in excess of what is
reasonably needed to meet the demands of the business enterprise.  A reasonably redundant
position is one rendered superfluous by any number of factors, such as overhiring of workers,
decreased volume of business, dropping of a particular product line previously manufactured by
the company or phasing out of service activity priorly undertaken by the business.  Among the
requisites of a valid redundancy program are: (1) the good faith of the employer in abolishing
the redundant position; and (2) fair and reasonable criteria in ascertaining what positions are to

66
be declared redundant and accordingly abolished. (Dusit Hotel Nikko et al. vs. NUWHRAIN and
Rowena Agoncillo, G. R. No. 160391, Aug. 9, 2005.)

c. Closure of Establishment:
           
Work is a necessity that has economic significance deserving legal protection. The social justice
and protection to labor provisions in the Constitution dictate so. Employers are also accorded
rights and privileges to assure their self-determination and independence and reasonable return
of capital. This mass of privileges comprises the so-called management prerogatives. Although
they may be broad and unlimited in scope, the State has the right to determine whether an
employer’s privilege is exercised in a manner that complies with the legal requirements and
does not offend the protected rights of labor.  One of the rights accorded an employer is the
right to close an establishment or undertaking. The right to close the operation of an
establishment or undertaking is explicitly recognized under the Labor Code as one of the
authorized causes in terminating employment of workers, the only limitation being that the
closure must not be for the purpose of circumventing the provisions on termination of
employment embodied in the Labor Code.
 
The phrase “closures or cessation of operations of establishment or undertaking” includes a
partial or total closure or cessation.
 
x x x Ordinarily, the closing of a warehouse facility and the termination of the services of
employees there assigned is a matter that is left to the determination of the employer in the
good faith exercise of its management prerogatives. The applicable law in such a case is Article
283 of the Labor Code which permits ‘closure or cessation of operation of an establishment or
undertaking not due to serious business losses or financial reverses,’ which includes both the
complete cessation of operations and the cessation of only part of a company’s business.

And the phrase “closures or cessation x x x not due to serious business losses or financial
reverses” recognizes the right of the employer to close or cease his business operations or
undertaking even if he is not suffering from serious business losses or financial reverses, as
long as he pays his employees their termination pay in the amount corresponding to their length
of service. It would indeed be stretching the intent and spirit of the law if a court were to unjustly
interfere in management’s prerogative to close or cease its business operations just because
said business operation or undertaking is not suffering from any loss. As long as the company’s
exercise of the same is in good faith to advance its interest and not for the purpose of
defeating or circumventing the rights of employees under the law or a valid agreement,
such exercise will be upheld. Clearly then, the right to close an establishment or undertaking
may be justified on grounds other than business losses but it cannot be an unbridled prerogative
to suit the whims of the employer. The ultimate test of the validity of closure or cessation of
establishment or undertaking is that it must be bona fide in character. And the burden of proving
such falls upon the employer. (Capitol Medical Center, Inc. vs. Dr. Cesar E. Meris, G.R.
155098, Sept. 16, 2005)

A brief discussion on the difference between retrenchment and closure of business as grounds
for terminating an employee is necessary. While the two are often used interchangeably and are
interrelated, they are actually two separate and independent authorized causes for termination
of employment. Termination of an employment may be predicated on one without need of
resorting to the other.

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Closure of business, on one hand, is the reversal of fortune of the employer whereby there is a
complete cessation of business operations and/or an actual locking-up of the doors of
establishment, usually due to financial losses. Closure of business as an authorized cause for
termination of employment aims to prevent further financial drain upon an employer who cannot
pay anymore his employees since business has already stopped. On the other hand,
retrenchment is reduction of personnel usually due to poor financial returns so as to cut down
on costs of operations in terms of salaries and wages to prevent bankruptcy of the company. It
is sometimes also referred to as down-sizing. Retrenchment is an authorized cause for
termination of employment which the law accords an employer who is not making good in its
operations in order to cut back on expenses for salaries and wages by laying off some
employees. The purpose of retrenchment is to save a financially ailing business establishment
from eventually collapsing.

A careful examination of Article 283 of the Labor Code shows that closure or cessation of
business operation as a valid and authorized ground of terminating employment is not limited to
those resulting from business losses or reverses. Said provision in fact provides for the payment
of separation pay to employees terminated because of closure of business not due to losses,
thus implying that termination of employees other than closure of business due to losses may
be valid.

Art. 283 governs the grant of separation benefits "in case of closures or cessation of operation"
of business establishments "NOT due to serious business losses or financial reverses.” Where,
however, the closure was due to business losses the Labor Code does not impose any
obligation upon the employer to pay separation benefits, for obvious reasons.

In any case, Article 283 of the Labor Code is clear that an employer may close or cease his
business operations or undertaking even if he is not suffering from serious business losses or
financial reverses, as long as he pays his employees their termination pay in the amount
corresponding to their length of service. It would, indeed, be stretching the intent and spirit of
the law if court were to unjustly interfere in management's prerogative to close or cease its
business operations just because said business operation or undertaking is not suffering from
any loss. (J.A.T. General Services et al., vs. NLRC and Jose Mascarinas, G.R. No. 148340,
January 26, 2004; ME-SHURN Corporation et al., vs. ME-SHURN Workers Union et al., G.R.
No. 156292. January 11, 2005.)

In the case of Josefina A. Cama et al., vs. Joni’s Food Services, Inc. et al., G.R. No. 153021,
March 10, 2004, the Supreme Court held:

“The Constitution, while affording full protection to labor, nonetheless, recognizes “the right of
enterprises to reasonable returns on investments, and to expansion and growth.” In line with
this protection afforded to business by the fundamental law, Article 283 of the Labor Code
clearly makes a policy distinction. It is only in instances of “retrenchment to prevent losses and
in cases of closures or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses” that employees whose employment has been
terminated as a result are entitled to separation pay. In other words, Article 283 of the Labor
Code does not obligate an employer to pay separation benefits when the closure is due to
serious losses. To require an employer to be generous when it is no longer in a position to do
so, in our view, would be unduly oppressive, unjust, and unfair to the employer. Ours is a
system of laws, and the law in protecting the rights of the working man, authorizes neither the
oppression nor the self-destruction of the employer.”

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Article 283 of the Labor Code provides that employees who are dismissed due to closures that
are not due to business insolvency should be paid separation pay equivalent to one-month pay
or to at least one-half month pay for every year of service, whichever is higher. A fraction of at
least six months shall be considered one whole year.

In cases of closures or cessation of operations of establishment or undertaking not due to

serious business losses or financial reverses, the separation pay of employees shall be
equivalent to one-month pay or to at least one-half month pay for every year of service,
whichever is higher. In no case will an employee get less than one-month separation pay if the
separation from the service is due to the above stated causes, provided that he has already
served for at least six months. Thus, if an employee had been in the service for at least six
months, he is entitled to a full month's pay as his termination pay if his separation from the job is
due to any of the causes enumerated above. However, if he has to his credit ten years of
service, he is entitled to five months pay, this being higher than one-month pay. Stated
differently, the computation of termination pay should be based on either one month or one-half
month pay, whichever will yield to the employees' higher separation pay, taking into
consideration his length of service. (National Federation of Labor vs. CA and NLRC, G.R. No.
149464 October 19, 2004.)

While retrenchment and closure of a business establishment or undertaking are often used
interchangeably and are interrelated, they are actually two separate and independent authorized
causes for termination of employment. Retrenchment is the reduction of personnel for the
purpose of cutting down on costs of operations in terms of salaries and wages resorted to by an
employer because of losses in operation of a business occasioned by lack of work and
considerable reduction in the volume of business. Closure of a business or undertaking due
to business losses is the reversal of fortune of the employer whereby there is a complete
cessation of business operations to prevent further financial drain upon an employer who cannot
pay anymore his employees since business has already stopped.
 
One of the prerogatives of management is the decision to close the entire establishment or to
close or abolish a department or section thereof for economic reasons, such as to minimize
expenses and reduce capitalization. While the Labor Code provides for the payment of
separation package in case of retrenchment to prevent losses, it does not obligate the employer
for the payment thereof if there is closure of business due to serious losses. As in the case of
retrenchment, however, for the closure of a business or a department due to serious business
losses to be regarded as an authorized cause for terminating employees, it must be proven that
the losses incurred are substantial and actual or reasonably imminent; that the same increased
through a period of time; and that the condition of the company is not likely to improve in the
near future. The closure of operation of an establishment or undertaking not due to serious
business losses or financial reverses includes both the complete cessation of operations and
the cessation of only part of a company’s activities. For any bona fide reason, an employer can
lawfully close shop anytime.  Just as no law forces anyone to go into business, no law can
compel anybody to continue the same.  It would be stretching the intent and spirit of the law if a
court interferes with management’s prerogative to close or cease its business operations just
because the business is not suffering from any loss or because of the desire to provide the
workers continued employment. In fine, management’s exercise of its prerogative to close a
section, branch, department, plant or shop will be upheld as long as it is done in good faith to
advance the employer’s interest and not for the purpose of defeating or circumventing the rights
of employees under the law or a valid agreement. (Alabang Country Club Inc. et al. vs. NLRC et
al., G.R. No. 157611, August 9, 2005)

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   XXX. DISEASE AS GROUND OF TERMINATION:
An employer may terminate the services of an employee who has been found to be suffering
from any disease and whose continued employment is prohibited by law or is prejudicial to his
health as well as to the health of his co-employees: Provided, That he is paid separation pay
equivalent to at least one (1) month salary or to one-half month salary for every year of service,
whichever is greater, a fraction of at least six (6) months being considered as one (1) whole
year. (Article 284)

XXXI. TERMINATION BY EMPLOYEE:

(a) An employee may terminate without just cause the employee-employer relationship by
serving a written notice on the employer at least one (1) month in advance. The employer upon
whom no such notice was served may hold the employee liable for damages.

(b) An employee may put an end to the relationship without serving any notice on the
employer for any of the following just causes:

(1) Serious insult by the employer or his representative on the honor and person of the
employee;

(2) Inhuman and unbearable treatment accorded the employee by the employer or his
representative;

(3) Commission of a crime or offense by the employer or his representative against the
person of the employee or any of the immediate members of his family; and

(4) Other causes analogous to any of the foregoing.

a. Resignation:

Complete reliance on the alleged "resignation letters cum release and quitclaim" to support their
claim that respondents voluntarily resigned is unavailing as the filing of the complaint for illegal
dismissal is inconsistent with resignation. Resignation is the voluntary act of employees who are
compelled by personal reasons to dissociate themselves from their employment. It must be
done with the intention of relinquishing an office, accompanied by the act of abandonment.
Thus, it is illogical for the employee to resign and then file a complaint for illegal dismissal. The
Supreme Court finds it highly unlikely that workers abroad would just quit even before the
expiration of their contracts, after all the expenses and the trouble they went through in seeking
greener pastures and financial upliftment, and the concomitant tribulations of being separated
from their families, having invested so much time, effort and money to secure their employment
abroad. Considering the hard economic times, it is incongruous for workers abroad to simply
give up their work, return home and be jobless once again. (Great Southern Maritime Services
Corporation et al., vs. Jennifer Anne Acuna et al., G.R. No. 140189, February 28, 2005.)

In Hinatuan Mining Corporation and/or the Manager versus National Labor Relations and Margo
Batister, the Supreme Court held that while it is true that under the Labor Code, an employee
who voluntarily resigns may not be granted separation pay, as in fact, the general rule is that an
employee who voluntarily resigns is not entitled to separation pay, however, there is an
exception, that is, when it is stipulated in the employment contract or CBA or such payment is
authorized by the employer's practice or policy.

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If it is clear from the CBA that when an employee or worker voluntarily resigns due to, among
others, “separation from the company without cause,” such as voluntary resignation, he is
entitled to separation benefits. In the interpretation of an employer's program providing for
separation benefits, all doubts should be construed in favor of labor. After all, workers are the
intended beneficiaries of such program and our Constitution mandates a clear bias in favor of
the working class. Also when it is also part of the employer’s customary practice that the
resigned employees had been given separation pay. (Victor Te et al. vs. Shirley Joseph, G.R.
No. 158251, March 31, 2005.)

b. Constructive Dismissal:

Management's prerogative of transferring and reassigning employees from one area of

operation to another in order to meet the requirements of the business is generally not
constitutive of constructive dismissal. Thus, in Philippine Japan Active Carbon Corporation v.
NLRC, 50 the Court ruled: “It is the employer's prerogative, based on its assessment and
perception of its employees' qualifications, aptitudes, and competence, to move them around in
the various areas of its business operations in order to ascertain where they will function with
maximum benefit to the company. An employee's right to security of tenure does not give him
such a vested right in his position as would deprive the company of its prerogative to change his
assignment or transfer him where he will be most useful. When his transfer is not unreasonable,
nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or a
diminution of his salaries, benefits, and other privileges, the employee may not complain that it
amounts to a constructive dismissal.

The employer has the burden of proving that the transfer of an employee is for valid and
legitimate grounds. Particularly, for a transfer not to be considered a constructive dismissal the
employer must be able to show that such transfer is not unreasonable, inconvenient, or
prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries,
privileges and other benefits. Similar transfers and re-assignments of employees have been
upheld by the Supreme Court, such as the transfer of a union president from his position of
messenger clerk in a hotel to purely office work. Mere incidental inconvenience is not sufficient
to warrant claims of constructive dismissal.

Certainly, the Court cannot accept the proposition that when an employee opposes his
employer's decision to transfer him to another work place, there being no bad faith or
underhanded motives on the part of either party, it is the employee's wishes that should be
made to prevail. On the basis of the qualifications, training and performance of the employee,
the prerogative to determine the place or station where he or she is best qualified to serve the
interests of the company belongs to the employer. To sanction the disregard or disobedience by
employees of a reasonable rule or order laid down by management would be disastrous to the
discipline and order within the enterprise. It is in the interest of both the employer and the
employee to preserve and maintain order and discipline in the work environment. Deliberate
disregard of company rules or defiance of management prerogative cannot be countenanced.
This is not to say that the employees have no remedy against rules or orders they regard as
unjust or illegal. They can object thereto, ask to negotiate thereon, bring proceedings for redress
against the employer. But until and unless the rules or orders are declared to be illegal or
improper by competent authority, the employees ignore or disobey them at their peril. (Benguet
Electric Cooperative vs. Josephine Fianza, G.R. No. 158606, March 9, 2004.)

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Constructive dismissal is defined as an involuntary resignation resorted to when continued
employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank
or a diminution of pay; or when a clear discrimination, insensibility or disdain by an employer
becomes unbearable to the employee. Jurisprudence recognizes the exercise of management
prerogatives. For this reason, courts often decline to interfere in legitimate business decisions of
employers. Indeed, labor laws discourage interference in employers' judgments concerning the
conduct of their business. The law must protect not only the welfare of employees, but also the
right of employers. In the pursuit of its legitimate business interest, management has the
prerogative to transfer or assign employees from one office or area of operation to another —
provided there is no demotion in rank or diminution of salary, benefits, and other privileges; and
the action is not motivated by discrimination, made in bad faith, or effected as a form of
punishment or demotion without sufficient cause. This privilege is inherent in the right of
employers to control and manage their enterprise effectively. The right of employees to security
of tenure does not give them vested rights to their positions to the extent of depriving
management of its prerogative to change their assignments or to transfer them.

Managerial prerogatives, however, are subject to limitations provided by law, collective

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

The transfer made in pursuit of the policy to "familiarize bank employees with the various
phases of bank operations and further strengthen the existing internal control system" of all
officers and employees is purely a management prerogative. The employer should not be
denied the right to transfer employees to expand their competence and maximize their full
potential for the advancement of the establishment. (Elmer Mendoza vs. Rural Bank of Lucban,
G.R. No. 155421. July 7, 2004.)

XXXII. SUSPENSION OF OPERATION:

The bona fide suspension of the operation of a business or undertaking for a period not
exceeding six (6) months, or the fulfillment by the employee of a military or civic duty shall not
terminate employment.

In all such cases, the employer shall reinstate the employee to his former position without loss
of seniority rights if he indicates his desire to resume his work not later than one (1) month from
the resumption of operations of his employer or from his relief from the military or civic duty.

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The Supreme Court recognizes that security guards may be temporarily sidelined by their
security agency as their assignments primarily depend on the contracts entered into by the latter
with third parties. However, the sidelining should continue only for six months. Otherwise, the
security agency concerned could be liable for constructive dismissal. (Mobile Protective &
Detective Agency vs. Alberto G. Ompad, G.R. No. 159195, May 9, 2005.)

Under Article 286 of the Labor Code, an employer may bona fide suspend the operation of its
business for a period of not exceeding six (6) months. In such a case, there is no termination of
the employment of the employees, but only a temporary displacement. When the suspension of
the business operations exceeds six (6) months, then the employment of the employees would
be deemed terminated. On the other hand, if the operation of the business is resumed within six
(6) months from the bona fide suspension thereof, it shall be the duty of the employer to
reinstate his employees to their former positions without loss of seniority rights, if the latter
would indicate their desire to resume work within one (1) month from such resumption of
operations, conformably to Article 286 of the Labor Code.

Closure or suspension of operations for economic reasons is, therefore, recognized as a valid
exercise of management prerogative. The determination to cease or suspend operations is a
prerogative of management, which the State does not usually interfere with as no business or
undertaking is required to continue operating at a loss simply because it has to maintain its
workers in employment. Such an act would be tantamount to a taking of property without due
process of law. However, the burden of proving, with sufficient and convincing evidence, that
such closure or suspension is bona fide falls upon the employer. (Nasipit Lumber Company and
Philippine Wallboard Corporation vs. National Organization of Workingmen et al., G.R. No.
146225, November 25, 2004.)

XXXIV. RETIREMENT:

Any employee may be retired upon reaching the retirement age established in the collective
bargaining agreement or other applicable employment contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits as he
may have earned under existing laws and any collective bargaining agreement and other
agreements: Provided, however, That an employee's retirement benefits under any collective
bargaining and other agreements shall not be less than those provided herein.

In the absence of a retirement plan or agreement providing for retirement benefits of employees
in the establishment, an employee upon reaching the age of sixty (60) years or more, but not
beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has
served at least five (5) years in the said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.

Unless the parties provide for broader inclusions, the term one half (1/2) month salary's shall
mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of
not more than five (5) days of service incentive leaves.

An underground mining employee upon reaching the age of fifty (50) years or more, but not
beyond sixty (60) years which is hereby declared the compulsory retirement age for
underground mine workers, who has served at least five (5) years as underground mine

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workers, may retire and shall be entitled to all the retirement benefits provided for in this article.
(An amendment by RA No. 8558, Feb. 26, 1998).

Retail, service and agricultural establishments or operations employing not more than ten (10)
employees or workers are exempted from the coverage of this provision.

Violation of this provision is hereby declared unlawful and subject to the penal provisions under
Article 288 of this Code.

In the absence of a retirement plan or agreement providing for retirement benefits of employees
in the establishment, an employee upon reaching the age of sixty (60) years or more, but not
beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has
served at least five (5) years in said establishment, may retire and shall be entitled to retirement
pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at
least six (6) months being considered as one whole year. Unless the parties provide for broader
inclusions, the term one half-month salary shall mean fifteen (15) days plus one-twelfth (1/12) of
the 13th month pay and the cash equivalent of not more than five (5) days of service incentive
leaves. (R & E Transport Inc. et al., vs. Avelina P. Latag, G.R. No. 155214, February 13,
2004.)

While it is axiomatic that retirement laws are liberally construed in favor of the persons intended
to be benefited, however, such interpretation cannot be made in light of the clear lack of
consensual and statutory basis of the grant of retirement benefits. (Divina S. Lopez vs. National
Steel Corporation, G.R. No. 149674, February 16, 2004.)

In Aquino vs. NLRC, citing University of the East vs. Minister of Labor and Batangas Laguna
Tayabas Bus Co. vs. Court of Appeals, the Supreme Court ruled that if there is no prohibition
both in the Retirement Plan and the Collective Bargaining Agreement, the employee has the
right to recover from the employer his separation pay and retirement benefits, thus:

"The Court feels that if the private respondent really intended to make the separation pay and
the retirement benefits mutually exclusive, it should have sought inclusion of the corresponding
provision in the Retirement Plan and the Collective Bargaining Agreement so as to remove all
possible ambiguity regarding this matter. . . .. Knowing this, he should have made it a point to
categorically provide in the Retirement Plan and the CBA that an employee who had received
separation pay would no longer be entitled to retirement benefits. Or to put it more plainly,
collection of retirement benefits was prohibited if the employee had already received separation
pay."

Clearly, under the above cases, the right of the concerned employees to receive both retirement
benefits and separation pay depends upon the provisions in the Retirement Plan. If retirement
plan provides that employee cannot receive both retirement benefits and separation pay then he
is not entitled to both. (Jose B. Cruz et al., vs. Philippine Global Communications, Inc. et al.,
G.R. No. 141868, May 28, 2004.)

There are three kinds of retirement schemes. The first type is compulsory and contributory in
character. The second type is one set up by agreement between the employer and the
employees in collective bargaining agreements or other agreements between them. The third
type is one that is voluntarily given by the employer, expressly as in an announced company
policy or impliedly as in a failure to contest the employee's claim for retirement benefits.

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The first paragraph of Article 287 deals with the retirement age of an employee established in
(a) a collective bargaining agreement or (b) other applicable employment contract. The second
paragraph deals with the retirement benefits to be received by a retiring employee which he
may have earned under (a) an existing law, (b) a collective bargaining or (c) other agreements.
(Marilyn Odchimar Gerlach vs. Reuters Limited, Philippines G.R. No. 148542, January 17,
2005.)

In Llora Motors, Inc. vs. Drilon, the Supreme Court held that Article 287 does not in itself purport
to impose any obligation upon employers to set up a retirement scheme for their employees
over and above that already established under existing laws, like the Social Security Act.

XXXV. PRESCRIPTION:

Offenses penalized under this Code and the rules and regulations issued pursuant thereto shall
prescribe in three (3) years. All unfair labor practices arising from Book V shall be file with the
appropriate agency within one (1) year from accrual of such unfair labor practice; otherwise,
they shall be forever barred.

All money claims arising from employer-employee relations accruing during the effectivity of this
Code shall be filed within three (3) years from the time that cause of action accrued; otherwise
they shall be forever barred.

The cause of action of an entitled employee to claim his service incentive leave pay accrues
from the moment the employer refuses to remunerate its monetary equivalent if the employee
did not make use of said leave credits but instead chose to avail of its commutation.
Accordingly, if the employee wishes to accumulate his leave credits and opts for its
commutation upon his resignation or separation from employment, his cause of action to claim
the whole amount of his accumulated service incentive leave shall arise when the employer fails
to pay such amount at the time of his resignation or separation from employment. In the case of
Auto Bus Transport Systems, Inc. vs. Antonio Bautista, G.R. No. 156367, May 16, 2005, the
Supreme Court has ruled that: “Applying Article 291 of the Labor Code in light of this peculiarity
of the service incentive leave, we can conclude that the three (3)-year prescriptive period
commences, not at the end of the year when the employee becomes entitled to the
commutation of his service incentive leave, but from the time when the employer refuses to pay
its monetary equivalent after demand of commutation or upon termination of the employee's
services, as the case may be. The above construal of Art. 291, vis-à-vis the rules on service
incentive leave, is in keeping with the rudimentary principle that in the implementation and
interpretation of the provisions of the Labor Code and its implementing regulations, the
workingman's welfare should be the primordial and paramount consideration. The policy is to
extend the applicability of the decree to a greater number of employees who can avail of the
benefits under the law, which is in consonance with the avowed policy of the State to give
maximum aid and protection to labor. In the case at bar, respondent had not made use of his
service incentive leave nor demanded for its commutation until his employment was terminated
by petitioner. Neither did petitioner compensate his accumulated service incentive leave pay at
the time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one
month from the time of his dismissal, that respondent demanded from his former employer
commutation of his accumulated leave credits. His cause of action to claim the payment of his
accumulated service incentive leave thus accrued from the time when his employer dismissed
him and failed to pay his accumulated leave credits. Therefore, the prescriptive period with
respect to his claim for service incentive leave pay only commenced from the time the employer
failed to compensate his accumulated service incentive leave pay at the time of his dismissal.

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Since respondent had filed his money claim after only one month from the time of his dismissal,
necessarily, his money claim was filed within the prescriptive period provided for by Article 291
of the Labor Code.”

Institution of money claims. — Money claims specified in the immediately preceding Article shall
be filed before the appropriate entity independently of the criminal action that may be instituted
in the proper courts.

Pending the final determination of the merits of money claims filed with the appropriate entity,
no civil action arising from the same cause of action shall be filed with any court. This provision
shall not apply to employees’ compensation cases which shall be processed and determined
strictly in accordance with the pertinent provisions of this Code.

GOOD LUCK

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